Political and Economic Motives of the Government - Coursework Example

International Business Name: Institution: Introduction International business has become a subject of interest amongst many across professions due to the numerous aspects involved in it. International business involves carrying Out business activities beyond national boundaries. It is an extension of domestic business, which includes the transactions of economic resources such as goods, capital and services comprising of technology, skilled labour and transportation. It includes not only international trade of goods and services, but also foreign investment. Precisely, it is now a subject of global concern with since it is relative to the most vibrant industry from which most countries generate income. In a professional institution, international business is an interdisciplinary major. It integrates course work in business administration, a foreign language and regional as well as cultural studies. It is therefore evident that the international aspect is appreciated by inclusion of a foreign language in the syllabus. When a business enterprise goes global, it not only seeks to internationalize but also to serve customers in the international markets. Setting base in other regions would mean that the international entity immerses in other nations’ cultures, values and business practices. These are key aspects alongside acknowledging the particular constitutional laws governing the business industry. Apparently, the most important factor for international business practitioners and firms revolve around the political and legal forces that are operational in the countries in which they plan to conduct business. The government’s involvement in the business is therefore inevitable. The universal government position is to ensure that the citizens are safe from harms resulting from business operations such as polluted products. According to Carney (2006), the government’s involvement in the industry stretches further than just ensuring the safety of the consumers. This paper therefore, seeks to discuss the motives behind the involvement of the government in the industry. The paper focuses on the political, economic and cultural motives Political Motives of the Government International business is more of a free trade affair with requirements of standardization and adherence to set rules and ethics for the shareholders. However, governments remain actively involved in the business for particular reasons. To start with, one of the major political reasons for this is protection of jobs. Cavusgil et al (2007) write that any government would get involved if the practise of international trade or the presence of an international business entity threatens jobs at home. Basically, availability of jobs is advantageous since it ensures that the citizens are employed and therefore actively participate in tax paying and more so economy building. Protection of jobs can be in the form of requiring that the international investors employ a greater percentage of locals or making local jobs more lucrative and motivating than those offered by these international businesses. Protection of jobs for locals remains the most critical reason for government involvement (Milkin Institute Global Conference 2009). Secondly, governments also get involved to preserve national security. In the business industry, preservation of national security will be in terms of ensuring an appropriate business environment for all. National security means a better value for the nation’s currency, better returns for investors and a good economy. This in subsequence ensures an exhibition of a country in a way that attracts more investors to the region. Industries whose existence is essential and vital to the national security like the business industry are at the advantage of receiving government assistance and intervention regularly (Pelaez, 2009). Government preservation of national security is mostly evident in terms of imports and exports. The government restricts importation when necessary, with the aim of guaranteeing domestic supply, which preserves national security. As expected of the national government, many protect their agricultural sectors for national security reasons. Evidently, importation of basic things like food puts a country at the risk of starvation (Laguerre & Angiello 2004). On matters of exports, regulations put on goods intended for exportation depend on the consequences accompanying the exportation of these goods. It also depends on the kind of goods or services that are subject to exportation. For instance, a country would normally export some of its cash crops and other agricultural products, as long as the exportation does not leave the country starving. When it happens that there is a food shortage as relative to the domestic farm products, the government would intervene to retain the cash crops so as to feed its citizens. The involvement of the government (Williamson 2012) also depends on the type of good of export that is in question. Much of these is seen in exports that entail technological goods and services, especially those that a designed to have dual usage. Dual usage implies that they find applications both in the military and industrial sectors (Paul & Wells 2006). A probable fourth reason for which a government would get involved, or otherwise intervene, in the international business is to politically respond to the actions of another country. Mostly this response is due to unfair trade in the sense that as one country allows for fair trade across its borders, other business partner country implements unfair legislations. Some of the unfair legislations include threatening to impose tariffs that only favour local companies and frustrates others, heighten importation taxes and disregard perspectives of the other shareholders. This calls for a development of necessary tools of communication so as to establish universally accepted modes of operation (Lydon & Wasik 2008). This is based on the idea that fair trade and cordial relationships can only be established through dialogue and respectful communication techniques. It enhances international relations and promotes business. Aside from the above, a political motive may also be in the form of governments with larger and stronger economies establishing relations with smaller nations of weaker economies. The main aim of this is purely the politics of gaining influence over these smaller countries. Having influence of these countries would mean that they also get to almost directly influence their economies and markets. The larger nations can then get easy access to the market of the smaller countries, to sell their products. Nevertheless, with much more currently developed civilization, establishment of such relations are not much popular. Economic Motives A competitive market has beneficial potentials that stimulate innovative economic efficiency, greater productivity and almost exponential economic growth. The economic system is the driving tool that determines a government’s strength and the products and services it allows in its markets from within or without the borders. Market economies are under the impacts of supply and demand. The laws of supply and demand suggest that producers must find an equilibrium point