The Growth and Expansion of International Business - Case Study Example

International business environment on the internationalization strategies of Chilean wine companies Introduction: The wide arena of international business has not only expanded opportunity for business people to reach more number of customers across the globe, increase total amount of revenue and contribute to a larger extent in contributing to the entire national economic condition, but at the same time level of competition, providing proper service according to demands of customers and surviving in the an extremely competitive market have also become great challenges for participants. Due to diverse range of participation, implementation of policies and variety of individual perception over execution of decision making, the field of international business has become so diverse that it does not have any definitive explanation. Scholars like Robock and Simmonds have observed international business as a platform for management training that “deal with the special features of business activities that cross national boundaries”. Opinion of Daniels and Radebaugh is more generalized as they have observed all operations of business transactions, which involve two or more number of countries, can be observed as international business. Scholars like Toyne are of different opinion, as they have provided special emphasis on individual business organizations as participating units in the operation of international business and they also have pointed out the main reason behind disparity is actual consensus that more emphasis is provided on the entire business situation; rather than the organization “as unit if analysis” (Vaghefi, Paulson and Tomlinson, 1991, p. 4). Thus, the entire field of international business highly diversified and encompasses within its scope diverse range of strategic applications that are actually aimed at ensuring survival of an organization in an extremely competitive market. The growth and expansion of international business in last two decades have provided a general perception that it is entirely a product of recent business development and dynamics of the entire process is quite new. In reality the journey of international business started since 19h century. Historical evaluation of international business shows that the entire process is discontinuous, “In different periods, different choices were made between alternative methods of operating abroad, and alternative forms of organisation. The relative importance of particular industries has varied markedly over time” (Jones, 1996, p. 23). In this context differed emphasis on the process of conducting business during 19th and 20th century can be cited. Internationalization Strategies from US and UK business organizations: The entire scenario of international business and trade, from the very beginning, was actually dominated by two nations, namely US and UK. However, despite their prevailing importance dynamics of international business has altered due to emergence of Japan and Germany as major economic powers in global context. At the same time emergence of several Asian as Latin American nations as NICs or Newly Industrialized Countries has also contributed to a considerable extent in altering the entire situation. Capacity of the United State economy as primary controller of world economy, it connection with the developing nations regarding international business, international debt issue, “1973 Arab oil embargo and fall of the shah of Iran” are also important factors that have contributed in the present scenario of international business (Vaghefi, Paulson, and Tomlinson, 1991, p. 4). The strategic application regarding investment in international business for business organizations in US and UK are dependent on ceetain factors. Scholarly research and analysis of international business has also found that there are “Five exogenous factors which influenced the growth and structure of international business…” (Jones,1996, p. 23) and whenever it comes to decision making of a corporate house whether or not to invest to participate in a business process across national boundary, dependence on this five factors become necessary. First, decision making of a business organization in the international business scenario primarily depends on reflecting over current trends in international business and the entire macroeconomic conditions. The second factor is to judge the magnitude of receptivity of the organization’s services to foreign enterprises and this factors needs to be judged both at national and international level. The magnitude of capital liberalization is the third factor that plays a considerable part for a business organization to join international business. “Trade protectionism” and development in transport and communications technology, are fourth and fifth factors simultaneously that needs to be provided with sufficient attention (Jones, 1996, p. 23-24). It is interesting to see that each of these five factors is equally important when it comes to decision making process of an organization regarding its investment in international business scenario. Unless decision of the governing body of the organization does not churn out from equal emphasis on these five factors, it becomes really tough for the organization to survive in the international business scenario. Taxation and changing face of International Business in IT era: The main reason behind implementation of changing taxation rules and increasing attention of different system of governance on this issue is to ensure the “capital-market