International Business Environment - Case Study Example

International business environment Organizations are ‘structures’ with a ‘collage’ of humans or workers doing their allocated work under the supervision of a leader, for the benefit of the organization as well as them. So, the workers only form the crucial ‘cog’ in the running of the organization. Only if these crucial workers are recruited or staffed optimally through an effective staffing process and Human Resource Management, the organization can achieve optimum success. This optimal staffing process and the resultant optimal performance of the organization will differ according to the nature or the type of the organization. That is, organizations may be divided into national firms and International firms. National or indigenous firms are normally started or established by the ‘sons’ and ‘daughters’, or citizens of a particular nation, while International companies will be established in particular nations by foreigners, with the native people or employees playing a prominent role. Diverse workforce in International companies will be segregated into different departments. Among the many departments, which constitute an organization, the marketing department’s role is omnipresent and crucial. Marketing department by using various options including advertisements, e-commerce, etc will only boost an organization including its international operations (i.e. International organizations) by building a brand image for it, or for its products and by attracting the customers in the foreign market. So, this paper will analyze how it is essential for organizations operating within the international business environment to have a high awareness of the differences between the political, economic and socio-cultural systems of the countries and regions in which they operate. This paper will analyze this statement by discussing the international operations of Nike and UPS. Nike Nike Corporation is the world’s leading supplier and manufacturer of sports equipments, athletic shoes and apparels. Currently Nike has over five hundred factory or office locations in around 45 countries all over the world making it one of the prominent International companies of United States. In an International company like Nike, the workforce recruited as part of the staffing process will show a lot of diversity. As mentioned above Organization is a ‘structure’ where ‘collage’ of workers will do their allocated work. This team of workers like the five different fingers in one’s hand; will be different from one another having different characters, attitudes, education, background and importantly ethnicity, thereby bringing in the diversity element. Nike incorporated this diversity element by following a Diversity program, introduced in 2005. “Nike set out on a five-year journey to make the company an Employer of Choice. We said diversity could be a competitive advantage. … Our commitment to diversity is an integral part of Nike’s identity as a company” (nike.com). In foreign countries, Nike has it own operations and also does outsourcing of its work. To manage both these operations, Nike recruits employees taking into account and being aware of political, economic and socio-cultural factors. Nike’s operations in foreign lands will be composed of workers from three national or country categories. That is, the employees from the parent country where the firm is usually headquartered or based (or came from) are called Parent Country nationals (PCNs). The employees from the host country where a subsidiary or International may be located are called host country nationals (HCNs). Finally, there will be third or other countries which may be the source of labour, finance, research and development, and the employees from these countries are called third country nationals (TCNs) (Scullion & Collings 2006). Among these three groups of workers, at least the first two groups of workers are normally recruited by Nike to fulfill certain needs and also as a form of political, social and demographic necessity. That is, Nike has mainly set up its subsidiaries or units in other countries, to tap the resources of the host country and thereby earn benefits from it. So, it is normal or necessary for Nike to give a share of their benefits, back to the people of the host country. Apart from fulfilling the unwritten rule of giving employment to the locals, this recruitment procedure is also benefiting the Nike by providing it surplus and cheap labour. And importantly, as Nike recruits each country’s citizens, it diversifies its work force further, thereby accomplishing the diversity program in a different way. Apart from recruiting locals and fulfilling its ethical responsibilities, Nike by taking good care of the employees in foreign operations particularly, in Third World countries is again able to meet the ethical standards. That is, when “problems surfaced regarding the abuse of employees and unfair wages in the factories producing Nike athletic shoes, Nike took a number of initiatives to solve these ethical problems” (Altham). Nike management and the contractors in those countries set up a code of conduct or standards to take care of the employees’ health and safety aspects. Also as part of its plans, “Nike also brought in auditing firms to monitor such issues as unfair wages, work schedules and child labor” (Altham). Importantly, Nike also carried out cultural sensitivity training for its contractors’ or outside operations’ expatriate supervisors or PCNs, so that they become aware of the culture of the host’s country employees. The other ethical step carried by Nike happened in Pakistan, where “Nike took a creative approach to the problem of child labor in factories producing soccer balls, by paying to educate those children rather than letting them work” (Altham). So, Nike incorporates its Diversity program and ethical steps in all its international operations, thereby fulfilling the political, economic and socio-cultural aspects. UPS United Parcel Service Inc (UPS for short), America’s major parcel service, is the world's largest package delivery company. Even though, the job at UPS involves routine tasks, out of the ordinary things tend to happen and the corporate culture of UPS has inbuilt mechanisms to plan out things, encourage decision-making and feedbacks to solve those things. And UPS’ e-commerce initiative came out from one of those processes. UPS's e-commerce initiative has developed into a full pledged one with specific a web site (ups.com) for operations. It features a fully functional online store