Discuss about the International Business for Global Line and Staff Activities.
Foreign Direct investment (FDI) is considered as an investment in the business and it is done by the investors from the other country for which the foreign investor also has the control over the purchase of the organization.
Foreign direct investment is different from foreign portfolio investment in many ways. It has been seen that foreign direct investment is related with the investment taken into consideration by the foreign investors to achieve substantial interest in the company situated in the various country (Vella & Sammut?Bonnici, 2014). whereas in foreign portfolio investment is when the international investor focuses on investing in the passive holdings of the company of another country and the investment takes place in the financial assets. Also in FDI the role of investor is active whereas in FPI the role of investors is passive (Roy, Shah & Sharma, 2017).
For example : in context to FDI there are many companies like IBM INDIA which is initially located in United States but has opened its own subsidiaries in various parts of India. Also, in context to FPI any foreign company invests in the shares of IBM (based in India).
The factor endowment theory focuses on holding the country various types of resources. The theory Hechsher Olin focuses on the country which have a competitive advantage in the product that take into consideration the aspects with which it is heavily endowed. At the time of calculating the comparative advantage, it is important to consider that it is the ratios concerned to the factors that matter. It is important to focus on the ratios as country could easily endow with the labor and the capital (Ragland, Widmier & Brouthers, 2015).
For example: Seattle focuses on doing trade with the Boston more if comparison is made with the Vancouver. Branding has an essential role in trade, so France has differentiated the products from the other countries and France endowments will continue in specialization of the wine and on the global basis the products will be bought.
Organizational design is the overall process that helps to determine how the company should be organized to ensure its worldwide activities of the company which are necessary for the effective manager. By focusing on the international context it is seen that the international division in the company is at the same level by focusing on the domestic division and it is also responsible for the non-home operations of the country. International product structure helps to represent a return of the domestic product division which is given as a responsibility for global line and staff activities.
The two primary dimensions that international company should focus are related with specialization and formalization. It is seen that specialization is related to the number and also the distribution of the specialist role. It can be easy for the people who are facing the issue to discuss it with one another and learn new things. It will help the people to learn and acquire new things. Next is related with formalization in which, what is done is similar to standardization but it is more related with the rules and policies. In this there is large central staff in which existence is based on the overall formulation of the policies and rules (Santos, Pache & Birkholz, 2015).
It has been seen that national culture helps to manage the conflicts at the time of conducting the activities. By knowing the culture it can be easy for the business to conduct the activities in the direction and also with proper efficiency. National culture also helps to consider the public needs and wants and according to that activities are conducted of the business (Antonczyk & Salzmann, 2014).
It has been seen that the culture of Japan and USA is different. At the time of conducting the business in Japan, the people of Japanese are more formal so activities should be conducted in that manner. Same with USA it is seen that people are not formal so the activities are conducted accordingly. Also the culture of Japan is related with the Japanese people in that it is seen that people are more reserve and more formal as compared to Americans. If anyone wanted to communicate on the streets then it is not possible in Japan. So at the time of conducting the activities the culture related with communication has to be considered.
Two international market entry modes are
For example: McDonalds used the franchising as an option to enter into the market. Through franchising the company can easily conduct or complete the activities in an effective manner (Nijmeijer, Fabbricotti & Huijsman, 2014).
Four components are
The Japanese industry has attained dominance in this industry. The reasons are related to factor condition in which the Japanese have a high number of electrical engineers per capita. Demand conditions are related to the Japanese market which is demanding just because of the written language. Next is related to many supporting industries that have the good technology. Domestic rivalry is also the factor in the Japanese fax machine industry which is pushed by innovation and there is also increase in the cost reductions. The last is related with the government support in which it is seen that approval of installation has been changed to the general type of approval.
The key drivers of globalization are:
The major concern of globalization led to iniquitous distribution of the overall income between the countries. Due to globalization there is no proper distribution of the income among the countries (Crane, Kawashima & Kawasaki, 2016).
Globalization has given negative impact on the pharmaceutical and manufacturing company of India. It has been seen that due to globalization just because of the latest technology the number of the labor has reduced and also it has given the result on the many people who have been removed from the job (Hirst, Thompson & Bromley, 2015).
Next example is related with the construction industry in which the developers are becoming aggressive and also to compete with others it has been seen that developers are occupying the areas of the rural for commercial purpose. As an outcome it has been seen that unplanned urbanization takes place (Grant, 2016).
