International Business

Ethical refers to the approved right or wrong in doing and especially in making a decision for the business. Businesses focus on profit maximization drops ethical practices in their daily doing mostly for the long term effect. Ethical involved in business are like, bribery and corruption, environment regulations and human rights.The use of ethical minimizes legal problems to business.

Business which avoids law compliance to its operation incurs huge loses when caught in erroneous. This may results to sanctions, high legal fee charges or heavy fines. Due to public awareness and publicity the business damages its reputation which highly affects it than fees and fines. Business that maintains ethical, experiences conducive environment and has no law suit challenges (Wolf, R., & Issa, T. (2015).

Ethical creates high morale to the employee by good and respectful treatment. This is passed through to the customers by employees, bringing in repeat business. These good morals improve market share. A business that observes ethical has high chance of winning a competitive advantage in a client.

Any shareholder feels satisfied in investing in such business structure where their shares are not at risk of unethical activities.The business objective is a better world, this can be achieved ethically .Promoting strong public image. A business observing ethical is advantaged to growth, earning customer royalty, conducive working environments thus building an organization of high value to all stakeholders. Such a business observes the environmental and contributes towards community projects.

This ethical enhances growth of business and moreover betterment of the world class. Ethical in business can be achieved and improve both profit and world betterment.

References

1. In Wolf, R., & In Issa, T. (2015). International business ethics and growth opportunities.
2. Rothlin, S., & McCann, D. (2016). International Business Ethics: Focus on China. Berlin, Heidelberg: Springer Berlin Heidelberg

Merger is a technique whereby an operation is expended so as to improve on long-term profits. It happens only if the merging companies have a good relationship unlike acquisition where the merging companies acquire in a hostile manner. To avoid hostile takeovers the company has to plan share holder rights which is referred to as poison pill . To date, a small number of mergers add share value of acquiring company. On the other hand corporate mergers normally lead to monopolistic competition through reduction of costs and taxes.

These practices may not please the public, therefore, the government step in by taking charge in supervising. Mergers may take several dimensions, either vertical, horizontal, congeneric or conglomerate basing on the merging companies. On the other side is the acquisition which is a hostile takeover. It occurs between the bidding and the target company. One of the companies (bidding) has a substantial control of the company. It occurs when the bidding firm is smaller than the target firm.

In the acquisition process, the bidder buys shares from the target firm or assets in other cases. Mergers and acquisition implementation According to studies is believed that mergers and acquisition will not cease from being a factor in both local and international arenas. Reports indicate that mergers and acquisitions are rapidly increasing. For example a report from American states that in the 1986 it was approximated to be 400 and an increment of 200 in 1988. In Japan register 44 mergers and acquisitions in the year 1984 and 315 mergers and acquisitions in 1988 .

Researches taken revealed that the increase in mergers and acquisition is brought about by privatization of firms a consolidation of domestic industries such as banking and airlines. This has is seen as a future opportunity for future acquisition. Despite the fact that mergers and acquisitions are rapidly increasing, none of them have met expectations of managers in terms of finances. A research undertaken in America indicates that neither the stock market nor the financial performance can result to improvement.

The major problem therefore is get involved in corporate improvement and how to achieve effectiveness. Solutions to mergers and acquisitions In order to succeed in this process, there are a number of measures that one has to undertake. One is that transactions should be strategized to come up with a competitive advantage. This is achieved though economies of scale, product design, improved technology so as to enhance differentiation. Successes come only if the firm is concerned with strategies and avoid being opportunist in doing a deal.

Two is that the price of buying a target firm should be higher that the merger because the strategized benefits attained after the change of ownership. The value of the buying firm is reflected by the final buying price of merger. In this case therefore combination value should be more than the purchase price. The last factor is the extent to which mergers and acquisition are implemented effectively by determining their value. The buying price and sound strategy should give a handsome combination. It can be achieved by effectively combining the merging firms so as to realize strategic benefits.

Challenges In transaction and implementation there arise problems to the managers in mergers and acquisitions. They include; one, the managers lack sufficient information on what to buy and what their inherent and combination values are. The manager has to have detailed information concerning the target firm that is almost winding up. It is almost impossible because they do not reveal their information to the public. When the firm is about to be closed much of the information are gathered such as valuation, negotiation and its due diligence.

At this point managers try to analyze the target firm in terms of its value, past operations and performance, and how they expect it to operate and perform in the coming times. They also link it with the buying firm and see their compatibility. Secondly is the issue of implementation. A firm which has failed to meet the financial expectations in that manager has always been seen to overestimating the strengths which they hope to achieve and underestimate the limitations that are to be involved . In order for the merger to succeed, there newly merged firms have to recognize and deal with the challenges.

These challenges may be language barriers, negotiating organizational cultures and managing virtual communication across the world. Impacts Impacts of mergers and acquisition can be to the employees, top management and shareholders of the acquiring firm. On the employees, as the firms have merged there will be layoffs in this case therefore some of the workers will be forced to resign from their jobs. In this situation the skilled labor will have an advantage as they will have a chance to move to a good firm as compared to the one that their current one through the layoffs .

It will be a disadvantage to those who had no skills as they will look for any sort of lob to keep their selves busy even if the remuneration is not pleasing. Generally it will lead to high rate of unemployment. On the management, advantages may equalize the disadvantages simply because they all have the skills of the job they are performing. To overcome this, the two managements may formulate strategies and policies that will meet the cultures of the two organizations. The company that benefits the most is the acquired one.

