International Business Issues - Assignment Example

Running head: International Business International Business [Writer’s Name] [Institution’s Name] Question 1 The report titled, “Global Trends 2025: A transformed World”, presents some extremely interesting scenarios for debate. The fact that our world continues to change at a rapid pace makes some of these scenarios ever more plausible. However, it must also be noted that humans prefer homeostasis. Change, whether it may be in attitude or business, is an extremely arduous process for most human beings. Therefore, although these situations exhibit a pronounced difference from the world we live in, we must take into account this characteristic to enable a pragmatic situational analysis. First such scenario is the Shanghai Cooperation Organization’s (SCO) exponential growth resulting in the formation of an economic bloc to rival NATO. Such an occurrence provides analogies to the Cold War era, where two distinct ideologies prompted spheres of influence which led to military and economic rivalry. However, this scenario is different in that it is not built upon two different ideologies, but in fact the need for economic gain. Furthermore, the SCO is seen as a consortium of emerging economic powers which signify the presence of economic opportunity. These two factors automatically provide a fertile ground for businesses to flourish. China and India, as portrayed in this scenario, seem to have embraced a future-oriented outlook by adopting new age technology, “…China and India became first adopters of so many new technologies—next generation Internet, clean water, energy storage, biogerontechnology, clean coal, and biofuels” (National Intelligence Council, p. 38), which suggests that entrepreneurs would find a better business environment in these countries as compared to the West. The scenario also puts Russia as a major energy source for China. This would imply stronger links between Chinese investors and Russian firms, signaling an increase in bilateral trade. It is pertinent to note here that although both these nations have distinct cultural heritage, both have had a strong communistic background. This would allow for more synergistic practices and thus better business environment. Similarly, China and India both exhibit cultures which promote strong personal interdependence and familial ties. Social obligation is given precedence over individualistic accomplishment. This bodes well for inter-business harmony and thus more chance for success. Furthermore, the geographical proximity of all three nations translates into lesser transportation costs and lesser overheads prompting more competitive pricing and higher profit margins. Bearing all these advantages in mind, it should be noted that all three nations India, China and Russia have at one point or the other been military rivals of each other. This may be due to varying factors but it emphasizes the antagonistic streak in each nation. This tendency would be accentuated by the competition in all three, especially India and China, for similar resources and business opportunities. China and India have both developed a strong agrarian base supplemented by rich mineral resources. On the one hand, these would promote economic inter dependence however these may also instigate business rivalry. In such a case the protectionist policies “Protectionist trade barriers were put up” (National Intelligence Council; p. 39), that brought SCO together might come into effect within SCO itself. So although there might be several factors promoting business opportunities, there exist several which may inhibit them as well. The second scenario of climate change causing serious economic and social turmoil is one which has been ever-present since the 90’s. It has generated serious debate and continues to urge the developed and developing countries towards more environmentally sound policies. The numerous international treaties and pacts build pressure on governments to act but aside from facile changes, nothing concrete has been brought about. The scenario depicts a very dark future in which the negative effects of climate change have not only halted economic progress, “The Europeans, of course, have been out in the lead on energy efficiency, but they have been too ready to sacrifice growth, and without economic growth, they have not been able to generate high-paying jobs,” (National Intelligence Council; p. 59). However, they have also caused major social problems, “People migrate to the cities but the infrastructure is insufficient to support such burgeoning populations. This in turn sows the seeds for social conflict,” (National Intelligence Council; p. 59). Such conditions make it difficult for businesses to operate much less do so successfully. However, the fact that there existed gaps in service delivery of resources, “The fact that we had clean water technology and could not find a way to get it delivered,” (National Intelligence Council; p. 59), allows for business opportunities. Organisations which have the capacity to access and deliver such technology at a large scale would stand to gain a lot. Furthermore, the increased immigration to cities would allow for increase in labour force which can be tapped to provide low cost resources. This would also allow a more concentrated customer base, one that doesn’t need high overhead transportation costs to tap into. However, the desertification “Because of the encroaching desertification,” (National Intelligence Council; p. 59), and the urbanization can both create lack of agricultural resources which may prove to be a hindrance to industrial growth. For instance, lack of cotton may result in a higher price of cotton products resulting in the cost of producing cloth going up. Therefore, it may be difficult for businesses to forego environmental concerns and concentrate solely on profit motives. The third scenario of increased animosity between China and India seems plausible considering the rapid growth of both these countries in the face of erosion of resources. In this particular scenario, the reliance of both these countries on the same resource results in heightened tensions. However, this also provides opportunity for increased business in terms of building links between these countries and other energy producers. Trade links which are not yet fully actualized, can be initiated which allow trade routes between these countries and