International Economics - Assignment Example

? International Business Management - Final Examination Table of Contents Answer 3 Answer a) 3 Answer c) 5 Answer d) 6 Answer 2 6 Answer 3 7 Answer6 8 References 10 Bibliography 11 Answer 1 Answer a) Cost Benefit Analysis of a Plant Factors Analysis Benefits of Moving In Mexico the transportation facility is available much faster and even at cheaper rates for moving the products and supplies from the place of manufacturing to the United States. Compared to the transportation cost in other countries, such as China, the manufacturing cost is also cheaper in Mexico. The Mexican currency called Peso has depreciated against the US dollar. As a result of the depreciating value of the Mexican currency, cost of machinery, cost of operation and the cost of labor would gain an advantage. Cost of Moving The different areas where the assembly plant has to bear cost of moving are as follows: Fittings, fixtures and land for the new plant Salaries of the new workers including the overheads and the training cost Social costs Transportation cost of exporting or shipping the finished products Power consumption and utilities Cost of installing machines Shareholders Affected The current economic crisis may affect the company’s ability to get business in the market. This might be the reason of declining profits. The company must conduct an internal analysis to find the root cause of their problem areas. After evaluating, the responsibility can be laid on a certain party. The benefit would be, that the labor cost, and production cost would be lower in Mexico and the maintenance cost would be lesser in US, so the shareholders profit can be guaranteed (Elliott, 2007, p. 13-14). Answer b) The strategic implications of moving and not moving are explained below: Moving: There are both advantages as well as disadvantages of moving the plant. Moving the assembly plant from the old location to a new place would help the company to start their business with cheap labor force and a new community to target to. The company would be able to generate more revenue. The company’s machineries are old and outdated which results in declining profits. So utilizing the low transportation cost, and tax free benefits in Mexico, the assembly plant can be moved. The disadvantage would be that the company would not be able to utilize its old site; it has to adjust according to the new and advanced equipments that will be used in the new plant. Along with that the training cost would be high as the employees of a totally different culture would have to be trained on new equipments. Not Moving: Legal implications may arise while moving to Mexico. The employees’ loyalty would be questioned and the originality of the company would be lost. The major issue of the company is to maintain its profitability and increase the long-term value. This could be even done by inputting new facilities into the old machineries to compete with the other players, hard-work, continuous improvement and through innovation. By keeping the assembly plant where it is the company would not only be profitable but also be loyal to the place (Deresky, 2006, p. 64-66). Answer c) If the management of the company is able to understand the obligations of communicating with the political and the social leaders, then their recently adopted obligation is right. It is important to persuade the leaders that the community as a whole and the employees are the priority and not the profits. The company must look for options for supporting their moving decisions. They may propose the existing plant to look for some new owner or explore the opportunities of owning the employees. In case of the new assembly plant in Mexico, the responsibility lies on the host country and the facilitators of the organization. It is important to have a good public relation in order to consider the environmental and social issues. The ethical implications may also have an impact on moving the assembly plant to a different location, through reduction of labor cost. The focus should also be on the social and environmental issues. The career opportunities for the old employees would be hampered if the company moves to a new location and employs new workforce for the assembly plant. Answer d) The organizational culture of Mexico is different from that of US, as for the Mexican’ building relationship is of greater importance than the success of the business. The individuals who have good business relationship and social reputation are utilized to establish new business. It is important to understand the difference in culture so as to avoid unintentional offense. The Mexican culture is gracious and warm and they specially avoid the ‘time is money’ attitude. For them personal relationship, good behavior and warmth is more valuable than money. In US the business culture specially focuses on time and money. They believe in profit maximization. Mexican workers prefer to stay away from their bosses so as to maintain a professional distance. The Mexican workers are strong, manly and believe in teamwork. Answer 2 The attitude of the MNCs to do or assume specific things even if they are not right, or in whatever condition the company is going through, is known as ethnocentrism. In case of ethnocentrism, a company follows the strategies and systems of their own country, irrespective of the code of ethics in the host country. Let us take up the example where an American company is setting up a manufacturing unit in a country where child labor is not prohibited. In such a situation, the American company will not recruit child laborers for reducing cost in the host country because the practice of child labor is prohibited in America. In case of ethical relativism, a company simply adopts the local culture of the country in which it is operating. It simply validates the saying, when in Rome do as the Romans do. For