International Business – Challenges and Opportunities

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Table of Contents

Introduction
International divisions
Challenges in international business
Key opportunities in international trade
Conclusion
References

Introduction

International business refers to the commercial transactions or trade activities that usually take place between two or more countries. Commercial transactions entails a wide range activities that are carried either by the governments of the nations or the private investors who may be conducting business at an international level with other investors in other countries (Rugman & brewer 2003, p.105).

On a broader context, international business incorporates all business activities that entail crossing national boundaries through transaction of goods, services or exchange of resources between two or more nations.

International trade between different countries is always a mutual relationship that is primarily defined by diplomatic relations that exist between the participating countries.

Different countries have different diplomatic relations with other countries and this significantly determines international trade; bad diplomatic relations between two countries or regional countries impairs international trade between the countries. The foreign policies of a given nation also play a significant role in determining the participation of a given nation in international trade (Feenstra 2004, p. 56).

The onset of international business was primarily influenced by the increasing globalization which harmonized global relations between various countries; which saw various companies scale their operations to international levels subsequently leading to the rise of multinationals such as coca-cola. Some companies merged with other companies in different countries so as to use the available opportunity to increase their sales at international level (Gabriele 2008, p. 87).

International divisions

International divisions play a significant role in determining relationship that exists among different countries and subsequently affects international business. International divisions are determined by a wide range of factors that are primarily defined by social, political, economic and to some extent geographic factors.

The diversity in social and economic factors among different countries plays an important factor in determining the international trade trends between different countries and regional alliances and sometimes affects intercontinental trade (Feenstra 2004, p. 55).

Some of the social factors that that are responsible for international divisions include religion, culture, geographical orientations and governance and economic structures. The international divisions play a significant role in determining the international relationships of a country. The market policies of a given country determine the international trade patterns that the country undertakes (Pressroom 2010, p. 56).

Challenges in international business

There are a number of challenges that are associated with international business. Some of the challenges that affect the local business also affect the international business at the same capacity. The challenges are dynamic and vary in nature according to the participating countries and the type of goods and services that the countries trade in. A challenge in itself is the way the participating countries establish strategies to approach the global trade challenges.

Global markets are faced with various impediments ranging from the structure of the global financial markets to the foreign policies of the participating countries. Cultural, political and institutional diversities and complexities still play a big part in determining international trade patterns as they have been since the onset of international trade. Other upcoming concerns in the international business include the climatic changes, rise of international terrorism and international fraud, just to name a few.

One of the challenges that significantly affect international trade is the formulation of the global trade strategies and the execution of the established strategies. The administrators and policy makers who are solely responsible for facilitating international trade always impair the process of global business (Taylor 2007. P. 39).

The various policies always have an effect on the patterns of global business and in most scenarios, the stringent policies does not favor the development of international trade. There are a large number of businesses that have the potential of carrying out their business operations on a world wide scale but on a few manage to gain international recognition due to the lack of proper international paradigms that only tend to favor a few international companies.

The main challenge is in the global business management; the present global management requires more than just ordinary management in order to make international business run smoothly without any impairments. The current trend however is indicating some improvements with the rise of professionals taking up management positions (Taylor 2007. P. 40).

Another challenge that greatly affects the international business is foreign politics. Foreign politics largely defines the way a given countries relates with other countries on an international platform.

The present foreign policies that have been adopted by a significant number of countries do not favor the sustainability and growth of international business (Moore & Harris 2010, p. 27). The policy makers of international policies put stringent measures such as taxes and rules and regulations that must be followed in order to carry out international business between private investors or the international trade between the participating countries.

These stringent rules and measures that are deployed at the borders or during the transit or exchange goods and services between the various countries always tend to impair international trade as they do not provide standardized international paradigms. Political disarray significantly affects the nation’s financial system and this greatly affects international trade (Moore & Harris 2010, p. 27).

Economic and financial challenges also play a significant part in impairing the sustainability and development of international trade. The organization of resources to initiate international business depends vastly on the variations in the international currency rates, international financial crisis or economic depression among the participating countries and especially the host nation, variations in the oil rates at the global arena, international price variations such as rising and subsequent falling off price of various commodities that are known to attract international attention, and the export rules that are associated with the exporting or host country and the import rules that are present on the partnering countries (Oliver 2008, p. 126).

All these factors serve as impairment to the development of international trade and its sustainability. A recent blow to international trade is the global recession and economic depression that was witnessed by many countries and particularly the unites states of America and in other European countries; this was accompanied by a major decline in international business activities.

Another challenge that international business faces is through the increased cost of conducting international business. Costs that are incurred during international transactions range from the cost of trading the goods or services such as tariffs and quotas to costs that entail direct ownership such as the involvement of foreign personnel in the global trade, taxations and costs due to corruption in the international business system.

