Globalization of Business & Policy of Regions - Essay Example

Globalization of Business & Policy of Regions Organizations that conduct business operations across national borders are called international firms or multinational corporations. Globalization has affected a wide spectrum of economic and social life of a nation. It has transformed trading pattern, finance, technological innovation, means and modes of communication, cultural pattern and patterns of governance, rate of employment and living standards. The openness of an economy as a result of globalisation can and should also be measured by the flows of the services, technology, information and ideas in and out of the borders of a country. Now, most organizations have no choice but to follow the policies of globalization and spread their businesses to different regions of the world instead being limited to certain territory of origin. As organizations enter into different regions for their business needs they have to follow policies of the region. Regional peculiarities cannot be ignored in favor of centralized policy of the government. The phrase 'think globally and act locally' points to the same idea that organizations have to adapt their business policies according to the region where they have decided to go into operation. Middle East as a Region Middle East traditionally includes countries or regions in Southwest Asia and parts of North Africa. Persian Gulf is considered as the main centre the area around which is generally referred as Middle East. Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, Turkey, the United Arab Emirates, Yemen, and Palestinian Territories are collectively known as Middle East. Multiculturalism is one important aspect of the emerging Middle East and Dubai in particular. For example, all kind of eateries and restaurants Italian, Chinese etc. can be found. Indians, Filipinos, Pakistanis, People from Arab countries and people from Western countries comprise the workforce in Dubai whether it is white collar or blue collar job. The new cultural wave of tolerance allows foreigners to spend wee hours of the night in a pub while at the same time call for five times prayers also fill the air of Dubai. Apart from Dubai, Middle East destinations like Egypt, Jordan, Israel, Morocco and Tunisia have always been known for tourist attractions. Middle East has emerged as one the fastest developing economies. Their move towards success would not have been possible if the states had not joined the global business environment and participated in economic activities. The fabric of the society is also changing as these countries are evolving in different areas of economy, culture, science and technology. Yet there are many cultural differences and nuances that managers must know when dealing internationally in this region. The region can be an attractive business venture considering the market available. Regional Factors Following important factors may need management consideration for conducting business in a particular region: Managing Politics: Political systems as well as government supervisions and regulations change when companies choose to operate in a certain region. Sometimes government officials and the general public and political activists view foreign companies as outsiders and are suspicious of their impact on economy as well as politics. This may be specifically true in certain Muslim Middle Eastern countries where mostly democracy is not in place and rules may be bent to please the government of the time. Companies have to be ware of government takeovers of property and acts of violence directed against the firm. The examples of such acts can be seen in Anti-American protests on famous American businesses. Since, such acts are not uncommon in Arab and Muslim world; companies must formulate special plans and programs against unexpected losses. Political instability, at times civil disorders and frequent changes of government are some of the common political phenomenon in the region. Political instability in particular increases uncertainty and thus business risk also increases. Although most companies would prefer to do business in stable countries but some of the greatest growth opportunities lie in regions like Middle East. Legislative Issues: Government laws and regulations also differ from country to country bringing new challenges for international firms. Host governments have many laws concerning libel statutes, consumer protection, information requirements, labeling requirements, advertising rules and norms, etc. International companies have to understand these rules and norms and abide by them. Understanding and then following the local laws is usually the main part of the policy decisions that the company takes. Middle East region too has specific laws and regulations. Some of the areas in the Middle East region have relaxed their laws and trade policies to facilitate international firms. In such a scenario doing business becomes more fruitful. Looking at the success of the business environment of Dubai others in the region have also tried to improve their laws and regulations creating an encouraging business environment. Sometimes, organizations can help in improving the legislative and political environment. For example, in Middle East region, labor force is available cheaply and sometimes suffers from worst living conditions. In such a scenario an organization may choose to uplift the status of labor working for the organization providing them better wages, better working and living conditions. A responsible corporate citizen tries to improve the environment it is operating and adopts a suitable regional policy. "Increasingly, countries throughout the Middle East are adopting stricter copyright and patent laws. These laws do more than curb bootleg cassettes: They will encourage a whole range of high-tech commerce which had previously been discourage, and facilitate Arab integration into the global economy. The days when cheap copies of western pop music cassettes could be bought in almost any Arab bazaar are coming to an end. The crackdown against bootleg cassettes - which presently account for up to 45% of total sales in Egypt and Saudi Arabia - is a price Arab countries find they must pay in order to expand their global trade relationships" (Martin 1996, p. 18) Economic Forces: The political and legislative forces in an alien environment take us to yet another front of crucial importance that is of economy. Organizations that choose to operate internationally in different regions can be affected by both national and international economic forces. In addition to understanding the type of national or regional economic system managers must also take into account level of economic development, infrastructure, balance of trade, currency issues, and resource availability. The level of economic development varies widely around the world. Those companies going in the region of Middle East might find certain Gulf States to be more developed and attractive than other countries in the Middle East. Most investors find the network of transportation, utilities, housing, education, highways, communication, and