IB7002-8, INTERNATIONAL BUSINESS
IB7002-8, INTERNATIONAL BUSINESS IB7002
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Popular in International Business
This 14 page Class Notes was uploaded by JC11 on Saturday April 9, 2016. The Class Notes belongs to IB7002 at Northcentral University taught by in Spring 2016. Since its upload, it has received 12 views. For similar materials see International Business in International Business at Northcentral University.
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Date Created: 04/09/16
NORTHCENTRAL UNIVERSITY ASSIGNMENT COVER SHEET Student: THIS FORM MUST BE COMPLETELY FILLED IN Follow these procedures: If requested by your instructor, please include an assignment cover sheet. This will become the first page of your assignment. In addition, your assignment header should include your last name, first initial, course code, dash, and assignment number. This should be left justified, with the page number right justified. For example: Save a copy of your assignments: You may need to resubmit an assignment at your instructor’s request. Make sure you save your files in accessible location. Academic integrity: All work submitted in each course must be your own original work. This includes all assignments, exams, term papers, and other projects required by your instructor. Knowingly submitting another person’s work as your own, without properly citing the source of the work, is considered plagiarism. This will result in an unsatisfactory grade for the work submitted or for the entire course. It may also result in academic dismissal from the University. IB70028 Isabel Wan, PhD International Business Assignment 8 Faculty Use Only <Faculty comments here> <Faculty Name> 2 Introduction The purpose of the final assignment is to select four countries and compare and contrast the business environment of each country. In order to become successful as a manager, marketer, or CEO of an international business, one must understand the environment where business is being conducted. To do this, one must review a variety of different types of data and analyze appropriately. The types of information required for this analysis includes the following: (1) performance information, (2) challenges, (3) advantages, and (4) disadvantages for selected st countries in the 21 century. Corporate social responsibilities and the global financial crisis also play a significant role in the global environment. Once this understanding is formulated, an individual can begin to compare and contrast various regions throughout the world to determine the best strategy moving forward. The following paper will include an analysis of each country and will include an evaluation, comparison analysis, and discussion of the business environment within each selected country. This evaluation will allow for a multinational company (MNC) to have an understanding of the stability of each country addressed for potential entry. In addition, this understanding will help a MNC to not only how to enter a country but how to be successfully strategize and wade through cultural barriers. Selected Countries The original primary selection method utilized to select four countries to evaluate is based upon areas I am personally interested in conducting business within. After making the attempt to find scholarly articles on the smaller islands and countries chosen, I had to look to find alternatives. The main focus was to look to countries that utilized a more direct communication 3 approach; as the alternative indirect approach would prove to be more frustrating than what it would be worth to me. While most of my choices are similar in nature to the U.S., I am including an alternative country, China. By incorporating China, a differing perspective can be shown within this paper. The countries selected for this study are as follows: 1) New Zealand, 2) Australia 3) Brazil, and 4) China . Challenges Identified One major challenge that every intercultural country will face is intercultural sensitivity or the lack thereof. While cultures begin to come together, the members that are part of the newly formed teams will need to become sensitive to the cultural attributes of the group. While the differences between cultures certainly make the work environment unique, each culture may want to label their own as superior. The limited understanding that each culture may have of one another may need to be identified and sensitivity training provided to avoid unnecessary conflict. By understanding those differences up front, the ability to accept and appreciate each culture becomes possible. As a U.S. citizen attempting to conduct business in a strict Islamic country, one may view the differences in culture as appalling and backwards. To be effective in this environment, one must take a step back and at least make the attempt to understand the history and the reasoning behind why the other culture thinks the way it does. Now, to take a deeper look at the chosen countries and the associated challenges. New Zealanders tend to focus on small, communitybased business partners. The residents tend to choose to conduct business amongst friends in their tight niche community with people termed “business mates”. The relationships built are extremely informal and community based. The challenge to enter into business in New Zealand will be to build enough trust to become part of 4 the existing community. To do so, this will take time to build the relationship (Park, Levine, Weber, Lee, Terra, Botero, & Wilson, 2012) . Australia offers very few barriers to entry, especially with American firms. The legal and corporate structures are very close in nature and entry is easily acquired. The one main area that could be a potential barrier is the level of competition. The easier the entry, the higher the level of completion from local and foreign businesses. Brazil’s challenges when it comes to entering this market include the pure number of businesses battling for a market share. This emerging global market is being saturated with foreign companies that are trying to be the first in line. As a