International Business issues - Essay Example

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International Business Table of Content 0 Challenges of international business 1 Organization Structure, Design and Control 3 2 InternationalMarketing 4 1.3 Global Operations and Supply Chain Management 5 1.4 Human Resource Management 6 1.5 Financial Management 6 2.0 International Institutions 2.1 The United Nations Millennium Development Goals 6 2.1.1 Progress Toward the Goals 6 2.1.2 Impact on International Business 7 2.2 The World Trade Organization Principles 8 2.2.1 The Principles 8 2.2.2 Success in Implementation of the Principles 8 2.3 The Organization for Economic Cooperation and Development 9 2.3.1 Selected Information and Data Resources 9 2.3.2 Usefulness of the Selected Resources 9 2.4 Financing Operations of the World Bank 10 2.4.1 Purposes of the Financing Operations 10 2.4.2 Success in Realizing the Purposes 10 3.0 Ethics in International Business 3.1 Transparency International 11 3.1.1 Priority Ethical Issues 11 3.1.2 Cooperation With the Business Sector 11 3.1.3 Impact on the Ethical Conduct of Business 12 4.0 References 1.0 Challenges of International Business 1.1 Organization Structure, Design and Control The success of multinational firms in the global market is influenced by a series of factors; the ability of these firms to adopt foreign practices, which have been proved effective in the context of the host country, is often limited. However, in order for MNEs to secure their position internationally, it is necessary to develop flexible plans, which would be easily alternated, if necessary. In accordance with Rugman and Collinson (2008), three different integration strategies, as related to organization structure, are available to MNEs in the context of the modern market: the backward integration, meaning the acquisition ‘of equity assets used earlier in the production process’ (Rugman and Collinson 2008, p. 291), the forward integration through which the company ‘comes closer to its customers’ (Rugman and Collinson 2008, p. 291), as for instance in the case that a firm which is well known in the television industry acquires a series of well known retail stores, aiming to use these stores for promoting its products (Rugman and Collinson 2008, p. 291). Also, there is the horizontal integration, i.e. the acquisition of a competitor (Rugman and Collinson 2008, p. 291); the above form of integration aims to increase the firm’s market share so that its profits are improved. All these forms of integration can result to critical changes on the organizational structure, at the level that after promoting one of these forms of integration a firm needs to align its structure accordingly so that the activities of the acquired firm are effectively monitored and supported. From another point of view, Aliber (1993) notes that the challenges of the global market are many; even MNEs that are well established in the international market face difficulties in competing their rivals. At this point, coalitions have been proved to be quite a valuable strategy for responding to the demands of the global market (Aliber 1993). Establishing teams with other firms allows MNEs to secure their position internationally controlling the risks related to their activities in host countries that are quite far from the home country (Aliber 1993). On the other hand, the design that a firm chooses when operating globally is not standardized (Neelankavil and Rai 2009). In most cases, it seems that factors such as ‘the industry in which a firm operates or the size of the firm’ (Neelankavil and Rai 2009, p. 315) can influence a firm’s decision in regard to its design. Other firms can participate in the global market through exports (Neelankavil and Rai 2009); for others, joint venture is a more appropriate form of operating internationally (Neelankavil and Rai 2009). In any case, it is necessary for the global design to promote three types of knowledge: ‘area knowledge, product knowledge and functional knowledge’ (Neelankavil and Rai 2009, p. 315). The control of firms operating globally can be a challenging task. Significant cultural and legislation differences in the host country can set many challenges for managers of MNEs, as of their potentials to control the activities of their organization in the particular country (Barnes 2008). Also, because the technology and the resources available in the host country may be significantly different from those used in the home country, the control of organizational activities in the host country can become quite difficult, another challenge that managers of MNEs have to face (Barnes 2008). 1.2 International Marketing Firms that operate globally have to face the competition from other organizations at local, national and international level (Doole and Lowe 2008). This fact can set a series of challenges for MNEs when trying to develop their marketing strategy. MNEs can use their knowledge on the global market for establishing quite effective marketing strategies; however, quite often firms operating locally are more appropriately prepared to respond to the demands of consumers in the local market while MNEs may need more time to capture the needs of the particular market in regard to a specific product or service (Doole and Lowe 2008). MNEs have also to face other MNEs that are also interested in improve their position in the same, foreign, market. Under these terms, the development of effective marketing strategies by MNEs can be quite difficult, especially if no prior experience exists in regard to the targeted market, i.e. when the marketing strategy involves in a market in which the organization plans to entry in the near future (Doole and Lowe 2008). 