This is because it will be paid more than what it should have been. In the local economy, shares are offered more than the prevailing market. To the acquiring firm being the most affected in terms of debt load they will be carrying. Conclusion Mergers and acquisition have an aim of making admirable profits and increase productivity of the firm. On the contrary, it is to minimize expenses that the firm ought to incur during its operations. It is not a must that a firm has to make profits losses sometimes are recorded.

There are a number of factors that always determine the success of either a merger, acquisition or a takeover. These are the resistance of a firm. It affects the workforce and the reputation of the company . There is also the factor of psychological issue where, through mergers and acquisition executives managers and the entire work force together with the share holders get affected during the process. References: Foster Business Library, Mergers and acquisitions Resources, 2010, http://www. lib. washington. edu/business/guides/mergers. html

CNN Money Website, Mergers and acquisitions, 2010, retrieved 18 July 2010, http://www. dart-creations. com/business-tree/stock/cnn_money. html Kawamoto, Dawn. Broache, Anne. Mergers and acquisitions. http://news. cnet. com/FTC-allows-Google-DoubleClick-merger-to-proceed/2100-1024_3-6223631. html? tag=lia;rcol Shill, Walter E. & Mackenzie David W. How to Build Value into a Merger. Outlook Journal. March 9, 2008 from http://www. accenture. com/Global/Research_and_Insights/Outlook/By_Issue/Y2005/HowMerger. htm Jensen, Michael. C & Ruback, Richard S. April 1983.

The Market For Corporate Control: The Scientific Evidence. Journal of Financial Economics 11 (1983) 5-50. 3/9/08 from http://papers. ssrn. com/ABSTRACT_ID=244158 Archibus, Inc, (2005). JP Morgan Chase: Managing the Merger. Retrieved from http://www. archibus. com/success/jpmorganchase. htm. CNN. (2004). J. P. Morgan agrees to buy Bank One in a deal that would combine two of the Nation’s biggest banks. 15 January 2004. Retrieved from http://money. cnn. com/2004/01/14/news/deals/jpmorgan_bankone/. Houston, Joel F. , Christopher M. James, and Michael D.

Ryngaert, 2001, Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders, Journal of Financial Economics 60, 285-331. Hofstrand, D. (2007), “Economies of Scope”, AgMRC, available at: http://www. agmrc. org/agmrc/business/gettingstarted/econofscope. htm (accessed on May 21, 2008) Andrade, Gregor& Mitchell, Mark & Stafford, Erik. (Spring 2001). New Evidences and Perspectives on Mergers. Journal of Economic Perspective. V 2] Asquith P. (1983. ). Merger Bids, Uncertainty, and Stockholder Returns. Journal of Financial Economics, 11, pp. 51-83.

This is based on the interview conducted by me with an international business person.

1. Name: Alan Anderson Title: Mr. Company: Alan Resources International Telephone Number:

2. Mr Alan Anderson is the CEO of Alan Resources International, a Company into importation of cassava from Africa.

3. In the course of the interview, Mr Alan made a remarkable statement about the essential qualities that someone in such a business as his should have.

He said that for a business man such as his to be a success, he must be assertive, also, you must be able to see opportunities and make decisions quick enough so that you will not too late and careful so that you will not rush into huge loss. He also, maintained that such a person must be highly informed and ready to learn new things. He or she must be open to changes because that is a surety.

4. After the interview, I told myself that I will be like Mr. Alan one day and I pray that day be soon. Why this? My decision for this is because I have always dreamt of being an international person, I have learnt long ago to look beyond my horizon.

International Business: Wal-Mart in China

            The expansion of Wal-Mart in China was influenced by the market indicators and sociocultral forces screening. In the market indicators, China’s market size, growth rate and e-commerce readiness were taken into consideration. According to the former CEO of Wal-Mart, China is “the one place in the world where you could replicate Wal-Mart’s success in the US.” In China, there are over “100 cities with populations of more than a million.” The average annual income of the over 150 million urban Chinese families reaches up to $10, 000 annually. This number results to a $6 trillion worth of retail spending yearly with annual growth of 15%. More so, since China is opening up to the world market, Wal-Mart had seized the opportunity to invest in a market that is big and booming (Chandler, 2005, p.83).

            For sociocultural factors, Wal-Mart had capitalized on the Chinese culture and society. Wal-Mart had taken into consideration the needs and wants of the local market. They sold merchandise to fit the way of life of the Chinese. More exotic products were marketed such as stinky tofu and spicy chicken fee in Wal-Mart stores. Also, they introduced the “retail-entertainment” wherein retail stores allotted “space for the local school groups to perform.” Through this innovative marketing, they were able to lure many Chinese to go inside the Wal-Mart stores and enjoy the wide array of products and services that they offer. More so, this strategy will increase the chances of Wal-Mart in successfully “weaving itself into the fabric of urban communities” (Chandler, 2005, p.84).  By focusing on this two screening methods, Wal-Mart have generated an immense understanding of the new and foreign market that they are trying to penetrate. As a result, their goal of increasing their revenues is just at their fingertips.

Reference

Chandler, C. (2005, July 25).The Great Wal-Mart of China. Time Magazine, 20, 82-85.

International business grew substantially in the second half of the twentieth century, and this growth is likely to continue. The international environment is complex and it is very important for firms to understand this environment and make effective choices in this complex environment (Buckley, 2005). International business is different from domestic business because the environment changes when a firm crosses international borders.

Typically, a firm understands its domestic environment quite well, but is less familiar with the environment in other countries and must invest more time and resources into understanding the new environment (Dunning, 1998). When a business tries to expand internationally, one has to seriously consider different aspects of the economy of such country. First consideration is the level of economic development. Secondly, the business must clearly understand the type of market a country has, for example free-market, centrally planned or mixed.

