Establishing the Operations at the International Market - Essay Example

? Factors That Entrepreneurs Should Consider Before Establishing Their Operations at the International Market Factors That Entrepreneurs Should Consider Before Establishing Their Operations at the International Market Introduction The current growth in the level of globalization has contributed to an increase in the level of competition among different companies. This makes it necessary for businesses to establish new markets for their products and services. With the increase in the level of globalization of the world economy, most businesses in search of new markets find it necessary to go global. Despite the growth in the number of businesses establishing operations at the international level, a number of them fail, while others succeed in their operations. The international business scene offers unlimited opportunities for entrepreneurs in generating income and increased revenues. However, such success does not come without a close analysis of the market, as well as the factors that are likely going to contribute to the success of the business at the international markets. Thus, different factors contribute to either the success or failure of businesses operating at an international level. This essay discusses the factors that entrepreneurs should bear in mind whenever trying to establish their operations at the international level. Culture According to Neelankavil (2007), culture of the people is one of the most important factors to consider before establishing a business at the international market. Different countries have different cultures and within these countries, people hold diverse cultural practices and beliefs. Experts argue that since United States is the most developed country globally, assuming that all cultures in the world resemble the United States is the worst mistake that a business could make. This is because culture not only determines the kind of products and services to offer to the people, but also determines the advertising media and tools to employ among the people. Culture, despite the era of civilization, differs substantially, necessitating all businesses to put it into consideration. Most entrepreneurs assume that due to the growth and development global technology, all communities embrace technology (Neelankavil, 2007). This is however not true as some cultures do not embrace technology at all. Subsequently, whenever deciding on the methods to use in advertising for the products, putting into consideration the level of technology absorption is important. Using technological modes of advertising such as the internet and social media, live adverts and television targeting such people is less likely to have any impact. Further, some communities due to their religious beliefs do not use some products. These could be either processed foods or elements of technology, which they consider unspiritual and unhealthy. An entrepreneur should be aware of such issues in the society before establishing operations in any place. Additionally, observing the traditional cultural events and practices of different communities is equally important for the success of any entrepreneur at the international market (McDonald & Burton, 2002). Observing and respecting these events in addition to making the business appealing to the local people reduces the levels of conflicts with the people. By showing respect and engaging in these events with the people engages the business, thus creating a good relationship with the locals. This could contribute to the success of the business in this market. Legal factors Every country has different legal systems from each other. As constitutions govern different countries, the constitution establishes the laws governing businesses operating within its jurisdiction. As such, any entrepreneur seeking to establish operations at the international level ought to consider the laws governing the businesses in target countries. The most important law to put into consideration is taxation of the businesses in the country (McDonald & Burton, 2002). While some of the emerging economies encourage international al investors, and thus provide some tax incentives to international investors, others see international businesses as an opportunity to earn income, thus taxing them heavily (Neelankavil, 2007). An analysis of such countries could help an entrepreneur decide on the most appropriate economy to invest in. Labour laws also determine the success or failure of an organization at the international level. Some governments in an attempt to increase the wages of its population result to determining the minimum wages of its population (McDonald & Burton, 2002). This affects the businesses operating in these areas, as it increases operational costs of these businesses. The result is reduced revenues or closure of operations whenever such companies fail to comply. Ownership structures of businesses at the international level are also important for any company seeking to invest internationally. In some countries, the law stipulates that local investors should hold a certain percentage if the total shares for it to operate in the country. Others hold that international companies should employ a particular percentage of the local people in the organization in order to operate in the country (McDonald & Burton, 2002). Failure by the company to observe these laws could lead to suspension of its operating licence, the closure of its business operations or attract heavy penalties. Thus, conducting a research and analysis of the legal system of the target country could help avoid any of these issues. Political factors Politics could be either healthy or unhealthy for a business operating at an international level. Just as it is important for an entrepreneur to analyse the legal climate of a target country, the political climate is equally important. Countries, especially the poor and developing ones have weak governments and governance structures. They suffer from civil wars and ethnic clashes fuelled by politicians. Other countries have poor power handling systems, which lead to war every time there is an election. While conducting an analysis of the political climate, an entrepreneur ought to consider the frequency of occurrence of these issues. Countries that face such problems at a higher frequency are poor investment destinations that an entrepreneur ought to avoid (Prakashan, 2007). Business climate of the country The government of any country provides the necessary policies and framework for businesses operating in the country. The government, either directly or indirectly lays down the necessary infrastructure such as roads, railways, airports and security. An entrepreneur should consider these essential factors before setting up operations in any particular country. If the country has proper infrastructure, then it is a good investment destination (McDonald & Burton, 2002). Security of the country and that of the business are important for an enterprise. If a country is prone to attacks from terrorists or other countries, then businesses in that country risk losing their assets in case of an attack. However, if the government ensures security of these businesses, then corporations could consider investing there. According to Prakashan (2007), an analysis of the existing businesses in the country could also reveal the viability of the business climate in the country. Foreign exchange and the rigidity of the laws governing foreign exchange in the country is important (Prakashan, 2007). Investing in a country that has weak foreign exchange laws is dangerous. Conclusion Although globalization provides businesses with excellent opportunities to increase their revenues, wise entrepreneurs conduct thorough analysis of the target country before starting their operations. This is because different factors affect the success and operations of the business at the international level. Failure of an entrepreneur to consider these factors leads to poor performance or loss of business. Entrepreneurs who do not consider the culture of the people, the political and legal factors, as well as the business climate of the country risks losing his/her invested capital. This is because these factors differ between different countries. References McDonald, F., & Burton, F. (2002). International business. London [u.a.: Thomson Learning. Neelankavil, J. P. (2007). International business research. Armonk, N.Y: M.E. Sharpe. Prakashan, N. (2007). International Business and New Trends. Nirali Prakashan. Mumbai Read More