International Business Management Assessment - Example

RUNNING HEAD: Assessment Report International Business Management Assessment Report Name Subject Professors Name Date Contents Contents 2 Question 1: 3 Reasons for carrying out International Trade 3 Question 2: 5 Barriers to international trade 5 Arguments for and against trade protection 6 Question 3: 7 Main types of political and legal risk 7 Strategies to manage political and legal risk 8 Question 4: 9 Hofstede's framework for analysing cultural differences 9 Strengths and weaknesses of Hofstede's Framework 11 Cultural characteristics influence on patterns of communication 11 Communication characteristics consideration by Managers 12 Question 5: 14 International trade organizations 14 Regional economic groups Influences 15 References 16 Question 1: Reasons for carrying out International Trade An international business is one that takes place over and across national boundaries compared to having a business set up a run within one particular country (Gamble, 2011). Content Incontinence (CI) is an Australian Biomedical Company set up by German migrants as well as they have already had a worldwide reputation for being amongst the best in dealing with incontinence. The main reason would be to seek a better and open market as opposed to staying in Australia which is saturated with CI’s products and services of treating incontinence. In India, the persons who are in need of their injections for incontinence is about 40 million people compered to Australia where those in need of the services are approximately 1 million people. Tapping is not foreign markets would give them better returns, as well as new people who can try their products. CI’s operations and the company would have other sub branches within foreign countries increasing its operations abroad. This is based on the fact that most companies do not desire imports but welcome an opportunity to have products made within their countries to enhance employment, boost their revenues as well as protecting their domestic markets. CI can also trade internationally based on the economies of scale, lowering resources and labour costs. Setting up a company abroad would best based on the availability of labour, reduced exports costs as well as competiveness within the foreign country with other companies providing the same services. Competition would also be an essential factor in setting up international trade in foreign countries to get maximum returns through providing a base to sell their products to gain a competitive advantage over other countries. CI might wish to trade internationally mainly to avoid the licensing their company’s technology abroad as well as get access to raw materials to enhance the companies. They may wish to avoid the problems that come with an alternative strategy such as licensing their company’s technology to an overseas company. International trade will also eliminate the dangers of having middlemen to sell their products during the manufacturing and distribution in different countries. CI will also be advantaged because they would have access to new technologies available in other countries other than Australia and better improve their procedures in treating incontinences. Experience garnered through international trade will also be enhanced as well as increasing the company’s reputations worldwide. Types of International business for CI Merchandise exports and imports: This type of business involves the merchandise exports of tangible goods sent out of a country, while merchandise imports are tangible goods brought into a country. CI would be keen in taking this type of international trade to meet the requirements of its manufacturing company through importing pharmaceuticals and scientific instruments necessary for their injections. The exporting and importing of goods would be an ideal source for CI’s revenues and expenditure for most countries. A foreign Investment is commonly linked to the ownership of property abroad, usually in a company, for a financial return. It involves two types; direct investment takes place when control follows the investment, therefore CI will get better returns when it invests in the foreign market and controlling the assets that are invested on. A joint venture would also be an ideal investment for CI as they can contract with another foreign company offering the same trade opportunities to enhance their market and competitiveness. Portfolio investments would also be a type of international trade applicable to CI’s purchase of foreign financial assets (stocks, bonds and certificates of deposit) for purposes essential for trading and better returns. Globalization Globalization is linked to the increase to interdependence of different countries in the increasing of trade, finance, ideas in a global market place, mainly international trade and the cross border trade. This term does not apply to countries where there is no good communication and they are not pro international trade (Hill et al., 2011) Question 2: Barriers to international trade Countertrade is a barrier to free trade that involves linking of an import and an export transaction in a conditional fashion. The main types of countertrade include: barter trade that involves the exchange of goods for goods without any form of currency used, counter-purchase that mainly associated with parallel contracts involving sale and purchase; buyback the provision of