Clearly the level of economic activity combined with education, infrastructure, and so on, as well as the degree of government control of the economy, affect virtually all facets of doing business, and a firm needs to understand this environment if it is to operate successfully internationally (Pauly, L. & Reich, S. , 1997). Another consideration is the political environment existing in the country. The political environment refers to the type of government, the government relationship with business, and the political risk in a country.

Doing business internationally thus, implies dealing with different types of governments, relationships, and levels of risk (Murtha T. P. and Lenway S. A. , 1994). The characteristics of a firm’s home country have been shown to be key determinants of the firm’s competitive capabilities in international markets (Porter, 1990). Home country or location advantage is strongest for firms that perform value-added operations in their home country and export goods to foreign markets. Examples of this in media industries include the producers of recorded music and most television programming.

A large domestic market and other technical and economic advantages allow the creation of a variety of content that can be successfully and profitably exported to smaller international markets. The impact of location advantage weakens, however, as firms shift increasing amounts of their value-added process to foreign subsidiaries (Cantwell, 1990) or if foreign competitors gain access to their home market. As location advantages decline, ownership advantages—based on home-country resources—may continue to influence the firm’s competitiveness in international markets (Daniels, J. D. , and L. H, 1997).

As location advantage declines, Foreign Direct Investment theory (FDI) suggests that firms may be able to maintain competitive ownership advantage by leveraging abundant resources and favorable institutional structures in their home country that may not be available to competitors in other countries (Dunning, 1996). Business may be viewed positively as the engine of growth, it may be viewed negatively as the exploiter of the workers, or somewhere in between as providing both benefits and drawbacks.

Specific government-business relationships can also vary from positive to negative depending on the type of business operations involved and the relationship between the people of the host country and the people of the home country. To be effective in a foreign location an international firm relies on the goodwill of the foreign government and needs to have a good understanding of all of these aspects of the political environment. A particular concern of international firms is the degree of political risk in a foreign location.

Political risk refers to the likelihood of government activity that has unwanted consequences for the firm. These consequences can be dramatic as in forced divestment, where a government requires the firm give up its assets, or more moderate, as in unwelcome regulations or interference in operations. In any case the risk occurs because of uncertainty about the likelihood of government activity occurring. Generally, risk is associated with instability and a country is thus seen as more risky if the government is likely to change unexpectedly, if there is social unrest, if there are riots, revolutions, war, terrorism, and so on.

Firms naturally prefer countries that are stable and that present little political risk, but the returns need to be weighed against the risks, and firms often do business in countries where the risk is relatively high. In these situations, firms seek to manage the perceived risk through insurance, ownership and management choices, supply and market control, financing arrangements, and so on. In addition, the degree of political risk is not solely a function of the country, but depends on the company and its activities as well—a risky country for one company may be relatively safe for another (Chamberlain S. L. and Tennyson S. 1998).

The cultural environment is one of the critical components of the international business environment and one of the most difficult to understand. National culture is described as the body of general beliefs and values that are shared by a nation. Beliefs and values are generally seen as formed by factors such as history, language, religion, geographic location, government, and education; thus firms begin a cultural analysis by seeking to understand these factors.

Firms want to understand what beliefs and values they may find in countries where they do business, and a number of models of cultural values have been proposed by scholars. The most well-known is that developed by Hofstede in1980. This model proposes four dimensions of cultural values including individualism, uncertainty avoidance, power distance and masculinity. The competitive environment can also change from country to country. This is partly because of the economic, political, and cultural environments; these environmental factors help determine the type and degree of competition that exists in a given country.

Competition can come from a variety of sources. It can be public or private sector, come from large or small organizations, be domestic or global, and stem from traditional or new competitors. For the domestic firm the most likely sources of competition may be well understood. The same is not the case when one moves to compete in a new environment. For example, in the 1990s in the United States most business was privately owned and competition was among private sector companies, while in the People’s Republic of China (PRC) businesses were owned by the state. Thus, a U. S. company in the PRC could find itself competing with organizations owned by state entities such as the PRC army.

This could change the nature of competition dramatically. In the theories linking the competitiveness of firms with the characteristics of their home environment no distinction is made between different types of such characteristics. Rather, all of them are assumed to provide similar bases for the creation of competitive advantage. Likewise, domestic firms are assumed to have favorable access to all of them vis-a-vis foreign firms investing in the country.

However, there are a number of reasons to expect that home country characteristics would differ in terms of their importance as the bases for competitive advantage and that there will also be considerable variation in terms of the liability of foreign firms in accessing them, with some displaying more similarity between foreign and domestic firms than others. For example, foreign firms often stand in a considerable disadvantage in acquiring local information and knowledge.

The nature of competition can also change from place to place as the following illustrate: competition may be encouraged and accepted or discouraged in favor of cooperation; relations between buyers and sellers may be friendly or hostile; barriers to entry and exit may be low or high; regulations may permit or prohibit certain activities. To be effective internationally, firms need to understand these competitive issues and assess their impact. An important aspect of the competitive environment is the level, and acceptance, of technological innovation in different countries.

The last decades of the twentieth century saw major advances in technology, and this is continuing in the twenty-first century. Technology often is seen as giving firms a competitive advantage; hence, firms compete for access to the newest in technology, and international firms transfer technology to be globally competitive. It is easier than ever for even small businesses to have a global presence thanks to the internet, which greatly expands their exposure, their market, and their potential customer base.

For economic, political, and cultural reasons, some countries are more accepting of technological innovations, others less accepting. In contrast, foreign firms are perhaps standing on a more equal basis with domestic firms regarding accessing general services provided on the market. Governments often create such variation across country conditions artificially, by denying access of foreign firms to certain resources but treating them equally to domestic firms, with reference to others. Resources may also differ in terms of the ability of MNEs to compensate for their liability in accessing them by internal transfer.

