Companies that do business across borders face a specific set of challenges and opportunities that domestic companies do not. While each business is unique, all of them must confront many of the same challenges. As such, these companies have developed a few standard ways of managing risks and doing business internationally.
Those adaptations have created a set of common characteristics for international businesses.
1. Cross-Cultural Management: Besides trying to get different personalities to work together, international companies must also deal with cultural differences, language barriers, differing holidays, conflicting laws and multiple time zones. International companies often employ country managers that are trained in international management, as well as liaisons specifically tasked with making sure that international communication runs smoothly. They may also employ psychological profiling tools such as the Cultural Orientation Indicator to identify potential culture clashes before they happen. Some keep international calendars to alert everyone in the company that the European Union staff will be on vacation in August, the Moon Cake Festival will shut down tin box production in China, and Canadian employees will be gone for Thanksgiving in October.
2. Supply Networks: International companies may be more interconnected with their suppliers and distributors than domestic companies. This may be due to a more complex product line, the necessity of real-time communications to accomplish complicated manufacturing, or close personal connections. In some countries, local laws force international companies to partner with a locally owned company. In addition, many larger international companies grow primarily through acquisition. For instance, a Chinese company that wants to expand into Brazil may find it easier to buy a Brazilian company than to start operations from scratch. This can further expand the network of suppliers and distributors. Those relationships and contracts may also be the most valuable part of the acquisition.
3. Foreign Exchange: Finance is critical to the health of any business, but an international company must pay particular attention to its finances. International companies work in multiple currencies and are often taxed in multiple locations. A timing error when paying a bill in Japan with revenues from France can result in a net loss on a project due to fluctuations in currency values. Conversely, a wise business decision can allow an international company to profit from a much lower cost of doing business due to a favorable exchange rate.
Those adaptations have created a set of common characteristics for international businesses.
1. Cross-Cultural Management: Besides trying to get different personalities to work together, international companies must also deal with cultural differences, language barriers, differing holidays, conflicting laws and multiple time zones. International companies often employ country managers that are trained in international management, as well as liaisons specifically tasked with making sure that international communication runs smoothly. They may also employ psychological profiling tools such as the Cultural Orientation Indicator to identify potential culture clashes before they happen. Some keep international calendars to alert everyone in the company that the European Union staff will be on vacation in August, the Moon Cake Festival will shut down tin box production in China, and Canadian employees will be gone for Thanksgiving in October.
2. Supply Networks: International companies may be more interconnected with their suppliers and distributors than domestic companies. This may be due to a more complex product line, the necessity of real-time communications to accomplish complicated manufacturing, or close personal connections. In some countries, local laws force international companies to partner with a locally owned company. In addition, many larger international companies grow primarily through acquisition. For instance, a Chinese company that wants to expand into Brazil may find it easier to buy a Brazilian company than to start operations from scratch. This can further expand the network of suppliers and distributors. Those relationships and contracts may also be the most valuable part of the acquisition.
3. Foreign Exchange: Finance is critical to the health of any business, but an international company must pay particular attention to its finances. International companies work in multiple currencies and are often taxed in multiple locations. A timing error when paying a bill in Japan with revenues from France can result in a net loss on a project due to fluctuations in currency values. Conversely, a wise business decision can allow an international company to profit from a much lower cost of doing business due to a favorable exchange rate.
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