New Globalization Regulations - Research Paper Example

International Business Essay Name: Course: Tutor: Institution: Date: Introduction The global market has over the years expanded and increased in its influence and popularity (Soriano and Dobon, 2009, p.235). In this case, as Singh (2010, p.7) argued, companies both multinational enterprises as well as the small and medium enterprises have expanded their overall market influence. Studies have in the recent decade demonstrated an increasing business globalization approach. For instance, a review by Tisdell (2001, p.579) argued on the nature and extent to which organisations have focused on venturing onto the global market through increased globalization internationalization strategies. However, as the essay focus summary article study by Bremmer (2014) demonstrated the global market and the approach and regulations to internationalization and globalization regulations. The study pointed out on the increased nature of government involvement in globalization and the emergence of new globalization rules. Based on this study argument, this essay evaluates the changing nature of globalization rules as well as their implications on respective organisations internationalization strategies. New Globalization Regulations State Capitalism One of the key new globalization regulations is the rise of state capitalism through which the government has stepped up and increased control of vital industries and sectors in the market that they consider strategic Aligica and Tarko (2012, p.359). In this case, the governments seek to control such industries as a measure of national interest or to reduce foreign dominance. Based on the evaluated and discussed changes in globalization rules such as the change and shift of the global economy from a free market to a government controlled economy as well as the rise of state capitalism has implicated on a variety of organisations new market entry market approaches (Haley and Haley, 2013, p.42). In this regard, the organisations have resulted to alternative market entry strategies that seek to mitigate the increased market controls such as exportation as well as joint ventures as discussed later on in details. These arguments can be evidenced by the study developed by Whitelock and Rees (1993, p.26). In the study the authors established a growing and emerging trend in the use of joint ventures as new market entry methods. This is a clear contrast of the study reviews by Kling, Baten and Labuske (2011, p.249) that established a declining use of foreign direct market entry procedures. Standardization An additional new globalization regulation is increased standardization. Unlike in the past where products quality was not a major interest issue, current systems advocate for standards and quality retention status across the foreign markets by the multinational players. As such, the new globalization regulations such as the need for increased products quality through improved standardization approaches have greatly implicated on the organisations production and operational processes. Lewis, Pun and Terrence (2006, p.966) evaluated the concept and implications of increased globalised competition. In this case, the study established that through increased regulatory measures such as the introduction of the ISO regulations on quality and the certification awards. As a result of these requirements, organisations have developed and established quality control systems. This is characterized by the increased application and use of the total quality management systems by multinational organisations as Perego and Kolk (2012, p.175) argued. Government Regulations The new age of globalization has experienced increased government regulations in the market. As such, global internationalizing ventures face government controlled markets rather than free markets. For instance, the Indian government sought to liberalize the drugs manufacturing industry. Therefore, the government cancelled the Pfizah patent to allow for the manufacturing of new cancer drugs in India at cheaper prices Bremmer (2014, p.2). Moreover, an additional example of increased government regulations on globalization and international markets can be cited in the case of China. The Chinese government in 2009 sought to liberalize the medical and healthcare drugs industry. In this case, the government established a price cap on a series and range of drugs. Consequently, this implicated on the pricing and profit margins of international ventures serving in the industry and supplying the drugs Bremmer (2014, p.3). Moreover, the government intends to expand the drug price cap base onto 500 drug brands. Therefore, this is likely to implicate more on the revenue models and streams of the respective globalization ventures in the Chinese market. The above examples indicate the increasing nature of government and state capitalism influence on globalization and internationalization business ventures (Tahir and Larimo, 2005, p.295). As such, the increased government involvement as well as increasing regulation approaches necessitates the need for globalization organization to adopt adaptive and adoptive strategies and measures through which to venture into the new markets. This includes prospective changes in the internationalization strategies as well as international markets expansion and development approaches. Evidences of Changing Globalisation Strategies Based on the above analysis on the changing nature and regulations on globalization, organisations are bound to change their entry and operational approaches in the market. In this case, organisations are likely to change in their strategic approach to the markets. The OECD (2008, p.30) argued that a majority of the organisations in the market traditionally adopted and applied the foreign direct investments (FDI) approach. Through the FDI approach, organisations directly set up production ventures as well as subsidiaries. However, changing government regulations such as high taxes and tariffs for the FDIs in a majority of the global markets has increased the production costs of these ventures (Neuhaus, 2006, p.142). Therefore, based on these arguments, the organisations are likely to adopt new strategic approaches of venturing into these markets. Among the expected approaches is through exporting, franchising, Joint ventures and market localization strategy. Exporting Meerhaeghe (2012, p.242) sought to describe and expand on the concept of exporting as a market entry strategy under globalization for organisations. In this case, the study argued that through exportation approach, organisations reduced their presence in the foreign markets. Under the exporting approach, organisations liaise with the external stakeholders in the market. As such, through the established relationships, the organisations export their products to the external partners. Stottinger and Holzmuller (2001, p.9) conducted a study to evaluate the working and business model of the exporting business approach. In its review, the study established that one of the key characteristics of the exporting business internationalization approach was the reduced involvement of the producing organisations and the greater role played by the foreign partners. In this regard, the producing companies develop trade agreements with international organisations that purchase the goods from them on a re agreed price and rates. In this case, The Export from Australia (2014, “Export Strategy”) website stated that once the organizations purchase the products, they acquire the ownership and possession rights. In this case, this implies that ones the products are transferred from the producer to the importing entity, their possession and ownership simultaneously change. Consequently, the producer looses all rights as well as responsibilities on the products once they exchange hands to the foreign partners. Subsequently, the foreign partners acquire the rights to rebrand the