Discuss about the International Business for Trade of Services and Capital.
International business means trade of services, capital, goods, knowledge, or technology at international level. It is comprised of transactions which are known as cross-border transactions of services and goods between different nations (Aswathappa, 2010). Economic resources transactions comprise skills, people, and capital, for the global manufacturing of physical services purpose of the international production of goods and services like construction, banking, insurance, and finance (Colli, 2015). International business is very important as it improves the standard of living of the nation by reducing poverty, boosting the economic development. Exporting the goods and services helps in opening the new and fresh market for the business which increases the sales (Neelankavil, 2015).
Businesses that expand their operations and export their products to other countries for them there are fewer chances of failure. Besides this, it helps in generating new job opportunities for the people (Menipaz & Menipaz, 2011). This report is aimed towards explaining how the globalization has altered the international business. The description of Porter’s theory of Competitive advantage will be provided. Besides this, based on some cases the answers of the question will be provided such as ways through which strategic alliances can be made more effective.
Basically, globalization is said to be the closer incorporation of nations and peoples of the sphere which has carried huge reductions in the costs of communication and transport and reduction of artificial barriers for the goods and services flow, knowledge, the capital (Beck, 2018).
Globalization is said to be an umbrella term used for the complex range of technological, cultural, political, social, and economic changes observed as increasing integration, interdependence, and communication among people and businesses in different locations (Ferguson & Mansbach, 2012).
International business means a broad series of activities of business performed across national borders. Along with fast-growing globalization, international business has now become a very famous subject which has gapped the attention of business managers, academics, and government officials. International business and domestic business both are different from each other. Globalization of the world economy at the international level, present both challenges and opportunities to the international businesses (Mathews, Ribeiro & Vega, 2012). Managers of business need to consider the environment of business while making worldwide strategic decisions and in handling continuing international operations.
Globalization in the fields i.e. political, social and economics is on the rise from 1970, getting specific enhancement after the Cold War’s end. Numerous economists trust that globalization might be the clarification for main trends in the economy of the world like:
In last 20 years, Globalization has been accelerated. In some years of strong economic growth, exports in the world in 1994 increased around 20% and over 32% in the year 2008 and at the same time worldwide trade decline back in 2009, as an outcome of the worldwide slowdown, but rebounded back in 2010.
Increasing foreign investment could be utilized as a measure of increasing economic globalization. FDI is said to be a measure of the productive assets of foreign ownership, like land, mines, and factories. The highest foreign investment flow takes place between the developed countries. Though, in some recent years, the flow of foreign investment in and out of the developing countries has increased considerably (Muciimi & Ngumo, 2014).
Globalization is an important factor in the life of an international business from last some decades. The phenomenon impacts the worldwide or international business in the below-mentioned ways:
Globalization results in the increased competition. It can be associated with service and product price and cost, technological adaption, fast manufacturing by the company, target market, etc. The time business manufacture product with low cost and vends it cheaper, it is capable enough to increase the market share. With increased competition from the foreign companies and brand, industries of all the countries are bound to enhance their quality and standards and services of customer satisfaction. This provides benefits to the consumers and the whole economy and increases the living standard of everyone. (Masteikiene & Venckuviene, 2015).
The increase in the levels of knowledge of nations as innovative technologies and cultures are unlocked to a specific area are strong, their base of knowledge also raises and enlarges concurrently. As a consequence, they are capable to manage their secondary and primary industries, and this eventually impacts their tertiary sectors in an optimistic manner as well.
Resources and industries, the opportunities for people increase exponentially too. There are various jobs available for people, and many people are opened for the profitable benefits of shifting to a foreign country. This upsurges rates of immigration along with this it is offering chances to people to grow socially and economically. The time people think of immigration, it reflects that the doors to various opportunities have opened for millions of people.
The increase in the foreign investment in the country support different industries and inherent cities. They develop and grow at fast speed. Foreign investment is considered as most valuable venture for every nation therefore they must always be ready for this.
Usually, customers in the whole world are better known, have greater incomes and consequently have higher and more demanding anticipations. This forces companies to encounter higher standards.
Trading in international market enables for huge economies of scale, though not all businesses benefit from these (Okoye & Nwaigwe, 2015).
The Globalization enables the business to enter into larger markets and related cost advantages.
A competitive advantage is the terms used to donate when a business offer superior goods and services to its customers as compared to other companies present in the market. The competitive advantage is earned by the business when it offers better goods as compared to the competitors at a reasonable price for which customer is ready to pay (Porter, 2011). This term is utilized for businesses. The policies or strategies operate for any company, individual or country in a competitive environment (Zenger, 2016). In order to make a competitive advantage, it is important to have a clear thought of the following three determinants:
Benefit- It is very important to know what actual benefits are provided by the product that company offers.
