Forming global strategic partnerships is essential for business development and growth. These partnerships are especially important when scaling operations, diversifying service or product offerings and expanding to new markets around the globe. However, engaging in global corporate partnerships and trade relationships that prove beneficial in the long run requires management professionals to perform intensive due diligence. This due diligence is an integral part of effective global management practices.
The knowledge and skills these practices rely on are key learning outcomes in the online Master of Business Administration (MBA) with a Concentration in Global Management program offered by the University of Wisconsin-Parkside (UW-Parkside). Through the in-depth study of such global management practices, business leaders can learn how to evaluate and advance strategic alliances that drive international business success.
What Is Due Diligence?
The phrase “doing your due diligence” has been around for centuries. Eventually the term “due diligence” evolved into a legal concept. In this context, Merriam-Webster defines due diligence as “the care that a reasonable person exercises to avoid harm to other persons or their property.”
But Merriam-Webster goes on to explain the phrase’s transformation: “More recently, due diligence has extended its reach into business contexts, signifying the research a company performs before engaging in a financial transaction.” Such financial transactions could involve corporate mergers, market expansion, investments or strategic partnerships.
How Does Due Diligence Apply to International Trade and Global Management?
The U.S. Department of Commerce’s International Trade Association states simply: “When considering a new market or buyer/partner, take time to conduct due diligence.”
Understanding the concept of due diligence means processing through steps to investigate numerous considerations involved with foreign markets and prospective partners. The information gleaned from due diligence can help organizations avoid unnecessary risk, costly obstacles, disruptive conditions and unpredictable business environments.
Considerations that global business leaders should investigate and analyze include political, financial, legal, economic and environmental conditions of foreign markets. Conditions could prove advantageous to expansion into those markets, but due diligence may also uncover volatility and uncertainty that could harm business outcomes and add risk to investment.
For example, the effects of climate change, political upheaval, civil unrest, currency instability and unpredictable supply chains can negatively impact business operations and growth in complex ways. Moreover, such volatile conditions can also cripple foreign partner organizations, adding risk to strategic corporate relationships.
Additionally, the economic and political relationship between the U.S. and other nations may also dramatically impact business outcomes. As a result, corporate representatives must thoroughly investigate tariffs, trade relationships, intellectual property laws and various restrictions and regulations surrounding foreign parties. Business professionals must consider potential future changes to these economic, political and legal aspects of trade.
Due diligence also includes evaluating prospective partners. Global strategic partnerships can provide a doorway into new markets and enable the diversification of product and service offerings in existing markets. But engaging in a corporate alliance can pose significant risk.
Thus, companies should assess prospective partners considering factors like their market share, valuation, regional and international reputation, supply chain network resiliency and forecasted growth.
What Resources Are Available for Performing Due Diligence in International Business Transactions?
There are numerous resources available for performing due diligence when managing global business planning, transactions and strategic alliances. For instance, the International Trade Association offers four invaluable tools for global managers. These include:
- Comprehensive Country Commercial Guides (CCGs) for evaluating political environments, economic conditions and other factors in foreign markets
- An initial market check by industry specialists for assessing the potential of a product or service in a specific foreign market
- International Company Profiles (ICPs) for evaluating prospective partnerships
- The Consolidated Screening List (CSL) of restrictions placed on foreign parties (governments, organizations or individual businesspeople) by the U.S. government
Upper management must continuously expand their understanding of the numerous, complex factors that impact the benefits and risks of international market expansion and partnerships. They must also have mastery of the strategies involved in maximizing the benefits of corporate alliances and ensuring those partnerships help accomplish their business’ vision and specific goals. An advanced, MBA-level study of global management will give professionals the relevant knowledge to reach these goals.
UW-Parkside’s MBA in global management program is tailored to help business professionals develop expertise in strategic alliance formation and effective growth strategies for multinational corporations. Degree candidates also examine international financial management, international market dynamics, foreign exchange risk and cross-cultural dynamics. With the strategic knowledge and skills gained from these studies, business leaders can engage in beneficial partnerships that vastly increase their organization’s growth potential and market standing on a global scale.