International companies deal with the same employee relations, logistics, product development and financial concerns as their domestic counterparts. But because they operate in more than one country, management of these functions must accommodate cultural differences, foreign exchange rates, customs regulations and labor laws, among other things. The characteristics of international companies differ depending on a firm's involvement with foreign markets and the degree to which the local business environment affects corporate goals.
First International Steps
When a company begins to engage in activities outside the borders of its home country, it gains international status, usually as an importer or exporter.
According to the U.S. Census Bureau's most recent 2011 Profile of U.S. Importing and Exporting Companies, more than 97 percent of import/export businesses had fewer than 500 employees.
Importers typically buy merchandise from foreign suppliers to offer a broader selection of goods to their customers. They use brokers to handle customs documentation and clearance, notes Warrington College of Business Administration. Exporters have a successful domestic operation and consider foreign markets a way to expand with minimal investment. They typically rely on independent distributors or agents who have in-depth knowledge of the markets involved and related shipping requirements, according to International Business.
Licensing and franchising represent other inexpensive ways companies start to do business abroad. Although more involved than exporting, these activities allow businesses to tap the purchasing power of consumers in other countries at a lower cost than direct investment would entail. These international companies, like exporters, have a product or service that is well accepted domestically. Companies that expand internationally through franchising, such as Yum! Brands, have staff dedicated to these activities, often assigning profitability responsibility to a department or division, according to the International Franchise Association, while licensors only need adequate legal and accounting support to monitor contracts and process royalties.
When a company adopts the strategy to have a physical presence in the foreign market or markets it serves, it becomes a true international business, often called a multinational corporation, or MNC. Typically, MNCs invest in subsidiary operations in select countries and adapt their products or services to local preferences. As the University of Indiana notes, the parent company of an MNC, based in the home country, sets policies and goals for worldwide operations. The parent company owns the subsidiaries from which it generates a sizable portion of its revenue. This type of international company, often referred to as a global business, employs people from many countries, not just those native to its subsidiary locations. They juggle legal regulations from each country in which they operate, as well as U.S. legislation.
Born Global Enterprises
A new genre of international companies has emerged -- dubbed "born global" -- that differs from multinationals and international companies. According to the Miami Herald, these firms concentrate from Day One on international opportunities. Born globals focus on serving foreign markets. Typically they begin by exporting specialized products that serve niche market segments before later selling them to a broader audience. Born globals characteristically are technologically advanced and offer superior products. Their management has an international entrepreneurial philosophy, yet these firms rely on venture capital. Examples of born globals include Zara, the Spanish clothing firm; IKEA; and Skype.