Challenges in International Business
Internationalization of organizations has become much more common in the Fourth Industrial Revolution. Today, enterprises have more resources and capabilities that allow them to take their business global. While international business can have many benefits for organizations, economies and professionals, it also comes with inherent challenges.
Every country has its own government, cultures, languages, policies, laws, currency and time zones. Managing a business across multiple countries means managing across all of these different factors. Add to that the stresses and challenges of the COVID-19 pandemic, and it can be quite intimidating.
5 Challenges in International Business
Did you know that 75% of British adults can’t speak a foreign language competently and 75% of American adults speak only their native tongue? And yet, there are over 7,000 languages and dialects spoken around the world.
In global business, it’s very common to meet people who speak a different language than you. And language barriers can make doing business internationally very difficult. For this reason, most international companies look for employees who are fluent in at least one foreign language.
At Thunderbird, we understand the importance of language in international business. That’s why we require our Master of Global Management students to be proficient in a foreign language upon graduation.
But language study isn’t just about language proficiency. Language study also helps expand Global Mindset – “being comfortable with being uncomfortable,” as Thunderbird professor Mansour Javidan says.
Learning a new language also provides cultural knowledge. One respondent in an alumni survey said, “Cultural understanding, and the enhanced cultural understanding that language studies provide, is vital to success in the international business community.”
That leads us to another challenge of international business—working with people from different cultures.
Oxford defines culture as: “the customs, arts, social institutions, and achievements of a particular nation, people, or other social group.” Each country, sometimes each region within certain countries, has a unique culture. Having an understanding of different cultures makes the management of cross-cultural business relationships and leading global companies much easier and more effective.
For example, different countries have different greetings. In the United States or Russia, the appropriate greeting is a handshake. However, in China and India the appropriate greeting is a bow. Meanwhile, in Brazil or much of Europe, the appropriate greeting is a kiss or brush on the cheek. The same nuances can be found in many other business-related customs – business meetings, business dinners, and workday or workweek length for example. Working across borders is also essential for success in areas such as global strategy, mitigating political risk, and other contemporary challenges.
At Thunderbird, we think the best way to learn about other cultures is through real-time interactions. Our international student and faculty population makes it easy for students to interact with people from all over the world on a daily basis. We also have many applied learning courses and study abroad opportunities where students are immersed in other cultures.
We believe celebrating different cultures expands and grows our knowledge, our compassion and our communication while supporting our vision: “A world with inclusive and sustainable prosperity.” Learn more about how you can develop cultural dexterity at Thunderbird.
Managing Global Teams
Developing and managing successful teams is hard enough. When you add language barriers and cultural differences along with varying time zones and levels of technology access, it becomes even more challenging.
Cultivating the right mindset and skillset makes the often tricky management of global teams easier. Leaders who develop a Global Mindset have a limitless resource for understanding diverse cultures and business environments and are emotionally intelligent. They are highly flexible and understand how to navigate through varied business and interpersonal interactions. Global Mindset plays an important role in global leadership and management.
Another key to managing global teams is having the right skillset. Empathy and compassion, communication, technological intelligence, agility and flexibility, and lifelong learning are some of the important skills that leaders and managers need to lead global companies and other transnational enterprises.
Political and Legal Nuances
The international business environment is highly influenced by political and legal nuances and foreign relations. When you're doing business in a foreign market, it's important to have a deep understanding of policies, financial systems, and country-specific tax implications. Having this knowledge will influence your strategy and ensure you're operating within the laws and regulations of the country.
Studying international business at Thunderbird prepares future leaders to navigate these nuances. Through our applied learning programs and simulated experiential learning, students gain real-world experience solving these challenges in corporate, government, or nonprofit settings.
When we talk about brand consistency, that covers everything from language and logo to company culture. Because multinational companies are navigating so many variables, it can be challenging to create brand consistency and balance that with cultural nuances. Developing an international corporate strategy is imperative.
A company’s brand is what sets it apart from competitors. It’s like a company’s fingerprint. Take Starbucks for example. If you walk into a Starbucks, you expect the same “legendary experience” and drink recipe regardless of where you are in the world. That consistency is what creates trust and loyalty with Starbucks’ customers and partners. But not all companies have had the same success.
In the 1970s, Procter and Gamble Co. tried to enter Japan's notoriously demanding market with their new disposable diapers. They showed ads of storks delivering diapers – imagery that resonated well with U.S. parents. Japanese parents on the other hand were stumped by the sight of this strange bird.
In Japanese folklore, babies are delivered not by a stork, but by a giant peach floating down the river. The international marketing team failed to do their homework and it cost P&G a lot of international business. Developing a new strategy that balanced consistency with sensitivity to the unique Japanese culture helped them turn things around.
Finding this balance across a global organization starts at the top and takes time and attention to cultivate. It takes leaders who communicate, teach and exemplify brand standards, and ensure that their teams are doing the same. At Thunderbird, we believe in that same consistency with our own brand and work purposefully to create a consistent experience and education whether you’re in Phoenix or Dubai.
International business is exciting and evermore prevalent in our global world. It also comes with many challenges. Our goal at Thunderbird is to make it less intimidating by preparing our students to lead and manage across borders.
Here are a few tips for managing international business challenges:
Communicate – Communication is key in any organization, but especially when you're managing across languages, cultures, time zones and varying laws and policies. Many studies have shown that when employees have regular check-ins with management, they feel more engaged and are more efficient. In-person communication is superior, but with international teams and the coronavirus remaining in circulation, face-to-face interactions might not always be possible. In those cases, virtual face-to-face communication is a close second.
Align to a purpose – According to Gallup’s State of the Global Workforce Report, “[Employees] are now driven more than ever by company mission and purpose, and require a workplace culture that delivers it.” And other research shows that 9 out of 10 people are willing to earn less for more meaningful work. Aligning to a purpose creates consistency and drives productivity. It's a win-win.
Access to technology – Some countries do not have the same level of technology access as other countries. It's important to ensure that all of your employees have the same access so that they can communicate with their team and do their jobs properly.
Do your research – Whether you're an executive looking to expand into new markets or you're just starting a career in international business, it's important to do your due diligence. Learn about the regions you want to be in and stay in-the-know about local news, especially when it comes to politics and regulations.
Continue learning – Never stop learning. Learn about best business practices, learn a new language, read a new book, take a class, be open to new ideas. One of the best things a leader (or anyone) can do is to continuously seek knowledge and understanding. Lifelong learning will help you meet the challenges of any environment, today and in the future.