Benefit must be in the measureable term and must be something for what the consumer of the company actually desire and offer them value. It must be known by the company that not just the features of the product, but along with this its advantages that offer benefit the consumers. It reflects that business needs to be regularly updated and aware of the fresh trends that influence the performance of the product, particularly new technology. For instance, printed newspapers used to slow response as compared to assess the ability of free news on the internet. It was assumed that people were ready to pay for the delivered news on a paper every day.
Target market- This is the critical aspect of the business to know who are the consumers or customers of business? And what are their wants and needs?
It is important to know for the businesses who are their buyers? And how business can make their customer’s life better? This is the way business makes a demand, the driver of growth of the economy (Weinstein, 2013). The target market of the newspaper floated to the older people who do not feel comfortable reading news online.
Competition- Have business recognized its actual competitors in the market? It is more in the sector where there are similar businesses or products. Newspapers Company has a thought that their competitors are other companies of newspaper till their understood that it was actually the internet. They did not know that how to compete with the provider of news that was instant and free.
In order to get success, business needs to coherent the advantages company offer to the target audience that is effective as compared to the competition. It is a competitive advantage.
The promotional message must be reinforced in all the channels of communication used to interact with the customers. That comprises public relations, sales aids, and advertising. It even comprises company’s employees and storefront.
In 1985, the School Professor of Harvard i.e. Michael Porter inscribed on “Competitive Advantage.” It is said to be a conclusive textbook of business school on the topic. He had written this in order to support businesses to make a sustainable competitive advantage. In it not applied that if a company is leading in the market presently will lead the market forever (Bakhshinejad, 2014). A business should make simple and clear objectives, operations, and strategies in order to make sustainable competitive advantage. The corporate values and culture of the workers need to be aligned with those objectives or goals (Narav, 2012).
It is very hard to do everything appropriately.
Porter had drawn the three primary methods through which businesses can attain a sustainable advantage. They are the focus, differentiation, and cost leadership. Porter recognized these policies by investigating businesses.
Cost Leadership refers to the concept where firms offer to provide products at a reasonable value or at the lower price. Companies perform this by regularly enhancing the efficiency of its operations (Scheele, 2014). This generally reflects paying less to the employees. Some companies compensate this by providing intangible benefits like promotional opportunities, benefits, and stock options. Other takes the benefit of surpluses of unskilled labor. As these companies develop, they could utilize the economies of scale and purchase in bulk. Costco and Wal-Mart are some of the good examples of the cost leadership. However, sometimes they offer their employees less than the living cost.
Law of Higher minimum wage intimidates their advantage.
Differentiation refers to the process when firms provide effective benefits as compared to other companies. A company can attain differentiation through an exclusive or high product quality (Williams & Williams, 2017). Another way is to deliver products faster. And the third one is to promote in a way that helps in reaching the maximum customers and in a better way. A firm with the strategy of differentiation can ask for a premium. This means it normally has a higher margin of profit.
Companies generally attain differentiation in the organization through quality, service to the customer, and innovation. Innovation reflects that company fulfills the similar needs however with the help of new method. Apple is the best example of this. The iPod of Apple was innovative as it permitted customers to listen to all type of music they desire to head and even in any order. Quality refers to the companies that offer best service and product to its customers. Tiffany’s Company can charge extra as customers look it as the best of all. Customer service refers to the way that delights the shoppers. Nordstrom’s Company was said to be the first to permit returns without raising any queries or questions.
Focus refers to the leaders of the company understand and serve their target audience with effective offerings as compared to others. They may select differentiation or cost leadership strategy to do so. The basic of focusing is to select one particular target market. Frequently it is the tiny market or niche that is not served by the large companies. For instance, community banks utilize the focus strategy in order to attain a sustainable competitive advantage. Their target market is domestic small or individuals with high net worth. Their target market enjoys the familiar tough that is not offered by the big banks. Consumers are ready to pay extra as charges for this service. These types of banks are utilizing differentiation method of the focus strategy.
How Countries make use of Competitive Advantage
A nation can make competitive advantage which is known as a national comparative advantage or national competitive advantage. For instance, China makes use of cost leadership strategy. The low-cost products are exported by China at a reasonable level of quality. It can perform this due to a lower standard of living; therefore it can pay less to its employees or workers. It also set the currency value, the Yuan, which is lower than the value of the dollar.
