International Business Project - BAT Company - Case Study Example

International business Project Business organization depends on its internal aspects or components for efficient and effective operations. The key internal elements includes; physical facilities and equipment, financial stability, human resources, production and operations, and market capability. When all the above elements are evaluated and analysis the results are the strengths and weaknesses of a company. Strength can be defined as a particular skill or distinctive competence that a company can do relatively better than other companies especially its competitors and which the organizations have and contributes to the achievements of the stated goals or objectives. BAT Company has a strong brand name which helps the organization to have a competitive advantage over the other tobacco producing companies like the Marlboro Company which is the BAT main competitor. A weakness can be defined as any aspect of the company which may hinder the company from attaining its objectives or goals. Usually, it covers the firm’s assets, resources, and capabilities. BAT culture of doing things and reputation has been questioned by many people in the world. There has been an argument that the products that the company is producing are harmful to human health, a development which has reduced their market share. External factors may include; economic, technological, competition, political/legal, and social-cultural factors. (Anthony, 1998) However, external environment of a company may be explicitly explained when opportunities and threats of the firm are considered. An opportunity in this aspect can be defined as any event, development, or a feature of the external environment which creates conditions that are favorable or advantageous to the business in relation to a particular objective or set of goals to be attained. For example there are great emerging markets in Africa, Asia, and Australia among other countries for BAT to explore. There is great investment demand in these places that BAT Company can maximize on it. A threat can be referred to as an environmental development or event which will present problems or challenges likely to hinder the achievement of organizational objectives, for example, competition, high interest rates, government legislations, declining real income among others. BAT Company is now facing stiff competition from its main rivals like the Marlboro Company, thus there has been a drop in the market share thus a reduction of their profits. The simple analysis involves understanding the organization’s political, economic, social and technological environments with reference to those who do business with the company. (Rob, 2005) Political factors may have a direct and indirect effect on the performance of the company. Some of the decisions made by the federal government of the U.S have impacted negatively on the operations of some companies like Microsoft Company. Take for example legal suits brought against in 2001 and the decision to minimize the production and marketing of high performance computers to countries believed to be a threat to U.S security. This has had huge implications to the company. Economical factors affect every business. Fiscal policy rates, interest rare policy, currency exchange rates, consumer factors, etc. It is possible that the U.S climate of the economy dictates how the consumer behaves in the society. If an economy is booming, recessing or recovering, the confidence of the consumer will automatically change. Social factors are forces within the society such as media, family and friends have affected the way Manxman has sold its products. Most of the customers have been mislead to believe that products made from America are of high quality. This means that companies such as Microsoft have benefited heavily. Social factors affect our attitude, opinions and interests on the way we view products from certain perspectives. Technological factors like the internet; for example has assisted companies such as Microsoft to meet new markets and extend its global outreach. Businesses should keep in touch with changing technology and modernization in this ever changing world. Legal factors reflect the way the company operates in terms of operating rules of law. Microsoft Company is engaged in legal business practice of marketing electrical products which is permitted by law. (Cullen and Parboteeah, 2005) Demographic changes always affect social and economic structure in a country; for example a country with high population like China will imply that more food supplies should be produced thus necessitating the existence of many local firms as well as foreign investments in order to meet the demand. Without such businesses there will be increase in levels of poverty thus no employment opportunities which in turn lead to diminishing or declining of social status of the people of China. The composition of age structure will imply different needs of those categories of people. For example there will be products that are appealing to the youth and those that appeal to old. A good example here is that of Nintendo Wii Company which produces video console products; the company should therefore target the youths and not the old in order to augment their sales. The birth and death patterns also influences production activities in that firms will produce less if the population is less or has migrated due to some external reasons and should also produce a lot if the population is growing in order to meet their needs. The public sector which is the government plays a major role in ensuring that its citizens are okay; they do not only provide a good business environment but they should implement policies which will foster the growth of the economy such as increase of pensioner’s pay and also attending to the old in the society. The provision of public goods should be efficient in that governments should ensure that the provision of services like infrastructure are of high quality in all parts of there countries to ensure balance growth. Market mechanism however, plays a get role in solving economic problem in that monopolies will not be allowed but an environment that will encourage free trade will be established which will foster economic growth; for instance no price fixing since the supply and demand schedules will determine the price. Governments can also offer incentives such tax reduction to encourage growth of businesses thus economic growth is achieved. (Cinchona and Ronkainen, 2005) There has been numerous problems and forecasting by businesses in there attempts to achieve there specific goals for example that of profitability. Planning and forecasting is a process which is influenced by many factors and include intervention by the government, social factors, cultural differences and economic factors among other factors. Under the role of social consideration market mechanism is left to determine the trade of trading activities; for instance the demand and supply schedules are allowed to interact thus determining the prices of the commodities in the market. The other social consideration of democratic and authoritarian regimes has also played a role in international business. Countries that are democratic in nature tend to allow free trade and limit the restriction to international businesses investing in there host nations, for example the UK, US and other developed nations are democratic in nature and they allow the concepts of both globalization and international business to prevail. However, governments to some extend need to participate in trading activities of the country. This usually happens when there is need to protect the local companies from exploitation or other adverse effects which may cause there collapse. Government should play only a limited or marginal role when need arises for example when its currency has been reported to be depreciating at a big value. The theory of comparative advantage should be left to prevail since it allows the businesses involved to benefit equally in there trading activities provided that they deal in manufacture of commodities with dissimilar costs. For example, the Middle East zone countries produce oil cheaply as compared to other nations while Pakistan produces tea at a cheap