the Middle East to become profitable. Furthermore, increasing investment in renewable energy resources allows for new avenues of exploration in terms of profit. The consequent rise in profitability allows for more economic viability. However, there are certain cases in which such a scenario may cause hindrance in business opportunity. The competing political interests of the US and Russia may result in decreased interest on the part of multi nationals to operate in a region which might exclude them from operating in both. Question 2 Reflecting upon the article “China Crosses the Rubicon”, I feel that China is in an effort to create its place, a stronger place than where it exists already, in the global society. Whereas the United States has always been in a position where it must and is expected to become involved in world issues of various countries from all ends of the world, China seems to be in effort to compete with the United States and overcome them by becoming the single greatest and most influential power, specifically in Asia. As phrased in the article, China’s “smile diplomacy” policy is a way to get its neighbours and other members of Asia to feel dependent on it (Liao 2009: p. 1). The article specifically focuses on how China has not only played a major role in Asia with helping out with situations in Sri Lanka, investing in Pakistan and trying to make conversation with North Korea, but has also shown its place in the global society by stepping in on issues of Europe, specifically those of the ex-Soviet Union. Looking at the example from the 2008 Summit of the Shanghai Cooperation Organization, the article highlighted that Central Asian members of the group made little effort to express their viewpoint if they had not had the backing of China (Liao 1009: p. 2). I believe China is creating a strong position in the global society by offering its services and support to countries in all parts of the world, especially in former Soviet Union. It is depicting the world that it is indeed a rising superpower of the world. China’s strive towards greater power and influence in the world generally has a great impact on the business aspect of the world. China already plays a key role in providing to the business markets around the world. I believe multinational companies would highly benefit from an increase in China’s sphere of influence around the world, as it would help expand their businesses. Globalization already has helped multinational corporations in their efforts to spread their wings along the world market and establish themselves in all parts of the world. With China’s new foreign policy and influence around different parts of the world, multinational corporations could gain China’s support and would have a chance to establish themselves even further with its backing. Multinational companies linked with China will have a chance to use China’s current foreign policy and relationships with more nations than any of its rivals will help those companies extend their bases in allied countries as well. Intergovernmental pressure creates a situation of interdependence, which strongly influences the way MNCs respond to China’s new world relationships. I suppose that the issue of culture must also be briefly touched upon. I believe that MNCs will not only benefit in terms of expansion from China’s newfound place in the global society, but will also have the opportunity to bring culture and work lifestyles from abroad back to China. China’s culture is a very strong and unique one, especially in the workplace. In the past differences in corporate culture of China and other parts of the world have shown to be a negative factor in China’s sphere of influence on multinational companies. Characteristics of Chinese culture, such as family orientation and relational orientation such as role formalization, relational interdependence and relational determination had an influence on multinational companies’ relationship cultivation strategies. However, with a new foreign policy and with China creating solid ground around the world with relationships with different countries, globalization of culture could be a result and serve and a strong benefit to Chinese businesses. The Chinese could share and strengthen their similar culture with their neighbouring friends in Asia and at the same time learn from and adapt to a slightly different culture in parts of the world such as Europe. When the issue of multi-lateral organizations is considered, we must focus on the idea that these rely on two or more nations coming together in some form of organization to focus on issues that relate to all of them. I believe China’s response to multi-lateral organizations after its outreach around the world could become quite complicated. Maintaining its position as a peaceful nation in the world, China would definitely want to be an active member of organizations, whether or not they reflect issues of it, just to continue with its image as a friendly nation that only wishes to create stability around the world. However, it its efforts to stand its grounds strongly enough to not allow its rivals compete; China would also want to have possibly the greatest say in the workings of the multi-lateral organizations. China would also want to be extensively involved with multi-lateral organizations mainly to create even more relationships and therefore to strengthen its position in the world. China has made efforts many times with its neighbours and has shown willingness to help with former Soviet Union as well; displaying their strong intention to become an active member in creating negotiations based on peace and help stabilize the globe. Assessing China’s behaviour, crossing the Rubicon seems to be a decision China would be willing to take. China’s recently aggressive nature in terms of its foreign policy has shown that it wants to stand up to its rivals and eventually become the greatest superpower in the world. Unlike superpowers such as the United States, China wants to reach its goal through a more diplomatic approach. That is why I believe China would not be considered about turning back after having made their decision to enter into the core of global issues. China’s newfound assertiveness, rather than creating fear, should be seen as establishing the necessary conditions for comprehensive negotiations about the very basis of peaceful coexistence and stability in Asia; respect for all