If you’re thinking of expanding your business internationally, then you’re probably envisioning new opportunities for business growth, market share, and corporate profits. While this is an exciting proposition, it’s not easy to go from a national business to an international one. Expect to take on significant risks and meet with unusual challenges.
Your global business will need a large and diverse talent pool to keep things running smoothly. Besides an able management team in your home country to coordinate things, you will need to find local talent for the country you plan to do business in. However, even this increase in your employment rate might not be enough. It might also be necessary to expand the talent pool by outsourcing information technologists and developers in Europe or India via the Internet. Your business will need to use collaborative software to exchange documents and to find the best and most expedient payment systems to send money online to your technical team.
Let’s take a quick look at some of the issues that can impact a company doing business internationally.
- Your business will be affected by legal issues. Every country has its own unique set of trade laws. In addition, you will still have to comply with the commercial laws and tax codes of your own home country. As a result, you may find yourself paying a variety of fees, dues, and taxes. You will need experienced legal advisers – lawyers familiar with the complexities of international law – to help your business steer clear of penalties and fines for non-compliance.
- Your business will be affected by language issues. If you’re doing business with a country that does not share the same language, translators will prove indispensable. Language issues will not only affect negotiations between partnerships but will also affect the efficacy of marketing and customer service. Even if doing business in a country that shares your language, there could be discrepancies in the language that can potentially create all kinds of misunderstandings.
- Your business will be affected by cultural barriers. Values and traditions that make perfect sense in one country can appear absurd in another, and what is considered perfectly acceptable social behavior or communication style in one country can be seen as the height of rudeness in another. In order to avoid a slew of cultural faux pas that might ruin the business, it’s important to hire people who can serve in the role of cultural ambassadors.
- Your business could be affected by political changes. Political policy shifts create waves of confusion and uncertainty for everyone, both those within the affected country and those doing business with that country. In the case of Brexit, for example, when the UK voted to pull out of the European Union, it affected the entire interconnected world, not just the UK and Europe. Countries as far away as the United States and China worry that the regulatory volatility will affect their economies as well.
- Your business could be affected by economic sanctions. An economic sanction is a commercial or a financial penalty that can affect your business in that country. How the placement or removal of economic sanctions on a particular country affects your business depends on the nature of the sanction and the type of business you do. There are a variety of different sanctions like trade-barriers, tariffs, and financial transaction restrictions. They can also be imposed or lifted for a variety of reasons—political, economic, social issues, or military.
- Your business could be affected by fluctuations in currency values and exchange rates. A floating exchange rate system affects all economies, and the rate between one country and another is influenced by both fundamental and technical factors in the financial markets. For instance, discrepancies in the value of two currencies might be influenced by supply and demand, inflation, and economic performance
- Your business could be affected by changes in labor costs. Labor changes will affect how much you have to pay your workers. It will affect your overheads.
- Your business could be affected by changes in import/export taxes. These changes will affect your profits or losses.
Many Possible Scenarios
A welter of issues can impact your company when it does business internationally, while you can anticipate and prepare for some, others will take you by surprise. While some of these challenges might arise from shortsighted planning, others will be due to the unpredictable nature of geopolitical forces and economic fluctuations. It takes considerable foresight and fortitude to manage risk in a globalized economy.