smaller company entering the market, businesses like WalMart may take the upper hand (Luthans & Doh, 2012). Lastly, one of China’s challenges that recently made the news is the level of pollution in the country. Not only were schools shut down for several days but businesses as well. The population in China is high as well as the output of pollution. Entering China will require a lot of thought and preparation on green and sustained building. Performance The next area to evaluate is performance during the global financial crisis. During the global financial crisis only a few countries reported doing well. Those that did, fell into the category of the BRICs countries. China was one of those countries. The reason they did so well was because the Chinese government had placed over $2 trillion in reserves and economic growth remained above 7%. In addition, the population in general save more than 40% of their income. With the savings in hand, government and individual, China was not as affected by the 5 crisis as they had planned for times such as these. In addition, China utilized $600 billion to stimulate it’s economy and develop infrastructure (Payne, 2013). Brazil is a second BRICs country that did well during the global financial crisis. Brazil’s growth was 5.7% in 2005, 3.2% in 2006, 4% in 2007, and 5.1% in 2008 due to the confidence in it’s economy as well as a positive and smooth presidential election and appreciation of the Brazilian real. Brazil offers a stable economy as well as a central location close to the U.S. and strong European countries. It has become one of the fastest growing automobile exporters, the second largest location for direct foreign investment next to China for developing countries, and one of the largest passenger airplane manufacturing countries (Luthans & Doh 2012). Australia also took a significant hit during the global financial crisis. The Australian dollar depreciated rapidly by over 30% in 2008. To attempt to stimulate the economy, Australia’s reserve infused the country with additional funds to become more liquid. A significant portion of the dollar’s depreciation was recovered in 2009. Until 2008, New Zealand’s Treasury, Kaitohutohu Kaupapa Rawa, the country experienced an average GDP growth rate until the global financial crisis. As the crisis took place, the country started a recession and began a decline. New Zealand’s GDP during the global crisis has steadily declined by 2.2% in 2009, 2.2% in 2010, and subsequently declined by 3.3% in 2014 (Reserve Bank of Australia, 2010). Ethical Perspective Elkington (2012) discussed the concept of sustainable development and social responsibility of multinational corporations. Companies like BP, Monsanto and Shell are only a few named that need to take into consideration the rules of the global world rather than just the 6 originating country. Multinational companies can no longer ignore the human element behind conducting business in various locations and a variety of cultures. While standards are put into place for U.S. citizens, they are not necessarily in place for third world countries. In addition, other areas of concern such as corruption, bribery, overworking employees, and utilizing child labor need to be analyzed and addressed. To further clarify what is meant by ethical perspective, I will share a personal example of conducting business in Afghanistan. OSHA standards are put into place for expatriate contractors. They are not necessarily put in place for local national contractors. The contracts written by the U.S. Government are written differently for local national personal and contractors versus those contractors brought in from countries located outside of Afghanistan. During my tenure in country, one of the contracts was to build facility that would house an Army Detachment. In the time we were on base, the contract that was put into place was awarded to an Afghan company. The personnel did not have to comply with OHSA standards as the standard only applied to expatriate contractors. As the local national company’s workers began to place the roof on the facility in January. The Afghan workers were seen in their moccasins on the metal roof, working in slick conditions. They did not have fall protection of any kind. This meant they were not hooked to anything and they were thirty plus feet off of the ground. The workers’ shoes did not have rubber soles, and the method of getting onto the roof was a wobbly, concocted ladder. In addition, the workers were seen having their very own snowball fight from one side of the roof to the other. All of this was done under the noses of headquarters staffing. At one point, one of the local nationals slipped and almost came off of the rooftop. Now, while discussing this story, the point being made is who has the responsibility to ensure that everyone 7 working on contract has the same standard? Is it reasonable to say that local national companies have to abide by the same rules, and in turn are then mandated to purchase safety equipment to meet the standard from the company conducting business in that country? While multinational companies work in other countries, a company must decide what is the correct balance between complying with the typical standard of the home country, and the location of where business is being conducted. Whose has the responsibility for work being conducted safety? In addition, which set of rules and can a company mandate third world country workers to comply? It it feasible to demand compliance with first world country standards? These are the questions that must be answered prior to ever conducting business within a country that holds a different standard. Now, how does this scenario apply to the four countries selected? It applies because of the emerging markets and strong markets that are building multinational companies within each country’s borders. The companies need to make decision up front on what their goals are and what their ethical responsibilities are in the operating environment. Brazil and China known as up and coming, developing countries. China may be the most controversial