India initiated as the cost leader, however, shifting towards the differentiation. It offers English speaking employees, skilled workers at a low wage. Besides India, Japan has also altered its competitive advantage. Japan was the cost leader in 1960s that shined at inexpensive electronics. Along with this, it got shifted up in quality brands to in the 1980s like Lexus.
Innovation is the comparative advantage of America. Companies of U.S. carry products that are innovative in the market as compared to any other nation. One of the examples of this is Silicon Valley, which is the innovative advantage of America. The reason why America is innovative is it possess massive and rich local base of the consumer. It is very easy for them to check the idea of the new product. If the product gets successful, they are promoted in the whole world.
How Competitive Advantage is utilized by Individuals
If a person is an employee in a company and functions as he/she is there for themselves. Then the target audience of the employee will be its employer. The benefit of the employee will be the way he/she will increase the profit of the company. The competitor of the employee will be technology and other employee working in the same company. The competitive advantage can be communicated with the help of resume, interview, and appearance. The time person will get the job, he /she will continue communicating their advantage in terms of performance at work (Amedeo, 2018).
International business is an extremely pertinent surface of the current economy and will become unified into the central strategy of business as technology endures to progress. International business is said to be just the synopsis of every commercial transaction that exists between different nations (cross political boundaries). This is not solely restricted to the field of business, as government, coops, and NGOs function in different borders of the country with a variability of objectives.
From the perspective of business, the primary obligatory in the environment of international business is the MNE (multinational enterprise), which is a firm that follows strategic achievement in worldwide sales and production (i.e. working in various country borders). This type of examples is increasing in number constantly. From the chains of fast food such as McDonald’s to the manufacturer of an automobile such as Honda to the designers of a smartphone such as Samsung, various players in the international market are regularly rising.
The international or Global expansion is very complex as well as costly. In order to balance these risks and costs, companies should have tough reasons for emerging a worldwide strategy. These reasons usually fit any of the three strategic areas:
Global Concentration – Based on the competitive attentiveness of a specified industry in an agreed region, it might make logic to arrive a market where there is rare competition and have high demand (Richard, 2016).
Global Synergies – Few companies have extremely developed aptitudes that are simply scaled. In these circumstances, international expansion reflects natural cooperation.
Global Strategic Motivations – Other causes for the expansion to a particular country might exist strategically, like emerging new finding sites for construction or obtaining strategic assets in an offered area (Rossum, 2017).
The global or International expansion could be an expensive and complex process. Before seeing such an important strategic change, management needs to consider the external factors that might influence success during an international transition. These comprise:
Language- Language, more precisely translation, should be given major attention to the time working on global marketing.
Taste- Entering in the global market can be very tough for some firms due to the eating habits of some countries. McDonald’s did complete makeover when it entered the Indian market.
Regional values- Usually, a nation in which a business wants to sell its products has great regional variances that should be considered while marketing the product (Choi & Mogyoro, 2011). The example of this is Canada; they possess a large population of French speaker near Quebec and Montreal that are ethnically diverse than the communities of English speaking found all through the rest of the nation.
Per Capita Income- The wealth of the country is a vast factor when defining possible target market nations and how to promote the product to those nations. For instance, Eritreans have less than $800 per capita income a year; it is possibly not a good market to vend $1000 side-by-side dryers and washers (Anastasia, 2015).
Laws- There was few of the laws in some nations that will hugely affect the aptitude to do the business in them. The example of this is Thailand which has particular laws declaring no foreign company or individual can possess more than 49% of the business in the country Thailand, therefore it is important to have a Thai partner to do business there.
Steps to make a successful strategic alliance
In order to have a successful strategic alliance, it is very important for every business to select the perfect and consonant partner who helps in increasing the strength and profitability of the alliance (Rachelson, 2015). For example- An alliance among Seattle-based Starbucks and Purchase, PepsiCo made the standard drink which was of coffee-flavored, i.e. Frappuccino. The association stirred Starbucks into the market of bottled-beverage whereas PepsiCo added an innovative product with a partner who is well-branded. Both of them met with their operational and strategic goals which in turn can be said as a perfect match.
It is not important to trust the partner in terms of sharing the information. Besides this, it just needs to decide what not to be shared. An alliance can include complicated interlinking of knowledgeable property from diverse labs of research and development possessed by numerous partners. Various companies of pharmaceutical have marketing alliance. Takeda Chemical Industries of Japan and Eli Lilly, have combined together to make a medicine for the cure of type-2 diabetes.
