Planning Business Opportunity Implementation for International Company - Research Paper Example

 International Business Globalization and Liberalization has changed the whole concept of international business immensely. Most of the countries have liberalized the rules and regulations for the entry of foreign direct investments (FDI) in their country in order to exploit the possibilities of Globalization. Offshoring and outsourcing are some of the established business strategies adopted by MNC’s to cut down their expenses and to increase their profit by exploiting cheap labour and possibilities from other countries. International business is not easy compared to domestic business because of the social, political, environmental, legal cultural and communal differences of the target country. The organization planning for internationalization must custom made their strategies for the smooth operations of their business in the target country based on the differences mentioned above. Even for the same product different marketing/business strategies are required for each country because of the above differences. Only those entrepreneurs who are willing to study these differences and make changes, will succeed in their overseas projects This paper analyzes internationalization of business by considering American business tycoon Microsoft’s intention to explore the business possibilities in Chinese market. For convenience, this report is divided into 3 parts; Background (Company profile, PEST and SWOT analysis), Strategies (Rational for selecting China), and implementation (Choice of mode of entry and justification, HRM issues, Marketing/Operations issues) Background Company profile Microsoft does not need an introduction in the world because of its established monopoly in software industries and computer world. Founded in 1981, controlled by Bill Gates and his team, Microsoft has become one of the all time best companies in the world considering its growth pattern. They are best known for their Microsoft Windows operating system and the Microsoft Office suite though they have other consumer products such as the Zune and Xbox. PEST analysis Microsoft, at present is facing lot of legal battles with respect to antitrust from its competitors. Because of its immense strength in the market it often develops software like internet explorer to work on its windows platform alone. Even the US courts have alleged Microsoft for this deliberate action. The Globalization and Liberalization policies adopted by America have resulted in making laws which may harm the business prospects of Microsoft. “Liberalization means the gradual decrease of control on the part of Microsoft with regards to source codes and other computer programs because of the recent antitrust rulings made by the U.S. Supreme court” (SWOT Analysis of Microsoft, 2009) Microsoft is one of the most stable companies in the world economically. It always retains its place in the 100 better performing countries list every year. Its revenue from international markets matches with its internal revenue from the American market. Constant updating of existing technologies along with innovating new ones, enable Microsoft to overcome all the external challenges and function as smoothly as before. Microsoft is a socially committed organization which has given employment to thousands of people all over the world. Career prospects for employees in Microsoft are best among the industry. Moreover, it engages in lot of social and charitable works in the communities wherever they operate. Microsoft is a technology driven company and it spends millions of dollars for the research and development of new products. In fact it updates its operating system Windows and internet explorer browser, and Office suit, frequently to cater the needs of the current world. A substantial amount of its revenue is utilized for innovating new products and updating the existing ones. SWOT analysis Huge brand image is the main strength of Microsoft. It enjoys a perfect (pure) monopoly in the software industry. Moreover Microsoft has around 30 million customer base around the world Microsoft strongly believes in their customer base. They always cater the needs of existing customers while searching for the new ones. Because of the conveniently placed main offices across the world, customers will be able to obtain proper services all the time. (SWOT Analysis of Microsoft, 2009) The lack of online service centers is one of the major weaknesses of Microsoft. Computer users often faces problems with the software they are using and in order to rectify such problems, fast response is often needed. Microsoft products are not compatible with other software from different manufacturers. A computer user who uses operating system other than Windows may not be able to use Microsoft products on his computer. (SWOT Analysis of Microsoft, 2009) Globalization has opened the world of opportunities widely to Microsoft. It can establish business offices in most of the countries at present without many barriers. Moreover Microsoft has immense opportunities in other fields like computer and internet games, search engine business, mobile communication technologies, etc. Linux seems to be the major threat for Microsoft from the operating system software industry. The main advantage of Linux is that it is free and the customers can have even the source codes of the program. Competitors often sued against Microsoft for the violation of trust exhibited by the customers on