at which the consumers are willing to pay the asking price and the company still makes profits as the consumers get services satisfactorily. A company’s involvement in the international marketing system from local positions can only mean economic growth (Goddard and Ajami 2006). This growth is enhanced by the global economic systems which increase economic stability and brings confidence, not only to interdependent nations but also to the firms involved. In economics, the government intervenes in international business to address non-competitive behaviours which cripple growth of the economy. There are various forms of such non-competitive practices such as monopoly, monopsony and the presence of middleman in the business industry (Ellis & Singh 2010). Monopoly is about a situation in which only one agent controls the supply of a good or a service. The agent therefore has the liberty to avail a good or a service at self-determined rates and at prices without regulation. On the other hand, monopsony is the situation in which one agent controls demand for a good while with middleman, one agent buys the product from the suppliers and sells to demanders. The major economic motive is to protect a small industry that is yet to spring out properly. The emerging industries need protection from international competition during development until they become competitive internationally. As put by Ellis and Singh (2010), it takes time for one industry to grow to global levels and before then, it can only compete locally. It would therefore be difficult to experience growth with stiff competitions from fully fledged and experiences international businesses. Protection can be removed after it gains the knowledge to become innovative, efficient, and competitive. The protection comes in terms of guiding their operation with different regulations that are not as restrictive as those governing international entities. Research shows that the other most evident economic motive is to pursue strategic trade policy. Current researches also indicate that government intervention helps firms take advantage of economies of scale and enjoy particular advantages (Doole & Lowe 2008). Most of these advantages are first-mover advantages which result because economies of scale limit the number of companies in an industry. It ensures that there a few companies, but with stiff competition hence better operation environment and economic growth. The benefit of this is that, with the first-mover advantages, companies earn profits and establish concrete market positions. As postulated earlier, it by extension helps companies survive poor economic times because of the wide range of industries in which they could have wanted to compete in. Cultural Motives The culture of a given region can tremendously affect its economic activities, as well as have its culture affected in turn by the economic activities around. Culture definition is relative by a universal perspective is that it characterizes acceptable ways in terms of behaviours, customs and values in the society. Subsequently, it is vital to have understanding of the culture of a nation in which an international company is to sell its products. Equipment with such knowledge greatly enhances the chances of business success (Kruger 2010). It is important, therefore, to acknowledge and take into consideration the main cultural and social factors as well as religion when conducting international business. Much of government intervention on cultural lines is based on the idea that exposure to people and products from without the borders may slowly alter the local cultures. Internationalization process of a firm increase interaction between the business and the social as well as cultural positions held by the new regions in which they venture. The variation of these two factors across the globe makes them central points of consideration in the implementation of international marketing strategies (Welsh 2005). This is because they influence all the behavioural aspects of a consumer or a buyer. The behaviour of the consumer relative to international goods would somehow determine the government’s involvement. Social and cultural factors may not be clearly distinct since they are heavily linked and interact in many ways. Some of the cultural factors to consider in international business are language and dialect, religion, dress sense and clothing fashion, colour codes and meanings, living standards, level of education and literacy and population density (Kruger, 2010). Governments also intervene to promote international business in cultural lines by advocating for appropriate intercultural communication. With, the possibilities of language or cultural barriers are eliminated. Intercultural communication gains importance with the growing international business (Redmond 2000). It is thus inevitable that at some point people from various backgrounds will interrelate to work together in this industry. The messages sent and received between members of different societies determine the manner in which the different cultures correlate. The mode of transmission also determines how a recipient perceives the culture of the sender. However, communication is usually realized because of the relative cultures that have defined the ways of communicating particular messages. As postulated by Schlesinger (2006), relationship between the message sent and the relative culture of the sender is the determinant of the response of the receiver. Intercultural communication is thus important to bridge language gaps, help organizations to bar conflicts and thus promote business. Conclusion In a general sense, governments intervene in the market for two basic reasons which are social efficiency and equity. From the above discussion, it is noted that the reasons and motives for government involvement do not encompass favouring certain firms or even for the government to gain any profits. Social efficiency relates to intervention in a situation where the cost of operation is higher than the benefits made. On matters of equity, relation is about fair distribution of wealth. This is where income to a country is equally distributed in a way that ensures justice. The paper also conclusively realizes that the government can intervene in a number of ways, a discussion that is beyond the scope of this paper. International business is a factor that moulds the countries of the universe into one community with access to various goods and service, it should then be promoted and supported. References Carney, T.P. 2006. Big business and big government. CATO Institute. Retrived from http: //www.cato.org/research/articles.html Cavusgil, S. T. Knight, G. & Reiseneberger, J. R. (2007). International business: strategy, management and the new realities. New Jersey: Pearson. Doole, I. & Lowe, R. (Ed.). (2008). International marketing strategy: analysis, development and implementation. Stamford: Cengage. Ellis, K. and Singh, R. (2010). Political Economy Factors affecting efficient functioning of Markets. Trade Hot topics, 1(73). Goddard, G. J., and Ajami, R. A. (2006). International business: theory and practice, New York: M.E. Sharpe. Kruger, A. A. (2010). Top Cultural Factors to Consider for International Search. 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