Dada Adefolami

By Dada Adefolami

An international business company or international business corporation (IBC) is an offshore company formed under the laws of some jurisdictions as a tax neutral company which is usually limited in terms of the activities it may conduct in, but not necessarily from, the jurisdiction in which it is incorporated.

The planned expansion of a company’s business activities into countries in several regions throughout the world
Global expansion implies more than just making investments in nations outside of the company’s home; the concept includes maintaining an actual business presence in those countries. However, the need for global expansion is when a business opens and expands opportunities for that business to increase sales etc., organization’s strategy will combine all of its marketing goals into one comprehensive plan. A good marketing strategy should be drawn from market research and focus on the product mix in order to achieve the maximum profit and sustain the business. The marketing strategy is the foundation of a marketing plan.

Meaning and definition of economic risk.

Generally speaking, economic risk can be described as the likelihood that an investment will be affected by macroeconomic conditions such as government regulation, exchange rates, or political stability, most commonly one in a foreign country.

An internal growth rate is the highest level of growth achievable for a business without obtaining outside financing, and a firm’s maximum internal growth rate is the level of business operations that can continue to fund and grow the company.

International management is the practice of managing business operations in more than one country. International Management professionals are familiar with the language, culture, economic and political environment, and business practices of countries in which multinational firms actively trade and invest.

International management is the management of business operations in an organization serving markets and operating in more than one country. It requires knowledge and skills beyond normal business expectations, such as familiarity with local market and competitive conditions, the legal and financial environment, the capability to do multicurrency transactions and managing across borders.

This definition stresses the need for a much more advanced set of skills than managing within national borders. It demands extensive knowledge of local conditions and adaptability.

As with strategic management and management theories, one might visualize international management as running across the more functional areas like marketing, finance and people/organization. What does this all mean? Do you need an international strategy? What does this mean?

An international business plan that includes a strategy for entering or expanding into targeted markets is critical to your success in the global marketplace. The U.S. Government provides U.S. companies with cost-effective resources to help you develop or improve your international business plan.

International management can mean a number of things: exporting infrequently to other countries; having a more established export strategy; having international agents, partners, or perhaps a direct sales force in a number of countries; even having supply and/or production facilities overseas; businesses can also make acquisitions abroad, which is a whole new ball game and one in which risks may well compound.

A simple business expansion plan template can help any growing company move up and to the right. Great templates outline realistic goals, identify leadership, and help to organize your company into teams that are efficient and motivated. Think of your plan as a roadmap for the next three to five years.

The risks faced when engaging in international expansion. When planning to expand a business into new markets, it’s normal to come across some risks that may prevent our companies from actively developing new opportunities in foreign areas.

A classic on international management is George Yipp’s Total Global Strategy: Managing for Worldwide Competitive Advantage. Yippemphasises that developing an international strategy requires the consideration of a lot more than in more run-of-the-mill competitive strategy, for instance:

1. To what extent is a market truly global? In other words, is there a single, world marketplace?
2. In what respects is the market more, or less, global? It may be possible, for example, to have a global brand but not global production and sourcing operations.
3. Some markets will have globally common competitors and some will not. Even when there are global competitors, they may vary hugely in the extent to which they can manage to co-ordinate any attack or defence against you. You will certainly find some huge corporations locked in global combat, such as Coca-Cola vs Pepsi, or Apple vs Samsung, but in many other more globally fragmented markets that will not be the case.

This, in turn, invites the very big questions below:
1. Are your markets global now?
2. To what extent and how is that the case?
3. What are the options for dealing with these opportunities and threats?
4. How attractive are these and what are the implications for you in the longer term?
5. If you are going to do business internationally, what would your strategic objectives be?

There has been a lot of hype here around markets ‘globalizing’ but in reality, as Yipp stresses, a market may be very global in one respect but not in another. For instance, the car market is global in terms of distribution and in some marketing although incompletely, as domestic manufacturers are still influential, but production still takes place predominantly in the manufacturer’s home country.

In the theory of international management, it has always been useful to ‘think global but act local ‘which need to understanding local customers’ culture.

An international strategy is a strategy through which the firm sells its goods or services outside its domestic market” (Hill 378). One of the primary reasons for implementing an international strategy (as opposed to a strategy focused on the domestic market) is that international markets yield potential new opportunities.

Boundaries and cultures still exist, but in the internet age and the spread of a common language – which is English – it’s easier and easier to cross. This is so much so that it is sad not to think about what your international marketplace is – that would be such a good agenda for an away-day for any board

In general terms, a globalmarketing strategy is the approach a business takes in marketing its company and products around the world. The term is also used to describe a specific form of worldwide marketing strategy in which a company’s message is consistent.

International marketing is simply the application of marketing principles to more than one country. However, there is a crossover between what is commonly expressed as internationalmarketing and global marketing, which is a similar term.

Objectives

Taking up the point on strategic objectives above, there might be a number of objectives for having an international strategy:

1. Global markets are vast and some are developing very fast. For example, in the BRICS countries (Brazil, India, China, Russia and South Africa), demand is growing while there is poor demand in the West.

2. Some products and services have a different appeal as they cross borders. In the Middle East, Africa and Central Europe, for example, executives will pay good money to hear a British academic speak. Some people will still pay very high prices for British cars – that’s Rolls-Royce.

3. There may be economies of scale.
4. Not being there might be dangerous – if a market transforms into a much more global one, then purely domestic operations may be marginalized and become uncompetitive.

A word of warning here is that global expansion which is not tested out through robust strategic analysis can easily destroy rather than create economic value, particularly if margins are reduced to gain entry to the market and the full burden of costs is not allocated in order to make the overseas numbers look good.

A corporateglobalexpansionstrategy can be thought of as a corporation’s formal plan for expanding the reach of its operations into multiple countries throughout the world. To be “global” a company must extend its reach to all major continents across the globe, not just one or two other countries.

FINALLY
The development of any international strategy often begins with something that is very much an ‘emergent strategy’. This is when the first moves occur through opportunities presenting themselves; these are then exploited very much as an experiment, with no particularly clear plan in mind. The difficulty comes when this becomes the set pattern – in the words of one client. I think we do have activities which seem to be in a slightly random set of countries; in truth, I think some of the staff just wanted to be in certain countries.

Clearly such an emergent approach is unlikely to work very well for long. Indeed, the blind urge to expand internationally is one of the destroyers of shareholder value in companies without a solid and sound international strategy.

In summary, International business consists of trades and transactions at a global level. These include the trade of goods, services, technology, capital and/or knowledge. It involves cross-border transactions of goods and services between two or more countries. Transactions of economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance, banking, insurance, and construction. International business is also known as globalization. Globalization refers to the international trade between countries, which in turn refers to the tendency of international trade, investments, information technology and outsourced manufacturing to weave the economies of diverse countries together. To conduct business overseas, multinational companies need to separate national markets into one global marketplace. In essence there are two macro factors that underline the trend of greater globalization. The first macro-factor consists of eliminating barriers to make cross-border trade easier, such as the free flow of goods and services, and capital. The second macro-factor is technological change, particularly developments in communication, information processing, and transportation technologies.

• Dada SurajuAdefolami, Professor of Finance, School of Business Administration, UNEM University Costa Rica, is a Finance / Management Consultant and Certified Forensic Accountant. You can reach him via: [email protected]; 08052043855