An expansive business relationship and interpersonal interaction have been critical drivers of commerce for a large part of the last few decades. Yet, within that time frame, trade has also been disrupted by various unplanned factors. The COVID-19 pandemic, for instance, hampered interpersonal interaction for the better part of a year for many.
The impact of the pandemic on the global marketplace and various economies further highlights how large a role international businesses play in our world today. As such, we must take a step back and examine how and why the free flow of trade between individuals, ventures, and organizations will always be of utmost importance to the human race.
The latter part of the 20th century highlighted international businesses’ ubiquity and the significant impacts these businesses had through free trade, industrial investments, and technological developments. Of course, free trade is not the only form of international interchange; tourism, culture, and diplomacy, are just some of the other ways to engage in international exchange. Yet, while these are also essential forms, they serve a more short-term purpose.
Regardless of how you see it, international businesses are the only aspects of an economy capable of creating long-term interpersonal exchanges through practical developments that incorporate everyone’s differences and strengths. Given this, we will explore international businesses in detail and their ever-growing roles in the global marketplace.
What is an international business?
An international business incorporates every commercial activity that fosters the transfer of goods, services, people, resources, ideas, and technologies across national borders. These global transactions are not limited to a specific currency, interest, or asset.
International business can occur in a variety of ways. Import and export trade is the predominant form of global commerce. However, it can also take place in the form of licensing and franchising — contractual agreements allowing foreign bodies to use products, processes, and services from other nations — and the development and implementation of commercial facilities in the global market.
A critical requirement for becoming an international business entails recognizing the impacts of all the activities above on local and international markets, nations, governments, and other companies. Understanding the diversity of the global marketplace also helps in handling the risks and uncertainties associated with international trade.
The evident growth in international business, often referred to as globalization, has been attributed to many factors, including technological changes, politics, economics, competition, education, environmental pressures, foreign exchange markets, import and export regulations, trade agreements, and even the weather. Some significant milestones have also shaped international business into what it is today, including:
- Formation of the World Trade Organization in 1995, with the aim of creating economic peace and stability in the world through a multilateral system based on consenting member states
- Adoption of electronic fund transfers enables easier international trade
- European Union’s introduction of the euro
- Novel technological improvements in communication and transportation
- Increasing decadence of numerous communist markets
Understanding the global marketplace
For businesses to remain competitive, especially in the sector’s current state, companies need to operate on a global scale. Any business exploring the global marketplace is exposed to opportunities that can help them grow rapidly and gain access to a new customer base — a sure way to establish new revenue streams and gain an edge over competitors.
Industrial experts use the term “global marketplace” to describe the exchange of goods, ideas, and services uninhibited by geographic borders. So, businesses can reach their customers regardless of their proximity in the global marketplace.
Based on an article from Hartford Business, on average, businesses in the global market tend to grow faster, generate more sales, create better jobs, and pay higher salaries than businesses not involved in international trade. As a result, the global market is an effective way for businesses to overcome regional economic instabilities.
What is the essence of a global marketplace?
To fully grasp the concept of a global market, you must recognize its advantages to society. Here are some benefits of the global market:
- Market diversification
Nations are vulnerable to different economic downturns. At times, these issues could be internal, such as unemployment and inflation. However, external factors such as the COVID-19 pandemic are much more difficult to anticipate and contend with. When handled poorly, these types of factors can significantly affect businesses and the economy.
Participating in the global marketplace offers businesses a level of insurance against most of these factors by diversifying the risks of economic impact. Thanks to this diversification, companies can ease the adverse effect of economic downturns within a country.
- Market targeting
Industrial experts have highlighted global trade as an effective strategy for international expansion. Companies that have found success in one country see international business as the next step in their development, and this is only made possible by the global marketplace.
Today, businesses examine the global marketplace and identify locations that offer better growth potential for a particular product or service. For instance, automobile companies recognize the limited transportation services in emerging economies and promote their products in such countries. Restricting services to a local market places a symbolic cap on a company’s growth.
- Workforce enhancement
Aside from imports and exports, the global marketplace also serves as an ideal solution for international recruitment. There are many reasons for international recruitment. Sometimes, a company could lack the talent to engage in specific processes. Other times, it could be due to a surplus of a particular skill.
In truth, a business or even a country can only grow if it features a diverse educational, cultural and linguistic background. Furthermore, a firm that seeks to expand in a new nation will need the expertise of the local workforce. International recruitment can enhance a company’s workforce to suit current requirements.
