You may have heard the age-old phrase, “It’s a small world.” In a time of advanced technology, the world not only feels small in terms of accessibility, but in terms of connectivity. It’s impossible to avoid being impacted by the decisions made by others around the globe—and no field showcases this dynamic better than business.
If you own a company or are a key employee, the actions and plans of business and political leaders worldwide impact your organization's trajectory, whether or not you operate internationally.
Because global business is such a multifaceted field that’s often studded with high-risk, high-reward opportunities, it can be intimidating to dive in. Here’s a look at what global business is, five ways studying it can help you as an organizational leader, and how to kick off your education.
What Is Global Business?
Global business, also called international business, is the production and sale of goods and services between countries. The term can also encompass the nuances, politics, and dynamics of doing business in a global economy.
There are three major categories international businesses can fall into:
- They produce goods domestically and sell domestically and internationally
- They produce goods in a different country but sell domestically
- They produce goods in a different country and sell domestically and internationally
If your business produces and sells strictly domestically, you may choose to expand internationally for the positive short- and long-term impacts on financial performance, increased production capabilities, new markets, and opportunities to join global business networks. Some examples of successful international businesses include well-known companies such as Walmart and Starbucks.
Why Is Global Business Important?
Even if your organization doesn’t produce or sell products internationally, the importance of global business can’t be overstated. It can enable you to assess new business opportunities, make informed decisions, and adopt a holistic view of global competition from a strategic standpoint.
For instance, imagine you own a clothing company that sells embroidered T-shirts. Your products are made in the United States from locally sourced material, and you only sell domestically. How might global business impact your company?
- Domestic competitors may produce or sell their products internationally and gain more traction. For instance, a rival company sources cotton from a farm abroad and charges less money for similarly embroidered T-shirts. It then develops a global audience and presence, perhaps where clothing trends differ from those of the US.
- Internationally-based companies could become your competitors, too. For example, a clothing company based in the United Kingdom may expand into the US and win over your customers.
- Laws in other countries regarding the taxation, production, and importation of goods may impact the market you operate in. Policy changes, even those made abroad, can have a ripple effect that impacts your domestic business.
Studying global business can enable you to navigate the challenging, ever-changing business world while capitalizing on opportunities for expansion and connection. Here are five benefits of studying global business to consider.
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1. Understand Macroeconomics
One benefit of studying global business is that you gain awareness of the dynamics of macroeconomics. You develop an understanding of economic metrics you can use to compare countries on a one-to-one basis and several other factors that impact a country’s economic health. These factors provide insights into how a country’s business economics impact its residents and other organizations.
Some metrics you can learn to use include:
- Gross domestic product (GDP)
- Unemployment rate
- Inflation rate
- Degree of income inequality
- Currency exchange rate
“It seems obvious why companies with operations or customers spanning the globe would have to worry about global macroeconomics,” says Harvard Business School Professor Forest Reinhardt in the online course Global Business. “If exchange rates move or inflation changes at different rates in different countries, it’s going to affect the economic performance of those firms.”
Reinhardt also stresses that even domestically operated companies need to understand macroeconomics.
“What about companies that make a product domestically and sell it domestically?” he asks. “Are they exposed to the global economy? It seems natural to say ‘no,’ but that turns out not to be the case.”
Learning a common language with which to assess and compare different countries’ economic performances can provide a foundation for your international business education.
2. Gain an Appreciation for Different Cultures
Just as important as the “hard skills” of macroeconomics are the “soft skills”—such as emotional intelligence—required to tactfully and respectfully navigate an international business world. Diving into global business means exposing yourself to cultures that might greatly differ from your own. Learning about the customs, holidays, beliefs, social norms, and expectations of the cultures in countries where you’ll be working, selling, and employing people is invaluable when making connections.
Some examples of cultural differences in business include:
- Personal space: While it might be standard in some cultures to greet with a handshake, understand that there are other ways business associates meet one another in other cultures that reflect different comfort levels around personal space.
- Communicating objectives: While people of some cultures are comfortable with short and direct instructions or requests for fast decision-making, others might be accustomed to require more explanation before moving forward.
- Etiquette: Small differences regarding how associates formally address one another, as well as specific gestures to avoid, reflect the importance of learning the nuances of different cultures.
Remember to keep an open mind and lead with curiosity, empathy, and respect. At the heart of every business deal is a relationship between people; set yourself up to forge meaningful relationships with professionals in other countries by expanding your cultural competency.
