Multilateral Bodies and Globalised Economic Environment - Coursework Example

Contemporary ​Business Environment​t Introduction International organisations and bodies such as the World Trade Organisation (WTO) and the European Union (EU) play important role in the continued development of global business opportunities. This paper would therefore crucially appraise the role played by multilateral bodies such as the EU and the WTO in creating a more globalised economic environment. Further, it has also been seen that marketing managers in transnational corporations also play a major role in the development of the organisation and are often faced with various constrains while operating in the contemporary business environment. The paper would also examine and analyse the role of foreign direct investment (FDI) and multi-national corporations (MNCs) within the context of international business growth. It would also reflect upon and analyse the key issues associated with the continuing process of European Union (EU) economic and political integration. Also, the paper would critically evaluate the main opportunities and threats evident within the global business environment, and examine how organisations may respond strategically to such challenges. Multilateral bodies and globalised economic environment Multilateral bodies such as the WTO and EU play important roles in today’s globalised economic environment. These organisations are seen as the watchdog of the economic scenario, especially post the recent economic recession. These organisations ensure that free and fair trade and commerce is being undertaken between the countries in the world, without the interest of any one country suffering due to local policies and biasness by the local government. With the establishment of multilateral bodies like WTO and EU, countries have been able to find a common platform wherein they can raise their concerns and help in formulating policies that would be beneficial for all. Before the formulation of such a body, mostly trade used to be conducted on mutual cooperation between the two countries, which often resulted in the weaker country being manipulated by the stronger one. However, with the formation of WTO such concerns could be easily mitigated as a common policy could be formulated to safeguard the interest of one and all. Similar to that of WTO, many regional organisations are also formulated to safeguard and promote trade and commerce in the selected region. Some of the examples of such regional organisations are the EU and the ASEAN, which looks after the trade interest in the European and Asian regions, respectively (Bello 2003). The US has been playing a major role in the promotion of free trade since the mid-1930s. In order to achieve greater success in terms of globalising the trade practices, the US led 23 nations to enter into a General Agreement on Tariffs and Trade (GATT) in 1948, wherein the signatories committed that they would reduce trade barriers among them to facilitate smooth business transactions. Further rounds of trade talks resulted in reduction of tariff levels and with the eighth round of talk, also known as the Uruguay round, countries started paying attention to the policy of NTB or reduction of non-tariff barriers. Most NTBs generally focus on various government policies which impede imports, while promoting exports from the country. Some of the instances of NTBs are health safety and environmental regulations imposed by government, quotas and policies related to procurement that favours domestic industries. Most of these trade barriers are often intentionally placed for restricting trade and putting more burdens on the foreign companies, and helping to promote the domestic industries. Therefore, by the end of the Uruguay round of trade negotiations, an important achievement was accomplished, with the formation of the World Trade Organisation or WTO in 1995, which was seen as a successor to the GATT. WTO was seen as an organisation that would strengthen the GATT, while preventing the creation of national standards that eventually result in putting barriers to international trade (Chang 2003). The organisation was able to strengthen its position by firming up the Agreement on Preventing Technical Barriers to Trade or the Standards Code, as it is commonly known as, and incorporating it as a part of the WTO/GATT agreement, with the formation of new regulations and procedures that facilitated the enforcement of the codes. Therefore, with the enforcement of this regulation, trade liberalisation could be achieved and various public policies could be formulated without giving importance to a single government’s policies and regulations. This also resulted in making the policies formulated by national governments subject to scrutiny by the organisation. Further, with the help of WTO, many countries were in fact able to formulate policies that promoted global businesses (Griffin 2003). Procurement is seen as a major challenge in case of international trade, which is being very swiftly handled by the EU through the issuance of its directive on procurement. The rationale behind the issuing of the EU Directive on procurement that is being described by the commission as follows:“that each and every economic operator across the EU should be able to participate, with simple and commonly used equipment and basic technical know-how, in