International Business and Implying Factors - Example

International Business and Implying Factors Name: Institution: Course: Lecturer: Date: Introduction International business entails conduct of business operations across the borders i.e. in more than a single country. This calls for embracement of international management as well as advanced business management. The key fundamentals surrounding business management in this case includes financing production as well as distribution of products and or services across international borders. The very basic management functions such as planning, leading and organizing remains the same, irrespective of whether a firm function domestically or internationally. However, the conduct of international business present difficult challenges to managers(Wild and Han 2014). Implication of Culture on International Business According to Hamilton and Webster (2015), it is not possible for a business to solelyrely on the present method of conducting its activities when it decides to undertake business at the global arena. Each and every country and nation present different variables that may be new towards an offshore company. This includes rules and regulations, different holiday seasons, taxation as well as different currency. According to study based on international negotiations, researchers maintain that successful negotiations requires high comprehension of the context in conducting negotiations and not only the usual technical proficiency. Such comprehension warrants the firm to secure profitable contracts(Hamilton and Webster 2015). Business expansion and conduct into the international territories may either be out of internal growth or through mergers and acquisitions. In this respect, cultural mismatch arises especially in an instance of internal growth since it takes time to set up the enterprise in another country from scratch. It gets difficult to adopt to the new culture and assume its traits. Business merger and acquisition surrounding an already established firm tend to be a beneficial method of global growth since the parent company is in a position to learn the norms as well as beliefs prevailing in the target company, via the acquired unit that is being operated within local cultural preferences(Radebaugh, Sullivan and Daniels 2015). Any organization with aspirations to extend her services to another country with different culture need to learn more about the cultural differences in order to have a thorough comprehension of the culture. This will necessitate the firm to map and bridge the prevailing gap between the commercial units operating in multiple cultures. A multinational organization operating in an ecosystem where different cultures are prevalent will tend to have smaller cultural gap as compared to the one operating within few different cultures. The main reason behind the abridged gap is overall learning factor of working in different cultures. According to study, different multinationals prefer establishing their new enterprises than the usual acquisitions and mergers(Ferraro and Brody 2015). In most cases, similarities exist in two cultures alongside the obvious differences. The level surrounding the similarities between cultures differ for different countries. According to the international business theory, most of the multinational firms try to expand to those countries that have more similarities as well as fewer differences in the two cultures with the purpose of avoiding cultural mismatch(Vaiman and Brewster 2015). Cultural distance within international firms pose negative effects which eventually hurt the firm’s reputation as well as the overall business overtime. A cultural blunder may result to loss of customers who shy away from the operations of the firm. This may end up creating problems to the firm through pressure groups as well as the general public outrage. The company will then attract negative feedback. Loss of consumers means loss of business and lesser revenues and profits. Customers aggrieved by cultural mistakes of companies may end up filing law suits that can results to accumulation of fines and settlement pay-outs(Radebaugh, Sullivan and Daniels 2015). Political and Legal Factor’s Implications The political and legal factors are instituted by governments in different countries to protect jobs and specific industries. Some of the industries are considered sensitive in respect to national security purposes with an example of defense, telecommunications as well as infrastructure. In yet another example, the governments are highly concerned of the ownership of ports and the activities conducted within. The national security is highly concerned with how the import and export businesses is conducted(Boddewyn2015). It is not the will of some governments to release technological information or share it with unfriendly foreign interests. Some government apply trade measures as retaliatory measures whenever another country results to be either politically and or economically unfair. Alternatively, governments tend influence trade in order to reward a country due to political support regarding global matters. Most governments are inspired by economic factors to interfere in trade. They may have an interest of protecting young industries and or preserve access towards local consumer markets especially for domestic firms(Forsgren and Johanson2014). Governments intervention in Business The past century experienced a major shift in to free trade. However, a sizeable number of government across the world continue to make intervention in trade. There are various key policy areas used to rules as well as regulations that are applicable in the management of trade. These are discussed below. Tariffs: These are taxes that are imposed on imports. The governments of respective countries impose two kind of tariffs; that is, fixed or specific charge as well as ad-valorem tariffs. The later