Microsoft. China - Country evaluation Economic growth of a nation is controlled by many parameters like, political stability, people’s living standards, unemployment problems, educational levels, infrastructure developments, overall domestic peace levels and the relationships with the neighboring countries etc. Another major factor is the country’s ability to mobilize the internal resources along with attracting foreign direct investments (FDI) to the country. China has started its economic reforms in the 70s and 80s only. Earlier, China focussed mainly on agricultural sector for the economic development, but later they realized that need for industrialization for economic development. As per the article China’s Economic Rise—Fact and Fiction, Albert Keidel, China’s economy will surpass that of the United States by 2035 and be twice its size by midcentury. (Keidel, 2008) China’s banking sector was able to support the financing of infrastructure development and other public utility segments necessary for sustained rapid growth even amidst the current crisis. (Keidel, 2008) Infrastructure development is one of the major indicators of economic development and China is still able to spend much on infrastructure development in order to keep the economic growth going further and further. Political problems are less in China compared to other countries though at the time of writing this paper, reports about some unhealthy incidents of agitations from China is coming; which shows more than 150 people were killed. Freedom of expression is controlled in China by law in order to sustain the political interests of the communist regime. Analysing all the above merits and demerits of China as a country, Microsoft has immense opportunities in China as a business entity. Dr. Xu Cheng Gang, a lecturer at the London School of Economics, argues that, with China in the midst of economic upheaval, the government continues to allocate resources, placing officials at the center of the market and enabling them to channel profits into their own pockets.” (Yao, 2002) Corruption is a major threat for business endeavors in China. Most of the business transactions are done in China with the help of bribes and illegal means. The root causes for China’s rampant corruption are due to, partial economic reforms, lax enforcement efforts, and reluctance by the Communist Party to adopt political reforms (Pei, 2002) Inequalities in income of the Chinese people are a major concern even under the socialist rule. The per capita income of China is only about 2,000 US dollars, which is fairly poor when judged against global standards. In per capita income terms, China stands at a lowly 107th out of 179 countries.’ (Economy watch, n.d) Strategies Rationale for selecting China China is the biggest country in the world as far as population is considered. The high volume of population is definitely a positive sign for Microsoft’s business prospects in China. Another positive sign for Microsoft is the rapidly growing Chinese economy. The growth of a nation towards an economic power can be identified by analyzing whether the state in question is much more economically and politically present or more active in more places around the globe than before. “China’s increasing economic activities in Africa and Latin America proves beyond doubt that China is actively participating in global issues more than ever “(Johnston, 2008, p.6) Even amidst the reported corruption, censorship over freedom of expression and reports of political agitations, the selection of China for business expansion by Microsoft can be justified because of the rapid economic growth and the huge population size of China. Overall strategies for China China and America have different political regimes; China is ruled by communist ideologies while America is under democratic rule. In fact both the countries have extremely conflicting ideologies and moreover, each of them watching other’s movements suspiciously. Because of these political ideological differences, the visualization of business is entirely different in these countries. Strategies which were successful in America may not be successful in China because of these political, cultural and social differences between these two countries. Chinese people are more disciplined under the iron fist of communist regime whereas the Americans always enjoy lavish freedom in every aspect of their human life and hence the Microsoft’s business strategies for America must be revised thoroughly to accommodate the need of Chinese people. America is a secular democratic country in which all religions can enjoy equal status where as China is a country where religions and religious activities were controlled. Analysing all the above facts about China, it is better for Microsoft to appoint more locals in their Chinese projects. Only the locals will be aware of the cultural, social, political, legal and economical aspects of China well and Microsoft must post a Chinese person at the top of their operations in China. If Microsoft decides to send some American managers to China, they must be well trained about the difference in business environment of China and America. Implementation Choice of mode of entry and justification A mode of entry into an international market is the channel which the organization employs to gain entry to a new international market. Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacture and International Sales Subsidiaries etc are some of the common channels employed for the internationalization of business (Marketing teacher, 2009) Microsoft can think in terms of an independent venture for the internationalization of business. This is because of the fact that Microsoft is one of topmost companies in the world with immense financial capabilities and resources. They are self sufficient in all the aspect of business and a strategic tie up with another organization or other internationalization channels will destroy the reputation of the company since people may think that even Microsoft need assistance from others to execute their business. HRM issues Man power is an important segment of every business organization and the judicious management of this valuable manpower resource is essential for attaining high productivity. The Human Resource Management (HRM) issues in China can be analysed through Hofstede’s Cultural Dimensions of international business. Hofstede’s Cultural Dimensions Gerard Hendrik Hofstede, the Dutch writer on the interactions between national cultures and organizational cultures has identified five dimensions for cultural aspects in international business; “Power Distance Index (PDI), Individualism (IDV), Masculinity (MAS), Uncertainty Avoidance Index (UAI) and Long-Term Orientation (LTO)” (Geert Hofstede Cultural Dimensions, 2009) In Geert Hofested’s opinion, when negotiating in Western countries, the objective is to work toward a target of mutual understanding and agreement and 'shake-hands' when that agreement is reached - a cultural signal of the end of negotiations and the start of 'working together'. But in Asian countries much negotiation takes place leading into the 'agreement', signified by shaking hands. In fact, it is a cultural sign that 'serious' negotiations are just beginning.   Because of the political and cultural differences in China and America, there will be a big gap between the power structures of organizations in these countries. The manger- subordinate relationship may be different in these countries because of the work culture differences. In Chinese organizations autocratic methods are more prevalent whereas in America, democratic methods dominate the organizational principles and culture. In some cultures, people may not believe in team work and they will try to work on individual basis though team work is encouraged by organizations as far as possible. For example some people may work for their own interests and their nearest family member’s interest rather than the interests of a team formed from different cultures. Uncertain incidents can arise anytime in the work places and the response to such incidents will be different in China and America. Moreover some people may work for long term goals while some others may work for short term goals. These cultural differences at work place can play an important role for the smooth functioning of an organization and the HRM strategies must account for all those aspects mentioned above. Marketing/Operations issues Marketing is the core of every business activity. Even better products failed in the market because of poor marketing strategies whereas cheaper products excel in market due to proper marketing strategies. Microsoft must consider giving proper training to their managers/workers on deputation to Chinese operations based on the requirements of software business in China. Marketing functions for Microsoft in China can be analysed through the perspectives of famous LESCANT model of cultural variables of international marketing, defined by former professor of Eastern Michigan University, David A. Victor. These varieable are Language, Environment, Social organization, Contexting, Authority, Nonverbal behaviour, and Temporal conception. (Victor, 2009) LESCANT model of cultural variables Language is an important entity in every communication process especially in international business. For domestic business activities in America, only the knowledge of English is required whereas in China apart from English, the knowledge of Chinese language is also important. The views and opinions of each party in marketing or business negotiation process can be conveyed properly if both the parties don’t have a language barrier. Both the parties must understand clearly what others are trying to communicate or convince for getting the maximum out of the deal. Communication often reflects the level of confidence a person have in his abilities. “Whenever two parties negotiate, the entire process occurs under two umbrella contexts, environmental and immediate” (Phatak & Habib, 1996) Environmental characteristics of China and America are totally different and hence the American employees on deputation to China for Microsoft’s overseas projects must know these differences well to conduct their business negotiation process meaningfully in China. The working culture, environment population size, technology and natural resources etc will be different in China and America. The training of deputized marketing professionals must account for the above aspects as well for their mission success in China. Most of the social organizations in China are culturally oriented. The Chinese society has only limited freedom as far as religion and expression rights are concerned. Most of the activities in Chinese society are supervised by the governmental agencies in order to find out whether anything wrong in it against the Chinese communist party. The marketing/operation experts must always remember those aspects while engaged in their mission in China. “Communication