As part of an international network, foreign affiliates can access some resources elsewhere and can supplement some local resources by those available in other geographic areas (Nohria and Ghoshal, 1997). However, this ability is likely to apply to some resources more than to others. For example, if foreign firms have less favorable access to the local labor market, and hence are unable to attract the best available employees, they might be able to compensate for this, in part by employing expatriates.

Likewise, foreign firms are often disadvantageous in their ability to raise capital locally, arising from lack of information of the market on the participant and vice versa. They may, and often do, compensate for this liability by raising capital elsewhere. However, they may not be able to apply similar compensation mechanisms to other resources, for example local customers. Nachum (1999) identifies four possible outcomes in the struggle for competitive advantage. If firms are dominant enough in their domestic market to erect effective barriers to entry by foreign firms, both location and ownership advantages are sustained.

If they are unsuccessful in preventing other firms from gaining home country entry, their advantage may decline but they may maintain their ownership advantage through foreign investment. In this instance, they will face a significantly more competitive marketplace because they no longer have sole access to home-country resources. If firms fail to buttress their ownership advantage through foreign investment and remain focused on their domestic market, they may lose competitive strength and enter decline.

Finally, if foreign firms succeed in accessing the resources of the advantaged country through foreign investment, they may succeed in undermining the competitive power of domestic firms. Sources of home country advantage are varied and differ from industry to industry. Financial resources such as capital markets, institutional investment capability, and a strong domestic economy frequently provide competitive advantage. Sound governmental, technical and legal infrastructures and human resources, such as a skilled and available workforce, may play important roles.

Cost advantages due to technology or the easy availability of raw materials are factors in many industries. One potential home country advantage that has been studied by marketers but has drawn relatively little attention from economists is the impact of national image on consumer behavior in international markets. Casual observations of the national patterns in industries may be interpreted as an indication of a variation across location characteristics in facilitating the creation of competitive advantages.

For example, about 90% of the world’s 100 leading management consulting MNEs emerge from a single country – the US. In contrast, in engineering consulting the world’s 100 leading firms originate from 6 countries and the dominant one accounts for only 30% of the total (Nachum 1999). This variation might be attributed to differences across location attributes in terms of their accessibility to foreign firms and the ability of the latter to compensate for their liability by relying on the MNE internal network.

The recognition that the home country environment is critical in shaping the competitive advantages of firms has underlain a number of theoretical conceptualizations of the sources of the competitive advantages of MNEs. Researchers in organization theory, adopting an institutional approach, have argued that firms develop their capabilities in relation to their particular environment, and hence possess resources that match the distinctive institutional characteristics of their home country.

Porter (1990) conceptualized the home environment as the critical environment that shapes the nature and type of competitive advantages of national firms. He used this conceptualization to explain why the leading global players often emerge from one or very few home countries. FDI theory implies that firms originating from location-advantageous countries would develop strong competitive advantages based on the resources abundant in their home countries (Dunning 1993), and will become dominant global players in the industries in which their home country is comparatively advantageous.

The literature is replete with attempts to illustrate empirically the association between the competitive advantages of firms and the institutional characteristics of their home countries and to show that firms originating from the same nationality share similar sets of competitive advantages (Fiegenbaum A. and Thomas H. , 1990). These studies show that the practices of firms are, in some sense, selected by the immediate environment in which they operate, and that the home environment is the most important one.

A fundamental assumption underlying this link between the competitive advantages of firms and their home country environment is that national firms enjoy favorable access to the resources of their home countries, which is denied from foreign firms investing there. It is also one conceptualization of the favorable access that national firms have to the resources of their home country, resulting from reasonable and unreasonable preferences of local customers and suppliers and from discriminatory policies of national governments.

Attempts to examine the extent to which firms can tap into location advantages of foreign countries via investing there (Thomas and Waring 1999) have generally concluded that such ability is limited. Domestic firms were found in these studies to enjoy an advantage stemming from their familiarity with the local environment and the system in which they have been operating since their establishment.

It is argued that if an advantage can be accessed via investment in a foreign country, it would not provide an exclusive advantage because the possibility of accessing it would be equally available to all firms (Kauser, S. and V. Shaw, 2004). Moreover that it is the governance system that creates the country-specific advantages those national firms enjoy, and hence merely operating in a host country is not enough to access these advantages. Implicit here is the notion that the same set of country conditions has different value for national firms and for foreign firms investing in a country.

Advances in transportation and telecommunications infrastructure, including the rise of the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities. Though several scholars place the origins of globalization in modern times, others trace its history long before the European age of discovery and voyages to the New World. Some even trace the origins to the third millennium BCC. Since the beginning of the 20th century, the pace of globalization has intensified at a rapid rate, especially during the Post-Cold War era.

The term globalization has been in increasing use nice the mid-sass and especially since the mid-sass. In 2000, the International Monetary Fund (MIFF) identified four basic aspects of globalization: trade and transactions, capital and investment movements, migration and movement of people and the dissemination of knowledge. Further, environmental challenges such as climate change, cross-boundary water and alarm pollution, and over-fishing of the ocean are linked with globalization. Globalization processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment.

The Benefits of Globalization

Globalization has been under a heated debate concerning third world, poorer, less developed countries. Some argue that with globalization comes exploitation where richer countries take advantage of the poorer countries, creating a large gap between is like comparing apples to oranges. Different parts of the world have different values and to someone who is unaware of these parts work may mistake globalization opportunities for corruption. International trade allows for developing countries to continue developing by increasing national incomes to fund modernization.