tariff is determined on percentage value basis. Many governments across the world impose ad-valorem tariff as an advanced way of regulating imports. This in turn raises revenue towards their coffers(Lawton McGuire and Rajwani 2013). Subsidies: this is a payment that is advanced to a producer. Two types of subsidies that are common include tax breaks and low-interest loans. Moreover, subsidies may be in form of cash grants as well as government-equity participation. However, these types of subsidies are uncommon since they require direct application of government sources. Import Quotas: International business is limited by imposition of voluntary export restraints as well as import quotas. The importing government normally directs import quotas whilst voluntary export restraints gets imposed at the will of the exporting country in cahoots with the importing country(Boddewyn2015). Currency Controls: The business is limited when one country limits the currency of another country. This is normally executed in order to reduce imports. Furthermore, some of the governments will manage a higher exchange rate with a view of creating an import disincentive. Requirement of a Local Content: It is a requirement in some countries that a certain percentage of the products produced within to be assembled locally. In addition, most countries operate with a rule that a local firm must be involved in business in order for the international firm to be allowed to conduct its activities(Lawton McGuire and Rajwani 2013). Administrative Policies: These are some of bureaucratic policies as well as procedures that most governments apply to discourage imports by rendering operations more difficult as well as time consuming. Antidumping Rules: International business gets affected by these rules. On the other hand, international firms offering products at a lower price can affect the international market. Dumping refers to selling a product in the market with an aim of weakening the competitor(Boddewyn2015). Economic Implications The economic ecosystem represents massive economic conditions in a country in which international organizations are based. The environment contains factors such as infrastructure, exchange rate and economic development. Moreover, other factors affecting international business include inflation, rate of interest as well as economic growth. a. Economic Development In today’s world, a lot of international companies have their headquarters in wealthy and economically advanced states. However, the trend has changed and smart firms are heavily investing in Asia regions, Eastern Europe, Africa and Latin America. For instance, the figure of the internet users within Latin American region has steadily increased(Meyer and Peng 2016). Majority of international firms dealing with the sale of computers are devising strategies to sell the computers to customers over the internet. Both the American Online based in Latin America as well as Universe Online International founded in Brazil have got a tremendous success in their operations. Currently these companies are exposed to huge risk and massive challenges, but will leap a lot of returns in the future. b. Infrastructure The physical facilities within a country which supports its economic activities constitutes its infrastructure. This includes overall transport system and facilities for instance, airports, energy producing firms such as power plants, highways as well as rail roads. Others include advanced communication facilities, for example telephone lines as well as radio stations(Meyer and Peng 2016). The international companies concentrating in developing countries are compelled to contend to low levels of technology, perplexing logistical distribution as well as communication problems. c. Inflation Inflation can be termed as overall rise in the prices of commodities and services. During the recession period, the extent to which inflation is experienced slow down. For instance, if in one year the rate of inflation is 5 percent and the rate drops to 3 percent in the subsequent year, then the decrease is experienced. An instance where the rate of inflation decrease is known as deflation(Christmann and Taylor 2012). In regard to international firms operating in other countries, inflation and deflation is a key issue that need to be considered while doing business. This is necessitated by implications yielded to the operations occurring in the respective countries. For instance, if a bigger portion of customer residing in the country have a fixed salary, then it means that they won’t afford the necessary goods during inflation. In regard to international trading, a country experiencing inflation is hard to trade with than a country with no or less inflation(Christmann and Taylor 2012). References Wild, J., Wild, K.L. and Han, J.C., 2014. International business. Pearson Education Limited. Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University Press, USA. Radebaugh, L.H., Sullivan, D.P. and Daniels, J.D., 2015. International business: Environments and operations. Pearson Education. Ferraro, G. and Brody, E.K., 2015. Cultural Dimension of Global Business. Routledge. Vaiman, V. and Brewster, C., 2015. How far do cultural differences explain the differences between nations? Implications for HRM. The International Journal of Human Resource Management, 26(2), pp.151-164. Forsgren, M. and Johanson, J., 2014. Managing networks in international business. Routledge. Boddewyn, J.J., 2015. Political aspects of MNE theory. In The Eclectic Paradigm (pp. 85-110). Palgrave Macmillan UK. Lawton, T., McGuire, S. and Rajwani, T., 2013. Corporate political activity: A literature review and research agenda. International Journal of Management Reviews, 15(1), pp.86-105. Christmann, P. and Taylor, G., 2012. International business and the environment. Meyer, K. and Peng, M., 2016. International business. Cengage Learning. Read More