Analysis of Network Approach in International Business

According to the network approach (Johanson and Mattson 1988) internationalization is seen as a process in which relationships are continuously established, developed, maintained and dissolved with the aim of achieving the objectives of the company. Relationships are developed through interaction in which the parties build mutual trust and knowledge. These relationships are connected by networks that consist of several companies including customers, competitors, supplementary suppliers, suppliers, distributors, agents, and consultants as well as regulatory and other public agencies (Johanson and Vahlne 1990).It is assumed that without a good network in international markets the company will have problems with future growth. According to Johansson and Mattson (1988) the internationalization of the company begins with the company being initially engaged in a network that is primarily domestic. The company then internationalizes by developing relationships in networks in other countries.

The main purpose of these networks particularly for born global - is related to reducing the uncertainty in the beginning of the cooperation with new partners (Solberg 1999).The network approach can according to Johanson and Vahlne be seen as an extension of the internationalization process. They state that an extension to take into account the network perspective should make the concepts "commitment, knowledge, current activities and commitment decisions" as multilateral rather than unilateral as in the original model. This means that the process is also inter organizational and not just intra organizational (Johansson and Vahlne 1990: 19).

The importance of company and personal relationships varies related to different industries and countries. It is indicated by Johanson and Vahlne (1990) that networks are especially important in turbulent, high technology industries.

Conclusion

A study by Lindqvist (1988) of the internationalization process of small high tech companies shows that some do not follow the traditional internationalization pattern, but go directly to more distant markets and more rapidly set up their own subsidiaries. One reason for this seems to be that the entrepreneurs behind these companies have international networks of colleagues dealing with the new technology. Literature on Internet enabled internationalization Internet's applications include both being a vehicle that enables more efficient processes of conducting international business and a tool for promotion, information and communication (Hamill and Gregory 1997, Samiee 1998). Samiee (1998) argues that the use of the Internet may enable business processes that traditionally have been performed manually to be automated. Bidding, purchasing, inventory management, and order/shipment tracking are examples of processes that have the potential of being automated through the Internet in an international setting. The Internet can also be deployed as a vehicle for revenue enhancement, for example, direct sales, promotion, and as a communications tool (Samiee 1998). Putting up a website can according to Hamill and Gregory (1997) provide an attractive, low-cost method of sales promotion and advertisement to global customers, including brand name recognition, public relations, press releases, corporate sponsorship, direct sales, customer support and technical assistance. According to Quelch and Klein (1996) the internet will revolutionize the dynamics of international commerce and in particular lead to more rapid internationalization of small companies. Several factors point in that direction. In particular, they expect the competitive advantage of scale economies to be reduced as a consequence of the Internet, making it easier for small companies to compete internationally. Global advertising costs, as a barrier to entry, are also expected to be reduced given the global customer reach at a lower cost of the Internet. Furthermore, companies offering specialized niche products will be able to find the critical mass of customers necessary to succeed through the worldwide reach of the Internet.

Tips About Conducting International Business

Information on Doing Business Around the World

Doing international business is more difficult that people perceive it to be. In overseas transactions, you do not only have the distance to worry about. You need to concern yourself with different cultures, code of ethics, standards and rules. Let us look at some of these rules.

Letters Salutations

Across boundaries, international letters salutations change. Most of us are used to simply writing Mr. or Ms. in your business letters; this will work well on transactions in English speaking countries such as the US or UK. However, if you work with Spanish speaking citizens, you will need to change your salutation to Sr. (for Senor) or Sra. (for Senora). For French speaking correspondents, this becomes Monsieur, Madame or Mademoiselle, which is best not abbreviated. For Japanese clients, it is best to put the suffix -Sama after the last name. These are just a few changes that you need to deal with in matters as simple as salutations.