The above named factors significantly affect the equilibrium of the international market structure; which is not suitable to sustain and facilitate the growth of international business transactions (Moore & Harris 2010, p. 30).

In order to beat the challenges that are associated with international business, the various countries have to implement several measures and policies that are directed towards the facilitation and improvement of international trade. The participating countries should therefore abide by a given set of norms that that serve to govern the logistics that are associated with international business transactions (Oliver 2008, p. 123).

Key opportunities in international trade

International trade greatly relies on the factors that harmonize global relationships between the various countries. The opportunities that facilitate the growth and sustainability of international business can be viewed from a social, economic, physical and infrastructural perspective. All the factors that attempt to harmonize the equilibrium of the global market serve as an opportunity to facilitate the growth and sustainability of international trade (Diamond 1995, p.36).

The onset of globalization was a major significant step towards the realization of international trade. Some key issues that facilitated the growth of international trade include the technological advancements that are associated with the information age of the late 20^th century.

One of the key opportunities that facilitated the onset, and continued sustainability and growth is globalization. Globalization is fully responsible for the interdependence of countries which ultimately resulted to the integration of business transactions on a global level (Moore & Harris 2010, p. 35). Globalizations also resulted to integration of people and ideas at an international level and this provides a healthy environment to sustain the growth of international business transactions and cross border trade activities.

The integration due globalization is widely evident due to international investments that various multinationals exploited and cross border financial flows. Evidence suggests that globalization has contributed greatly to the rise and growth of international trade (Moore & Harris 2010, p. 35). The onset of globalization harmonized cultural differences between the various countries and this presented an opportunity for exchange of resources between different countries (Diamond 1995, p.36).

Another opportunity for the sustainability and development of international trade is the technological advancements that have been associated with the rise of information age during the late 20^th century (Sawyer & Sprinkle 2006, p.27). The technological developments especially the onset of the internet and the World Wide Web provided a great platform to facilitate international business through the use of online platforms; what is commonly being referred to as e-commerce.

Online business defies geographical orientations which may pose a barrier to the development of international trade. Technological advances lowered the costs that are associated with transportation, marketing, and communication at the global basis.

Advances in technology made it economically feasible for a multinational company to establish the different phases of production at different nations; this greatly promoted the rise of international trade because it scaled the operations of the various international companies on a global basis (Moore & Harris 2010, p. 27).

The liberalization of the global markets also presented an opportunity for the development if international business. This paved way for the rise of open markets with fewer government restrictions which in turn increased the private sector involvement in international business transactions (Indira & Stone 2004, p. 39).

Economic liberalization was due to the need for countries to be globally competitive in terms of international trade which in turn facilitated the development of international business between different countries on a global basis. Liberalization of global markets played a significant role in ensuring the flexibility of global financial markets in terms of both trade and capital markets. Liberalization of the market facilitated exports and imports between different countries (Indira & Stone 2004, p. 42).

Generally other opportunities that facilitated the growth of international trade include the increased privatization, free markets, the development of international financial institutions such as the World Bank and International Monetary Fund (IMF). The development of regional alliances such as the Common wealth and European Union saw the rise in international trade (Sawyer & Sprinkle 2006, p.27).

Conclusion

International business primarily requires the interaction of different government agencies. This implies that it is mostly affected by the government relations rather than the technological advancements and the onset of globalization. With regard to this, participating countries should establish appropriate policies to govern the foreign relations with other countries.

International business is vital for the development of any country through exports and imports which results to foreign income and at the same time facilitating the acquisition of resources that the country lacks (Indira & Stone 2004, p. 34). However, care should be taken when balancing the tradeoffs between the imports and exports in order to avoid cases of inflation (Taylor 2007. P. 54).

References

Alan, M. R & Thomas L. B., 2003, The Oxford handbook of international business, London: Oxford University Press.

Diamond, E. D, 1995, Contemporary challenges: American business in a global economy, New York: New York University Press.

Feenstra, C. R., 2004, Advanced international trade: theory and evidence, Princeton, NJ: Princeton University Press.

Gabriele, G. S., 2008, International business under adversity: a role in corporate responsibility, conflict prevention, and peace, Cheltenham: Edward Elgar Publishing.

Indira, C. & Stone, P., 2005, International trade law, New York: Routledge.

Moore, G., & Harris. L., Trade and Technology Policies. P. 27. Web.

Oliver F. W., 2008, Peace through Commerce: Responsible Corporate Citizenship and the Ideals of the United Nations Global Compact, Notre Dame, Ind: University of Notre Dame Press.

Press room, 2010, Challenges confronting international trade. Web.

Sawyer, C. W. & Sprinkle, R. L. 2006, International Economics (second Ed), Upper Saddle River, New Jersey: Prentice Hall.

Taylor, S., 2007, Major Challenges Confronting the International Trading System. Web.

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