Introduction
Well established modern business organizations have increasingly been seeking to expand their operations beyond the boundaries of their mother countries. Consequently, international trade has been stirred up and accelerated thanks to advancement made by man in Information Communication Technology (ICT) and other areas during 19th and 20th Centuries.
Business organizations particularly from world’s major economies and the emerging Asian economies offering goods and services in different commercial sectors or industries are striving to establish a high profile presence in the international markets in an attempt to enhance their profitability and remain competitive in an era of accelerated globalization.
Some of them are part and parcel of the business organizations known as multinational corporations (MNCs) or multinational enterprises (MNEs) which have operational branches in virtually all stable nations world over. There are various reasons that encourage business organizations desire to expand in to the international or foreign markets.
Ireland, Hoskisson and Hitt (2008) have identified four main reasons that usually motivates companies, or business organizations seek to expand in to international markets namely the desire to use current resources and gain access to new resources, seeking to expand or develop new markets, competitive rivalry and controlling core competences and learning.
These authors point out that companies search for economies of scale in the use of their existing resources by expanding in to new foreign markets. At times they enter international markets in order to reach specific valuable resources like raw materials, specialized knowledge, or cheap labour.
As companies become well established in the domestic markets, they begin searching for international markets in order to increase their revenue and gain more profits, enhance their competition with major rivals and influence further development of their core competencies (Ireland, Hoskisson and Hitt, 2008; Ajami and Goddard,2006).
Background
Increased and accelerated international business activities have brought up the need for special managerial knowledge and skills on how to manage profitably and successfully companies that seeks to expand their operations in to new global markets. The need for this knowledge has been partly due to the fact that irrespective of the many benefits that a business organization accrues because of expanding into new foreign markets, they encounter various problems and challenges in their preferred international markets Dewan & Sudarshan (1996).
Furthermore, the internet, as a matter of fact, has made international business inevitable because companies, as well as consumers, can now access more information about markets and goods respectively easily than they could before the advent of the internet technology. In other words, as Lane, DiStefano and Maznevski (2005) put it, as the international economy grows and expands current and new business managers are forced to learn how to work as efficiently in foreign countries as they do in their mother countries as well as how to develop bridges across the world by controlling both likeness and differences.
Also, business organization has realized that their survival in a world that is ever becoming small in line with technological advancements can no longer be hinged upon domestic market alone. These needs have seen institutions of higher learning design international business management study programmes meant to produce professionals with necessary knowledge, attitudes and skills needed to manage global business organizations successfully.
International business differs in many ways from domestic business and so does global business management from domestic business management. International business management refers to the practice of controlling, directing and guiding business operations in host countries where socio-economic and political conditions, general and business laws and business practices are critically different and unique from domestic business practices and conditions which managers are normally conversant with Newlands and Hooper (2009).
In other senses, the term international business management refers to human activities involving exchange of goods and services directed towards personal satisfaction between and among more than two countries and the study discipline concerned with such activities and practices.
Objectives
The purpose of this paper is to discuss the importance of international business management for running a success company. It aims to establish the nature of international business. It also seeks to identify strategies that a company can adopt in order to sustain its competitive advantages at the international markets so as to safeguard its profitability and survival.
Findings and Analysis
The significance of international business management for running a successful company rests upon the many advantages that accrue from a company’s expansion into new international markets and development of an international identity by a company Korine and Gomez (2002). To begin with, going global gives a company numerous financial advantages.
For instance, the larger the network of a successful company the easier it is to move to places of maximum safety and with highest returns and profit Mead and Andrews (2009). Managing a successful company internationally is a strategic plan that managers can use to mitigate business risks by moving company’s capitals from insecure and socio-politically unstable markets to safer markets.
It also enables a company to focus its energies up on the most profitable markets in a region or segments in a given market, thereby boosting its profits. Secondly, running a business internationally offers production and marketing advantages Mead and Andrews (2009). For example, access to new international markets enables a company to reduce its production costs by accessing valuable inexpensive raw materials as well as cheap labour.
International business management also enables a company to reach and acquire specialized knowledge in new global markets which is unavailable in home markets. Also, a company that is managed internationally is able to partner with local marketing companies, thereby deriving marketing advantages in the sense that a company product gets identified with already known companies and brands.
Also, a company gets an opportunity to market its identity in new markets. International business management also enables a company to enjoy economies of scale through use of their existing resources to expand into new foreign markets. Even though there are various similar managerial practices between domestic and international business, international business has four primary areas of business which raises concerns that global managers must understand for their companies to be successful Newlands and Hooper (2009).
They include cultural differences, commercial environments, politico-legal environments and financial issues. When doing business in different countries cultural differences must be put in to consideration carefully in order to shun cultural clash which is harmful to business Shenkar and Luo cited in (Newlands and Hooper, 2009; Briscoe, Schuler and Claus, 2008).
The main cultural difference to consider is language without which communication can not take place effectively within a business organization Newlands and Hooper (2009). The management must also put enough efforts to understand people’s social customs. For instance, they should learn how people greet each other, work ethics, their sense of individualism versus collectivism, their concept of hierarchy, personal space among many other social aspects which affects business activities Newlands and Hooper (2009).
