How is managing an international business different from managing a purely domestic business briefly discuss not just list three differences?

Since the financial crisis, the world political and economic order has seen a return to volatility, nationalism, protectionism, and trade wars. The world economy is looking set for a bumpy time, and individual country situations and bilateral relationships are becoming less predictable, creating new challenges for organisations that wish to do business internationally.

There are still great rewards for businesses investing and operating around the world, and many ways in which technology, in particular, is helping to make it easier. However, in terms of rules and regulations, from labour laws to tax, accounting, and fiduciary duties, we see an increase in fragmentation of rules and their complexity and an increase in the sanctions for failing to manage that complexity.

Unfortunately for businesses eager to expand, market opportunity and complexity often go together, with some of the most attractive investment locations also being the most difficult to do business in safely and compliantly. That isn’t a reason to avoid those opportunities. It does, though, mean that you have to take on board the cost and sanctions of breaching local rules and be careful not to underestimate the challenges of operating there.

The factors driving complexity include:

  • Reporting requirements. These are becoming more stringent to drive greater transparency and investor confidence, while tackling money laundering, tax evasion, and other crimes. Over 80% of the jurisdictions where TMF Group operates have committed to exchanging information under the Common Reporting Standard developed by the Organisation for Economic Co-operation and Development.
  • Legislative changes. Theseare becoming more frequent. Their intention is often positive; for example, to bolster an economy or make a country more attractive for investment. Some are not likely to be simplifying, such as the yet-to-be-defined UK rules that will apply post-Brexit. Regardless of their intent or the politics behind them, they all require work by companies to stay compliant.
  • Labour laws. Legislators,often in response to local political pressures, create difficulty for firms looking to operate globally. Where we operate, specific reporting requirements and impediments to hiring staff before a business has been incorporated as a legal entity are major hurdles for firms.
  • Penalties for noncompliance. Penalties imposed by the authorities are seen as disproportionately high in many jurisdictions. With serious breaches, reputation and even survival are threatened, as exemplified by multibillion-dollar fines applying to banks caught up in money laundering and market abuse cases.
  • Accounting and tax requirements. Local authorities often now prescribe their own reporting formats. For example, some Greek islands operate as independent provinces for compliance and tax. VAT refunds are subject to different treatments, depending on the tax office. In Greece, we have seen individual cases of dividends being taxed at rates varying by more than 10%.

The difficulty of interpreting the rules in any given country, coupled with the frequent changes, can mean that multinational firms, in particular, face a daunting task in operating compliantly. There are no simple solutions other than working with professionals on the ground who are familiar with what is required locally and ready to respond as rules change. For those managing such complexity in multiple locations, singular reporting and control across those locations is critical to managing risk. Adding internal complexity to market complexity is a recipe for failure.

Some of the key factors essential to a constructive approach that senior leaders should take when expanding their business into a new jurisdiction or when adapting strategies to hard-to-operate locations include:

  • Monitor continually. Every country in which a firm operates represents a compliance risk. Laws and regulations may be tweaked on short notice and with little or no notification, increasing the penalty for noncompliance. Even the predictable regulatory changes — such as country-level implementation of the OECD’s supranational Base Erosion and Profit Shifting (BEPS) initiative — appear on statute books at different times depending on the jurisdiction. Each location may well implement BEPS in a slightly different way. The solution is to create a robust monitoring process, whether in-house or outsourced, that must be able to catch any significant legislative, regulatory, or process change in any country in which the firm operates.
  • Run a fluid resourcing strategy. Firms need to be agile enough to respond to new legal, accounting, and other compliance demands. This might include having a network of responsive law firms that can hire freelance or permanent staff at short notice, or having worldwide suppliers with a comprehensive accounting, tax, or compliance skillset. Avoid a one-size-fits-all strategy, but allocate resources in line with each jurisdiction’s requirements. This approach also allows you to adapt to requirements, such as the economic substance tax rules coming into force in many offshore jurisdictions that require companies to have “adequate” economic activities.
  • Adopt a singular digital control system. This can streamline processes significantly — there are now tools that allow aggregation of work and compliance status from different countries, whether aggregating your legal entity status, accounts, or payroll. The tools make it much easier to control a portfolio of entities and operations spread across a wide range of jurisdictions. Different languages and laws often mean there is no single tool that will work everywhere, plus there is a cost of moving to a single system. This means that middleware, which can aggregate from local tools, is the more efficient route to getting that single view and control.
  • Work with local partners. Local complexity requires local knowledge — people who know the rules, regulations, and systems as well as the softer but still crucial factors of language, culture, and trust. These partners are also likely to be engaged in rule changes that are being considered and can help forewarn and even shape them to be helpful to your circumstances.

Complexity in the world’s top 5 economies*

US: Complexity is low, thanks to relatively straightforward regulatory standards, but with 50 states applying different rules, care is still needed to stay compliant.

China: Complexity is high, driven by regional variations in legislation. While these pose challenges in the short term, there is an optimistic outlook, thanks to measures to develop and implement more consistent tax and regulatory compliance standards for international businesses looking to invest in China in the future.

Japan: Complexity is low to moderate. With world-class infrastructure, a highly skilled workforce, and a culture of innovation, Japan’s domestic market has enormous purchasing power.

Germany: Complexity is high, driven mainly by a challenging accounting and tax landscape. Strict adherence to European and global regulations can wrong-foot foreign investors unfamiliar with the requirements. Fines from the Federal Office of Justice for missing deadlines are high and can escalate quickly.

UK: Complexity is moderate, driven by a complex tax system that can be intricate and prone to annual rate and duty changes.

* According to GDP, 2018 IMF world rankings.


Mark Weil is CEO of TMF Group, which provides business services to clients operating and investing globally. To comment on this article or to suggest an idea for another article, contact Oliver Rowe, an FM magazine senior editor, at .

How is managing an international business different from managing a purely domestic business?

Answer and Explanation: Managing an international business is different from a domestic business since the investors operate in a foreign land which is governed by different laws, as compared to the domestic country. Thus, the investor must familiarize him or herself with those policies to avoid legal problems.

How is managing an international business different from managing a purely domestic business enumerate all four reasons?

Managing an international business is different from managing a purely domestic business for at least four reasons: (1) countries are different, (2) the range of problems confronted by a manager in an international business is wider and the problems themselves more complex than those confronted by a manager in a ...

Which of the following describes a difference between international and domestic business?

Which of the following describes a difference between international and domestic business? Domestic business involves transactions that use one currency; international business involves transactions that use multiple currencies.

What is the difference between international and domestic trade?

The exchange of goods and services between countries and across borders is referred to as international trade. Domestic trade happens when this business is conducted inside of a country's borders.