integration and global commercial competition” (Feldstein, Hines, and Hubbard, 1995, p. 1). Technological advancement and introduction of liberalized national economy have provided a fertile ground for globalization and the business houses also received opportunity to enhance the scope of their respective business on an elaborate plain. However, it did not provide business organizations with the opportunity for profit making in the same magnitude. Thus, the changing taxation policies in the context of international business helped in maintaining a situation of equilibrium. Changing rules of taxation have become increasingly important due to recent boom in technology. The online shopping facility has not only helped in altering the concept of traditional shopping but at the same time, it also has provided a great deal of scope of customers to avail products of their choices from any market of the world. Such development in the concept of shopping has helped in the social capital development and community formation (Park and Roome, 2002, p. 106). However, shift from traditional shopping to online purchase can provide substantial pressure on a nation’s economy as there is a possibility of decline in the local tax system. If the system of taxation cannot be implemented properly, the multinational business organizations would accumulate all the profit and business sector of a particular nation would suffer loss. The system of taxation helps in maintaining equilibrium in the entire global economic system. Internationalization Strategies of Chilean Wine companies: Strategic advancement of the Chilean wine companies in the global market can be observed as an excellent example in support of such observation. Among the Latin American nations Chile enjoys a great deal of advantages when it comes to exporting its products into the international market. However, if it would have formed cluster with other nations and followed the policies that would not have given Chilean wine sector the same kind of exposure, “Sectors with strong global growth potential and a strong comparative advantage may turn out to form successful clusters without public sector interventions …. the Chilean wine industry has moved towards promoting the range of Chilean wine abroad and increasingly co-operated on upgrading Chilean grapes through R&D as export prospectus soared over the past decade” (Organisation for Economic Co-operation and Development, 2009 p. 93). In the year 1973, Miguel Torres, for the first time adopted the French wine manufacturing process and since the 1990s onwards there has been sudden increase in production as well as consumption of Chilean wine across the globe, especially in the United States and United Kingdom. Direct foreign investment, technological upgrade and expertise to compete at international level resulted in great success of the Chilean wine companies. During the period of 1978 to 1998 the Chilean wine industry encouraged a total turnover of $ 50, 135 billion in US alone. One of the major strategic applications from Chilean wine companies has been to capitalize on the increasing rate of demand since 1990 onwards. The grape production unit of Chile for the purpose of wine production operates on a region which is almost one third of the entire territory of the country. Prior to 1973, the wine production system was quite scattered and individualized; however, new age business thinkers of Chile agreed to the aspect that unless the entire system does not become well organized and goal oriented, it would not be possible to take a leading position in the global scenario of wine business. Thus, the wineries started to spread their business in an organized manner. They not only provided special care on quality and production but establishment of administrative offices, special marketing and strategic development units were also provided with adequate attention. Santiago, the capital of the nation emerged as a center for “marketing, administrative and strategic decision-making functions in the Chilean wine industry” (Visser, 2004, p. 20). Initiatives taken by the Chilean wine companies stated showing remarkable results since 1986 onwards. While in 1986, Chile was at 13th position in the context of exporting wine, by the year 2000, it occupied 5th position among leading wine exporting nations in global scenario (Visser, 2004, p. 22). Thus, for the purpose of internationalizing the wine exporting business in US and UK, the Chilean wine companies not only focused on forming mutual cluster and developing collaboration with other wine production companies around the globe, but capitalizing the right opportunity, adequate strategic and marketing approaches, administrative also played important roles in development of the entire business. References Hubbard, G. Hines, J.R. and Feldstein, M.S. 1995. The effects of taxation on multinational corporations. Chicago: University of Chicago Press Jones, G. 1996. The evolution of international business: an introduction. London: Routledge. Organisation for Economic Co-operation and Development. 2009. OECD Economic Surveys: Chile 2010, Volume 2009. New York: OECD Publishing Park, J. and Roome, N. 2002. The ecology of the new economy: sustainable transformation of global information, communications and electronics industries. Sheffield: Greenleaf Publishing Vaghefi, M.R. Paulson, S.K. and Tomlinson. W.H. 1991. International business: theory and practice. London: Taylor & Francis Visser, Evert-J. 2004. A Chilean wine cluster?: governance and upgrading in the phase of internationalization. London: United Nations Publications Read More