International Business
“Businesses operate in a world of regionalism not globalism”
This paper disagrees with the statement that “Businesses operate in a world of regionalism not globalism”. Regionalism is the traditional concept applied by businesses in the earlier times. The world has opened up traditional boundaries in favour of globalization, a concept supported by the ‘global village’. International business is characterized with a diverse environment of operations that international companies face defined by both domestic context and international context.
Managing international business requires different skills in cross border management, which is part of internationalization and globalization (Hill, 2012). International markets are influenced by economic elements, political elements, legal institutions and informal institutions such as religion, culture and language among others (Gilpin & Gilpin, 2001). Formal and informal institutions influencing international business are part of internationalizing and globalizing companies. Globalization is a form of regionalism reflecting on the world as one market.
International business is characterized with commercial transactions related to sales, governments, private organizations, logistics, investments and transportation among other factors taking part beyond the political boundaries. International companies are facilitated by profits; governments are facilitated by political reasons and for profit (Rugman & Collinson, 2012). International business is characterized by cross border movements of services, goods and resources. Movement of economic resources is facilitated by the skills, people and capital among other factors necessary in industries such as in construction, finance, insurance and banking among others.
Business ethic is influenced by the environment of operations, it varies with jurisdictions. Foreign Direct Investment (FDI) and Trade environment influence the way international business is carried out. International business strategies are changing with globalization as companies seek international market share (Rugman & Collinson, 2012). Entering foreign markets depends on the target market, and there is no one model that fits all. Companies seeking an international market share must conduct a thorough business research in understanding the target market. There are cases where international business has failed after research on the target market was not conducted well (Hill, 2012). An example of a failed international business is the investment of the American based Nova automobiles in the Spanish market. The word Nova in Spanish means that the product does not move, similar translations on the Nova automobiles led to failed business in Spain; target market in this concept influence internalization of the strategies (Rothaermel, 2012).
Organizations may enter the target market through different modalities; there are companies that prefer entering new markets on their own or in partnerships. Such organizations must develop mechanism of the detecting the associated risks and on models of negotiating with the governments in the target business jurisdictions. Managing international business is characterized with a clear understanding of the international finance, international marketing, international strategy, international sustainability management, international human resource management and on international supply chains characterized with logistics, production and operations (Rugman & Collinson, 2012). Corporate functions are part of international business in realizing the desired domestic and international goals facilitated by international strategies (Rothaermel, 2012).
It has been noted that globalization is influenced by diverse political processes, economic pressures and diversity in the approach of the international markets (Boudreaux, 2007). International trade together with the free trade are some of the factors that shape globalization. Globalization has opened up regional businesses to international business (Rugman & Collinson, 2012). Globalization and socialization are current concepts that are shaping societies, business life, business environment and different economies; where the globalization has led to failure and emergence of new businesses. Information sharing is in real time around the world despising national borders, a model influencing international businesses. International businesses are forced to adapt to the changes in remaining relevant in the target market, through developing competitive edges.
The concept of globalization has enabled small companies in seeking a share in the international markets (Rugman & Collinson, 2012). Multinational companies (MNCs) are also expanding to the global market share taking a significant share in the developed nations, developing nations and in the least developed nations. Examples of established brands in the international markets are The Coca-Cola brand, General Motors, Google brand, Toyota, Ford Motor Company, Samsung, Nokia, Sony, LG, Shell, BP and Dell brand among others. Some MNCs are very strong to an extent that they influence the nations of operations (Roberts, 2007), particularly in the developing nations and in the least developed nations. The returns associated with some MNCs are huge to an extent that they exceed the Gross Domestic Product of some host nations of doing business. The global economy to some extent is being controlled by some powerful MNCs (Rugman & Collinson, 2012).
Surveys indicated that MNCs affect the balance of payments and import huge capital to the nations of operations, the practice affects the business practices in the host countries, which is associated with globalization. Importation may be in the form of tangible capital and also human capital resources; the model affects the business practices in the region. MNCs to some extent in the host nations facilitate more importation than the exportation of goods and services, a model that betters the living standards of people in the host country (Telò, 2004). MNCs have been characterized with facilitating the globalization concept.
