International Business: Definition, Strategies, & How to Become One

As the world has become increasingly globalized, the face of business has changed. Many companies, hoping to stay competitive and maximize profits, are opting to enter markets across the globe. International business refers to all the commercial transactions transpiring between organizations from two or more nations. A majority of the business transacted today could be classified as international. It's important that students of politics, economics and finance, as well as business professionals, understand the nuances of these global transactions and how they differ from domestic ones.

You may be wondering, "What defines international business?" Any transaction occurring between two countries can be classified as international business and includes both private and government business activities. Anything related to the sale of goods or services, logistics, transport or investments is considered international business if it occurs between two parties that are based in different nations. Furthermore, imports and exports, licensing and franchising or having manufacturing, distribution or research and development centers in other countries all fall under the umbrella of international business.

Understanding the landscape of today’s global economy is challenging, particularly since there are so many components and a tremendous number of players. For instance, everything from finance to politics to economic policies can play a role in determining the business behaviors of countries. Before any decisions are made that will impact the future of a company, it’s important to evaluate all aspects of the markets they hope to enter and how shifting global trends and political changes will affect them.

Over the past century, enhanced technologies and expedient travel have made it possible for businesses to test the waters of international trade. Though the global economy has existed for eons, it changed dramatically when boats, and then airplanes, enabled salespeople and financiers to expand their company’s markets by visiting other countries. The popularity of buying on credit, lending and ever-evolving internet technologies have further contributed to the spread of international business.

Also, improved political relationships among many of the world’s powers in the past century have encouraged business to flourish, which has helped developing countries to find success, as well. Higher demand for trade has led to a boom of the middle class around the world, which in turn spurs additional demand for traded goods or those originating in other nations. The more money available in an economy, the higher the demand for products or services that come from elsewhere.

International business is good for all world economies, as it enables companies to buy components and materials at lower prices to raise their profit margins. In turn, they can offer finished goods at reduced rates since they cost less to produce. Less expensive goods and services encourage consumers to invest additional money into their economies and helps entire nations to thrive.

Also, by doing business outside of their nations, companies can find efficiencies on micro and macro scales. For example, if an ice cream company in England can purchase their chocolate directly from the farmers who grew the cacao plants in the rainforest regions of Peru, the English company will save money and be able to put superior chocolate fresh from the source in their ice cream. They can charge less for their ice cream since there was no markup by another English company doing the work of sourcing it. Further, consumers will enjoy it more since it contains better chocolate leading to increased sales and profitability. In turn, the farmers in Peru can sell more cacao, since they aren’t limited by their nation’s borders. This increases their profits also and helps them to reinvest in their businesses over time.

In the modern economy, it is generally assumed that businesses of a certain size, as well as many industries, will attempt to sell to markets in other countries at some point. The ability to establish a presence in a variety of nations around the world helps companies to gain brand recognition and take their success to the next level.

International business management is managing the transactions of companies operating on the global scene. International business managers must be diplomatic, professional and courteous and have a great depth of knowledge when it comes to the cultural practices and political and economic trends of the nations they are interacting with. They must also have a background in business or finance specific to their company’s industry.

Choosing to study international business management can place you on the proper path to gaining a seat at the table in global business transactions. Topics such as finance, human resources management and marketing will be covered to help students gain an understanding of strategies for management, business theory, practical applications and legal considerations. In addition to preparing students for a career in international business management, learning more about global business also helps in any non-global business or finance role as well.

International business is a dynamic field of study and students who wish to enter this field will be asked to become familiar with aspects of economics, finance, politics and management, as well as technology and linguistics. Being multilingual can be extremely helpful when working in a global industry. Also, studying abroad to gain exposure to customs and business practices in other countries is a common aspect of undergraduate degree programs in international business.

Depending on your desired vocational trajectory, you can study international business in graduate school or pursue an MBA after you complete your undergraduate coursework. Some graduate schools offer a Master of International Management, which presents information on business and management from a global perspective. You’ll gain insight into various cultures and gain a solid base before venturing out into the corporate world.