when it comes to ethical standards. While working in China, the decisions that come to mind are those that have to do with child labor, unequitable pay, gender equality, corruption, contract kickbacks, and favoritism for contract awards towards family and friends. The positive aspect of a business that is sourcing products from China will find that products made more quickly and are less expensive. With that in mind, a multinational company must make the decision as to which ethical standards they may need to break or to what extent they willing to bend for that cheaper product. While China has a considerable level of successful 8 business dealings without corruption or the other negative connotations, the negative aspects also need to be considered. In Brazil, one of the concerns is in regards to ethics is consulting a legal team. While in the more Westernized countries, legal counsel is utilized to avoid ethical issues, it is a concern to contact them in Brazil. Brazil managers and nonmanagers alike tend to steer away from legal council finding it to be more of a risky concept to utilize legal versus not utilizing legal (Leila Trapp, 2011). Ethical standards in New Zealand are much like the U.S. Individuals that work in New Zealand find that while generally ethical standards are high, that the belief is that the standards have been compromised over the last few years. Individuals find that further down the line in the chain of command, the more likely it is to have to bend the rules and the overall standard in order to make a successful transaction happen (Alam, 1999). While business ethics is growing as an important issue in Australia, the overall concern by senior management, the overall concern by lower level employees believe that ethical standards are lacking (MiltonSmith, 1997). In a later study, it was noted that the code of ethics is not a normalcy in Australia. Australians do believe in an ethical standard, but they do not have the same belief in creating and following a written policy (Callaghan, M., Wood, G., Payan, J. M., Singh, J., & Svensson, G, 2012). Communications Building business relationships is extremely important concept to become successful in the international environment. Each culture has a different method and form and way of communication desires and wants. The difficulty becomes knowing which form of 9 communicating is being utilized as well as understanding the nuances behind each type. By studying each of the four identified countries, a baseline can be developed. Once that baseline is identified, a marketer or business owner could understand how not to offend the other country’s culture as well as work within the alternative guidelines towards success. To begin, New Zealand boasts a very similar culture to the U.S. in the form of business communications. New Zealand has a culture that incorporates the direct communication method as well as low context methods. Low context styles focus on monochrome styles, tangible or shortterm business goals, and one relationship at a time. The business relationship is a very pointed and direct relationship where most issues are discussed openly and meanings are clear and up front. China on the other hand is a high context culture boasting indirect communication. The Chinese tend to imply their message through body language and meanings are imbedded in an individual’s actions. They also have a tendency to focus on a multitude of relationships at the same time (Zhu, 2009). Australia utilizes many of the same communication methods that New Zealand and the U.S. utilize. Australians, even in business, are generally easy going, friendly, and informal. Negotiators and managers conducting business in Australia need to pay attention to sporting events in the area, local news, and entertainment. In addition, informal and friendly conversation, a sense of humor, and eye contact are all important. Australians move towards utilizing first names very quickly. It is important for individuals conducting business in Australia to have a business card readily available, to be on time, and while a gift is not required, a small one is appreciated (Clark & Vemuri, 2008). 10 Brazil is a bit tougher to navigate as there are four distinct subcultures within the country. A marketer, negotiator or manager must identify which subculture they are working with and subsequently choose the appropriate communication strategy. The personality traits such as achievement, selfdirection, enjoyment, security, and restrictive conformity vary amongst the four different subcultures. As one learns to navigate the various areas of Brazil and begins to understand the differences, an individual can alter the strategy to end in success (Volkema, 2012). Challenges and Differences Challenges and differences are prevalent in each culture. Finding a way to understand those differences will be part of any successful business strategy. One of the ways to ensure that business students are taught about the various cultures they intend to conduct business within. Students and employees alike will need extensive crosscultural training to provide another frame of reference. If the individual is not properly trained, the only frame of reference that individual will ever know is his or her own. This creates a limited understanding of the way the other country’s team members operate and will certainly be the cause of disputes in the future (Durocher, 2009). To attempt to combat cultural disputes and potentially offending team member sand coworkers, a MNC moving into a new country must evaluate a number of areas. Bharadwaj (2013) discussed the following areas as key areas to research and prepare answers for prior to conducting business in another environment: 1) approach towards formality and individual status 2) attitude towards uncertainty, 3) attitude towards time, 4) role of hierarchy, 5) role of gender, 6) choice of communication channels, and 7) degree of formality. By having a good 11 understanding of each of these items, an individual can be much more prepared for the alternative business environment. One of the primary challenges