sides’ vital interests (Liao 2009; p. 2). This statement suggests, which I agree with, is that China seems to be more than ready to step in as one of the leading nations in efforts to unite and stabilize all nations around the world. Question 3 The article “Rich Nations snaffle 30 million hectares of Third World farmland” focuses mainly on the fact that as global issues rise, specifically in concern with the shortage of food, rich countries of the world continue to take advantage of third world nations by taking possession over their farmland to grow food for their own people. This causes a grave problem for the third world countries who, already being faced with problems of shortages, suffer from an even greater deficit of food. The article gives eye-opening examples such as “South Korea’s acquisition of 700,000 hectares in Sudan, and Saudi Arabia’s purchase of 500,000 hectares in Tanzania,” (Vidal 2009). Countries such as Japan want to raise the issue and have such purchases stopped, or at least create a situation in which the poorer countries being stripped of their land and food are given something in return (Vidal 2009). Mutual benefit seems to lack right now as only the rich countries get the benefits of eliminating their shortages while the poor countries suffer even more that they did to begin with. Both the consumers and producers of food from farmland should have equal returns and both their countries should be at an advantage from such acquisitions. Such an issue would definitely be an emotional one as the people of the Third World countries would feel almost robbed of their assets. Such countries have many developmental issues to begin with, and having rich countries come in and take their resources for themselves with no return would only aggravate the nationals. I believe there would be two reasons for this. The first cause of the aggravation is likely to be the nationalistic streak inherent in most people. To have another, in this case richer country, take away from their own country leaving them with little for themselves will indeed affect the ego of the nationals, especially when they are not compensated for it in any way. The second factor could be the worsened living situation of the nationals of Third World countries. The people of such countries already suffer from shortages of many things, including very basic needs of life. When farmland that should be rightfully theirs, which could easily be used to help lessen their own shortages of food, is acquired by other countries that do not have enough for themselves and so decide to use their power to take from others, will definitely worsen the pre-existing scenario. The people of the Third World country will be worse off than they were to begin with, which was not very pleasant. Indeed this will present a very emotional situation as the nationals of the Third World country would feel as if their rights to their property are being violated. If other countries were to come to my country and take possession over assets of ours leaving us with much lesser to begin with than we did I would be quite frustrated and hurt at the same time. I would feel for the people of my country and be upset about the fact that whereas we already do not have much to begin with, we were stripped away of the little we did have. I would probably have some emotions of animosity towards the richer countries for not providing us with any sort of compensation in return for taking away what is rightfully ours. I would be frustrated that other entities have come into our land and decided what to do with it. The situation is analogous to one in which I have earned a certain amount of money for my birthday, but the neighbour’s child decides how to use that money for him/herself. It almost becomes a situation of human rights. Everyone should have a right to their property and be able to decide what to do with it. The same should apply to a country as well. A country should be in a position to decide what to do with its farmland rather than allowing other richer countries to come and decide how to use that land, especially if they plan to use it for themselves. I also believe that some consideration should be made on the fact that this farmland is being taken from poorer countries that already suffer from many problems of their own. Being a richer, more developed country, other nations should use their power to help improve the situation of their less fortunate neighbours rather than worsen it. I would hope that such situations would not carry on for much longer to become common practice, and perhaps they might not as awareness is increased around the world and Third World countries collectively stand up for their rights. However, it must be taken into account that such countries also feel a sense of dependence upon the richer countries of the world. The poorer countries of the world feel they must keep the richer countries pleased, so that the richer countries may help them in some way in dealing with their numerous existing problems. For that reason, under-developed or developing countries might allow the richer and developed countries to do as they please with the farmland in order to either build a new or keep an existing positive relationship going. As mentioned in the article though, countries such as Japan intend to bring this issue up in world conferences. In addition, the issue plans to be discussed by world leaders in the upcoming G8 summit (Vidal 2009). That could perhaps help create laws or agreements that would allow at least mutually beneficial situation to exist. The existing situation only allows the richer countries to benefit from it. Perhaps such awareness and reaction from Third World countries might help those nations gain something from the rich countries, instead of just a dependence link, in return for their farmland. Therefore, I believe that whereas such practices might become more common in the future, there will be some alterations made to such agreements in order to create a mutually beneficial environment. With the recent global financial crises, worry of global warming, and increase in shortages around the world in all areas, all nations are dependent upon each other and it seems only unfair to let one take advantage of the other’s weaker position. All nations must help each other deal with these problems, and I believe action will probably be taken to ensure this as opposed to the way things are