Description
Assignment of Ace Institute of Management
ASSIGNMENT
International Business EMBA SPRING 2012
2013/10/02 Submitted by RAJU KARKI
1.
"Culture plays a silent role in a business." Elucidate in the context of international business. Culture is defined as ?complex construct that embodies a people's knowledge,
morals, art, beliefs, customs, laws and other capabilities gathered by a community over time? (Clifton, 2004). There are various challenges doing business on international platform. One of the challenges is Culture. Due to globalization and multinational companies being established on different nations, it has been the crucial that we need to have better understanding of the culture associated with the dealing stakeholders. ?Keegan‘ has summarized the importance of studying cultural environment for a International Marketer. According to him, ?The task of the global marketers is twofold. Marketers must be prepared to recognize and understand the differences between cultures and then incorporate this understanding into the marketing planning process so that appropriate strategies and marketing programmes are adopted.? There are different cultural variations when two international parties negotiate or deal. Some of them are as follows:1. Contract or relationship:- North Americans are contract deal maker whereas the Asians negotiate creating the relationship. Hence, it is very important that you should know your strategy whether to convince or persuade the other party with the rewards over the long term, which may be a waste of time and energy or to deliver a low-cost contract. 2. Win -Lose or Win – Win :It is very important factor to identify the negotiator in front of you whether he is collaborative or biased. Especially the Japanese are found to exhibit the win-win process whereas most of Spanish would love to exhibit the Win-Lose situation 3. Personality : Informal / Formal
ealing with various culture personalities may reveal that culture strongly influences the personality style. Germans have a more formal style than Americans. Similarly, for an American, calling someone by the first name is an act of friendship and hence a good thing but for a Japanese, the use of first name is an act of disrespect and therefore bad.
2
4.
Communication : Direct / Indirectifferent cultures follow different types of communication system. Some of them emphasize direct and simple method of communication whereas some rely heavily on indirect and complex methods. For example, American or the Israeli express a clear and definite response to the query whereas Japanese have the culture of indirectness with impatience, of not saying what they meant.
5.
Sensitivity of time :- High or Low Depending upon the culture Germans are always punctual, Latins are habitually late, Japanese negotiate slowly and Americans are always quick to make a deal. For Americans, the deal is a signed contract and time is money, so they reduce formalities and are aggressive whereas the Japanese and other Asians wants to create the relationship so that they have time to communicate and understand each other. Americans prefer very detailed contracts so as to anticipate all possible circumstances and eventualities whereas Chinese prefer a contract in the form of general principles rather than detailed rules.
6.
Building an agreement : Bottom up or top down:For French, building an agreement is to agree on basic principles that will guide and indeed determine the negotiation process afterward whereas for Americans, negotiating a deal is basically making a series of compromises and trade-offs on a long list of particulars.
7.
Risk Taking : High or Low:Americans are risk takers whereas Japanese prefer group decision –making process and tend to be risk averse. Managers need to develop understanding and skills in dealing with other
cultures. Culture matters in international business in areas such as developing products and services; interaction with foreign business partners; selecting foreign distributors; business negotiations; dealing with customers; preparing for trade fairs; and preparing promotional materials. Cross cultural differences complicate workplace issues such as teamwork, employment, pay-for-performance systems, organizational structures, union-management relationships, and attitudes toward ambiguity
3
2.
Managers engaged in domestic industries often say that the study of international business is for those engaged in multinational enterprises. Do you agree? Why do you think a domestic manager also needs to study international business?
I disagree the statement that the study of international business is for those engaged in multinational enterprises. But the domestic managers also need to study international business.
In a recent world, no business is domestic. Every industry directly or indirectly depends on international business. May be the industry depends on raw material or technology or the finished products directly imported from or exported to other countries. This dependency increases from developing country to the developed countries. In developed countries, they imported the raw materials, process the raw material and then again export the finished products to different countries. This involves the direct impact of the international business. They need and receive the foreign currency to trade with other countries. This way they are affected with the international business and hence everyone in business whether domestic or international must have the knowledge of international business.
