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The Concept of Globalization - Essay Example

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This work called "The Concept of Globalization" describes the ways for the global business environment to become more open to international trading activities. The author outlines political factors and legal factors, ethics, and the case of Koodo, the cultural difference between China and Western countries. …
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Extract of sample "The Concept of Globalization"

Reflective Portfolio Table of Contents Part B: Discussion and Critical Analysis 3 Reflection 6 Reference 8 Appendix: Part A 10 Part B: Discussion andCritical Analysis The concept of globalization allows the global business environment to become more open to international trading activities (Hakanson and Dow, 2012). It has brought several business houses together, which are otherwise geographically and politically separated. The advent of globalization has integrated the business environment and has suppressed the national barriers. As a result, the firms all across the globe can conduct business activities together. The inception of Liberalization has made overseas trading easier which as a result further boosted the progress of globalization. Moreover, technology also has a major role to play in the process of globalization (Ghosh and Dandapani, 2007). Advanced communication and transportation system has made overseas trading easier than ever. Globalization has allowed the foreign multinationals to involve in overseas trading activities which as a result have improved the economic and infrastructural conditions of both the home and host nation. However, Osland (2003) have argued that the onset of globalization has also degraded the business opportunities for the domestic firms. Globalization has attracted several multinational firms to shift their business to overseas location; as a result, they have posed a challenging competition for the local companies, which do not have the required financial or technological prowess to face the industry giants. The entry strategy of a firm largely determines the success of it internationalization. The entry strategies can be of various types and depending on the business operation or individual choices a firm can choose any one of them. The entry strategies in an industry can be one of the following, opening own subsidiary, franchising and joint venture (Eaton, Kortum and Kramarz, 2011). Opening subsidiary is the most direct approach where no other third party is involved. The companies directly enter in the host country and set up their business over there. Opening subsidiary may lead to higher risk of operation, but it also gives higher returns as there is no third party involved. In case of franchising, the firms offer licensing and permission to use the company name and products and its manufacturing techniques and in return the franchisor gets paid by the franchisee. Finally in case of joint venture, the company makes business collaboration with one of the firms in the host country, which makes it easier for them to operate in a foreign land with reduced risk (Lee, Madanoglu and Jae-Youn, 2013). The multinational firms (or multinationals) are the ones that are characterized by their presence in multiple overseas locations. These companies are headquartered in a particular nation but they make several geographic expansions to expand their market reach. The choice of internationalizing a business can arise from several factors (Peterson, 2009). The multinationals also face certain political and legal factors. The political factors largely influences the operational activities of the firm as it is mostly determines the trade regulations of that the firms are exposed to. The political relationship between the host and home country also determines whether or not the firm will be able to commence overseas business activities without any hassle. A stable political relationship favours international trade. The legal framework of the host country dictates the boundaries for the foreign firms. The legal boundaries often restrict the business operations of the companies which in turn may impact its revenue generation and its operational activities (Styles and Wilkinson, 2012). Thus it can be stated that the multinationals can only succeed if they are capable of adapting to the difference in the market environment of the host nation. The multinationals also bear certain characteristics apart from being present in several overseas locations. These firms are capable of leveraging high economies of scale by increasing their production volumes in a resource efficient manner (Filippov, 2010). The multinationals often adopt different internationalization approaches depending on their business activities and the market environment. The most two most important strategies are the adaptation and standardization. The adaptation allows the firms to make necessary changes in the marketing mix and its business strategies so that the company can meet the preferences and needs of the target