American Companies Exploring Global Markets: Challenges and Opportunities - Essay Sample

Introduction

Most companies mainly in the United States have recognized significant market prospects globally for their services and products. The markets are substantial in terms of population, in foreign nations including China. The businesses and consumers purchasing power in most countries is also highly significant for American companies wanting to pitch competition in such business sectors. Nevertheless, internationalizing firms in foreign markets comes with its challenges, and businesses tend to make pricey errors by not doing an adequate analysis of international markets before they invest there. Internationalizing businesses could provide the firms with exciting new profit and growth prospects; although there are significant risks and barriers linked to going international, and the good thing is that they can be overcome though strategies such as licensing and franchising to help the firms continue thriving globally.

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Barriers to Internationalizing Firms

Cultural Issues

Different societies have different qualities, and once in a while, these distinctions can be unmistakable. For instance, gender issues can appear to be sensitive in individual nations where men and women do not get equal rights. Individuals might wind up thinking about whether they can securely send female personnel to other countries such as Japan - where they believe that women ought to be subservient to men - on business duties (Brooke & Buckley, 2016).

Similarly, marketing strategies in different nations might vary, and ethical behavior in the United States might be inconsiderate somewhere else. Certain cultures do not pay as much attention to trade agreements as others, and several societies perceive the group to be more significant than the individual (Brooke & Buckley, 2016). Thus, cultural diversity could cause a barrier for firms striving to set a base in foreign nations if they are not aware and adapt to the cultural intricacies of the area.

As a result of movies and the advertisements on the internet, the United States culture and its business images of that culture - branding- is quite famous globally. That does not signify that the US firms will prevail as well when established in different nations (Rahman, Uddin, & Lodorfos, 2017). Awareness of a brand name is not equivalent to liking or having a strong preference for it. It might very well be a costly and lengthy procedure to get the trust of buyers who are used to their local goods and services for a very long time. Internationalizing firms in overseas nations could appear as an attempt to assume control over the long-held position by local organizations, thus causing hatred.

Communication Barriers

Communication issues are a conspicuous drawback to doing business in foreign nations. One might need to depend on interpreters when addressing business contacts, and the complexities of what the associates say could be lost in the translation process. If one is outsourcing customer service to other nations, the clients might be struggling to clearly understand individuals whose first language is not quite the same as their own (Brooke & Buckley, 2016). The customary leap of business talks could also vary. For instance, most of the time Americans are fond of wanting to rush negotiations, while in other nations, creating a rapport between potential business associates is given more serious consideration. Officials from different countries might put a higher incentive on factors such as, outward appearance rather than simply what is being discussed.

Tariffs and Trade Restrictions

Tariffs are taxes imposed on imports, that are collected by the central government and which increases the cost of the goods to the buyer. Also referred to as import duties or obligations, taxes for the most part focus on confining imports and raising revenue (Toulova, Votoupalova, & Kubickova, 2015). The impact of quotas and tariffs is similar: to restrain imports and to give protection to local businesses from international competition. As indicated by Toulova et al. (2015), a levy raises the cost of the foreign goods past the average market value, that reduces the interest for and, ultimately, international businesses. For example, a levy might be collected to bring the benefits of the newly set up firm to the same level as local businesses thus levelling the playing field of both domestic and foreign organizations (Toulova et al., 2015). In this game, the internationalized firms lose. Other nontariff trade restrictions include burdensome customs procedures, business permits, and licences.

Legal Issues

When conducting business in another nation, one ought to be acquainted with that nation's legal stands. The legal barriers of internationalizing businesses could be a big challenge, and when there is no appropriate legal counsel one might be liable to penalties and fines (Rahman et al., 2017). For firms to establish themselves in different regions, they must have reasonable international attorneys with a firm understanding of the laws of the new country where they plan to set up the firm.

Political Barriers

The majority of individuals strongly oppose international trade activities, globalization, and outsourcing (Toulova et al., 2015). Some businesses might lose part of their client base on the off chance that they start working in other nations, especially nations that have tense associations with the US including Iran and Russia. Besides, if an organization takes part in abusing human rights in other countries - regardless of whether they had no clue that these maltreatments were happening - they might be liable to an attack of bad publicity and risk losing their business. Similarly, if a company is set up in a foreign nation that has positive relations with the US, but the employees still experience work abuse, the organization could risk facing criticisms back home (Rahman et al., 2017).