can be seen as being high or low in contexting.” (Victor, 2009) Contesting depends on the level of information possessed by the two parties. It is difficult to have two parties of different cultures with same contexting level and hence one party will act as the higher contexted and the other, the lower contexted, in a communication process. Americans and Chinese have different levels of contexting and the knowledge of these differences is essential for the Microsoft professionals on deputation. “The view of authority in a given society affects communication in the business environment significantly as it shapes the view of how a message will be received based on the relative status or rank of the message's sender to its receiver”. (Victor, 2009) Authority and power are the two sides of the same coin. Leadership definitely needs power to execute their functions. The concept of Authority and leadership styles may be different for Chinese and American people. The knowledge about these styles and differences in functioning is essential for the overseas workers. “Much of nonverbal communication may be broken down into six areas: dress; kinesics, or body language; oculesics, or eye contact; haptics, or touching behaviour; proxemics, or the use of body space; and paralanguage. Any one of these areas communicates significant information nonverbally in any given culture” (Victor, 2009) Non-verbal communication methods will be different both in China and America. In some business negotiations, the amount of nonverbal communication may exceed the verbal communication. Our gestures, facial expressions and body language can communicate so many things to the people to whom we are dealing with. Temporal conception is the understanding of time. Some people may not give much importance to time in business process. Some others may even deliberately delay things. Americans are so particular about the timely delivery of services. The concept of time can be classified into two categories; Monochronic time (M-time) and Polychronic time (P-time) (Victor, 2009). M-time is characterized by one thing at a time while P-time means several things happening at the same time. P-time put more emphasize on human relationship rather than a task or job alone. Also P- time concentrate more on long term relationship. The awareness about these differences in temporal concepts of Chinese and American people will be helpful for the Microsoft mangers to formulate suitable strategies for China. Conclusions International business is a complex process because of the differences in the social, cultural, political, communal, economical, legal, and environmental differences between different countries. Each country needs separate business strategies even if same product/service is being internationalised. China is rapidly marching towards attaining the status of a world super power because of its economic growth and political stability. Most of the economic sectors in China are functioning well and the current global financial crisis has not caused many damages to the Chinese economy. Wide spread corruption and the regulations on freedom of expression (censorship of media and internet) are some of the weakness in Chinese society which retards the economic growth. China and America are two different countries with different political and social setups. Microsoft, for its internationalization of business to China must formulate well defined business strategies in order to succeed in China. These strategies must account for the difference in market structure between America and China. References 1. Market teacher, (2009), Modes of Entry into International Markets, Retrieved on July 10, 2009 from http://www.marketingteacher.com/Lessons/lesson_international_modes_of_entry.htm 2. SWOT Analysis of Microsoft, (2009), Retrieved on July 10, 2009 from http://ivythesis.typepad.com/term_paper_topics/2008/01/organization-an.html 3. Victor David A. (2009) Cross-Cultural/International Communication Retrieved on July 10, 2009 from http://www.enotes.com/biz-encyclopedia/cross-cultural-international-communication 4. Phatak Arvind V. , Habib Mohammed M. (1996), The Dynamics of Iinternational Business Negotiations, Retrieved on July 10, 2009 from http://findarticles.com/p/articles/mi_m1038/is_n3_v39/ai_18348264 5. Geert Hofstede, Cultural Dimensions, (2009)Retrieved on July 10, 2009 from http://www.geert-hofstede.com/ 6. Johnston Alastair Iain, (2008), Is China Rising? Retrieved on July 10, 2009 from http://www.mtholyoke.edu/global/assets/CGI/Johnston_paper.pdf 7. Keidel Albert (2008), China’s Economic Rise—Fact and Fiction, Retrieved on July 10, 2009 from http://carnegieendowment.org/publications/index.cfm?fa=view&id=20279&prog=zch 8. Yao Shuntian , 2002, Privilege and Corruption: The Problems of China's Socialist Market Economy - New Perspectives on Transition Economics: Asia, Retrieved on April 13, 2009 from http://findarticles.com/p/articles/mi_m0254/is_1_61/ai_84426602/ 9. Pei Minxin , (2007), Corruption Threatens China’s Future, Retrieved on July 10, 2009 from http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=19628&prog=zch 10. Economy watch, (n.d), China Economy, Retrieved on July 10, 2009 from http://www.economywatch.com/world_economy/china/ 11. Yao Shuntian , (2002), Privilege and Corruption: The Problems of China's Socialist Market Economy - New Perspectives on Transition Economics: Asia, Retrieved on July 10, 2009 from http://findarticles.com/p/articles/mi_m0254/is_1_61/ai_84426602/ Read More