customers. This strategy is quite important from the point of view of catering to different needs of the customers all across the world. The strategy of standardization allows the firm to sell a standardized product in all the markets irrespective of different customer preferences. The standardization allows the firms to maintain a global brand identity which as a result helps to create a strong differentiation factor for the company (Chandra, Styles and Wilkinson, 2012). The culture is the aggregate of customs, beliefs and attitudes that the people of a society is characterized by. The culture defines the social trends and norms which defines the behavioural pattern of a society. The cultural practices of a particular nation vary greatly across the world, which clearly reflects that the individual preference and needs may also vary across the geographic boundaries. The theoretical models on cultural background of a region can be utilized by the firms to conduct proper cultural management. The Hofstede’s cultural dimensional model offers six parameters on which the psychographic profile of a particular region can be ascertained and depending on that the firms can redesign its marketing strategies (Hofstede, 2011). The six parameters are power distance, individualism, masculinity, uncertainty avoidance, long term orientation and indulgence. The power distance measures the degree to which the society accepts and acknowledges the presence of unequal power distribution. The low score of power distance suggests that the firms must not apply authoritative approach for managing people. The individualism indicates that degree to which the people are self oriented. The high score indicates high self centred behaviour and the low score suggests that the people care for the social groups and distant family members. In a society with high individualism the firms can offer a product that complements smaller families. The masculinity is a measure of competiveness and thrive for success. In a highly masculine society, the firms motivate the employees by offering challenging jobs. The high degree of uncertainty avoidance leads to intolerance towards unorthodox behaviour. The society has strict laws and breaking those results in severe punishment. The high score in long term orientation indicates that the society is traditional in nature and looks at any new change with scepticism. Thus any new product offering may be avoided by the society. The dimension of indulgence indicates that the society measures the propensity of people to spend on luxury goods and services. A high score indicates that the people like to spend of leisure activities and luxury goods. From this model the firms can easily identify the needs and preferences of the customers and make the necessary changes in their business activities and marketing strategies accordingly (Hofstede, 2011). Ethical practices are one of the most sought after topic of discussion in the international business scenario. The international marketing strategies are mostly focused on regenerating revenue by expanding the business operations into several foreign locations which increases the customer base of the company by several folds (Carrigan, Marinova and Szmigin, 2005). However, these firms often become blinded by their short term financial goals and often adopt unethical activities to meet their desired objectives. This myopic approach of the firms often leads to devastating long term effects. Ethical organizational practices involve taking care of all the stakeholders of the company and not just the investors. Hood (2003) mentioned that the firms which are best known for their ethical practices are the ones which are most likely to have higher sustainability in their business operations. Moreover, it has also been evidenced that the firms involved in ethical business activities, particularly the ones who are socially responsible have a tendency to achieve higher financial performance in the long term perspectives. Furthermore, they also bear a higher corporate image in the industry which helps the firm to attract more footfalls, thereby earning more revenue (Ameer and Othman, 2012). The companies can learn from the theoretical framework about the socially responsible activities. The CSR pyramid proposed by Carroll (1991) suggests that the ethical practices of a firm should be based on four stages and it should complete all the stages to fulfil the necessities to become an ethical company. The first stage is the economic responsibilities, where the firms need to focus on its profitability and ensure that the shareholders get the proper returns. The legal responsibilities involve focusing on the business laws and conducting the operational activities by following all the rules set by the law enforcement authority. The ethical responsibilities allows the firms to focus on the conducting their business activities in an ethical manner by ensuring that all the stakeholders interests are taken care of. Finally the philanthropic responsibilities involve being a good corporate citizen, that takes care of the society by voluntarily engaging in social