Four types of international competitive strategies which international company consider for growth are
The first international strategy that is taken into consideration by the MNC who wants to compete by both the practices are cost reduction and meeting the overall local demands but at a low level. McDonald’s consider international strategy as it provides its burgers that meet the local taste in low price. For instance: In Pakistan the company provides spicy burgers at the less competitive rates as it is seen that local fast food is highly saturated in the two countries (Levchenko & Zhang, 2016).
The next is multi domestic strategy which is adopted by the company to differentiate the products in the local market so that demand of the customers can be meet. Like McDonalds respond according to the demand and also provide the products at low cost to the customers. The products are differentiated by the company according to demand of the customers (Johnson, 2016).
Third global strategy in which the emphasis is on providing homogenous products in the operating market. This is related with the prices and the company focuses on offering low price products in the market (Ariu, 2016).
The last is transnational strategy in which the prices are competed and also the customized products are offered. Like Toyota considers this strategy as it cannot offer a left hand car in the sub-continent just because of the local demands.
It is important to know the culture so that activities can be conducted in the right manner according to the demand of the customers. The two types of culture are high culture and foreign culture. In high culture attitude and belief is related with the group of people as whole. Example is enjoying the ballet. Next culture is foreign culture in which the belief of the country is different and also language of the country is different.
International managers should focus on developing business plan and also accurate decisions should be taken so that activities can be conducted effectively.
Two approaches are
Absolute advantage is related with the ability of a party to produce a high quantity of goods than competitors by considering the same amount of resources.
Comparative advantage is related with the economic law which is related to the ability of the economic factor to produce goods and services at low opportunity cost rather than other economic factors (Seretis & Tsaliki, 2016).
For example: Japan and United States both can create cars but it has been seen that Japan can create cars of a higher quality at the fast rate. It is considered as an absolute advantage in the auto sector. In context to this if there are limited resources then the nation choose to specialize in the production of a particular product which is influenced by the comparative advantage.
For example: the US can serve to devote the resources and manpower to the next sector which focuses on the absolute advantage rather than considering competing with Japan.
References
Alon, I. (2014). The internationalization of US franchising systems. Routledge.
Antonczyk, R. C., & Salzmann, A. J. (2014). Overconfidence and optimism: The effect of national culture on capital structure. Research in International Business and Finance, 31, 132-151.
Ariu, A. (2016). Services versus goods trade: a firm-level comparison. Review of World Economics, 152(1), 19-41.
Crane, D., Kawashima, N., & Kawasaki, K. I. (2016). Culture and globalization theoretical models and emerging trends. In Global culture (pp. 11-36). Routledge.
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hirst, P., Thompson, G., & Bromley, S. (2015). Globalization in question. John Wiley & Sons.
Huang, X., & Zhu, Y. (2016). Cross-Cultural Management and HRM. In Managing Chinese Outward Foreign Direct Investment (pp. 122-139). Palgrave Macmillan, London.
Johnson, G. (2016). Exploring strategy: text and cases. Pearson Education.
Konsolas, I. (2017). The competitive advantage of Greece: an application of Porter’s diamond. Routledge.
Levchenko, A. A., & Zhang, J. (2016). The evolution of comparative advantage: Measurement and welfare implications. Journal of Monetary Economics, 78, 96-111.
Nijmeijer, K. J., Fabbricotti, I. N., & Huijsman, R. (2014). Making franchising work: A framework based on a systematic review. International Journal of Management Reviews, 16(1), 62-83.
Ragland, C. B., Widmier, S. M., & Brouthers, L. E. (2015). A factor endowment approach to international market selection. Journal of Strategic Marketing, 23(6), 497-511.
Roy, A., Shah, M., & Sharma, R. (2017). Need for Foreign Investment. Journal of Accounting, Finance & Marketing Technology, 1(1), 18-21.
Santos, F., Pache, A. C., & Birkholz, C. (2015). Making hybrids work: Aligning business models and organizational design for social enterprises. California Management Review, 57(3), 36-58.
Seretis, S. A., & Tsaliki, P. V. (2016). Absolute Advantage and International Trade: Evidence from Four Euro-zone Economies. Review of Radical Political Economics, 48(3), 438-451.
Treven, S. (2017). Human resource management in international organizations. Management: journal of contemporary management issues, 6(1-2), 177-189.
Vella, M., & Sammut?Bonnici, T. (2014). Foreign direct investment. Wiley Encyclopedia of Management.
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