with UPS’s e-business tools to guide potential customers. The other initiatives of UPS in e-commerce sector are USPnet, eVentures etc. When the UPS planned to introduce its e-commerce site, its main goal is to reach majority of the international customers by unveiling a fully functional e-commerce site with separate sections or web pages for the different countries of the world. That is, UPS wanted to develop its international operations with multilingual website and a streamlined back office. But, while creating the website for its international operations, the external issue of culture orientation came into the picture. That is, as internet is a borderless world with people from any part of the accessing it, UPS’s e-commerce site had visitors from different parts of the world. UPS handled this external issue of culture assimilation by planning out and blending with the local culture. UPS joined the bandwagon of e-commerce, patronizing it fully. With the spread of Internet in 1990’s, UPS saw the prospects of e-commerce and created a separate department for it in 1996. “In 1996, UPS created its e-commerce team to develop ways to use the internet to conduct business. The company realized that any way companies buy, sell, and do business would affect UPS” (Deresky, 2006, 346). Also, with the financial condition of UPS in optimum condition, they planned to expand their business further. That is, UPS had gone for an Initial public offering (IPO) in 1999, which raised $5.47 billion. The company was cash-rich and it paved the way to expand its international operations optimally. Since then, UPS has focused on International expansion, consistent with its new mission to become an enabler of global e-commerce. UPS's broad vision of e-commerce did not have a smooth sailing with some inbuilt challenges, which have been addressed effectively. The challenge, UPS faced when integrating e-commerce with world countries is the difficulty in blending with local cultures. The first of the challenge faced by UPS is the positioning of its service in the new International market, where existing players offered the same service. So, UPS formulated a price based strategy to position its services, which are within the reach of customers, based on the concept of competitive price. Along with this challenge of positioning in an existing market, UPS was also tagged as an outsider. This challenge was an important one to surmount. Otherwise, they will not be able to ‘root’ themselves in the new culture and the international market. Even with the spread of English and its usage in Internet, UPS approached and enticed the local people with in a local ‘flavour’, in the aspect of language and culture. “E-commerce companies have to think ahead of how they manage these different customers' needs and how they easily target the "local" customer with a "local" message.” (Amling cited in Wan, 2002, 452). If the ‘communication’ is in the ‘foreign’ language of English, websites will not be accessed by the local customers. So, the challenge was to design Websites on a bilingual basis or vernacular basis, thus the websites became the main vehicles behind e-commerce. Alan Gershenhorn is one of the leaders inside UPS, who played a key role during the introduction of e-commerce as part of UPS’s international operations. He continues to formulate all the plans regarding UPS’s e-commerce wing. “As senior vice president of worldwide sales and marketing for UPS, Alan Gershenhorn directs electronic commerce… Under his direction, UPS is focused on deepening customer relationships through an expanded offering of technology-based services and solutions.” (ups.com). The steps taken by Alan to boost the performance of UPS’s e-commerce mainly focused on catering to all the aspects of local market and local culture. About the positioning for the UPS’s e-commerce, Alan decided to promote the e-commerce concept in the markets, which are Internet literate and ready for a new entrant. In addition, Alan and UPS promoted their e-commerce service mainly with its motto of "Best Service, Lowest Rates”. This tactic, which worked successfully in USA, also succeeded in its International operations. Alan also planned out well to handle the important challenge of reaching out to the customers of the local market in their own language, taste, culture, etc. Alan was able to do that by taking the UPS in the bilingual route. In its international e-commerce websites, the local language was given major importance when marketing about its e-commerce’s features. This tactic, which is already followed, by UPS in some of the North American and European market, was developed further, particularly in the Asian Market. “We continue to roll out additional local language sites and have seen an increase in usage. In the latest Asian sites, we have seen preliminary numbers indicating an increase of 22-143%.Visitors chose the local language version 84-96% of the time.” (Amling cited in Wan, 453-454). Unison of humans into a team, with an urge to usher the organization into a successful ‘territory’ will actualize, only if the workers show optimum functionality. But, as a kind of cycle, only if apt, qualified, equipped workers are recruited, they could exhibit optimum functionality and take the organization into successful territory. That is, leaders of the organizations and also the workers as part of the marketing department will only formulate effective strategies while entering international territory. These strategies based on the political, economic and socio-cultural systems of the particular countries will optimize the internationals operations of the companies. This is what Nike and Ups did as part of its international operations, reaping in rich benefits both economically as well as ethically. Works Cited Altham, J. Business Ethics versus Corporate Social Responsibility: Competing or Complimentary Approaches? International Business Ethics Institute, Washington, DC Deresky, H. (2006) International Management: Managing Across Borders and Cultures. Pearson Prentice Hall, Upper Saddle River, New Jersey nike.com. Employees and Diversity. Retrieved April 14, 2008 from http://www.nike.com/nikebiz/gc/r/fy04/docs/employees_diversity.pdf Scullion, H & Collings, D. G. (2006). Global Staffing. Routledge Ups.com. (2007). UPS foundation. Retrieved February 10, 2008 from http://pressroom.ups.com/mediakits/landing/0,2307,50,00.html?mkit_name socialresponsibility Wan W.P. (2002) Interview: United Parcel Services's Director of Electronic Commerce. Thunderbird International Business Review, 44(4) pp445-454. Read More