Discuss the similarities and differences between global, international and regional business.
International business is the business which works in different countries but does not exists across the globe. International business is generally prevalentwith small firms and organization. Global business is the business which operates across the world. Regional business is the business which operates in a particular region.
Example: McDonalds has expanded its reach not only to the local US market but also to different countries. It has expanded its reach by following transnational strategy.
It has expanded its reach particularly by following franchising. The concept of franchising is the key for McDonald’s world wide success. Through this they have ensured consistency of quality and uniformity of product from location to location and country to country. McDonalds key objective was global standardization with an statement ‘Expand our mindset by sharing best practices and leveraging our best people resources around the world’. The strategy of McDonalds relies on achieving low costs and prices with reliable quality and value for money. The company’s strategy is based on knowledge of modern lifestyles, young people tastes, food production processes and service levels coupled with a strong brand image, its constant product innovation and effective marketing tools.
McDonalds follows transnational strategy to reach its customers globally. To facilitate global reach McDonalds follows Local preferences of products by customers. The overall strategic mission and vision of the company is based on the resources and competence of the organization and the extent of industry and market globalization. McDonalds took into consideration the expanding market and increasing needs of the consumers and the changing preferences and tastes of consumers of different countries of its operations.
McDonalds focuses on the needs of every nation so as to cater to the specific needs of the customers of every nation and thus follows transnational strategy.
[7.5 marks]
Discuss the role of culture in international business.
Understanding culture is crucial when a company does across borders. For international companies to be successful, in a global society they must adapt to, relate to, and understand the culture of the countries where they conduct business.
Culture is an essential part that defines the individual, a human community and different social organization. Culture is basically the values, beliefs, perception and traditions which shape the behaviour of an individual. “Culture is defined as the collective mental programming of the people in the environment. Culture is not characteristics of the individuals; it encompasses a number of people who are conditioned by same education and life experience” (Hofstede) . Thus, it can be said that the culture is affected by the place we live, time, language we use, traditions followed. So each country has different culture.
With the increase in global trade and globalization the need to know the culture of different nations as important as it will facilitate the better working. Each individual has different attitudes, perception and value towards certain things, these are the main things which helps in shaping the culture of an individual. Belief is a thought which an individual hold about a particular thing, this is highly influenced by the place the individual live in. Culture is an unconscious thing which comes in an individual while the development of his personality.
Communication is based on culture. One perceives and draws conclusion of the communication on the basis of what he has learned. The main problems faced in the cross cultural communication are body position and movements, each country or culture interprets the movement or non verbal communication differently. For example if an individual moves his hand to and fro, it can be interpreted as a good bye in America and No in Europe.
[7.5 marks]
Outsourcing is the key strategy in global supply chain. Discuss.
Outsourcing refers to giving out a portion of the work to another nation in order to have it done in a better and more efficient way. It may be within the country or may be given to a firm in another nation. U.S. manufacturers become vulnerable to offshore outsourcing as they have to compete with them.In cases of not being able to perform a task efficiently and effectively, outsourcing becomes a blessing and helps the firm achieve a lot of savings of effort, time and capital. A firm might not be able to handle an order completely, but would be extremely competent at delivering some of the tasks. In such cases, it is essential that the firm opts for outsourcing and delivers the completed product or service to the final customer. Outsourcing can be based on technological outsourcing or outsourcing of a particular business function. In any of these cases there is a requirement of consideration of certain factors which includes the cost benefit analysis as one of the most important considerations. It really matters as the cost of the final product is greatly influenced by this strategic decision of outsourcing.The outsourcing market has experienced strong growth over the last several years because of businesses' need to focus on core competencies, Web implementation initiatives, consolidation across industries, and a tight labor pool. The outsourcing of noncore, transaction-based processes has gained significant momentum over the last few years as organizations have become more comfortable with the concept of outsourcing and its advantages.
Organizations elect to outsource for a variety of reasons. Some of these reasons are tactical, while others are strategic. No one would seriously expect an oil company to outsource its exploration and refining functions; pharmaceutical companies probably would not outsource their research and development; and few, if any, major automakers would consider out-sourcing their production planning or marketing campaigns. These activities are core to their businesses and often the means for differentiation in the marketplace and a source of competitive advantage. Businesses outsource their noncore functions, such as payroll and IT.
In the urge to downsize, “right size,” and eliminate headquarters staff, and to focus on value-added activities and core competencies in order to survive and prosper, public and private organizations have outsourced an extremely broad range of functions and activities formerly performed in-house. Some activities, such as janitorial, food, and security services, have been outsourced for many years. Information systems (IS) is one activity that has received much attention recently as a target for outsourcing.
Other popular outsourcing targets are mail rooms, copy centers, and corporate travel departments. Almost no function is immune to outsourcing. Accounts payable, human resources, marketing/sales, finance, administration, logistics, engineering, and even purchasing are examples of functions now outsourced but previously done in-house. The company may outsource the entire function or outsource a part of it and keep the remaining part as in-house. Like an IT firm can outsource the technical part but may retain the basic things so as to focus on lower purchases. The function needs to be identified and then segregating the same in potential components which can be kept in house and outsourced.
[7.5 marks]
Discuss the theories of competitive advantage.
Competitive advantage is the most important and crucial strategy for the organization to achieve and to get benefited with this strategy for the long run of business. Since, it is a kind of integrated strategy of cost minimization and profit or wealth maximization. It makes the thing effect by making the optimal use of the resources to get the maximum benefit from this. So, the organization could make the most perfect and effective move at this age of competitive scenario.
According to Michael Porter, there are basically two types of competitive advantage:
Cost advantage and differentiation advantage strategy. These two aspects are very important for the competitive advantage as the cost is one of the most important and crucial factor for any business to make it effective and efficient and on the other hand differentiation strategy also plays a vital role to make an effective and efficient move to gain the core competency and finally helps in achieving the competitive advantage for the long run of business.
Differentiation can be achieved by innovation of new and value added products, through an integrated and enhanced customer service. Cost leadership can be achieved through economies of scale in production and distribution and optimal utilization of resources.
Competitive advantage is the most crucial and important strategy now a days that makes an organization effective and efficient for the long run of business and also helps to cut the competition in the market.
[7.5 marks]
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