Foreign Investment Expansion to Meet New Market Demand - Assignment Example

FOREIGN INVESTMENT EXPANSION TO MEET NEW MARKET DEMAND Introduction International business refers to business activates carried out across national boundaries. This means that business and government engage in one or more countries and are thus subjected to issues on currency rates, treaties, tariffs political and cultural differences taxes fees and penalties of each country in which they are doing business with. The firm may conduct business in its own country but emphasise is on international trading, (wiki.answeres.) Domestic firms on the other hand have their activities composed to the local market. This means that the firm deals with one currency, local customs and cultures, taxes of local nature and local customs, products and services, (wiki.answeres.) The Australian government has two main land territories and six states. The state based parliamentary federal dimension is under the common wealth while the bicameral commonwealth parliament consists of House of Representatives and the senate. The state is the administrative arm of the law, (lawtax.net). Recent years has seen Australia open up and position itself into an internationally competitive market economically, (lawtax.net). The purpose of this paper is to consider Foreign Investment Expansion to Meet New Market Demand. Foreign Investment History The prosperity of any nation today in this dynamic global economy is dependent on the countries international competiveness, (Wilkinson et al, 2000). Information Systems provide support in decision making thus where the information flows there is bound to be better coordination and management of operations and increased business visibility to their global supply, (Shev et al,2003), cited Hawking, (2009). The flow is usually hindered by poor systems and infrastructure as well as lack of standaization. In 1980s, due to low world resource prices, the Australian labour government put in restrictions in an effort to control the primary exports of the country. The re-emergence of the Asian countries such as India and China have increased the global demand for mineral resources making Australian policy makers reverse the trend thus tie the nation’s industrial sector prosperity to primary exports, (liew,2000). Australia’s Foreign Investment markets have shifted from Europe and N. America to Japan and East Asian markets have seen it re-merging to become stronger lowing its deficits and debts and emerging stronger, (Australian.info). Implication of International business on the Australian Government The host government benefits from company income tax collected from value addition. Other benefits lie in the efforts of direct investment on the value productivity of resources owned by the host country modified 1960, carde 1967. 1971. The multinational corporation may provide significant increase in competition in the host country. It tends to provide industry where barrier to entry by new turns are high. It may pull down monopolistic distortions and raise production of the host country by improving allocation, (Cares, 1974) Technical efficiency (Pay 176), cited Lee (2012). The Australian government will benefit from international trade through earning revenue thus raising the gross domestic product. The multinationals also bring in revenue to invest hence the county’s source of revenue is sufficient, (Economy watch, 2010). The Australian nation will become prosperous as have the power to control world economy due to international trade. Poverty will be reduced tremendously within the nation. Some of the gains of international trade include individual benefits company profits and standards of living improved in the countries participating in international trade, David Ricardo, classicle economist, (Economy watch, 2010). Among the benefits that the Australian government will benefit include in areas where skilled training is done for its citizen. Employment opportunities will also be available for its citizens, (Reiche and Hazing, 2009) Improved infrastructure when technological expertise is being used. Spill overs depend on the sector and nature of country under consideration and on whether the domestic firms have the technical capacity to capture the knowledge from the multinationals, Lee, 2012. Knowledgeable citizen. The world has been a global village due to advancement in Information Technology and Information Systems, (Hawking, 2007) Competitive advantage where by a firms internal competencies depends on its efforts, skills and resources as well as on the performance of other firms and organizations and on their nature of the relationships both directly or indirectly, (Wilkinson et al,2000). Implication of International business on Australian Domestic firms In Australia, the influx of foreign investors after the de-regulation of the financial system led to boosted local competition and the internalization of domestic firms both institutions and suppliers of software and technical support, Wilkinson et al, 2009) Before a firm decides to join the global market, its managers must consider certain forecasts. These include looking at the business industry where factors such as whether the firm is market driven will be looked at. Factors to be regarded include economic environmental and whether the firm is competitive driven. Market forces are determined by customer receptiveness to the global strategy to be used and how cost effective it is. Environmental factor investigate the availability of infrastructure and other related elements. Whether the firm is competitive driven provides the necessary drive to spur to action, internal and external strengths must be put into consideration. Domestically around firm are expected to benefit both from fray firs in that their workers accommodate knowledge in case where there are join ventures, ( Altken and Harrison, 2000). A firms specific know how of a certain firms expertise may spill over to the domestic industry thus exposing the domestic firm to new products and marketing technics thus improved product. Foreign firms may act as a sound source of demand inputs which benefit domestic firms. They may allow training go take place thus making a friendly relationship with employees. In this case, the productivity of domestic firm is raised. Foreign markets may also have a negative influence on the domestic firms where costs are concerned and the foreign market demand from the domestic firm causing production to go down,( Altken and Harrison, 2000). Implication of international business on Australian International firms International trade is vital for the survival of a nation as it boosts domestic productivity for the host country and enables a country utilise a large variety of products and capital. International trade provides a chain of communication between the nations thus they each learn from each other for instance on production methods, organisation methods, product and market knowledge, (Lee, 2012). Domestic firms imitate international markets and adjust their technology for domestic use. Imitation plays a major role in the growth of performing economies such as Japan and China. Three ways in which domestic markets benefit from, international