Becoming A Global Presence - Economic And Legal Environments

While the information revolution has produced software and systems for managing and moving goods on a global scale, the headaches of adjusting local practices to respective national laws, taxes, and tariffs remain—although moves toward regional common markets were alleviating such difficulties somewhat. Firms in the early 2000s operated in the context of national political jurisdictions, each with their own tax and legal structures. A challenge for companies establishing a global presence was to negotiate these jurisdictions across their operations. More than simply coming to terms with these various legal environments, there were clear-cut strategies for optimizing a firm's interaction with them. For instance, while the propensity to conduct business in one country or another is subject to traditional cost-benefit analysis that includes the legal and tax codes of those countries, there were methods for transforming those red-tape headaches into added value, most particularly in trying to limit overall tax liability based on where certain business operations are based. Clearly, companies will, within the context of their overall business strategies, attempt to locate particular operations where they are least costly in overall terms, including where taxes on those operations will be most limited. Finessing the banking systems and acting diplomatically to create influential contacts and networks in foreign countries was often an expensive and daunting undertaking, but could pay off substantially in the long run.

The nuances of global e-commerce opportunities from region to region are staggering. For instance, some regions, particularly Africa, were beset by a relative dearth of Internet access; others, like Western Europe, boasted widespread access but still struggled with a clear and coherent e-commerce tax structure; China, meanwhile, remained committed to centralized economic planning but was aggressively pursuing e-commerce.

Technical considerations are another factor in global business decision-making. Different countries and regions have vastly different information-technology and telecommunications infrastructures, and this consideration factors greatly into how, when,—and even if—particular companies decide to enter certain markets. For instance, in countries with a higher relative rate of mobile Internet connectivity, companies need to adjust their e-commerce strategies to those technological factors. Elsewhere, regions with relatively low Internet access or with little tradition of credit-card use could be prohibitive, or alternatively could provide opportunities for novel approaches that rival firms may be reluctant to employ. In addition to localized Web content, Web pages geared toward specific countries and cultures also need to account for local telecommunication capacities. For instance, in areas where capacity is limited or expensive, Web sites with sophisticated graphics or otherwise intensive downloads may serve to alienate rather than attract customers.

Along the same lines, consumers in different countries have different propensities to, and reservations about, making purchases online. While in the United States both consumers and companies have relatively clear guidelines about the responsibilities of all parties in a transaction, such codes are far from universal. For instance, consumers in Latin America tend to be reluctant to use a credit card with a business with whom a relationship of trust has not been established. In Germany, moreover, the most common form of e-commerce payment is not via credit card but via electronic debit. Other countries prefer traditional cash-on-delivery payment schemes. Companies need to be aware of often-intangible characteristics such as these if they are to embark on successful marketing strategies.

The currency in which companies opt to bill their customers is another major consideration. With rapid and often dramatic currency fluctuations marking the global economy, companies need to carefully consider the comparative advantages and disadvantages of billing customers in their local currencies versus billing in U.S. dollars. By billing in U.S. dollars, companies may be shifting the risks of currency fluctuations to their customers; alternatively, firms that bill in local currencies assume the currency risks themselves. Understanding the international banking and financial environment in light of currency fluctuations thus becomes an added pressure for globalizing businesses.