International business Essay Example
Topic: Emerging Markets and Internationalization
In the recent years, there have been various changes for emerging markets and the trend in the changes has been changing a lot (The economists, 2014). Many companies with advanced management and technological advancements have invested abroad. When the foreign and emerging markets give customers in targeted markets products that do not meet their demands, the success of that project, business plan cannot be realized, or targets achieved (Jansson, 2007). Foreign and emerging business or corporate should first the understanding implications they are about to enter and be able to find sustainable strategies that will help them to ensure that there is a continuity between their supply, offer and customers demand (Frances, Henry & Giuseppe, 2009).
The implications exist in a wider spectrum because they involve understanding of the market trends, and existence of volatility within the market before the business is implemented. Many business people have had best business plans but they end up to quit from foreign markets because if failure to align their resources of product definitions with what customers want (Ramamurti & Singh, 2009). As such, closure of businesses may become so inevitable in the sense that, less number of customers will tend to buy the products or even show the will of buying them. The foreign market and host nations have different lifestyles, legalizations, social structures, beliefs, election calendars, and different political frameworks (The economists, 2014).
This means therefore that before any business decides to invest in a different country or away from the host nations, proper evaluations through documentary analysis, and case studies should be done to ensure that there is consistent and that every challenge has been noted. The noting down of the implications enables stakeholders to lay down the strategies that they might use to mitigate the noted problems (Frances, Henry & Giuseppe, 2009). The implications are broken into the following.
In the past years, foreign investments investing developing countries like Latin America, Africa, and Asia used to face challenges because of the unstable governments with regard to politics. Because of the instabilities was that, many businesses lost their goods, and equipments due to seizures from the government (Zucker, 1977). Political parties used to gamble for top sits in the government and any difference in relations between the host countries and foreign country that owns the business could lead to disappointments to investors because their investments were seized (The economists, 2014). However occurrence of seizures have reduced in many developing but has been changed or transformed into various other fatal policy regulations which have ended up sabotaging efforts of foreign investors (Frances, Henry & Giuseppe, 2009).
Whereas seizures have reduced, some nations have implemented policies that have even challenged investors from practicing sustainable businesses (Ramamurti & Singh, 2009). For example, some nations have initiated the idea whereby foreign investors are overtaxed. The extra value of fund they pay inform of taxes reduces their viability and position in the market. Still, some nations have implemented serious policies, which demands foreign to exchange the profits into local values for taxations. Depending with the exchange rates, investors end up spending more amounts to pay as tax, and the current studies have revealed that the challenges or implications of implementing internationally are more difficult to be ascertained, and comparison purposes, it is expensive than the seizures. Previously developing countries were more susceptible to experience chaos and wars during the election time and during time of political instabilities resulting from conflicting political interests.
Social and cultural
Cultures are different and they keep on varying from region to the other. This means that business operates in different cultures and serving customers who have different beliefs and expectations (Frances, Henry & Giuseppe, 2009). The most important aspects for business are to ensure that they operate within sustainable frameworks and meet cultural and business demands of people. Professionals working in different regions have been trained differently and they would always perceive things differently. Still, lifestyles of people are different and their lives are defined within unique and specific environments. Business doing international business in emerging markets is difficult because people are keen to note the branding and packaging styles of products (Zucker, 1977).
For example, the social lifestyle of Africa, Asia, and Latin America have been changing significantly and there by initiating the demand for phones. As a result Vodafone decided to sell its phones in most developing and emerging markets, whereas their sales in developed or western countries has been reducing (Zucker, 1977). This is a good strategic management Vodafone has among the people and customers. They company management to include social websites and features, which could enable people to communicate and share their ideas more happily, but sustainably (Zhao, Luo & Suh, 2004). Because of their features, many customers were convinced to buy the products and use them for communication and social stabilization purposes. However, many emerging businesses started to supply and find new markets in emerging markets, a scenario that has forced Vodafone to reduce and put in place new prices for the products. As such, the company has recorded low sales in the recent years.
