Themes and Issues in the Modern Global Economy - Research Paper Example

? International Business Executive Summary The essence of international business is to offer a global outlook of the available opportunities for organizations to increase revenue. The need for international outlook means that each company, whether small or multi-national, desires a chance to market its products to an international clientele. This will force such a company to use advanced technologies to reach out to millions of clients throughout the world. E-commerce has accelerated the growth of companies such as Samsung and Coca Cola as they do not boast of a wide global network. They are able to use these feedbacks to customize their products to fit their demographics. As a result, the need to venture into areas where the cost of production is cheaper and easier to market to other areas arises. Despite these merits, the political, economic, social, technological and environmental issues have to be put into consideration and optimally explored to ensure maximum profitability. The country which offers better marketing mix attributes has many multinational companies knocking to invest their resources in order to maximize on profitability. One such country is China. The products to be bought are electronics mainly television sets and computers. These two are quite crucial in the every day life of an American and the rapid technological improvements are making them quite dynamic. This dynamism allows the company to tap into the different market potentials with different marketing mix strategies put into efficient use. International Business International business activities affect many spheres of people’s daily lives. Whether one looks at the products, services and the impact of each of these, the results are obvious; internationalization of business is imminent. The act of globalization makes business much easier as different agreements and trading blocs allow for greater and easier access of products and services at reduced or subsidized prices. This reduces the cost of production and increases a company’s profitability. Business restrictions are lessened every day with competition spreading in a global scale. The use of currencies is also being harmonized in some trade blocs such as the European Union with political relations being strengthened amongst the principal economic powers. The better relations ensure peace and stability; hence better global economic prospects. This further leads to better trades and economic relations that lead to sound competition and proper utilization of resources. Imports and exports have thus been key determinants of how well a country is performing in terms of its GDP growth and the level of economic freedom. Some economic regulations are made to regulate the number of foreign companies sourcing for products or raw materials, and the amount that each company can export or import into the country. Local companies are given the first priority. The report herein will explore the benefits and challenges of buying electronics from China, and what impact such trade will have on the business environment within the US. Product and Country Background The benefits of buying electronics from China are many. The Chinese market and manufacturing sector have grown immensely over the past few decades with strong indicators witnessed through the Chinese economic prowess. Exports to China rose by $91.9 billion in 2010, as compared to a decade earlier, and this is still expected in the coming years. Imports from China have also risen by almost similar margins, mainly in electronics and agricultural products. It is also reported that at least 2.7% of all American consumption comprises goods made in China (Daniels, Radebaugh and Sullivan, 2007). Regulations placed by the government have hindered many companies from exploiting the skilled and cheap labor as well as abundant resources that the country has to offer. Much emphasis is laid on local businesses to flourish with the international community allocated some percentage of the available economic ventures. Direct control is exercised in areas related to specific physical output quotas and supply allocations for some of the goods and services. Economic levers affect market incentives and these have remarkable influence on how each product retails (Joshi, 2009). Social impacts of the business ventures will be accessed by the poor rural residents who depend on meager incomes despite the growing GDP. The gap between the rich and the poor continues to widen everyday. Thus, to get access to the products in the highly regulated country, the entry mode chosen has to be the strategic partnership model where the outsourcing company has already identified a strategic company within China (Starr, 2001). The inland company will be tasked with manufacturing while the outsourcing company will provide the distribution channels to help in supplying the products to global markets. Product Description, its Benefits and Features Televisions and computers are every day gadgets whose impact to people’s lives is incredible. They are used for different purposes in the contemporary American society with each having different attributes that assist in every day life. The television is an informative electronic gadget that has been used primarily to influence the lives of the American society. Whether positive or negative, the influences have changed the society in comparison to how it initially was in the early 19th century. Computers, on the other hand, have become an integral part of every American in both formal and informal settings. Almost all transactions are currently being carried out using computers and internet; hence the necessity of having one in every household (Johnson and Turner, 2009). The continued use of the internet has also made it part of every day educative, entraining and informative gadget that is a must-have for every American. The features that comprise the products to be sold include the Liquid Crystal Display (LCD) screens that have higher quality and better contrast and viewing angles than the CRT screens produced before. There are portable computers such as the laptops and the palmtops which ease communication and portability. High speed processing units will be the main feature at low costs, but higher efficiency and better output in comparison to products found in the US (Samii, 2004). With the continued access to the internet, some of these portable computers and netbooks will come in handy in managing crucial business data and information. The demographics targeted include all areas that have embraced the new technologies in their daily activities. Within the US, the urban areas are constantly expanding owing to increased investment, immigration as well as migration from the rural areas. The company will take advantage of these developments, and market the product to the increasing population. The pricing strategies will be based on the market research conducted to inform on the consumer spending and income surplus dedicated to items like computers and televisions (Wall, Minocha and Rees, 2009). The fact that they will be outsourced from China makes it cheaper