INTERNATIONAL BUSINESS TRADE want your business to grow rapidly, consider
selling into one of these emerging markets.
(IBT) Language, financial stability, economic system
and local cultural factors can influence which
1. The International Monetary System. markets you should favor.
Refers to the system and rules that govern the use Population and Demographic Shifts
and exchange of money around the world and
The population of the industrialized world is aging
between countries. Each country has its own
while many developing countries still have very
currency as money and the international monetary
youthful populations. Businesses catering to well-
system governs the rules for valuing and
off pensioners can profit from a focus on
exchanging these currencies.
developed countries, while those targeting young
2. The International Monetary Fund System. families, mothers and children can look in Latin
America, Africa and the Far East for growth.
Is an organization of 189 countries, working to foster
global monetary cooperation, Speed of Innovation
secure financial stability, facilitate international trade,
The pace of innovation is increasing as many new
promote high employment and sustainable economic
companies develop new products and improved
growth, and reduce poverty around the world.
versions of traditional items. Western companies
POINTERS TO REVIEW no longer can expect to be automatically at the
forefront of technical development, and this trend
a) The major trends in International will intensify as more businesses in developing
Business/Small Business countries acquire the expertise to innovate
successfully.
Growing Emerging Markets
More Informed Buyers
Developing countries will see the highest
economic growth as they come closer to the More intense and more rapid communications
standards of living of the developed world. If you allow customers everywhere to purchase products
made anywhere around the globe and to access Environmental factors are already a major
information about what to buy. As pricing and influence in the West and will become more so
quality information become available across all worldwide. Businesses must take into account the
markets, businesses will lose pricing power, environmental impact of their normal operations.
especially the power to set different prices in They can try to market environmentally friendly
different markets. technologies internationally. The advantage of this
market is that it is expected to grow more rapidly
Increased Business Competition than the overall economy.
As more businesses enter international markets, b) Global trends
Western companies will see increased
competition. Because companies based in A general development or change in a situation
developing markets often have lower labor costs, that affects many countries of the world: The
the challenge for Western firms is to keep ahead growth of the bank's wealth management business
with faster and more effective innovation as well is part of a global trend. The numbers give, in real
as a high degree of automation. time, a clear indicator of the demand for key
products and are an indicator
Slower Economic Growth of global economic trends.
The motor of rapid growth has been the Western c) Cite examples of Business Trends 2020
economies and the largest of the emerging
markets, such as China and Brazil. Western
economies are stagnating, and emerging market 1) Robots taking our jobs
growth has slowed, so economic growth over the
next several years will be slower. International Probably the biggest change that is affecting our
businesses must plan for profitability in the face of businesses is how machines are taking over tasks
more slowly growing demand. ranging from window cleaning to inventory
management. Anyone with a transaction based job
Emergence of Clean Technology or business will be having a forced career change
before the end of the decade.
2) The Internet of machines The mobile phone app is currently booming but
the real effects of these mobile services will be felt
Those robots and computers are talking to each on industries as diverse as the taxi industry to the
other which speeds up business decisions and will mining and agricultural sectors.
strip layers of management from organisations.
7) The fight for control of the mobile payments
3) Flatter organisations system
A consequence of those faster decisions is the An upshot of the app economy is the question of
need for less management. Organisations need to who processes, and makes money, from online
be flatter in order to process information faster payments. The battle between banks, credit card
unless they want to risk nimble competitors seizing companies, telcos and software companies is
business opportunities. going to be a major business story of the decade.
4) 3D printing 8) Reinventing entertainment
One of the most exciting, and business changing, Apps and connected machines are going to
technologies is 3D printing which allows you to change consumer behaviour and nowhere is this
print a coffee cup at your desk, help robots more notable in the entertainment industries which
construct new buildings and a give a little boy a are being revolutionised by tools like Google
set of fingers. Glasses and social media.
