International Business Operations - Assignment Example

International Business Operations Table of Contents Question 3 Question 2 5 Question 3 6 Question 4 8 Question 5 11 References 13 Question China is one of the leading economies of the world and a trading superpower. China has been one of the incredible export engines in the field of manufacturing goods over a past decade. In the year 1978, the total import and export of China was US$20.6 billion and contribution made to the world trade was one per cent. On the contrary, in the year 2010, China’s trade exceeded US$3 trillion contributing 10.4 per cent in the world trade (Li, 2013). In this regard, it can be determined that China is maintaining itself as a manufacturing superpower. However, with the growing competition in the global market and the changing preferences of the people, China might face threat to maintain its position as a superpower of manufacturing. The mounting pressure from countries such as Mexico is pulling the production away from China. Conversely, it is determined that China is the world’s manufacturing workshop as it has a number of manufacturing plants established over the last few decades. China has taken over the United States (US) to become the leading exporter due to the support from Foreign Direct Investments (FDI). China has enhanced FDI flow which is benefitting the trading aspects even due to the increased pressure. China has maintained a strong Gross Domestic Product (GDP) growth and export import policies with a large customer base. Thus, it can be anticipated that China will not relinquish its global supremacy and will be able to sustain its superpower for a decade and more even after the threat from certain other upcoming economies. The key reason is the strong Gross National Product (GNP) and GDP of the country. The confidence is built by the country on the foreign companies to move their export oriented manufacturing plant to China. The strong employee base and international business operations with other countries support the position of China in being the superpower of manufacturing. Moreover, the setup of special economic zone (SEZ) is an important strategy that has given China’s economy a major boost to draw global business conglomerates for setting up their manufacturing operations (Shirk, 2007). Correspondingly, it is observed that the announcement by General Motors regarding their investment of USD 540 million in Mexico made the country join in the growing list of manufacturers (Banderas News, 2013). In this regard, Mexico can be the next country taking over the position of China in trading. Mexico can be stated as the next position holder as it replicates benefits such as low cost of shipping and low wages which makes it competitive and Mexico is also enjoying the benefit by getting FDI in considerable amount. These factors are helping the country to flourish in the manufacturing and trade activities. Mexico is gaining support from various European as well as North American businesses to develop into a manufacturing superpower. Besides, in the present day context, the differences between the wages are less amid China and Mexico which creating a decisive edge for Mexico. The manufacturers at China are facing pressure related to cost management and thus the scope for Mexico is increasing. The environment of Mexico in respect of salary growth, market expansion and business culture is making the country to be considered as the next superpower (The Offshore Group, 2013). In accordance with the report of HSBC, with the growing rate of the export, Mexico can acquire the position of China by 2018 primarily because of the shrinkage in the labour cost (Banderas News, 2013). Question 2 If given an opportunity to work for particular company, in relation to the present day purview, it will be prudent to opt for working in a Western MNE such as Microsoft from USA, a developed economy moving into India, a developing economy. The reason for such choice is because of the availability of wider scope for nurturing the work in the best possible manner. The rational reason for such choice is due to the availability of growth potential. It is acknowledged that the growth in the emerging market is more than that of the developed economy due to wide range of scope. In the long run with the growth of the business, the prospective for the candidate to leverage more career growth would also rise in terms of revenue. The emerging market will help to increase the domestic household income and gain FDI support, thereby increasing the prospect for the candidate. Owing to the fact that the Indian economy is emerging, the company Microsoft will get a first mover advantage in the country and is likely to be successful to derive its niche in the Indian market. Subsequently, in order to project oneself as an attractive candidate the key management skills should include the ability to adapt to changes, along with understanding the cultural aspects and rituals by facing minimal risks. The essential management