Related: 6 Tips for Managing Global & International Teams
3. Navigate the Opportunities and Challenges of International Politics in Business
Because political leaders and systems have the power to influence education, transportation, laws, and taxes, they can also alter the global business landscape.
Studying global business can prepare you for scenarios that occur as a result of political decisions. It can also give you a tool kit for thinking on your feet when the unexpected happens.
One such unexpected event was the coronavirus (COVID-19) pandemic, which swept the world starting in early 2020. The pandemic devastated communities with deaths and health complications and caused international tensions and economic and political unrest.
According to an article by EY, the incidence of political risk—defined as a political event that alters the expected value of a business investment or economic outcome—has increased dramatically in recent years, hitting its highest point since World War II between 2016 and 2018. The tensions resulting from COVID-19 are likely to send the incidence of political risk to a new high.
EY outlines five key business areas that can be impacted by geopolitical risk:
- Cost of capital
- Cross-border flows
- Market entry and global footprint
- Corporate responsibility
- Innovation
“While 51 percent of global executives say political risk is having a greater effect on their companies today than just two years ago, 50 percent are also very confident in their ability to effectively manage it,” the firm reported in 2019.
In a time when political risk is predicted to reach an all-time high, having a background in global business can help you navigate these unexpected dynamics and gain the confidence to capitalize on opportunities for success.
Related: 5 Common Challenges of International Business You Should Consider
4. Learn from Others’ Triumphs and Mistakes
Another benefit of studying global business is learning about the triumphs and failures of international businesses that came before yours. Because global business can be equally rewarding and challenging, familiarizing yourself with other firms’ strategies can help inform your own strategic planning process.
Hearing real business leaders—maybe from your specific industry—tell the stories of their forays into the global economy can bring humanity to concepts and frameworks and allow you to put yourself in their shoes. Would you have made the same decisions they did? If so, what were the outcomes of those decisions, and how did they impact their business? What can you learn from their stories to be better prepared for your involvement in international business?
To ensure your global business education includes this benefit, look for a course offering that uses the case method or be prepared to research examples independently.
Related: The History of the Case Study at Harvard Business School
5. Craft Winning Business Strategies
A long-term benefit of studying international business is developing the ability to think on a global scale, and thus formulate strategies for your business with the big picture in mind.
When crafting winning strategies, it’s important to keep in mind all factors that could possibly impact your business’s trajectory toward its goals. In a global market, that list of factors must include the political and social relations between countries where your organization operates and your market’s global economic trends.
A global business education may also inform the strategic goals your firm pursues; for instance, expanding into another country where your product could fill an unmet need.
It’s important to remember that the international business landscape is always evolving. As such, so should your business strategy.
Demand for International Business Skills
Another important benefit of studying international business is the diversity and strength it brings to your professional skill set. As the world becomes more interconnected than ever before, employers are increasingly regarding international business as a desired skill for future hires.
Some of the top industries hiring people with international business skills are:
- Manufacturing
- Professional, scientific, and technical services
- Educational services
- Transportation and warehousing
This trend is not only reflected across industries, but also across job postings. Some of the most common job titles that require international business skills are:
- Global Trade Analyst
- Conflict Analyst
- Global Services Consultant
- Tax Manager
By seeking education in global business, you can diversify your future job opportunities while also ensuring that you’re a well-rounded professional.
How to Start Studying Global Business
Starting your global business education doesn’t need to be difficult—in fact, it can be as simple as diversifying your daily news intake to include international publications. Keeping up on current events, international politics, and relationships between countries can enable you to envision how your business is impacted by and fits into the global sphere. Research the leading businesses in your organization’s market and adjacent markets. Where are they based? What do their supply chains look like? In which countries do they sell products?
Additionally, learning about other cultures can give you the knowledge and respect necessary for making global connections that serve you well professionally and personally.
If you’d like to take your education one step further, consider taking an online course like Global Business. Taught by HBS Professor Forest Reinhardt, the course equips learners with the knowledge to navigate the global business landscape’s challenges and opportunities. For the full global experience, make sure the course you select has a social component—a cornerstone of HBS Online courses—so you can learn from and share knowledge with business professionals around the world.
Are you interested in breaking into a global market? Sharpen your knowledge of the international business world with our four-week online course Global Business, and explore our other business in society courses.
This post was originally published on May 27, 2021. It was updated on August 5, 2022.
