Table of Contents:
Management Basic Processes and Concepts
Importing and Exporting, Communications
Legal, Social, Political, Economic and Management aspects of Trading internationally, focusing on behavioral perspective in organizations
Evaluation of Benefits of International Business
Possible Improvements on the Market World
The motion for entering a new environment is mainly because that environment lacks good competition, or competition is weak or does not exist at all. For a business to succeed internationally it begins with its management systems it puts in place. The management has to have an ability to behave accordingly and be able to follow the set rules. International operations have grown and are changing slowly such that the basic management process and concepts still need to be followed although very closely in case of any new changes. Communication is very important when doing business internationally as the channels are also changing with technology systems. International operations are also growing due to political environment changes in the international environment. World exports are increasing according to Devinney, Timothy M., Pedersen, Torben, Tibanyi, Laslo (2010) from $60 billion in 1950 to $16, 070 in 2008. Agreements on trading conditions have been put in place to enable such growth. For any country to grow beyond its borders it means more competition and new opportunities.
A study on the importing and exporting rules and regulations is very important as this helps evaluate the strength of business in the chosen environment. Also understanding the legal, social, economic and political status of the chosen environment is very important as the behavioral patterns of these can easily be positive or negative to business. Evaluating how the organization will benefit by investing internationally and how they can improve the market locally and globally. These facts are necessary as they help create opportunities for organizations and improve efficiency of service in the products and services.
There are many benefits and limitations that come with internationalizing businesses and managing it. For example there are issues of culture and customer behavior which may differ from the known culture by the organization. This could make it difficult to operate as culture and behavior need to be studied first before investment.
Resource allocation can be done by the government who in most cases do this to control the economy. Although it is important that the government helps in the control of the resource allocation and manage economic policies with recognition of how delicate the financials are from an international point of view.
Management Basic Processes and Concepts
For every business to succeed some business functions need to be followed. To understand the basic functions, management and all concerned stakeholders have to be very clear on their goals and direction they are taking the organization, from the government to the culture of the region or country. The main functions are development, marketing and sales, production and administration. Some concepts and processes include use of the balanced score card, branding, consumer relationship management, entry and exit barriers, culture, JIT (Just In Time), competitive edge, 4Ps and many more.
Government decisions and enactment of legislation always affect the activities of any business and the business should give it some considerations.
Unexpected new laws or additions to the existing ones like taxation laws, political decisions affecting trade and subsidies removal can have major effects on a business.
Organizational culture begins with the values, standards and work experience that an organization would set and create together in order to adhere to. Some culture is negative and some positive but they take time to be recognized. A good culture gives employees a sense of belonging although needs everyone involved to be aware of the organization’s mission, its goals, how they are to be achieved and measured and through what strategies are they to be achieved with. Once everyone is aware of what’s expected of them, a manual on a company culture can be set. For example McDonald’s has a slogan of quality, service, cleanliness and value which represents its culture throughout its branches. Everyone who is employed there gets to read and understand what the organization is all about. Images, videos depicting how the organization operates are displayed and played within the organization under the customer’s ears providing and showing what the organization stands for.
This involves the development of product or service that the organization offers to its customers and the development of the organization and the people involved in it. There is need to adapt to the needs of all the business activities.
This is all about creating demand for the business or product on offer. The customers have to have a demand arising from their needs to make a business available and be able to sell.
This is the total process of making the services and goods that the customer needs and making sure that the customer gets the goods.
This is a function that can be under the production or marketing function as its importance is valued by the demand of the product and the target market.
This function covers all aspects and actions the business is involved in to control production and distribution of the products.
- Balanced Scorecard
This is one of the concepts that the business can use to control and make a record to follow up on important facts the organization wants to look at. The organization has to establish what is important to them to establish the process of obtaining their final product or service. Non-financial values like finding out employee satisfaction and growth, customer satisfaction, process lead times, efficiency and many other parameters that the organization can choose to set up. Some organizations separate these parameters into internal, external and profit perspective. The table below shows how these parameters can be separated;
INTERNAL EXTERNAL PERFORMANCE
PERSPECTIVE PERSPECTIVE PERSPECTIVE
- Processes customer finance
- Efﬁciency relations/stakeholders economy
- Employee external business environment Owners
- Innovation/renewal/learning Suppliers profitability
- Organization Community
The best way to work with the balanced scorecard in order to obtain the best results is to describe for each perspective long term goals, success factors established t achieve the goals, activities to be carried out to achieve the goals and indicators to be measured to monitor development. The scorecard aims to balance the focus of the internal and external factors.
The entry barrier is a strategy that an organization would use to block new competition coming in or also the exit barrier that prevents competition from leaving the market. Entry barrier is done through creation of obstacles to gain a step ahead of the rest. Location, capital injection, product differentiation, distribution channels, experience, retaliation, trade restrictions, patents and licenses and pricing can be an obstacle to the competitor to enter or penetrate the market. The idea is to create an atmosphere that deters new competition from getting established.
The cost of admission into the market so high such that the return on capital is risky or not even predictable to be profitable therefore signing off any investment into such a market. In some markets the entry barrier is designed in a way that it attracts a higher fee to enter or increase risk to the new entrant.
Also another barrier is the exit barrier where an organization would have invested a lot of money and exiting becomes difficult and they decide to stay due to wanting to maintain image, avoid write off of heavy investments, management pride, government intervention, relationship with suppliers, distributors and customers. In other words exit barriers are more on sociopolitical, economic or emotional status. They influence the levels of competition which also affects the potential returns like a contract to supply a supermarket bars competitors from doing the same at the same period.
Branding involves strategies of promoting the product, the brand or the organization as a whole. A brand is a trademark, symbol or imprint that an organization uses to distinguishing itself from other organizations and identifies its products through that. It is a registered trademark with the authorities where the organization is operating from. A good brand is said to be spread and with power, meaning it’s well known and what it is known for. The value of a brand gives it the spread and power. For example Morgan J P. from his study attributes the values of the strongest brands in the following category; Coca-cola ($69.6), Microsoft ($64.1), IBM ($51.2), G.E ($41.3) and many others. This research was done long back the figures might have altered by now but the research showed considerable evidence that brand loyalty was very high on the products despite the cost of the product.
- Is all about what it is all about, what does it stand for and who knows about it and what position in the market is it at?
- What does the brand represent and who should see it and recognize it?
- What position should it have in the market?
- If there is a gap, how can that gap be closed to stay on the favorable position.
- Is the organization moving in the right direction?
To answer some of these questions an organization should be able to identify what makes it known to its target market. The profile represents the image the organization has to its target market giving all its competitive advantages.
According to Czinkota, Michael R., Ikka A, (2011) Dr Frans Melin, a researcher of brands at Lund University, has identiﬁed brand building with a six step process, product attributes, brand identity, core value, positioning, marketing communication and internal brand loyalty.
1. Product attributes
A good product has a quality and functional value attached to it that a target market looks out for. Also packaging would add value to it.