members presences include; Moving of high skilled staff from domestic firms to multinational domestic firms. Secondly, demonstration effects through arm’s length relationships between multinational and domestic firms whereby firms learn superior production technologies for multination’s domestic functions’. Thirdly, competition from multinational foreign domestic rivals to update production techniques and thus become more productive The positive effects of farm, investment are likely to increase with the level of local capacity. Yip et al (1988), suggests that for a firm to get competitive advantage over its competitors, the managers must focus on two factors. The first factor to be considered is to have a global strategy This means that the managers have to look from within the organisation and face the five major strategy options available to them, these being Venture big in a major market and benefit from larger volumes and being a market leader Specialization in the main product and customise on customer preferences while getting closer to the customers Add value to a few activities and obtain economies of scale thus manufacturing in one country and commercializing or marketing in another Adopting a good marketing mix will go a long way in ensuring that internal focus and brand consolidation is enhanced. Strategically compete across countries by taking the global perspective to every country they venture into. The second factor that managers must consider is to have good management structures which include the Organisation Structure, Management Processes and procedures, Human Resources and Organisation Culture. Organisation structure In considering the organisation structure, centralization of authority ought to be the first priority. This has a direct effect on organisation behaviour. Management processes and procedures The Management processes and procedures are the driving forces in an organisation and may include providing coordination across the borders, planning and budgeting globally. Performance reviews ought to be done globally and personnel awarded according to their good performance. There will be need to hold discussions and forums to air concerns and exchange valuable ideas. Human Resources Here a decision needs to be made on whether to use foreign personnel or locals. While sourcing from outside may be preferred, local talent must be considered and promoted to make use of development opportunities. Culture This is the most sensitive as it could bring conflict between the firm and the national policies hence an agreement on the foreign: national employee assessed and agreed upon before implementation is done. Conclusion Globalization is causing firms to embraced modern technology and move away from traditional practices. Organisations must be willing to be knowledge based if they are to remain relevant in a highly competitive global market. A firm will be able to assess how ready it is to go global by analysing four sets of its industrial potential. These are the market, the economic and environmental factors and its competitive advantage. Firms cannot thrive on their own. They must operate like networks in order to input from other firms such as machine, products, finance, services, material, and equipment. They must act as markets that are intertwined to remain successful. It is prudent to remember the ‘ethics gap’ in the midst of all the rapid development going on around us. Zacznick (1993) cited, Mirwoba, (2009) states that the ‘ethics gap’ that exists due to globalization should not be ignored as it is the expectation of the society that businesses will be professionally done. Carroll, (2004), cited Mirwoba, 2009, also mentions that there is need for cutting edge thinking on the demand of business ethics in a world where organisations are expanding their products and services. Competitive production and markets are such that it is not easy to distinguish or identify the origin of goods and services due to global nature of products in a highly technological dynamic world wide web, Mirwoba, (2009). Q2. Both articles fall under Foreign Investments and expansion into new markets. In my opinion foreign investment is a wide topic and success in a nation is determined by the history of a nation and the structures put within a nation. It is vital for a nation to have open markets which enable it to readily compete on the basis of its strategic assets thus position itself at a competitive advantage thus benefit from the international trade,(Dic and Merreet, 2007), Cited Deepak,( 2007) Factors that have impeded the growth of Australian in the 1980s include government restrictions and monopolistic bureaucratic policies, (Dic and Merreet, 2007), cited Deepak, (2007) The gap created by technical know how that exists abroad and ignorance by the managers on their companies global potential as well as lack of knowledge on the firms competitive advantage leaves room for being either over confident or blind to the realities of overseas expansion. There is need for firms to maintain commitment of international operations as they forge forward in the 21st century. In both the articles, there is opportunity for expansion in the foreign direct investment sector in order to venture into new markets. One is in the airline industry while the other is in the agricultural sector. Markets can be said to be networks. Just as firms cannot thrive alone, nations too, need to relate with other nations in order to be competitive as iron sharpens iron, (Wilkinson et al, 2000). It is evident that a firm’s resource relationship are full of challenges and not directly easily controlled. A lot of cooperation and collaboration with other firms is therefore required even though these firms are independent with their own strategies. References ALTKEN, B. and HARISON A., (2012), Do Domestic Firms Benefit from Direct Farming Investment, Evidence from Venezuela retrieved from books.google.com Economy Watch, (2010), Benefits of International Trade, retrieved on 23.04.2012 from: http://www.economywatch/internationaltrade/benefits/htm/ HAWKING, P. ( ), Implementation of ERP systems globally; Challenges and Lessons learnt, Journal of Business Systems Governance and Ethics, Vol. 2 No. 1 LIEW, H. (2010), As Asians Quarry: Implications for Australia, Griffith University LEE, S., (2012), Patterns of Knowledge Spill over: an FDI perspective, Yu Da University, Vol. 1 No. 10, (10-17) Australia Information, Geography, Climate, History, Culture, retrieved on 24.04.2012 from: www. http://cyberlink.com/besite/arustralia/htm MIRWOBA, S.,(2009), Rethinking Ethical Issues in Global Business Environment, KCA journal of Business Management, Vol. 2, issue 2 REICHE, S. and HARZING, A., (2009), International Assignments, Sage Publications WILKINSON, I., (2010), International Competiveness and Trade Promotion Policy a Network Perspective Wiki Answers, International Business and Trade, retrieved on 25.04.2012 from: http://www.wkik.answers.com/Q/internationalbusinessandtrade YIP, G. et al, (1988), How to Take Your Company to the Global Market, 23 Columbia Journal of World Business, Vol. No. 4 DEEPAK, S., (2007), International Business Strategy, retrieved on 24.04.2012 from: http://www.highbeam.com Read More