Samsung Group International Business - Case Study Example

Theories and Concepts of International Business The Case of the Samsung Group Insert Name Course, Class, Semester Institution Instructor Date Theories and Concepts of International Business Introduction Globalization and international trade are two concepts that go hand in hand with the latter depending on and contributing to the former. With the advancement in technology, the world is slowly shrinking into a small market place where all firms and business organization can sell and by without much hassle (Cavusgil et al 2012). It is imperative to note that computer technology has shortened and to some extent eliminated the distances that were a limiting factor to business expansion in the recent past. Worth mentioning is the actuality that globalization has seen many firms move from the local markets to the global arena at a very high rate. Today, unlike a few decades ago, many firms, including the small and middle enterprises are operating as multinational enterprises. The theories of international trade are operational and relevant in today’s world more than any other time in the history of global business (Brink 2004). Worth mentioning is the fact that international business is associated with a number of risks, political risk, also referred to as country risk being the most prominent. Similarly, cultural risks are among the most pronounced in the global arena. This paper is an explication of how businesses operate in the global arena, and how they manage to cope with and mitigate various risks, in light of the Samsung case. The Samsung Group Founded in 1938 by Lee Byung-chull, The Samsung Group is arguably one the biggest companies in the international scene today. Going by the revenue of the year 2012, The Samsung Group is the biggest information technology organization globally. The organization began as an all manufacturing and processing organization in South Korea. Three decades after its incorporation, the organization ventured into various businesses including, electronics, food processing, ship building and so on. Over the years, Samsung has endeavored to embrace specialization as a way of concentrating on one area and emphasizing quality (Michelle 2010). Today, Samsung is synonymous with breakthrough technology in computers and telecommunication industries. With such products as the novel android cell phones, Samsung can only be rivaled by such giants as Apple Inc. the organization, which has been operating in the global market for a considerably long time now, has the capacity and experience of having to deal with various risks, both political and cultural. Choice of Company The primary reason why I chose Samsung as the case corporation for the purposes of this paper is the reality that the organization plays a paramount role in shaping Korean politics and economy. Arguably, the biggest taxpayer in the Korean economy, the organization is in position of determining some legal factors, such as taxation policy and investment decisions. With its affiliates producing a quarter of the Korean exports, the organization is a definite game changer in the international markets (Michelle 2010). Being a competitor of many organizations, Samsung influences the decisions of many investors. Apparently, Samsung has operated in many countries and this has enabled the group to come into contact with quite a number of cultures and political systems. Surviving the hardships and challenges posed by the different regional conditions has made Samsung one of the most reputable organizations globally. The competitive advantage enjoyed by the organization makes it a firm worth noting. The number of foreign direct investments and attempted business combinations over the years are an explanation why the organization has exemplary potential. Samsung’s experience in the light of the global business concepts and theories Globalization of markets has been described variously as the deliberate efforts by the countries’ governments and critical business stakeholders to somewhat amalgamate the local markets across the globe in such a way that the market for various products from different countries can be centralized (Cass 2011). Worth noting however the actuality is that such globalization efforts have been accelerated by the point that businesses such as Samsung are going global. The kind of business that Samsung engages in cannot be confined to one local market. Technology being a product that has demand across the globe, makes Samsung operates globally, selling its products in various countries. Typically, organizations operating in the global arena obtain resources – human, capital and physical – from the same international markets. Today, the organization is operating and almost dominating the global markets handling the products that it produces. Globalization has initiated death of distance occasioning quick transactions and closer business relationships. The primary drivers of the concept of globalization, which has taken Samsung to the global market, include the liberalization of markets, industrialization, and existence of free markets, market integration and most importantly, technology. While free market is a hypothetical concept, it somehow does exist in the contemporary business setting. This is, in other words, implying that the restrictions instituted by the governments are no longer a barrier to market entry and exit. This is primarily because of the concept of market integration. Market integration refers to a situation where the countries in one region make some formal arrangements to have trade blocs (Renn 2000). Such blocs are integrated markets without tariffs and restrictive taxes. Of prominence is the reality that Samsung has been, and still is, in a position to enjoy such markets in Korea and neighboring countries. This explains why the Samsung products are much cheaper in the region. The Samsung Group is a key participant in international trade. The organization participates in the capacity of a focal organization. A focal organization is any organization operating as a multinational organization. The organization operating as a multinational is referred to as a focal organization because it binds together all other stakeholders in the international business arena (Cavusgil et al 2012). Samsung, being a multinational enterprise, is a focal organization. The organization has affiliates and distribution channels. The firms specialized to distribute goods and Samsung products are also participants in international trade. Usually, the distributors, referred to as the intermediaries act as a link between Samsung and the final consumers of the products. The third participant in international trade is referred to as the facilitator. The facilitators are the people or parties, primarily concerned with aiding the focal organization make major decisions (Pomfret 2008). Such parties include tax consultants as well as legal experts. Samsung Group has invested substantially in making facilitators count. The forth participant in international trade is the government. The home government of an organization will usually tend to follow up the activities of an organization operating within and without the borders. This is usually so for purposes of taxation and efforts of expatriation. Samsung has managed to penetrate various foreign markets through a number of ways. Much like many multinational organizations, Samsung penetrates such markets through franchising, licensing, importing and exporting. The organization, Korea’s biggest exporter has managed to penetrate foreign