productive facilities paid for with the resulting output; and offsets which involves agreeing to make some purchases from firms in the customer’s country. This form of barrier entails that there is no purchase of goods for value but CI would only be getting goods depending on what they would get from the foreign country. The insufficiency of foreign currencies to buy goods would affect CI’s international trade especially in developing countries. Trade tariffs are also a barrier to international trade, based on the fact that most countries would seek to insulate and protect their domestic markets. Tariffs can affect CI based on the closed market of the foreign market, and they cannot export their products for fear of competing with domestic products. Arguments for and against trade protection The Fallacious arguments seek to state that money would be kept at home as opposed to investments abroad and profits being credited to the investing country. The other issues is that the domestic producer requires the protection and right to access the domestic compare to foreign products; Moreover tariffs are aimed to equalize the costs of protection basic on the fact that only certain goods are allowed limited access to the country. Labour obtained in the foreign country would be quite lower as opposed from labour in the investing country and trade protection is also necessary to prevent injuries to it before a concession has been negotiated on. The questionable arguments are on the question of employment as most countries introduce tariffs to protect their home production and employment as opposed to open market where no opportunities are presented to them. Bargaining and retaliation is also an aspect in trade protection based on the fact that better services can be got through better bargaining. Reciprocity is the ability of different countries to give access to the market of foreign companies, on the premise that the same would be given to their countries, where there is no reciprocity, and then international trade opportunities are limited. However there are qualified arguments in cases where the national security of the foreign country can be compromised hence international trade cannot be carried out. The aspect is on the stability of the trade depending on whether it is on a long-term basis or on short term, the benefits are what would be the basis of protection. Sophisticated arguments are mainly focused on the terms that CI would seek to incorporate into the foreign country as well as the setting of the optimal tariffs. Another reason for protection would be premised on how well CI can perfect the already imperfect market economies unless CI will provide better opportunities to improve its standing in the global economy. Question 3: Main types of political and legal risk Different economic objectives: CI is mainly based in Australia which has different objectives in how the undertake economic opportunities. Foreign countries might however has a different object dissimilar to Australia hence CI would be require having a changed economic objective to suit the foreign countries interests (Brooks et al., 2011). Monetary and Fiscal Policies ; the foreign nationals policies might be at variance with CI interest and desires for instance in interest rates and taxations, hence limiting CI businesses and investments and giving rise to conflicts. Industrial and economic development policies can pose a risk for CI and the foreign state to promote domestic industry as opposed to CI’s objective to gain competitive advantage globally. Laws of foreign Country: The laws of a country can also pause a risk based on the fact that different countries have adopted various forms of legal systems that might not suit CI’s policies and practices such as dealing with corruption, taxation and company laws (Terry & Giugni, 2010). Transition Governments: An unstable government or one under change of government can bring about risks and uncertainty for CI’s investments and its futures. Strategies to manage political and legal risk The effective strategies that would be crucial for CI in managing political risk may include: Negotiation of a long term commitments from the host government on the regulation of the companies activities, not necessarily based on written contracts but also the fact that the host country should not fail to meet its side of bargain, (Martinez & Mahony, 2002). Even if the agreement is in writing, there is no way it can fail to meet its contractual obligations. Legal action need to be provided to CI as a means of resource and a guarantee of a free and impartial judicial system. CI may also resort to use its relative bargaining power, based on the products and benefits that are not within that country. For instance if India does not have tangible parts to run their manufacturing plants and get the products, CI through its access to this products can deny India unless they agree to their own terms (Hill et al. 2011). Political lobbying would also be important based on the fact that they are the main people who influence decision making in the government. Australia can also use diplomatic channels in ensuring that CI gets support as well as exert pressure in the country where it invests. Joint ventures with a local company would also help alleviate political risks based on the fact that a local company can be affected by political action, something politicians would not want (Keillor et al., 