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Becoming an international company opens doors to new marketplaces and revenue streams. However, it also brings about new challenges for business leaders. Dispersed resources, varied cost structure, cultural differences and governmental factors all provide international management obstacles.
When you have a business spread across multiple continents and countries, you have to address resource logistics obstacles. A company that manufactures goods, for instance, may have to source materials from multiple locations and get them to a production facility. You also have a significant distance between your people and your technology. Global work teams may never meet in person; instead they rely on virtual office technology to discuss strategy and execution.
Varied Cost Structure
One major strategic decision you have to make when operating internationally is whether to deliver a uniform brand, or one that is distinct for each market. The varied cost structure in making or acquiring goods in different markets plays a role. Labor and supplies cost a lot more in the United States and much of Europe than in China or India, for instance. However, if you concentrate production activities in these low-cost regions, you have to figure out how to get finished goods to other parts of the world. Pricing decisions are complicated when you have different costs of goods sold. If you adjust prices based on costs, you risk sending mixed brand signals. It is important to establish a clear strategy for branding.
Culture plays a huge role in the efficiency and effectiveness of most organizations. It is challenging enough to develop a strong culture in a domestic operation; when you throw in cultural differences, the job gets even tougher. Some cultures value team interaction and groups, while others put individual expression and autonomy on a pedestal. You can address this obstacle by identifying a few central values that appeal to each culture and building those into the fabric of the business. Another approach is to avoid entering countries with cultures that don't mesh well with the established brand and culture.
The level of acceptance a government offers your business affects your performance as well. For example, McDonald's faced political, religious and cultural resistance in India over its beef products. The company responded in 2012 with an all-vegetarian menu in the country. Some governments require that foreign-owned companies employ a percentage of local workers when they enter. While localized labor has advantages, such regulations limit your ability to select the right strategy for your business. Tax laws, tariffs and views on business ethics all vary by society and government.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.