HOW TO START AN INTERNATIONAL BUSINESS

Meaning of international business-

International business can be defined as a cross border transaction between people, businesses, or
government entities. Mainly it involves export and import from other countries. Such transaction
can be of anything that has value (money worth), for example
 Physical Goods
 Services such as banking, insurance, tourism. construction, etc.
 Technology such as software, arms and ammunition, satellite technology, etc.
 Capital and
 Managerial knowledge (know-how)
Conducting an international business has become possible because of globalization. It refers to a
shift towards a more integrated, interactive and interdependent world economy. It has increased
cross border trade and investment.

Starting an international business it lot more than just obtaining a visa, packing your bags, catching a
flight to go abroad to work on a business idea. In international business, all business transactions are
conducted on a very large scale, e.g. - production and marketing of goods and services is conducted on a
huge scale. There can be many reasons for going global- it can be a better market opportunity, better
income, better standard of living or just wanderlust. The obvious out of all is to grab the upcoming
opportunities and make the most out of them. There are numerous many international opportunities
present before us nowadays. One can exploit corporate technology and knowhow. By entering the
global market, you'll learn how to gain a competitive advantage against foreign companies. The
maximum opportunities are available in the markets of China, Japan and Europe. But those only skim
the surface. There are also other fast-growing, less-competitive markets. Also, it is advisable for firms to
first gain experience from the domestic market before they move in to the foreign markets.

International business includes investment of more costs in terms of capital as well as time.
Businessman intending to go global often ends up making the mistake of taking it lightly while
preparing their various budgets and assuming running it to be same as a domestic business on
their domestic land. But it is important to know that making a detailed budget doesn’t assure you
hundred percent successes, there are many other factors needed to be considered. Neither does it
have a direct impact on the failures of the business.

However with everything planned correctly, starting a business on global level doesn’t always
have to be so costly. With the optimum use of right technology, the updated social media and
content marketing, you can achieve global coverage without having to relocate or going
anywhere. Content marketers utilize sites like Facebook and Twitter to reach audiences that
would otherwise be out of reach, while search engine optimizers cater that content to make sure
their message reach those audiences. Varied climate, formal and informal barriers to trade
between countries, barriers to foreign direct investment, transportation costs, issues related to
political risk, economic risk, foreign currency values and the global price of goods or services
are some of the things that can majorly affect your choice for international business.

Going international can be considered easy or difficult, depending on what type of business you
intend to start and where do you intend to do your business in (in which countries). One can start
an International business in following eight types-

 Imports and exports

 Licensing
 Franchising
 Outsourcing and off shoring
 Joint ventures and strategic partnership
 Multinational companies
 Turnkey projects
 Foreign direct investment (FDI)

These are the different types of entry modes into international business. Each entry mode comes
with its own different advantages and disadvantages. A person has to make significant analysis
of different entry modes. The basic framework for establishing any business internationally is
more or less the same. Before going in a world market, investigate transportation facilities, other
basic utilities, internet speed, political and economic stability—even weather conditions.

There are some basic entry decisions that should be taken by any firm while stepping into
international markets-

 Which market to enter- long run profit potential, size of the market, cost and risk
involved, availability of resource, competition, political and legal environment
 When to enter those markets or timing of the industry- first mover advantage, first
mover disadvantage or late entrants
 On what scale to enter- small scale entry or large scale entry

The foremost steps to be followed before starting an international business are-

1. Pick the right target market- it doesn’t have to the largest market because bigger
market doesn’t always means more profit, bigger the market means larger the
competition which can create difficulties to survive in the marketplace. The chosen
market should be the efficient and relevant one.
2. Commune and communicate with the locals- accommodating to a new country takes
time, efforts and energy, however it would be a mistake to limit one’s socializing to
already known people and acquaintances. “If you’re simply hanging out with the people
 who look, think and act just like you, that may not get business done,” Better to stay, eat
and socialize among local people of the country so you'll be able to obtain the nuances of
their culture, language accent and business attitudes, also it will be easier to develop
contacts which will ultimately be beneficial for you.
3. Learn and embrace the business culture- honoring native business customs will create
the distinction between winning and losing customers. Always respect the customers,
employees, industry members or other important people for the business.
4. Seek World tax and legal counsel- It might cost you heavily to assume that the tax and
legal protections you relish within the Asian nation apply worldwide. Don’t try to
navigate this alone. You need advisers who understand each local and Indian law. Such
counsel can be tough to look for, unless you can afford international law and accounting
companies.
5. Find a native partner- finding a trustworthy business partner who is native to the region
or familiar with the local business climate can simplify things. Finding a local partner
also can be a lifesaver if you haven’t mastered the native tongue, also they can help you
in adapting the environment of a new country.

