Push and Pull Factors in International Business

Companies decide to go global and enter international markets for a variety of reasons, and these different objectives at the time of entry should produce different strategies, performance goals, and even forms of market participation. However, companies often follow a standard market entry and development strategy. The most common is sometimes referred to as the “increasing commitment” method of market development, in which market entry is done via an independent local partner. As business and confidence grows, a switch to a directly controlled subsidiary is often enacted. This internationalization approach results from a desire to build a business in the country-market as quickly as possible and by an initial desire to minimize risk coupled with the need to learn about the country and market from a low base of knowledge.

International markets evolve rapidly and very often companies struggle to keep up in terms of their strategy. It is therefore reasonable to deduce that many companies’ international operations will consist of a collage of country market operations that pursue different objectives at any one time. This, in turn, suggests that most companies would adopt different entry modes for different markets. More commonly, however, is for companies to evolve a template that is followed in almost all markets. This usually starts with market entry via an indirect distribution channel, usually a local independent distributor or agent.

The factors leading to the wide acceptability of international business are:

  1. Globalization of economics: The policy of liberalization was adopted which led to the globalization of various economics including the former communist countries and socialist pattern of the society.
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Importance of Understanding Culture in International Business

As described by the famous author Edgar Schein, the culture in reference to the corporate world is the different corporation’s learning that is developed by different discoveries, invention and the development for handling the internal and the external issue effectively. These learning and development should be successful enough to be passed and taught to the coming and joining employees for handling such affairs in the future. He also remarked the famous quote, “the culture has a same meaning to the group what personality has to with individual”. Also it is well understood in the current era of global market that a successful multinational company has to have an in-depth knowledge of the environment and the different cultural background of the different countries and regions in which it is operating to have a considerable amount of success.

For any of the successful MNC, it is very essential to understand the different cultural distinctions between the different cultures. The selling of same kinds of products in the markets that are entirely different in terms of their cultural backgrounds has always proven to be quite a tough task. Also, the product or services should not violate any rule or regulation based on the culture of the country it is operating. The promotional campaigns and the mode of the advertisements also should be designed according to the cultural background of the region it is going to be launched or shown. If these things is not taken into the marketing strategy, the product which had been very much successful in one country, may even fail in the other.… Read the rest

The Seven Dimensions of Culture by Fons Trompenaars

Fons Trompenaars is the author who belongs to dutch he is one the author of cross cultural communications. Fons studied economics from free university of Amsterdam and he got hid PhD from Wharton school. Trompenaars and Charles hampden have developed a culture which have seven dimensions. Five of his dimensions covers the way in which people interact with each other. The seven dimensions of  culture by Trompenaars are explained below.

1. Universalism (vs. Particularism)

Universalism/particularism distinguishes societies based on the relative importance they place on rules and laws as opposed to personal relationships. The basic question is: “What is more important—rules or relationships?”

Members of universalistic societies focus more on rules, codes, values and standards and believe that they take precedence over the needs and claims of friends and other personal relationships; believe that rules or laws can be applied to everyone and should be used to determine what is right; use precisely defined agreements and contracts as the basis for conducting business; tend to define global standards for company policies and human resources practices; and believe that agreements and contracts should not be changed.

Members of more particularistic, sometimes referred to as pluralist, societies focus more on human friendships and personal relationships than on formal rules and laws; place emphasis on friendships and look at the situation to determine what is right or ethically acceptable; believe that deals are made based on friendships and that contracts can be adapted to satisfy new requirements in specific situations; and permit local variations of company and human resources policies to adapt to different requirements.… Read the rest

Technology Risk in Business – Challenges of Changing Technology in Business

The changing technology environment has and still become one of the biggest challenges in international business management. Technological changes can wreak havoc on industries. In making decisions regarding technological changes, companies err in two ways. They either commit themselves to a new technology too fast and burn their fingers or wait and watch while another company comes up with a new technology that puts them out of business. The issue of when and how to react to the emergence of a new technology is a matter of judgment. However, this judgment need not be based purely on intuition. By doing a systematic structured analysis of developments in the technological environment and putting in place the necessary organizational mechanisms, technology risk in business can be considerably reduced.

How can managers identify the emergence of a disruptive technology?  Clayton Christensen’s research reveals that disruptive technologies are often developed privately by engineers working for established firms. When such technologies are presented to customers, they get a lukewarm response. So, established companies do not give much importance to these technologies. The frustrated engineers consequently join start-ups, who are prepared to look for new customers. Companies must take note when talented scientists and researchers leave them to join start-ups. Often, they do so, to work in an environment where their innovative ideas are taken more seriously.

Companies must also learn to assess the impact of a new technology. The steam engine was developed for pumping water out of flooded mines. It was years before a range of applications was developed in industries and for transportation.… Read the rest

Free Trade Zones – Definition and Meaning

In simple words, free trade means free international trade. The classical economists like Adam Smith, Ricardo and others strongly favored free trade and this doctrine held the field for nearly one hundred years. How ever later, the countries all over the world began to adhere to the policy of imposing restrictions in one form or other.

History and Development of Free Trade Zones

During the last 20 years, the labor charges in developed countries have increased substantially. According to a recent estimate, the labor cost is nearly 1 USD per hour for semi-skilled workers in most European Countries, U.S and Japan. This high labor cost was due to the acute shortage of both skilled and unskilled labor in most of these countries. Countries like Germany, France, Switzerland, Sweden, Austria, Belgium and England even imported laborers from other countries. Therefore, the cost of production involving a considerable labor content has become noncompetitive in these countries. Therefore, these countries prefer to send the raw materials and components to developing countries where trained man power and skill are available at a comparatively lower cost. So that they may have finished products which they can market at competitive prices.

In order to take advantage of this situation, various developing countries which have strong labour force began to organize Free Trade Zones (FTZs) in their countries. These FTZs not only provide employment to millions of people in these under developed countries and improve their economy, but also provide an opportunity to earn foreign exchanges to the extent of the conversion costs.… Read the rest

Issues of International Technology Transfers

International technology transfer is the process by which a technology, expertise, know how or facilities developed by one business organization (MNC in the case of international business) is transferred to another business organization. There are many issues associated with the international technology transfer. The most important international technology transfer issues are; ways of technology acquisition, choice of technology, terms of technology transfer, and creating local capability.

Modes of Foreign Technology Acquisition

One of the major issues in technology transfer relates to the mode of acquisition. Developing new technology may conjure up visions of scientists and product developers working in R&D laboratories. In reality, new technology comes from many different sources, including suppliers, manufactures, users, other industries, universities, government, and MNCs . While every source needs to be explored, each firm has specific sources for most of the new technologies. For example, because of the limited size of most farming operations, innovations in farming mainly come from manufacturers, suppliers, and government agencies. In many industries, however, the primary sources of new technologies are the organizations that use the technology. Broadly the acquisition routes are three:

  1. Internal Technology Acquisition: This is result of technology development efforts that are initiated and controlled by the firm itself. Internal acquisition requires the existence of a technology capability in the company. This capability could vary from one expert who understands the technology application well enough to manage a project conducted by an outside research and development (R&D) group to full blown R&D department. Internal technology acquisition options have the advantages that any innovation becomes the exclusive property of the firm.
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