skill is to have proper knowledge regarding the country, the culture and about the people along with the demographics. Being in an emerging economy, it provides scopes as well as few limitations. Understanding and evaluating the traits of the past performances of the country in that sector and the shortcomings faced are the important skills that might assist the candidate to be the chosen one among the number of available candidates. The other essential management skill that is important is the ability to adapt to changes and promoting personal growth by working in an emerging economy. The ability to evaluate the trait of the people regarding the company and business emerging in the developing country can make the candidate prospective. To gain proper knowledge regarding the economic position and evaluate the track record before incurring any decision are important factors. The selection of the job itself explains the intelligence of the candidate as it is important from a management point of view to expand the business in a market which is not explored rather than entering a market which is in a maturity stage (Gibley, 2012). One of the vital skills required to emerge as a potential candidate includes the need to have a proper knowledge regarding the culture, proper communication skills, motivational aspects, self-reliance, risk taking attitude for better prospect and diplomacy. Foresight regarding the perspective of the growing economy, sensitivity towards demographics, optimism, resilience and experience are the vital factors for the candidate to be effective and well organised. Moreover, the personal aspects also make the candidates attractive. Knowledge of the business practices in the world, the implication with regard to culture, flexibility, and the level of risk tolerance are a few such skills. The ability to create brand value of Microsoft in the country, along with generating huge market share and eliminating the various other complications is the other aspects associated with management skills (Ellis, 2005). Question 3 International firms face various risks while operating their business in the overseas market. In order to mitigate the risks, it is important for the business to implement strategic risk management. Strategic risk management is a method of recognising, assessing, managing risks as well as uncertainties which are affected by the internal along with external scenarios. The uncertainties and the risks are the factors that obstruct the organisation in attaining the strategy as well as the strategic objective. Through the implementation of the strategic risk management framework, the international firms will be able to achieve their ultimate goal by protecting the shareholders’ value along with the stakeholders. The implementation of the risk management strategy helps to evaluate the risk considered due to the internal factors of the country and the organisation along with the external factors such as the economy, politics and exchange rates (Frigo & Anderson, 2011). It is an important factor that risk not only creates potential loss for an organisation but also provides potential benefits. The allied risks provide value to the firm if the risk is adjusted in the management level by evaluating various factors. Through the help of strategic management, risk can be reduced to a certain level by getting timely information. For example, strategic risk management is effective as it supports business planning by making effective use of the resources. Strategic risk management will help to grasp new potential opportunities with minimal risk due to the strategy development and continuous improvement. There are various methods through which risk can be analysed in the strategic risk management purview. The methods include the Risk Factor Analysis (RFA), Risk Analysis and Management of Projects (RAMP) and Shape, Harness, And Manage Project Uncertainty (SHAMPU). Moreover, in order to identify the threat from the internal external source, it is important to manage the risk using the SWOT analysis (Tyson, 2011). RFA is a vital method through which risk can be analysed through the quantitative approach. RFA is a flexible factor that adapts to various risks keeping in view the cost factors related to the labour and materials. The risk can be managed by evaluating the organisational strategy along with the countries cultural and political aspects. For instance, demographics, human resource and communication strategy are vital aspects which are to be analysed to derive proper result. RFA evaluates the technical risks and personal risks and thus helps the business to reduce the risks through proper strategic risk management. SWOT analysis is another important risk analysis method which evaluates the internal strengths, weaknesses along with the external threats and opportunities. This analysis helps to understand the risk associated with the business like competitor risks and political risks among others. These methods offer information which is effective for