Standard Shipping Charges

Conducting businesses overseas that deal with products or materials that need to be sent via shipping, you need to be aware about shipping rates to various countries. You will need to charge shipping rates accordingly. You would not want to overcharge as this might discourage your potential clients. Naturally, you should not charge less than what should be or you end up at the losing end. The postal service is by far the most cost-efficient shipping service. Before confirming a deal, you must already have informed your client of the postal charges for international shipping. US postal charges for shipping to other countries can be checked through the website. You only need to provide information on the kind of item and packaging to be shipped. Once finished, you will have a more or less accurate estimate so you can inform your client about the shipping cost they need to pay on top of the item cost.

Global Tipping

If international business for you means going on travels abroad, restaurant tipping would be one of your major concerns. You will most likely attend seminars, lunch meetings and dinner gatherings. All these instances will put you in the awkward situation of knowing whether you should tip or not, or how much tip is enough. Generally, restaurant tipping varies greatly from one country to another and from one person to another as well. The main rule is to check your bill first whether or not come form of service charge is included. If it is not included, feel free to lay down about 5 to 10% of your bill. Tipping in America and Asia (except in countries like Japan) is most often unnecessary, but the gesture is highly appreciated. In Europe, most restaurants add a service charge so tipping may not be necessary. In other countries which have stricter standards, it is safest to "do as the locals do." Of course, if you are very satisfied with the food and the service, you can leave a few euros. Be careful though that your act will not be misinterpreted for something else.

Business Opportunity - Things to Consider With International Business Expansion

Before you decide to start an international business opportunity, you should analyze a number of areas. Many home based business expectations have possible overseas potential.

Vigilantly consider all the aspects associated with such an endeavor. All the options should be weighed like it is done with any new business venture. Only there will be much more to investigate. Given below are some points that are essential to consider before embarking upon such an international home based business.

The start-up capital:

The first and the most important thing to look at are your financial resources. If you do not have enough funds required as start-up capital, you'll need to find the funds from some other sources, like venture capital, business partner, loans but only with caution. Always remember that the start-up money is crucial for your business to take off and to keep going until it is time for you to start drawing personal profit out of your business.

Create a buffer:

Do not anticipate immediate benefits from your international business opportunity. Initially the going may be tough. You need to remain self-motivated through the difficult times. Besides, you will need to keep some money separately as a cushion to tide you and your family over the pre-profit period which could last for a year, two or more.

This is essential since it may take a long time to break even. You should prepare and apprise your family about the financial hurdles that they may have to face in the days ahead.

Be prepared for a long-drawn-out journey:

Any new home based business demands a lot of hard work and a great deal of obligations towards not only your clients but also your family. Starting a business is certainly not as easy as many online scammers claim. Besides being motivated, you will need the support of your family and friends. Your physical and emotional capabilities will be put to the test.

After you have done a thorough research on the kind of international business opportunity you will undertake, be prepared for a long-drawn-out battle. You are going to stay with your business for a considerable period of time. Therefore it is of paramount importance to thoroughly analyze all the pros and cons before taking a plunge. Being strong on why you want a business of your own rather than a job, being lazar focused and specific on this goal, will really help carry you through the growth all businesses go through.

Know the nitty-gritty of the business:

It is necessary to know about the taxation rules and copyright laws of an international venture. Find out if there is any restriction from your local of enforcing authorities. Example: the gambling websites might be legal in some countries but it might be illegal in yours.

You'll need to dig out a lot of information before you actually decide to spend your time and money on any international business opportunity.

Design a clear plan about the advertising of your product or service on the Internet or other media. If you are thinking of taking an international franchise, look at its stature. Make sure that you do not associate with dishonest and dubious companies.

You must conduct an investigation on the following:

o Availability of the market for the product or service that you propose to sell

o What are import and export laws of where you plan to market

o What will be the market be like in four to five years time - do some research

o The kind of competition you will face in your proposed area of specialization

You may not have thought before of your business going international, but in today's market, many companies that were only in the US now market overseas. It's a bold new world out there and available for your expansion.

What is an International Business Development Executive?

A reader recently asked what the difference is between an International Business Development Executive and an International Sales Executive.

