International Business and Management
For many organizations, international business is a vast and significant source of opportunity. Due to labor that is becoming increasingly mobile, and ict that enables companies to overcome time barriers, organizations cannot remain ethnocentric. (in the belief that there home market is superior) For the growth of international business are many explanations; free trade has opened borders and barriers, there is more open information and communication. Liberalization resulted in mobility of people, goods, services and capital. Not only importing and exporting is simplified, also establishing businesses abroad has become more easy. This expansion is driven by a variety of factors: Market oriented factors and competitive pressures. Managers are also confronted with new challenges; local challenges and cultural differences.
In economics, a business is a legally recognized entity, designed to provide services and goods. An international organization is any organization that engages in international trade.
Organizations can be classified in many ways. One of the most common is to classify them by focusing on their primary profit making activities: agriculture, manufacturer, service provider, retailer, real estate, etc. Another way to classify them is by where they do business, are they domestic, international or multinational companies? Further, they can be classified by ways in which they add value. Value is essential in production, because it is the extra consumers are willing to pay for. Three main factors influencing the value equation are the input costs, transformation costs and the amount consumers are willing to pay for this product. The value chain is a model that analyzes how activities of the supply chain can add value to products. It consists of five primary and four supporting activities. The chain of activities gives the product gains more value than the sum of all the parts solely. It sees the organization as a process.
Marketing and sales
The support activities are
Human resource management
The traditional theory of the firm assumes that profit maximization is the main goal of the organization. This is also a way to add value to customers. Companies can focus on reducing its costs or differentiating their product.
The triple bottom line, or people, planet, profit, demands that the organization should be responsible to its stakeholders; anyone who is influenced, directly or indirectly, by the actions of the organization.
To be a multinational company, three conditions need to be satisfied.
Ownership advantage, specific knowledge that gives a competitive edge can be transported at low cost to foreign production facilities.
Location advantage, accessing scarce resources that provide an advantage over others
Internationalization advantage, undertake foreign production is more profitable than licensing
Not all multinationals are the same
Global organization, promote convergence of consumers preferences and strives to maximize standardization of production, which makes centralization and integration profitable. A global organization possess firm-specific advantages and sees the world as a single market
Multi-domestic organizations, develop strategies for national responsiveness. It character is determined by cultural and political characteristics.
Transnational enterprise, balances the combination of convergence and responsiveness. Activities and resources may differ from country to country, they are coordinated globally.
Globalization refers to the growing interdependency between nations and organizations through international trade and factor mobility. There are many forms of globalization
Cultural globalization, the concept of converging cultures
Economic globalization, increased interdependence of national economies and greater integration of goods
Geographical globalization, reduced travel times between locations
Institutional globalization, world bank and WTO which seek to make markets more flexible and demolish barriers to trade
Performance relates to the organizational purpose, its mission. It reflects achievements relative to the resources the organization uses, must be considered within the environment the organization operates. It must be integrated with the concepts of effectiveness and efficiency. Operational effectiveness and strategy are both essential to superior performance. A company can outperform others by creating greater value of comparable value at lower cost. Activities are the basic units of competitive advantage. Operational effectiveness refers to the better use of resources over others.
Competitive strategy is about being different and strategic positioning. Choosing a unique position, however, is not enough to guarantee a sustainable advantage. The drawback is that everything can be easily imitated by competitors. The key is to combine several attributes, a true competitive advantage grows out of the entire systems of activities.
Trade and Business
In the 18th and 19th century, theories or absolute and comparative advantage emerged. Absolute advantage is the ability of a country to produce goods more efficiently than any other country. It can produce a greater amount of goods with the same amount of resources. A country has got a comparative advantage when it is able to produce goods at a lower opportunity cost than other countries. It has to give up less resources or labor to produce a good. Comparative advantage results from different endowments of production factors. Not all countries have the same amount of labor or capital. The factor proportions theory by Heckscher Ohlin, suggest that countries will produce and export products that require resources that are most abundant and this cheapest in the country.
Michael Porter developed another theory, the theory of national competitive advantage (the Porter Diamond). This theory tries to explain why certain countries are leaders in producing certain products. The identified four elements that present the varying degrees that form the basis for national competitiveness
Factor conditions, what products a country will produce and export
Firm strategy, structure and rivalry,
Related and supporting industries,
Whereas international business focuses on economic activity, international management focuses on the productive and transformational activities of the international organization. It focuses more on achieving operational effectiveness and efficiency through the way resources are used, humans are motivated.
Leverage reflects which resources are utilized in the international business organization. Leverage is using given resources in such a way that the potential positive outcome is magnified. The resource based view (RBV) is the perspective on strategy stressing the importance of capabilities in determining a competitive advantage. It sees capabilities as the most important determinant of organizational performance. There are two fundamental categories of resources, tangible and intangible.
Financial and psychical assets
Intellectual property, reputational
The RBV does not see all resources as equally important, it describes resources in terms of their value, rareness, inimitability and non-substitutability. The most important resources score high on all these points.
Galbreath and Galvin discovered that the RBV sees intangible resources the most important determinant for organizational performance. However, they found that the strength of some resources largely depended on interactions and combinations with other resources.
Dynamic capabilities are the firm’s ability to integrate, build and reconfigure internal and external competences to address rapidly to changing environments. Agility is the ability to detect and seize opportunities for innovation by assembling necessary assets, knowledge and relationships with speed. The convergence of computing and communications offer organizations significant opportunities for enhancing agility.
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