International Business Unconventional Business Approach

Question: Discuss about the International Business for Unconventional Business Approach. Answer: What is fair trade? Who benefits from it? Claar Haight (2015) explains fair trade to be an unconventional approach under which an agreement between producers and consumers regarding superior terms of trade is created to have better deal amongst them. The beneficiaries of fair trade are the parties involved where they are able to improve their lives and can structure improved policies for the future. Under this process, a minimum price for the producers is determined as per directions offered by Fairtrade Standards and Pricing Unit (Fairtarde Labelling Organizations International, 2011). Price fixed by the parties ensures that it covers producers average costs of sustainable production. Moreover, producers and consumers can negotiate prices of the items based on quality of items and value prevailing in markets (Fairtarde Labelling Organizations International, 2011). On the other hand, consumers or companies buying items through fair trade can create positive impact on people that they have used sustainable way to have busine ss. Since 1992 Indonesia has imposed high export taxes on export of raw wood sawn timber. Why would it do this? (Hint; what is the impact of these export tariffs on domestic market for wood timber?) Which domestic industries will benefit from this impact?) Who is hurt by these high export taxes? When GATT/WTO came into existence it reduced trade barriers on items belonging to various segments to a great extent that is negotiated among members (Brann, 2002). However, the impact of these barriers was found to be high forest produce which gave rise to varied conflicts in international negotiations and environment. Complications of these issues were apparent in Indonesia which is biologically and geographically diverse and controls different natural resources like oil, gas and timber (Brann, 2002).The political factors or regulations in order to protect its natural resources were weak that resulted in exploitation. During Asian financial crisis the country faced complexities in improving its economic growth where the government in order to have financial stability raise the export taxes (Fyfe, 2012). During 1989-1999 the Indonesian international transactions increased 2.5% greater than GDP (Brann, 2002). It was also noticed that forest items exports before occurrence of economic crisis was nearly $9 billion per year which increased to $200 million in 1980s (Brann, 2002). Timber trade (raw wood and sawn) is extremely significant for Indonesian economy where its contribution to countrys GDP is nearly 10% where in mid 1980s it contributed to70% of globe plywood export segment (Fyfe, 2012). Imposition of higher export restriction on raw wood and timber results in reduction in local price of taxed items as domestic players can supply timber and wood at smaller quantity which decrease producer surplus (Fyfe, 2012). U.S, Japan, Singapore and ASEAN countries are significant importers of these items where high export restrictions will impact their trade treaties (Fyfe, 2012). Should we worry foreigners sell us goods cheaply? When foreigners sell their good cheaply in countries it can be reason for worry as it can have adverse impact importing nations economy (Gao, 2005). Specifically, there are two reasons behind why these foreigners sell their good inferiorly to other nations; the producing country is trying to promote their domestic industry which is also termed as dumping goods (Gao, 2005). When items are available cheaply through imports the demand for local producers reduces and there is a possibility that due to decreased competition future prices may increase (Czako, Human Miranda, 2003). Secondly, higher interdependence on foreign items impacts the balance of payments occurring between varied nations and affects currency exchange that can increase inflation rate further and harm the economy (Czako, Human Miranda, 2003). Under what condition can WTO members not use MFN when dealing with one another? Under Most Favored Nation policies, a country cannot discriminate the imported items as compared to domestic items and members are instructed to behave with compliance to commitments made by them on tariffs (WTO, n.d). However, WTO members may not use MFN while dealing with nations under following conditions (WTO, 2016): General Exceptions: When it is essential to safeguard human, animal or natural resources WTO can restrict members not to use the policies given under MFN. Security Exceptions: Countries in order to protect essential national security welfares can restrict WT members from utilizing MFN policies. These security exceptions are also permitted under GATS and TRIPS agreement. Exceptions for Regional Trade Agreements: Countries when in order to have preferential treatment of goods or services from the transacting partners agrees to depart from MFN policies. Balance-of-payments: A country in order to protect its economy from adverse impacts of deficit can restrict the MFN policies. What strategies can North American and Asian firms adopt to ensure access to the enormous EU market? With globalisation countries are entering different nations to take advantage of opportunities available in varied markets (European Commission, 2011). Several developing countries have entered European Union market with low cost strategies. For instance, Chinas Haier Group in electronic and Indias Infosys in IT is performing very well in Europe (Khannd, Palepu Sinha, 2005). Western companies that want to create counter strategies to compete with local players can implement innovative ideas to serve the requirements of people. Specifically North American and Asian firms can make two choices: Where they can adapt their business model as per the countries environment keeping their core value proposition unchanged Entities can change their contexts (framework) of working to be economical and practical. For instance, Metro Cash Carry while entering the European and Asian nations changed its context by creating links among farmers and small-scale producers and by shifting