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Culture is a principle element that takes a vital role in the international business. It is generally compared to an iceberg, thus, there is always more to the issue than it meets the eye. These hidden characteristics, if not realized, may either break or make an international business transaction.
The raising interdependence that exists between nations, people and businesses has initiated the importance of international cultures to the forefront. Culture in the international business may be transmitted behavior norms, values, patterns and beliefs in these businesses. Nevertheless, it is vital to note that the nationality and culture are not normally the same. A culture that exists within a nation may be distinct.
For some cultures, the fundamental goal of the next Summer Olympic Games is to arrive to a particular deal so as to sign a contract, while other cultures in international businesses see it as an establishment of a long term relationship that normally exists between parties that may eventually lead to a particular contract. For example, Summer Olympic Games are held every four years in a different station from where there were held the previous time. This has established a long term relationship among all nations in the globe (Schermerhorn, 2009).
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Any relationship that exists in the international businesses is normally built upon relationships existing between individuals. Therefore, trust has to develop before the participation in an international business. In contrast, some other international businesses attach more importance to a contract that has been created through the signing. This might be because negotiators normally tend to be lawyers.
Parties from different international businesses approach the negotiations’ table having a win-win or a win-lose altitude. The win-win negotiators see negotiations as a collaborative effort, whereby both parties normally gain, whereas the nature of win-lose negotiators normally results in one side losing as the other wins.
In conclusion, the role of culture in international businesses assists various organizations in learning about their counterparts. This role provides knowledge that enables negotiators in understanding the negotiation behavior in various counterparts with an effort that makes negotiations proceed a bit more easily.
The Reasons why Companies Go into Partnerships
A partnership is generally formed where two or more individuals decide to come together forming a business. The way a partnership is created and run, as well as the way it is taxed and governed often makes it seem to be the most appealing business form. Nevertheless, there are situations where this is not the case.
The use of strategic alliances has dramatically expanded over the past decade. International businesses move into a strategic alliance to develop an arrangement whereby two or more firms decide to cooperate for their mutual benefit. Various firms may bring together their efforts for a variety of purposes that include sharing knowledge, expenses, expertise, as well as gaining entry to new markets. Further, development of a strategic alliance may turn potential competitors to become partners, thus, working towards a set common goal.
One of the main reasons as to why come into partnership in their international operation is to make it easier to develop the starting capital. Due to the business nature, the partners fund the business using the startup capital. The more are partners in a starting business, the more money that can be put into the business. This allows a better flexibility of the business and makes it more potential for the development and growth.
Partnership also allows flexibility. This is due to the fact that partnerships are normally easier to form, run and manage. They are not strictly regulated, that is, in terms of the law that governs their formation since partners are the ones who determine how the business would be run, without any interference by shareholders. They are extremely flexible in terms of management, as far as all partners agree.
Nevertheless, there are some disadvantages that are encountered in partnership. This includes the issue of disagreement among members of various issues. This makes hard to develop some ideas that might of beneficial to the company. Disagreements in partnership may also lead to disputes that may harm the business.
Profit sharing is another disadvantage. Profit is shared equally and this may lead to inconsistency where some partners may not be putting a fair share of effort into the management of the business.
In conclusion, forming the partnership appears as the most logical option. Running a normal small business that has a low turnover may not be equivalent to having to form a partnership that would be a decent choice of a legal structure that forms a new business.
Factors that make Global Logistics Complex
Douglas Long, the author of the book ‘International Logistics’ explained that global logistics is of real significance in multinational corporations. International logistics involves the ability to move commodities and services from one location to another so as to meet customers’ demands. This process can at times be complex and quite hectic. The complexity of the international logistics is determined by processes involved in transporting the ware house, the maintenance of the inventory records and controlling it, the ordering process and the process of monitoring information between suppliers, distributers, up to the person who had placed the order for goods being transported.
Other factors which make the global logistics be considered complex include: transportation distances, means of transportation, institutions involved, as well as the flow of information all along the transportation chain. This process also involves a lot of financial risks. When one looks at all these factors, one can affirm that this process is multifaceted since these processes cause substantial economic impacts.
Distances covered in global logistics systems are more vital than those involved in domestic logistics. This increases the ambiguity in terms of meeting the demand in the market in time, as well as if goods being transported were food stuffs they could perish before reaching their markets. This causes suppliers, as well as all others involved in these institutions, to be caught up in a financial crisis due to the immense loss they have to encounter.
To avoid problems brought about by long distances cases, most companies prefer having their goods being transported by better and reliable means of transportation which will deliver the goods in a decent time and condition. Air transport is at times considered faster and more expensive, but when goods are bulky, water or rail transport are considered. Small companies wishing to participate in this global logistics join efforts and share the cost of transportation so as to have this process running smoothly on their side.
Michael Porter’s Theory of the Competitive Advantage of Nations
Most discussions that have been held with regards to competitive success of various nations in the globe look at aggregate and economy-wide measures, such as the trade balance. Porter decided to choose a different starting point. He began with individual competitors and industries and building up to the whole economy. Different nations normally do not compete in market places but business firms usually do, and performance by various individual companies in specific industries whereby the competitive is either lost or won. The home nation affects the ability of its firm so as to succeed in specific industries, with the failure or success of many struggles in various industries establishing the state of the economy of the nation and the ability it has in order to progress.
Porter studied ten vital trading nations that included three vital industrial powers (the Germany, United States and Germany), plus some other Asian and European countries that are chosen to vary in government policy to industries, geography, social philosophy, religion and size. In every case, various firms were discovered to be internationally competitive, since they had a set of conditions in their home security that were favorable to their industries’ development.
Four determinants normally interact forming what is best known as a “diamond’’. A diamond stands for a rivalry and structure; factor conditions (for example, natural resources); and supporting and related industries. The diamond has been further influenced by the government action and chance events. There is no set of national conditions that are favorable to every industry, a fact that is borne out by the country studies and the detailed industry which comprises the bulk of the book. The final part of the diamond presents implications for the strategy of the company, national agenda and government policies of ten countries.
The Role of the Multinational Companies in International Business
Practically in all the sphere of modern life, multinational companies are a strong economic force. In a developing globalized world, multinational companies integrate with developing states in a multifaceted manner. The debate over the Multinational companies is neither new nor complete.
Multinational companies are a vital factor in the globalization process. Local and national governments are often competing against each other in order to attract the multinational companies’ facilities, with the anticipation of the increased employment, economic activity and tax revenue. The concentration of competition among various multinational companies leads to a labor division creation and capitalist processes that are normally crucial in attaining economies of scale.
In order to compete, the political entity may opt for offering incentives, such as pledges of government assistance, tax breaks and subsidized infrastructure to multinational companies. These routines of attracting the foreign investment might be criticized and be pushed towards the autonomy for different companies. Multinational companies play a vital role in uplifting the economy of various developing countries. For instance, the act of investing in these countries normally provides market to the multinational companies.
Multinational companies are normally tied to the operational frequency. These include a high standardization degree. Therefore, multinational companies are likely to adapt the process of production in most of their operations. This allows them to conform to most rigorous jurisdiction standards in which they operate (Jagdish , 2004). Multinational companies pay their workers in the developing nations far much below in nations where productivity labor is a bit high.
Finally, going by the multinational company’s nature, investment in any nation shows a desire for an average to a long term return, as training workers and establishing plant may be costly. Once they have been determined by jurisdiction, therefore, multinational companies are potentially susceptible to arbitrary intervention of the government, such as sudden contract renegotiation, expropriation, compulsory licenses purchase and expropriation.
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