Analysis Into Challenges Facing International Business

Analysis into challenges facing international business
Term Paper, 2013

17 Pages, Grade: B
I M ISAAC MBUGUA (AUTHOR)
Excerpt
CONTENTS TABLE
1.1 Introduction
1.2 Challenges facing international business
1.2.1 Globalization
1.2.2 Strategic Choices for International Business
1.2.3 Culture and the Costs of Doing Business
1.2.4 The Impact of Political Risk
1.2.5 International Trade Theory
1.2.6 National and International Accounting
1.2.7 Difference in Office Hours
1.2.8 Software and Hardware Support
1.2.9 Difference in Regulations
1.2.10 Language Barrier
1.2.11 Different Standards
1.2.12 Innovation
1.2.13 Supply Chains
1.2.14 Information Overload
1.2.15 Infrastructure within the Foreign Country
1.2.16 Corruption Amongst Foreign Officials
1.2.17 Pricing
1.2.18 Tariffs and Quotas
1.2.19 Company is Not Flexible
2.0 Conclusions
REFERNCE
INTERNATIONAL BUSINESS
1.1 Introduction
One of the keys to business success is the ability to trade internationally and
participants on regularly try draw ways of how to tackle the challenge of
remaining competitive while growing the business by going global.
Expanding internationally can be an attractive and lucrative business

proposition, and international business, across both developed and emerging
markets, offers a wealth of new opportunities. it is important to recognize that
organizations need to improve their game in order to engage effectively with
their clients, who themselves are established in the global businesses.
1.2 Challenges facing international business
As the prospect of international business looms, there are challenges faced

which include;
1.2.1 Globalization
Globalization refers to growing economic interdependence among countries as

reflected in increasing cross-border flows of three types of commodities: goods
and services, capital, and knowhow (Govidarajan & Gupta 2000).
It may also refer to the closer integration of the countries and peoples of the
world …brought about by the enormous reduction of costs of transportation and
communication, and the breaking down of artificial barriers to the flows of
goods, services, capital, knowledge, and people across borders (Stiglitz 2002).
Globalization is divided into globalization of markets and globalization of

production (Hill 2005). Market globalization implies a standardization of
products across the world as national barriers become less and less relevant
while globalization of production refers to the sourcing of goods and services to
take advantage of a difference in the factors of production (land, labor, capital).
Globalization has significantly impacted on the business environment,

prompting the development of the multi-national enterprise (MNE). The
governance of the MNE is recognized as being different than that of a national
company. For instance, Bartlett and Ghoshal (1998) have introduced the
influential concept of the transnational model, which allows the transfer of
knowledge developed and jointly shared on a worldwide basis. In order to
create a successful global business, Bengley and Boyd (2003) have underlined
the importance of a global mindset, defined as the ability to develop and
interpret criteria for business performance that are not dependent on the
assumptions of a single country, culture or context. Corporate management
must not automatically assume that the culture of the home office is equally
applicable elsewhere (Bradley 2005). An important new development in the
international business arena has been the rise of ‘mini-multinationals’ – small
and medium size enterprises that do business on a global basis (Hill 2005).
1.2.2 Strategic Choices for International Business
There have been numerous emphases by scholars on the importance of adopting

a global strategic approach to business. The optimal strategy for tackling global
markets has been a matter of dispute. Often scholars propose an evolutionary
view of strategy, which goes from a simple international strategy to
sophisticated transnational solutions (Hill 2005).
Under the international strategy framework, international business is not a core

interest of the firm. The company simply decides to “go international” and often
sets up an international division that deals with the non-domestic business of the
company. As the international business develops, the company may decide to
source some components from overseas, and to standardize some of its
products. As Briscoe and Schuler (2004) point out, when a certain critical mass
develops, the company must choose other, more complex strategies of tackling
the international market.
As a company’s international presence increases, often a multi-domestic or

localization strategy develops. Under this strategy, the company sets up
subsidiaries in several countries, which tend to operate independently from each
other and often relatively independently from the headquarters (Briscoe &
Schuler 2004). This type of strategy emphasizes local responsiveness, but this is
often achieved at the expense of costs and possibly quality.
When MNEs grow in size, they could reach a level where ‘global
standardization strategy’ may be a strategic choice. The global strategy was
promoted by Levitt (1983), who considered that globalization naturally results
in uniformity of consumer taste. In this framework, a company could achieve
significant economies of scale by producing the same standard product at a
global level.
In addition to overall strategic choices, a company seeking international

business must consider the method of accessing international markets. At a very
simple level, a company may choose to invest in foreign firms (Briscoe &
Schuler 2004). A company could restrict itself to exportation of goods or to
franchising, which is type of quality or brand export. In more involved
strategies, a MNE may choose to establish an equity joint venture with a local
or global company, or to create a whole-owned subsidiary.
1.2.3 Culture and the Costs of Doing Business
Different countries have different cultural values and standards. Culture is the
collective programming of the mind which distinguishes the members of one
human group from another. Hofstede (1984) identified the main dimensions of
culture that affect work practices in different countries: Power distance,
uncertainty avoidance, individualism vs. collectivism, masculinity vs.
femininity, long vs. short-term orientation.
Uncertainty avoiding countries tend to have solid legal frameworks and strict
rules of doing business (Pagell & Halperin 2001). In such countries, thorough
auditing tends to be carried out to ascertain compliance with rules (Hill 2005).
These countries tend to have uniform accounting procedures and low disclosure
levels (Gray 1988). Coming from a different cultural perspective, an
international business may find it costly to adapt to the national standards and
rules of the country it wishes to do business in. Paradoxically, uncertainty
avoidance can also translate into unethical practices as persons seek to secure a
more certain result through corruption (Husted 1999). In terms of entry modes
into the country, businesses may find that uncertainty avoidant countries favor
solid frameworks such as established subsidiaries or local ownership, which are
more costly and risky.
Masculinity vs. femininity also tends to influence business costs. For instance,
high masculine cultures have been associated with unethical practices (Vitell et
al 1993). Feminine cultures could result in higher secrecy and conservatism in
accounting and finance (Salter & Niswander 1995).
Religion has an important impact on doing business. For instance, Hill (2005)
noted that Islamic culture encourages private enterprise and the right to private
property. This implies that doing business in Islamic culture may have reduced
political risks, whose prevention can become costly.
[...]
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Isaac Mbugua (Author), 2013, Analysis into challenges facing international
business, Munich, GRIN Verlag, https://www.grin.com/document/264703

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Analysis into challenges facing international business

Term Paper, 2013

I M ISAAC MBUGUA (AUTHOR)

Expanding internationally can be an attractive and lucrative business

1.2 Challenges facing international business

As the prospect of international business looms, there are challenges faced

Globalization refers to growing economic interdependence among countries as

Globalization is divided into globalization of markets and globalization of

Globalization has significantly impacted on the business environment,

1.2.2 Strategic Choices for International Business

There have been numerous emphases by scholars on the importance of adopting

Under the international strategy framework, international business is not a core

As a company’s international presence increases, often a multi-domestic or

In addition to overall strategic choices, a company seeking international

1.2.3 Culture and the Costs of Doing Business

Excerpt out of 17 pages

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