The Impact of Globalization on International Business

Question:

Discuss how the various economic, international trade, legal and technological factors assist or hinder Multi-National Corporations in entering new global or regional markets – you should seek to provide specific Multi-National Corporations examples to support your answer.
 

Globalization is shaping our lives and is leading us into a new territory. New technologies help in reducing the cost of global communication and travel where the people are exposed to the international cultures by travelling. The Countries these days have taken major decisions where they have reduced their rules and policies in terms of travel and in terms of allowing new business firms to grow (Milmo 2008). These moves in terms of globalisation have transformed the ways in which the business organizations respond to the growing competencies and they have also helped the organizations grow more effectively.

The multi – national corporations are looking out for newer opportunities to grow and to emerge in the newer markets with their own customers by intensifying the competition on an international scale (Milmo 2008). The Companies face a lot of issues in terms of economic factors, the international trade barriers, legal barriers and technological factors depending on the political and economic situation of that specific international market which they choose to enter. All the new strategies of the organizations have started to motivate the Managements alter their management strategies and policies in terms of implementing their projects. International Business involves different issues at some junctures where there could be sure possibilities of exchange of views and systems in terms of various economic, international trade, legal and technological factors which can cause some type of hindrance in promoting the Multi – National corporations to a greater level (Branigan 2008).

The dynamic nature of the International Business Organizations has been changing a lot where if we consider the examples of the alarm clock with which we wake up on a daily basis has a major link with the international country – China and these clocks are being exported to almost all the Countries in the world. This shows that the business is being outsourced a lot to the international locations for a lot of advantages like emerging markets in those countries, the competitive advantage in those countries which the Multi – National corporations are being able to realise (Branigan 2008). These Multi – National corporations are also being proposed as stronger business firms in the market where they have proven to exhibit a greater sustainability and corporate social responsibility.

There are a lot of international companies or the Multi – National corporations which have made their ways to almost all the Countries in terms of their products like the Adidas shoes, Nike stores and their large variety of clothes, the Mobile Phones with Companies like Samsung and Xiaomi, electrical products from General Electric, Computers, Laptops and Accessories from companies like Dell, Chocolate brand which almost all the people in the world are familiar with like Nestle and the phone companies like Vodafone who are a major mobile service providers in the world (Mercado, Welford and Prescott 2001).

MNCs and International Market Competition

Overview of new market entry

The Organizations see the local determinants in terms of their interaction which would be ownership – specific and based on the internalisation advantages in terms of a larger situation in designing the corporate strategies. The Organizational strategies aim and spread their objectives in terms entering new markets, reducing risks, entering markets like oligopolistic and competitive environments.

What makes MNC’s enter into new market

The new market seeking objectives could be majorly focussed on entering new markets in order to enhance the scope of acquiring new businesses, starting up newer branches in the international locations, attaining the market power and aiming at diversifying the markets in terms of spreading the risk strategy (Mercado, Welford and Prescott 2001).

Brief discussion of factors – economic, international trade, legal and technological

There are various factors which can assist or cause hindrance to MNC’s to enter new markets which include

Economic factors like

• Free market capitalisation and various economic enhancements which they can achieve
• The average market profits which they can make
• Government’s rules and policies which might affect the market decisions
• Market factors like economic situation of the Country, market borrowings and fluctuations
• Levels of Education and labour market laws
• Availability of skilled labour
• Levels of infrastructure which is maintained

International Trade

• FDI policies and interventions
• levels of protectionism
• Levels of Government interference in business activities
• Economic and Trade pacts with the other Countries
• Participation in international and regional trade agreements

Legal

• Levels of Government interference and Government’s rules and policies which might affect the market decisions
• Legal policies and codes of conduct which are formed
• Rules of law
• Issues of jurisdiction in terms of policies to be adapted and implemented

Technological

• Types of technological development like infrastructure of the buildings to open the new ventures
• Types of technological qualification which people should have
• Technological products which would be introduced in terms of technical qualifications and skills to acquire
• Technological skill assessment to contribute towards the economic development which is required in that specific country

2.1 Economic Factors

a) The general economic factors which are to be considered before entering the new global and regional market depend on various situations. All the business organizations face some competition in terms of setting their business in the international markets with respect to the internal and the external factors (Bhalla and Shiva Ramu 2003). The external environmental factors which have to be considered include economic factors, socio – cultural factors, Government factors and policies inclusive of the legal factors, demographic factors and the internal local economic factors.

b) The economic situations can turn out to be viable and non – viable in some cases depending on the situations of the country and the type of business and the situation of their local economic and political factors (Helmore 2004).