for them to afford with the company profiting due to the low costs of importing directly from China. This will also take into account the reference value and the differential value in making its pricing decisions. In relation to promotion, the use of the internet and print media advertisements will be sourced to capture the urban elite with billboards being used to capture the attention of those who may not have access to radio and the internet. Several points of sale will be introduced to help improve the strategic placement of the products. Further, intensive and exclusive distribution will be used to complement the location and distribution of the products (Kerin and Rudelius, 2001). Domestic Company The domestic company has quite a unique organizational design that helps to tap the potential of all its employees. The hierarchical system of administration is the primary system of choice where the controls are held by one person. The model of leadership, however, is the democratic one where all people are accorded a chance to voice their opinions with these opinions being taken into consideration by the company. This allows for greater participation and motivation for workers. It has ideal strategies laid out as objectives with strategic planning being used to improve performance and increase efficacy (Kesler & Kates, 2010). As a company aiming at going global, the outsourcing of goods from china increases the chances of recognition in the international business arena. This helps in knowledge management through the exchange programs with the Chinese counterparts. This helps to increase diversity, improve on trade relations and on research methodologies in regards to the new culture and relative technological advancements of the two countries. The organizational design has laid emphasis on creating a learning organization which is accredited for its international ventures. For instance, they have resorted to the Chinese way of doing business with ethics coming taking centre stage. This ensures accountability, transparency and strengthened relations with clients and suppliers. Acknowledging these differences helps in maintaining better social and cultural relations between the two companies (Kates & Glabraith, 2007). Further, it has lessened the conflicts that could emerge as a result of intellectual properties and their ownership. According to the agreement signed by the two companies, the product brand will be the same and will remain unchanged with the American company acting as the brand protector within the US boundaries. Any issue that arises within the US market will be handled by the domestic company on behalf of the Chinese conglomerate. The intellectual rights will be partly owned by each company until the expiry of the contract, pending further renewal if applicable. This will reduce price wars as well as dishonoring of contractual terms. The contract also allows the two companies to finance both the production and exports from China with profits being used to offset related costs as agreed upon (Aswathappa, 2010). Problems that may arise from the whole business venture will also affect the international business front. Inflation is one of these factors. An increase in import penetration and the falling export prices would mean a depressed economic growth for the country and an influx of goods thereby saturating the market. This would also imply lower employment rates with those who are still employed asking for higher wages to maintain their living standards. This would reduce the surplus income hence affect the sales of the imported products from China. Though trading blocs such as the EU and North American Free Trade Agreement (NAFTA) have regulations regarding currency and trading between members, international competitiveness would be severely affected in the event of inflation (Hill, 2012). The competitiveness would slow down the growth of member economies, resulting to a slow but steady rise in the rates of unemployment. The devaluation of currency may restore exports at the expense of making imports rather expensive. As such, the two companies will be negatively affected. Another issue that may create a risk in the business is that of transfer of goods from Asia to North America. The cost of goods from Asia to America and the amount of taxes could affect the general business owing to increased overheads. However, the presence of a recipient company with somewhat elaborate distribution channels reduces some of the costs that could be incurred in distributing the products once they leave the customs department in the US (Aswathappa, 2010). However, the fees will be cost-shared by the two companies as agreed with the export and import levies being paid out in agreed proportions. This ensures constant participation of the two companies in ensuring the safety of the goods and their timely availability to the clients as requested. Conclusion With the continued global interdependence, numerous issues have to be considered when forming trade partnerships across borders. As seen, the difference in opinions between communist and capitalist governments provides different views on how to conduct trade. The regulations placed within the two countries, i.e. US and China, are quite different as each seeks to protect its resources. Eventually, the amount of foreign direct investment in each of the countries will increase the mutual benefits, and with time, a reduction in the number of trade restrictions as a result of increased trade agreements signed between the two. As a company, indulging in outsourcing allows the raising of standards within the company’s field of specialization and a thrust into the international limelight may earn it the needed recognition and numerous business opportunities. References Aswathappa. (2010). International business. New York, NY: Tata McGraw-Hill Education. Daniels, J., Radebaugh, L., & Sullivan, D. (2007). International business: Environment and operations. Upper Saddle, NJ: Prentice Hall. Griffin, R. W., & Pustay, M. W. (2010). International business. Upper Saddle, NJ: Prentice Hall. Hill, C. (2012). International business. New York, NY: McGraw-Hill Companies, Inc. Johnson, D., & Turner, C. (2009). International business: Themes and issues in the modern global economy. London: Taylor & Francis. Joshi, R. M. (2009). International business. New York, NY: Oxford University Press. Kates, A., & Galbraith, J. R. (2007), Designing your organization: Using the star model to solve five critical design challenges. San Francisco: Jossey-Bass, 2007. Kerin, H., & Rudelius, K. (2001). Marketing, the core. Sudbury, MA: McGraw Hill Publishing. Kesler, G., & Kates, A. (2010), Leading Organization Design: How to make organization design decisions to drive the results you want. San Francisco: Jossey-Bass. Samii, M. (2004). International Business and Information Technology: Interaction and transformation in the global economy. London: Routledge. Starr, J. (2001). Understanding China: A guide to china's economy, history, and political culture. Beijing: Hill and Wang. Wall, S., Minocha, S. and Rees, B. (2009). International business. San Francisco, CA: Pearson Education, Limited. Read More