Globalization can benefit all countries, rich or poor, if that country is ailing to be open to international trade. Not only do they have to be open to the world market, but they would have to do it in such a strategic way based on how their country is run in order to gain from trade. Practicing globalization the exact same way, by a set of regulations may lead to a country economic downfall. By choosing the best way to engage in international trade, a country can successfully grow economically as well as socially.

By using a country comparative advantage, or what they can produce at a lower opportunity cost than other countries, they can get all the benefits of trade. If every country has a comparative advantage that means that everyone can gain from trade. There is remarkable evidence that globalization is helping countries expand and achieve higher incomes or a higher GAP. Research was conducted on national incomes around the world during the sass and results showed that the income of rich globalizes countries increased by 2% each year.

The results also show that poor, more globalizes countries have a higher increase in income per year than poor, less globalizes countries. Actually according to this research the poor, more globalizes countries have had an increase in income of 5% ACH year while the poor, less globalizes countries had a decrease of 1% per year. On the other hand it is suggested that there is a big gap between the rich and the poor. In 1960 the average income of the richest 20 countries was 15 times higher than the poorest 20 countries. Today the income of the richest 20 countries is 30 times higher.

Globalization significantly led to higher incomes is in China over the past several decades. They have mastered the concept of globalization in their own way far from the Western norms. In an article by Danni Radio China has averaged almost 8% per annum per capita by opening up to the world economy. By taking part in globalization China has been able to fund modernization by selling its products on the world market. Another remarkable fact as a result of opening up to free trade is that in 1960 China’s life expectancy was only 36 years of age and by 1999 reached 70 years.

These statistics prove that with a strategy most fit to a country, globalization can be achieved successfully. Many people are anti-globalization for several reasons. They say it is wrong to pay workers overseas a very small fraction of what an item sells for in wealthier countries. According to an example in an article by Aguish Buckwheat, a designer Jacket may sell for $190 in New York while the worker overseas gets paid 60 cents an hour. This amount is considered to be cheap labor according to those against globalization. Of course 60 cents an hour would seem like an unfair wage too wealthier country.

Also this price of $190 is only for one Jacket; not all jackets sell and the cost to get these products to their destination have to be covered as well. The fact is these “IoW’ wages are about the same as what the average worker makes in these poor countries. In fact according to the same article by Buckwheat, workers that work for foreign-owned enterprises in Vietnam are making more than workers not employed by these international enterprises. A study was companies were making twice the salary as the average worker at a Vietnamese company.

It is impossible to compare wages of wealthier countries to poorer countries much less compare the way a poorer country runs their nation to a richer one. Another issue concerning globalization is child labor and workers that work long strenuous hours in so called “sweatshops”. In these developing countries, sending their children to work is the only way a family can survive. Usually there is not an abundance of schools and medical care like in the wealthier countries, and even if education and proper health care is available it is only available to the wealthier families who can afford it.

Through globalization, households will make higher incomes which may eventually enable a family to send their children to school and provide some type of health care. In another article by Aggie Baggage’ he states, “child labor will certainly diminish over time as growth occurs, partly due to globalization. ” A proposed bill called the Harkin Child Deterrence Bill that was trying o eliminate child labor only led to child workers getting laid off and trying to find jobs elsewhere. Much worse some of the female children were forced into prostitution.

These workers, adults and children, in poor countries are not being forced into hard labor, but it is more like it is a necessity in order to survive. Nicholas Kristin and Sherry Wooden, writers for New York Times Magazine say that these workers volunteer to work longer hours in order to earn more money. These workers are willing to work as much as possible in order to stay alive. People who are anti-globalization are merely blind to the actual facts. Poorer countries do what they can to survive, and globalization helps them obtain higher incomes and improve living conditions.

Just because wages are significantly smaller in poorer countries does not mean exploitation is present. Countries with lower incomes, poor literacy rates, and poor health care cannot become wealthy and efficient overnight. Globalization is a slow process, but it is working. It is allowing for more techniques and methods to be shared around the world. A country closed to the rest of the world will not learn to be better that before, and continue to do things the way they eve been doing. As a result there will not be as much room for improvements and new opportunities to countries that do participate in globalization.

• Globalization help in international business
• Technology is expanding, especially in transportation and communications.
• Governments are removing international business restrictions.
• Institutions provide services to ease the conduct of international business.
• Consumers know about and want foreign goods and services.
• Competition has become more global.
• Political relationships have improved among some major economic powers.
• Countries cooperate more on transnational issues.
• Cross-national cooperation and agreements.

Global Business Organization

With improvements in transportation and communication, international business grew rapidly after the beginning of the 20th century. International business includes that take place between two or more regions, countries and nations beyond their political boundary. Such international diversification is tied with firm performance and innovation, positively in the case of the former and often negatively in the case of the latter. Usually, private companies undertake such transactions for profit.

Such equines transactions involve economic resources such as capital, natural and human resources used for international production of physical goods and services such as finance, banking, insurance, construction and other productive activities. International business arrangements have led to the formation of multinational enterprises (MEN), companies that have a worldwide approach to markets and production or one with operations in more than one country. An MEN is often called multinational corporation (NC) or transnational company (TNT).

Well known Macs include fast food companies such as McDonald’s and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LEG and Sony, and energy companies such as Complexion, Shell and BP. Most of the largest corporations operate in multiple national markets. Businesses generally argue that survival in the new global marketplace requires companies to source goods, services, labor and materials overseas to continuously upgrade their products and technology in order to survive increased competition.

