No country is independent, to survive on its own without the help of services and businesses from other countries [Why?]. It’s not easy enough to produce everything within a country due to the different scenarios in every country. Then comes the role of International businesses and services.

What are International Businesses and Services?

It involves cross-country business of goods and services between two or more countries. Activities of economic resources include capital, skills, and people for the grounds of the international production of physical goods and services or assistance such as finance, banking, insurance, and building or construction. International business is familiar with globalization.

How do companies go International?

To direct business internationally or overseas, international companies need to cross or bridge separate state or national markets into one universal or global marketplace. Two large-scale elements underline the tendency of greater globalization. The first involves eliminating barriers to make trans border trade easier (e.g. free move of goods and services, and capital, mentioned as “free trade”). The second is technological change, especially developments in conveying, information conversion, and transportation technologies. The direction of international activities and operations depends on a company’s objectives and the method with which they carry them out. The functions affect and are impacted by the physical and amusing element and the aggressive environment.

Operations

All companies that want to go international have one objective in common; the aspiration to increase their specific economic values when charming in international trade transactions. To fulfill this goal, each company must develop its plan of action, and approach to maximize value, lower costs, and increase profits. A companies value formation is the difference between V (the value of the product being sold) and C (the cost of production per product sold).

Value formation or creation can be classified as;

• Primary task (research and development, production, marketing and sales, customer service)
• Support task (information systems, logistics, human resources).

All of these tasks must be directed successfully and be compatible with the company strategy. However, the success of a company that extends internationally depends on the goods or services sold and on the company’s core capability (Skills within the company that challengers cannot easily match). For a company to be successful, the company’s master plan must be compatible with the environment in which the company works. Therefore, the company needs to change its institutional structure to consider changes in the setting in which they are working and the strategy they are chasing.

Once a company determines to enter an international market, it must determine a mode of entry. There are six different ways to enter an international market, each way has pros and cons that are attached to it. The company must decide which way or mode is most suitable ranged with the company’s aims and objectives. The six different ways of entry are transporting, end-to-end projects, licensing, authorizing or franchising, establishing joint ventures with a host-state company, or setting up a new completely owned subordinate in the host state.

The first entryway is transporting. Transporting is the sale of a product in a different state or national market than a consolidated hub of production. In this way, a company may understand a significant scale of economies from its universal sales revenue. For example, many Japanese auto manufacturers made inroads into the U.S. market through exporting. There are two main pros or advantages to exporting: avoiding high costs of setting up manufacturing in a host state and obtaining an experience bend. Some possible cons to exporting are high transport costs and high tariff fences.

The second entry mode is an end-to-end project. In an end-to-end or turnkey project, a self- sufficient constructor is hired by the company to supervise all of the composition for entering an International market. Once the composition is complete and the end of the constructor is reached, the plant is turned over to the company fully ready for function.

Licensing and franchising are two additional entry modes that are common in operation. Licensing permitted a licensor to allow the rights to the intangible or incorporeal property, to the licensee for a definite period in exchange for a nobility fee. Franchising, on the other side, is a limited form of licensing in which the “franchisor” sells the intangible or incorporeal property to the franchisee and also needs the franchisee to work as dominated by the franchisor.

Lastly, a joint volunteer or venture and completely owned subordinate are two more entry modes in international business. A joint volunteer or venture is when a company created is jointly possessed by two or more companies (Mostly joint volunteer are 50-50 partnerships). This is in disparity with a completely owned subsidiary, when a company possesses 100 percent of the capital of a company in an International country because it has either set up a new function or operation or obtains an established company in that country.

Types of operations

Exports and import

Merchandise export or import of goods:

• The corporeal or physical good or product that is imported into the specific country. Countries import products or goods that their country is lacking. An example of this is that Colombia must import cars since there is no Colombian car company.
• Service exports: As of 2018, the fastest increasing export sector. Most of the companies generate a product that requires attachment or installation, repairs, and overhaul, Service exports are simply, a resident of one country generating service to another country. A cloud software program used by people or companies outside the domestic country.
• “Tourism and exportation or transportation, service functions, asset use”.

Exports and Imports of products, goods, or services are usually a country’s most important international economic transactions.

Choice of entry mode in international business:

Planned variables affect the choice of entry mode for international company growth beyond their domestic markets. These variables are global concentration, global synergies, and global strategic motivations.

• Global concentration: Many of the MNEs share and overlay markets with a limited number of other companies in the common industry.
• Global synergies: The reprocess or sharing of assets by a company may include marketing departments or other inputs that can be used in various markets. This includes, among other things, brand name recognition and acknowledgment.
• Global strategic motivations: Other elements beyond entry mode that are the fundamental reasons for company expansion into a supplementary market. These are planned reasons that may include establishing an international or international settlement for expansion, developing sourcing areas among other strategic reasons.

Means of business

Entry modes: Export/import, completely owned subsidiary, merger or incorporation, alliances, and joint volunteers ventures, licensing or permitting

Modes: Importing and exporting, tourism and transportation, licensing and franchising, end-to-end or turnkey operations, administration contracts, direct investment, and portfolio investments.

