Last decades the global business and economy displayed the trend to globalization no matter how the term of “globalization” is accepted by its supporters and opponents. The international business integration is taking place and growing steadily. The basic knowledge of economy and marketing is no doubt of great importance but apart of basic knowledge it is necessary to obtain a special set of instruments and tools to realize the international business operations. These tools need to be studied in details while preparing to the international business activity.
Normally any business is connected with the exploring the target markets. The integration processes occurring in various parts of the world now are aimed to unify the business processes. The formation of EU and other international economic and political alliances (ex. ECOWAS, West Africa), unify the procedures of developing the international cooperation within the territories of the agreements.
According to some prognosis the international cooperation can be developed by to some scenarios. According to Robert J. Laubacher the international business may be developed either as” Small Companies, Large Networks” or as “Virtual Countries” (1).
Following these scenarios the international business may be developed by small highly integrated companies or by large conglomerates like GM or Toyota with their unified strategy, policy, management etc.
In both cases the special knowledge is required. First of all the marketing survey in the country different from the country of basing the business is connected with the legal regulations. It is necessary to posses a certain set of knowledge to evaluate the competitor environment, the taxation, to understand payment and shipment procedures.
The chain of actions while performing the international transaction consists of the market survey, negotiations, signing the agreement, shipment, delivery and payment. Special knowledge is required at any stage of the international business cooperation.
Thus, market survey presupposes apart from the general economic knowledge, the special knowledge of the target region or a country, its legislation, business environment etc. Governments being highly interested in the international cooperation assist the companies to enter the foreign markets. Thus for example BISNIS is the U.S. Government’s primary market information center for U.S. companies exploring business opportunities in Russia and other Newly Independent States. It was established in 1992 under the Freedom Support Act and is a part of the U.S. Department of Commerce’s International Trade Administration, which promotes market access for U.S. companies worldwide (2).
The negotiations and signing the contract require special knowledge on both the national legislations and procedures and the international ones. The international procedures require the understanding and competence in such issues as INCOTERMS, shipment and inspection procedures, customs clearing etc.
The international contracts are interpreted by INCOTERMS. INCOTERMS are standard trade definitions most commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they are at the heart of world trade (3).
Apart from INCOTERMS there are a number of procedures to be observed in international cooperation. One of them is the independent pre-shipment inspection. There are a number of internationally recognized companies in the world who are authorized to make an independent pre-shipment inspection.
COTECNA, SGS, Bureau Veritas are among them. Their business is to validate if the physical quality, specification and quantity of goods to be shipped correspond to those stated in shipment documents and contract. These pre-shipment procedures are specific to international trade only and the knowledge of them could be obtained from the specific course. The aim of these organizations is to make the pre-shipment inspection and issue an appropriate report which could be used as testimony in the international arbitration in case of disagreement between the parties.
Another very important scope of knowledge on the international business is the payment procedure. Most commonly used mode of payment in the international trade is L/C or the Letter of Credit. This type of payment is absolutely different from the payment inside the country. While issuing L/C bank takes the obligation to make the payment if the terms of the contract are fulfilled.
Of course the international trade and cooperation develops according to the generally formulated economic laws and procedures. Special course of the international business can not substitute the basic knowledge in economy. It is better to say the international business is derived from the basic economy, but the international cooperation is characterized by such a lot of peculiarities that the special course is highly required.
While doing business within one country it is necessary to evaluate the risky factors which are more or less defined by the national legislation and national economic environment. While doing business on the international level the risks are multiple and they are summarized by the national economy risks of the resident countries of the partners.
The basic peculiarity of the international business is to find solutions which do not contradict the national legislation and economic procedures on one hand and are appropriate for the all parties involved on the other one.
Though the international business has certain peculiarities the most important is that business is normally being done not between the companies, countries or corporations but between people. That is why the human factor, fairness and mutual respect are most important.
If a person knows and understands the national traditions, language, etc of his partner he has more chances to succeed in cooperation.
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- Robert J. Laubacher, Thomas W. Malone, and the MIT Scenario Working Group
- Understanding Incoterms
Robert J. Laubacher, Thomas W. Malone, and the MIT Scenario Working Group, Two Scenarios for 21st Century Organizations: Shifting Networks of Small Firms or All-Encompassing “Virtual Countries”?, available at http://ccs.mit.edu/21c/21CWP001.html, retrieved 8.12.2005
BISNIS, available at http://www.bisnis.doc.gov/bisnis/whoweare.cfm, retrieved 8.12.2005
Understanding Incoterms, The International Chamber of Commerce, available at http://www.iccwbo.org/incoterms/id3042/index.html, retrieved 8.12.2005