1.3 Global Operations and Supply Chain Management A critical perspective of firms operating globally is their ability to manage effectively the ‘new produce development process’ (Rugman 2009, p. 467). At the same time, it is necessary for global firms to deliver their products on time, meeting specific quality standards and responding to the preferences of consumers locally (Rugman 2009, p. 467). Because of the above, supply chain management can be quite critical for the success of firms operating in the global market. In most cases, MNEs choose to promote standardized products globally, aiming to keep the cost of production and control on products low (Dlabay et al. 2010). Therefore, supply chain management of MNEs needs to be appropriately aligned with these firms’ needs and characteristics, focusing on the rate of production rather than on innovation (Dlabay et al. 2010). Of course, it is possible for MNEs to choose a different approach for entering foreign markets, meaning that the characteristics of their products will be differentiated across countries, an issue that needs to be taken into consideration when designing MNEs’ supply chain management policies. In accordance with Sople (2012) one of the major challenges for MNEs is their potential to develop ethical supply chain management strategies that would allow control on every part of the relevant processes. 1.4 Human Resource Management Firms that operate globally have to face a significant problem in regard to their human resource management: the safety of the firms’ employees in host countries is not always guaranteed (Sims 2007, p. 81); reference can be made to high risks for kidnappings and terrorism in certain countries internationally (Sims 2007, p. 81). Safety measures need to be developed in advance, ensuring that methods for evacuating a firm’s operational units are available in case of severe political or social crisis locally. 1.5 Financial Management The financial management policies used by MNEs globally are usually based on specific criteria. However, such practice cannot be used in all countries internationally. In certain countries, political risks can be high, meaning the trend for continuous and uncontrolled changes in regard to critical political decisions (Rugman and Collinson 2008). For example, an unexpected increase in tariffs or taxation can highly impact the performance of a MNE in a particular country. It is preferable for MNEs to adopt flexible financial management frameworks that can be changed with no delay ensuring the limitation of risks in regard to the firm’s profitability. 2.0 International Institutions 2.1 The United Nations Millennium Development Goals 2.1.1 Progress Toward the Goals The United Nations Millennium Development Goals were set in 2000 during the UN Millennium Summit (World Bank 2010). In the above meeting, 189 governors of countries worldwide set eight goals, which would be achieved by 2015 (UN 2012): a) elimination of hunger, b) promotion of education internationally, c) elimination of gender discrimination, d) child health, e) maternal health, f) control of the expansion of AIDS, g) promotion of sustainability, h) global partnership (UN 2012). The progress of the above goals is monitored continuously. In accordance with a report of United Nations, published in 2010, the progress of the Goals is encouraging, as indicated, for example, in the reduction of the percentage of undernourished people in developing countries and the reduction of under-five children who are underweight (Figure 1, below). Figure 1 – Percentage of undernourished in developing countries – proportion of under-five children who are underweight (Source: UN report 2010, p. 11 and 14) 2.1.2 Impact on International Business The United Nations Millennium Development Goals have promoted the development of trade worldwide, especially through the support of global partnership. From this point of view, the globalization of business activities has been benefited by the above scheme. However, the Goals set by the United Nations set specific limitations on corporate governance worldwide: a) maternal health should be secured, b) equality in terms of gender should be promoted, c) poverty should be reduced and s) the environment should be respected (United Nations 2009, p. 979). The above principles would be incorporated in the corporate governance frameworks of all firms worldwide. From this point of view, the United Nations Millennium Development Goals can be considered as factors contributing in the transformation of international business worldwide. 2.2 The World Trade Organization Principles 2.2.1 The Principles The World Trade Organization focuses on the promotion of trade worldwide. Emphasis is given on the alignment of trade with specific standards, or, else, principles. In this context, the WTO notes that trade worldwide should be: a) free from discrimination, b) based on negotiation, c) aligned with the international trade rules, d) free from unfair practices, e) supportive towards developing countries (WTO, Principles, 2012) 2.2.2 Success in Implementation of the Principles The efforts of WTO to promote its principles, as described above have been intensive. In fact, the organization develops a series of briefings annually for ensuring that the policies of its members worldwide are aligned with the Organization’s principles (Figure 3, below). Figure 3 – Briefings of WTO in 2010 (Source: WTO report 2011, p. 123) The effectiveness of the Organization to promote its principles is also reflected in the limitation of disputes filled annually, as presented in Figure 4. Figure 4 – Disputes filled annually in the Dispute Settlement Body, WTO (Source: WTO report 2011, p. 88) 2.3 The Organization for Economic Cooperation and Development 2.3.1 Selected Information and Data Resources The Organization for Economic Cooperation and Development was established in Paris in 1961; currently, its members are estimated to 34 (OECD, About, 2012). The organization aims to promote and secure the well-being of people worldwide (OECD, About 2012). The Organization’s website provides access to valuable resources; for example, reference can be made to the category ‘Topics’ and the category ‘Statistics’ (OECD 2012). 2.3.2 Usefulness of the Selected Resources As noted above, OECD aims to promote the well being of people internationally. Providing information related to critical human activities is part of the Organization’s strategy for achieving its goals. In regard to the two categories of resources chosen, the category ‘Topics’ and the category ‘Statistics’ the following facts should be highlighted: the category ‘Topics’ provides access to a wide range of issues related to important social and economic activities worldwide, for instance agriculture and employment; it also provides access to services important for well-being, for instance health (OECD 2012, Topics). Each of these topics is critically analyzed, supported by relevant statistics and any source/ data, which is considered as valuable. Similar information is provided through the category ‘Statistics’ with the only difference that in this category only statistical data on a wide range of issues/ themes is provided. 