The environmental factors are beyond the control of any Organization and the success will depend on the adaptability to the environment which would in turn control the opportunities which the Organizations would get and the threats which they might face in order to sustain in that specific local market.

c) For example the changing economic situations in the Countries have set low standards in terms of growth rates especially for the Companies in the Consumer Business like NESTLE in the UK. The brands have to come up with newer strategies in order to come up with newer products and offers to sustain the competition in the local market.

The same is the case with Companies like Vodafone, Dell and General Electric where the changing economic situations can hamper the development of the products and can also impact the market decisions to a great extent (Ewing and Edmondson 2005).

The changing economic factors can cause a great deal of discomfort in the markets by causing changes like increased unemployment because of the non-performance of the Companies and their products in the markets. These situations also arise because of the change in interest and exchange rates in the international global environment when the Companies try to enter newer international markets like EU and UAE. The rise of the other international economies like China and India can also hamper the economic growth of their local market (Bulkley 2008).

All these factors happen when there is a large transformation of a specific brand or a company into a consumable product like for example DELL and VODAFONE. When the market for such products grow there is a large competition which develops due to the emerging newer brands in the international market. For example in the case of DELL they have faced a large competition with COMPAQ (Bulkley 2008). 

International Business Strategies

a) International Trade

International Trade is the exchange model of various types of products and services across various international locations. The International trade processes consist of different initiatives taken by the Government and the Companies in most of the international markets. The international trade share is represented by the GDP – Gross Domestic Product.

b) What type of International Trade is preferred by MNC’s and why

The International trade preferred by the MNCs is similar to that of the trade which is conducted between the Countries where they expect something from each other in terms of exchange of products and services. The trade is an essential activity which involves exchange however it might not always focus on the Government policies which are involved.

c) Examples to support arguments

For example in case of DELL and VODAFONE the trade happens between the products, accessories and peripherals related to the production and sales of the products. The MNCs prefer to specialise in types of products and services which are unique to their brand and  they trade in those specific products.

This figure shows us the product possibility curve and the constant opportunity costs which it might create.

a) What are the legal issues

In terms of business firms there could be a possibility of various legal issues in terms of handling consumers, partnership companies, Government and Suppliers and Vendors.
Legal issues can be related to any litigations because of the Companies, the internal employees, suppliers and the Management. Litigations could also arise due to the patent issues of their products and the issues related to their dissatisfied Consumers.

b) How could it help or hinder MNCs to enter global market. What causes Legal environment to change

The external or the environmental factors like the economic and socio – cultural factors, government and the legal factors are all called as uncontrollable factors where the environmental factors are far beyond the control of a firm and the success of the Organization depends on its adaptability to change and adjust to the new environment. There could be a lot of legal factors like macro environment and micro environment factors which could involve external environment factors like suppliers, market vendors, competitors and partnership companies. All these factors could change the macro environment by causing some changes in the legal environment of the company. Apart from these parameters factors like exchange markets, foreign legal systems, cultural differences, rates of inflation and fluctuation in the markets cause the legal environment of a company to change. There are a distinct set of strategies which have a major control on the responses of any specific issue where the firms can restructure themselves based on various legal strategies in order to work towards the organizational growth (Bartram 2004).

c) Examples to support arguments

If we consider the case of DELL the company has grown to a major extent and the computers have become more of a commodity and the companies in competition like Compaq have become rivals to DELL. The factor here is the market competition. In this category Compaq has continued to maintain its processes with great systematic procedures and the competition shifted to the value for money (Chindnovsky 1999).

