CHALLENGES FOR GLOBAL BUSINESS:
Entering
new country markets unprepared can often lead to disappointing results as well
as detract from efforts in your domestic marketplace. One of the first
challenges is how to appraise the success of any global business activity. We
have all too often found that a global business quite literally “takes on a
life of its own” and grows with specific strategy, management, and no specific
performance metrics. Measuring the ROI is a complex activity that involves
analyzing the many variables particular to global expansion.
There are
additional costs in developing products to be used in global markets, and there
are additional administrative costs in creating marketing and sales materials,
or obtaining special export licenses. There are also longer sales cycles,
longer cash conversion cycles, and the difficulty of trying to determine return
on investments when there are multiple currencies involved.
All in
all, it is far all too easy to fall into the trap of defining what constitutes
a “success” too narrowly because each product/market situation requires that
you set different objectives and establish a different performance metrics
process.
For
example, the complexities of shipping and logistics are overwhelming. In fact,
the hardest aspects of circumnavigating the business world fall into two broad
categories: how to get an order from one place on the globe to another, and how
to negotiate the Byzantine bylaws of trade and customs regulations.
Other
challenges include having to learn new business practices, as well as dealing
with insufficient technology, local employee hiring, regulatory hurdles,
international transaction costs, currency differences, and establishing local
partnerships.
Monitoring
“country risk” is most challenging for small ventures. Large corporations like
IBM, General Motors, and Coca-Cola have huge departments for monitoring this
specific challenge. Country risk is composed of a handful of challenges. For
examples, there is the challenge of dealing with “political risk” which is
dealing with the overall attitude of host governments, attitudes of consumers,
expropriation, racial strife, religious freedoms, civil strife, corruption,
nepotism, nationalism, war, and bureaucracy.
There is
also the challenge of following and monitoring governmental controls, trade
barriers, exchange rate policy tools, and foreign exchange systems, such as
currency inconvertibility and the intervention of buying and selling of
currencies in foreign markets. Finally, there is the challenge of monitoring
the international flow of funds, each country’s “capital account,” or each
country’s trade balances with the rest of the world.
Perhaps
the greatest challenge is refreshing the global mindset.
It is
only through a fundamental shift in mindset that new opportunities are
discovered. In fact, some suggest it should be a formal corporate process that
consists of “global learning.” We stress that this formal process should be an
ongoing commitment of time and energy and, perhaps more important, the ability
to admit that you never know everything and to be always open to learning
something new.
Compliance and Regulations
Whether
you are a small business shipping homemade handbags through a website or a
consulting firm offering your services to multinational corporations, you must
understand and follow various rules and regulations that govern your goods and
services. You must comply with the tax laws of different countries as well as
statutory export regulations. Some countries have strict policies about the types
of business practices allowed in their countries that often include human
resource and pension restrictions and rules if you hire a foreign workforce.
Culture and Language
One of
the advantages of a global economy is that more small businesses can compete
competitively. However, few small businesses are prepared to handle the
customer service calls from China, Vietnam and other emerging markets key to
the success of a global competitor. If your sales are increasingly going
overseas, you have to find ways to navigate the language barriers that may crop
up in emails and phone calls. At the same time, cultural differences can play a
big role in your success in the global market. For example, in China, the color
red is a symbol of luck, while in other countries, it represents a warning
sign. Religious and cultural boundaries must be understood to run effective
marketing campaigns abroad.
Environmental Impact
Recycling
is rapidly becoming a common practice in most U.S. companies as business
leaders realize the impact their behavior has on global environmental issues.
You may be challenged to incorporate successful recycling programs because they
may be cost-prohibitive or just inconvenient. Energy-saving devices such as
compact fluorescent light bulbs make a dent in world energy consumption, but
they may not be viable for your office. Challenges abound for developers
looking to build new factories or office space. Food, energy and transportation
companies all face environmental pressures to use fewer natural resources and
offer products made with recyclable materials.
Technology and Communication
One of
the biggest challenges facing globally competitive marketplaces is the
communication issues that crop up when technology doesn’t keep up in every
sector. When your company relies on disparate systems that can’t communicate
with each other, your bookkeeping gets bogged down, and orders slow or cease.
Access to vital information may be compromised when technological systems are
not standardized. You’ve got to rely on translations and reports from foreign
staff members instead of using a centralized system when the technology you
rely on to run your business isn’t compatible with the technology used by your
buyers, foreign offices and global sales force.
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