- Cost-effective business processes
Following its widespread adoption in the late 20th century, the global marketplace has significantly reduced businesses’ operational costs in other countries. The economics for this are pretty straightforward. Operating costs are lower in countries with a low cost of living, raw materials are cheaper in some locations, and taxation is more lenient in some economies.
Aside from these factors, some countries, particularly developed ones, employ higher technological processes that foster cheaper operations. Businesses can use the global market to employ cost-effective strategies relative to their local market.
The increasing role of international business in the global market
International trade has become a channel for cultural and societal understanding, better communications between nations, the exchange of new ideas, and vast improvements in products and services. International businesses have positively impacted the quality of life of people globally.
Understanding the impact of free trade on different nations of the world is essential, and businesses that recognize this impact gain a broader acceptance in the global market. Here are some of the impacts of international enterprises on the worldwide marketplace:
- Commercial diplomacy
Commercial diplomacy is a type of diplomacy that focuses on the development of business between two countries. This aims to generate commercial gains through trade, business, and entrepreneurship investments. Countries engaging in commercial diplomacy do this as part of an attempt to attain economic stability, welfare, and competitive advantage.
Engaging in free trade requires collaboration between countries, state departments, and the heads of all governments involved to negotiate profitable agreements and maintain a friendly trade relationship. International businesses conducting these trades also become ambassadors through their imports and exports.
For instance, the United States has a strong trade relationship with Trinidad and Tobago, with over 50% of the country’s total exports going to the US. However, aside from imports and exports, there is also an indirect export of cultural values, which makes it possible for Americans to understand and respect the way of life in the dual-island nation. In truth, through commercial diplomacy, international business facilitates other diplomatic processes.
- Improving small-business viability
International trade, to some extent, has created a level playing field in the global market. Recent developments in creating effective international shipping options have provided a platform for small-scale businesses to compete with massive organizations in the global market.
With the dynamic and competitive nature of the sector, it’s pretty standard for new businesses to struggle with larger corporations. However, international companies that streamline this global trade make it possible for small players to compete and flourish.
Today, there are numerous opportunities for small businesses and startups to ship their products and reach the intended audience, regardless of the influence of more prominent corporations. This is most evident in technology as most tech companies begin their operations as startups and grow to become significant players in the industry.
While this increases competition in the market, competitiveness fosters the improvement of products and services as customers opt for quality innovation by new startups rather than settle for mediocre services from top brands.
- Accelerating new markets
In the past, many emerging markets faced different challenges than developed countries. However, these challenges come with opportunities, and with emerging markets making up about 80% of the world’s total population, these businesses need to be accelerated.
With international business, emerging markets are pushed to the forefront rapidly. Through developments in digital communications, new markets are able to develop a lot quicker than they did in the past. The internet has been a significant driving force in accelerating new markets as it offers businesses the opportunity to easily provide products and services both locally and globally.
According to the Corporate Finance Institute, emerging market economies make up 70% of the world’s GDP growth. Accelerating these markets helps generate revenue, enriches the world economy, and creates better employment and advancement opportunities.
- Encouraging diversity
Every culture, country, and person views the world differently and has varying perspectives on different topics. However, it does a lot of good when each of these sectors recognizes and respects the views of others. This is why diversity is so important.
Engaging in free trade requires all parties to understand and respect the value of diversity regarding ethnicity, religion, gender, customs, beliefs, and backgrounds. The level of diversity promoted by international businesses helps to create a tolerant environment and acceptance among everyone involved in the trade.
Through interpersonal contact, exposure, and communication between people, there is an opportunity for everyone to learn how to handle differences in a positive way, free of problems, barriers, and threats.
- New revenue potential
Free trade liberalization has served as an encouragement for the globalization of businesses. This trade liberalization, along with consumer habits, technological developments, and pressure from foreign competitors in the local market, has also led to globalization.
Businesses open to globalization are exposed to a much larger customer base. So, there is an opportunity for these businesses to enjoy a significant boost in revenue, especially when the product is of a higher standard than other businesses.
Another way more revenue can be generated from international businesses is through foreign investment opportunities. Foreign investment can be precious to any business, and the chance to secure such a benefit is only open to companies operating in the global marketplace.
Needless to say, the global market is dynamic, so it takes a highly skilled professional with a solid business education to run an international business effectively. While there are numerous options, a Master’s in Business Administration remains the gold standard in business education.
Many universities now offer an online MBA program for professionals seeking to take their business know-how to the next level. These programs feature a curriculum that helps entrepreneurs build confidence in making critical managerial decisions with skills in finance, accounting, marketing, and management, all of which are relevant when competing in the global market.
There are numerous ways distance learning can advance your career, and with an online program, you have the opportunity to apply your classroom learning directly to your job.