Challenges and How to Overcome - Essay Example

Going Global: Challenges and How to Overcome Student’s Name Institution Affiliation Going Global: Challenges and How to Overcome Introduction Since the onset of the 20th century, globalization has become intensive with both small and large companies investing in international markets in order to gain the various benefits associated with going global. Going global can be described as the process through which a company undergoes to establish and run its business operations across borders. Research shows that many companies have ventured in global markets and prospered and this explains the reason why globalization has become the norm of the day in the business world. However, despite the benefits, there are various challenges that company managers and directors need to plan on how to overcome, before deciding to go global. Consequently, this discussion explains the challenges associated with going global. The discussion also briefly describes the steps of going global, and the strategies that a company can employ to overcome one of the identified challenges using various examples of companies who have successfully managed such a challenge. In essence, there are various benefits of going global, but companies need to draw a plan and come with strategies of overcoming the associated challenges in order to become successfully. Meaning of Going Global and the Steps Involved According to Boddewyn, Toyne, and Martinez (2004), going global is the process of expanding global connections, venturing into international markets in order to increase customer base and tap cross-cultural and diverse talented human resources to expand business growth and increase profits. Going global is not a one step thing but takes various steps. Jones (2013) explains that the first step in going global is doing a thorough and extensive market research. This helps the business managers in determining whether there is enough market across borders to buy their products and services. The second step is to adopt the right technologies to enable clear and expansive marketing of products both at the local and international market. According to Held and McGrew (2000), for a company to be known oversees, it must do its marketing right from the local markets. Once well-known in the local markets, a company can easily penetrate the international markets and compete at par with other competitors already in the market since it has already established a good name for its products and services. The next step is the formation of a talented, well experienced and skilled human resources team (Clark & Knowles, 2003). It determines to a great extent the success of the business in going global. Researchers point that the greatest challenges faced by companies when going global is the management of culturally diverse employees. Therefore, a company should invest in recruiting and training intensively a team, which is to be entrusted with managing such a culturally diverse workforce. Another step when expanding a business across borders is ensuring that there are enough resources to make sure that the whole process of globalization runs smoothly within the approximated time. According to Jones (2013), this is important because resources in terms of human resources, materials and time are the most important in any investment plan. Enough resources mean that there will be no delays, wastage of time, and resources in the process. The final step is the implementation of the well thought and carefully planned globalization idea (Clark & Knowles, 2003). Challenges faced by Companies when Going Global Regulations Challenges Notably, countries have different laws. According to Amsden (2001), the fact that laws in countries differ pose great challenges to investors who decide to go global. For instance, researchers point out that European nations have authoritarian regulations on customer information use by business people. Other countries have very strict laws when it comes to advertisements and other forms of marketing through the Internet. According to Banerjee and Linstead (2001), various nations have differing views concerning the protection of intellectual property. For instance, in most of the European countries, some laws assist in licensing intellectual property to a reliable partner across the border with the understanding that the partner must dutifully defend the company interests (Banerjee & Linstead, 2001). However, these European nations have strict laws that gorven against pirated software and proprietary goods. This challenge is overlooked by many investors going global with their business. They fail to make prior plans on how to overcome it, and hence, end up being a hindrance to their global expansion process. Avery and McKay (2010) advice that before a company decides to go global, its managers should invest in hiring a well-informed attorney on matters of international trade and safeguarding of intellectual property. The attorney’s main responsibility would be to advice the management on the various differences and similarities between the regulations on trade of the two or more nations that it plans to invest to ensure that the process of going global runs smoothly without any regulation hindrances. Challenges related to Currency Any currency is affected by unforeseen currency fluctuations. When a currency fluctuates, it can either increase or decrease its value. According to Wells (2001), currency fluctuations can either make a business loose most of its profit or obtain enormous businesses. Wells (2001) argues that the relative strength of the U.S. dollar against the currencies of other nations that a global company supplies can make the company’s products and services either inexpensive or costly. Researchers point out that, such challenges can be overcome through what is termed as currency hedging. Westney (2005) explains that currency hedging is the act of entering into a monetary agreement in order to guard against unforeseen, foreseen or predicted changes in currency exchange rates. A company can involve in currency hedging contracts when it invests in seeking the services of a proficient currency trading firm. According to Wells (2001), many companies do not foresee currency fluctuation as a problem when going global; hence, whenever this occurs and affects their businesses negatively, it almost or even may destabilize their international operations. Challenges related to Delivery According to Pan Fan and Zigang (2004), delivery of products across borders can be challenging and time consuming. Payment for orders in international trade requires to be made through bank letters of credit, a process that takes long. Shipping containers across borders has various risks and uncertainties. Many times, ships have been hijacked and containers worth of millions of money looted or destroyed. Challenges in delivery affect a company’s relations with customers adversely due to delays in delivering and receiving goods, which may lead to failure of the company in meeting customers’ expectations. Therefore, a company planning to go global should enter into a contract with trustworthy delivery services such as international overnight package companies, which can solve these problems and at the same time expand a company’ customer base significantly. Companies going global should form strong business