cost. However, Middle East can produce tea at high prices while Pakistan on the other hand can produce oil products at high prices. Therefore if both countries engage in international business then each stand to benefit from each country for example Pakistan will get oil from Middle East at cheaper cost while the Middle East can source tea from Pakistan at a lower price. (Blythe, 2001) The promotion of free trade by WTO should be encouraged since it allows for new openings not only for a host nation but also to a foreign country seeking investment in that country. Such free trade will enhance production of quality products at the same time relatively affordable to the consumers since competition will be the order of the day in the market place; it also leads to creation of employment opportunities at the same time boosting the growth of economies involved. For example in the European Union members like France and the UK they are benefiting from trade union such that both countries have established firms in each country. For example the UK has invested heavily on the alcohol industry in France while the later has invested in the hospitality industry in the UK. However, a foreign country may benefit more than the host country while investing in that country; for example BAT Company has invested in African countries by setting up its subsidiaries in such nations. The African countries too have industries that produce tobacco products but in the market BAT products are reported to be doing well as compared to locally produced tobacco products. Such a scenario may lead to collapse of local industries because of the unfair competition that exists and may need intervention by the government in some other instances. (Kotler, 1996) Social responsibility is the in-thing for any private sector business in the modern world. Organizations for example Home Depot Company have considered ethical practices that has immensely contributed to meeting the needs and expectations of the society surrounding it as well as attaining there formulated objectives. According to Home Depot company history the company has observed the issue of corporate social responsibility keenly for example it been able to recruit more than 200,000 employees who are normally skilled in the implementation of its home improvement goals in many nations. The company is also recognized for its specialization in building resources and products. It has a number of stores through which it practices the economies of scale with an experienced staff in the application of the customer service in the company therefore meeting the needs of the surrounding society effectively and efficiently. Therefore company has played a greater role in the area of social responsibility that includes protection of the environment and provision of social services to the community for example helping the members of society when they are faced with problems e.g. natural calamities like floods. (Brassington and Pettitt, 2000) Many organizations have neglected the question of social responsibility and have concentrated more on profitability issues thus raising concerns on both the existence and continuity of the business. An issue like pollution for example has led to deaths of hundreds of people in many nations. On the other hand the exploitation of human resource through payment of lower wages and salaries has also further propagated the problem of international businesses to perform poorly. Also the question of tax payments have raised concern in that there has been arguments that many countries favor their host industries thus in the process imposing high taxes on firms wishing to invest in such countries. This scenario has led to shortage of supplies of commodities in that in some countries the local firms may not be able to produce certain products due to high costs involved in the production process; a scenario which has escalated poverty levels among African countries for example in Zimbabwe in Africa. There has also been a case of bribery and corruption which has seen selective application of existing trade laws on different companies. Corruption and bribery have also been manifested in the way in which some firms pay their taxes for example some have been able to evade such remittance of taxes. (Fletcher and Brown, 2005) Globalization can be defined as the interaction of people from different cultures, societies, and diverse backgrounds in undertaking various business activities with the aim of achieving their goals. Because of globalization there have been great disregard to national borders, governments have lower hand in controlling the flow of their economies and Multi-National Corporations are now not restricted to only one particular nation as it was before. Globalization have led to significant increase in production of business services for instance firms dealing with Just-in-Time ideas have led to customers getting information .e.g. delivery of products in time. Due to globalization financial systems in organizations have now been integrated and they work as one unit thus enhancing the chances of conducting business globally for example through the use of Credit Cards and the existence of flexible exchange control systems in many nations. However, for globalization to be attained the concept of international business has been useful since many firms have now been engaged in international malpractices related to business. International Business management practice is the greatest concept that must be understood clearly by all managers and Chief Executives Officers of MNC’s before going global. It is the process of applying management concepts and techniques in multinational environment so that firms can become and remain international in scope. This process is influenced by new technologies, improved communication and transportation systems. It involves identifying the suitable approaches to going global e.g. joint ventures and foreign direct investments and understanding all the advantages and disadvantages of each approach before going international in any business undertaking; British American Tobacco Company have utilized FDI approach in many countries in its attempt to go international. Going international depends on several factors that the individual companies must consider, for instance; the cost of entering the new market, existing policies in the country of choice, the rate of technology, foreign currency exchange rate control systems among other factors. (Gronroos, 1994) Internationalization therefore has become the norm of modern business and it has been enhanced by many factors. Such a factor is that of information communication technology; Information Communication Technology (ICT) remains an important aspect in building organizational value. ICT has the capacity to change product nature, their processes, change industries and companies and even affect competition itself. The introduction of e commerce, which can be defined as selling and buying of goods or services using electronic media for example, the internet as seen an increase of volume of goods and services being bought and sold. BAT Company has utilized the concept of E-commerce by reaching out and exploring to new markets all over the world which has given the firm added advantage since it has acquired large market share. (Baker, 2000) The other aspect that has encouraged internalization is that of reduction in trade barriers among countries. Most nations because of intervention of such bodies like the World Trade organization and International Monetary Fund have relaxed their trade barriers thus providing incentives to multinational companies to go international. This has been enhanced through the process of regionalization for example European Union; where its members which are developed have only concentrated in helping its colonies or specific countries in developing. A good example is that of Britain funding Kenya to initiate some viable projects. However, international business has led to loss of culture and national identity; for example MNC’s have been reported to dominate fully the markets which are not of their origin. For instance in the case of McDonald Corporation, the firm has opened many branches and now to some extent dominates in many countries. (Hoyer and MacInnis, 2001) Read More