2005). This will also aid in domesticating CI’s businesses within the host country. Adopting an integrative approach will be a necessity for CI to be in the host country’s infrastructure through; production of the CI’s as much of the products as locally as possible with the use of the in-country suppliers and contractors, the hiring of local people to manage the operation, carrying out research and development within the host country, and developing effective labour management (Cullen & Parboteeah, 2011) relations. Question 4: Hofstede's framework for analysing cultural differences Geert Hofstede is credited for creating the Hofsted’s framework for analysing cultural differences and divided it into two contexts: low-context and high context cultures (Ahlstrom & Burton, 2011). The dimensions identified are five that seek to establish national cultural differences. The high context for analysing cultural differences involves the importance of negotiation and the words spoken. Cultural clues are considered when individuals seek to understand what has been communicated as well as establishing interpersonal relations. In the low context framework what is used when attempting to understand what is being conveyed by a speaker, where the message is important to the listener. This is framework is ideal based on the fact that businesses generally seek to understand what is written in the business contract rather than the context where the negotiations took place or the relationships (Hurn, 2007). The dimensions include; the power orientation whose main attributes are that it focuses on the appropriateness of power, and authority differences, the extremities as well as the level of tolerance. Power is attributed to affecting the basis of negotiations or other agreements based on the fact that there can be no proper relationship between the superiors and the subordinates. Secondly the social orientation which is mainly concerned with the individual and the relations they have on groups that they do belong in. The social orientation does range from the aspects of collectivism as well as to the individualism. The other dimension is the uncertainty orientation which is mainly concerned with the tolerance degrees of future uncertainties. This can either be effectively by long term planning in any business. Motivation is highlighted in goal orientation dimensions which aim at attaining different goals. The last dimension is dependent on time orientation based on the fact that a business is influenced by both long term outlooks. The Hofstede’s framework is attributed to people in business to manage and understand the different cultures, as well as practices. Strengths and weaknesses of Hofstede's Framework The main strengths for Hofstede’s framework is that it identifies that the society can be grouped into two contexts that of high-context culture and the low-context cultures that are crucial in understanding the different cultural cues that exist within society (Daniels et al, 2012). The framework is also a guide for CI’s managers in understanding the cultural characteristics of the region where they work as well as giving them an understanding on why culture is important. The framework also provides for giving CI a chance to have long-term and short-term, plans to orientate their managers. CI will also be able attains its goals, as well as deal with uncertainty that might occur during their carrying on of business in a host country. The main weakness is that it fails to capture the issues of cultural convergence based on the fact that with globalizations, different cultures are being drawn close (Griffin & Pustay, 2010). Better communication, the understanding of other people culture and liberalization of trade have facilitated better communication as compared to how people carried on international trade in the old centuries. Cultural Similarities also arise based on the fact that different nations can have the same background, hence cultural barriers would not exist (Alhstrom & Bruton, 2011). Cultural characteristics influence on patterns of communication Communication is known to be an essential part of culture, and it affects both the verbal as well as the non-verbal communication in individuals. Language is also known define culture and multiculturalism based on the fact that there are diverse languages in the entire world. USA and in India there are different people from different cultures and backgrounds, and the official language cannot be used to delineate culture (McFarlin& Sweeney, 2011). CI operates in Australia which is an English speaking country while India is an Asian country known to communicate in English, but compared to Australia, India is more culturally sensitive. Unfamiliarity with the local language can however inhibit CI’s operations in India when the transactions would be based on persons who are from the local community. A cultural clash would also potentially arise based on the fact that Australia and India have different cultural background as well as the CI Company has adopted most of its policies from Germany. The chances of miscommunication would also potentially increase based on the relationships if CI would have employees or subordinates from India. Generally, nonverbal behaviour have different interpretations in the two countries, this would potentially give rise to different meanings in different continents. The state of India is considered to be a high-context