Will the Future of International Business Be Similar to That in the Past - Assignment Example

Will the future of IB be similar to that in the past? The future of international business will be different from that of the past and the international trends will be more important. In terms of location and source of growth, the emerging market economies such as China and India will still continue increasing their effect on the world economy. Due to emerging economies, there will be significant development of new opportunities and the efficiency shown by these countries will earn them new markets in developing countries. For instance, China will be the country to watch. It will be viewed as the ‘new New York’ to the new investors in the global market. That is, ‘if you can make it in China, then you will make it anywhere’. Due to domestic pressures as result of urban-rural imbalances and weakness in banking system, the corporation in China will be spreading their wings overseas. India will also be an important participant and a rival to the growth in China due to democratic government, widespread facility with English language among others. This will increase linkages in communications and information sectors. Based on environment, conservation as well as sustainability, China will experience environmental problems which will significantly affect its ability to compete as a centre for global manufacturing. Rapid growth in emerging economies such as India and China will lead to depletion of natural resources. In addition increase in medical and social costs will lead to a dramatic reduction in firms wishing to invest in China, thus; FDI will be moved to other locations which include Europe and U.S. On the other hand, Africa will provide significant opportunities for green investments as well as carbon credits accumulation. Based on information, there will be an expectation of fewer sources of data offering increasingly large data quantities due to cost cutting, mergers and accusations. Due to such developments, the reliability and accuracy of making the use of data heavily-trust dependent will be affected. Due to transparent sourcing, the willingness of people and firms to offer information will be decreased. In addition, due to more technology, a lot of international business will require less physical and human connection. Does increased IB mean increased risk? Just as the benefits increase due to increased international business, the risks involved also increases. Such risks include technological, environmental, economic financial, terrorism among others. With more and more technology, the electronic transactions are facing more risks in regard to security. This will call for more cost in developing technology for fighting insecurity. In addition, given that the new technologies may fail, the result may have a dangerous effect on conduction of business in the international arena. Increased international business increases economic risks. Increase in globalisation of business is changing the foreign investments policies leading increased interest rate thus; increasing economic risks. As the countries become competitive grounds for foreign investors, countries tend to make it difficult for investors to repatriate funds or profits outside the country in order to ensure development within the country. This makes such firms to invest at less optimal levels leading to financial losses. With increased terrorism risks, there is creation of potential sabotage of foreign companies, hostile attitudes, and employers and employees kidnapping. Maintaining the growth of an international business in such areas requires more costs to address such issues. Increased international business also creates a significant challenge in environmental protection. Environmental risks increases in industrialisation due to exploitation of natural resources, water, air and environmental pollution. This affects the people directly and indirectly and leading damaging of the reputation of the firms. For instance, with the rapid growth in manufacturing industry in China, there are also more environmental problems. In order to control such problems, more costs are required in order to reduce environmental risks and maintain the growth of the industry. Although the benefits of increasing international business usually exceeds the risks, firms find themselves assessing each country or region in order to address the rising challenges in corruption, intellectual property, ownership restrictions, human resource restrictions among others. Such challenges increase with the increase in international business. Is it beneficial for nations to become dependent on each other? A country cannot survive in isolation and it have to share its technical know-how, prosperity, as well as undertake trade in order to find market for the surplus products. Thus, countries become interdependent in order to progress economically. As the countries become dependent on each other, they are able to exchange what is not locally available in each of the country at lower costs as compared to normal international business between many countries. For instance, the United States and Canada have one of the largest bilateral relationships in trading. In addition to having a similar language between the two, each of them has specific comparative advantages. For example, Canada has abundance of raw materials that it exports to US. On the other hand, US have a variety of desirable goods and services that it exports to Canada. Another example is the most comprehensive and effective free trade agreements between Australia and New Zealand which is referred to as Closer Economic Relations (CER). Due to this agreement, New Zealand has been one of the largest markets for Australia’s elaborately transformed manufactures. In addition both countries enjoy removal of tariffs as well as quantitative restrictions of trade. Such close relations between these two countries have led to mutual benefits and enhancement of the wider international competitiveness of these countries. Thus, being dependent on each other is beneficial to the country. Various benefits include reduction on tariffs and other restrictions, better quality of goods, variety of goods for consumers in the two nations, closer ties, competition at international levels and increase in employment. Why is the Chinese share of the world trade market increasing? The growth of exports from China in both market share and volume is an event in the history of world trade for the last two decades. Every country throughout the world has seen China taking a large share of its import market. In addition, many countries are losing their market share to China. The increase in share of the world market for China started during the recession where many firms were being obsessed with pricing. But China reacted in a smart way to recession and was able to increase its market share at the expense of its competitors. In order to achieve this goal, China reduced the levels of wage and received a lot of sate aid. As a result, China has been overtaking various countries and has converted to being the largest world exporter. As