a public procurement process which takes place partially or entirely by electronic means.” This statement is generic in nature and raises the question whether the EU and international law would be able to support such procurement even if economic operators in the EU intend to undertake e-procurement. It is one thing to be able to use EU law but another to use it effectively to solve disputes and issues through the existing laws (Wallach 2004). In a similar manner, the Association of Southeast Asian Nations (ASEAN) also focuses on various international trade regulations for the promotion of trade and commerce in the southeastern Asian region. The organisation is also important from the social point of view as well, as it comprises of smaller countries such as Indonesia, Malaysia, the Philippines, Singapore and Thailand, Brunei, Burma (Myanmar), Cambodia, Laos and Vietnam, who require to be united to compete with giants such as China and India in the Asian region. Thus, with the formation of ASEAN, even smaller countries were represented in the global trade scenario (Wallach 2004). Role of FDI and MNCs in international business growth Foreign direct investment (FDI) involves the process of possessing direct ownership of the production unit or retail outlet in the target nation. Such a process requires transferring of resources like technology, capital as well as key people. Often companies acquire other firms in the target nation to enter into the market (Lymbersky 2008). Most multinational companies select FDI route in case the target country has imposed import barriers, does not have a very diverse culture, potential to achieve high sales figures and low political risks (Onkvisit & Shaw 2004). The multi-national may gain more knowledge about the local market through the use of this method. Further, it would be able to apply specialised abilities and skills in a better manner and would be viewed as an insider. This method however is a riskier than other modes. It would require high commitment and resources from the organisation. The company may find it tough to manage the local resources (Onkvisit & Shaw 2004). Role of marketing manager within an MNC Marketing managers within an MNC also play an important role in helping a company achieve global standards. However, in the contemporary business environment, it could be witnessed that their role has become more challenging while tackling with various trans-national issues. Thus, it is important for marking managers to develop strategic management plans while entering into a global business. Strategic management is defined as art of planning the business at all levels in order to de-risk the company. As a part of the responsibility of the higher management, strategic development and providing insights on the path way to lead in the market place, is considered to be one of the important function. It also helps the company for focusing its energies and ensuring that the members in the organisation are able work for a common goal. For leading the company towards one energy or force, it is mandatory to develop strategic management. It also makes sure that some of fundamental decisions are taken care of to meet the higher targets. Over the last decade, there have been two contrary paradigms which have been dominating the landscape of strategic management theory. While one of them has been the resource-based view wherein the organisations are constantly looking at sustaining themselves in the competitive environment through the capability of rent earning. The other paradigm being competitive positioning based view of strategy wherein the marketing strategies stress on creating external market orientation for achieving success and scoring over the competitors (Fisher, Hughes, Griffin, Pustay 2006). In order to implement the strategy of entering into a strategic alliance in an international market, marketing mangers would have to understand the various functional strategies for adopting such a corporate strategy. While implementing the corporate strategies to expand business in the international market, it is important to focus on the following areas as well (Roth et al. 1991). The main factors that firms engaged in international business need to take into consideration in communicating with overseas clients and partners include the following: The managers should be able to communicate effectively with clients, distributors, suppliers and partners from various cultural diversities. Such a skill is essential as the language used by one culture might be contrived in a negative manner in another culture and might upset the client. Every culture has a different way of interpreting the message and therefore, the manager should have the knowledge and skill sets to address the issue of cultural diversity (Parkhe 1991). Therefore, the marketing managers should focus should also be placed on non-verbal communication. It has been found that the non-verbal communication consist of around 80-90 per cent of the amount of communication being transmitted to the client or partner. Non-verbal communication may include eye contact, body language, facial expression, silence, gestures through hands etc. Again every country has a different manner of interpreting non-verbal communication. For instance, the Australians interpret silence as a symbol of not able to understand the point, while in Japan silence means that