The answer can seem simple to many readers. For many companies they are one and the same. Some companies feel that the job title International Business Development Executive is more palatable than a job title with "Sales" in it.

The Job Scope

Some people can argue that an International Business Development Executive spends his time to:

• Create strategic alliances on a broad level
• Initiate strategic relationships with third parties
• Look for new business opportunities

While the International Sales Executive:

• Looks for more immediate sales opportunities
• Follows up sales leads

And in large companies there are usually two distinct job functions. Small companies, however, usually have one person to cover the global sales function.

You see, both job functions are sales functions. They are revenue generating job functions.

The Job Function

But the job functions of an International Business Development Executive can vary from one company to the next. You see how an International Business Development Executive spends his days depends on his company's current international business situation and where they want to go.

A business can:

• Sell from their local offices to clients abroad
• Have foreign offices with foreign sales representatives
• Work with international sales agents
• Have foreign distributors
• Operate foreign franchises
• Rely on international joint ventures

And the International Business Development Executive will work within the corresponding development strategies.

Broad Responsibilities When Working Abroad

This reader's question came up because no matter what the job title and size of the company, the International Business Development Executive and the International Sales Executive have the same role.

It comes with the territory.

• Working abroad.
• Resources are usually limited.
• Companies need all sources of international business intelligence.

Even when a company tries to separate or limit responsibilities, the person in the field has the direct contact with that market. Good team work will get you more international sales, not rigid hierarchy.

Improve Sales Appeal

But the question of International Business Development Executive or International Sales Specialist brings up the issue of cultural perception. And what job title will get you more international sales.

For example, it is easy to imagine that a foreign company selling to a North American market will usually need to re-vamp job titles to be taken seriously.

There are distinct cultural responses to the word "sales" in many cultures.

The best way to find out what title you need is to look at the other job titles in the country you are targeting.

Remember, international sales appeal is not all about your job title. It is often more about:

• How your company positions itself
• How you are introduced
• How you introduce yourself
• Your reason for approaching your international client

In many cultures, it is the combination of this information that will create the right response in your international client.

Understanding the Importance of International Business

International business is all business transactions-private and governmental-that involve two or more countries. Why should one be interested in studying international business? The simplest answer is that international business comprises a large and growing portion of the world's total business. Today, almost all companies, large or small, are affected by global events and competition because most sell output to and/or secure suppliers from foreign countries and/or compete against products and services that come from abroad.

More companies that engage in some form of international business are involved in exporting and importing than in any other type of business transaction. Many of the international business experts argue that exporting is a logical process with a natural structure, which can be viewed primarily as a method of understanding the target country's environment, using the appropriate marketing mix, developing a marketing plan based upon the use of the mix, implementing a plan through a strategy and finally, using a control method to ensure the strategy is adhered to. This exporting process is reviewed and evaluated regularly and modifications are made to the use of the mix, to take account of market changes impacting upon competitiveness. This view seems to suggest that much of the international business theory related to enterprises, which are internationally based and have global ambitions, does often change depending on the special requirements of each country.

Another core issue is the company's growth and the importance of networking and interaction. This view looks at the way in which companies and organisations interact and consequently network with each other to gain commercial advantage in world markets. The network can be using similar subcontractors or components, sharing research and development costs or operating within the same governmental framework. Clearly, when businesses formulate a trading block with no internal barriers they are actually creating their own networks. Collaborations in aerospace, vehicle manufactures and engineering have all sponsored the development of a country's or a group of countries' outlook based on their own internal market network. This network and interaction approach to internationalisation shows the substance of being able to influence decisions when knowing how the global network players work or interact.

For example, a crucial market network is that of the Middle East. Middle East countries are rich, diverse markets, with a vibrant and varied cultural heritage. This means that although there has been a harmonisation process during the past few years, differences still exist. Rather than business being simpler as a result, it should be recognised that because of regulations and the need those countries have to restructure as they enter the global market, performing any kind of business can be highly complex. It should be remembered though that the Middle-Eastern countries have a low-income average and like to have their cultural differences recognised. Those firms that will or have recognised these facts have a good chance of developing a successful marketing strategy to meet their needs. Fortunately some firms have realised these important differences and reacted adequately when strategic decisions had to be made regarding their penetration to this kind of markets.

