International Management: What Is E-Commerce - Assignment Example

BBA 2551 11E INTERCULTURAL MANAGEMENT” Question What is e-commerce? What are some of the potential problems and the barriers encountered when establishing a successful global e-business? Electronic commerce commonly known as e-commerce is a type of trade where business activities (buying and selling) take place over electronic systems such as computers and network systems. Advancements in technology have made e-commerce a possibility hence revolutionizing global business. Availability of technologies such as computers, networks, mobile phones and electronic currencies have made e-commerce a possibility. Each day thousands of items are sold or bought electronically. These include services, digital commodities, and physical commodities. E-commerce is more popular with services and digital commodities such as music, films, books, software, and other commodities that can be bought or sold online. Although e-commerce has been successful, it has considerable barriers that have prevented or hindered its application. Firstly, there is a problem with electronic payment and delivery of physical goods. Certainly, electronic payment systems or e-currencies are localized and therefore they cannot be used internationally (Thomas, 2008). For example, the most common electronic payment system PayPal is only available in the US and some European countries. Moreover, there are political and economic barriers that are imposed across different countries to control e-commerce. Such barriers include money laundry controls and international trade regulations. Besides governments and international trade controls, e-commerce is threatened by fraud, lack of popularity in some countries. For instance, cyber criminals target the e-commerce sector with the aim of obtaining confidential information from customers such as credit card numbers. The criminals then use this information to steal money from the customers’ account. Other forms of fraud involve hacking of user’s accounts particularly electronic wallets and banks accounts. Such occurrences make customers to shy away from using or accessing services provided through e-commerce. Question 2: In lieu of suspending operations, or withdrawing from the country, a MNC will usually take one of two routes to manage political risk: adaptation or dependency. What is adaptation? What is dependency? What are the four characteristics of adaption and dependency? Suspending or withdrawing operations is a challenging task for an MNC. Before withdrawing or suspending its operations, a multinational company usually considers adaptation or dependency. Political adaptation is a risk management strategy that MNC apply to ensure their ability to continue with operations within a given political environment. Adaptation involves compromising some of the company’s objectives or creating new measures to cope with political situation within a country (Thomas, 2008). Adaptations also include creating new regulations to cope with immediate political situation. For example during the cold war, some multinational companies had to adapt to the immediate political situations. For example, coca cola had to being dragged into political confrontations. For instance, coca cola logos and adverts were used in political strife to criticize capitalist states. In the midst of these political crises, Coca-Cola had to maintain its international operation through political adaptation. Dependency is the least in the list of preferences when it comes to political crisis. Dependency involves collaborating or associating with a particular political affiliation. This is in relation to vertical integration theory whereby firms or companies seek to establish their identity within a country (Luthans, & Doh, 2009). The main characteristics of dependency and adaptation are political affiliation, government support and tax exemptions. Question 3: Firms operating in some countries are exposed to political risks. What are the primary types of political risks? Explain each of them, and provide some examples. Political risks refer to difficulties that businesses face because of political decisions or political alterations. These risks affect the mode of doing business within a given country. Political risks can also be defined as political alterations that alter the chances of achieving business objectives. Political risks can broadly be classified into macro level and macro level risks. Macro level risks are risks that affect all the stakeholders of a business. Macro level risks pose both direct investment and portfolio risk. They include currency regulations, sovereign credit defaults, corruption, wars, and changes of government structures. These events affect the suitability of an investment destination. Research studies on political risks prove that macro-level risks can be quantified or modeled as any other forms of risks (Deresky, 2011). Macro level risks affect businesses within a given country or region and they can cause other recurrent risks. On the other hand, micro level risks are project-specific uncertainties that affect a given business. Besides macro level risks, companies should evaluate their impact or contribution to the local economy. In most cases, micro political risks favor businesses rather than multinational companies. These risks include expropriation or nationalization of assets and projects, Committee on Foreign Investment in the United States (CFIUS) reviews and the selection of trade partners. Micro political risks affect a company’s public relations thereby affecting its influence within a given market. Such risks are significant factors of consideration in state owned investment projects and initiatives. Question 4: The legal environment is a component of international business. What types of laws regulate international corporations? How do the differences in laws and regulations in different countries affect international corporations? Provide some examples. The legal environment of international business is not a consolidated or scaled up version of domestic law but business laws that are enforced by different authorities. In most legal environments, these bodies have fragmented and overlapping jurisdiction. International business laws include rules and customs that regulate trade within nations. International business laws include laws that regulate currency, monetary system, and international trade developments. International trade laws include laws that govern business activities within and beyond a country’s borders (Luthans, & Doh, 2009). International trade laws encompass laws and regulations that regulate the operations of a business in the international markets. These laws protect the interests of a business as well as the role of the business in the trade environment. These include laws and regulation created by international trade organizations such as World trade organization (WTO), General Agreement on Tariffs and Trade (GATT). Differences in laws and regulations in different countries affect international corporations in a number of ways. International trade regulations determine the type or form of business that can be established within a given country. This is because trade regulations are designed to protect the interests of a particular country or trade union. For instance, EU trade regulations protect the interests of European countries by ensuring there is minimal proliferation of low quality goods. Moreover, the laws ensure that the region has attractive trade balance to enhance investment and export market. Different countries have different laws and therefore they have different influences on businesses and investments. While some products are legal in home country, they might be illegal in a foreign country thereby affecting international trade. Other impacts of laws on business include taxation and business support. Most countries have laws that regulate imports while promoting exports. Such laws affect the establishment of Multinational Corporation within a given country. References Deresky, H. (2011). International management: Managing across borders and cultures (7th ed.). Upper Saddle River, NJ: Prentice hall. Luthans, F., & Doh, J. (2009). International management: Culture, strategy, and behavior (7th ed.) New York, NY: McGraw-Hill Irwin. Thomas, D. (2008). Cross-cultural management: Essential concepts (2nd ed). Los Angeles, CA: Sage, Inc Read More