The international business environment may change the availability of the raw materials, there may be the massive fluctuation in the price of the materials or even the global economy may crash that will ultimately affect our business. There are various importance of studying the international business. Some of them are as follows:?
understanding the global business environment—that is, the interconnectedness of cultural, political, legal, economic, and ethical systems; learning to improve international business relations through appropriate
?
communication strategies;
?
Identifying forms of business ownership and international business opportunities.
4
Knowing international business and being global is always a competitive advantage for a business. For example, when America was in recession, Britain loses its business in America but there was the high demand of British products in China and other countries. Similarly, China explore different other countries for their products when America and Europe was in recession. Similarly, a domestic product and business could explore the international market if it could not do well in domestic market. For example, if garments manufacture premium products that could not be afforded by Nepalese they could explore the market somewhere in Europe and America. Going global is always a better option these days. The global association helps in branding of the product which will further help in business growth. There are other different importance of the studying the international business. They are as follows:
?
Efficient utilization of scare resources: International business will help us to utilize the resources more efficiently. We can use the technology and methodology similar to the related business abroad so as to use our resources efficiently.
?
Gain competitive advantage: International business helps to gain a competitive advantage over domestic market easily. The objective of an international business is to ensure high profits delivering best quality products. This unique feature of a business organization assists to gain competitive advantage over the domestic markets.
?
Allocation of business risks: International business reduces business risk through global operations. This is possible because domestic business will suffer loss if there is loss within the periphery. But the international business may recover loss from one country by the profits from other potential countries.
?
Improve operational efficiency: International business will provide the same product in lower price. Hence the domestic product must improve the operational efficiency to provide the product competing with the price of the international business.
?
Business expansion and diversification: International business offers new geographical destinations in order to expand and diversify business activities.
5
International business also searches new customers through entering into new global destinations. Hence we can say that all the domestic business directly or indirectly related with international business. There is no business in Nepal which is not affected by the petroleum prices. The agricultural business depends on foreigner for fertilizer, insecticides, and pesticides and even for the improved seeds. Furthermore, the produced agricultural products will be affected by the price of petroleum products for their transportation. Similarly other business will also have the impact of international business. And hence, it is very important for all the business houses to have the knowledge of international business.
6
3.
Considering different theories of international trade, what do you consider one of the most relevant trade theory in the present day business and why? Trade is the concept of exchanging goods and services between two people or
entities and International trade is exchanging between people or entities in two different countries. People or entities trade because they believe that they benefit from the exchange. They may need or want the goods or services. There are different trade theories that tried to explain the international trade. Some of the trade theories are as follows: 1. Classical or Country Based Trade Theories. a. b. c. d. 2. Mercantilism Absolute Advantage Comparative Advantage Heckscher-Ohlin Theory (Factor Proportions Theory)
Modern or Firm Based Trade Theories a. b. c. d. Country Similarity Theory Product Life Cycle Theory Global Strategic Rivalry Theory Porter‘s National Competitive Advantage Theory
The different trade theories have helped economists, governments, and businesses better understand international trade and how to promote, regulate, and manage it; these theories are occasionally contradicted by real-world events. Let's take an example of Heckscher-Ohlin Theory (Factor Proportions Theory). According to this theory, Countries will produce the goods they are efficient for i.e. country would focus on how a country could gain comparative advantage by utilizing the factors that were in abundance in country. It means the theory depends on the production factors like land, labour and capital. This theory suggests that the cost of factor or resource is the function of supply and demand. Factors with more supply
7
would be cheaper and those factors in greater demand would be more expensive. Hence, countries would produce and export goods that required resources or factors that were in great supply and, therefore, cheaper production factors. In contrast, countries would import goods that required resources that were in short supply, but higher demand. For example, China and India are abundant with cheap, large pools of labor. Hence these countries with produce labor-intensive industries like textiles and garments. On the other hand, United States was abundant in capital and, therefore, should export more capital-intensive goods. However, Wassily W. Leontief's research in 1950s showed the opposite: the United States was importing more capital-intensive goods. It was found that the labor in United States were both available in steady supply and more productive than in many other countries; hence it made sense to export labor-intensive goods. Hence international trade is more complex and is impacted by different changing factors. Trade cannot be explained neatly by one single theory. Governments and companies use a combination of these theories to both interpret trends and develop strategy.