Go Global With International Business

With the development of an integrated global economy, marked by free trade and free flow of capital, now is the time to pursue a cutting-edge international business career.

Around the World

In case you hadn't noticed, U.S. firms are expanding abroad. This requires organizations to form effective strategies for entering the international business market. They need to be aware of legal matters pertaining to specific countries, and they need to be concerned with organizational and administrative issues, especially if they are involved in a partnership with a foreign firm. As international business markets become more competitive, U.S. firms are learning to use resources more efficiently by reducing costs, streamlining operations, and developing marketing strategies.

That's why today's professionals need comprehensive knowledge of international business as well as foreign cultures and languages. Globalization has increased the need for international business workers with these specialized skills to manage multicultural and multinational workforces effectively.

"Distance" Learning

An international business degree will provide you with the training you need to manage an international business and to succeed in our global economy. With an international business degree, you'll be equipped with a global focus across different functional areas of business. You'll learn theories of international protocol and how they continually change. You'll learn to recognize global differences and apply sensitivity to cultural diversity issues in communications, management, marketing, and the legal aspects of global business operations in your international business career. You'll explore the differences among various economic development levels, as well as the new economic groups forming in Europe and Asia.

International degree program coursework may include international marketing, export/import practices, globalization, international trade, financial management, business planning, economic development, international law, international business policy, international culture, foreign languages, overseas business practices, foreign market analysis, foreign operations, sourcing, communications and negotiations, critical thinking processes, ethical codes of conduct for global business leaders, marketing strategies, and management practices and processes.

The Real World

With an international business degree, you can work as a business strategy consultant, managing consultant, account manager, project manager, business developer, distribution manager, director of international affairs, finance advisor, foreign market analyst, or management analyst, to name a few.

Management analysts, for example, held about 605,000 jobs in 2004, according to the U.S. Bureau of Labor Statistics. Employment of these international business career professionals is expected to grow faster than the average for all occupations through 2014. And, median annual earnings of management analysts were $63,450 in May 2004, with the highest 10 percent earning more than $120,220.

International Business and Communication

How overcoming cultural differences in communication benefits business.

Today companies trade goods and provide services to global customers. Many companies have facilities in different countries and most companies, small and large, work already with a highly diverse, international workforce.

Communication is clearly the enabler of any kind of cooperation and business activities - nationally and internationally. Different cultures have particular business communication styles, well accepted and adopted by their population. Other cultures have different ways to conduct business and with that, use different styles to open, discuss, negotiate and close business deals and maintain business relations.

What is the best way to communicate for people of different cultural background? The potential customer's style or the one that relates to the language used during the communication? Unfortunately there is no clear answer to this question.

Specific communication styles have developed over long periods based on cultural values. Even with the wish to "speak the language of the customer", these values cannot just be set aside when writing or talking to people of other cultural influence.

Two little anecdotes show the difficulties in communicating internationally. A Japanese corporation hired a professional trainer to teach their people how to communicate with Western customers. The Japanese style uses passive wording, perceived by Western customers "as if they do not want to make business with us". Nothing was further from the truth; the Japanese corporation was of course very interested in Western business. I witnessed another case of misinterpreted correspondence first hand, when a colleague received an email from another colleague in Europe. When reading it he suddenly murmured: "Why is he yelling at me?" I asked him what he meant and he responded that the colleague's use of exclamation marks would be equal to yelling at him. A look at the email confirmed what I thought: the exclamation marks underlined great importance - not to scold the reader. Using the exclamation mark that way is common practice in the country of the writer. But the author wrote in English - so should it not be natural using Anglo-American writing styles and rules?

