Global business and economics: Understanding and operating in the international market

Doing business internationally may seem risky, but it comes with multiple advantages. A well-managed international business can produce goods more cost-effectively, giving it an edge over its competitors.

Globalization in business refers to the exchange of goods and services between countries. It enhances interconnected trading, which can bolster economic integration–policies that help reduce trade barriers between countries.¹ Economic integration benefits countries by encouraging growth.

Additionally, businesses operating globally open themselves up to millions of potential new customers. With technology evolving, businesses can connect with international clients and partners easily, which fosters easier collaboration.

This post provides an overview of things to consider when expanding into an international market.

A business owner may consider entering the market in a new country for tax incentives, to expand their target audience, to diversify their market, or for any combination of these reasons.

International operations give businesses access to a broader talent pool and can boost their potential revenue by increasing customer volume.²

To successfully operate a multinational company, you as a business owner or manager need to understand international market operations and other factors that could affect your business.

Expanding a business into a new country is not as easy as choosing a location and “setting up shop.”

The operational and marketing procedures you use in the United States may not be appropriate in your new country. You need cultural intelligence, which refers to your ability to work with and relate to people from other cultures.³ It is an essential skill for operating a cross-cultural business.

For example, if you’re entering the market in a more conservative country and use risqué marketing messages to sell your product, you risk offending your potential customers. If you outsource marketing to a local company with intimate knowledge of how to speak to customers in the region, you can sell your product more effectively and build a more positive brand image.

Creating a strategy for entering a foreign market can make the venture less risky. Common strategies include:

• Exporting: Selling products or services directly to customers
• Licensing: Buying the right to produce products in a foreign country
• Franchising: Opening a branch of an existing business in which you own the branch but use the business' branding
• Joint ventures: Sharing ownership with a local company
• Foreign direct investment: Investing directly with foreign companies

As a business owner or manager, your chosen strategy should enable you to connect with customers and establish a local presence.⁴

Some countries don’t allow foreign companies to operate. In this case, you as an executive may have to operate your business with a local company as a partner or co-owner so your business is legal.⁵

Economics plays a pivotal role in shaping the landscape of international business operations and the global economy. However, navigating this terrain becomes complex when encountering diverse economic ideologies. One such ideology that significantly impacts global business is mercantilism.

Mercantilism is an economic doctrine that emphasizes a nation's accumulation of wealth through exports while limiting imports from the global market. This ideology was prevalent during the 16th to 18th centuries and continues to influence policy decisions in some countries today. At its core, mercantilism prioritizes a positive balance of trade, believing it leads to economic prosperity and national power.

For businesses operating in the global arena, understanding the implications of mercantilist policies is crucial. Governments adhering to mercantilist principles perceive foreign companies as a threat to their employment rates, gross domestic product (GDP), financial markets, and other economic markers and may use tariffs and trade barriers to discourage foreign companies from entering their market.⁶

These protectionist measures pose challenges for international businesses seeking to enter or expand into mercantilist economies. Higher tariffs increase the cost of imported goods, making it harder for foreign companies to compete with domestic producers. Moreover, trade barriers hinder market access and limit the potential for growth in these markets.

China's economic policies provide a contemporary example of mercantilist practices impacting global business operations. The Chinese government employs various measures, such as subsidies for domestic industries and restrictions on foreign investment, to promote exports and limit imports. While these policies have contributed to China's rapid economic growth, they have also sparked tensions with trading partners, particularly the United States.⁷

For business owners and professionals with expertise in international business, understanding mercantilism is essential for devising effective strategies in global markets. A comprehensive understanding of business strategy, economic policies, and geopolitical dynamics enables informed decision-making, helping businesses identify opportunities and mitigate risks.

Studying international business or international marketing, whether through a formal education program like a top-ranked online MBA with global economics course offerings, provides valuable insights into navigating the complexities of the global business environment. By staying informed about international trade policies and market trends, businesses can adapt their strategies to thrive in the modern global business landscape on a global scale.

Currency fluctuations pose another risk to international businesses. Shifting currency values and exchange rates can impact profits, particularly in volatile markets.⁸

To mitigate these risks, companies can match currency flows by taking on debt in the same currency making up the bulk of their income. For example, if a company does more business in euros than U.S. dollars, they may consider borrowing in euros.

If you’re in charge of finance at your future company, you may consider hedging, or locking in an exchange rate or exchanging currencies, during favorable conditions.⁹

Although the internet allows businesses to communicate with foreign customers and partners immediately, you as a business manager still need to deliver products and services across the ocean. You can do so by setting up manufacturing and logistics within your foreign market.

Be aware that operating overseas opens you up to certain challenges. Some countries offering cost-effective labor may do so at the expense of their people. Make sure to investigate all potential vendors before partnering to avoid human rights violations and other geopolitical risks.¹⁰

For solopreneurs and smaller businesses, emerging markets can be attractive for global entry.¹¹ These countries often have less established competition, and small businesses can better tailor their offerings to their local customers.

Expanding into these countries comes with challenges, such as infrastructure constraints and political volatility.

To succeed in these markets, U.S.-based businesses need to understand the needs of locals and adapt their unique value proposition to meet these needs. They also need to consider potential barriers and adapt their supply chain or operating models to adapt.

With an emerging markets MBA focus and the right knowledge and skills, you can help your future employer identify the best places to build.

Before doing business in a foreign country, you as an executive need to become familiar with local compliance and legal requirements. Each country has different guidelines for taxes, employment law, intellectual property, and environmental regulations.¹²

Violating these rules can come with hefty fines and other consequences.

Multinational corporation management skills help companies successfully break into new markets.

For example, South Korean tech giant Samsung prioritized the emerging markets of China and India when competitors were hesitant to enter. The company opened an office in Beijing in 1985 and carefully studied the market to develop products that would sell well, including smartphones in the late 2000s.

By 2013, Samsung had a market share of 19%, beating competitors including Apple.¹³

Although Samsung has shifted its focus away from the Chinese market in the 2020s, its strategy of entering an emerging market and catering to the clientele highlights how to successfully build an international presence.

The University of Kansas offers one of the best online MBA programs in the country at an affordable price.¹⁴ It will give you the international business foundation you need to successfully operate your business and market your products in foreign markets. You will learn from renowned faculty with real-world experience.

Let KU help you refine your academic and practical skills while familiarizing yourself with the global business culture, so you can successfully manage businesses abroad.

Contact a KU admissions outreach advisor today to learn more and get started.