How to Do International Business? | Rules, Reflation, and Benefits

The concept of ‘Globalization’ is deeply rooted in the history of various human civilizations. It refers to the growth and broadening scope of international economic exchange that is measured by trade and Foreign Direct Investment (FDI) flows. It encompasses different types of exchanges as well like capital, people, technology, ideas and effective institutional practices.

Rules for Conducting International Business

• Labour and Employment Law
• International Trade Compliance – Import/Export, Sanctions
• Corporate Structure for Conducting Business
• Taxes
• Intellectual Property
• Payment, Finance and Exchange Controls
• Termination of Business

Reflation and International Business Expansions
Benefits of Setting up an International Business Operation

Rules for Conducting International Business

Different countries have different guidelines and rules that apply to international business. A company engaged in international business operations is controlled by both, the host nation as well as the foreign country in which it conducts business. The company representatives are legally bound by the law of the land in which they operate.

It is almost impossible to cover every law and rule that applies to every country within the scope of this article. However, there are certain common rules that apply to companies wishing to engage in international business:

Labour and Employment Law

Any hiring or subcontracting in a foreign country is subject to that particular country’s labour employment laws. It is prudent to engage in a detailed study of the compliances and benefits that affect the hiring process.

International Trade Compliance – Import/Export, Sanctions

Expansion of a business beyond its country’s borders invokes the national security and economic interests of the host country as well as of the country or countries of expansion. What products can be imported or exported, what are the current bans, and what sanctions and approvals are required, need a careful and detailed study. International business laws are harsh on corruption practices like bribing officials.

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Corporate Structure for Conducting Business

Depending on what is the proposed business, the best applicable corporate structure needs to be decided. It could be in the form of establishing its own branch, a subsidiary or working with an international partner or representative office. Each option is subject to its own costs, timelines and tax consequences of the country.

Taxes

It is probably one of the biggest considerations during an international expansion. It is prudent to carefully examine the tax structure, what threats and opportunities it presents and what are the tax consequences of doing business in a particular country.

Intellectual Property

Trademarks, patents, copyrights or trade secrets are all a part of a company’s intellectual property and its most valuable assets. Any protections for the same in the host country may not be applicable in another country. Sometimes, it is expensive to secure and enforce the same rights overseas. However, there are ways and means available to mitigate the risks through carefully crafted licenses, employment agreements and other contractual agreements.

Payment, Finance and Exchange Controls

International movement of money adds complexities to a simple transaction. Foreign currency exchange laws and controls for more secure and safe methods of payment is an area, where it is important to get the details right. They can prove costly if not done right.

Termination of Business

It is difficult to talk about termination at the outset, however, when venturing in an international business expansion, it is wise to consider an exit strategy right at the start. This can be very helpful in successfully negotiating, if and when, such a case arises. Sometimes, closing a business can be a lengthy and costly affair in some countries, not to mention the tax consequences and the creditors’ and employees’ rights.

Reflation and International Business Expansions

Reflation is, basically, a monetary policy that is designed to expand output and stimulate spending to curb the effects of deflation – usually occurring after a period of economic recession.

There are numerous ways how a reflation is induced:

• Tax Cuts
• Infrastructure spending
• Lowering interest rates
• Changing Money Supply

All these steps are taken to ensure a boost to a flagging economy, infuse a steady cash flow and boost employment.

International Business expansions rely on these attractive lures to enter into a country to set up their operations. Businesses take advantage of tax rebates, lower interest rates and various other investment opportunities that recovering and growing economies offer. They also help these economies to generate more employment.

Benefits of Setting up an International Business Operation

As economies develop and grow, more and more opportunities are available for existing businesses to grow. The way to access these exciting new markets and capitalize on these opportunities is through international business expansion.

Setting up an international business operation for expansion has many benefits:

Global Talent Acquisition

• The hiring of new talent
• A move forward in business development
• Availability of a multi-lingual employee
• Access to a different skill set
• Inroad to understanding cultural nuances to better understand the market
• Easy navigation of language barrier and etiquette

Access to Foreign Investment Opportunities

• Access to attractive financial incentives from developing economies
• Deductions in Corporate tax
• Additional investment opportunities
• Opportunity to develop new resources of income
• Forge new connections

Competitive Advantage

• First-mover advantage in countries where competition does not have a presence.
• Build strong brand awareness, unhindered.
• Access to new technologies and industry ecosystems to improve operations.
• An international presence can aid in further additional acquisitions.

Diversification

• Asset diversification can safeguard against unforeseen events.
• Can introduce unique products and services in international markets to help maintain a steady revenue stream.
• A diverse portfolio also broadens the prospect of acquisitions and mergers.

New Markets

• Companies that operate on a global scale often see a maximum of their consumer base outside of the home country.
• The strategic expansion helps to lessen the geographical distance and offers direct access to a large consumer base.
• It also offers the opportunity to conquer newer markets.

Things to Remember While Dealing With International Clients

When dealing with international clients it is advantageous to keep certain aspects in mind like time zones, currency value, language differences, etc.

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Conclusion

All in all, location plays an important role in deciding to set up an international base of location. Of course, the suitability of the location depends on the type of operation that is to be set up and how business-friendly that country is.

International Business expansions are a great boost to globalization. To add to it, they are also a great way to diversify and add to an existing portfolio and conquer new markets.

FAQs

Why international business is needed?

International business helps countries to take advantage of specialized and various factors of production from other countries. This also enables the countries to supply goods and services in the international marketplace.

What are the rules for conducting international business?

Some of the most common rules for conducting international business are:

• Labour and employment laws
• International Trade Compliance – Import/Export, Sanctions
• Corporate Structure for conducting business
• Taxes
• Intellectual Property

What are the types of international business?

Some of the major types of international business are:

• Franchising
• Direct Investments
• Joint Ventures
• Licensing
• Import and Export
• Custom Consultancy

What country is best for international business?

The best countries for international business are:

• United Kingdom
• Canada
• Singapore
• Germany
• New Zealand
• Japan