welfare. Reflection This module has given us an in-depth insight regarding the international marketing strategy and how the firms have adapted to different market conditions. This module has taught me that the globalization is one of the major factors that has facilitated the growth and expansion of international marketing. The liberalization of overseas trade laws has allowed the firms to commence international business much easily. I think this is quite important from the stand point of internationalization of the multinational firms. The multinationals have been able to expand its business mostly because the international trade laws have been eased off by the government (Kolk and Pinkse, 2007). This as a result will allow the domestic firms to flourish in the home market without having to worry about facing steep competition from international rivals. At the same time, the entry of the foreign firms will also help to improve the overall economic conditions of the host nation. This module has also taught us that the political relationships between different countries play a major role in facilitating international business. The firms can expand their operations seamlessly across different nations if there is political stability in the host nations and there is a good relationship between the host and the home country. We have also learnt that the cultural background of a particular nation is also quite important for a manager of an international firm which is seeking forward to internationalize its business to a different nation. We have seen that the cultural and social norms along with the psychological profiles of the people vary greatly across nations. By following this module, I will be able to implement these learning in my career in the near future. It will help me to understand the basis of international marketing and how understanding different cultures can help me to understand their psychological profile easily. I will be able to make overseas business deals more easily after I get a clear idea of about the cultural background of the host country. It will help me to understand how to make the right business communication which will help me to close a business deal easily. I have also learnt this module to recognize the importance of ethical practices. In my future career, I will ensure that I follow my roles and responsibilities in an ethical manner. This will help me to maintain sustainable performance and self development. I will also make sure that I do not get blinded by the short term financial goals or get greedy for unethical sources of income. This will not only help me to be good human being but it will also help me to serve my employer in a better way. Ethical practices have become quite rare these days, but this module will help me to maintain it in my career so that I can make positive contribution to the society. In my future career, I aspire to work for a multinational firm and this module of international marketing will help me to understand how the business should be operated and how it can expand its business in the overseas locations. I have realized how globalization can positively impact a multinational firm to commence its business. I will make sure to leverage the technological availability of a host nation to improve the business operations of my company. Thus, overall it can be stated that this module will help me a lot in my future career where I will be able to add value for my employer and ensure future sustainability. Reference Ameer, R. and Othman, R. (2012) Sustainability practices and corporate financial performance: A study based on the top global corporations. Journal of Business Ethics, 108(1), pp. 61-79. Carrigan, M., Marinova, S., Szmigin, I. (2005) Ethics and international marketing: Research background and challenges. International Marketing Review, 22(5), pp. 481-493. Carroll, A. B. (1991) The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business horizons, 34(4), pp. 39-48. Chandra, Y., Styles, C. and Wilkinson, I. F. (2012) An opportunity-based view of rapid internationalization. Journal of International Marketing, 20(1), pp. 74-102. Eaton, J., Kortum, S. and Kramarz, F. (2011) An anatomy of international trade: Evidence from French firms. Econometrica, 79 (5), pp.1453-1498. Filippov, S. (2010)Russian companies: the rise of new multinationals. International Journal of Emerging Markets, 5(3/4), pp.307-332. Ghosh, D., Dandapani, K. (2007) Efficiency of the Federal Reserve under Globalization and Presence of Electronic Transactions. International Journal of Business, 12(4), pp.493-502. Hakanson, L., Dow, D.