If you run a business, having a global marketing strategy can go a long way toward ensuring your company’s longevity and success. Fortunately, thanks in large part to the internet, it’s possible to gain international reach without spending all your company’s marketing dollars in one fell swoop. Many well-known companies use technology and creative marketing strategies to build their international business opportunities and gain brand recognition globally.

Red Bull, famous for making energy and sports drinks, hosts extreme sporting events in a variety of countries all over the world. They are also known for sponsoring athletes or cars in competitions. Experts agree that Red Bull's packaging sets them apart from traditional U.S. beverage companies since they use a thinner can that is decorated with unique artwork.

Companies like Airbnb have risen to global prominence, thanks to their use of social media. Their popular “one less stranger” social campaign garnered millions of engagements and helped the organization achieve worldwide attention. The business model for this company is well-suited to expansion into many countries. As a home-sharing and rental network, Airbnb could (and does) exist anywhere.

Businesses like Dunkin’ Donuts have achieved global prominence and maintain their popularity by providing food that appeals to customers in all corners of the globe. Shops in other nations, as well as in certain regions of the United States, are known for selling baked goods that conform to local cultural trends. For instance, Chinese stores have been known to offer dry pork and seaweed donuts. By keeping the brand name but altering the product to appeal to customers in a variety of markets, Dunkin’ Donuts is ensuring its long-term success.

Other companies, like Domino’s Pizza, do similar things, such as offer special toppings to appeal to customers all around the world. McDonald's also subscribes to the concept of “glocalization,” in which they aim to put local twists on their products around the globe to appeal to a wider audience. In France, for instance, the fast food giant even sells macaroons.

Companies like Nike have used their athletic background to establish prominence around the world by way of sponsorships. From longstanding partnerships with major soccer teams to support of individual athletes, the company is using its position to further infiltrate otherwise untapped markets. In addition, Nike now offers customers the opportunity to design many of their products themselves via their website. This makes it possible to determine what styles are popular in certain markets, providing what is essentially free market research. Also, it helps to increase sales since customers can pick and choose colors, patterns and styles that appeal to them, rather than shopping elsewhere to find what they’re looking for.

Another way companies can increase their presence globally is to commit to charitable work in other countries. Coca-Cola, for instance, is known for doing this. They have completed projects in the past like the building of 650 clean water installations in Egypt, providing Ramadan meals for children all over the Middle East and working to improve facilities at local schools in India. These programs help those who might become loyal customers in the future and also makes the brand look good in the eyes of other patrons.

If you’d like to grow your company into an international business, you can start by reducing your dependence on existing markets and broaden your horizons. Many products and services from the United States do very well overseas, which gives American companies a huge advantage right off the bat.

Something to consider before you begin is whether your company will be immediately accepted in your new, target markets. Some products or services may require consumer education to be successful. Conduct some market research to determine what you need to do to acquire customers. Have a strategy in mind before you launch so you don’t waste time or other resources trying to convert customers once you've set up a presence.

Preparing for an international expansion requires more than just developing a marketing strategy. You need to educate your team about the culture, language and political and economic trends in the new markets you’re hoping to explore. Whoever has boots on the ground in another country will need to understand exactly how things work there to decide the best business strategies in that location. They should be able to work effectively with banks, stores and other companies in the location to give you the best chance for success.

Even if you can generate significant interest in your company overseas, you also need to develop solid distribution strategies before you set up shop in a global location. If there's substantial interest in your new line of smartphones, but you have no definitive plan for getting them into stores in another nation, you’ll need to re-think your strategy. Agreements with local stores, trucking companies and warehouses should be part of your preliminary plan. Without these critical parts of the supply chain, an international business cannot be successful. Hiring a logistics expert for your team is a smart strategy and invaluable for this juncture of the expansion process.