2.4 Financing Operations of the World Bank 2.4.1 Purposes of the Financing Operations The World Bank provides financial support in regard to a range of activities in countries globally. The purpose of the financial support that the Bank provides is not standardized, meaning that such plans are tailored in accordance with each country’s needs. The Bank uses two specific types of lending instruments: ‘the investment loans and the development policy loans’ (World Bank Financial Management, 2012); the first of the above lending scheme, aims to support specific projects, related to a series of industrial sectors in countries worldwide (World Bank Financial Management, 2012). The second of these financial instruments aims to support the borrowing needs of governments and cannot be used for funding specific projects (World Bank Financial Management, 2012). 2.4.2 Success in Realizing the Purposes Through the decades, the World Bank has managed to achieve its goals. This fact is reflected in the Bank’s latest report, of 2011, where reference to certain of the Bank’s achievements up today: a) in Bhutan the Bank funded the improvement of the country’s water infrastructure, b) IDA, a fund that the Bank has developed for providing financial support to poor countries, has helped to the improvement of living conditions of people in 79 countries, c) the Bank also helped Indonesia to escape the global crisis, which had severely affect the country’s banking system (World Bank, Results 2011). 3.0 Ethics in International Business 3.1 Transparency International 3.1.1 Priority Ethical Issues The Transparency International is an organization focusing on the limitation of corruption worldwide; reference is made to corruption as potentially developed, more or less, in both the private and the public sector of each country (Transparency International 2012). The organization aims ‘to increase the awareness of corruption’ (Transparency International 2012), as the specific problem can be related to many areas, such as the private or the public sector and politics (Transparency International 2012). 3.1.2 Cooperation With the Business Sector Different ethical rules can be used for ensuring transparency in businesses internationally. As a priority, legislators should focus on the obligation of businesses to ensure fairness and equality in the workplace and control the effects of their activities on the environment. The deontological theory of ethics of Kant, as also accepted by Rawls, could be used at this point for explaining the ethical obligations of businesses no matter of the outcome, based rather on the motivation of leaders/ entrepreneurs (Kline 2010, p. 10). 3.1.3 Impact on the Ethical Conduct of Business Transparency International cooperates with businesses worldwide for fighting corruption; the organization’s business principles for fighting bribery (Transparency International 2012) are indicative of this type. In accordance with the organization’s report of 2010, corruption in the private sector would require a strategy consisted of three parts: ‘prevention, enforcement of laws and greater transparency’ (Transparency International, Report of 2010, p. 31). Examples of the contribution of the organization in the limitation of corruption in the private sector are the following ones: a) in Moldova, the organization’s suggestions helped to control corruption in the country’s energy sector, b) in 2010 in Lebanon 30 owners of SMEs participated in the organization’s local conference in regard to the control of corruption, and so on (Transparency International, Report of 2010, p. 32). The above examples reveals the potentials of the organization to influence the ethical conduct of businesses worldwide; it also indicates the necessity for the increase of control over business activities worldwide in regard to their relationship with corruption. 4.0 References Aliber, R. (1993) Readings in international business: a decision approach. Massachusetts: MIT Press. Barnes, D. (2008) Operations management: an international perspective. Belmont: Cengage Learning. Dlabay, L., Scott, J., & Scott, J. (2010) International Business. Belmont: Cengage Learning. Doole, I., & Lowe, R. (2008) International marketing strategy: analysis, development and implementation. Belmont: Cengage Learning. Ellsworth, R. (2002) Leading with purpose: the new corporate realities. Stanford University Press, 2002 International Monetary Fund (2001) Financial organization and operations of the IMF. Washington: International Monetary Fund. Kline, J. (2010) Ethics for International Business: Decision-Making in a Global Political Economy. Oxon: Taylor & Francis. Neelankavil, J., & Rai, A. (2009) Basics of international business. New York: M.E. Sharpe. OECD (2012) Available from http://www.oecd.org/home/0,2987,en_2649_201185_1_1_1_1_1,00.html Rugman, A. (2009) The Oxford handbook of international business. Oxford Handbooks Online. Rugman, A., & Collinson, S. (2008) International Business. Essex: Pearson Education. Sims, R. (2007) Human resource management: contemporary issues, challenges, and opportunities. Charlotte: IAP. Sople, V. (2012) Supply chain management. New Delhi: Pearson Education India. Transparency International (2012) Available from http://www.transparency.org/ United Nations (2010) The Millennium Development Goals Report 2010 http://www.endpoverty2015.org/files/MDG%20report%202010.pdf United Nations (2009) Yearbook of the United Nations 2006. Blue Ridge Summit: United Nations Publications. United Nations (2012) End Poverty. http://www.endpoverty2015.org/en/goals World Bank (2012) Financial Management http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/EXTFINANCIALMGMT/0,,contentMDK:21384785~menuPK:3914217~pagePK:210058~piPK:210062~theSitePK:313218,00.html Read More