5) Nano-technology 9) The fall and rise of social media
The 3D printing is happening alongside biological Like many innovations social media was greatly
engineering. By the end of the decade, we’ll be hyped and now we’re seeing the backlash of it
able to print our own skin. By 2030, we’ll be being oversold. Over the rest of the decade
printing replacement body parts like heart valves. organisations are going to figure out how to use
6) Mobile apps redefining service industries social media services effectively and profitably
without hype.
10) Newspapers cease to exist
One of the effects of social media, mobile phone target markets is key. From tax
apps and the pervasive internet is the end of implications through to trading laws, navigating
newspapers by 2020 as futurist Ross Dawson has legal requirements is a central function for any
predicted. successful international business. Eligibility to
trade is a significant consideration, as are potential
tariffs and the legal costs associated with entering
d) The main elements of International Business new markets.
Environment International accounting
Geographic factors include location, Of the main legal areas to consider when it comes
climate, terrain, waterways, and natural to doing international business, tax compliance is
resources. perhaps the most crucial. Accounting can present
Cultural factors include language, family, a challenge to multinational businesses who may
religion, customs, traditions, and food. be liable for corporation tax abroad. Different tax
Economic factors include technology, systems, rates, and compliance requirements
education, inflation, exchange rate and can make the accounting function of a
infrastructure. multinational organization significantly challenging.
Political and legal factors include Cost calculation and global pricing strategy
government system, political stability, trade Setting the price for your products and services
barriers, and business regulations. can present challenges when doing business
overseas and should be another major
e) The challenges International Business (2017) consideration of your strategy. You must consider
International company structure costs to remain competitive, while still ensuring
If your aim is to be competitive globally, you must profit. Researching the prices of direct, local-
have a team in place that’s up for the challenge. market competitors can give you a benchmark,
One fundamental consideration is the structure of however, it remains essential to ensure the math
your organization and the location of your teams. still works in your favor. For instance, the cost of
Foreign laws and regulations production and shipping, labor, marketing, and
Along with getting your company structure in distribution, as well as your margin, must be a
place, gaining a comprehensive understanding of taken into account for your business to be viable.
the local laws and regulations governing your
Universal payment methods An obvious risk for international business is
The proliferation of international e-commerce political uncertainty and instability. Countries and
websites has made selling goods overseas easier emerging markets that may offer considerable
and more affordable for businesses and opportunities for expanding global businesses may
consumers. However, payment methods that are also pose challenges, which more established
commonly accepted in your home market might be markets do not. Before considering expansion into
unavailable abroad. Determining acceptable a new or unknown market, a risk assessment of
payment methods and ensuring secure processing the economic and political landscape is critical.
must be a central consideration for businesses Supply chain complexity and risks of labor
who seeks to trade internationally. exploitation
Currency rates When it comes to sourcing products and services
While price setting and payment methods are from overseas, managing suppliers and supply
major considerations, currency rate fluctuation is chains can also be a tricky process. Unfortunately,
one of the most challenging international business the length and complexity of supply chains
problems to navigate. Monitoring exchange rates increases the chance of working with suppliers
must therefore be a central part of the strategy for who have unethical — and even illegal —
all international businesses. However, global business practices. Of growing concern is the risk
economic volatility can make forecasting profit in international business of forced labor
especially difficult, particularly when rates fluctuate and worker exploitation.
at unpredictable levels. Worldwide environmental issues
Communication difficulties and cultural differences As the environmental risks and effects of climate
Good communication is at the heart of effective change are becoming better
international business strategy. However, understood, sustainability is high on the agenda of
communicating across cultures can be a very real many major global corporations. Recent
challenge. At Hult, developing cross-cultural international legislations and proposals, such as
competency and communication skills are a core the UN’s Sustainable Development Goals, have
focus inside and outside of the classroom. put environmental issues at the forefront of
Political risks international business development. The Ash ridge
Centre for Business and Sustainability at Hult
researches innovative ways that organizations can
develop and implement more environmentally
sustainable business models.