the person might be thinking about the point (Roth et al. 1991). There are various factors that international business managers need to take into consideration while motivating staff and handling workplace diversity within a multicultural workplace of an international business. Some of these include the following: Motivation is mostly influenced by the cultural diversity along with the behavior and attitude of the individuals, especially the people in a group and the immediate supervisor. Thus, it is the job of the manager to create such an environment wherein the employees feel motivated to work and feel integrated along with the larger company culture. The manager should also keep in mind the diversity issues and address the employees only after analysing the local culture of the organisation. For instance, the centralised culture of the organisation may indicate motivating the employees by organising a get-together with the employees’ families. However, such a method may not work in a country that has a very traditional approach towards the concept of family and outings (Hartel 2004). Along with motivating the employees, the manager also needs to manage workforce diversity. The manager should be skillful enough to help people realise their maximum potential and perform up to their mark. The manager might also have to look at changing the culture of the organization and aligning it as per the requirements of the local market. In case the manager is able to manage diversity in an effective manner, the organisation would be able to address the issues of employee attitudes and reducing the cost of the organisation to manage workforce and recruit new employees (Hartel 2004). The manager may also adopt the technique of acculturation which means transferring of cultural knowledge between various groups. This process ensures that the groups are able to adapt to the changing environment and a greater coherence is formed between diverse groups. Such a strategy is especially essential to merge a minority group with a majority one, without making the minority group feel being dominated by the majority one. Commonly, there are four ways of adopting acculturation, which include separation, assimilation, pluralism and deculturation. It is therefore important for an international manager to understand the characteristic of every individual employee as well as the culture he or she belongs to and assess the similarities and differences between the cultures to find a plausible solution for such issues (Parkhe 1991). The concept of strategic control means the process through which the managers are able to access that the resources are utilised in an effective and efficient manner to fulfill the organisational goals. This process also helps in understanding and formulating marketing planning. The manager is required to analyse the strategic control process at a regular basis to understand whether the process is in coherence with the changing market scenario and the prevailing economic conditions. Such a process is essentially important to undergo an analysis in the time of turbulent business situations such as recession. Thus, it is essential for companies to implement strategic control methods to ensure that the business is able to conduct in a seamless manner in the international market (Lewis 2003). Strategic control is also initiated to monitor and analyse whether the international business is able to formulate the strategy in a proper manner and to find out how well the business is able to implement the strategy. Along with strategic control, the organisation also needs to control the financial, operational and organisational aspects of the business as well. Operation control would also include controlling the process of the subsidiaries and other business units as well (Lewis 2003). In order to deal with the process of strategic control, it is recommended that the process should be managed effectively and the manager should be skilful enough to handle any situation arising from the strategic control issues. The manager should be able to understand the process of formulating a control system, setting the standards for creating the control system, measuring the performance of the control system, comparing the performance with the set standards and responding effectively to correct any deviations or errors. Some of the essential techniques of control system include the accounting system, procedures and performance rations. The manager should have ample knowledge on how to work on these systems and if required provide suggestions to change the systems accordingly (Hartel 2004). Despite the fact that strategic control system helps in streamlining the process in global companies, many people resist the implementation of such a control system. Some employees feel that such a system creates over control, gives more power to the manager, increases accountability and might be misused. In order to overcome these issues, the manager may decide to engage the employees in the process of creating a control process. The manager should also help in developing a focused control system that would help in creating reasonable amount of accountability and does not give maximum power to the supervisor (Fisher, Hughes, Griffin, Pustay 2006). Multi-national companies face the challenge of creating appropriate corporate strategy and maintaining good employee relations while