Understanding Challenges in International Business Environment
Clarke Ricks School of Business,
Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
May 7, 2022
Understanding Challenges in International Business Environment
International business is not easy to undertake due to the challenges in International
Business Environment. It faces numerous uncertainties and challenges like different political
environments, taxation and other legal barriers. In this article, we shall cover some of the
prominent challenges faced in the international business environment.
Overview of International Business Environment
International Business Environment refers to trading across the world. In other words, it
means selling and buying goods and services across the world. International business connects
with transactions taking place across borders while keeping the management in a single
country.
The scope of international business has enhanced as it focuses on opportunities and
challenges in the business environment that operates on global level. The differentiating factor
of this business from domestic business is that international business functions in an uncertain
environment altogether subjected to rapid changes with the probability of enhanced income
and customer base.
What are the types of International Business Environment?
Some of the major types of International Business Environment are:
Political Environment-
Political environment includes the kind of government that operates in an economy, its
laws, policies etc. While doing business in other countries, business owners deeply considers
the relationship of government with businesses and the political risk prevalent in the country.
Economic Environment-
In this, all factors are considered while doing business in a country. Each country may differ
in terms of its economic environment depending on the category of the country, whether it’s
developed, developing or underdeveloped country. The economic environment is deduced
after taking into variety of factors like National and Per capita income[1], taxation aspects,
availability of raw materials, infrastructure facilities etc.
Technical Environment-
Technical environment pertains to technical up-gradation as well as advancement in
technological adoption and methods of manufacturing and production. The success level of a
business relies upon the acceptance level and utility of technological innovation in various
countries. With technical advancement, businesses gain competitive advantages and stay
competitive on global terms.
Cultural environment-
Culture in a country means beliefs and values followed in the country. Factors like
language, history, level of education, resistance to change, lifestyle of people etc., combine to
become the cultural environment of a country.
Challenges in International Business Environment
Businesses today are expanding and diversifying like never before to reach new clients,
increase their customer base and increase their overall profits. As global markets become more
accessible than yesteryears and more interconnected, there are risks and challenges involved in
international business which should be tackled.
Some of the major challenges in International Business Environment are as follows:
Company’s structure
The structure of the company may pose a challenge to your business if its working
structure is not pre-decided. There should be a qualified team if the company wishes to be
globally competitive, for which it would consider the organization structure and location from
where the team operates.
Foreign Laws
Not having clear understanding of the foreign laws poses a challenge for international
businesses. Therefore gain a comprehensive understanding of laws and regulations. There have
been instances where businesses had to face the heat due to the lack of understanding of
foreign laws. It’s a major challenge that needs to be attended.
Accounting
It is a critical concept when it comes to multinational business liable to pay corporate
tax in the countries they operate. Various tax implications, tax rates and compliance
requirements make accounting a challenge in international operation.
Liability to pay taxes
A company is liable to pay taxes in the country of its operations. Paying multiple taxes
proves to be a challenge for companies with double taxation even reducing their overall
revenue. Tax liabilities pose a challenge to companies because of lack of understanding of tax
concepts like tax treaties between countries etc. Companies should get advice and knowledge
in tax concepts which can help the company.
Payment methods
Payment methods become one of the most terrain challenges in international business
environment. This is because payment methods applicable in the home country may not be
acceptable abroad. Therefore it becomes a challenge for any business as payment is the key of
running business. However, to tackle this, businesses may decide to keep different methods of
accepting payment.
Fluctuation in currency rates
Fluctuation in currency rates is one of the challenges in international business environment
that should be considered by the business operating overseas. Major volatility can affect the
expense and profits.
Cultural Differences
Communication is an efficient skill for businesses, whether operating in the home country
or overseas. However, differences in cultures and languages across countries constitute a
significant challenge. Considering that effective communication is critical for international
business success, companies look to adopt means to bridge cultural differences.
Political risk and Terrorism
International businesses have to deal with cases of political instability, and uncertainties as
political risk is a major challenge and threat. Regulations and policies that are not pro-business
can adversely affect the working of a business.
Terrorism has also been another massive issue that needs to tended as global trade is not
easy with terrorism.
Conclusion
There are numerous challenges in international business environment which should be
overhauled proactively. We may see new forms of challenges in the future as well but are we
prepared.