The employment concept in the twenty first century is currently globalized. Import and export of human capital is evident as people live largely in multicultural societies (House et al., 2004). The free movement of human capital in the world is discouraging regionalism in favour of globalization. Different professionals are distributed all over the world irrespective of their originality, it has come to a point that regionalism is not critical in defining business operations around the world (Shenkar & Luo, 2008). In so doing, movement of human capital around the world is improving the quality of the human capital in the local communities as people engage in constant learning as people match the demands of new jobs that are facilitated by globalization (Rugman & Collinson, 2012). A sound example of labour importation identifies with Japanese companies importing cheap labour from China, Bangladesh and Philippines among other neighbouring countries. The model supports globalization and disfavours regionalism.
China is the current market targeted by all the MNCs in the world; each and every MNC is setting out a factory or distribution network in China. It is argued that the Chinese market offers a ready market due to the high population of people and that the factors of production in China are cheap compared to other nations of the world. Almost every product in the market has links to China. This is part of globalization and not regionalism. MNCs are facing stiff competition, and also pushing away local companies in the host countries (Telò, 2004). Companies in the twenty first century are engaging more and more in partnerships, mergers and in acquisitions as a way of building a competitive edge in the target domestic and international market. De-regularization in most nations is encouraging direct foreign investments (Rugman & Collinson, 2012), which is part of globalization. Traditional markets that were inaccessible in earlier times are currently exploited by the huge MNCs that are after each and every opportunity in the international market.
It is argued that international business facilitates local and global companies refine their products and services in meeting the exact needs and preferences of the target market (Boudreaux, 2007). Consumers are more informed than in the decades before, an indication that they have better information on the products and services in the market. Flow of information has been facilitated by the growing trends in information and technology. Access of information by the target consumers is influencing the purchase patterns of the consumers, hence shaping local and international business (Rugman & Collinson, 2012).
Consumers in the world are characterized with diverse purchasing powers, MNCs benefit from economies of scale where they sell the products and services at subsidized prices in favour of huge sales. There are diverse gadgets in the market that are generating real time information in all parts of the world (Telò, 2004); the concept is encouraging globalization since the information is consumed by people in all parts of the world. Transfer of information does not value the national boundaries and facilitate international business (Rugman & Collinson, 2012). Companies are opening up to global knowledge and information in adapting to the consumer trends in the target market.
International business is encouraging transfer of technology mainly from developed nations to developing nations (Hill, 2012). Transfer of the technology does not value national or geographical barriers. Technology is evenly distributed around the world, depending on the interests of the international companies. This is part of globalization where technology in the current context can be channelled to any nation of the world (Stiglitz, 2007). Local companies seeking international markets are forced to upgrade their managerial and technical expertise, in a number of cases, international expertise is required in bridging the gap (Rugman & Collinson, 2012).
The world in the current context is concerned with the concepts of environment more than before, in the same concept, issues of environmental conservation is not a one nation fight, it requires the efforts of all nations of the world (Shenkar & Luo, 2008). This is part of globalization where local and international businesses are changing business operations to align with the ‘green’ concept. Global warming is a reality, and it is affecting the world in general; effects of global warming are global concept, which is inclined to a global concept and not to regionalism.
Corporate Social Responsibility (CRS) is a modern concept in local and international businesses. CRS is critical in making sure that people from different cooperates are working as teams in local and international businesses. CRS connects human capital to the target market and facilitates mutual understanding of people from diverse cultural orientations (House et al., 2004). CRS is evolving with time as local and international businesses adopt the concept in managing some of the local conflicts in building a competitive edge (Rugman & Collinson, 2012).
MNCs are difficult to control, particularly with the weak governments. In countering different governments, MNCs use transfer pricing tricks. Surveys done on globalizations indicated that different nations affect different variables depending on the host culture (Chhokar, 2007). Different governments are developing incentives that encourage foreign direct investments, as a way of improving the economic status of the nation. The attractive and cheap business environments encourage influx of the MNCs (Stiglitz, 2007); China has succeeded in FDI and overtaken United Kingdom, which was initially preferred due to the availability of strong financial institutions.
English is the business language accepted worldwide, more and more nations are learning English as part of facilitating international business and globalization (Rugman & Collinson, 2012). Globalization of English is critical in facilitating a common language that enhances efficient communication among the stakeholders involved in international business. Organizations in the twenty first century are aware of the differences among the employees, in so doing; organizations are sensitive to the input of the human capital to the success and failure of organizations. Multicultural management is a concept that is taking shape among the local and international businesses (Rugman & Collinson, 2012).
