Discuss About The Implementation In International Business.
In the past two decades, international business has become a trending issue as a result of increased market for many goods in various countries across the world. International business refers to the process of exchanging goods and services across borders or foreign investment. The global product and services traded have expanded by more than 6.5% per year since the 1950s leading to billions of dollars to be transacted in the global forex markets every day. The constant growth of globalization has made it difficult for many organizations to avoid expanding due to the search of more market, fulfilling consumer’s needs, and gaining a competitive advantage among many others reasons (Miller 2015, p.871). Most of the business that has invested into the foreign markets has thrived, however, after facing numerous challenges such as cultural differences, economic, organizational communication, inadequate human resource, social, political, nature of competition and regulations among many others. Therefore, it is imperative for such organizations to conduct extensive research on the target market to avoid failing. This paper explores understanding on the international business with a significant focus on the challenges faced by Smithfield Cattle Company based in Australia that wants to expand into Argentina.
Smithfield Cattle Company is a family owned business that started operating in the early 1920s through community service involvement. Alf Smith relocated to South Burnett from Ireland, and opened a joint butcher with Bob Levitt and supplied beef to the community (Leon-de,Thorsteinsdottir & Calderon-Salinas 2018,p.23). Growing slowly by opening more shop in various streets and cities such as Blake Street, Kileymore among others. Through the years the enterprise went through various business changes such as securing potential customers, production of grain and Feedlot embarked significant growth. The enterprise expanded and currently is capable of accommodating 18,500 heads of cattle’s to become substantial cattle and beef supplier in Australia and other countries in the world
Argentina is an enormous country found in South American with vast pampas grassland, the traditional grazing ground favoring beef cattle (Jones 2018, p.276). Among Argentina, beef formed the primary daily diet and was a significant beef exporter in the past decades before the drought-spurred liquidation at the end of the decade led to the surge of the cattle and beef production in the country (Gondim 2015, p.71). The prolonged drought made many ranchers shift from keeping animals to growing crops such as soybeans, wheat, and maize among others creating a gap since the domestic consumption of beef rose with a decrease in the beef output. : This provides a potential market for beef exportation to the country by Smithfield Cattle Company.
Argentina has significant strong family ties than any other North America and other European nations, and mostly consists of one spouse and children (Flores et al 2016, p.69). The family ties are also active with kinships, nephews, and nieces showing closeness among people and warm welcoming, however it is advisable to build business network first before embarking on the real action. The Argentines speak mostly Spanish and English hence creating a better communication channel for international business.
Argentina has been perceived as a pariah state by the global funds market, but currently, the state is trying to be stable getting second look among the investors hence attracting a significant number of investors. Additionally, the county has numerous ministries such as public health, environment Agriculture, and livestock (Brusa et al 2017, p.9)
The economic status of Argentina is presently on the rise after the recovery of the financial crisis of 2001/2002 with an increase of GDP of 9.2 from 2005 to 11.3 % in 2016. The country has embarked as one of the world exports of agricultural products such as corn, soybeans wheat and sunflower among others creating good cash flow in the country (Porter & Ronit 2015, p.420). This creates high purchasing power of consumers giving a good sustainability for the beef industry.
Argentina has a dichotomous mix of technology and infrastructure in major urban centers such as Rosario, Buenos among others (Pawley 2016, p.40). These favor trade development as through the provision of storage materials for beef, business communication, and management, transportation of meat to various part of the country for easy customer accessibility.
The government interventions such as the structural reforms have created a friendly FDI environment that was deregulated in the 1970s by the military. The FDI was achieved by removal of all the restrictions that had been placed such as no approvals, registrations or formalities that are required from the foreign direct investors (de Oliveira et al 2017, p.31). Additionally, there was no discriminatory withholding of taxes on profit remittance from the FDI.
The removal of these restrictions has led the Argentina government to sign several trade treaties such as Multinational Agreement on Investment hence providing a better ground for the Smithfield Beef Company to invest in the country. Other policies that positively impacted international trade in Argentina include privatization, trade liberation and provision of specific incentives that attract investors (Backer 2015,p.156). The increase of FDI has positive on the country’s economy, as more people felt employed, increased cash flow leading to increased purchasing power.
Argentina has been involved in several economic integrations that have considerably impacted trade. Establishments of interactions such as Mercosur (Southern Common Market) in 1991 between Brazil, Paraguay, and Argentina eliminated trade barriers hence facilitating free movement of products among the member’s countries. The integration of Argentina into the world market has positively impacted the economic growth of Argentina such as specialization in comparative –advantage sectors (Wei 2017, p.332). More importantly, the interaction has allowed passage of goods and service into the country, hence favoring the exportation of beef by Smithfield Cattle Company.
Every business expands into the broader market for some ideas. For the Smithfield Cattle Company, the associated strategic goals are: Increase the sales of cattle and beef through the Argentina market due to the high demand in Argentina (Gordin 2017, p. 40). Going global is also another primary reason for the Smithfield Cattle Company of investing in beef business in Argentina to improve the beef business climate through exportation of hence the company increases the global market share.
The primary market entry for Smithfield Cattle Company will include direct export into the market which is more comfortable as the company will have full control over the profit and loss incurred (Torrado 2016, p.695). The company can also make a joint venture with any beef-producing company in Argentina to aid in marketing ability that might be affected by the domestic consumption nature of the Argentina.
The current climatic condition of Argentina that puts the country under long-term drought poses excellent obstacles to cattle farming in the country (Khan 2017). Climatic experts predict a small increase of 2 to 8% if rain shortly of 2020 to 2029, an amount that can support extensive livestock farming since an investor will need to acquire vast piece of land for the growth of grass and adequate water for both irrigation and cattle feeding (Stella et al 2016, p.618). Another significant challenge for animals keeping in Argentina is the availability of cattle foot and mouth disease that reduces the output of the cattle farming.
The high inflation as a result of the two financial crises led the country into quiet little business credit that eventually affected the business environment of the country. The high inflation leads to lower purchasing power; however, the system is currently changing.
Conclusion
International business boosts most of the business capability leading to high-profit making an increase of market share. Many international businesses face different challenges such as political instability, economic status among others. Therefore, it is upon the organization to do extensive research regarding the market and the country to determine the viability of the investment. Argentina has more significant advantages of foreign investment over challenges hence favoring the move by Smithfield Cattle Company into the market through different strategies such as direct exportation and joint venture.
List of References
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