Multinational strategy Companies adopt this strategy when each country market needs to be treated as self-contained. It can be for the following reasons:

• Customers from different countries have different preferences and expectations about a product or a service.
• Competition in each national market is essentially independent of competition in other national markets, and the set of competitors also differ from country to country.
• A company’s reputation, customer base, and competitive position in one nation have little or no bearing on its ability to successfully compete in another nation.

Some of the industry examples for multinational competition include beer, life insurance, and food products. Global competitive strategy Companies adopt this strategy when prices and competitive conditions across the different country markets are strongly linked together and have common synergies. In a globally competitive industry, a company’s business gets affected by the changing environments in different countries. The same set of competitors may compete against each other in several countries.

In a global scenario, a company’s overall competitive advantage is gauged by the cumulative efforts of its domestic operations and the international operations worldwide. A good example to illustrate is Sony Ericson, which has its headquarters in Sweden, Research and Development taupe in USA and India, manufacturing and assembly plants in low wage countries like China, and sales and marketing worldwide. This is made possible because of the ease in transferring technology and expertise from country to country.

Industries that have a global competition are automobiles, consumer electronics (like televisions, Task 2-a Kosher Limited wants to enter international market. Will country risk analysis help Kosher Limited to take correct decisions? Substantiate your answer. Country Risk Analysis (CRA) identifies imbalances that increase the risks in a cross- border investment. CRA represents the potentially adverse impact of a country environment on the multinational corporation’s cash flows and is the probability of loss due to exposure to the political, economic, and social upheavals in a foreign country.

All business dealings involve risks. An increasing number of companies involving in external trade indicate huge business opportunities and promising markets. When business transactions occur across international borders, they bring additional risks compared to those in domestic transactions. These additional risks are called country risks which include risks arising from national differences in socio- lattice institutions, economic structures, policies, currencies, and geography. The CRA monitors the potential for these risks to decrease the expected return of a cross- border investment.

Analysts have categorized country risk into following groups: Economic risk. This type of risk is the important change in the economic structure that produces a change in the expected return of an investment. Risk arises from the negative changes in fundamental economic policy goals (fiscal, monetary, international, or wealth distribution or creation Transfer risk This type of risk arises from a decision by a foreign government to restrict capital events. It is analyses as a function of a country ability to earn foreign currency.

Therefore, it implies that effort in earning foreign currency increases the possibility of capital controls. Exchange risk This risk occurs due to an unfavorable movement in the exchange rate. Exchange risk can be defined as a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. Location risk This type of risk is also referred to as neighborhood risk.

It includes effects caused by problems in a region or in countries with similar characteristics. Location risk includes effects caused by troubles in a region, in trading partner of a country, or in countries with similar perceived characteristics. Sovereign risk This risk is based on a government’s inability to meet its loan obligations. Sovereign risk is closely linked to transfer risk in which a government may run out of foreign exchange due to adverse developments in its balance of payments. It also relates to political risk in which a government may decide not to honor its commitments for lattice reasons.

Political risk. This is the risk of loss that is caused due to change in the political structure or in the politics of country where the investment is made. For example, tax laws, and bureaucracy also contribute to the element of political risk. Country Risk Risk assessment requires analysis of many factors, including the decision-making process in the government, relationships of various groups in a country and the history of the country. Country risk is due to unpredicted events in a foreign country affecting the value of international assets, investment projects and their cash flows.

The analysis of country risks distinguishes between the ability to pay and the willingness to pay. It is essential to analyses the sustainable amount of funds a country can borrow. Country risk is determined by the costs and benefits of a country repayment and default strategies. The ways of evaluating country risks by different firms and financial institutions differ from each other. The international trade growth and the financial programs development demand periodical improvement of risk methodology and analysis of country risks.

The historical brief helps to identify aspects that interfere in the future behavior of the country, educing the ability to payback any external commitment. The main historical data provides a good understanding of the key factors which draw the behavior of the society, the government, the private sector, the legal environment, the economic, political, and the relationships to neighbor nations and the world as a whole. The organization of the government and its features like political and administrative organization are also relevant aspects to be approached.

The political forces which act in the country, their representatives and the main national issues must be focused. The other considerations include social aspects and their key-indicators like population growth rate, unemployment ratio, infant mortality rate, composition of the population and life expectancy. The geographic positioning and its related strengths and weaknesses are also critical aspects. Task 3-a How can managers in international companies adjust to the ethical factors influencing countries?

Is it possible to establish international ethical codes? Briefly explain. Ethics can be defined as the evaluation of moral values, principles, and standards of human conduct and its application in daily life to determine acceptable human behavior. Business ethics pertains to the application of ethics to business, and is a matter of concern in the corporate world. Business ethics is almost similar to the generally accepted norms and principles. Behavior that is considered unethical and immoral in society, for example dishonesty, applies to business as well.

Most countries have similar ethical values, but are practiced differently. This section deals with the way individuals in different countries approach ethical issues, and their ethically acceptable behavior. With the rise in global firms, issues related to ethical values and traditions become more common. These ethical issues create complications to Multi-National Companies (Macs) while dealing with other countries for business. Hence, many companies have formulated well-designed codes of conduct to help their employees.

Two of the most prominent issues that managers in Macs operating in foreign countries face are bribery and corruption and worker Bribery and corruption Bribery can be defined as the act of offering, accepting, or soliciting something of value for the purpose of influencing the action of officials in the discharge of their duties. Corruption is the abuse of public office for personal gain. The issue arises when there are differences in perception in different countries. For example, in the Middle East, it is perfectly acceptable to offer an official a gift.