Many international business practices being conducted in emerging and developing economies are being considered by many business firms as a mechanism to diversify the risk. The core reason for establishing and investing in low income or emerging countries is because the salary incomes and wage control are different with countries and regions. For some emerging markets, a large percentage of people are unemployed and therefore, there is a great room to negotiate on salaries (Zhao, Luo & Suh, 2004). Because of this, many stakeholders and investor do always take advantage of investing in low income countries because the wage control and compensation plan is almost low, and therefore, it keeps the profits at a stage. However, it has been noted that low-income countries are more vulnerable to insecurity matters because levels of unemployment are low, and therefore the crime rate is high. With regard to sustainability of business operations, economist journal outlines that most investors are more willing to invest in developing countries to benefit from the low wage control mechanisms and the high rate of unemployment among youths who are most of the time skilled men but with no jobs (Wright et al, 2005).
However, the implications is that, doing business in low income nations increases vulnerability to loose property through fires, vandalisms, undirected seizures, and low profits when market conditions change (Marinov & Marinova, 2012). However, multinational companies have found greater opportunities to diversify their risk by investing in different parts of the world (Zhao, Luo, & Suh, 2004). However, countries have different exchange rates and it may generate low sales for companies especially when inflation occurs. Such occurrences affected stability of several companies during the 2008 recession, and the ability to continue with the business was challenging because the effects of inflation was allover the world, and more evident in developing nations. Therefore, all the factors including cultural, social, political, and economic fluctuations between the home country and the international country should be evaluated and studied upon before an investment is done.
Market diversifications have occurred in different environments and many investors and managers have been left with many questions whether to invest in emerging markets or not. The puzzle can only be solved by considering the effects that macro-environment components can cause on the business (Wright et al, 2005). Numerous macro-environment components have been associated wit delays and challenges in the business sector. Their combined force is great and the effect has always affected many businesses on either a temporary basis or permanent basis. Almost all of the factors are dangerous to the welfare of international business in an emerging market but according to my evaluation and thinking, political risk is the worst macro-environment that poses serious consequences on businesses (The economist, 2014).
Impact of cultural environment on international business in emerging markets
Conducting of a business operation in different geographical locations leaves lot of gaps to be analyzed and understood. This is especially when politics of nations around the globe are unique to each other and similarities, the content, definitions, and with people varies. This means that there needs to be a transition between managers and stakeholders from the home based of thinking to the global mode of thinking (Wright et al, 2005). Every business plays a role in the market and the variability that exists between macro-environment components seems to have a common effect and negative twisting of a company’s objectives and aims. Since the beginning of the international markets, there have been increasing trends in numbers of businesses that have been looted and their occupancy burnt down or set on demolitions (Etemad, 2013). In the recent years, there have been revolutions and civil wars within developing markets and the worst encounters has been realized in cities where many businesses are operated or in urban centers where the market for most products is sought.
For example, political instabilities in most African nations such as Central Africa, Mali, Ivory Coast, Libya, and other nations led to destruction of many international businesses in cities and most of the products looted were consumed or used by government officials, and relatives of the doers. As much, there have been allegations that everything is being considered in order to ensure that when chaos occurs within the host country, businesses should be protected and given due guard. Political instability causes fatal problems to the organization when a firm involves use of Materials such as cement, wood or timber and metals. This is because the rate of taxation on local and foreign investors is different and therefore, most investors will require strategy to keep the business going, and adjustment funds allocations to enable the management withstand the extra costs that are imposed on them in form of taxes. This is because, after every election, the cabinet and the parliament have a tendency of adjusting their economic policies in order to reflect their manifestos that they promised to accomplish to their electors or citizens (Williamson, 1991). Random changes for taxation affect the total revenues being targeted by a company, and then the expenditure of sustaining the environment.
Some nations have established mechanisms whereby, any company operating on the international platforms have to apply for permits and license expensively while local or domestic businesses pay less for them. The changes inn government structures are not done in close discussion with international investors, and instead, the government officials and its cabinet do the proposal on change of foreign investment terms. However, the implementations of the proposed bills and regulation affect the foreign investors either in terms of tax compliance, or on resource allocations basis (Williamson, 1991). Some companies operate businesses and for technical matters, the management teams tend out source from the country of origin.