8
doc_358780451.docx
Assignment of Ace Institute of Management
ASSIGNMENT
International Business EMBA SPRING 2012
2013/10/02 Submitted by RAJU KARKI
1.
"Culture plays a silent role in a business." Elucidate in the context of international business. Culture is defined as ?complex construct that embodies a people's knowledge,
morals, art, beliefs, customs, laws and other capabilities gathered by a community over time? (Clifton, 2004). There are various challenges doing business on international platform. One of the challenges is Culture. Due to globalization and multinational companies being established on different nations, it has been the crucial that we need to have better understanding of the culture associated with the dealing stakeholders. ?Keegan‘ has summarized the importance of studying cultural environment for a International Marketer. According to him, ?The task of the global marketers is twofold. Marketers must be prepared to recognize and understand the differences between cultures and then incorporate this understanding into the marketing planning process so that appropriate strategies and marketing programmes are adopted.? There are different cultural variations when two international parties negotiate or deal. Some of them are as follows:1. Contract or relationship:- North Americans are contract deal maker whereas the Asians negotiate creating the relationship. Hence, it is very important that you should know your strategy whether to convince or persuade the other party with the rewards over the long term, which may be a waste of time and energy or to deliver a low-cost contract. 2. Win -Lose or Win – Win :It is very important factor to identify the negotiator in front of you whether he is collaborative or biased. Especially the Japanese are found to exhibit the win-win process whereas most of Spanish would love to exhibit the Win-Lose situation 3. Personality : Informal / Formal
ealing with various culture personalities may reveal that culture strongly influences the personality style. Germans have a more formal style than Americans. Similarly, for an American, calling someone by the first name is an act of friendship and hence a good thing but for a Japanese, the use of first name is an act of disrespect and therefore bad.2
4.
Communication : Direct / Indirect
ifferent cultures follow different types of communication system. Some of them emphasize direct and simple method of communication whereas some rely heavily on indirect and complex methods. For example, American or the Israeli express a clear and definite response to the query whereas Japanese have the culture of indirectness with impatience, of not saying what they meant.5.
Sensitivity of time :- High or Low Depending upon the culture Germans are always punctual, Latins are habitually late, Japanese negotiate slowly and Americans are always quick to make a deal. For Americans, the deal is a signed contract and time is money, so they reduce formalities and are aggressive whereas the Japanese and other Asians wants to create the relationship so that they have time to communicate and understand each other. Americans prefer very detailed contracts so as to anticipate all possible circumstances and eventualities whereas Chinese prefer a contract in the form of general principles rather than detailed rules.
6.
Building an agreement : Bottom up or top down:For French, building an agreement is to agree on basic principles that will guide and indeed determine the negotiation process afterward whereas for Americans, negotiating a deal is basically making a series of compromises and trade-offs on a long list of particulars.
7.
Risk Taking : High or Low:Americans are risk takers whereas Japanese prefer group decision –making process and tend to be risk averse. Managers need to develop understanding and skills in dealing with other
cultures. Culture matters in international business in areas such as developing products and services; interaction with foreign business partners; selecting foreign distributors; business negotiations; dealing with customers; preparing for trade fairs; and preparing promotional materials. Cross cultural differences complicate workplace issues such as teamwork, employment, pay-for-performance systems, organizational structures, union-management relationships, and attitudes toward ambiguity
3
2.
Managers engaged in domestic industries often say that the study of international business is for those engaged in multinational enterprises. Do you agree? Why do you think a domestic manager also needs to study international business?
I disagree the statement that the study of international business is for those engaged in multinational enterprises. But the domestic managers also need to study international business.
In a recent world, no business is domestic. Every industry directly or indirectly depends on international business. May be the industry depends on raw material or technology or the finished products directly imported from or exported to other countries. This dependency increases from developing country to the developed countries. In developed countries, they imported the raw materials, process the raw material and then again export the finished products to different countries. This involves the direct impact of the international business. They need and receive the foreign currency to trade with other countries. This way they are affected with the international business and hence everyone in business whether domestic or international must have the knowledge of international business.