Factors Affecting International Business

In the case of NESTLE and Vodafone the companies have to consider the legal laws and policies of that specific country and have to implement their sales strategies. The laws include various aspects like health and safety, consumer laws, employee laws and discrimination laws which can protect the interests of the employees on a legal front on the Government’s front (Jones and Mackintosh 2005). The laws are safeguarded for all purposes where the Employees are treated with great care and equally. 

a) Role of Technology

Technology can have a significant impact on the people in terms of the company’s future and fortune. There have been a lot of technological achievements which have made a lot of contribution in terms of introducing newer tools and apps to make some processes function and in innovating new products like mobile phones, computers, accessories, apps, internet related products and scanners.

There has been a heavy investment in new technology which has paid a lot of higher returns for the Companies. If we consider the mobile technologies the companies have invested in a greater technology which can support newer platforms and make the global company stand out as a global leader in the international market.

b) Advantages and Disadvantages

The critical factor to technological investment and implementation is market understanding of the products and the technological sophistication. A higher investment in the technological companies can majorly change the fortune of the companies in a positive way. If we consider the GE’s products we would see that the implemented technology has changed the quality of the products which has allowed to exhibit their talent in a great way. Vodafone with its technology has changed the quality of the speakers and the microphones with which the listening ability has been enhanced.

These technological investments have contributed to high end market potential where the companies have identified the required technological changes which had to be brought in order to enhance the quality of their products and services. These technological changes can also contribute to provide newer opportunities for new products to be introduced and they can also reduce the risks in the markets.

c) Examples to support your arguments

Having the products of General Electric are for sure a great hit in terms of a product brand as they are known to be the pioneers in the product categories of electric stoves, cleaners, dishwashers and electrical products. In cases of products like computers and electronics there has been a large competition in terms of introducing newer product category by revolutionising their mobile technology and devices (Bhalla and ShivaRamu 2003).  DELL is known for its higher reputation in terms of quality, specifications, reliability and innovation. 

Conclusion

We have analysed various economic, international trade, legal and technological factors assist or hinder Multi-National Corporations in entering new global or regional markets. The Management of the companies should identify various dimensions in order to handle all the issues related to identifying new markets and analysing them. This type of an analysis will recommend newer styles and dimensions where the companies can deal with any of the extremities which they might face (Engardio 2005). The Companies can also adapt and implement any of the contingency models which can ensure a better approach for successful implementations of their products and services.  

References

Milmo, D 2008, “Former BA Bosses Face Price-Fixing Charges”, Guardian, 7 August, 26

Mercado, S., R. Welford and K. Prescott 2001, “European Business: An Issue-Based Approach”, Harlow: FT Pearson. 5

Helmore, E 2004, “Do Not Pass Go Says EC”, Observer, 28 March, 3.

Jones, A. and J. Mackintosh 2005, “Taking the Hit: European Exporters Find the Dollar’s Weakness is Hard to Counter”, Financial Times, 3 May, 17. 13

Watts, N 2006, “Migrant Workers from East Helping to Boost EU Fortunes, says Report”, Guardian, 9 February, 22. 14

Ewing, J. and G. Edmondson 2005, “Rise of a Powerhouse, Business Week, 12/9 December”, 42–60. 15. Ewing and Edmondson (2005) op. cit. 16

Bartram, P 2004, “Targeting the New Ten”, Marketeer, May, 22–5. 17

Engardio, P 2005, “A New World Economy, Business Week”, 22/29 August, 32–8. 18

Bulkley, K 2008, “Partnerships Are Key, Media Guardian, 29 September, 1; Anonymous (2008) Alternative Reality, Economist, 2 February, 69. 19

Branigan, T 2008, “Rush for Yorkshire Pud and Cotton Socks”, Guardian, 3 October, 21.

Bhalla. V.K. and ShivaRamu. S., 2003, “International Business”, Anmol Publications, New Delhi

Chindnovsky, Danial. B., 1999, “The Globalization of Multinational Enterprise Activity and Economic Development”, Macmillan, London

Branigan, T 2008, “Rush for Yorkshire Pud and Cotton Socks”, Guardian, 3 October, 21.