managing the risks existing in the environment and reduce losses. The methods are effective to analyse the existence of risk which can hamper the organisation. The method supports the need of decision making regarding the mitigation of the political, cultural, economic, financial and unique risk through the response strategy (Li, 2009). Question 4 The analysis of the competitive environment and the needs of the people of a location is a vital aspect when entering a new prospective country. The competitive environmental framework is important to identify the market potential, performance, infrastructure and also the resources (Daniels & et. al., 2001). In this regard, a PEST analysis is conducted of the potential candidates for setting up of a new manufacturing factory. Political France: The country is developed and has political stability. The country has no crisis, conflicts in terms of the political environment and thus provides a suitable business environment to set up a new manufacturing factory. Setting up of business in France requires substantial capital and government has limited the investment for the foreign enterprises to 1,500,000 Euros. The government has implemented mandatory tax system wherein every business has to pay tax (Scribd Inc, 2014). Turkey: Turkey has democratic government providing power to every governing body. It has a stable foreign policy formulated in the recent years with various global initiatives. The stability in Turkey is less compared to France due to the political turmoil with Iraq (Datamonitor, 2008). Poland: The political environment of Poland is unstable and it is ruled by centre-right Civil Platform. In the recent years, the country has become open and free with regard to the business domain with increasing flow of FDI (Eskildsen, 2011). Economic France: GDP of France is USD 2612.90 billion representing 4.21% contribution in the world economy in the year 2012. It implies better economic stability with purchasing power of the people. The rate of employment in the country has increased due to better economic situation. The economic environment of France is favourable for the business (1Trading Economics, 2013). Turkey: The economy of Turkey has improved with a GDP of USD 789.30 billion contributing 1.27% to the world GDP in 2012. This implies that the purchasing power of the people is moderate. The country is trying to increase the savings of the people and reduce the deficit (2Trading Economics, 2013). Poland: GDP of Poland was USD489.80 billion in the year 2012 with 0.79% contribution. The economy is not very strong for the business to be effective (3Trading Economics, 2013). Social France has a greater skilled workforce as compared to the other two nations. Moreover, the growth rate of the country is also more with high literacy rate in comparison with the other prospective countries. The social aspect of France is attractive for the business operating in personal computer industry due to the demographic factors. Technology France offers an outstanding technological environment and is the leader in space technology. The government provides fund for the growth of the technological development to have better living standard. Besides, the country provides relief on tax for the companies’ R&D operations. Whereas Poland lacks innovation and technological development due to the weak economy it poses and a lack of literacy. Turkey is developing in the technological sector but is way behind France. European Union provides support to the people of Turkey (Scribd Inc, 2014). Thus, from the PEST analysis, it can be reflected that the potential location for the business to set up its manufacturing factory is France due to its better scope related to skilled workforce and stable business environment. Question 5 Wal-Mart is one of the leading retail enterprises and employers in the world. In the recent times, it is observed that the retail industry based organisations have often failed to meet the Corporate Social Responsibility (CSR). Subsequently, Wal-Mart faced various issues regarding its unethical acts due to the violation of the labour law. Wal-Mart has been engaged in various scandals in its overseas business such as the bribery issue. The unethical behaviour of the company is evident from its low wage policy and long working hours. It is observed that the retail workers get USD7.50 per hour for their full time service and they need to work for nearly 40 hours a week (Crofoot, 2012). This reflects that the employees of Wal-Mart are quite financially challenged as they are not being provided with minimal wages. Furthermore, the health policy of the company was not up to the industry standards due to the various irrational clauses. The working condition provided to the employees was not hygienic and the behaviour of the management towards the employees was pathetic. They are alleged of not following the employment practices and overlooking the facts of employee welfare. Furthermore, Wal-Mart has been accused of violating the law by