The international business sector works continuously with diverse options so that organizations can catch the opportunities and the status in the vast field of international trade in order to dominate in the global arena. These benefits are the most important pillars of the companies that are leaders in the international market through technological innovations or strategic alliances. We could grasp the major factors playing a key role in increasing international investment and trade through such an approach.
Competitive Advantages in International Markets:
Companies apply multiple mechanisms of competitive advantage in their effort to dominate the global marketplace.
- Technological Innovation: Initially, technology superiority is a key part of competitive advantage. Companies that make substantial R&D efforts to develop next-gen technology can branch into new markets, their products can be tailored to the specific needs of the consumers, and their business processes can be improved (Farida & Setiawan, 2022). Electric vehicle technology, such as that of Tesla, is cutting edge, placing the company as the leading auto player in the global market, giving it the power to jostle easily against established automakers in different countries.
- Cost Leadership: The second competitive advantage is to be a cost leader by applying supply chain efficiency, scale economy and proper production techniques. By internalizing the production process and minimizing production costs, businesses can offer competitive prices to consumers and increase their market shares when they have a competitive advantage. The case of Walmart demonstrates how a company can be successful by offering everyday low prices and utilizing its massive scale and founder skills in moving products around the world efficiently to compete with small stores and grow internationally.
- Brand Reputation and Customer Loyalty: A key for businesses with ambitions to succeed in global markets is to build a robust brand image and foster a reliable customer base. Bottom-line-driven, consumer-resonant brands that win customers’ hearts, loyalty and credibility, can command higher prices, foster repeat purchasing, and delay pressure from competition. Arguably, Apple is the model of this since the company has managed to remain the top smartphone manufacturer worldwide despite all the severe competition due to its strong brand image, passionate customers and best premium tags.
- Strategic Partnerships and Alliances: Joint efforts and collaborations open new markets and give businesses access to new resources and capabilities. Businesses may be more successful in their search for new growth opportunities by making the most of complementary traits and synergies (Sołoducho-Pelc & Sulich, 2020). A great example is the joint venture between Starbucks and Nestlé, which allows Starbucks access to Nestlé’s marketing and distribution networks while allowing Starbucks to enter grocery stores and foreign markets.
Recent Event:
The case of MGM Studio’s acquisition by Amazon resulted in the dramatic use of a business’s competitive advantage to gain influence in international markets. According to Amazon’s press release of May 2022, the company agreed to pay the amount of US$8.45 billion for MGM Studios, which was a maximally expensive acquisition up to now. Brand MGM’s for Amazon Prime video to ramp up the collection figure of cult movies and TV series such as The Handmaid’s Tale and Jaguar Bond series.
This well-thought-out choice brings precision to Amazon’s strategy in the content distinctiveness and technology innovation market to break past much competition available to it in the streaming business. Amazon Prime Video can now give service members loads of identical streaming content because of its content contract with MGM. Therefore, it will become an enticing brand and dominate the market, with competition from other platforms such as Netflix and Disney being fewer.
Therefore, Amazon, as a very huge company with a vast outreach, is able to benefit from economies of scale and the creation of original content as well as the Hongkiatowning of its international presence, all of which make stronger its position as a key player in the global market of streaming content.
The political environment is the principal factor influencing trade rules, trade policies, and diplomatic ties between countries that overlap tightly. Trade among states has recently been related to international politics since it is often subject to big governmental decisions and events that influence the core resilience and responsiveness of the business.
The closure of trade lines between the US and China complicates global investment and trade and perfectly illustrates how politics favours one country and is detrimental to another. The biggest trade partners of the world have struggled to find a harmonized trade policy lately as they were at odds with each other on tariff impositions and geopolitical instability (Agustian et al., 2023). This has led to the formation of fear and disruption for organizations performing business across international supply chains.
Industries that operate in China or source their products, including those that Trump started in China, have benefited through supply chain reorganizations, rising production costs, and unstable markets. Trade disputes with the tit-for-tat retaliations from both sides over goods valued at countless dollars have come to define the trade war. To mitigate the impact of increasing global tensions, multinational corporations, namely the ones from the manufacturing and the tech sectors, have to scrutinize their sourcing method, turn their supply chains into a network of several sources and deal with a complex regulatory environment.
In addition, the companies involved in cross-border trade between the United Kingdom and the European Union must deal with new export barriers, regulatory issues and concerns about trading partners, which have been caused by a political change such as Brexit. Manufacturers and traders handling business in UK and EU markets have encountered logistical provisions, trade networks, and regulatory compliance reforms due to the UK’s withdrawal from the EU’s customs union and common market.
Foreign Exchange Market Dynamics:
The replacement of one currency by another is enabled by the foreign exchange (forex) market, which can be regarded as a centre of trade and investment for global currencies. Hence, this market stimulates international investments and trade around the globe. Exchange rates, commonly known as prices in the foreign exchange market, are determined by multiple factors that interact with supply and demand, e.g., interest rates, inflation, economic indicators, political and military events, and market sentiment.
