Trade creates demands for international services Most US business services companies enter international marks to service their US clients abroad. Accounting and advertising firms were among the early companies to establish branches or acquire local affiliations abroad to serve their US multinational clients. Hotels and auto rental agencies followed the business traveler abroad. Most recently healthcare services providers have been following firms abroad – Blue cross is now selling HMO services to American companies operating in Mexico. Once established many of these client followers as one researcher refers to them expand their client base to include local companies as well. As global markets grow, creating greater demand for Business services service companies become international market seekers.
The mode of entry for most consumer services firms is licensing, franchising or direct investment. This is so because of the inseparability of the creation and consumption of the services. However, because some business services have intrinsic value that can be embodied in some tangible form (such as a blueprint or architectural design), they can be produced in one country and exported to another. Data processing and data analysis services are good examples. The analysis or processing is completed on a computer located in the US, and the output (the service) is transmitted via the Internet to a distant customer. Architecture and engineering consulting services are exportable when the consultant travels to the client’s cite site and later returns home to write and submit a report or a design.
Business services firms face most of the same constraints and problems confronting merchandise traders. Protectionism is the most serious threat to the continued expansion of international services trade. The growth of international services has been so rapid during the last decade it has drawn the attention of local companies’ governments and researchers. As a result direct and indirect trade barriers have been imposed to restrict foreign companies from domestic markets. Every reason, from the protection of infant industries to national security, has been used to justify some of the restrictive practices. A list of more than 2,000 instances of barriers to the free flow of services among nations was recently compiled by the US government. In response to the threat of increasing restriction, the United States has successfully negotiated to open business services markets through both NAFTA and GATT.
Until the GATT and NAFTA agreements, few international rules of fair play governed trade in services. Service companies faced a complex group of national regulations that impeded the movement of people and technology from country to country. The US and other industrialized nations want their banks insurance companies, construction firms, and other business service providers to be allowed to move people capital and technology around the globe unimpeded. Restrictions designed to protect local markets range from not being allowed to do business in a country to requirements that all foreign professionals pass certificate exams in the local language before permitted to practice. In Argentina, for example, an accountant must have the equivalent of a high school in Argentinean geography and history before being permitted to audit the books of a multinational company’s branch in Buenos Aires.
Restrictions on cross border data flows are potentially the most damaging to both the communications industry and other MNCs that rely on data transfers across borders to conduct business. Some countries impose tariffs on the transmission of data, and many others are passing laws forcing companies to open their computer files to inspection by government agencies or are tightly controlling transmission domestically. Most countries have variety of laws to deal with the processing and electronic transmission of data cross borders. In many cases, concern stems from not understanding how best to tax cross border data flows.
Clearly opportunities for the marketing of business services will continue to grow well into the 21st century. International marketers will have to be quite creative in responding to the legal and cultural challenges of delivering high quality business services in foreign markets and to foreign customers.