Functions: Marketing, universal manufacturing and supply chain management, accounting, finance, human resources

Overlaying alternatives: Option of countries, organization or institution and control apparatus or mechanism

Physical and social factors

Geographical influences: Many different geological factors affect international business. These elements are the geographical dimension, the climatic provocation happening throughout the world, the natural resources available in a certain area, the population issuance in a country, etc.

Social elements: Political strategy: political conflict, particularly those that result in the military conflict, can derange trade and investment. Legal policies: domestic and international laws play a vital and important role in regulating how a company can operate overseas. Behavioral elements: in an international environment, the related regulation such as anthropology, psychology, and sociology are helpful for executives to get a better understanding of values, attitudes, and beliefs. Economic forces: economics highlights country differences in cost and price, currency values,
and market dimensions.

Risks

Faulty arrangement or Planning:

To reach success in probing an International market and enduring profitable, efforts must be administered towards the planning and performance of Phase I. The use of SWOT examination, market research, and cultural research will give a company suitable equipment to reduce the risk of defeat or failure abroad. Risks that increase from worst planning include large amounts or expenses in marketing, administration, and product development; disadvantages obtained from local or combined laws of an international country, lack of demand because of a soaked market, defacing of physical property due to uncertainty of country; etc.

Cultural risks when entering an international market are necessary. The absence of research and understanding of local customs can lead to the isolation of locals and brand separation. Planned or Strategic risks can be defined as the uncertainties and inoperative opportunities submerge in your strategic purpose and how well they are implemented. As such, they are crucial for the board and affect the whole business, rather than just an isolated unit.

Operational risk:

A company has to be aware of the manufacturing costs not to waste time and money. If the spending and costs are managed, it will create a well-organized production and help the internationalization. Operational risk is the expectation of loss following from insufficient, or failed procedures, systems, or policies; employee mistakes, systems collapse, fraud, other criminal pursuits, or any event that disrupts business procedures.

Political risk:

How a government rules a country can affect the performance of a company. The government might be corrupt, combative, or totalitarian; and may have a negative image around the universe. A company’s distinction can change if it operates in a country managed by that type of government. Also, an unsteady political situation can be a risk for international companies. Elections or any predicted political affair can change a country’s situation and put a company in a difficult position. Political risks are the probability that political intensity will cause extreme changes in a country’s business environment that injure the profit and other objectives of a business undertaking.

Political risk tends to be substantial in countries undergoing social disruption. When the political risk is high, it is likely that a change will happen in the country’s political environment that will threaten international companies there. Corrupt international governments may also take charge of the company without warning, as seen in Venezuela.

Technological risk:

Technological development bring many satisfactions, but some disadvantages as well. Some of these risks include, “absence of security in electronic deals, the cost of developing new technology … the reality that this new technology may break down, and, when all of these are paired with the outmoded existing technology, the result may create a threatening effect in doing business in the international platform.”

Environmental risk:

Companies that initiate a subordinate or factory abroad need to be aware of the body they will produce, as some may have a negative impact such as noise or pollution. This may cause worsen to the people living there, which in return can guide to a dispute. People want to live in a clean, and silent environment, without pollution or unnecessary noise.

In case any conflict arises, this may lead to a negative change in a customer’s approach to the company. Actual or potential warning of major effects on living being and environment by sewage, discharge, wastes, resource exhaustion, etc., arising out of an organization’s pursuits are contemplated to be risks of the environment. As new business heads come to achievement in their careers, it will be increasingly important to restraint business activities and embody that may hurt the environment.

Terrorism:

An optional act of violence regarding a group of people. In most cases, acts of terrorism are explained by the loathing of religious, political, and cultural faith. An example was the well-known 9/11 attacks tagged as terrorism due to huge on American Society, and the global economy comes from the hostility towards Western culture by some complete Islamic group.

Terrorism not only impacts non-combatant but it is also injured companies and other businesses. These impacts may include physical mischief or demolition of property, sales reduction due to scare consumers, and government supply public safety reduction. Companies charming in international business will find it is hard to operate in a country that has an unknown affirmation of safety from these attacks.

Bribery:

Bribery is the act of collecting or requesting any items or services of value to impact the actions of a party with public or legal commitment. This is contemplated as an immoral form of exercising business and can have legal consequences. Companies that want to operate legally should command employees not to involve themselves or the company in such activities. Companies should avoid doing business in countries where unsteady forms of the government live as it could bring unjust advantages against domestic business and/or harm the social structure of the citizens.

Conclusion

This article explains opposition in transnational markets. Administrative must think about the benefits, and risks of taking part internationally when making decisions about whether to expand transoceanic. Administrative also need to determine the probability that their companies will succeed when they participate in international markets by examining demand situation, factor conditions, related and supporting industries, and master plan, structure, and contention among its domestic competitors. When a company does travel overseas, a decision must be made about whether its international plan will be multicultural, global, or International. Finally, when leading a company to enter a new market, administrative can choose to manage the operation via transporting, exporting, creating a completely possessed subsidiary, franchising, licensing, and creating a joint volunteer or strategic association.

Edited by: Veerashwar Singh Jadaun