(2012)Markets and Networks in International Trade: On the Role of Distances in Globalization. Management International Review, 52(6), pp. 761-789. Hofstede, G. (2011) Dimensionalizing cultures: The Hofstede model in context. Online readings in psychology and culture, 2(1), p.8. Hood, J. N. (2003) The relationship of leadership style and CEO values to ethical practices in organizations. Journal of Business Ethics, 43(4), pp. 263-273. Kolk, A., Pinkse, J. (2007) Multinationals Political Activities on Climate Change. Business and Society, 46(2), pp.201-219. Lee, K., Madanoglu, M., Jae-Youn, K. (2013) Developing a competitive international service strategy: a case of international joint venture in the global service industry.The Journal of Services Marketing, 27(3), pp. 245-255. Osland, J. S. (2003) Broadening the debate the pros and cons of globalization. Journal of Management Inquiry, 12(2), pp.137. Peterson, M. (2009) Internationalizing as a Business Educator: A Personal Guide to Gaining a Global Dimension. Journal of International Business Education,4, pp.151-174. Søderberg, A. M., and Holden, N. (2002) Rethinking cross cultural management in a globalizing business world. International Journal of Cross Cultural Management, 2(1), pp. 103-121. Triandis, H. C. (2001) The study of cross cultural management and organization: The future. International Journal of Cross Cultural Management, 1(1), pp.17-20. Appendix: Part A Week 2: Globalisation Globalization has attracted a lot of attention over the past decade. It was covered in almost all news papers and became the topic of discussion for the politicians along with several politicians. In the article named “Turning Their Backs on The World” (The Economics, 2009), the concept of globalization is involved with the process of integrating the transfer of products and services along with the capital and jobs in a global perspective. According to Tim (2009) stated that various famous brands like Coca-cola, Microsoft, Apple and Nike are available all across the world. The impact of globalization can influence the economic and political and cultural factors of a nation (Giddens, 2000). Robertson (1998) explained that globalization is a phenomenon that leads to compression of the global business environment and intensifies the consciousness of the world. Robertson (1992) stated that globalization makes the whole world become a small village. David (2000) further added that globalization is a two-edged sword. On one hand globalization is capable of improving the economic, cultural and technological conditions of several nations, whereas on the other hand it can also make devastating effects like poverty, war and even cultural genocide. Reference David, H. (2000) A Globalizing World? Culture, Economics, Politics. London: Routledge. Giddens, A. (2000) Runaway world: How globalization is reshaping our lives. Routledge. Robertson, R. (1992) Globalization: Social Theory and Global Culture. London: Sage Publications Ltd. Roberson, R. (1998) Discourses of Globalization. Preliminary Considerations, in International Sociology, 13 (1), pp.30-32. Tim, H. (2009) The Economist Guide to Management Ideas and Gurus. 2nd ed. New York: Bloomberg Press. The Economist.(2009) Hard Truths about Helping The Losers From Globalisation [Online]. Available from: http://www.economist.com/printedition/2015-02-14[Accessed on: 14th February 2015]. Week 3: Trading blocs Trade blocs contain Twenty-six regional trade groups in the world, Among them three major regional trade groups are: North American Free Trade Agreement (NAFTA), European Union (EU) and the Association of South East Asian Nations (ASEAN) (Hufbauer and Schott, 1992). Usually, the neighbouring countries would like to attend a certain trade group, because they usually belong to one continent or the same geographic plate. So they share similarity in weather, topography, natural resources, culture, religion, etc. Therefore, they can share the resources, produce identical products with similar economic structure, and enhance cooperation to increase economic benefits. At the same time, globalization makes international trade become feasible (Bridges, 2004). Moreover, it increases the effectiveness of international trade. Meanwhile, the international trade promote the progress of globalization (Chossudovsky, 2000). However, sometimes globalization makes international trade become an inconvenience. According to Moran’s (2007) opinion, globalization also has certain disadvantages for the poorer nations. This is mostly because globalization facilitates free trade for the countries and the nations always look forward to protect the national markets. The primary export operations of inferior nations are usually associated with agriculture. It becomes difficult for these inferior nations to compete with financially strong foreign rivals that offer subsidy and privileges to their own farmers. As the farmers cannot compete with the new foreign entrants so they are forced to sell their goods at a much lower price. Reference Bridges, (2004) International Centre for Trade and Sustainable Development (ICTSD). 