We will have more fruitful interpersonal and business experience, if:

1. Individuals writing in their second or third language, avoid phrases, formulations and special punctuations that are common in their language but might be unknown or sometimes even offending in other cultural regions. Keep it as simple as possible.
2. Receivers of emails not written in the writer's mother-tongue should read them with extra tolerance. The writer took great efforts to learn this language, but do not expect impeccable wording. Try to understand what the writer had in mind.
3. Openness and willingness to understand different cultures and how they express themselves in business communication, bears a huge potential of additional possibilities. There is benefit in learning the ways of other cultures. Adapting some of them may even give the own company a head start.

While we should adhere to a minimum standard and etiquette in international business communication, it can never be perfect. Good ideas and intentions should not be paled by a curtain of ignorance and limitations.

Risks in International Business

Just as there are reasons to get into global markets, and benefits from global markets, there are also risks involved in locating companies in certain countries. Each country may have its potentials; it also has its woes that are associated with doing business with major companies. Some of the rogue countries may have all the natural minerals but the risks involved in doing business in those countries exceed the benefits. Some of the risks in international business are:

(1) Strategic Risk

(2) Operational Risk

(3) Political Risk

(4) Country Risk

(5) Technological Risk

(6) Environmental Risk

(7) Economic Risk

(8) Financial Risk

(9) Terrorism Risk

Strategic Risk: The ability of a firm to make a strategic decision in order to respond to the forces that are a source of risk. These forces also impact the competiveness of a firm. Porter defines them as: threat of new entrants in the industry, threat of substitute goods and services, intensity of competition within the industry, bargaining power of suppliers, and bargaining power of consumers.

Operational Risk: This is caused by the assets and financial capital that aid in the day-to-day business operations. The breakdown of machineries, supply and demand of the resources and products, shortfall of the goods and services, lack of perfect logistic and inventory will lead to inefficiency of production. By controlling costs, unnecessary waste will be reduced, and the process improvement may enhance the lead-time, reduce variance and contribute to efficiency in globalization.

Political Risk: The political actions and instability may make it difficult for companies to operate efficiently in these countries due to negative publicity and impact created by individuals in the top government. A firm cannot effectively operate to its full capacity in order to maximize profit in such an unstable country's political turbulence. A new and hostile government may replace the friendly one, and hence expropriate foreign assets.

Country Risk: The culture or the instability of a country may create risks that may make it difficult for multinational companies to operate safely, effectively, and efficiently. Some of the country risks come from the governments' policies, economic conditions, security factors, and political conditions. Solving one of these problems without all of the problems (aggregate) together will not be enough in mitigating the country risk.

Technological Risk: Lack of security in electronic transactions, the cost of developing new technology, and the fact that these new technology may fail, and when all of these are coupled with the outdated existing technology, the result may create a dangerous effect in doing business in the international arena.

Environmental Risk: Air, water, and environmental pollution may affect the health of the citizens, and lead to public outcry of the citizens. These problems may also lead to damaging the reputation of the companies that do business in that area.

Economic Risk: This comes from the inability of a country to meet its financial obligations. The changing of foreign-investment or/and domestic fiscal or monetary policies. The effect of exchange-rate and interest rate make it difficult to conduct international business.

Financial Risk: This area is affected by the currency exchange rate, government flexibility in allowing the firms to repatriate profits or funds outside the country. The devaluation and inflation will also impact the firm's ability to operate at an efficient capacity and still be stable. Most countries make it difficult for foreign firms to repatriate funds thus forcing these firms to invest its funds at a less optimal level. Sometimes, firms' assets are confiscated and that contributes to financial losses.

Terrorism Risk: These are attacks that may stem from lack of hope; confidence; differences in culture and religious philosophy, and/or merely hate of companies by citizens of host countries. It leads to potential hostile attitudes, sabotage of foreign companies and/or kidnapping of the employers and employees. Such frustrating situations make it difficult to operate in these countries.

Although the benefits in international business exceed the risks, firms should take a risk assessment of each country and to also include intellectual property, red tape and corruption, human resource restrictions, and ownership restrictions in the analysis, in order to consider all risks involved before venturing into any of the countries.