example, McDonalds sell its products by customizing its menu according to the country and the choice of food people of that country prefer. Moral universalism means the company follows a uniform strategy of conducting business in all the parts of the world. It also signifies that the company strictly follows a set of principles which is probably derived from the home country. For example, certain human rights, labor rights laws, etc. It cannot be exactly said as to which approach is better than the other two because MNCs generally implement the approaches according to their need. Ethical relativism is preferable in most of the MNCs so as to grab market share through winning the hearts of the local customers, whereas moral universalism is also attractive, as through this the company would be able to introduce their unique identity in the world market (Sharan, 2012, p. 232). Answer 3 There are few norms in the Chinese culture that affect their negotiation process. They are: a) belief in maintaining strong relationship between family, work and friends, b) social obligations, c) politeness, and d) emotional restrains. The Chinese emphasize more on the cultural norms for negotiation because they prefer to build strong personal and emotional relationship even in their profession place. They also attempt to save face. Face has two major components, they are: lien- the moral character of a person, and mein-tsu- the reputation of the person. The Americans while approaching the Chinese should keep in mind that they do not show attitudes of winning from their Chinese counterparts, so that the Chinese have to lose face. They need to be shown respect through token concessions (Sarkar, 2010, p. 114-116). The next very popular concept of the Chinese culture is the Guanxi. It explains the theories of maintaining a strong relationship between friends, family and workplace. It signifies a close relationship even in case of business relationship and negotiation. The important negotiating styles in the Chinese culture are as follows: The Chinese always want to deal with the top executives of the American companies so as to develop strong personal relationship with its clients. For them building a relationship of trust and friendliness is very important for developing a good negotiation. Chinese prefer elder and matured people when it comes to cross-cultural negotiations. They respect the elderly and experienced people more in case of negotiations. The team size in China is twice in case of any negotiation, than the team size of any western company. The negotiators in China have no authority to take important decisions. Lastly the Chinese believe in understanding the details of the product characteristics before moving on to the final part of negotiation (Lam, 2000, p. 158-159). Answer 6 The codetermination law of Germany is called ‘mitbestimmung’. It means the right of the labor to participate in the management of the company. Under this law it becomes mandatory for the union representatives and employees of the company to be on the supervisory board of the companies. All the big companies have such work councils of the employees at the work site. The concepts of trade unions are well integrated in the company for taking the managerial decisions and contributing towards restructuring and also corporate competitiveness. The power of the union in Germany is strong and voluntary. The contract negotiations by the employee federation are therefore accepted by the companies who are the members of these federations. These negotiation contracts help in increasing the pay scale of the employees. In Germany the trade union play a very important role in hiring employees, firing them, or reassigning them at times (Cleiss, 2009, p. 9). The law of codetermination has modified the managerial style in Germany from the authoritarian to humanitarian, without making any changes in the effectiveness or efficiency of the work. DaimlerChrysler is a German American company, which has its headquarters in Germany. It also has a work council integrated in the company, according to the German law. This shows that the labor representatives of the company pay attention to the American attitude. This may lead to alterations in the collective bargaining processes, but the traditional two tier system of the management board and the supervisory council remains unaltered. DaimlerChrysler was one of the companies which desperately wanted to cut labor cost in 2004 and were suffering from the threat of shifting its plant to a different place to remain globally competitive. The German workers are paid the highest in the world that is about ten times the pay the workers get in Mexico. So it can be said that if the German workforce wants to remain competitive, they have to offer more concession (Jones, & Mathew, 2008, p. 14). References Cleiss, M. O. (2009). German Co-Determination and Corporate Governance. Berlin: GRIN Verlag. Deresky, H. (2006). International Management: Managing Across Borders and Cultures. (5th ed.). New Delhi: Pearson Education India. Elliott, D. S. (2007). Measuring Your Library's Value: How to Do a Cost-Benefit Analysis for Your Public Library. Chicago: ALA Editions. Jones, G. R., & Mathew, M. (2008). Organizational Theory, Design, and Change. (5th ed.). New Delhi: Pearson Education India. Lam, M. L. (2000). Working With Chinese Expatriates in Business Negotiations: Portraits, Issues, and Applications. Connecticut: Greenwood Publishing Group. Sarkar, A. N. (2010). Global Business Negotiation. New Delhi: Pentagon Press. Sharan, V. (2012). International Business Management. New Delhi: Pearson Education India. Bibliography Fancy, T. (1998). Chinese Business Negotiating Style. London: Sage Publisher. Mutti, J. H. (2009). International Economics. (7th ed.). Oxon: Taylor & Francis. Nees, G. (2000). Germany: Unraveling an Enigma. Maine: Intercultural Press. Read More