International Business paper
Multinational companies should bridge separate national markets into global markets for them to be able to conduct business overseas. A multinational enterprise has worldwide methods on approaching the markets, production, as well as operations that take place in various states. We have famous enterprises which are multinationals such as Starbucks Coffee Company, Microsoft, vehicle manufacturers such as General Motors, some electronic producers like LG and Samsung only to mention a few (Jeston 2014). We have various factors that might affect any business activities that may include; Living standards, accounting standards, tariffs, import, and export regulations, language, environmental standards, economic policy, and climate. Stephen Hymer is a Canadian economist, who is one of the first scholars, engaged in the development of a theory of multinational companies.
The following phase is in the neoclassical article of 1968 that he came up with includes internationalization theory and further describe the growth direction in the international expansion of firms. Operations The desire to increase respective economic values is the goal of almost all firms that want to go international. It is upon the firms to develop their strategies and approaches to maximize value, to reduce and find ways to increase profits, for them to accomplish that solemn goal (Chidlow, Plakoyiannaki, & Welch 2014). The cost of production of each product sold is different from the product’s value that is being sold. The two are differentiated by the firm's creation of value which can be grouped as the major activities which include; marketing and sales, production, research and development, and customer services.
However, exporting also comes with some disadvantages. Examples are the high tariff barriers and high transport costs. ii. Turnkey project. In this mode, the company will hire an independent contractor to oversee all preparation meant for entering a market that is foreign. Physical and Social factors. Geographical influences: International business is affected by various geographic factors which include, the climate changes that are happening throughout the world, the geographical size, the population distribution in a country, and the available natural resources on a specific territory. i. Legal policies. Domestic and international laws highly determine the mode in which a company can operate overseas. The first risk is Faculty planning. Efforts must be put in place to channel towards planning as well the phase of execution one to achieve success in the penetration.
The use of SWOT analysis and market research could be appropriate tools for a firm to mitigate the risk of failure abroad — poor planning results in high expenses in administration, marketing, and the development of a product. We also have some cultural risks when entering a foreign market. Failure to understand the local customs can result in alienation of locals. Environmental risk is the other issue. Before a firm establishes anything, it has to be aware of the effects. For example, if a company decides to establish a factory, it is needful to be concerned about the adverse effects such as noise or pollution. This element cannot be overemphasized because in an event conflicts start as a result of the factory, people will change their perception about the company, and this will lead to loss of customers.
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