7(6). Chossudovsky, M. (2000) The Globalisation of Poverty and the New World Order Common Courage Press. Hufbauer, G.C. and Schott, J.J. (1992) North American Free Trade: Issues and Recommendations. Institute for International Economics, Washington, DC. Moran, G. (2007) International Trade and Globalisation, Charles Smith. Teaching Business & Economics, 11(2), pp.33. Week 4: Multinational Although there are several definitions of what a multinational company is, but the underlying meaning is same. A multinational is defined as a firm based in a particular country, but it owns, controls, or manages production facilities in several other countries (Chang, 1999). Nunn and Trefler’s (2008) also suggest that multinational is involving or operating in several nations or nationalities. After reading the relevant articles, I found that global expansion has both advantages and disadvantages on international companies. The advantages are: 1. they are able to attain large production capacity which can decrease production costs and enable them to sell their products at lower prices (Antras et al., 2006). 2. By producing in a host country, the company can save on transport costs and avoid import taxes. For example Toyota produces cars in Thailand. 3. Profits are returned to the head office and the shareholders. 4. The overall risk is reduced if the market in one country is in decline, then it will be counteracted by the growth in another country (Grossman and Rossi-Hansberg, 2006). However, the disadvantages are: 1. seeking to minimise costs may lead to the company paying very low wages and exploiting its workers. 2. They are often more powerful than governments and can dictate terms to countries about location, working conditions, etc (Bobillo et al., 2002). 3. It is difficult for smaller local business holders to compete with multinationals and some will be forced to shut down or acquire. For example, Tata group acquired Jaguar and Land Rover in 2008. 4. Profits are often taken out of the host countries and are returned to the home countries of the multinational corporations. 5. A multinational may decide to close down in one country with devastating effects on the local economy. Reference Antras, P., Garicano, L., Rossi-Hansberg, E.(2006) Offshoring in a knowledge economy. Q J Econ, 121(1), pp.31-77. Bobillo, A.M., de Andres Alonso,P. and Gaite, F.T. (2002) Internal funds, corporate investment and corporate. governance: International evidence. Multinational Business Review, 10(2), pp.151-162. Chang, E.(1999) Control in multinational corporations (MNCs): The case of Korean manufacturing subsidiaries. Journal of Management, 25(4), pp.541565. Nunn, N., Trefler, D. (2008) The boundaries of the multinational firm: an empirical analysis. Harvard University Press. Grossman, G., Rossi-Hansberg, E.(2006) Trading Tasks: A Simple Theory of Offshoring. Mimeo: Princeton University Press. Week 5: Culture In a broad perspective the definition of culture states that it is the overall way of a person’s way of living. Culture of a person includes his values and beliefs, his language and way of communicating and even his perception towards his life. In a more streamlined way, it can be stated that the culture is the local practices, trends, beliefs or customs that are particularly found in a particular region which may also include organizational culture, food habits and way of communication (Barger, 2007). As we all know, 1. Language is a part of a culture. 2. Language is the carrier and symbol of culture (Collins, 1994). 3. Language is influenced and shaped by the culture. 4. Every people have its distinct language and culture (Collins, 1994). Different cultures create different ideas, values and beliefs reflected in different languages. However, McCracken (1986) suggest that culture is the most basic cause of a person’s needs and behaviour. Culture has effects on buyers behaviour. On the other words Culture is one element that influences behaviour. For example, the culture elements can be put into an advertisement to make it impressive and attractive to the target customers. Furthermore, Chinese and Western cultures have different cultural backgrounds, customs, behaviour, code of conduct and lifestyle. The Chinese nation has insisted on the practices of normalization and the harmonious living (LEI, 2011). But in western culture they centred on the pluralistic standpoint. They pay attention to diversity and changes of material. They also emphasize on the change and different nature of human beings and focuses on maintaining personal freedom, self-development and personal enterprise (LEI, 2011). Reference Collins, R. (1994) Trading in culture: the role of language. Canadian Journal of Communication,19(3/4), pp.377-399. LEI, M. (2011) Righteousness in Chinese and Western Culture: RUSH HOUR and ROMANCE OF THREE KINGDOMS. Cross-Cultural Communication,7(4), pp.63-65. McCracken, G. (1986) Culture and consumption: a theoretical account of the structure and movement of the cultural meaning of consumer goods. Journal of Consumer Research, 13(6), pp. 71-84. Barger, B. B. (2007) Culture An Overused Term And International Joint Ventures: A Review Of The Literature And A Case Study. Journal of Organizational Culture, Communication and Conflict, 11 (2), pp.1-14. Week 6: Cultural difference between China and Western countries The world looks like a big family where people belong to different countries. They have their own race, belief and lifestyle (Triandis et al., 1990). So, there is no doubt that cultural difference exist among lots of countries, such as between the Chinese and Western nations. The primary differences