Overcoming Barriers in International Markets

A Legitimate Oversight

Regardless of whether a business is opening a branch in another nation or one is just selling and purchasing property, settling away from home reduces its oversight. It is, therefore, a good option employing individuals who could enlighten corporates on matters concerning the status of the planned business in different nations and who could caution in case of any potential issues. Without an authentic oversight, one might discover that they are signing an unfair or unlawful agreement, or investing on services and goods that might pose a risk to the consumers or the business, in general, leading to its downfall (Brooke & Buckley, 2016). Additionally, it is essential for an organization to have a reasonable array of strategies concerning enticements for exceptional work and corrective measures for unacceptable performance.

Franchising

In franchising, one party gives the other, the right to apply its trademark and structure in producing and marketing a service or good following specific condition. The franchisee settles a fee and a percentage of sales income as royalty and gets assistance in upgrading and promoting products, training of employees, detailed strategies of successfully running the firm, and immediate brand recognition. The franchising division in the United States is universal, with more than sixty per cent of franchisors looking for foreign chances (Brooke & Buckley, 2016). Diversifying permits American businesses to internationalize with few restrictions because the hosting business associate, be it a master or a direct franchise, accepts initial investments and startup costs (Madanoglu, Alon, & Shoham, 2017).

With regards to franchising, advancing in home and foreign markets is not a fundamentally discrete choice, since companies apply part of the manipulative insight acquired in local markets to global markets. similarly, the skill picked up in global markets might help improve local activities. Based on authoritative ability to use both hands, diversifying firms will perceive host and home markets as significant hotspots for increasing practical experience (Gollnhofer & Turkina, 2015). In financial terms, when an ecological vulnerability in home markets rises, businesses will want to apply exploitative information since it depends on consummated schedules, influences more certain profits, and requires fewer assets (Madanoglu et al., 2017).

Licensing

Licencing allows one to quickly tap the current marketing, distribution, and production frameworks that different organizations might have invested time creating. Consequently, one gets a percentage of the income from services and products sold under their permit (Brooke & Buckley, 2016). Licencing fees regularly sum up to a small portion of the business cost although it may increase rapidly (Brooke & Buckley, 2016). A licence or rather known as a business permit, is thus, basically a tool, that when used in the right manner, it is an incredibly savvy advertising instrument. Business permits offer three noteworthy favourable conditions.

To start with, it might mean that a firm has something unique that its competitors lack. Second, it might mean showing signs of improvements due to its uniqueness. Lastly, licencing could also imply that ten per cent of the retailers that business approaches that they never could pitch to will, at last, have an interest because the firm will now be presenting something else (Gollnhofer & Turkina, 2015). Furthermore, when that occurs, the business could be in a better position of selling the rest of their line.

Conclusion

Barriers faced when internationalizing firms overseas can be annoying. However, they do not need to destroy an organization's goals to indulge in international trade. Marketing personnel could blunder by believing that the interests of individuals in different nations are precisely similar to the desires of their local consumers. It tends to be a costly and time-consuming procedure to gain the consumer's trust in foreign countries since these are people who are used to consuming their local market products for ages. Internationalizing firms additionally face miscommunication issues because of cultural and language differences. The political atmosphere of a nation also plays a noteworthy effect on global trade; political instability might alter the attitudes on foreign firms thus creating a horrible environment for international organizations to thrive. The other barrier is that tariffs could be applied to discourage business establishments in global digestive markets. Overcoming such obstacles requires firms to recognize legal and regulatory supervisory strategies with the potential partners, build reciprocity, empathy, and trust, negotiate a formal agreement, and above all get licences to work in the host country, and take a focused step in franchising the firm. Eliminating one barrier could open more doors for an entire industry and for firms to thrive overseas.

References

Brooke, M. Z., & Buckley, P. J. (2016). Handbook of International Trade. Springer.

Gollnhofer, J. F., & Turkina, E. (2015). Cultural Distance and Entry Modes: Implications for Global Expansion Strategy. Cross-Cultural Management, 22(1), 21-41. doi: 10.1108/CCM-07-2013-0114

Madanoglu, M., Alon, I., & Shoham, A. (2017). Push and Pull Factors in International Franchising. International Marketing Review, 34(1), 29-45. doi: 10.1108/IMR-03-2015-0037

Rahman, M., Uddin, M., & Lodorfos, G. (2017). Barriers to Enter in Foreign Markets: Evidence from SMEs In Emerging Market. International Marketing Review, 34(1), 68-86. doi: 10.1108/IMR-10-2014-0322Toulova, M., Votoupalova, M., & Kubickova, L. (2015). Barriers of SMEs Internationalization and Strategy for Success in Foreign Markets. Interna...