currently done. With the UN involved, and the topic being thoroughly discussed at G8 meetings, perhaps a middle ground could be reached where such practices are allowed, but only with certain restrictions to guarantee fairness. Question 4 Black Swan events are the type of events that are low in probability, but once they do occur, have a high impact on businesses and seem almost obvious after their occurrence. Black swan events are typically random and unexpected. This combination of low predictability and large impact makes the Black Swan a great puzzle. A Black Swan event could be either positive or negative. Some examples of a Black Swan Event could be the recent financial meltdown in the United States, the rise of the Internet, success of Google, World War I, the tsunami of 2004, etc. The effects of Black Swan events are usually very drastic and not only effect one type of business, but many, and sometimes even economies as a whole. I would specifically like to look upon the example of September 11, 2001. The attacks on September 11 were perhaps one of the most unpredictable and highly impacting events to occur in the last ten years, making it one of the greatest Black Swan events of the decade. The attacks had massive impacts on many businesses in the United States and around the world. Those businesses abroad that were linked to the United States suffered as their sales to the United States decreased. Changes were made in organisational practices. Various industries such as the transportation and logistics ones were impacted. Risk management, food, tourism, and emerging war service industries also suffered changes. The greatest impact of the attacks was probably on the world financial market. United States links with other countries around the world were also dramatically affected, especially as security arose and as the blame-game started. Overall, global geopolitical landscape was intensely altered by 9/11. The attacks were entirely unexpected and led to changes in almost every industry and business of the United States and even abroad. The attacks of September 11, 2001 had a massive impact on the airline travel industry, not just in the United States, but around the world as well. Swissair, Delta, United Airlines, US Airways and Northwest Airlines all declared bankruptcy following the tragedy. Airlines struggled to reduce high fixed costs, and cost-cutting initiatives quickly followed apparent revenue decrease. The immediate reaction, at least in the United States post 9/11 was a shutdown of all US airlines. Shutting down an industry with high costs has even higher affects. Airlines have lost almost several years of traffic growth, while the industry depends solely on an increase in growth. Worldwide, passengers began to travel less for numerous reasons. Firstly, safety became a major issue for passengers. The hijackings shook the confidence people had in air travel. Secondly, fare prices shot up. While agencies tend to blame the increase in fuel prices and a decrease in demand for all the losses, governments focus on environmental issues and reluctance on the part of travelers post 9/11. A third factor is also that airport security measure have already increased dramatically, making traveling become less convenient than it used to be. Collectively all these factors have massively hurt the airline industry and all related businesses. The aftermath of the attacks on air travel was unimaginable and still remains a major issue, as the industry has not yet fully recovered. Subsequently, the impact of the Black Swan event of 9/11 on the air travel industry also affected many other industries. With less demand for air travel, producers of air travel reduced demand for the products they needed before. There was reduced demand for in-flight meals, airplane equipment and even traveling crews. In this way, a number of other industries were also affected. The cycle of negativity keeps going as producers and consumers see negative things happen in many different industries. The automatically assume that the situation will only worsen. Thus, the web of negativity keeps growing and consumption and production stops, leading to a much larger problem than it did to begin with as numerous interconnected industries all suffer from the effects of one event. A specific type of business, which was affected by the downfall in the airline industry, was the business of travel agencies, the intermediaries between airline and customers. My family owns a small traveling agency and was greatly affected by the events of September 11, 2001. As traveling had decreased around the world, the family business also began to suffer. Fewer customers would and still purchase airline tickets to travel around the world, which is almost what the agency depends upon. Whereas I heard much about the impact on airlines on the news, I felt the effects at home when a family business suffered. Airline travel industry has come to a point where anything that permanently, or even temporarily, raises the cost of travel, holding benefits constant, reduces the level of travel volume. Specifically, travel to the United States has decreased, for multiple reasons. Firstly, there is hesitance on the part of travelers to go to the US. Secondly, landing in the US has become much more difficult than it ever was for many people around the world, solely because amount of security has increased. United States checks every passenger and traveler with great scrutiny before allowing him or her to freely explore the American land. Difficulty in attaining visas and the thought of facing tough security once in the United States has caused traveling to the US dramatically decline. Sales of tickets for such routes have dropped significantly, whereas pre-9/11 it was one of the most popular routes due to high tourism in the US. The demand for air travel, specifically to the US, plummeted leaving airlines and airline agencies at a great loss. Overall, through this process, I saw the impact of September 11, 2001, a perfect example of a Black Swan event, drastically affect a business I was extremely familiar with. Question 5 The article “Can Business be Ethical?” by Peter Singer reflects upon the current financial crisis and its causes in reference to business ethics. He discusses whether business ethics can be followed in a truly competitive corporate world or not. He specifically highlights how graduates of one of the top schools