Difference in International Business Versus Domestic Business

Difference In International Business Versus Domestic Business

The impact of China's new membership in the World Trade Organization is much debated, but most agree that inflows of foreign direct investment will pick up. Foreign firms will have unprecedented access to geographic regions and economics sectors but must contend with China's general lack of codified laws, the regional diversity of "legal systems" and practices, and the absence of case precedents. A literature survey and in-depth interviews with business and legal experts in China make it clear that firms entering China must be fully aware of these challenges and quickly establish the personal connections and procedures needed to operate successfully.

The fact that this big economic opportunity of a market of over 1.3 billion people opened up to the world economy, has meant that all multinational managers have to gear up to understand the nuances of the way of doing business in China.

There are multiple forces that come into play when doing business in a foreign country, which can be categorized as external or uncontrollable forces and internal or controllable forces.

Internal and controllable forces are to do with the factors of production – personnel, finance, production and marketing – that management administers to adapt to changes in the uncontrollable forces listed below.

External Forces are those that on which management has no control and internal forces are those that management can develop and use to formulate and execute the firm’s strategy given particular external forces.

External forces affect foreign business due to cross border difference as listed below: 1. Competitive: where the kinds and number of competitors, their locations, and their activities are not controllable. 2. Distributive: the kinds of national and international agencies that is available to distribute goods and services in the foreign country 3. Economic: Variables such as GNP, unit labor cost, and personal consumption expenditure that matter to business and influences a firm’s ability to do business. 4. Socioeconomic: Characteristics and distribution of human population and its impact on business. 5. Financial: Interest rates, inflation rates, taxation ad other variables that have an impact on business. 6. Legal: the many foreign, domestic, and international laws governing a firm’s operations in a country. 7. Physical: natural elements such as topography, climate, and natural resources (factors of production) 8. Political: the political climate, forms of government, and international organizations 9. Sociocultural: elements of culture such as attitudes, beliefs, opinions and their similarities or differences that affect international managers 10. Labor: Composition, skills, attitudes of labor 11. Technological: technical skills and equipment that affect how resources are converted to products

In a foreign environment, the multinational manager can be bewildered by the diametrically opposed political forces and values. For example, in the event that there is an embargo placed on doing business with one country, the same can be circumvented by going to another friendly country with the same product being manufactured by an affiliate, not governed by the rules of the parent organization’s country.

Foreign forces are many a time difficult to assess – especially true for legal and political forces. Laws may be passed to appease sections of the society but may appear to be against foreign investment, but upon taking closer assessments, clauses and exceptions can be used to ones benefit.

Forces are often interrelated, where the abundant availability of one factor of production could cause the other factors of production to be underutilized and closes made dependent on these factors could change.