Few of the businesses have altered strategies to concentrate on the alliances because they are the major generators of the revenue. Presently, IBM’s 30% of the revenue was generated from a variety of alliances. IBM is capable to get thrive on this scope as they have a procedure, approach, strategic commitment, structure, and metrics to make alliances operate from company’s highest levels. A few years ago IBM has altered some strategies and incorporated alliances, as considering them the perfect method to provide their consumer’s more appropriate and valuable resolutions to their wants. In some cases, they took the decision to partner in place of competing with some vendors of independent software (Segil, 2018).
The maker of computers HP, its alliance with the Walt Disney Co. has revealed excessive outcomes as HP offers key IT innovation and solution to the varied divisions of Disney along with co-branding as a serious portion of the relationship. The alliance between both the companies was negotiated and structured properly, along with a proper understanding of what every partner has to add and can anticipate originating from the association and how it will change over time.
Various corn, vegetables, and fresh fruits, along with their processing are the outcomes of alliances. The Des Moines Pioneer, Hybrid International, Iowa, and some part of DuPont, makes and executes research and development alliance of agriculture that has subsidized considerably to the food resources of the world and our well-being. This reflects that mostly partnership with small business, individual academics, and scientists where outcomes of trials don’t appear accurate on time and flexibility is desired to redesign the investigation searching for other consequences demanding customized solutions.
From last some years, business organization and market globalization have augmented the number of corporate executives and entrepreneurs engaged in multinational and international strategic alliances and joint ventures (Gangone, 2010). Others are concerned in foreign markets by doing direct investments in order to increase the domestic operations, expand market share and increase profit margins (Marketing School, 2012). While these strategic initiatives of business and efforts are progressively appealing due to their benefits, companies competing in international markets need to deal with some realities of commitment to suitable ethical values and social responsibility in international and cross-cultural settings of business (Gurnani, 2015).
Ethics of Marketing are the collection of principles, values, and rules, should be followed in the regulations of marketing activities. In the marketing of the product in the different country, businesses deal with various issues and challenges because of social, political, and cultural differences in diverse countries. Some of the ethical issues deal by the Goodman International Company is:
Price is the significant factor in promoting or marketing a product in the different country. Sometimes companies charge a high price in the international market in order to increase their revenue however which is not atoll an ethical practice as the government of different countries fixes some prices for the company to charge from the customers (Markgraf, 2018). Moreover, the buyers of Goodman International in the international market are unaware of the actual manufacturing cost that is incurred by the manufacturers they pay the prices as set by the companies. However, if the company does not charge the reasonable prices for its products in the international market it would be an unethical practice on part of the companies as they are manipulating their product prices for their own benefits.
Goodman International needs to charge an appropriate price in order to perform ethically in the international market and to gain the trust of the customers.
The misleading advertisement is not just unethical in fact they are illegal. The Federal Trade Commission (FTC) planned “truth in advertising” instructing that companies make precise statements in their campaigns of advertising and when conceivable support their claims with scientific proof. However, there are various companies who adopt an unethical way to advertise their products (Mack, 2018). For example, in toy industry company can claim that they make use of best quality of raw material such as plastic in the manufacturing of toys but use poor quality to save cost because good quality of raw material costs high to the company as compared to the low-quality raw material. Moreover, the low-quality raw material contains toxic ingredients that can affect the health of kids. Therefore, Goodman International need to follow ethical ways and have to make an advertisement that reflects real image of the company.
Many companies make use of strategy i.e. they buy various email addresses in order to make their subscriber list and contact with people who are not known to them. It is important to know that FTC has implemented the CAN-SPAM act, the law in which business are legally permitted to mail people deprived of their consent but one single time (DeMers, 2017). However, this one time also irritates people as it is an uninvited communication. Therefore, Goodman International should adopt different ways to market their offerings such as social media advertisement, hoardings, and boarding, etc.
Conclusion
In the conclusion, it can be said that international business is one of the advantages offered to local business to expand and offer their products in the different market and show their skills and talent. The emergence of Globalization has changed various things in the international business which has been explained in the above report. Besides this, the report has highlighted how companies, countries or individuals create their competitive advantage in the market with the help of some examples. Further, the report has elaborated the concept how a business can successfully make strategic alliance effective and some of the ethical practices and issues business deal in the international market with the help of Goodman International company’s example.
References
Amedeo, K. (2018). What Is Competitive Advantage? Three Strategies That Work. Retrieved from https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828
Anastasia. (2015). Factors to Consider For International Marketing. Retrieved from https://www.cleverism.com/factors-to-consider-for-international-marketing/
Aswathappa. (2010). International Business. 4th edn. U.S: McGraw-Hill Education.