In Britain it is considered as an attempt to bribe the official, and hence, considered unlawful. Worker compensation Businesses invest in production facilities abroad because of the availability of low- cost labor, which enables them to offer goods and services at a lower price than their competitors. The issue arises when workers are exploited and are underpaid compared to the workers in the parent country who are paid more for the same Job. The disparity arises due to the differences in the regulatory standards in the two countries.

Companies use management techniques to encourage ethical behavior at an organizational level. Various techniques of managing ethics like practicing ethics at the top level management, special training on ethics, forming committees to oversee ethical issues, and defining and implementing code of ethics are:

1. Top management. The senior management of a company must be committed to ensure that ethical standards are met. The chief executive of the company must not engage in business raciest harmful to employees, or the society. The top management must focus on ethical practices while informing employees of their intention. .
2. Code of ethics. One of the best practices for ethics is creating a ‘corporate ethical statement’ and communicating it within the company. Such practices enhance the company’s public image. Almost all Fortune 500 companies have such codes.
3. Ethics committee. There are ethics committees in many firms to help them deal with and advice on work related ethical issues. The Chief Executive Officer can head the committee that includes the Board of Directors. Such a committee answers employee queries, helps the company to establish policies in uncertain areas, advises the Board on ethical issues, and oversees the enforcement of the code of ethics.
4. Ethics hotlist. A company’s ethical hotlist helps its employees report any ethical issues they face at work. The ethics committee then investigates these issues. Such hotlist calls are treated confidential, where the caller’s identity is protected to encourage employees to report on ethical issues.
5. Ethics training programs. Most firms take ethics seriously and provide training for its managers and employees. Such training programs help the employees become familiar with the official policy on ethical issues. These programs demonstrate the use of these ethic policies in everyday decision-making.Ethics training is most effective when conducted by managers and when focused on work environment.
6. Ethics and Both law and ethics focus on defining the perfect human behavior, but they are not the same. Law is the government’s attempt to formalism rightful behavior, but it is rarely possible to enforce written laws. It depends on individual or business ethics to reduce unlawful incidents. Ethical concepts are more complex than written rules nice it deals with human dilemmas that go beyond the formal language of law.

Code of Conduct for Macs

The code of conduct for Macs refers to a set of rules that guides corporate behavior. These rules prescribe the duties and limitations of a manager. The top management must communicate the code of conduct to all members of the organization along with their commitment in enforcing the code. Some of the ethical requirements for international companies are as follows:  Respect basic human rights.  Minimize any negative impact on local economic policies.  Maintain high standards of local political involvement. Transfer technology.  Protect the environment. Protect the consumer.  Employ labor practices that are not exploitative. When a manager of an international firm faces an ethical problem, certain models help in solving these ethical issues. The first task is to consider the ethical and legal consequences of the issue and whether the action or its consequences are in accordance with the law, both in the home and host country. Task 4-a Discuss the international marketing strategies. How is it different from domestic marketing strategies? International marketing involves the firm in making one or more marketing mix sections across national boundaries.

At its most complexes, it involves the firm in establishing manufacturing/processing facilities around the world and coordinating marketing strategies across the globe. At one extreme there are firms that opt for ‘international marketing simply by signing a distribution agreement with a foreign agent who then takes on the responsibility for pricing, promotion, distribution and market development. At the other extreme, there are huge global companies such as Ford with an integrated network of manufacturing plants worldwide and who operate in some 150 country markets.

Thus, at its most complexes, international marketing becomes a process of managing on a global scale. These different levels of marketing can be expressed in the following terms:  Domestic marketing, which involves the company manipulating a series of controllable variables such as price, advertising, distribution and the product/service attributes in a largely uncontrollable external environment that is made up of different economic structures, competitors, cultural values and legal infrastructure within specific political or geographic country boundaries. International marketing, which involves operating across a number of reign country markets in which not only do the uncontrollable variables differ form of cost and price structures, opportunities for advertising and distributive infrastructure are also likely to differ significantly. It is these sorts of differences that lead to the complexities of international marketing.  Global marketing management, which is a larger and more complex international operation. Here a company coordinates, integrates and controls a whole series of marketing programmers into a substantial global effort.

Here the primary objective of the company is to achieve a degree of synergy in the overall operation so that by taking advantage of different exchange rates, tax rates, labor rates, skill levels and market opportunities, the organization as a whole will be greater than the sum of its parts. This type of strategy calls for managers who are capable of operating as international marketing managers in the truest sense, a task which is far broader and more complex than that of operating either in a specific foreign country or in the domestic market.

Thus, how international marketing is defined and interpreted depends on the level of involvement of the company in the international marketplace. International marketing could therefore be:  Export marketing, in which case the firm markets its goods and/or services across national/political boundaries.  International marketing, where the marketing activities of an organization include activities, interests or operations in more than one country and where there is some kind of influence or control of marketing activities from outside the country in which the goods or services will actually be sold.

Sometimes markets are typically perceived to be independent and a profit centre in their own right, in which case the term litigation or multi-domestic marketing is often used. Global marketing, in which the whole organization focuses on the selection and exploitation of global marketing opportunities and marshals resources around the globe with the objective of achieving a global competitive advantage. The first of these definitions describes relatively straightforward exporting activities, numerous examples of which exist.

However, the subsequent definitions are more complex and more formal and indicate not only a revised attitude to marketing but also a very different underlying philosophy. Here the world is seen as a market segmented by social, legal, economic, political and technological (SLEPT) groupings. For all these levels the key to successful international marketing is being able to identify and understand the complexities of each of these SLEPT dimensions of the international environment and how they impact on a firm’s marketing strategies across their international markets.