Multicultural management is related to multinational management where organizations learn different ways of conducting international trade in different setups (House et al., 2004). Employment policies vary with different nations, this call for new ways of managing human capital that is in line with the global changes basing on diversity in religions, cultures, languages and nationalities among other variables (Rugman & Collinson, 2012). Management of people varies with jurisdictions as people are motivated and de-motivated by different things, it is critical for the international organizations understand the target market before commencing in any forms of trade. This is to avoid risks of failed business like it happened with Nova automobiles in Spain.
Institutions of higher education have introduced different courses that are related to international business. Culture management is part of embracing differences generated by globalization (Chhokar, 2007). Universities among other educational institutions are preparing human capital on the best modalities of dealing with cultural diversity (Rug.nl., 2013). The responses of the universities are a surety that the world is facing rapid globalizations and not regionalism. Human capital is also prepared on the best modalities of meeting other people from different cultures, instead of arguing over issues, cultivating a learning culture from one another as a way of building a mutual understanding (Hofstede et al., 2010).
Each and every culture from different parts of the world has some values and practices that could benefit the whole world. Learning from one another is critical in picking a meaningful attribute and in doing away with the negative concepts (McLaren, 2012). Taking a critical look at immigrants in the United States, such people face what is referred to as a culture shock (Hofstede et al., 2010). Residents of the United States practice direct communication and individualism; this is different from other parts of the world like in Africa and Middle East where residents practice indirect communication and communal approach to issues.
Immigrants must be prepared in facing the new environment and adapt to the new cultural practices (McLaren, 2012). Immigrants in the United States find Americans arrogant basing on their culture and this could lead to withdrawal on the part of immigrants. Immigrants prepared in advance on the importance of different cultures find it easy to adapt to the new culture and move on with life (House et al., 2004). In this same way, stakeholders in the international businesses must understand the cultures of the host nations. Understanding issues of cultures are part of building a competitive edge. National borders have lost taste, and people and organizations are after international businesses tapping into the vast global market (Rugman & Collinson, 2012). Trade in the earlier decades considered national boundaries as important, organizations ignoring globalizations are on the verge of disappearance as the world is changing fast.
MNCs have devised different models of dealing with physical factors and societal factors that influence the business environment. The objectives of each and every organization are directed to meeting the needs and wants of the target market. Operations of international businesses in most cases are geared towards resource acquisition, sales expansion, diversification of revenue streams and in minimizing the risks (Rugman & Collinson, 2012). Means of businesses are attached to modes, overlying alternatives and on the functions. Modes engaged by the international businesses are aligned to transportation, tourism, exportation, importation, franchising, licensing, management contracts, turnkey operations, portfolio investments or indirect investments among others.
The functions of MNCs in international business are aligned with global manufacturing, marketing, supply chain management, human resources, finance or to accounting. Overlying alternatives that MNCs make are attached to organizations, choice of countries and on the control mechanisms guiding the ways of doing business (Roberts, 2007). There are different risks associated with globalization, common risks identify with: strategic risk, political risk, operational risk, environmental risk, technological risk, planning risk, financial risk, terrorism risk and economic risk (Rugman & Collinson, 2012).
Globalization is facilitated by a number of factors in international business, common factors are: expansions in technologies, governments encouraging FDI, local institutions supporting MNCs, changing tastes and preferences of the consumers towards global products and services, competition opening up new markets, sound political relationships, cooperation among nations and international agreements (Boudreaux, 2007). Globalization is real and it is taking part at a very fast rate, hence shunning regionalism.
Globalization is not only affecting the local businesses, but also the international businesses. Companies have to keep on changing with globalization as a way of building a competitive edge. Globalizations has increased the competition among businesses, created increased awareness among the target consumers, increased sensitivity of the companies on the needs and wants of the target market, facilitated economies of scale, encouraged flexibility of organizations and facilitated collaboration among companies. Regionalism has been overtaken by events and the world has warmly accepted the challenges and the benefits that are attached to globalization. Governments are working more closely together than before in facilitating international business. International business is the way to go in the twenty first century, which is fuelled by globalization and socialization.
References
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