American business no longer stops at the border. Companies are looking overseas for diversification and growth.
The American Enterprise Institute reports that many U.S.-based multinational corporations, including Apple, ExxonMobil and Johnson & Johnson, do a majority of their business outside the country. An American Express survey found that 80% of small and mid-sized businesses that sell globally have seen revenues increase.
What’s more, many American brands are owned by companies based outside the United States, such as Budweiser (Belgium), Chrysler (Italy), T-Mobile (Germany) and Firestone (Japan).
A business degree with a concentration in international business can help students prepare for an increasingly globalized world. These students will understand that doing business abroad poses complex challenges, including organization strategy, trade regulations and cultural differences. However, studying international business can be advantageous in several ways.
Structure Your International Business Initiative
There’s more than one way to do business abroad.
- Some companies may opt to keep nearly all operations in the United States, relying on exports to move products and services to foreign countries.
- Others may want to explore franchising or licensing.
- Joint ventures, where a U.S. firm may team up with a company in another country, can be beneficial because the other firm may have local expertise, and they both share the risk.
- Larger companies might have the resources to simply establish their own operation in a different country.
It’s very important for students to understand all options and know which one is most appropriate for their company’s situation.
Navigate Local Laws and Free Trade Areas
Every country has different rules and regulations regarding business. In addition, many countries participate in free trade agreements, such as the North American Free Trade Agreement (NAFTA), Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) and the Association of Southeast Asian Nations (ASEAN). The European Union (EU) serves as both a free trade area and political union, uniting many of the countries in Europe. A free trade agreement makes it easier for a country to import and export its goods with another country by lowering or eliminating barriers to trade, such as tariffs or other restrictions.
Students shouldn’t expect to learn every single foreign law in an international business class, but it’s important to know that the business environment differs from country to country, and some of the laws in other countries will differ greatly from those in the U.S. Students should also be able to identify the major trading blocs in the world, and how they affect business between member states.
Understand Cultural Differences
It’s important for students to learn about cultural differences for two reasons. First, people involved in international business need to understand their target audience for goods and services.
A product that sells well domestically may not be so popular in another country — a Big Mac would be culturally insensitive in India, where beef is taboo. Other products might need modifications or different approaches to marketing.
Even packaging sizes can affect sales. A Euromonitor report found that consumers in India prefer to purchase shampoo in small packets (98% of sales in 2013).
The second reason has to do with business relationships. Cultural norms — gestures, facial expressions, body language and speaking styles — are very different around the world. This could play out in different scenarios:
- How fast negotiations proceed
- How to engage in small talk
- How people are seated around the table
- How to say no
- How to adhere to an agenda
- How to choose business gifts
- How business cards are presented
International business students will be exposed to some of these differences and can expect to gain an appreciation of cultural norms.