International business managers must also understand the politico-legal environment in which their companies will conduct its business. It is important to note that different countries have unique political and legal systems Newlands and Hooper (2009). The management must consider issues such as dispute resoluition, employment regulations and contracts. Thirdly; international business managers must note and understand that different countries have different economic or commercial environments Newlands and Hooper (2009).
For example, some countries are more developed and highly industrialized than others, while others are emerging economies. At the same time, different economies grow at different rates so that while some are growing rapidly others are declining Newlands and Hooper (2009). In addition, resources availability, infrastructure and support needed for conduct of business differ from one country to another.
Last but not least, international business managers must consider financial issues Newlands and Hooper (2009). They must note that countries while countries have to trade with each other they have different currencies which operate at different exchange rates in the international markets. Those are some the main aspects of international business which managers must consider carefully in order for their companies to succeed in international markets.
In order to promote and maintain competitiveness in the international markets the following points should be considered by all international designers of a company’s business plan. First, since international markets are increasingly dynamic arenas for competitive interaction; to compete successfully marketing managers of a company should have an in-depth understanding of the diverse needs and demands of customers in various global markets in which these firms intermingle Aswathappa (2010).
Secondly, the company should ensure that consumers’ attitude towards its products which are of course foreign to them is positive because their attitude profoundly influences their purchasing behavior Aswathappa (2010). Finally, those designing a company’s marketing strategies should consider the already confirmed fact that country-of-origin literature contributes considerable knowledge of consumers’ attitude toward foreign products in various countries and can make available insights into the importance of such knowledge for the determination of successful international marketing Aswathappa (2010).
It should also be understood that although numerous developing countries and emerging economies have emerged as vital points of products in international business activities, research on the attitudes of consumers towards foreign should be intensified in the developing countries.
Other strategies that a company can embrace include maintainance of a long-term differentiation strategy geared towards production of goods and services that consumers recognize as being different (Aswathappa, 2010; Harrison 2009). However, international managers should note that a successful differentiation strategy is successful after an intensive study of the customers’ needs and preferences in order to establish the viability of integrating one or more differentiating features into a product.
Successful differentiation feature allows a company to continue charging higher prices for its products and acquire customer loyalty because customers may become strongly attached to the differentiated features Aswathappa (2010). International managers should also take advantage of their companies’ economies of scale in order to attain the lowest cost in all industries in which it is a player.
According to Aswathappa (2010), certain elements of cost should be pruned in order to achieve low cost. These elements include economies of scale, learning and experience curve effects, level of competence utilization, connection with suppliers and distributors, R&D costs, labour, taxes, energy and shipping expenditure Aswathappa (2010).
However, it is important to note that cost leadership strategy as a method of dealing with problem of competitiveness in the global markets is usually effective in situations whereby the market is composed of many price-sensitive buyers or when consumers are not concerned very much about the differences from brand to brand as well as when there is a large number of customers with adequate purchasing power Aswathappa (2010).
Conclusions and Recommendations
Countries must inevitably do business with each other regardless of their diverse business practices and varying business conditions and environments. International business management becomes an important means through which managers use their special knowledge, attitudes and skills in bridging the similarities and differences between domestic and international business activities.
International business managers must note that even though there are certain business practices practiced at home that are also doable at the global markets, international business differs sharply with domestic business. They must particularly take note of the all significant cultural differences and learn how to harmonize and manage employees from different cultural backgrounds.
They should also consider keenly politico-legal differences between various countries where their operations are carried out. Managers must also consider economic or commercial environments of the different countries in order for their companies to succeed in new international markets. Financial issues should be considered carefully because different countries have different currencies with diverse features and abilities within the global foreign exchange markets.
It is recommendable that given the accelerated rate of globalization those training as business managers should study deeply how to manage business organizations internationally. Those working for companies operating internationally should get on job training on matters and trends pertaining international business management in order to safeguard success of their companies.
Reference List
Ajami, R. A., & Goddard. J. (2006). International business: theory and practice. Armonk NY: M.E. Sharpe.
Aswathappa. (2010). International Business 4E. New Delhi: Tata McGraw-Hill Education.
Briscoe, D. R., Schuler, R. S., & Claus, L. M. (2008). International Human Resource Management. London: Taylor & Francis.
Dewan, J., & Sudarshan, K. (1996). International Business Management. New Delhi: Discovery Publishing House.
DiStefano, J. J., & Maznevski, M. L. (2005). International management behavior: text, readings, and cases. Hoboken, NJ: Wiley-Blackwell.
Harrison, J. (2009). Foundations in strategic management. New York, NY: Cengage Learning.
Ireland, R. Duan, Hoskisson, R. E., & Hitt, M. A. (2008). Understanding Business Strategy: Concepts and Cases. New York: Cengage Learning.
Korine, H., & Gomez, P. (2002). The leap to globalization: creating new value from business without borders. Hoboken, NJ: John Wiley and Sons.
Mead, R., & Andrews, T. G. (2009). International Management. Hoboken, NJ : John Wiley and Sons
Newlands, D. J., & Hooper, M. J. (2009). The global business handbook: the eight dimensions of international management. London: Gower Publishing, Ltd.