operating in diverse geographies. The first and the foremost issue that these companies face is regarding the choice of an appropriate internationalisation strategy. Most often it has been witnessed that the companies usually implement the same central strategy used by the parent company in all its subsidiaries, while some create a totally decentralised policy for the cross-border branches. However, some adopt the local practices and incorporate them in their central corporate strategy (Fisher, Hughes, Griffin, Pustay 2006). Shift towards financial economies: Most companies have corporate strategies that aim to achieve financial goals through various financial planning models and systems, and therefore, are not able to incorporate management-style strategies such as focusing on employee relations, diversity etc. Purcell and Ahlstran'd (1989) believes that for an organisation to develop, it is essential to focus on creating corporate strategies that include the employees in the growth process as well. Thus, the focus should not just be on financial gains but also on the human capital development for the overall growth of the company. Pressure to perform financially: Due to the focus on financial goals, most managers are pressurised to only look after improving the bottom-line of the company rather than the overall development of the company. As per Purcell and Ahlstran'd (1989), the financial goals focus on creating short-term targets and exert pressure on the managers to employ strategies such as reducing costs, increasing margins and reducing investments. These in turn put added burden on the employees who are constantly pressurised to perform under strict deadlines with limited resources. Role of trade unions and regulatory bodies: The MNCs often disregard the issues related to trade unions and other such regulatory bodies functioning in the country of their operation. In the absence of understanding about the various trade union and regulatory organisations’ rules, these companies often miss out on major employee relations policies that are considered minimal labour standards in the country of their operation. Purcell and Ahlstran'd (1989) suggests that companies need to configure their corporate strategy as per the internal labour market policies as well. Companies need to access their strategy incorporating labour mobility regulations and job grading systems. Conclusion Thus, in a globalised economic environment, multilateral bodies such as WTO helped in formulating various policies that helped in the creation of swifter trade movements between different countries, taking into consideration the business goals of each country and helping all the nations in deriving maximum profits through free and fair trade activities. Such an organisation also helped under-developed countries as well to be a part of the globalised economy by safeguarding their interests and ensuring that they are not manipulated by developed countries for resources. Further, with the establishment of WTO, many multinational companies were also able to conduct the trade in a free and fair manner in different regions of the world. These companies no longer had to be dependent on the local policies alone and could have their interests safeguarded with the WTO at the helm. Further, regional organisations such as the EU and ASEAN also help in promoting regional trade and commerce in a free and fair manner and help the regional countries to compete with developed and established players in the market. It is also important to note that in a globalised economy, it is essential to look into the role of the marketing managers as well in the promotion of the company on a global level. References Bello, Walden 2003, Deglobalization: Ideas for a New World Economy, London: Zed. Chang, Ha-Joon 2003, ‘The Future for Trade’, Challenge Vol. 46, No. 6, pp. 6–15. Fisher, G., Hughes, R., Griffin, R. and Pustay, M. 2006, International Business, 3rd Edition, Pearson Education Australia. Griffin, Keith 2003, ‘Economic Globalization and Institutions of Global Governance’, Development and Change Vol. 34, No. 5, pp. 789–807. Hartel, E. J. 2004, ‘Towards a Multicultural World: Identifying Work Systems, Practices and Employee Attitudes that Embrace Diversity’, Journal of Australian management, Vol. 29, No. 2, pp. 189-200. Lewis, M. A. 2003, ‘Cause, consequence and control: Towards a theoretical and practical model of operational risk’, Journal of Operations Management, Vol. 21, No. 2, pp. 205-224. Lymbersky, C. 2008, Market Entry Strategies: Text, Cases And Readings In Market Entry Management, Hamburg, Germany: Management Laboratoy Press, pp. 67-250. Onkvisit, S. and Shaw, J. J. 2004, International marketing: analysis and strategy. New York: Routledge, pp. 243-271. Parkhe, A., 1991, ‘Interfirm diversity, organizational learning, and longevity in global strategic alliances,’ J. Int. Bus. Stud. Vol. 22, pp. 579–601. Purcell, J. & Ahstrand, B, 1989, “Corporate strategy and the management of employee relations in the multi‐national divisional company,” British Journal of Industrial Relations, Vol. 27, No. 3, pp. 396‐417. Roth, K., Schweiger, D., Morrison, A., 1991, ‘Global strategy implementation at the business level: Operational capabilities and administrative mechanisms,’ J. Int. Bus. Stud. Vol. 22, pp. 369–402. Wallach, Lori 2004, ‘Trade Secrets’, Foreign Policy Vol. 140, pp. 70–71. Read More