its transaction from roadside markets to computerised storeroom. What are the steps in international strategy formulation? Strategy formulation can be explained as process of selecting the most appropriate options available to entities in order to attain its specified goals and vision (Bhalla, 2013). An enterprise must involve various steps essential for effective strategic formulation before entering a new market which are as follows (The Sailor Foundation, 2013): Clarifying and determining the organisational objectives: An enterprise while entering new territories must clarifies the motive and varied means through which desired outcomes can be achieved. Evaluating the Organisational and External Environment: Proper scanning of ones own strength and weakness helps an entity to formulate effective strategies that can help them to create competitive edge among consumer segments. In order to have better internal analysis a company can implement various techniques like SWOT through which major opportunities and threat can also be identified. PESTEL and Porter five forces are other techniques through which the impact of policies on companies activities and competitive or industry analysis could be done. Setting Quantitative Targets: Under this, entity must fix quantitative target values to as per the desired outcomes. Through this a comparison based on time taken and contribution made by personnel in achieving the desired goals can be evaluated. Choosing Strategies: Based on objectives determined by companies and what outcomes in quantitative terms a firm wants to attain from international areas, selection of appropriate strategies must be done. These include selecting strategies of location, technology and pricing. How can a poor SWOT analysis affect strategic planning? SWOT analysis guides entities to identify the positive and negative aspects or factors present in the internal and external environment of company (Harrison, 2010). If organisations fail to analyse significant factors present in the environment it can result in failure of businesses as strategic formulation and selection of entry mode are done on the basis of environmental scanning (U.S. Department of Health Human Services, 2015). Under strategic planning an entity plans regarding its objectives, results and means to obtain desired performance (strategies) and when the initial steps of conducing activities are inefficient it can result in losses and increased cost that ultimately makes business a failure. How are the components international strategy (scope of operations, resource deployment, distinctive competence, and synergy) likely to vary across different types of corporate strategy (single business, related diversification, and unrelated diversification)? Global environment of enterprises may differ depending on the type of strategies that a company implements in order to take advantage present in new areas (Lymbersky, 2008). For having proper balance and profitability a company can implement different strategies like global (single), related and unrelated diversification. The distinctive elements of international policy like scope of operation vary depending on corporate strategies selected by the firm. For instance, the scope of growth that a company wants to have are different depending on geographical region or market conditions (low or high cost) and how capable a company is able to create distinctive competence (Lymbersky, 2008). Under distinctive competence an entity determines means to create competitive edge over other players while under resource deployment looks after different options (FDI or alliances) through which it can serve the requirements of consumers (Lymbersky, 2008). On the other hand, synergy is to analyze whet her the total of company part is larger than its part. While developing and implementing strategies an enterprise tries to develop necessary tactics through which it can attain its desired goals which can be determined efficiently only when different components of international strategy are analyzed properly. What are the three specialized entry modes of international business, and how do they work? The three mode entry modes of international business are single business, related diversification and unrelated diversification (Lymbersky, 2008; Tang Liu, 2011). Single-Business Strategy: Under this a firm depends on single business, items or services for earning revenues. Through this strategy an entity can have advantage of concentrating on single product through which it can serve the changing requirements of people efficiently (Lymbersky, 2008). However, changes in external environment can have vulnerable impact on the performance of enterprises following single-business strategy. Dell, McDonalds and Singapore Airlines are some of the enterprise following this strategy. Related Diversification: In this, firms are operating its activities in different areas with related (similar) business and sector at a time (Lymbersky, 2008). An enterprise that implements this strategy can have benefit of developing a creative edge in one segment in order to strengthen its performance in other business. Moreover, fluctuation occurring in the market does not result in poor performance as it can focus on other items. Unrelated Diversification: An enterprise implementing this strategy is having its activities in unrelated segments and different areas. Raising capital is easier under this mode as units are performing independently from each other and overall risk is diversified. However, the major drawback of this mode is its complexity as wider businesses are involved (Lymbersky, 2008). What factors could cause you to reject an offer from a potential licensee to make and market your firms products in foreign market? Factors that can result in rejection of potential licensee to make or market firm items in global areas are (Aswathappa, 2008): When entrance of the particular enterprise could restrain the scope of market opportunities and will lead in formulation of mutual dependency like cartel. The enterprise earlier has been involved in violation of requirements or policies mentioned in the licensing agreements. If the firm