What Possibilities Does The International Business Offer You, And How To Start It?
The definition of international business says that business activities go beyond the space of only one national or state economy.
These activities can be commercial, capital, or financial, while the current market globalization is progressing swiftly, especially in trade and services. What are the opportunities entrepreneurs have in this regard?
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International business – development and current state
Throughout history, international business has undergone dynamic changes that affected both its development and the depth of business in the international space concerning nation-states.
Analyzes of the world economy define four periods during which further developments in international business and trade took place.
Each period is characterized by something different, not only from an economic point of view but mainly from a political point of view. These two factors influence each other significantly.
Let’s briefly imagine the development of international business:
The growth phase from 1870 to 1913
During this period, international trade was under minimal political intervention and was characterized by a stable environment of the international monetary system as well as the free movement of capital and people, while the economy grew the most in the USA and the least in Asia.
The phase of changes and crises between 1913 and 1950
In this period, the world went through two world wars, but also significant geopolitical changes that had an impact on international trade and business; the economic crisis in the 1930s also caused more excellent political interventions in the USA and Western Europe, in the USSR there was a radical restriction of private property.
The recovery and reconstruction phase from 1950 to 1987
During this period, national economies focused on economic reconstruction and a return to the world’s liberal trade system, which also meant an increase in foreign investment and, thus, the strengthening of international business.
The phase of transformation and changes from 1987
This period lasts until the present day. It is characterized by a summary of several changes and transformations, for example, the decisive entry of Asia into the international business space, but also economic integration, which has an impact on economic relations, geopolitics, and geoeconomics; thus, globalization and joint ventures are becoming more typical terms in contemporary international trade.
The current situation is mainly accompanied by globalization, which in practice means the development of trade and services on a global scale when a new and broader space is created for international business to achieve higher efficiency.
In connection with globalization, joint ventures, so-called joint ventures, are when a production or business activity is combined with the participation of a domestic and foreign partner – either companies from two countries create a joint venture in a third country or one of their home countries.
International business from the perspective companies and entrepreneurs
If you want to expand your business abroad, as a domestic business, you need to consider and prepare for all aspects of expanding your business. Entering foreign markets brings several worries, from choosing the correct form and securing sufficient capital to choosing an appropriate strategy to ensure sustainable growth in the global economic and economic space.
Everything depends on whether you plan to produce and deliver products, that is, goods, or whether you are running a service business. Currently, international business is no longer the prerogative of large companies, but more and more small entrepreneurs are expanding their business activities beyond the borders.
International forms of business and expansion strategies
In the case of the form, in this case, it is not so much a question of the form of a business company and, therefore, for example, a joint-stock company or a limited liability company and their equivalents in individual states, but rather whether you will focus on the creation of a subsidiary, a foreign branch or a particular form of cooperation in within the given state.
You can enter the foreign market through export, joint ownership, or direct participation, and each form has its pluses and minuses.
If you have produced in the country, you can choose:
- Indirect export through an export company, export house, export association, or piggybacking
- Direct export either without direct investment, with direct investment, or through branches or subsidiaries
If you have production abroad, you also have several forms to choose from:
- Entry without direct investment, for example, through the sale of a license, the sale of know-how or a franchise, contract manufacturing, or a management contract
- Entry with direct investments, either as a wholly foreign-owned enterprise or in the already mentioned joint venture, i.e., co-ownership
If you decide on a joint venture, you have several options:
- Buying a license
- Bilateral agreements
- Cooperation in several areas
- Joint venture
- Strategic alliance
- Merger and acquisition
Market evaluation and analysis
Part of deciding how and where to enter the international business is correctly selecting a specific market. The international business environment is always made up of specific conditions in that country.
Although more and more parameters and criteria are similar or identical, the right choice can be the essential factor for the success or failure of an entrepreneur. This is also why international business strategies focus on market analysis and evaluation.
Such an analysis includes the following parts :
- Evaluation of the potential of the foreign market
- Assessment of access and availability
- The sensitivity of the given market to the product or service
- Competition analysis
- Analysis of own strengths and weaknesses
- Evaluation options
- Social, political, and legal conditions
- Financial conditions
The most important thing for international business is to have capital. A successful entry into the international economic, commercial, and economic space is impossible without sufficient capital and financial coverage.
This capital can come from several sources, depending on the possibilities and the comparison of advantages and disadvantages. This is also why, in any case, international business management must focus on what and how to finance entering and staying in foreign markets.
As an entrepreneur, you have the following options for raising capital, along with their advantages and disadvantages:
The advantage is that you decide everything yourself, the disadvantage, on the other hand, is the risk of exhausting your own funds and endangering your home business.
Capital from bank sources
If you decide to take out a loan or use bank sources, this is an advantage of getting huge funds, but the disadvantage can be the need to focus more on faster returns than on longer-term opportunities.
Capital from investors
Investors are external capital resources that combine the advantages of bank resources but also the disadvantages of limiting the complete freedom of decision-making about the direction of the business
Joint capital with another entity
In the case of an explicit agreement, it can be advantageous to share both financial resources and experience and share risks and the organization. On the other hand, the disadvantage is the natural necessity to share the profit and a little less flexibility in decision-making.
Legal and tax coverage
Part of international business is also the issue of international law and taxes. In this regard, very few people can know enough not to need external specialists.
Therefore if you plan to enter the international business and business space, these two factors should also be part of the plans and implementations. Whatever you decide to enter any foreign market and whatever form of business or participation you choose, you will need the following:
- Legal services for the field of international law, for covering supplier and customer relations, and for covering forms of cooperation
- Legal services in the given country for the foreign market concerning the specifics of the local legal order
- Economic services from the point of view of capital management and financial flows following both the law and accounting rules
- Accounting services for the reconciliation of financial flows within the entire international business
- Tax services and consulting in the field of international value-added tax refunds, tax offsets, and avoidance of double taxation.
- Tax services for consulting and setting concerning the foreign market
Representation around the world with the help of a specialist in international business
Suppose you want to start an international business in several areas simultaneously and focus mainly on services. In that case, you can also try the services of specialized agencies or commercial companies that offer mediation, especially logistics and local representation abroad.
The most significant advantage is that you get comprehensive services in one package, and you don’t have to worry about where you can find a suitable space for representation in a given country.
Most often, such specialized companies provide the following:
- Natural office spaces and commercial spaces or even virtual offices and branches
- Meeting rooms, business lounges, and other spaces for negotiations
- Conference areas and conference rooms
- Logistic matters, especially transportation in the given country
- Administrative and business agenda, for example, handling phone calls and mail
- Contacts for legal, tax, and other advice in the given country
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