employing child labour and illegal workers (Scribd Inc, 2011). It has also been alleged that Wal-Mart is against women employment. It has been charged of supporting racial and gender discrimination. Furthermore, it is determined that the working condition was such that the employees were forced to work round the clock without any rest. The treatment of the women employee is considered as an illegal and unethical concern for the business. This implies that the CSR of the company is not being followed properly due to the allegation such as bribery. The notion of Wal-Mart is to provide low cost product which is at times met by providing harmful products. It can be termed as a socially-irresponsible business practice. Besides, Wal-Mart is accused of mixing melamine in the food offered for the dog and harmful paints for toys that might lead to killing of children (The American Association for Justice, 2010; Oliver, 2007). These activities were objected by the labour laws due to the various unethical activities in the company from several years. The issue related to Bangladesh, Mexico and other countries made the fact visible to the people i.e. the real story behind the low cost of goods. A reformation in Wal-Mart is possible by reengineering the business model of providing the low cost product. Moreover, the business must create return on equity in order to provide the investors with comparative return. In order to regain its reputation the business must be operated with ethical business practices. The company needs to build its Reputation Management Strategy in order to regain the confidence of the people. The business will require following best employee practices by disregarding discrimination and providing equal opportunity to the people (Davis, 2007). The reputation can be built by managing the issues within the organisation by proper communication, abiding by the legal as well as labour laws. The ethical practices of the business should be maintained by following a proper ethical supply chain management (SCM) and stakeholder relation. References Banderas News, 2013. Mexico - The Next Global Manufacturing Superpower. CNBC. [Online] Available at: http://www.banderasnews.com/1311/nr-mexicomanufacturinggiant.htm [Accessed March 23, 2014]. Crofoot, A., 2012. Wal-Mart: Rolling Back on Ethics. Business, pp. 1-20. Daniels, J.D. & et. al., 2001. International Business: Environments And Operations. Pearson Education India. Datamonitor, 2008. Turkey. In-depth PESTLE Insights, pp. 1-71. Davis, N. D., 2007. Corporate Reputation Management, the Wal-Mart Way: Exploring Effective Strategies in the Global Market Place. Department Of Communication, pp. 1-90. Ellis, C.W., 2005. Management Skills for New Managers. AMACOM Div American Mgmt Assn. Eskildsen, N.H.S., 2011. Nordea Bank Polska S. A. Copenhagen Business School, pp. 1-120. Frigo, M.L. & Anderson, R.J., 2011. What Is Strategic Risk Management? Strategic Management, pp. 21-61. Gibley, M., 2012. Emerging Markets: What You Should Know. Resource. [Online] Available at: http://www.schwab.com/public/schwab/resource_center/expert_insight/investing_strategies/international/emerging_markets_what_you_should_know.html [Accessed March 23, 2014]. Li, X., 2013. China as a Trading Superpower. Reports, pp. 25-31. Li, S., 2009. Risk Management for Overseas Development Projects. International Business Research, Vol. 2, No. 3, pp. 193- 196. Oliver, W., 2007. Wal-Mart Owns Up to Melamine in Dog Treats. Newser. [Online] Available at: http://www.newser.com/story/6251/wal-mart-owns-up-to-melamine-in-dog-treats.html [Accessed March 23, 2014]. Shirk, S.L., 2007. China Fragile Superpower. Oxford University Press, pp. 1-320. Scribd Inc, 2014. PESTEL Analysis. PESTEL France. [Online] Available at: http://www.scribd.com/doc/36606235/pestal-france [Accessed on March 23, 2014]. Scribd Inc, 2011. WalMart Ethical & Unethical Business Practices. Wal-Mart. [Online] Available at: http://www.scribd.com/doc/46644779/WalMart-Ethical-Unethical-Business-Practices [Accessed March 23, 2014]. 1Trading Economics, 2013. France GDP. France. [Online] Available at: http://www.tradingeconomics.com/france/gdp [Accessed March 23, 2014]. 2Trading Economics, 2013. Turkey GDP. Turkey. [Online] Available at: http://www.tradingeconomics.com/turkey/gdp [Accessed March 23, 2014]. 3Trading Economics, 2013. Poland GDP. Poland. [Online] Available at: http://www.tradingeconomics.com/poland/gdp [Accessed March 23, 2014]. The Offshore Group, 2013. Mexico Manufacturing Information. Mexico: The Upcoming Manufacturing Superpower. [Online] Available at: http://offshoregroup.com/2013/11/21/mexico-the-upcoming-manufacturing-superpower/ [Accessed March 23, 2014]. The American Association for Justice, 2010. Playing with Safety: Dangerous Toys and the Role of America’s Civil Justice System. Justice, pp. 3-15. Tyson, B., 2011. Methods of Risk Analysis. Risk Management. [Online] Available at: http://www.brighthubpm.com/risk-management/110911-methods-of-risk-analysis/ [Accessed March 23, 2014]. Read More