between the Chinese and the western culture indicate that the Chinese culture is oriental in nature and the Western countries bear an open minded culture. (Michailova and Hutchings, 2006). Moreover, the Chinese culture is relatively older and is in existence for more than 5000 years. China has developed their own traditional culture which includes the developing music, musical instruments, books, etc (Hitt et al., 2004). Despite of developing a strong and persistent culture of China, the Western countries are more advanced. As compared to the Chinese, the western population are more attracted to adventurous activities and travelling new places. From the point of view of lifestyle it can be stated that the Chinese people always have a bath in the evening or at night in order to relax themselves after the day’s hard work. On the other hand, the western people take a bath in the morning so as to keep themselves fresh for the whole day. In terms of the food culture, the Chinese people prefer to prepare delicious food items. Their eating habits are quite sophisticated and mostly involve setting up the table, arranging dishes, etc. In the Chinese culture the family members prefer to have dinner while sitting together. On contrary, in western culture the people do not spend so much time in easting and often prefer food from outside (Berliner, 1988). Furthermore, Chinese always deal with things indirectly. However, western people just go straight in to the heart of the problem and solve it directly and efficiently. Whereas the Chinese always want to satisfy everyones need so, they spend more time to solve a particular problem.  Reference Berliner, J. (1988) Soviet industry from Stalin to Gorbachev: Essays on management and innovation. NY: Cornell University Press. Hitt, M.A., Ahlstrom, D., Dacin, M.T., Levitas, E., Svobodina, L. (2004) The institutional effects on strategic alliance partner selection in transition economies: China versus Russia. 15, pp.173-185. Michailova, S. and Hutchings, K. (2006) National Cultural Influences on Knowledge Sharing in China and Russia. 43(3), pp.383-405. Triandis, H.C., Bontempo, R., Leung, K. and Hui, C.H. (1990) A method for determining cultural, demographic, and personal constructs. J.Cross-Culture Psychol, 21, pp.302-318. Week 7: Case study of Muslim Cola This week is focused on the comparison of different cross cultural frameworks. It also looks at the characteristics of culture bound and culture free products. The seminar of this week is based on the case study Muslim Cola. After reading this case, I have realized the Qibla cola and Mecca cola have been position in such a way that they can easily attract the Muslim population. This shows that there is a market for products aligned with profound personal values (Gray, 2003). The Muslim Cola should appeal to non-muslin countries, and target a wider audience. Brand identity of the products is aligned to the belief system of the customers. "Brands such as Qibla and Mecca understand Coke does not address to certain people." said by David Nichols. As for an example, the modern “hip hop” culture is associated with certain clothing style and accent, which clearly suggests that the people associated with that culture maintains particular “bling-bling” lifestyle. However, if I was the CEO of Coca-Cola, I would focus on advertising, packaging design and branding and understand customer’s wants and needs (Meissonier, et al., 2013). Mecca cola is name after the holy place for Muslims, Mecca and also to protest against the American trade policies But, any brand must adapt to the unique conditions of a particular market. Reference Gray, R.(2003) Badge of belief. Marketing, pp.34-35. Meissonier, R., Houzé, E., and Bessière, V.(2013)Cross-cultural Frictions in Information System Management: Research Perspectives on ERP Implementation Misfits in Thailand. International Business Research, 6(2), pp.150-159. Majidi, N. and Passariello, C. (2003) After Iraq, Cola wars heat up [Online]. Business Week. Available from: http://www.businessweek.com/bwdaily/dnflash/apr2003/nf20030417_5930_db039.htm.[Accessed on: 25th March 2015]. Week 8: Ethics and case of Koodo I had read some articles about the relationship between law and ethics. According to these, I found that the laws originate as ideas of what would be considered as ethical conduct in society (AMA, 2012). It has been evidenced that there is a significant correlation between law and ethics. It role of judgement has somehow come on the managers who has to decide what is legal and what can be considered as a ethical for the society. It is relevant for the managers to consider the cultural and social ethical practices, before they implement any marketing strategies. Surely, in this case about Koodo mobile in the Canadian cell phone market, we found that the fact is they did not tell the customers they are from the same company. So, a lot of customers were feeling dissatisfaction and angry. Facing these challenges, Koodo and Telus need to tell the customers they are from the same company. They formulated policies for their marketing, such as reduce the charge