relations with an international bank with branches in the target markets in order to provide vital and prompt solutions to any arising problems (Wallerstein, 2005). Diverse culture challenges in Global Companies Multi-culture teams can be described as teams who work for the same company, but from different geographical locations, cultures, and languages, who connect their professional skills through technology such as the Internet in order to achieve their shared goals and objectives (Nishii & Özbilgin, 2007). Despite that cultural diverse teams have various advantages to an employer, they can also have numerous challenges. Pan Fan and Zigang (2004) explain that there are four main challenges with cultural diverse teams: communication, culture, technology, and project management. According to recent research, many companies going global experience team failure due to failure to build trust, positive relationships across the various boundaries they operate their businesses, and cultural differences (Jones, 2013). One of the challenges faced by companies with culturally diverse employees is the available technology in the various nations that a company operates (Nishii & Özbilgin, 2007). Despite the great improvements in technology across all nations, some employees living in different regions may not have access to new, advance technologies such as communication networks, especially in rural areas. These disparities bring about differences in performance among a global taskforce bringing in conflicts. The greatest challenge in managing culturally diverse employees is language barrier and cultural differences (Dunavant & Heiss, 2005). When team members speak different languages, they have challenges in communicating. Clear and effective communication is vital not only in international businesses but also in every business. Ineffective communication among employees creates many problems, which hinder the smooth running of a company’s day0to-day activities. Jones (2013) gives a good example of a language barrier and its adverse impacts on a company’s operations. In 2013, Chevrolet introduced a car by the name “Nova” in the Mexican markets. In Mexico, the name “ no va” stands for “ it does not go”. Obviously, such a name is not a good for a car. Therefore, it did not sell as expected due to language barrier. Culture differences can also pose challenges in the operations of a global company. According to Pan Fan and Zigang (2004), despite that price discounting is taken as a way of valuing and appreciating customers in many firms, in Japan, discounting is considered a sign of inferior products. Strategies to overcome challenges related to Culturally Diverse Employees According to Wallerstein (2005), managing culturally diverse workforce can be challenging. Across many nations, the most common languages used in businesses today are English, Spanish, Japanese, and Chinese (Pan Fan & Zigang, 2004). Researchers such as Buckley (2005) point out that the challenges associated with linguistic and culture differences can be avoided if a company establishes trustworthy partner companies and reliable advisers in all the target countries. The partners ensure that the company remains well-informed in all matters relating to language and culture that might affect the company negatively. An exemplar of a firm that has implemented this strategy in overcoming language and cultural barrier is McDonald’s (Fleishman, 2012). Before expanding its business to Middle East, the company established partnership with several well-known companies in the hotel and fast food industry. The strategy helped McDonald’s not only to learn the various cultural and linguistic challenges, which were ahead of them but also on coming up with effective strategies to overcome the identified challenges. Another strategy of overcoming cultural barriers when going global is by carrying out a cultural savvy prior to venturing into the international markets (Boddewy, Toyne, & Martínez, 2004). Such a savvy helps a company in identifying the languages used in various nations that it intends to invest, and hence agree on the best way forward. A good example given by Fleishman is Coca-Cola Company, which operates in over 130 countries. The company conducts surveys in the various target markets before investing in order to come with strategies of overcoming the various language and culture barriers identified. Conclusion Clearly, going global has its various advantages and disadvantages. A company going global experiences various challenges such as currency fluctuations, differing regulations on trade, delivery challenges and culturally diverse workforce. Diverse workforce has various benefits to a company but can also pose several challenges such as language and culture barriers. However, culturally diverse workforce can be managed through various strategies such as conducting a cultural savvy in the target markets prior to going global, establishing reliable companies to partner with in the target markets, investing in recruiting and training new employees from the target populations. Therefore, going global is a business strategy, which brings many benefits to a company but also has various challenges which a company should identify and come up with strategies to overcome, in order to be successful. References Amsden, A. (2001). The rise of “the rest”: Challenges to the west from late-industrializing economies. Oxford: Oxford University Press. Avery, D. R., & McKay, P. F. (2010). Doing diversity right: An empirically based approach to effective diversity management. In G. P. Hodgkinson, & J. K. Ford (Eds). International Review of Industrial and Organizational Psychology, 25, 227-252. Banerjee, S., & Linstead, S. (2001). Globalization, multiculturalism and other fictions: colonialism for the new millenium? Organization, 8(4), 683-722. Boddewyn, J., Toyne, B., & Martínez, Z. (2004). The meanings of “international management”, Management International Review, 44(2), 195-212. Buckley, P. (Ed.). (2005). What is international business? London: Palgrave. Clark, T., & Knowles, L. (2003). Global myopia: globalization theory in international business. Journal of International Management, 9(4), 361-372. Dunavant, B. M., & Heiss, B. (2005). Global diversity. Washington, DC: Diversity Best Practices. Held, D., & McGrew, A. (2000). An introduction to the globalization debate. Cambridge: Polity Press. Jones E. (2013). How to go global in five steps. Retrieved from http://realbusiness.co.uk/article/24379-how-to-go-global-in-five-steps Nishii, L. H., & Özbilgin, M. F. (2007). Global diversity management: towards a conceptual framework. The international Journal of Human Resource Management, 18, 1883-1894. Pan Fan, K., & Zigang, Z (2004). Cross-cultural challenges when doing business in China. Singapore Management Review, 01295977, 2004 1st Half, Vol. 26(1). Wallerstein, I. (2005). After developmentalism and globalization, what? Social Forces, 83(3), 1263-1278. Wells, G. (2001). The Issue of Globalization-An Overview (RL30955). Washington, DC: Congressional Research Service. Retrieved from http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1005&context=crs Westney, D. E. (2005). What is international business? A sociologist’s view. In P. Buckley (Ed.). What is international business? London: Palgrave Journal of International Management, 9(4), 361-37 Read More