markets through selling goods in such markets, offering expert services in such markets, importing material from such markets, franchising other firms to manufacture and sell Samsung products in foreign markets (Lucas 2007). Another way through which multinational organizations find their ways in to foreign markets is through foreign direct investment, commonly referred to as FDI. Being a multinational corporation Samsung has found ways of existing and functioning in the cultural environment of international business. The cultural environment is one unique setting where various cultures interact, each holding different beliefs on one thing or the other. Worth noting is the actuality that Samsung, much like all other multinational organizations has had to deal with the challenging issue of cultural diversity. Cultural diversity refers to a concept that the organization embraces in order to work with and for people from various cultures (Dlabay & Scott 2010). Cultural diversity is inevitably critical considering that multinational businesses touch on such things as cultural inconsistencies. It is imperative to note that where an organization endeavors to remain resilient, it has to find ways of handling cross-cultural risks. Samsung, in a bid to maintain continuity, has had to work with various consultants and business partners in order to eliminate cultural inconsistencies as a way of mitigating cultural risks. Cross-cultural risk refers to the uncertainties associated with a multicultural setting. The probability that one culture will be welcoming to an organization is a variable point considering that beliefs affect business dealings. As a matter of fact, the Chinese way of doing business is considerably different from the western way of doing things. The western way, which is perceived as selfish and ethnocentric is not applicable in the Far East. Worth noting at this point is the fact that Samsung, in order to survive in all markets, has had to employ people from a region to work in a subsidiary in that region (Mckellar 2010). In china for instance, business relations are founded on personal interactions. This can only be done by a manager that understands the Guanxi culture. It is for this reason that Samsung employs local subsidiary managers. Among the key concepts that organizations in the international scene have to deal with is ethnocentrism versus polycentrism. As a matter of common knowledge ethnocentrism will kill an organization’s international profile. Polycentrism, which entails holding all cultures kin the same regard, is the way to go for any multinational organization that endeavors to operate as such into the foreseeable future. Cross-cultural risk has been identified as one of the sources of commercial risk. Commercial risk is the inability of an organization to trade smoothly following a number of factors. Primarily, an organization will not prosper as a multinational if it cannot handle cultural risk. Handling cultural risk is the primary way of forming a strong base for commercial success (Teichmann 2003). To maintain currency strength and mitigate country risk, an organization should act proactively in scanning the environment. Such scanning should be a continuous process that should enable an organization to identify any threats arising from cultural inconsistencies. Continuous scanning can as well enable an organization through the process of acculturalization. This is the process of an individual or an entity orienting itself with the culture of the people in the area where it operates. Samsung group encourages polycentrism in all its major endeavors, from advertising to staffing. All Samsung adverts are not the same. Why? Different adverts reflect different cultures. Many theories have been advanced to explain international trade and investment. Among the earliest theories of international trade were such concepts as mercantilism. Mercantilism was a theory, basic as it may seem, that many governments believed in as a way of maximizing returns. Maximizing returns, according to mercantilism called for achieving more exports than imports. The assumption was that a country could only achieve more exports in monetary terms so as to be considered a successful player (Rivera-Batiz & Oliva 2011). As such, such measures as tariffs, quotas and embargoes were employed. Currently, neo-mercantilism is considered the way forward for modern international business. Korea is no exemption to this theory as it has subscribed to regional trade where tariffs do not apply and embargoes are unheard of. Samsung is capable of exporting unlimited amounts of products, thanks to the death of mercantilism. Under neo-mercantilism, export and import trade are somewhat non-restricted dealings. In exporting and importing products and materials, businesses such as Samsung run what is referred to as political or country risk. Political or country risk is a form of uncertainty associated with the actuality that the political and legal systems of various countries are considerably different (Brink 2004). The differences in such political systems cause inconsistencies in business policy prompting the organizations to change the way they do things from one place to another. Samsung has been in the international scene long enough to discover various ways of dealing with such inconsistencies. A political system has been described variously as a set of systems and formal structures that govern the order in which things should be done. On the contrary, legal system is a set of restrictions, rules and laws governing the manner in which people and firms relate among themselves as well as with the state. The legal system of a country could be made up of such thing as the taxation policy, the civil law, the regulations and rules governing contracts and so on. In working under various political systems and legal frameworks without many problems, Samsung has come up with a strong and effective strategy. The strategy entails continuous environmental scanning. Environmental scanning will enable an organization determine whether or not working in the country is a viable venture (Brink 2004). Adherence to laws and regulations is a primary concern to the Samsung group as it enables it reduces chances of conflict and legal processes that are unnecessary. In order to work effectively in the foreign markets, the organization collaborates and works with various organizations which have been in the local market for a considerable period. Conclusion Samsung, arguably the biggest information and technology firm in the world, has experienced various theories and concepts of global trade, thanks to internationalization of business. The organization which is a major player in the international market has been identified as the most resilient organization in the industry. The primary reason for this is that it has various strategies of dealing with political and cross-cultural risks. Globalization has contributed greatly to the success of the organization over the year. Cultural diversity and continuous environmental scanning have all along been the organization’s key strategies. From the foregoing, it is clear that globalization is inevitable in the current business world. Additionally, globalization comes with various risks. 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Cross-Cultural Risk Perception: A Survey Of Empirical Studies. Dordrecht [U.A.], Kluwer. Rivera-Batiz, L. A., & Oliva, M. A. 2011. International Trade: Theory, Strategies, And Evidence. OUP Catalogue. Teichmann, I. 2003. Globalization. North Mankato, Minn, Smart Apple Media. Read More