However, this approach and decision is restricted in some nations, which tend to tell the foreign investors to outsource from the host country, employ human resources from the host country or purchase goods and services from the host country (Zhao, Luo & Suh, 2004). This becomes difficult because it may change in pricing and strategic positioning. Emerging markets are critical even though the current changes and political will of the people has been enabling different companies to orient their businesses with the global expectations and controls on foreign investments (Zhao, Luo & Suh, 2004). Unification of foreign investment should be adopted by all nations and implemented an international body that will have a mandate to be neutral and advice nations on the need for uniformity in terms of taxations, resourcing, and marketing.
International entrepreneurship theory
The theory outlines that every business operating in a business market represents a unique platform for analysis on how political or policy risk affects normal operation of a business. The phenomenon outlines that small and medium based business have been shaping business conducts both in home cities and in host countries. For the same case, the need for managers to take a business on the international level requires a unified and direct step after consultations from stakeholders (Williamson, 1991). The theory outlines that, several managers have always wanted to operate their business on international levels, but then, they have failed to do so because perceptions still tell them to stop and look for other options of increasing their operations local. They fear that regulations and policy can change in host countries within a very short time and affect their businesses before even they establish or make profits (Williamson, 1991). Some of the managers have such perceptions because they have ever experienced such occurrences while working with other companies or have seen their competitor succumb into turmoil after making such decisions (Zhao, Luo & Suh, 2004). However, the theory outlines that almost all managers would like to take their businesses worldwide or on international scale but the conditions, imaginations, and restrictions restricts them from making such movements and decisions (Henisz & Zelner, 2014). Empirically, managers are always in need to expand their business operations but the problem has been that no one wants to make any tangible step without convincing their motives, and imaginations.
Emerging markets are potential field in which sustainable business operations are done. Management of business should look at challenges their operations will face when operating in different markets away from their home countries. Doing such requires analysis of macro and microenvironment components that poses danger to the business. This positions the business in a neutral arena where they can effectively compete with small, medium, large scale and most full-fledged businesses operating in host country.
Etemad, H. (2013). The process of internationalization in emerging SMEs and emerging economies. Cheltenham, UK, Edward Elgar. http://lib.myilibrary.com?id=490516.
Frances, F. Henry, M., & Giuseppe, L. 2009, understanding decisions to internationalize by small and medium-sized firms located in an emerging market. Viewed 29 April 2014, <http://www.freepatentsonline.com/article/Management-International- Review/223374189.html>
Henisz, W.J. & Zelner, B. 2014, The hidden risks in emerging markets. Viewed 29 April 2014. <http://hbr.org/2010/04/the-hidden-risks-in-emerging-markets/ar/1 >
Jansson, H. (2007). International business marketing in emerging country markets: the third wave of internationalization of firms. Cheltenham, UK, Edward Elgar.
Marinov, M., & Marinova, S. T. (2012). Internationalization of emerging economies and firms. Houndmills, Basingstoke, Hampshire, Palgrave Macmillan.
Ramamurti, R., & Singh, J. V. (2009). Emerging multinationals in emerging markets. New York, Cambridge University Press.
The economist . 2014, Business in emerging markets: The boom in emerging –market investment by rich world firms has led to a plenty of disappointment. Viewed 29 April 2014.
<http://www.economist.com/news/leaders/21598640-boom-emerging-market-investment-rich-world-firms- has-led- plenty >
The economists. 2014, Business in emerging markets: Western firms have piled into emerging markets in the past 20 years. Now comes the reckoning. Viewed 29 April 2014. <http://www.economist.com/news/business/21598642-western-firms-have-piled- emerging-markets-past-20-years-now- comes?zid=295&ah=0bca374e65f2354d553956ea65f756e0>
Williamson, O. E.,1991, Strategizing, Economizing, and Economic Organization, Strategic Management Journal, vol. 12: 75-94.
Wright, M. et al. 2005, Strategy Research in Emerging Economies: Challenging the Conventional Wisdom. Journal of Management Studies, 42(1): 1-33.
Zhao, H./Luo, Y./Suh, T., 2004, Transaction Cost Determinants and Ownership-based Entry Mode Choice: A Meta-analytical Review. Journal of International Business Studies, 35( 6): 524-544.
Zucker, L. G. 1977, The Role of Institutionalization in Cultural Persistence, American Sociological Review, 42 (5): 726-743.
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