fees, because this is about honesty and ethical conduct. In fact, Telus is a company with diversity and inclusiveness. In the contemporary business market environment, diversity of business practices can lead to diversity of thought and cultural innovation. They need to understand their clients’ needs, enhance customer experience and reduce the cost to enhance their competitive position to attract and retain the customer. The social networking services like Facebook is quite popular in Canada and has become an integral part of their life. It allows the people to communicate with their friends and loved ones. Koodo has brought new innovation in the social networking industry. INQ Cloud Touch has reinvented the mobile version of social networking experience which offers seamless Facebook integration (Anonymous, 2013). TELUS is associated with the detection of breast cancer and its treatment. In the year 2013 the Pink campaign sponsored by TELUS highlighted its collaboration with Rethink Breast Cancer and the Quebec Breast Cancer Foundation (QBCF) to offer exclusive support to the women suffering from breast cancer (TELUS, n). Based on the article Normative Perspectives for Ethical and Socially Responsible Marketing, it can be stated that the level of implementation and enforcement of the legal system plays a major role in setting the ethical standards of the society, that involves both the marketers and the customers alike. Reference American Medical Association. (2012) Opinion 1.02 The relation of law and ethics. Code of Medical Ethics [Online]. Available from: http://www.ama-assn.org//ama/pub/physician-resources/medical-ethics/code-medical-ethics/opinion102.page [Accessed on: 15th April 2015] Anonymous.(2013)Telecommunications; The INQ Cloud Touch is now available from TELUS and Koodo Mobile. Marketing Weekly News, pp. 1028. TELUS. (n) Awards:TELUS is one of Canada’s Best Diversity Employers[online]. Available from: http://about.telus.com/community/english/about_us/company_overview/diversity/awards [Accessed on: 15th April 2015] Week 9: Political factors and Legal factors This week has introduced the political and legal aspect of PESTEL analysis. Two main types of law affect global marketing and the types of political risks and some frameworks for analysis. The seminar looks at the case of UK Optimax laser eye surgery clinic into South Korea. They need to focus on political and legal factors, if they want to enter into the South Korea. About political: 1. Trade barriers 2. Tax rates 3. qualification for laser eye operators 4. health insurance 5. Trade Tariff 6. Security management and sale management 7. Equipment 8. Trade restriction 9. Political relationship UK/South Korea 10. Foreign currency exchange 11. Fixed assets and shares 12. Eye/sight government approach for 13. Healthcare business rules and regulation reception 14. intellectual property protection 15. stability of government Meanwhile, about other aspect such as law: 1. Trading law 2. Opening law 3. Safety standards 4. Legal litigation 5. Intellectual property protection 6. Employment law- opening law 7. Insurance requirements 8. Intellectual property protection 9. Employment law 10. Discrimination law 11. Health system 12. Advertising standards, 13. Product labelling 14. Product safety 15. Health-care risk The definition of political risk states that it is the risk of uncertainty that involved with the governmental policies and its impact on the venture of an organization (Weston and Sorge, 1972) or a set of government policies across the border that often comes in conflict with each other (Shubik, 1983). Political risks can emerge from any sudden changes in the political environment which can potentially impact the value proposition of the firms. (Robock and Simmonds, 1989). The political risks can be segmented into three parts: Ownership risk, Operating risk and Transfer risks. In case of Ownership risk the firms’ property is threatened by confiscation or expropriation (Dunn, 1983). Operating risk is the one in which the ongoing operations of a company and its employees’ safety threatened by the political environment and the changes in the trade policies (Yüksel, 2012). Transfer risk is involved with the government intervention with a company’s ability to move funds across the national border. Therefore, Optimax perhaps fear from conventional political and legal risks such as expropriation. Reference Dunn, J. (1983) Country risk: social and cultural aspects. Managing International Risk, Cambridge University Press, Cambridge. Robock, S. H. and Simmonds, K. (1989) International Business and Multinational Enterprises. 