of the world, Harvard Business School, have signed an oath, which declares them to be ethical businesspeople who will serve for not only their own interest but in the interest of others around them and for the greater good of society (Singer 2009, p.1). Whereas profits are a necessity to a successful business, the graduates will do so only in ethical manners and with the intention of long-term sustainable well-being of society and the business. Highlighting the global financial crisis, Singer states that although the market failure was the main cause behind the crisis, fraudulence on large scales also played a great role. The global financial crisis revealed deception on the part of many businesses around the world, which eventually brought about the need to focus on business ethics (Singer 2009; p.2). Many universities have started separate courses that study only business ethics while companies have also started educating and training their employees on corporate social responsibility since the revelations about the corporate world following the crisis. Peter Singer also uses the comparison of business ethics with those of other professions. He believes that the ethics involved, due to the differences in profession, are dissimilar. Singer uses the example of medical professionals to illustrate that their oath is such that professionals would divert from it under any circumstances because they have “a real commitment to serving the best interest of their clients,” (Singer 2009, p.1). He feels that the objective of a business is to earn profits which contradicts with the serving the best interest of society, therefore managers seem to be in a profession in which their oaths are not as binding as in other professions and that is why abiding by the laws of business ethics becomes difficult. I personally feel this comparison is incorrect. When we look at general examples from developing countries, we see that there are many cases of fraudulence on the part of doctors, specifically examples of surgeons who “steal” their patient’s organs in surgery to sell off in the black markets to make extra money. We also see examples of lawyers, even in countries such as the United States, who find themselves justified in hiding pieces of information from the judges, which could be of crucial value to the case, only in the best interest of their clients. Many examples of insurance “scams” and such related to commission from around the world can also be seen. In these examples and more, we see a lack of ethical value, regardless of their profession. I believe ethics are pertinent to every profession and it cannot be said that oaths and codes of conduct of certain professions or the setup of certain professions is such that fraudulence in terms of ethics cannot take place. Therefore, I do not feel such a comparison is valid. It cannot be said that the nature of the profession managers are in is such that lack of business ethics are bound to occur while other professionals have no choice but to be ethical, even when trying to behave purely in self-interest. I personally feel that ethics are more a matter of personal choice than an outcome of the environment that a business operates in because all types of workplaces and professions can create a situation in which self-interest can be found. The main purpose of business is to make efficient use of capital, labour and material resources to produce goods and services that meet society's needs and wants. The main purpose of management of a business it to manage all activities and to designate work in such a way so as to maximize their profits ethically while taking society and its benefits into account as well. Competition is valid in such a profession, but as long as it is healthy, competition can always exist. Competition does not necessarily imply that codes and conducts must be violated. While trying to maximize profits, constraints such as costs are taken into account. I believe even the most competitive of managers could consider abiding by ethical laws and keeping social benefit under consideration could only be thought of as an added constraint in the process of maximizing profit. Indeed, I agree upon the fact that the setup of current businesses also plays a role in the increasing amount of ethical violations in this market. Market mechanisms deliver punishments and rewards based on quarterly earnings and profit statements. This serves as an incentive for employees to resort to measures that involve breaking ethical rules to earn rewards. However, I do not feel that is the crux of the problem and an incentive big enough to say that the value of ethics in business is distinct from those of other professions. Being ethical at the workplace is purely a matter of personal choice. Considering the analogy of a student who cheats during an exam, although he/she may find short-term results of a good grade, in the long-term the student suffers because he/she is not prepared to face real life situations, which they have to deal with on their own. In addition, there is a social cost involved in such a situation. Other students who study for their exams suffer because they might end up with relatively lower grades, making them appear not as good of a student as the cheater. The teacher might also be fooled by such a student and may recommend him/her for more complex educational opportunities, and once the student is caught, it might affect the credibility of the recommending teacher as well. Basically, fraudulence as a result of acting on self-interest by one individual creates a cycle of detriments suffered by all members of society, involved or uninvolved. Whereas short-term benefits, such as abnormal profits in the case of businesses, can be seen, long-term results, especially those affecting society, can become harmful to overall welfare. Such social costs need to be taken into account by every individual when analysing profits and self-interest, thereby making it a matter of only choice rather than force. References Liao, W, 2009, ‘China Crosses the Rubicon’, Project Syndicate, p. 1-3. National Intelligence Council, 2008, 2025 Global Trends: A Transformed World, (C. Thomas Fingar, Commissioner), Office of the Director of National Intelligence, United States of America. Singer, P, 2009, ‘Can Business Be Ethical?’, Project Syndicate, p. 1-2. Vidal, J, 2009, ‘Rich Nations Snaffle 30 Million Hectares of Third World Farmland’. Read More