As in domestic marketing, the successful marketing company will be the one that is best able to manipulate the controllable tools of the marketing mix within the uncontrollable environment. It follows that the key problem faced by the international marketing manager is that of coming to terms with the details and complexities of the international environment. Difference between domestic marketing and international marketing. The scope of domestic marketing is limited and will eventually dry up. On the other end, international marketing has endless opportunities and scope.

Benefits As is obvious, the benefits in domestic marketing are less than in international marketing. Furthermore, there is an added incentive of foreign currency that is Domestic marketing is limited in the use of technology whereas international racketing allows use and sharing of latest technologies. Political relations Domestic marketing has nothing to do with political relations whereas international marketing leads to improvement in political relations between countries and also increased level of cooperation as a result.

Barriers In domestic marketing there are no barriers but in international marketing there are many barriers such as cross cultural differences, language, currency, traditions and customs. Task 5-a Discuss the various International product and pricing decisions.In decisions on producing or providing products and services in the international market it is essential that the production of the product or service is well planned and coordinated, both within and with other functional area of the firm, particularly marketing.

For example, in horticulture, it is essential that any supplier or any of his “out grower” (sub-contractor) can supply what he says he can. This is especially vital when contracts for supply are finalized, as failure to supply could incur large penalties. The main elements to consider are the production process itself, pacifications, culture, the physical product, packaging, labeling, branding, warranty and service. Production process In manufactured products this may include decisions on the type of manufacturing process – artisan, Job, batch, and flow line or group technology.

However in many agricultural commodities factors like seasonality, permissibility and supply and demand have to be taken into consideration. Quantity and quality of horticultural crops are affected by a number of things. These include input supplies (or lack of them), finance and credit availability, variety (choice), sowing dates, product range ND investment advice. Many of these items will be catered for in the contract of supply. Specification is very important in agricultural products.

Some markets will not take produce unless it is within their specification. Specifications are often set by the customer, but agents, standard authorities (like the EX. or TIC Geneva) and trade associations can be useful sources. Quality requirements often vary considerably. In the Middle East, red apples are preferred over green apples. In one example French red apples, well boxed, are sold at 55 diners per box, whereas not so attractive Iranian greens are sold for 28 diners per box. In export the quality standards are set by the importer.

For the international business with operations in different countries, of considerable importance is how a society’s culture affects the values found in the workplace. Management processes and practices may need to vary according to culturally determined work-related values. For example, if the cultures of the United States and France result in different work-related values, an international business with operations in both countries should vary its management process and practices to take these differences into account.

International business is different from national easiness because countries and societies are different. Societies differ because their cultures vary. The cultures vary because of profound differences in social structure, religion, language, education, economic philosophy, and political philosophy. Three important implications for international business flow from these differences. The first is the need to develop cross-cultural literacy. There is a need not only to appreciate that cultural differences exist, but also to appreciate what such differences mean for international business. A second implication looks at the injection between culture and ethics in decision making. A third implication for international business centers on the connection between culture and national competitive advantage.

Across-Cultural Literacy

One of the biggest dangers confronting a company that goes abroad for the first time is the danger of being ill-informed. International businesses that are ill-informed about the practices of another culture are likely to fail. Doing business in different cultures requires adaptation to conform with the value systems and norms of that culture. Adaptation can embrace all aspects of an international firm’s operations in a foreign country. The way in which deals are negotiated, the appropriate incentive pay systems for salespeople, the structure of the organization, the name of a product, the tenor of relations between management and labor, the manner in which the product is promoted, and so on, are all sensitive to cultural differences.

What works in one culture might not work in another. To combat the danger of being ill-informed, international businesses should consider employing local citizens to help them do easiness in a particular culture. They must also ensure that home-country executives are cosmopolitan enough to understand how differences in culture affect the practice of international business. Transferring executives overseas at regular intervals to expose them to different cultures will help build a cadre of cosmopolitan executives.

An international business must also be constantly on guard against the dangers of anthropocentric behavior. Ethnocentrism is a belief in the superiority of one’s own ethnic group or culture. Hand in hand with ethnocentrism goes a disregard or nonempty for the culture of other countries.

Culture and Competitive Advantage

The value systems and norms of a country influence the costs of doing business in that country. The costs of doing business in a country influence the ability of firms to establish a competitive advantage in the global marketplace. Japan is a good example of how culture can influence competitive advantage. Some scholars have argued that the culture of modern Japan lowers the costs of doing business relative to the costs in most Western nations. Japan’s emphasis on group affiliation, loyalty, reciprocal Marketing By Unassumingly The emphasis on group affiliation and loyalty encourages individuals to identify strongly with the companies in which they work. This tends to foster an ethnic of hard work and cooperation between management and labor for the good of the company.

Similarly, reciprocal obligations and honesty help foster an atmosphere of trust between companies and their suppliers. This encourages them to enter into long-term relationships with each other to work on inventory reduction, quality control, and Joint design, all of which have been shown to improve an organization’s competitiveness. In addition, the availability of a pool of highly skilled labor, particularly engineers, has helped Japanese enterprises develop cost-reducing process innovations that have boosted their productivity.

Thus, cultural factors may help explain the competitive advantage enjoyed by many Japanese businesses in the global marketplace. For the international business, the connection between culture and competitive advantage is important for two reasons: First, the connection suggests which countries are likely to produce the most viable competitors. Second, the connection between culture and competitive advantage has important implications for the choice of countries in which to locate production facilities and do business.

But as important as culture is, it is probably less important than economic, political, and legal systems in explaining differential economic growth between nations. Cultural differences are significant, but their importance in the economic sphere should not be overemphasized. For example, Max Weber argued that the ascetic principles embedded in Hinduism do not encourage entrepreneurial activity. While this may be the correct academic interpretation, recent years have seen an increase in entrepreneurial activity in India.