The world is big and, when it comes to business, everyone is intertwined. Whether or not you produce and sell goods internationally, global business impacts every organization.

“Everybody has to care about macroeconomics and the global economy,” says Harvard Business School Professor Forest Reinhardt in the online course Global Business.

So, how can you, as a business owner, manager, or employee, stay informed and find your organization’s place in the global market?

Here’s an introduction to international business, some common challenges to consider, and suggestions for how you can prepare.


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What Is International Business?

International business is the production and sale of goods and services between countries. There are several ways a business can be international:

  • It produces goods domestically and sells both domestically and internationally.
  • It produces goods in a different country but sells domestically.
  • It produces goods in a different country and sells both domestically and internationally.

Businesses typically produce goods overseas due to lower labor costs or taxes, and they sell products and services in the global market because of the high potential for gaining a larger audience, new customers, and increased revenue.

“Although international business is extremely exciting, it can also be risky,” Reinhardt says in Global Business.

Because every country has its own government, policies, laws, cultures, languages, currency, time zones, and inflation rate, navigating the global business landscape can be difficult. Here are five challenges to consider.

Related: 3 Economic Indicators to Consider Before Expanding Your Business Globally

5 Common Challenges of International Business

1. Language Barriers

When engaging in international business, it’s important to consider the languages spoken in the countries to which you’re looking to expand.

Does your product messaging translate well into another language? Consider hiring an interpreter and consulting a native speaker and resident of each country.

One example of a product “lost in translation” comes from luxury car brand Mercedes-Benz. When entering the Chinese market, the company chose a Mandarin Chinese name that sounded similar to “Benz”: Bēnsǐ. The name translates to “rush to death” in Mandarin Chinese, which wasn’t the impression Mercedes-Benz wanted to make with its new audience. The company quickly adapted, changing its Chinese name to Bēnchí, which translates to “run quickly, speed, or gallop.”

It’s also critical to consider the languages spoken by your company’s team members based in international offices. Once again, investing in interpreters can help ensure your business continues to operate smoothly.

2. Cultural Differences

Just as each country has its own makeup of languages, each also has its own specific culture or blend of cultures. Culture consists of the holidays, arts, traditions, foods, and social norms followed by a specific group of people. It’s important and enriching to learn about the cultures of countries where you’ll be doing business.

When managing teams in offices abroad, selling products to an international retailer or potential client, or running an overseas production facility, demonstrating that you’ve taken the time to understand their cultures can project the respect and emotional intelligence necessary to conduct business successfully.

One example of a cultural difference between the United States and Spain is the hours of a typical workday. In the United States, working hours are 9 a.m. to 5 p.m., often extending earlier or later. In Spain, however, working hours are typically 9 a.m. to 1:30 p.m. and 4:30 to 8 p.m. The break in the middle of the workday allows for a siesta, which is a rest taken after lunch in many Mediterranean and European countries.

3. Managing Global Teams

Another challenge of international business is managing employees who live all over the world. When trying to function as a team, it can be difficult to account for language barriers, cultural differences, time zones, and varying levels of technology access and reliance.

To build and maintain a strong working relationship with your global team, facilitate regular check-ins, preferably using a video conferencing platform so you can interact in real time.

Research by Gallup shows that employees who have regular check-ins with their managers are three times more likely to be engaged at work than employees who don’t.

When distance divides teams, as it has for many during the coronavirus (COVID-19) pandemic, communication is key to ensuring everyone feels valued and engaged.

Related: How to Foster Employee Engagement When Your Team Is Remote

4. Currency Exchange and Inflation Rates

The value of a dollar in your country won’t always equal the same amount in other countries’ currency, nor will the value of currency consistently be worth the same amount of goods and services.

Familiarize yourself with currency exchange rates between your country and those where you plan to do business. The exchange rate is the relative value between two nation’s currencies. For instance, the current exchange rate from the Canadian dollar to the US dollar is 0.77, meaning one Canadian dollar is equal to 77 cents in US currency. Make it a point to watch exchange rates closely, as they can fluctuate.

It’s also important to monitor inflation rates, which are the rates that general price levels in an economy increase year over year, expressed as a percentage. Inflation rates vary across countries and can impact materials and labor costs, as well as product pricing.

Understanding and closely following these two rates can provide important information about the value of your company’s product in various locations over time.

5. Nuances of Foreign Politics, Policy, and Relations

Business doesn’t exist in a vacuum—it’s influenced by politics, policies, laws, and relationships between countries. Because those relationships can be extremely nuanced, it’s important that you closely follow news related to countries where you do business.

The decisions made by political leaders can impact taxes, labor laws, raw material costs, transportation infrastructure, educational systems, and more.

One hypothetical example Reinhardt presents in Global Business is that if the Chinese government decided to subsidize Chinese dairy farms, it would impact dairy farmers in all surrounding countries. This is because, with extra funding, Chinese dairy farms may produce a surplus of dairy products, causing them to expand their markets to neighboring countries.

It’s both exciting and intimidating that the nuances of international politics, policies, and relations can impact your business. Stay informed and make strategic decisions as new information arises.

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Preparing for International Business Challenges

Global business comes with unique challenges but can be an opportunity for enormous organizational growth. To prepare for those challenges, vary your news intake and closely follow foreign politics, make connections in countries where you hope to do business, invest in interpreters to overcome language barriers, and consider taking a global business course to prepare for today's nuanced, interconnected business world.

Are you interested in breaking into a global market? Sharpen your knowledge of the international business world with our four-week Global Business course, and explore our other online strategy courses.

Catherine Cote

About the Author

Catherine Cote is a marketing coordinator at Harvard Business School Online. Prior to joining HBS Online, she worked at an early-stage SaaS startup where she found her passion for writing content, and at a digital consulting agency, where she specialized in SEO. Catherine holds a B.A. from Holy Cross, where she studied psychology, education, and Mandarin Chinese. When not at work, you can find her hiking, performing or watching theatre, or hunting for the best burger in Boston.