Do you know what it takes for success as a global business entity? A well-known US-headquartered big box retailer thought it did, but it took the leap of international expansion before looking into theories of international business. The result was it applied its US management styles to another culture, causing disgruntled workers and breaking labor laws in another country. Blindly entering foreign markets without preparing for the new venture can put your firm legally and financially at risk, as well as hurt your brand or goodwill earned. Thorough knowledge of some fundamental trade terminologies, international trade theories, and international investment theories is crucial before moving into international markets.
It is vital for managers to understand that liberal trade policies encourage competition, promote innovation, and act as ingredients for trade success. When trading with another country, exploring how trade came into practice and the theories behind international trade is important. In general, classical theories provide an understanding of how trade theories were born when surplus items were traded between countries and countries traded to obtain gold and silver to fund armies for colony expansion. But the failure of country-based theories to tackle the expansion of intraindustry trade or trading of goods between two countries in the same industry sparked the growth of firm-based theories. Conversely, modern trade theories were developed after World War II with the growth of multinational corporations (MNCs).
As a manager, financial analyst, or executive in charge of an international division or a consultant on a foreign venture, gaining a comprehensive picture on trade fundamentals and understanding the basic theories that contribute to the advanced trade principles practiced today is pertinent.
Are you prepared for international business? Take time to look before you leap. The Accenture Academy course Defining Theories of International Business discusses the evolution of theories of international business, as well as what is in practice today. The course also relates theories with real-life examples of various MNCs.