Cultural Differences in International Business Negotiations

The 21st century global marketplace offers many opportunities for international business expansion. The global market means that many companies now have officers, affiliates, supplies, staff and customers in a wide range of countries and cultures, thus it is unavoidable for business people to communicate with people from different cultures. However, the differences in language, food, dress, attitude toward time, work habit, social behavior from different culture can cause many of our business to be frustrating or even unsuccessful.

Culture is the deposit of knowledge, experience, beliefs, rules, actions, attitudes, meetings, hierarchies, religion, nations of time, roles spatial relation, concepts of the universe, and artifacts acquired by a group of people in the course of generations through individual and group striving. Culture and communications are linked: communication makes culture a continuous process, for once cultural habits, principles, valves attitudes and the like and formulated.

People always believe that their culture is the only true culture. They will discriminate people whose cultural norms are different from their own values and behaviors. When we communicate with members of our own culture, we have internalized the cultural rules that govern the behavior and we are able to communicate without giving much thought to these rules. If we communicate with people from different cultural backgrounds according to our own cultural rules, we always encounter a variety of misunderstandings. This is a phenomenon caused by cultural conflict which is becoming universal and unavoidable. Actually, cultural conflict is very common in multinational companies.

Company H is a large company and its products are among the best of the same line in China. They have already extended their business into several regions overseas; however, the Middle East remains blank, as they have no experience in doing business with Arabs.

So the problems come as they do not pay enough attention and also misunderstanding comes also. This also cause the big lose for their business and also set some difficulties for the international business development for them. This example told us we should pay attention to promote the cross-cultural business communication and get enough preparation before take international business negotiation to solve the cultural and continental differences of different people with different nations.

International Business Travel - Dos and Don'ts

My first business meeting in a country where English was not the native tongue was in Germany. I was terribly nervous. I didn't know German, and no one was with me that could speak it. I fell all over myself trying to make apologies for speaking in English and not knowing their language. They brushed it off as no big deal. It turns out that English is widely accepted in Germany as the language of business and most Germans are taught it as a second language throughout their early school years.

So began my journey into the new world of international business travel. I made many mistakes along the way, but eventually I was able to make these trips and hold business meetings routinely without all the drama. I'll spare you the learning curve and share these international business travel Dos and Don'ts with you:

• Do use the buddy system. It's very important to have someone with you when you travel internationally. Making your way in an unfamiliar country can be bewildering and is more work than you realize. It usually takes two sets of eyes and ears to do things that you would normally do on autopilot when you're at home.
• Do find local help. If you can have someone meet you at the airport, get you settled at the hotel, help you with logistics, and join you for your meetings, then don't pass up the opportunity. It simplifies things greatly. And even though English is the language of business, don't take it for granted. There are important points that will be missed in a meeting just because it's too hard for your hosts to think of the right words to say in English. A helper who knows the language will pick up on this nuance and take the time to get everything on the table and make sure you understand.
• Do speak slowly. You need to slow it down and pause frequently so that your hosts have time to translate in their heads. This way of speaking will feel unnatural, but if you don't do it they will either stop you repeatedly so that they can catch up, or they'll give up altogether and tune you out.
• Don't cram too much into a meeting agenda. You need to cut your expectations in half at least. It takes twice as long to exchange ideas when there are translations going on.
• Don't be an ugly American. Keep the mindset at all times that you are a guest and that their time and company is a gift to you. Try to learn a few phrases of their language for little things like, "thank you", "pleased to meet you", "good morning", and "good bye". Show an interest in their culture and history, and be respectful of their traditions and past.
• Do be prepared for culture shock. Total immersion in another culture will take it's toll on you. Between this and the jet lag your mental energy will run out and you will crash hard the first couple nights. Don't be surprised if you are dying for a cheeseburger and all you want to do at night is hide in your room. But resist these urges and get out and see the world. Your chances to do this are few and far between, and the memories will last you a lifetime.