Importance of Technology in International Business

by Catherine Capozzi - Updated September 26, 2017

Technology has revolutionized the lives of consumers and businesses alike. The increased array of products on the shelves, the lowered cost of goods and services, and the ease of accessing information are just a few of the ways technology has enhanced society. The field of international business is particularly sensitive to technological innovations.

History

In the early 1700s, international trade was impeded by economic forces that included wildly fluctuating currency exchange rates, handwritten correspondence via an unreliable postal service, and common supply-chain disruptions such as theft and vandalism of passing ships. Furthermore, as Douglas Irwin explains in a "Library of Economics and Liberty" article, imports used to be highly regulated and taxed to discourage countries from running trade deficits. Improvements in the legal system allowed for contracts with greater transparency and enforceability, and improvements in the mode of transportation allowed goods to be transported in less time.

Identification

The most important modes of technology in international business include electronic communication such as emails, texts, faxes and virtual conferences. Tracking methods for shipping and purchasing is another huge technological innovation, as it allows businesses to verify the delivery of goods and the quantity of inventory purchased. Electronic spreadsheets and databases are other inventions that allow international companies to manage and store their information with greater ease.

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Considerations: Communication

The improvement in technology regarding communication is a linchpin of international business. The ability to instantaneously communicate with a manager in China or a factory in Singapore, for example, allows companies to expand overseas. Though multinational companies existed before the Internet, the ease of communication allows companies to outsource their operations with greater assurance: Video monitoring of factory and working conditions, inexpensive conference calls to consultants working in different countries, emailed reports to foreign vendors, and cheap long-distance phone calls are just a few of the ways technology has facilitated international business trade and operations.

Considerations: Logistics

Multinational corporations have much more complex supply chains than local brick-and-mortar businesses. International companies often have vendors, factories, customers and consultants in different parts of the globe. Keeping track of how a product is developed, manufactured, shipped and purchased can involve hundreds of steps in several countries. Technological innovations streamline the supply chain by allowing up-to-the-minute results on the assembly of a product, and global tracking technology highlights where the product is moving. RFID technology assists companies such as Wal-Mart Stores with inventory control. Jack Plunkett, author of “Plunkett’s Transportation, Supply Chain and Logistics Almanac,” states that Wal-Mart mandated 600 of its suppliers to implement RFID technology to track and monitor deliveries and shipments.

Benefits

Technology allows companies to produce products for less money. As Sudalaimuthu and Anthony Raj explain in the textbook “Logistics Management for International Business,” the cost of shipping goods can account for 25 percent of production costs; thus, the reduction in the cost of shipping significantly decreases the cost of producing goods. Furthermore, companies have a wider selection of vendors from which to choose which lowers the cost as well. For instance, technological innovations enable a clothing company to choose from textile plants in Vietnam, Singapore, Taiwan and several other locations. The increased selection lowers the cost as these foreign companies bid against the others for contracts.

About the Author

Since 2008 Catherine Capozzi has been writing business, finance and economics-related articles from her home in the sunny state of Arizona. She is pursuing a Bachelor of Science in economics from the W.P. Carey School of Business at Arizona State University, which has given her a love of spreadsheets and corporate life.

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