a result, it gains has even caused more friction in US and Europe. As the world trade diminished as a result of recession, consumers began demanding products at low prices. With its determination to maintain its export levels, factories in China were aggressively cutting their prices and a result; they increased their shares in traditional markets and penetration to new markets. As a result, China has been gradually displacing countries like Canada and is now the main exporter to US. Thus, the key reason to such advances is the ability of the manufacturers in China to cut the prices by reduction of wages as well as other industrial costs where there is a significant dependence of migratory workforce. As a result, the buyers are demanding reductions in prices which make China to do it safely. In addition, due to financial crisis, the demands for manufacturing goods for developed countries had slowed but the demands for foreign manufacturing goods in developing countries were relatively strong. China took this advantage and increased its world market share by extensive exportation to emerging developing countries. Is the IB entity not a cultural imperialist? In a move to bring about change or in the efforts to cater to the increasingly homogenous demand in the world markets, the international business entity be blamed of cultural imperialism. This is the case especially if the changes that are being brought about are dramatic or if the adaptations that are culture-specific are not made in marketing programs or in management. For instance, some countries such as France, Canada, Indonesia and Brazil usually protect their cultural industries such as motion pictures and music through subsidies and restrictive rules. The GATT agreement which allows restrictions on US entertainment exports to Europe is justified by Europeans as a net for cultural safety in order to preserve both regional and national identities. Another similar example is a company from India known as Kentucky Fried Chicken (KFC). KFC provides an illustration of the challenges that marketers may encounter as they enter into markets that are culturally complex. Even if this company opened its branches in two most cosmopolitan cities in India (that is, New Delhi and Bangalore), there were protests targeting this company from a wide range of opponents. This company could have eliminated or rather alleviated some of anti-western passions by modification of the company’s activities to fit local conditions. In order to avoid the accusation of cultural imperialism, the company would have opted for various approaches. First, instead of going for a direct control, it should have collaborated with the local partners in order to get support and advice. Second, the company should have made efforts to look more Indian instead of using western ideas for high-profile advertising. This is because Indians are usually undivided in regard to foreign culture and such ideas may not always be compatible there. Finally, the company should have made some plans in regard to competition that originated from small restaurants with political blow at the local level. How else could one explain the phenomenon of MNE’s? Multinational enterprises can be explained in their roles in the modern world. They account for almost a half of the world manufacturing output as well as a quarter of the world trade. The greatest percentage of world automobiles, computers soft drinks among others are produced and marketed by multinational enterprises. MNEs requires two qualifications, first, they require a significant direct investment in regard to foreign countries. Second, MNEs involves active management of offshore assets instead of simply holding these assets in passive financial selection. Based on emerging economies such as China and India, the most important motivation for multinational enterprises in successful international operation is low-cost factors of production. Such approach has a very significant influence on the economies of developing countries because it acts as a catalyst the process of growth. In addition, the critical factors that needs to be considered while entering new markets are the local culture and market. These enterprises use various methods to enter into the market. one of them include making initial commitment of resources to the new market in order to gain the knowledge of local market on the grounds that evaluations can be made further. Other ways include building the knowledge of the market through acquiring or investing in local partner. However, MNEs recognize the need for being responsive to local political needs and markets as well as management styles and following a strategy of thinking globally and acting locally. Is culture really important, after-all ‘we are business people doing business not visitors here to take in the environment?’ What is your response ….…! Doing an international business requires a very good understanding the culture. This is because the success of the business is entrusted to the consumers within your business environment and it is important to know that what works in where you come from may not be accepted in another region or country. Thus, the success of a business rely on cross cultural sensitivity because it is important to understand the differences in the culture on where you want to venture and that such differences may adversely affect your relationship with the existing community. This means that cross cultural awareness is a determinant factor of where your brand will succeed or not in an international market. The people may also dictate the success or failure of a company merger, venture or acquisition. If they are not cross culturally aware, it means that there will be a misunderstanding and a communication breakdown. Such breakdown influences areas such as public relations, management, negotiations and advertising which are very essential factors for success in international business. The following examples show the importance of cultural sensitivity or understanding of the environment in an international business. First, an American company which specialises in manufacturing of golf balls package these balls into the packs of fours. This company became successful in selling these products internationally. However, there came a challenge in their sales in Japan where number four represents death. Second, a soft drink company introduced its products in Arab countries. Unfortunately, the Arabs declined to buy the products of this multinational company. The reason behind this is that the package label has a six-pointed star on it. According to Arabs, this symbol was interpreted as pro-Israeli. The company decided to remove the symbol and printed another one that contained ten different languages. The Arabs again did not buy because one of these languages was Hebrew. Based on the above examples, it is clear that understanding culture is very important because the company will understand the needs as well as the preferences of the consumers. Failure to this, the product will cost a lot through modification and finally it may not be accepted on the basis of culture. Read More