The interaction with buyers and sellers seeking to exchange currencies for different reasons, which include trade activities, investments, speculation, and currency risk management, shapes the process of determining the rate between the currencies for the foreign exchange market (Jatmulia et al., 2023). The prices of exchange change due to supply and demand fluctuations in which currency to buy and sell exists.
Central banks intervene in macroeconomic affairs by controlling interest rates, open market operations, and currency trading. The latter is designated to preserve exchange rate stability. Bond and currency market players are primarily concerned about central bank statements, policies, and latest moves because these could give hints regarding their future monetary policy plans and, consequently, their impact on currency valuations.
Role of International Banks:
Banks set up nationally are the coordinators of the currency conversion and the liquidity suppliers to the players in the foreign exchange market with its intermediary efforts. The banks, which include global financial powerhouses like JPMorgan Chase, Citigroup, and HSBC, are where the major trading companies take positions in their proprietary trading, compete in the interbank markets, and perform currency converting on behalf of their customers.
The primary functions of international banks in the foreign exchange market include:
- Market Making: On the other hand, international banks function as market makers by setting bids and offering prices for different currencies; moreover, they provide liquidity when customers and counterparties demand exchange transactions in those currencies.
- Risk Management: To assist customers who worry about currency issues such as foreign investment, commerce, or financial activities, banks urgently provide foreign exchange services (Ricardianto et al., 2023). Such require goods and services to ensure businesses are protected against such scenarios as swaps, options, and contracts for the future.
- Arbitrage and Speculation: Banks engage in short-term trading and profit from prevailing currency trends by including a special feature in their operations called arbitrage. This operation allows the bank to buy and sell currencies in different markets depending on the exchange rates.
- Client Services: Banks offer a wide range of forex services, including various currency exchange, fees and charges levels for payments, trade finance, which includes various guarantees and documentary credits, and consulting services to corporate clients, institutional investors, governments, and retail customers.
Oversight of International Banks:
Foreign regulatory bodies such as the Financial Stability Board (FSB), the Bank for International Settlements (BIS), and domestic banking authorities play supervisory roles over foreign banks that make an appearance in the marketplace utilizing foreign currencies. The regulatory framework and supervisory procedures aim to ensure that banks adhere to ethical conduct in the market, risk management rules and actual business operations.
International banks are subject to various regulatory control measures, including: 1. Capital Adequacy: To ensure the banks’ capital is sufficient in proportion with their risk exposures, including forex trading activities, banking regulators stipulate the commitment of capital to banks. The Basel Committee on Banking Supervision, established by the word Basel III, implements international banking laws that require each bank to hold minimum capital and establish risk-based capital adequacy ratios.
- Market Conduct: To stop it, regulators set rules and policies prohibiting insider trading, intrusive behaviour, market manipulation, and other misconduct in foreign exchange (Agustian et al., 2023). While banks are conducting their activities in trading operations, client relationships, and communications, they must be established ethically, and they should be with high transparency and best practices.
- Risk Management: To determine, assess, supervise as well and limit the foreign currency trading risks, such as credit risk, market risk, liquidity risk, and cupro operation risk; supervisory authorities evaluate banks’ systems, controls, and procedures for the risk management program. In order to mitigate risks and financial system instabilities, banks have to ensure that there are highly controlled internal procedures, rigorous risk management and compliance systems in place.
- Compliance and Reporting: In terms of foreign exchange dealings, these institutions are under the reporting regulations, accountability obligations and anti-money laundering (AML) and counter-terrorism financing (CTF) legislation (Ricardianto et al., 2023). Agencies conduct anti-money laundering programs through regular on-site inspections, audits, and evaluations to determine banks’ compliance with the law, financial standing, and any deviations or weaknesses in their business methods.
In summary, to effectively manoeuvre the global economy, firms are expected to use their competitive positions, decipher dynamism in the political environment, and understand the operations of the exchange market. Through innovation, strategic alliance buildup, and proper risk management, entrepreneurs can benefit from the potentialities of global markets and contribute to profitable expansion. Regulatory supervision and conformity are mandatory to retain its integrity, stability, and resilience while giving sovereign market participants confidence and transparency. Firms must be attentive, adaptable, and alert to evolving tendencies, barriers, and opportunities to create new international trade, investment, and foreign exchange patterns as the globe’s economy keeps on shifting.
References
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Agustian, K., Pohan, A., Zen, A., Wiwin, W., & Malik, A. J. (2023). Human Resource Management Strategies in Achieving Competitive Advantage in Business Administration. Journal of Contemporary Administration and Management (ADMAN), 1(2), 108-117.
Farida, I., & Setiawan, D. (2022). Business strategies and competitive advantage: the role of performance and innovation. Journal of Open Innovation: Technology, Market, and Complexity, 8(3), 163.
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Ricardianto, P., Lembang, A., Tatiana, Y., Ruminda, M., Kholdun, A., Kusuma, I. G. N. A. G. E. T., … & Endri, E. (2023). Enterprise risk management and business strategy on firm performance: The role of mediating competitive advantage. Uncertain Supply Chain Management, 11(1), 249-260.
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