to entering the Australian market is making assumptions that the other culture is understood. U.S. marketers may think they understand another culture and their philosophies, but in the end, truly may not. By making the assumption that American business personnel understand Australian culture, many points can be missed. While both of the cultures are similar in nature, the smallest of nuances that are missed may be the difference between signing the deal or being eliminated from the deal (Clark & Vemuri, 2008). In Brazil, there are a number of entry barriers including: (1) restricted access to financing (2) inefficient government assistance systems, (3) shortages of skilled labor, and (4) weak institutional frameworks (Cardoza, Fornes, Farber, Gonzalez, & Ruiz Gutierrez, 2015). As the Chinese conduct business, the initial team meeting is utilized to start the relationship building process. The Chinese businessmen and women tend to focus on bringing in a third party that knows both parties to vouch for each other. By doing so, this begins building the relationship as well as helps to gain trust and confidence in each party. New Zealand and Australia are more independent and tend not to rely on a third party to build relationships, but rather utilize direct relationship building strategies and shortterm goals. Chinese managers tend to focus more on the personal touch, feelings, and friendship while conducting business. New Zealanders on the other hand do not. Their primary focus was on the achievement of business goals and getting to the end state as quickly as possible. The New Zealand managers focused on developing and building business relationships to achieve objectives while the Chinese managers would focus on business as well as friendship. The end goal for the Chinese was to build long 12 term business and personal relationships. As the Chinese became more comfortable with the individuals in their friendships, communication would become much more direct (Park, Levine, Weber, Lee, Terra, Botero, & Wilson, 2012). Conclusion In conclusion, multinational corporations face a number of varying issues when it comes to entering a new market. The incentives for conducting business in the international environment can be lucrative, but at the same time can be challenging. The purpose of this assignment was to select four countries and evaluate the business environment for each country. The countries selected for this study were: 1) New Zealand, 2) Australia, 3) Brazil, and 4) China. The focus of the selection was based on countries that as a business leader, I would choose to conduct business within. The criteria were based upon a preference of countries with direct communication and low context styles. The differences and challenges identified will help to further tailor the list to the ideal location. In addition, China was added to provide a variation to the above paper. The culture differences between each of the cultures were discussed not only in communication styles, but perspective, ethical perspectives, as well as advantages and disadvantages in the various environments. 13 References Alam, K. F. (1999). Business ethics in New Zealand organisations: Views from the middle and lower level managers. Journal of Business Ethics, 22(2), 145153 Bharadwaj, A. (2013). Teaching intercultural business communication to management students: Challenges and strategies. 3(2) 7484. Retrieved from http://www.bmr.business journalz.org Callaghan, M., Wood, G., Payan, J. M., Singh, J., & Svensson, G. (2012). Code of ethics quality: an international comparison of corporate staff support and regulation in Australia, Canada and the United States. Business Ethics: A European Review, 21(1), 1530. doi:10.1111/j.14678608.2011.01637.x Cardoza, G., Fornes, G., Farber, V., Gonzalez Duarte, R., & Ruiz Gutierrez, J. (2015). Barriers and public policies affecting the international expansion of Latin American SMEs: Evidence from Brazil, Colombia, and Peru. Journal of Business Research, doi:10.1016/j.jbusres.2015.10.148 Clark, E., & Vemuri, R. (2008). Conducting business in Australia: Prospects and strategies for international managers. Global Business & Organizational Excellence, 27(5), 4964. doi:10.1002/joe.20222 Durocher,Dennis O., Jr. (2009). Teaching intercultural communication competence to business students. Journal of International Business Education, 4, 119134. Retrieved from http://www.neilsonjournals.com/JIBE/ Elkington, J. (2011, May 5) What is the triple bottom line? [Video File]. Retrieved from http://www.youtube.com/watch?v=l5MPOuhmpmk Leila Trapp, N. (2011). Staff attitudes to talking openly about ethical dilemmas: The role of business ethics conceptions and trust. Journal of Business Ethics, 103(4), 543552. doi:10.1007/s1055101108799 Luthans, F., & Doh, J. (2012). International Management: Culture, Strategy, and Behavior 8th New York, NY McGrawHill Irwin MiltonSmith, J. (1997). Business ethics in Australia and New Zealand. Journal of Business Ethics, 16(14), 14851497 Park, H. S., Levine, T. R., Weber, R., Lee, H. E., Terra, L. I., Botero, I. C., & Wilson, M. S. (2012). Individual and cultural variations in direct communication style. International Journal of Intercultural Relations, 36179187. doi:10.1016/j.ijintrel.2011.12.010 14 Reserve Bank of Australia. (2010). The global financial crisis and its impact on Australia. Retrieved from http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/1301.0Chapter 27092009–10 The New Zealand Kaitohutohu Kaupapa Rawa. (n.d.) New Zealand Economic and Financial Overview 2010. The Economy of New Zealand: Overview http://www.treasury.govt.nz/ economy/overview/2010/04.htm Volkema, R. (2012). Understanding initiation behavior in Brazilian negotiations: an analysis of four regional subcultures. Brazilian Business Review (English Edition), 9(2), 88108 Zhu, Y. (2009). Managing business relationships in New Zealand and China: A semantic perspective. Management International Review, 49(2), 225248. Retrieved from http://www.springer.com/business+%26+management/journal/11575
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