4th ed. Irwin, Homewood, IL. Shubik, M. (1983) Political risk: analysis, process, and purpose. Managing International Risk, Cambridge University Press, Cambridge. Weston, V.F. and Sorge, B.W. (1972) International Management Financ, Richard D. Irwin, Homewood, IL. Yüksel, I. (2012) Developing a Multi-Criteria Decision Making Model for PESTEL Analysis. International Journal of Business and Management, 7(24), PP. 52-66. Week 12: International marketing environment This week has focused on the discussion of the international marketing environment. Marketing Environment is the composite of all the influential factors that impacts the organizational activities or is capable of changing its decision making (Jachson and Wood, 2013). To a certain extent the internal environment of the firm is controllable,therefore the marketing environment includes the company’s external uncontrollable environment. The characteristics of international marketing environment are duality, relativity, diversity, plasticity and variability. The types of marketing environment are the company’s micro-environment and the company’s macro-environment (Jachson and Wood, 2013). The business environment of a nation includes the governmental policies and regulations. However, the legal impacts on four aspects: 1. Products. The physical and chemical aspects of a product are affected by legal system seeking to protect consumers. It also applies to the packaging along with the packaging material (DEBBIE, 2000). 2. Price. The free market system does not operate in many countries. Prices are also affected by taxes such as sales tax, import tax; value added tax and port tax (DEBBIE, 2000). 3. Place. The legal sytem in most nations encompass the physical distribution of products. Many nations have regulations regarding the conditions under which a foreign company might cease the local agency agreement (potential for big damage claims (Kohli, et al, 1993). 4. Promotion. Some of the frequent areas of regulation associated to promotion include: symbols, product content, trade descriptions, and advertisement and other promotional contents (DEBBIE, 2000). Reference DEBBIE, T.L. (2000) Marketing planning and the policy environment in the European Union. International Marketing Review, 17(3), pp. 193-215. Jachson, R.W. and Wood, C.M. (2013) THE MARKETING ENVIRONMENT: A NEW PARADIGM. Academy of Marketing Studies Journal, 17(1), pp. 35-50. Kohli, A.K., Jaworski, B.J. & Kumar, A. (1993) MARKÖR: A measure of market orientation. Journal of Marketing Research, 30, pp. 467-77. Portfolio 13: Global Marketing and Risks management Globalization has achieved enough consideration from scholars as it has put significant influences on both countries and companies. According to Hill and Jain (2012), globalization means international exchanges of cultures, technologies, products, services, etc. Hill (2008) states that globalization is the integration of social, economy, finance, and communication. Gregory (2006) proposes that globalization reduces the barriers and costs of international trading and develops comparative advantage of multinational companies. Therefore, international marketing is essential for the growth and expansion of multinational companies. According to Leonidour, et al. (2010), effective international marketing is essential for the prosperity of a global firm which is conducting its business in a highly globalized and competitive economy. However, a company would meet different risks including operational risk, political risk/country risk, global risk, foreign exchange rate risk, etc. when they do business in the global business market. For example, Agarwal and Feils (2007) proposed that political risk is a highly relevant factor during the process of internationalization including pre-entry, entry, and post-entry stages. Therefore, the reduction of various risks of internationalization has been an increasingly concerned topic. Jack Ma states in the video that good relationship with government is important for a company. According to Minor (2003), developing good relationships with host government is one of the focuses of an international company as it can reduce the political risks and global risks during their internationalization. Jack Ma also states that the success of Alibaba also benefits from its corporate social responsibility, including promoting employment, pay attentions to employee satisfaction, and status of women. According to Webb (2012) proactive CSR acts as a mechanism to address global risks. Reference Agarwal, J. and Feils, D. (2007) Political Risk and the Internationalization of Firms: An Empirical Study of Canadian-based Export and FDI Firms. Canadian Journal of Administrative Sciences, 24(3), pp.165-181. Gregory, M. (2006) Globalisation: how China and India are changing the debate. Teaching Business & Economics, 10(2), pp. 8-11. Hill, C. W., & Jain, A. K. (2012) International business: Competing in the global marketplace. 9th ed., Global ed. New York, NY: McGraw-Hill/Irwin. Hill, C.W.L. (2008) Global business today. 5th ed., international ed. New York; London: McGraw-Hill Irwin. Leonidour, L. C., Barnes, B. R., Spyropoulou, S., and Katsikeas, C. S. (2010) Assessing the contribution of leading mainstream marketing journals to the international marketing discipline. International Marketing Review, 27(5), pp. 491-518. Minor, J. (2003) Mapping the new political risk. Risk Management, 50(3), pp. 16-21. Webb, K. (2012) Political risk insurance, CSR and the mining sector. International Journal of Law and Management, 54(5), pp.394-415. Read More
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