International Business Management Essay Sample
Global marketing indicates the integrated and coordinated marketing activities across many different markets. Taking into account the various conditions on which markets vary and depend, appropriate marketing strategies should be devised and adopted. Like, some countries prevent foreign firms from entering Into Its market space through protective legislation. Protectionism on the long run results in inefficiency of local firms as it is inept towards competition from foreign firms and other technological advancements. It also increases the living costs and protects Inefficient domestic firms.
The decision of a firm to compete Internationally is strategic; it will have an effect on the firm, Including Its management and operations locally. The decision of a firm to compete in foreign markets has many reasons. Some firms go abroad as the result of potential opportunities to exploit the market and to grow globally. And for some It Is a policy driven decision to globalize and to take advantage by pressuring competitors. 1 Segmentation Firms that serve global markets can be segregated into several clusters based on their similarities. Each such cluster Is termed as a segment.
Segmentation helps the firms to serve the markets in an Improved way. Markets can be segmented Into nine categories, but the most common method of segmentation is on the basis of individual characteristics, which include the behavioral, cryptographic, and demographic segmentations. The basis of behavioral segmentation is the general behavioral aspects of the customers. Demographic segmentation considers the factors like age, culture, income, education and gender. Cryptographic segmentation takes into account: beliefs, values, attitudes, personalities, opinions, lifestyles and so .
Market positioning The next step in the marketing process is, the firms should position their product in the global market. Product positioning is the process of creating a favorable image of the product against the competitor’s products. In global markets product positioning Is categorized as high-tech or high-touch positioning. The classification of high-tech and high-touch products. One challenge that firms face is to make a trade-off between adjusting their products to the specific demands of a country and gaining ‘OFF image and cost savings. 3. International product policy
Some thinkers of the industry tend to draw a distinction between conventional products and services, stressing on service characteristics such as heterogeneity, inseparability from consumption, intangibility, and permissibility. Typically, products are composed of some service component like, documentation, a warranty, and distribution. These service components are an integral part of the product and its positioning. Thus, it is important to consider the findings of marketing research and determine customer’s desires, motives, and expectations in buying a product. Firms have a choice in marketing their products across markets.
Many a times, firms opt for a strategy which involves customization, through which the firm introduces a unique product in each country, believing that tastes differ so much between countries that it is necessary to create a new product for each market. Standardization proposes the marketing of one global product, with the belief that the same product can be sold in different countries without significant changes. Finally, in most cases firms will go for some kind of adaptation. Here, when moving a product between markets minor modifications are made to the product. 4.
International pricing decisions Pricing is the process of ascertaining the value for the product or service that will be offered for sale. In international markets, making pricing decisions is entangled in difficulties as it involves trade barriers, multiple currencies, additional cost considerations, and longer distribution channels. Before establishing the prices, the firm must know its target market well because when the firm is clear about the market it is serving, then it can determine the price appropriately. The pricing policy must be consistent with the firms overall objectives.
Some common pricing objectives re: profit, return on investment, survival, market share, status quo, and product quality. The strategies for international pricing can be classified into the following three types:; Market penetration: It is the technique of selling a new product at a lower price than the current market price. Market holding: It is a strategy to maintain buy orders in order to maintain stability in a downward trend. ; Market skimming: It is a pricing strategy where price of the goods are set high initially to skim the revenue from the market layer by layer.
The factors that influence pricing decisions re inflation, devaluation and revaluation, nature of product or industry and competitive behavior, market demand, and transfer pricing. 5. International advertising International advertising is usually associated with using the same brand name all over the world. However, a firm can use different brand names for historic reasons. Brands. A firm may find it unfavorable to change those names as these local brands have their own distinctive market.
Therefore, the company may want to come-up with a certain advertising approach or theme that has been developed as a result of extensive global customer research. Global advertising themes are advisable for marketing across the world with customers having similar tastes. The purpose of international advertising is to reach and communicate to target audiences in more than one country. The target audience differs from country to country in terms of the response towards humor or emotional appeals, perception or interpretation of symbols and stimuli and level of literacy.
Standardization is required for products by some firms. Standardization helps to achieve economies of scale and a consistent image can be established across markets. Demonstration also assists in utilizing creative talent across markets, and facilitates good ideas to be transplanted from one market to other. International advertising can be thought of as communication process that transpires in multiple cultures that vary in terms of communication styles, values, and consumption patterns. International advertising is a business activity and not Just a communication process.
It involves advertisers and advertising agencies that create ads and buy media in different countries. International advertising is also reckoned as a major force that mirrors both social values, and reportages certain values worldwide. 6. International promotion and distribution Distribution of goods from manufacturer to the end user is an important aspect of business. Companies have their own ways of distribution. Some companies directly perform the distribution service by contacting others whereas a few companies take help from other companies who perform the distribution services.