society compared to USA that is considered to be like Australia which is low-context societies. Communication would be highly affected in India since they are multi-cultural therefore CI managers would need to adopt a different means of communication as opposed to USA. The attitudes of USA towards achievements are that risk taking in order to attain a personal gain is a characteristic not adopted in Australia. India on the other hand has been affected by brain drain; hence the expertise that would be needed in India would be high compared to USA where brain drain has not affected it. Communication characteristics consideration by Managers To adequately create effective communication, CI managers must first learn to appreciate the differences that exist in the interactions with people from all walks of life. The managers need to improve their communication by: Respecting cultural differences: The managers must be cultural sensitive when they interact with foreign environment with different cultural backgrounds. They would need to be open minded, listen to their concerns and contributions as well as understand their customs in the foreign countries. Listen to implicit meanings: Since CI plans to have and carry out an international business; there are different patterns of communication in both the low-context cultures and in the high-context societies, to ensure that they listen and understand to the meanings conveyed in their communications. Training and Speaking: CI managers would be required to learn as well as be trained on how to speak different languages depending on the state they are in. This would give them a better insight of how they can speak better, understand the customs, literature and philosophy as well as enhance CI business performance and competitiveness Be aware of Social-Cultural nuances: This would be important for CI managers based on the fact that they need to know how to properly address people in a formal business setup in the countries, in the proper manner. Awareness of perpetual differences; Perceptions on different things differ from place to place as well as individuals, being aware of these would enable the managers deal with misunderstandings within the company. Enhancing boundary-spanning activities: this is crucial for managers to enhance communication in different departments as well as peer groups and geographically dispersed operations (Daniels et al. 2011). This would be important for emphasis power distance in different cultural dimensions. Question 5: International trade organizations World Bank: The World Bank provides funds through providing multinational (or multilateral) loans or aid for development purposes. CI can seek funds to expand their international business abroad necessary for business, to fund their projects. Purchase of new technologies, as well as the World Bank’s centre for arbitration, will provide a basis for CI to resolve their disputes that arise out of their business transactions. The Multilateral Investment Guarantee Agency (MIGA) is also important in providing insurance-type agreements necessary for protecting CI against expropriation, currency inconvertibility , wars, revolutions or any kinds of civil disturbances. This would be important in protecting its investments in developing countries who are state signatories to MIGA. The United Nations: The UN can procure goods and services for CI that would be crucial for making good sales worldwide. The Asian Development Bank (ADB): the Asian market is crucial for CI’s investments and will also promote economic growth and cooperation in Asia. It is also important for CI since ADB will also provide and guarantee investments loans and technical assistance for the company. The World Trade Organization: WTO aims at promoting freer global trade and this would be an important factor for CI to facilitate better trading opportunities in different countries. Trade restrictions are also of importance because WTO will ensure that CI is not treated unfairly or less favourably as well as foreign enterprise will not be discriminated against in favour of domestic enterprises. Products such as software’s and equipment’s are also protected through free trade an advantage for CI. Regional economic groups Influences CI can seek to use the influence of APEC, the Asia Pacific Economic Cooperation to promote freer trade and cooperation within the Asia pacific regions. APEC, on the basis that Australia is a member will, ensures that it will have an access to the capital market as well as protecting its investments. The products made by CI will also be protected through the Intellectual property and rights issues hence their products would not be infringed (Argyrous & Barnberry, 2009). Closer Economic Relations (CER) will be of importance it CI based on its liberalization of trade across the Tasman as well as services of CI can be enhanced through the regional group, (Argyrous & Barnberry, 2009) Joining NAFTA will also provide for CI to have a fair competitive market as well as other procedures for dispute settlement, administration of trade agreements as well as their implementations. References Ahlstrom, D., & Bruton, G. D. (2011). International management: Strategy and Culture in the Emerging World (pp. 101-104). Australia: South-Western. Argyrous, G., & Bamberry, G. (2009). Cumulative Causation and Industrial Development: The Regional Stage. 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