can have complexities linked with the agreement that can have adverse impact on its speed on entrance in the foreign economy. Unit 4 What are the basic differences between a joint venture and other types of strategic alliances? A joint venture involves investment of fund, resources like technology and facilities on long-term basis by the combing parties (Ministry of Business, Innovation and Employment, 2015). Under this form the benefit are segregated among all the parties involved and they have equal contribution in new venture formed after the joint venture. On the other hand, strategic alliance is categorised as collaboration among parties (companies) to have mutual shared outcomes. Partners involved in these agreements retain their independence and derives competitive edge by using other parties competency (Ministry of Business, Innovation and Employment, 2015). Some of the forms under strategic collaborations are technology transfer, purchasing settlements and joint product creation. Why would a firm decide to enter a new market on its own rather than using a strategic alliance? Though under strategic alliances enterprises can reduce their overall investment there can be integration complexities like cultural or corporate difference among entities (Carpenter Dunung, 2012). A firm in spite of using strategic alliances can directly utilise exporting as a means of undertaking transactions. The overall risk involved in the process is low and it creates an opportunity for the traders to enter new areas rapidly where they serve the requirements of people based on their framework. However, the mode can also be disadvantageous under these firms have little control over the areas with low knowledge of changing preferences of people (Carpenter Dunung, 2012). What is global matrix design? What are its strength and weaknesses? Global matrix design can be explained as a conceptual framework of conducting business in varied parts of globe that several reporting lines are developed (Aswathappa, 2008). Figure 1 illustrates a global matrix design where different managers related with departments of marketing, finance, operations and HR are involved. Matrix structure are commonly utilised by entities operating in technology segment, for instance WIPRO has segregated itself in three segments Wipro Technology, Wipro Infotech and Wipro consumer care and lighting (Aswathappa, 2008). Figure 1: Global Matrix Design (Source: Aswathappa, 2008) The major strength of this structure is that flow of interaction among the departments is two-way which assists the enterprise to get useful insights before strategy implementation. Secondly, the structure ensures flexibility which allows firms to have advantage of its key functional areas (Aswathappa, 2008). However, the structure is not advantageous for enterprise with few product lines and whose operations are in stable markets. The structure is complex where several meetings must be undertaken in order to come up with decisions and hence faster strategy formulation is not possible (Aswathappa, 2008). Do managers of international firms need to approach organization design differently from their counterparts in domestic firms? Why or why not? Past studies mentions that size of enterprise, level of competition, technology, wages, productivity factor and export propensity affect the performance of enterprises (Bellak, 2004). Yes, it is essential for managers to approach the organizational design differently from their counterparts in domestic firms. The reason behind it is that the complexities in dealing with different factors vary significantly between international and domestic entities. While going international new techniques of organizing activities are required for managing the differences in operating environmental factors like political and cultural elements. In order to have organizational control an entity must design its processes differently to serve consumers requirements efficiently (Bellak, 2004). How do legal, cultural, and economic factors influence product policy? External environment of enterprises differs greatly due to varied, legal, cultural and economic factors prevailing in countries (Aswathappa, 2008). Economic factors like changing rate of GDP, recession and depressions impacts the requirements and supply of items and can generate superior or poor performance. For instance, in Indonesia higher export restrictions are charged by government on timber (raw material) as it is being imported by various nations like U.S (Aswathappa, 2008). Entities operating in furniture segment largely depend on supply on timber and raw woods and higher legal restrictions Moreover, it is not necessary that same level of legal restrictions is prevailing in every parts of the globe. Cultural difference among ASEAN countries and European countries is different and therefore impacts the requirements of items (Aswathappa, 2008). What are some of the fundamental issues that must be addressed in international advertising? Some of the key issues that require to be addressed in international advertising are language barriers, improper design and symbols and varying perception of people (Okazaki, 2012). An enterprise cannot use a single language for an international marketing campaign, for instance, in India 22 different languages are spoken that could greatly impact the names and signs of brand choices (Okazaki, 2012). Similarly, cultural difference among countries like China, Mexico and U.S are different where different customs for personal and business transactions are followed (Okazaki, 2012). What are the pros and cons of trying to use single brand name in different markets, as opposed to creating unique brand names for various markets? Under single brand name, each item is named differently and sometimes there is no link among the ranges of products that the same company offers to people (Aswathappa, 2008). This branding avails the marketers to benefit from easy diversification to other field with brand diffusion. However, it can be disadvantageous for the enterprise in international marketing as they have to spend heavily on creating awareness for the items in the area going to be served (Aswathappa, 2008). What are the advantages and disadvantages of each pricing policy? Why do most international firms use market pricing? Pricing policies are of three types, competitive based, skimming and penetration pricing (Aswathappa, 2008). Under competitive (market) pricing policies an entity fixes the value of its items based on its competitive value. Skimming prices are used by firms when it wants to serve the requirements of high end consumers while under penetration pricing the cost of the item are kept low in the beginning and is raised after the product create demand among people (Aswathappa, 2008). By implementing market based pricing a company is able to compete with its different other players strongly in the area served. It can create competitive edge among the consumers by offering additional benefits within similar price of competitor (Aswathappa, 2008). Unit5-1 What basic set of factors must a firm consider when selecting a location for a production facility? While selecting a location for production facilities in different areas, an enterprise must look after various factors like (MacCarthy Atthirawong, 2001): Nature of operation: The nature of business a firm is in determines the location of production facility. For instance, construction or mining firms must always be located away from civilization to reduce pollution impacts on people while for retail stores a well-known or easily accessible area must be chosen. Transport: In order to transfer the items within desired period it is essential for the firm to choose a place for production unit from which transportation is available. Labour: Entities heavily dependent on labours for production requires setting up with their units to a place that can be easily accessible by the personnel else their non-availability can hamper the overall process. What basic factors must be addressed when managing international service operations? Factors like intangibility and perishability of services must be addressed by enterprises to while operating their activities internationally (World Bank, n.d; Ricks, 2006). Intangibility of services can crate complexities in assessing the service quality while perishability factors can make capacity planning critical (World Bank, n.d). In order to have better service operations customer participation is significantly essential as sometimes they sometimes people prefer customization of amenities based on their personal preferences. Why are services most closely associated with developed, industrialized economies? As per research, the share of service segment in U.S has increased significantly from 60% to 80% from 1950-2000 (World Bank, n.d). Currently the developed and industrialised economy is highly dominated by rising requirements of service segments like finance, hospitality, health, education and education (World Bank, n.d). With globalisation numerous entities are entering the developed or industrialised economy to have higher market share and profitability which has increased the intensity of competition to a great extent. With products or offering being similar, it has become important for enterprises to offer superior services to its consumers that are not provided by its competitors that can derive competitive edge among different players. What is translation exposure? What effect does balance sheet hedge have on translation exposure? Translation exposure is the changes that take place in the companys equities, income, assets and liabilities of enterprises as per the fluctuating exchange rate (Aswathappa, 2008). On financial statements like balance sheet this transaction exposure appears as financial increase or loss incurred by the entity as per change in value of assets. For instance, a company having a facility in Germany valued 1 million is currently 1:1 (dollar-to-Euro). However, due to variations in exchange rate the ratio changed to 1:2 as per which assets value become $500,000 which will be illustrated as a loss in balance sheet of company (Aswathappa, 2008). What capital budgeting techniques are available to international businesses? Pay Back Period Method: A process which proposes a period within which an enterprise will be able to recover its initial investment and there is no concept of time and value (Aswathappa, 2008). Accounting rate of return (ARR): Under this rate of return rate is determined in order to have percentage of earning as compared to investment made in a particular project (Aswathappa, 2008). As entire economic life of project is involved it provides the entity an option to compare better means that are available. Net present value: Expected cash flow at different time period can be determined with the help of discounted rate from which comparison between present value of cash inflow and investment initially made can be evaluated (Aswathappa, 2008). The government of Colefax and Fowlers home country, the United Kingdom, has chosen not to be a participant in European Unions (EUs) single currency scheme. Will this put Colefax and Fowler at a disadvantage in competing for business in other EU countries? If so, is there anything the company can do to reduce its disadvantages? Researchers expects that in short-term the impact of U.K exit from EU will result in currency volatility while its long-term impacts will be dependent on how the country unravels its involvement from the EU (PwC, 2016). Companies having their business in UK or EU markets can be disadvantageous as enterprises who conduct their business through financial mechanisms are going to experience adverse impacts like political instability and low US interest rate (PwC, 2016). In order to reduce its adverse implications companies must have better accessibility to financial reporting options like treasury, hedging and intercompany transactions (PwC, 2016). References Aswathappa. (2008). International Business. New-Delhi: Tata McGraw-Hill. Bellak, C. (2004). How domestic and foreign firms differs and why does it matter? Retrieved from https://core.ac.uk/download/pdf/11007065.pdf Bhalla, V.K. (2013). International Business. New Delhi: S. Chand Publishing. Brann, J,. (2002). 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