other facilities to be better in Gulf States and Dubai better and therefore make beeline there. On the other hand some have to go to Saudi Arabia where facilities are these but they have to face different sets of laws and regulations. Some regions might not even have both but the the size of the market itself could be an attractive feature. "There is no doubt international banks are increasing their presence in the Middle East in general and the Gulf in particular. It is difficult to assess whether this process is primarily being driven by domestic reforms or the increased opportunities on offer, but one thing is certain: Increased competition will improve services and banking rates for both personal and commercial customers so, once established, the foreign firms look set to stay, forcing local banks to respond if they are to compete in an open market" (Ford, 2005, p.46). Branding Policies: In business branding strategies are adopted to succeed in the competitive business environment. The brand is not just marketed as a product that provides benefits and fulfills needs but efforts are made to adopt strategies to make it a long term success. Long term success in a certain region could only be possible if thorough understanding of the new customers is gained. Customers become the foundations of a strong brand anywhere in the world. A particular region like Middle East for instance would also require a better understanding of the people living there who are actually going to become the eventual receivers of goods and services of the company. A good example of changing circumstances of people and the region is exemplary, "Dubai's tolerance can also be a good thing. Alongside its bars & night clubs there are mosques and churches and Hindu temples and for a city with so many competing religions and nationalities, it is remarkably free of ethnic conflict. 'I don't know who is a Sunni and who is a Shia and I don't care' Sheikh Mohammad told the scribe in a brief meeting. ' If you work hard, if you don't bother your neighbor then there is a place for you in Dubai.' Even Israelis can do business (quietly) with Dubai" (Molavi 2007). To successfully compete in world markets, managers must obtain a better knowledge of historical, cultural and religious forces that motivate and drive people in other countries. On the basis of their research and understanding these companies do also allow some experimentation and adaptation according to the norms and culture of the country in which the business is set up. They also show sensitivity towards the religions of the world. In order to operate in Arab or other Muslim countries some companies in the food business make sure that the food is served in a way that does not hurt the religious sentiments of the people. They also try to adapt to local customs and norms. Organizational Culture/HR Issues: Organizational culture is one of the most important factors in implementation of regional strategies that managers formulate to attain competitive edge. Organizations and their strategies fail because of this tangible yet crucial factor. Certain centralized organizational values may hamper the implementation of strategies/techniques and so the managers must honor the corporate practices prevalent in the region. Mangers must try to assimilate the local culture into original culture instead of forcing the organization's own culture upon employees. It is the local employees mostly that take the cause of the company forward and implement its policies. Also, if the organizational culture assimilates itself to the local one then and then only the product and services of the company become acceptable in the general public. For example, Arabs have a distinct corporate culture which is different from say American and European culture in its unique way. Strategic Planning & Implementation Outlook All the factors discussed above when combined together make the strategic outlook of the company all set to establish or expand the business in a new region. In fact these days more and more organizations are making it a policy matter to expand into new regions and or at least they plan to tread new territories at some point in time. Organizations that seek business in new regions have to have a long term and strategic outlook for their business. They must be aware of all the forces acting in their favor as well as against them. They cannot sit comfortably on their initial environmental scan for their initial long term policy making. They have to be constantly alert and keep on updating and reviewing their policies as per the changing circumstances. Top management must also encourage employees at all levels to provide their valuable inputs but they have to act as catalysts in formulating and implementing strategic policies for their organization. "Strategic planning has often been thought of as a management function most appropriate to large organizations, but many small business managers now realize that a well-developed strategic business plan can significantly enhance their organizations' performance. This realization has arisen in part from the reported results of empirical studies of planning in small businesses. For example, in a study of over one hundred small service, retail, and manufacturing firms, Robinson found that firms that engaged in strategic planning with expert outside advice tended to perform significantly better than those which did not" (Jones 1985, p. 31). Conclusions In today's competitive environment only those organizations succeed that make better business policies. Market economy and free trade are phenomenon that is the realities of the day and globalization is a phenomenon that has flourished because of market economy. Expansion of businesses in different regions like Middle East can not be stopped. It is in the benefit of the individual firm as well the economy to let market forces play their role and make regionalization an important component of their business policy. Right strategies can lead organization in the right direction and so the managers must make a comparison of the new strategies required to achieve prominent position in the market and the values or culture prevalent in the organization. References: Ford, N. 2005, International Banks Target Middle East: Increasing Numbers of International Banks Are Moving into Commercial and Banking Operations in the Middle East Region, Taking Advantage of New Liberalization Laws. Contributors: Neil - author. Magazine Title: The Middle East. 359: 46+. Daft. 1997. Management. Dryden Press. Molavi, A. January 2007, Sudden City: A feverish dream of the future springs from the sands in Dubai. National Geographic. 211(1). January. Jones, R. 1985, Internal Politics and the Strategic Business Plan. Journal of Small Business Management. Volume: 23.: 31+. Martin, J. 1996, Arab Governments Back Stricter Patent Laws. The Middle East. Issue: 253 : 18+. Pillai, R., Scandura, T. & Williams, E. 1999, Leadership and Organizational Justice: Similarities and Differences across Cultures. Journal of International Business Studies. Volume: 30. Issue: 4: 763. Read More