Before starting your international business, be sure that you possess some, if not all, of the following
talents or skills:
 Be a good salesperson
 Be organized and good at paperwork
 Enjoy working with people from different cultures and ways of doing business
 Have a background in international business
 Have specific industry expertise
 Enjoy travel
 Be prepared to work unusual hours
 know more than one language

Before you start tapping into new overseas markets, consider these things to include in your
global expansion strategy-

1. Start your international expansion by preparing an international business plan to measure

your needs and wants and set your goals. It's necessary to know your willingness and
commitment to grow internationally before you get started. It’s important to assess what you
want to achieve ultimately and what resources are available to you and how you will be
managing the available scarce resource. One needs to formulate a Strategy and a detailed
Business Plan to drive success for the ultimate achievement of the overall organizational
objectives and strategies.
 Define short-, medium-, and long-term strategy.
  Set reasonable goals to control process, progress and costs.
 Define goals, objectives, and success metrics.
 Complete the business model or organization structure.
 Prepare an annual budget.
 Develop a factual project plan with deadlines and commitments.
 Perform a SWOT analysis
 Know your competition
 Create a list of all the costs that will be incurred by your international business
including the hidden costs.

2. Research Business Practices- every country has its own varies business practices, laws,
ethics, banking policies, and taxation (rates or manner). While you can set up a business in
one country in a single day, it might take weeks or perhaps months in other countries. Before
you make a move and get started, study the laws and requirements for the country you’re
curious about, and investigate what will be cost of capital, price to acquire or rent a property,
and begin operating. Conduct foreign market research and identify international markets
properly. Then select your target market. You have to be sure that your ideal customers base
exists in your chosen target market. Find out if there is enough need/requirement for your
goods or service, and how likely the chosen customers are going to buy it. Learning
everything you can relate to your chosen market can give you an honest indication on
whether or not your business can succeed there. Before starting your business overseas, you
should do some research of the market to determine whether there is need for your product,
interest in your product or service, and how much competition is there (look deeper into the
competition tactics). Find out about the other businesses of the same category that are already
operating?
When you are expanding internationally, it’s important that you avoid getting in a market
that is already saturated, or where there are already businesses offering similar services.

3. Study Cultural Differences- understanding another culture- One huge distinction between
doing business domestically and internationally is culture. Culture is learned, shared
behavior, acquired through education or experience, and passes on from one generation to
another. The different components of culture such as education level, social structure,
religious and ethical beliefs have important implications on international business. The
cultural system, norms and beliefs of a country can affect the costs of doing business in that
particular country.

In the era of globalization, today international businesses consist of people from different
countries and having different cultures coexisting in real and virtual workplaces. To be
successful in international businesses, managers must, therefore understand the cultures of
different countries and how to adapt to them. The critical element of culture encompasses
language, gestures, religion, values, attitudes, customs, manners and aesthetics. Thus the
mentioned differences in language, customs, religions, etc. constitute the differences in the
cultural environments of different countries. Language barriers are often one of the biggest
challenges of taking your business global. Despite the fact that fewer than 20 percent of
Americans speak a second language, English is not the first language of doing business — and in
the majority of International markets, customers say that they are more comfortable to do
business when the products and materials are bestowed in their own language.

 Do your research. Learn the possible number of pointers and facts regarding the
country; it shows you respect cultural heritage. Also, get comfortable with the
essential words in their language.

 Dress with respect and authority. This would be obvious, if it's not, seek the
assistance of an image expert.

 Understand body language.

 Think about taking a few short trips abroad to get your bearings and begin
interacting with the local people. You would like to know cultural variations that
would have an effect on your business’s viability. Research the culture
encompassing the merchandise, goods or service you’ll be selling to make sure
that there’s a market and a requirement for it.

 Optimum use of available resources to differentiate oneself.

Every country has totally different cultures and beliefs, and other people may be very
terribly sensitive to those beliefs. A global company, if not careful, can land a lot of
problems if they don’t look-out of the country’s behavioral factors. For example,
McDonald cannot sell its beef burgers in India; else it will have to face the strength of the
Indian population that is majority Hindu. In response to this McDonald launched a new
burger names ‘Aloo Tikki’ to gain Indian customers. Venturing into a whole new country
requires learning about the cultures within and how they might perceive your brand. Find
 out everything you'll be able to regarding native traditions, values, religions, holidays,
and different cultural variations you ought to adapt to.

4. Understand the Country’s Political and legal Climate- differences in the structure of law
between countries have important implications for the practice of international business. The
legal system of a country is defined by the government. Having different governments, every
country has different laws and policies. A corporation got to check all the legal requirements
within the country throughout that it need to carry out business. The essential laws that
require attention are securities laws, shopper protection laws, employee protection laws,
consumer protection laws and many more. The process is a necessity although it’s prolonged.
Legal systems in different countries may be classifies as common law, civil law or theoretical
law. Legal jurisdiction issues are more complex in the context of international business than
in domestic business.

It’s vital that you simply perceive the political climate of the country you’re coming into,
moreover as its concerning taxation and asset acquisition.” You wouldn’t want to be stuck in
a position where your profits are unfairly taxed or your assets are seized due to some political
or legal non-compliance. You need to observe carefully to do your best to work in a country
with a stable political and economic system.

