12 Challenges of International Business (Explained)

Issues and Challenges of International Business

As the saying goes with great power comes great responsibility similarly international business with great benefits and the potential it provides also provides great issues and challenges.

Stepping into a global business is a worthy endeavor of a company but it also brings different challenges to the company. In order to succeed in international business, a company must confront different challenges. Here we have mentioned some challenges:

International Environment

Doing international business means doing business in an international environment. Managing different global environmental factors like political, economic, socio-cultural, technological, environmental, and environmental is a great challenge.

In domestic business companies only have to interact with the national environment and they are familiar with local languages, cultures, needs, and preferences, and this helps companies to formulate better strategies. But when they go global it is challenging to address global languages, cultures, people’s economic conditions, and so on to come up with an effective strategy.

Need For New Strategies

Companies operating at the international level requires to have new plus effective strategies. The company’s strategies should align with the resources they have and the expectations of the internal market.

Research is required to come up with new effective strategies. A company should do research on different factors of the international market and especially about the place where it wants to expand its operation.

Competition

Competition is one of the most notable challenges of international business. Here the competition is very very high since the market is open competition is increasing day by day.

For example, with the famous brands crossing their national border in the process of international business, many national brands have seen reduced market share, sales, or even death of their nationality. Dabur is no longer India’s alone after Dabur Nepal Ltd started its production and marketing in Nepal. BMW is no more a German automobile brand. No more is Japan’s Toyota or USA’s McDonald’s.

Broader Management Skills

Managers now have to think globally to act locally. When companies enter global markets managers need skills to manage companies’ operations globally also.

Hiring international talents, understanding the international market, strategy formulation, complying with international laws, cultures, politics, managing global teams, etc. all have become essential for managers to think to operate efficiently globally.

Communication

It is also called communication is the heart of international business. Without proper communication, there is no existence of the international business.

At the domestic level, companies would easily organize meeting programs and share the matters. But at the global level, due to physical distance companies’ operations are scattered into different countries even their territories.

At this time physical meeting is not possible, companies should use technologies such as video conferencing, zoom meetings, etc. Even the Covid pandemic has also forced companies to use different modes of technologies to handle business activities without physical presence.

Choosing The Right Countries

It is obvious that all the countries may not have the potential to serve international business. A manager should choose the right countries where he wants to expand his company’s operation.

In choosing the right country the manager should analyze and understand different countries, and their markets, compare benefits & drawbacks, and forecast potentials.

Company’s Structure

Companies should develop a structure that best fits the international market. Defining roles, responsibilities, and authorities relationship is crucial to developing an efficient structure.

The company should decide before hands who will lead a particular operation in a foreign country, where will be its headquarters, how all functions should be, etc.

Pricing

Pricing is also a challenging task for the manager in international business. By comparing it is easy to set different products or services prices in domestic business since all the relative factors are clearly identified and studied.

But in the global market pricing becomes difficult. Managers have to do extensive research on consumers’ economic conditions, consumptions pattern, competition levels, and other emerging factors. As in the global market, quality and low-priced products are high managers also suffer from whether to reduce the price or improve quality as production costs have incurred there.

Payment Methods

In this modern time, since different payments systems are introduced however it has become one of the main challenges for the success of the international business.

While setting payment methods companies to have to understand what payment methods a particular country use or is famous there where they want to expand their business. If an American company wants to engage in international business with India, it must understand what payment systems the Indian market use.

Basically, Paypal and Payoneer are effective payment methods for international business. And, if the company wants to do global business with Nepal should consider payment methods Esewa, Khalti, IME Pay, and if with India Phonepay, Paytm, etc. should be considered.

Currency Exchange and Inflation

A manager engaging in global business must have knowledge about the exchange rates and inflation rates. The exchange rate is the relative price between countries where inflation is decreasing the value of a country’s currency.

The two countries’ currency value is not equal. A manager should know the value of his country’s price with the countries with whom transactions are supposed to do. For example, India’s Rs. 1 is equal to Nepal’s Rs. 1.6.

Foreign exchanges rates are changing every day, managers should study this and also know about constant and changeable exchanges rates. When doing financial transactions with nations the manager must look at exchange rates.

Supply Chain Management

Supply chain management (SCM) is about handling the flow of products to final consumers consisting of raw materials importation and production. Doing business internationally managers have to establish different supply chains where their operations are running.

A short and efficient supply chain is crucial for companies to gain the most from international business. A manager should confront the different regions and regulations and establish short and efficient supply chains.

Environmental Concerns

It is critical for companies to observe international environmental regulations when they begin operations in a foreign country. Quality products that do not harm the environment’s health, and protecting the surrounding environment where the business operates are the prevailing international environmental concerns.

In addition, companies should also take extra measures to alleviate environmental issues in the areas where they work. Any failure on the side of the firm to address such concerns, whether through ignorance or avoidance, will harm the company’s brand image and ruin its business.

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