The distribution services include:; The purchase of goods. ; The assembly of an attractive assortment of goods. ; Holding stocks. ; Promoting sale of goods to the customer. ; The physical Q. How can managers in international companies adjust to the ethical factors influencing countries? Is it possible to establish international ethical codes? Briefly explain? Answer: Ethics can be defined as the evaluation of moral values, principles, and standards of human conduct and its application in daily life to determine acceptable human behavior.
Business ethics pertains to the application of ethics to business, and is a matter of concern in the corporate world. Business ethics is almost similar to the generally accepted norms and principles. Behavior that is considered unethical and immoral n society, for example dishonesty, applies to business as well. Managers are influenced by three factors affecting ethical values. These factors have unique value systems that have varying degrees of control over managers. In religious teachings, religions agree on the fundamental principles and ethics.
All major religions preach the need for high ethical standards, an orderly social system, and stress on social responsibility as contributing factors to general well-being. Culture – Culture refers to a set of values and standards that defines acceptable behavior passed on to generations. These values and standards are important because the code of conduct of people reflects on the culture they belong to. Civilization is the collective experience that people have passed on through three distinct phases: the hunting and gathering phase, agriculture phase, and the industrial phase.
These phases reflect the changing economic and social arrangements in human history. Law – Law refers to the rules of conduct, approved by the legal system of a country or state that guides human behavior. Laws change and evolve with emerging and changing issues. Every organization is expected to abide the law, but in the pursuit of refit, laws are frequently violated. The most common breach of law in business is tax evasion, producing inferior quality goods, and disregard for environmental protection laws.
Ethics is significant in all areas of business and plays an important role in ensuring a successful business. The role of business ethics is evident from the conception of an idea to the sale of a product. In an organization, every division such as sales and marketing, customer service, finance, and accounting and taxation has to follow certain ethics. Public image – In order to gain public confidence and respect, organizations must ascertain that they are honest in their transactions. The services or products of a business affect the lives of thousands of people.
It is important for the top management to impart high ethical standards to their employees, who develop these services or products. A company that is ethically and socially responsible has a better public image. People tend to favor the products and services of such organizations. Investors’ trust is Just as important as public image for any business. A company that practices good ethical creates a positive impression among its stakeholders. Management’s credibility with employees – Common goals and values are developed when employees feel that the management is ethical and genuine.
Management’s credibility with employees and the public are intertwined. Employees feel proud to be a part of an organization that is respected by the public. Generous compensations and effective business strategies do not always guarantee employee loyalty; organization ethics is equally significant. Thus, companies benefit from being ethical because they attract and retain good and loyal employees. Interests of the organization, its employees, and the public. Ethical decisions take not account various social, economic and ethical factors.
Profit minimization – Companies that emphasis on ethical conduct are successful in the long run, even though they lose money in the short run. Hence, a business that is inspired by ethics is a profitable business. Costs of audit and investigation are lower in an ethical company. Protection of society – In the absence of proper enforcement, organizations are responsible to practice ethics and ensure mechanisms to prevent unlawful events. Thus, by propagating ethical values, a business organization can save government resources and protect the society from exploitation. Most countries have similar ethical values, but are practiced differently.
This section deals with the way individuals in different countries approach ethical issues, and their ethically acceptable behavior. With the rise in global firms, issues related to ethical values and traditions become more common. These ethical issues create complications to Multi-National Companies (Macs) while dealing with other countries for business. Hence, many companies have formulated well-designed codes of conduct to help their employees. Two of the most prominent issues that managers in Macs operating in foreign entries face are bribery and corruption and worker compensation.
Bribery and corruption – Bribery can be defined as the act of offering, accepting, or soliciting something of value for the purpose of influencing the action of officials in the discharge of their duties. Corruption is the abuse of public office for personal gain. The issue arises when there are differences in perception in different countries. For example, in the Middle East, it is perfectly acceptable to offer an official a gift. In Britain it is considered as an attempt to bribe the official, and hence, considered unlawful.
Worker compensation – Businesses invest in production facilities abroad because of the availability of low-cost labor, which enables them to offer goods and services at a lower price than their competitors. The issue arises when workers are exploited and are underpaid compared to the workers in the parent country who are paid more for the same Job. The disparity arises due to the differences in the regulatory standards in the two countries. Earlier, we believed that ethics is a prerogative of individuals, but now this perception has immensely changed.
Many companies use management techniques o encourage ethical behavior at an organizational level. Code of conduct for Macs behavior. These rules prescribe the duties and limitations of a manager. The top management must communicate the code of conduct to all members of the organization along with their commitment in enforcing the code. Some of the ethical requirements for international companies are as follows: ; Respect basic human rights. ; Minimize any negative impact on local economic policies. ; Maintain high standards of local political involvement. ; Transfer technology. Protect the environment. ; Protect the consumer. Employ labor practices that are not exploitative. When a manager of an international firm faces an ethical problem, certain models help in solving these ethical issues. Culture is a major factor which influences marketing decisions and practices in a foreign country. For example, in the middle-eastern countries the prior approval of the governing authorities should be taken if a firm plans to advertise a product related to women’s apparel, as showcasing some aspects of women clothing is considered immodest and immoral.