products to their desired brands as they so wish. Through this approach, rebranding increases the domestic nature and approach through which the products can be increasingly adopted and accepted in the market (Zou, Kim and Cavusgil, 2009, p.8). The exporting approach has a range of merits as an internationalization strategy to the exporting globalizing organisations. On one hand, the organisations interactions with the foreign markets are considerably reduced. Therefore, the challenges and risks of coping with the dynamically changing foreign markets socio and economic aspects are considerably reduced. Moreover, business costs associated with internationalization such as marketing costs are considerably reduced. Therefore, this forms a potential approach through which internationalizing organisations are likely to adopt in a bid to reduce on the associated market related costs (Muller, Cloete and Badat, 2001, p.14). Therefore, this essay asserts that global ventures seeking to internationalize will consider the exporting approach as a viable globalization alternative. Franchising Franchising is a business model and approach through which organisations seek and subsequently establish liaisons and partnerships with locally established firms in their internationalization approach. In this regard, through franchising, organisations seek out already established foreign market players with the market domestic origins to establish approaches and nature through which to venture and penetrate such foreign markets. Through a franchise approach as Pradhan and Pradhan (2009, p.23) argued, organisations apply the existing business models and approaches of the selected franchisees businesses. Greco (2001, p.8) evaluated the business model and structure of the franchise approach as an internationalization strategy alterative. In this regard, the study established that through payment of loyalties, franchisee businesses acquire the mandate and legal authority to supply specific franchisor brands through their organizational business structures and distribution chains. In this regard, the franchisee business ventures benefit from the approach through their increased product diversity and variety a major contributor to the overall increased market brand positioning as well as increased organizational sales, a precursor to increased revenue streams in the market. On the other hand, the franchisor organization benefits form a range of merits such as the existence of ready market structures. In this regard, the organisations will not be required to develop and invest high capital values as part of their initial investments common under the FDI approaches. In this regard, the organisations are bound to reduce on their investment costs. Moreover, through the adoption of already existing ventures, organisations are bound to overcome the challenges of increased governments regulations and insulations of foreign ventures though tariffs and taxes (Zweig, 2002, p.36). Therefore, through the adoption of this approach, organisations will overcome the state capitalism approach adopted by international governments. In addition, the adoption of the franchise approach and its merits in reduced expansion costs will enable organisations achieve their internationalization dreams. In this regard, through this approach, organisations would diversify internationalization funds to many international markets unlike under the traditional FDI approaches that channelled huge resources in single markets due to the high initial capital investment requirements. Therefore, based on the merits and obvious gains for the application of the franchising approach as an internationalization strategy, this essay develops the arguments that a majority of the globalizing organisations will result to the adoption and assimilation of this approach as their key internationalization approach in the market. Joint Ventures One of the strategic internationalization approaches available for globalizing organisations in the market is the joint ventures approach. As already illustrated in the above arguments, state capitalism seeks to reduce on foreign domination in their economies through encouraging and supporting local industries and organisations. The Economist (2114) post debate article noted that through state capitalism, international governments seek to safeguard industries perceived strategic and of great importance to their success and execution. Therefore, through this approach the governments offer subsidies and incentives to local organisations while rising taxes and tariffs as well as entry barriers for foreign organisations, to curtail their influence in the market. Therefore, one approach through which international organisations can circumvent the challenge is liaising through joint ventures. Boateng (2004, p.58) in Ghana joint ventures case study, argued on the nature through which joint ventures are formed and executed. In this case, the study established that local organisations benefit from such ventures through increased capital base through which they can expand their operation and execution of their mandate in the market. Therefore, through joint ventures, local organisations stand a chance to benefit from increased funds and quality establishment in the market. In addition, the study established that through increased joint ventures use as an internationalization strategy, organisations are bound to increase their influence in the global market as they can avoid the high taxation and regulatory requirements traditionally experienced under the FDI approach. Consequently, through this approach the organisations would in over and acquire consumer base support. O'Dougherty (2007, p.56) argued that besides government regulations, state capitalism approach elucidates itself in the consumer buying behaviours where the industry allows for increased consumption and demand for local products rather than foreign goods. Therefore, through joint ventures, such organisations will attain increased demand for their products through the local aspect tag through the ventures. Based on the internationalization approach, this essay develops the argument that the strategy serves as a key internationalization approach for global organisations in the wake of new regulatory regulations. Conclusion In summary, this essay offers an evaluation of the changing globalization regulations as well as its implications on the nature and internationalization approaches adopted by the respective organisations. In this regard, the essay develops its argument from the article developed by Bremmer (2014), arguing on the changing globalization regulations. As such, the essay establishes that through increase state capitalism revolution in the market, has led to reduced attractiveness of FDI investments in the market. In this case, the essay establishes that increased tariffs and taxes for foreign investors as well as subsidies and incentives for the local investors among global markets. Therefore, the essay establishes that there is need and increased likelihood that foreign organisations will consider alternative internationalization strategies. In an evaluation of the potentially viable internationalization alternatives, the study establishes that among other potential alternatives include exporting, franchise and joint ventures. In this case, the essay concludes that through the application of these alternatives, internationalizing organisations will circumvent and overcome the existing state capitalism development in organisations globalizations aspects. References Aligica, P.D. & Tarko, V. 2012, "State capitalism and the rent-seeking conjecture", Constitutional Political Economy, vol. 23, no. 4, pp. 357-379. Bitzenis, A.P. 2005, "Company oriented investment interest and cross-border transactions under globalisation: Geographical proximity still matters", European Business Review, vol. 17, no. 6, pp. 547-565. 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