Other countries have their own legal system you’ll need to abide by, and it might look totally
different than the one you’re already used to. This is why you might need to use translators
that can help with the upcoming financial challenges. They can assist you with the banking
and other required details to ensure that you comply with the law.

Different types of legal systems are-

O Property rights
O Protection from intellectual property
O Product safety and product liability
5. Seek Legal Advice- The degree to which property rights are protected can vary from country
to country. Patents, copyrights and trademarks are the tools used to establish ownership
rights over intellectual property. It differs from country to country. For example- many
countries have stringent regulations on the intellectual property rights but china and Thailand
allow the manufacturing selling of pirated computer software.

Hiring a lawyer is a good idea especially when starting a business overseas. Locate an
experienced lawyer from your home country who is living and working in the country to
which you are planning to move. This will ensure that your lawyer knows your cultural
background but also has the knowledge and skills to help you in navigating the foreign
environment.

 Some countries are highly litigious when it comes to legal processes, so it is important that
strong legal processes are put in place to minimize unnecessary financial risks.

 Government agencies have strict requirements regarding the necessary legal

documentation required to conduct business in another country. This could be costly on the
upfront however it’s better than risks and liabilities.

 Create localized business agreements.

 Review industry-specific requirements to ensure compliance of the regulations and

certifications are obtained beforehand if needed.

6. Seek Local Guidance- Just like you might get involved with the Chamber of Commerce or
Small Business Association in the U.S., you should try to get in touch with other business
owners operating in the country where you plan to move. Do this before actually physically
moving so you have a few acquaintances already with whom you can discuss things
regarding business.

Human talent- Unless your business will be run by robots, you need to think about how you
intend to staff your new location. Specify your requirements regarding education levels and
other capabilities, as well as the option of relocating talent from your home land to work
 abroad. There could be other compliance requirements and considerations when hiring
foreign staff, including worker’s salary, other benefits, minimum wages, expected
environment, and other details worth knowing.

Key contacts- In business, it’s not just about what you know, but also about whom you
know. Get it touch with relevant industry leaders in the country you are intending to move to.
They can provide you with helpful resources and introduce you to other important industrial
people who can influence your success.

7. Currency- international transactions involve converting money into different currencies.

When running a business in a different country, you should have some prior knowledge
about how to appropriately price your products and services you will be dealing in. You
should also consider having a look at the banking options available that can help you manage
your foreign money. Converting currencies can lead to a cut in your profit margins as such
conversion into other currency isn’t free. Don’t forget to add currency conversion costs in
your price budgets and strategies. Remember that your prices may need to be adjusted over
time to record changes in exchange rates. Managers must be quick in developing policies for
changing rates. A single wrong policy in this respect may lead to the downfall of your
business whereas one right policy can make it reach heights.

It’s important that you make it easier for your international customers to do business with
you. You need to set a reliable and secure means of processing your transactions. You can
use any local bank or the online applications like paypal, paytm, etc.

Financial help- As with any growth plan, expanding internationally requires financing. And
growing globally has special requirements when it comes to finances. Export-import is one of
the best option and source for financing your global business.

8. Technology
 Technology has been a very important facilitating factor of international business. It is a
universal factor that crosses national and cultural boundaries. Once a technology is
developed, due to globalization it is possible to share it globally. Technology makes it
imperative for the business firms to capture markets in various countries and share the rising
costs and risks.

9. Competition

Another important force driving international business is increasing competition.

Competition compels firms to explore new ways of increasing their efficiency, extending
their international markets and by shifting certain production activities to reduce costs.

10. Give Yourself Time

Even if you’re certain of every detail about getting your business started; always keep in
mind that all good things take time. Don’t rush the process. Don’t expect things to come your
way overnight. Don’t get over-excited. Give yourself sufficient time to research, seek trusted
acquaintances and contacts, and navigate the ins and outs of moving abroad. It is a lengthy
process with number of steps involved. Applying and receiving a visa is itself a time
consuming step. As a small business, you aren’t going to be able to take advantage of every
chance and opportunity that approaches your way when it comes to international growth. It’s
would be better to focus your limited resources in the markets where you can get a
substantial client base, cost efficiencies via cheap labor and materials, or a business-friendly
environment with least possible competition. If an opportunity offers one or more of those
benefits, it is worth pursuing. Above all, stay focused and stay determined and do not go
running after every small opportunity that seems great to move aboard, although the
opportunity might have has limitations.

Bottom line
The decision regarding moving or expanding globally should not be taken. If you haven’t crafted
a ultra-careful expansion strategy, you’re wasting your chances for successful growth. However,
if everything goes according to the plan, you might find your new business flourishing even
more than your own expectations. The additional yet most important benefit of taking your
business global is the protection from recession because of the diversified client pool. Consider it
an adventure for the lifetime to own an international business, to fulfill your dreams. With proper
research and prior planning — and the help of a few professionals — you can see the success
coming towards you.