The difference between domestic and international business operations is discussed in the following paragraphs below:
Table of Contents
Difference between domestic and international business
1. Culture difference
Global business operations differ from domestic operations in several ways. Culture is often a key issue in these differences.
Each nation has its own custom-value orientations and problems can easily develop in the global environment selecting a manager for an overseas assignment is becoming increasingly difficult high failure rates from poorly matched past assignments have increased costs.
Thus selecting an expatriate is an important human resource function in today’s global business. Some managers view an international assignment as a career risk.
If the post to which you are assigned is cut or does not work out you may lose your job. The humorous problems highlight the real differences that often exist between two cultures.
2. Political difference
The political environment also differs from nation to nation, and this creates both opportunities and risks for international business. We know about the huge potential of the Chinese economy. Most recently the repatriation of Hong Kong adds more momence to worm irate.
China is part of the government’s drive to build its economy. U.S. products manufactured in China include trucks, chemicals, processed foods, appliances, and apparel. But the student protest in Tiananmen Square and the Chinese government’s reaction has forced foreign firms to reexamine their presence in the country.
More recently, China’s lack of respect for U.S. copyrights and patents led to heated debates and nearly an all-out trade war between the two countries.
However, just before the U.S. deadline, an agreement was reached China promised to outlaw the theft of software and agreed to protect patents agricultural chemicals, and pharmaceuticals.
In return, Washington decided to lighten its view of trading with China. In general, the relationship now between the United States and China is becoming more. positive.
3. Other political risks
Businesses must also face other political risks. The Iranian revolution of Ayatollah Khomeini not only caused the overthrow of the Shah of Iran but also resulted in the nationalization of U.S. business assets.
Khomeini made the Unite States a scapegoat for many of Iran’s problems, and his solutions included the nationalization of assets, the taking of U.S. hostages, and the economic isolation of Iran from the Western world.
4. Differences in taking bribery
Issues such as bribery also take on international significance. In the United States, bribing a public official is illegal. In many nations, however, bribery is an expected part of doing business with the government. The problem becomes worse when cultural clashes occur.
It is still a violation of U.S. law for a U.S. fin to commit bribery, even if the recipient of the bribe is a member of a foreign government. How does a firm compete abroad if it isn’t allowed to play by the rules of the host nation?
5. The global legal environment also differs from the domestic environment
Many firms operate with a mix of expatriate managers and local employees. Laws about responsibility for corporate actions are often more severe in other countries than in the United States.
In Venezuela, top executives can be imprisoned without bail if their firms are accused of violating Venezuelan Law. Venezuelan officials issued over 45 arrest warrants in 1989 for top executives of firms suspected of being involved in a foreign exchange scandal.
As a result, many foreign managers fled the country to avoid prosecution for acts that would have been the responsibility of lower-level employees in the United States.
In the United States, they would not have been jailed; rather, subordinates who committed the crime would have been.
The fact that the expatriates held higher-level positions in Venezuela was thought to be the reason why the government went after them.
6. The infrastructure of each nation also varies considerably
The state of roads, telephone, water, and sewage among other systems may range from modern to trout modern to nonexistent.
All these systems affect a firm’s ability to operate in the global environment. If an operation such as a steel plant requires massive amounts of power, the region must be able to supply power to the plant or it must have adequate roads for transporting fuel to it.
If the local government is unwilling to unable to provide these services, the firm must measure the worth of building the necessary systems itself.
7. Business practice also differs in the global environment
What’s acceptable in France may not be acceptable in Honduras. These differences may be as small as the standard hours of business or as large as what makes a contract.
In many nations, a handshake may be as binding as a legal contact of the eyes of a local businessperson.
At best a failure to realize these differences causes hard feelings. At worst, it may wind up costing a firm a lot of money.
8. Firms also face a variety of financial and currency problems it must not be ignored
Exchange rate problems occur when one type of currency is an ex for another at a time when the exchange rate is unfavorable.
A profit in one currency can be a loss in another at the time of exchange. Late in 1997 many Far East Asian economies experienced severe threats to their currencies.
South Korea, one of the largest world economies, was damaged to the point where it required assistance from the International Monetary Fund (IMF).
There may be no hard currency in the country; that is, it cannot be exchanged. Inflation, in foreign countries, is more volatile than in the United States and can present a real problem.
In addition, firms can infringements on the relatively prevalent black market. Some nations are unreasonable in their requirements for foreign companies.
They may expect a large tax payments or further investment. Accounting laws may differ from country to country resulting& in confusion,
Finally, certain moral issues such as playing on friendships or favoring relatives over others can cloud the business decisions of managers.
Whatever differences exist, if the firm is organized and managed correctly, it will be able to face any global problem.
But organizations should remember this difference between domestic and international business for better performance.
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