Bakhshinejad, M. (2014). Porter’s Competitive Advantage Model and its Application in Bottled Drinking Water in Iran. Agricultura Tropica Et Subtropica, 47(2), 60-67.
Beck, U. (2018). What Is Globalization? 3rd edn. U.S: John Wiley & Sons.
Choi, J., & Mogyoro, M. (2011). Influence of Internal and External Factors on Expansion Strategy. Retrieved from https://www.diva-portal.org/smash/get/diva2:427823/fulltext02.pdf
Colli, A. (2015). Dynamics of International Business: Comparative Perspectives of Firms, Markets and Entrepreneurship. 1st edn. U.S: Routledge.
DeMers, J. (2017). 5 Common Unethical Marketing Practices: Are You Guilty? Retrieved from https://www.forbes.com/sites/jaysondemers/2017/05/17/5-common-unethical-marketing-practices-are-you-guilty/#773fbe972f27
Ferguson, Y.H., & Mansbach, R.W. (2012). Globalization: The Return of Borders to a Borderless World? Ist edn. U.S: Routledge.
Gangone, A.D. (2010). Ethical Issues In International Business. Fascicle of The Faculty of Economics and Public Administration, 10(2010), 189-199.
Gurnani, R.M. (2015). Globalization and ethical challenges. The Business & Management Review, 5(4), 116-119.
Mack, S. (2018). Unethical Activities in the Field of Marketing. Retrieved from https://smallbusiness.chron.com/unethical-activities-field-marketing-65705.html
Marketing School. (2012). Ethical Marketing. Retrieved from https://www.marketing-schools.org/types-of-marketing/ethical-marketing.html
Markgraf, P. (2018). Social or Ethical Issues Companies Face in a Foreign Market. Retrieved from https://smallbusiness.chron.com/social-ethical-issues-companies-face-foreign-market-48721.html
Masteikiene, R., & Venckuviene, V. (2015). Changes of Economic Globalization Impacts on the Baltic States Business Environments. Elsevier, 26(2015), 1086-1094.
Mathews, G., Ribeiro, G.L., & Vega, C.L. (2012). Globalization from Below: The World’s Other Economy. 2nd edn. U.S: Routledge.
Menipaz, E., & Menipaz, A. (2011). International Business: Theory and Practice. 2nd edn. U.K: SAGE.
Muciimi, E.N., & Ngumo, E.M. (2014). Implications of Globalization for International Business Strategy: A Multi-Sectoral Approach. International Journal of Science and Research, 3(4), 68-78.
Narav, S. (2012). Porter’s Theory of Competitive Advantage of Nations of International Trade. Retrieved from https://www.preservearticles.com/2012012621657/porters-theory-of-competitive-advantage-of-nations-of-international-trade.html
Neelankavil. (2015). Basics of International Business. 3rd edn. U.S: M.E. Sharpe.
Okoye, H.N., & Nwaigwe, L.C. (2015). The Impact Of Globalization To Business And The World Economy. International Journal of Business and Management Review, 3(5), 17-32.
Porter, M.E. (2011). Competitive Advantage of Nations: Creating and Sustaining Superior Performance. 3rd edn. U.S: Simon and Schuster.
Rachelson, D. (2015). 7 Steps to Building a Strategic Alliance. Retrieved from https://www.entrepreneurmag.co.za/advice/doing-business-in-sa/business-landscape/7-steps-to-building-a-strategic-alliance/
Richard, N. (2016). Top Four Reasons Businesses Expand Globally and What You Need to Know. Retrieved from https://www.radiusworldwide.com/blog/2016/2/top-four-reasons-businesses-expand-globally-and-what-you-need-know
Rossum, J.E. (2017). 5 benefits of international expansion. Retrieved from https://www.bizjournals.com/bizjournals/how-to/growth-strategies/2017/12/5-benefits-of-international-expansion.html
Scheele, D. (2014). The trade-off between cost leadership and differentiation. 1st edn. Germany: GRIN Verlag.
Segil, L. (2018). 5 Keys To Creating Successful Strategic Alliances. Retrieved from https://www.forbes.com/2002/07/18/0719alliance.html#55b0714c11f4
Weinstein, A. (2013). Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms. 3rd edn. U.S: Routledge.
Williams, R.L., & Williams, H.A. (2017). Vintage Marketing Differentiation: The Origins of Marketing and Branding Strategies. 1st edn. Germany: Springer.
Zenger, T. (2016). Beyond Competitive Advantage: How to Solve the Puzzle of Sustaining Growth While Creating Value. 1st edn. U.S: Harvard Business Review Press.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download