Differences Between Domestic and International Business
Exporting and international business can be interesting, exciting and in some cases challenging. In all cases it should be profitable and help a business grow.
Doing business internationally is not the same as doing business at home. There are new skills to learn and new knowledge to acquire about the country you will be going into. You will need to learn about the different laws and regulations, the different customer buying habits, and change your marketing strategies and materials to appeal to the new country you are entering. It is important to remember that the way you operate your business will be determined by culture of the market you are entering, not yours.
It is important to understand the differences between domestic and international business but they should not inhibit your interest or drive for success internationally. Rather they should whet your appetite for success.
No two cultures are the same and understanding both the social and business culture in another country is the first key to success. Culture defines everything a society does, from its business practices, to its response to advertising and marketing, to negotiating sales. It is important to include research on the culture of the country(s) that you intend to sell to prior to entering their market. Understanding these, often sensitive, areas will mean that you are better prepared when first entering the market. Although the people that you will deal with will not expect you to be completely in tune with the culture, respect and politeness will go a long way.
Level of Competition
The level of competition you will experience in foreign markets is likely to be more dynamic and complex than you experience in domestic markets.
A good strategic tool to use to determine if you are able to compete in a particular international market is the Porters 5 Forces analysis. This tool will assess your supplier power, buyer power, threat of competitor products and the threat of new entrants to the market.
The key points to determine when gathering market intelligence on the market you intend to enter are:
- Understanding how the market works
- Who your direct competition is, and
- The best market entry strategy.
It may be difficult to find reliable information and data for some markets, particularly less-developed economies as their statistical agencies may not be as sophisticated as developed market economies. However it is important to gather as much information as you can to successful enter the market.
Link to Level 2: Market Research
No two countries have the same political and legal systems. Each government has its own policies relating to foreign firms and products. The key is to understand that once you are in a foreign market you must abide by the rules and laws of that country, not the ones in your own market. These laws and regulations can severely impact the potential long term success of your business and it is wise to consult with legal counsel, based in that country, to ensure you reduce the risk of these laws and regulations effect on your firm.
Countries determine their laws based on the needs of their citizens not the concerns of foreign companies. By and large, international law is a gentlemen's agreement which is honoured, but not always. For example in areas such as intellectual property, although there are many agreements in place, protecting intellectual property can be time consuming and costly.
Link to Level 3: Intellectual Property
Link to Level 4: INCOTERMS
The degree of technology can vary substantially in foreign markets. If your product or service requires a high degree of technology sophistication to use or implement, then markets with low levels of technology will not be suitable for your busines.
Like technology, business infrastructure in foreign markets will be at different levels of development. This may well have an impact on your ability to get your products to that market. It is important to research your new target market and understand how goods are moved within the country before you commit to that market.
Advertising your product and service will of course be an important component of your marketing strategy. It is important to be aware of the types of media available and the kind of media your target market uses to gain information about products and services they wish to buy. Not everyone is connected to the internet nor is every customer able to read and write. This does not mean those markets should be ignored. It does mean that how you advertise and market your products will require an examination of the most appropriate media for your target market.
There are a many differences between domestic and international business. Whether they are cultural, technical or legal they require an understanding and an appreciation of the differences. Following are a few web links to help you get started.
Canadian Sources for Research, Planning and Country Information
- Department of Foreign Affairs and International Trade
- Export Development Canada
- BC Business Network
- Business Beyond Borders - HSBC
- Forum for International Trade Training
International Organizations and Resources for Statistics and Market Information
- International Monetary Fund
- World Bank
- Organization for Economic Cooperation and Development
- The Economist