The international business environment may change the availability of the raw materials, there may be the massive fluctuation in the price of the materials or even the global economy may crash that will ultimately affect our business. There are various importance of studying the international business. Some of them are as follows:?
understanding the global business environment—that is, the interconnectedness of cultural, political, legal, economic, and ethical systems; learning to improve international business relations through appropriate
?
communication strategies;
?
Identifying forms of business ownership and international business opportunities.
4
Knowing international business and being global is always a competitive advantage for a business. For example, when America was in recession, Britain loses its business in America but there was the high demand of British products in China and other countries. Similarly, China explore different other countries for their products when America and Europe was in recession. Similarly, a domestic product and business could explore the international market if it could not do well in domestic market. For example, if garments manufacture premium products that could not be afforded by Nepalese they could explore the market somewhere in Europe and America. Going global is always a better option these days. The global association helps in branding of the product which will further help in business growth. There are other different importance of the studying the international business. They are as follows:
?
Efficient utilization of scare resources: International business will help us to utilize the resources more efficiently. We can use the technology and methodology similar to the related business abroad so as to use our resources efficiently.
?
Gain competitive advantage: International business helps to gain a competitive advantage over domestic market easily. The objective of an international business is to ensure high profits delivering best quality products. This unique feature of a business organization assists to gain competitive advantage over the domestic markets.
?
Allocation of business risks: International business reduces business risk through global operations. This is possible because domestic business will suffer loss if there is loss within the periphery. But the international business may recover loss from one country by the profits from other potential countries.
?
Improve operational efficiency: International business will provide the same product in lower price. Hence the domestic product must improve the operational efficiency to provide the product competing with the price of the international business.
?
Business expansion and diversification: International business offers new geographical destinations in order to expand and diversify business activities.
5
International business also searches new customers through entering into new global destinations. Hence we can say that all the domestic business directly or indirectly related with international business. There is no business in Nepal which is not affected by the petroleum prices. The agricultural business depends on foreigner for fertilizer, insecticides, and pesticides and even for the improved seeds. Furthermore, the produced agricultural products will be affected by the price of petroleum products for their transportation. Similarly other business will also have the impact of international business. And hence, it is very important for all the business houses to have the knowledge of international business.
6
3.
Considering different theories of international trade, what do you consider one of the most relevant trade theory in the present day business and why? Trade is the concept of exchanging goods and services between two people or
entities and International trade is exchanging between people or entities in two different countries. People or entities trade because they believe that they benefit from the exchange. They may need or want the goods or services. There are different trade theories that tried to explain the international trade. Some of the trade theories are as follows: 1. Classical or Country Based Trade Theories. a. b. c. d. 2. Mercantilism Absolute Advantage Comparative Advantage Heckscher-Ohlin Theory (Factor Proportions Theory)
Modern or Firm Based Trade Theories a. b. c. d. Country Similarity Theory Product Life Cycle Theory Global Strategic Rivalry Theory Porter‘s National Competitive Advantage Theory
The different trade theories have helped economists, governments, and businesses better understand international trade and how to promote, regulate, and manage it; these theories are occasionally contradicted by real-world events. Let's take an example of Heckscher-Ohlin Theory (Factor Proportions Theory). According to this theory, Countries will produce the goods they are efficient for i.e. country would focus on how a country could gain comparative advantage by utilizing the factors that were in abundance in country. It means the theory depends on the production factors like land, labour and capital. This theory suggests that the cost of factor or resource is the function of supply and demand. Factors with more supply
7
would be cheaper and those factors in greater demand would be more expensive. Hence, countries would produce and export goods that required resources or factors that were in great supply and, therefore, cheaper production factors. In contrast, countries would import goods that required resources that were in short supply, but higher demand. For example, China and India are abundant with cheap, large pools of labor. Hence these countries with produce labor-intensive industries like textiles and garments. On the other hand, United States was abundant in capital and, therefore, should export more capital-intensive goods. However, Wassily W. Leontief's research in 1950s showed the opposite: the United States was importing more capital-intensive goods. It was found that the labor in United States were both available in steady supply and more productive than in many other countries; hence it made sense to export labor-intensive goods. Hence international trade is more complex and is impacted by different changing factors. Trade cannot be explained neatly by one single theory. Governments and companies use a combination of these theories to both interpret trends and develop strategy.
8
doc_358780451.docx