International Business and Ethics Bribery and corruption: Bribery can be defined as the act of offering, accepting, or Worker compensation: Businesses invest in production facilities abroad because of Managing ethics to encourage ethical behavior at an organizational level. Various techniques of managing ethics like practicing ethics at the top level management, special training on ethics, forming committees to oversee ethical issues, and defining and implementing code of ethics are illustrated in figure.
Figure: Techniques of Managing Ethics Top management:The senior management of a company must be committed to ensure that ethical standards are met. The chief executive of the company must not engage in business practices harmful to employees, or the society. The top management must focus on ethical practices while informing employees of their intention. Code of ethics: One of the best practices for ethics is creating a corporate ethical statement and communicating it within the company. Such practices enhance the company’s public image. Almost all Fortune 500 companies have such codes.
Ethics committee: There are ethics committees in many firms to help them deal with and advise on work related ethical issues. The Chief Executive Officer can head the committee that includes the Board of Directors. Such a committee answers employee aeries, helps the company to establish policies in uncertain areas, advises the Board on ethical issues, and oversees the enforcement of the code of ethics. Ethics hotlist: A company’s ethical hotlist helps its employees report any ethical issues they face at work. The ethics committee then investigates these issues.
Such hotlist calls are treated confidential, where the callers identity is protected to encourage employees to report on ethical issues. The act of reporting illegal, immoral, or illegitimate practices by former or current employees involving its employees is known as Whistle-blowing. Whistle-blowing is favorable to a company because employees can alert the management on possibly deviant behavior rather than reporting it to the media, which adversely affects the company. A case of whistle-blowing in Xerox corporation (a pioneer in copier machines), led its Chief Financial Officer to be fined $ 5. Million and banned from practicing accountancy after reports of falsified financial statements emerged. Ethics training programs: Most firms take ethics seriously and provide training for its familiar with the official policy on ethical issues. These programs demonstrate the use of these ethic policies in everyday decision-making. Ethics training is most effective when conducted by managers and when focused on work environment. Ethics and law: Both law and ethics focus on defining the perfect human behavior, but they are not the same.
Law is the governments attempt to formalism rightful behavior, but it is rarely possible to enforce written laws. It depends on individual or business ethics to reduce unlawful incidents. Ethical concepts are more complex than written rules since it deals with human dilemmas that go beyond the formal language of law. Legal rules seek to promote ethical behavior in companies. The following are some f the Acts which seek to ensure fair business practices in India: Foreign Exchange Management Act (FEM.) of 1999 – FEM. regulates the cross border movement of foreign and local currencies.
Companies Act of 1956 – Companies Act provides the complete legal framework for the formation, running, and winding up of a company. Consumer Protection Act of 1986 (CPA) – CPA provides and regulates the are essential framework for the protection of consumer rights. Essential Commodities Act of 1955 – This act defines the goods and services that for the people at all times and provides a legal framework for the uninterrupted supply f the same. National Differences in Ethics In the previous section we examined how ethics is significant in international ethics.
In this section, let us consider the differences in understanding ethics across countries. The differences in national cultures have an impact on the social and ethical practices of multinational firms. Cultural norms and values that usually influence business practices are attitudes towards women, minorities, bribery, and law. Religion and law are the key social factors that influence the type of ethical issues. In Macs, managers play a key role in managing ethics. While working in a foreign entry, you cannot expect a manager to have a comprehensive knowledge of that country’s culture and social factors that affect business.
Therefore, the international manager needs to acquire adequate knowledge of a country’s cultural, legal, and social scenarios to ascertain the important ethical issues and to manage these issues. The approaches to understand national differences in ethics are ethical relativism, ethical universalism, and ethical convergence. Let us discuss each of them in detail. Ethical relativism means that each country’s outlook on ethics must be considered valid and ethical. This implies that if bribery is not unethical in a foreign country, then it is acceptable for an NC to encourage bribery even if it is illegal in its home country.
Ethical relativism means that when a company deals with a host country for business, the international managers must follow the ethical norms of the host country. Another example is the attitude towards women employees in certain Arab countries. The attitude differs to a large extent compared to western countries. In Saudi Arabia, women employees are segregated from their male counterparts at the work place. All companies, Macs or local, must comply with these rules. The principle of ethical universalism states that there are basic moral principles that are valid across all cultural and political boundaries.
For example, all countries forbid unethical accounting practices and tax evasion. Both these principles have drawbacks when in international business. Ethical relativism is a convenient way to indulge in unethical practices with cultural differences as an excuse. The universal approach can be perceived as cultural imperialism, since business managers may regard business practices in some countries as inferior or immoral. Ethical convergence Ethical convergence is defined as the practice of a uniform system of ethical codes in different countries that are culturally and socially different.