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IBUS 370 - Strategic Challenges in International Business Assignment

   

Added on  2020-03-04

14 Pages3879 Words43 Views
Running head: STRATEGIC CHALLENGES IN INTERNATIONAL BUSINESSStrategic Challenges in International BusinessName of the studentName of the universityAuthor note

1Strategic STRATEGIC CHALLENGES IN INTERNATIONAL BUSINESSIntroductionIn the present business scenario, international business is much more complex than ever.Organisations entering in the international business are various cultural, social, economical andpolitical issues. Accordingly, they are also coming up with different solutions to overcome thechallenges. Off shoring is one of the tools used by the organisations in order to reduce their costof production. However, implementation of the off shoring activities is also facing lots ofbarriers. This is due to the reason that, the political environment between the countries is moreadverse currently compared to a decade ago (De Villa, Rajwani & Lawton, 2015). This isadversely impacting the business competitiveness of the organisations. Moreover, theintroduction of strict rules regarding the outsourcing of jobs by the developed countries hasforced the business organizations to opt for off shoring (Oshri, Kotlarsky & Willcocks, 2015).Offshoring refers to shifting of the production process of the organisation to a country having alow cost of production (Ottaviano, Peri, & Wright, 2013). However, this does not involve anythird party vendors like in the case of outsourcing. The production facility in another country isbeing regulated and controlled by the concerned organisation. It helps the organisation to reducetheir cost of production and eventually their average cost. In order to compete and gain costadvantage or effectiveness, more organisations are looking for off shoring their partial functions(Levchenko, & Zhang, 2016). Thus, off shoring has become an effective strategy in theorganisational strategy for an international business. In this assignment, the strategies related tothe off shoring will be discussed from the perspective of Tata Consultancy Service. Tata is one of the leading global conglomerates from India having their foothold invarious diversified business sectors. JRD Tata was founding Tata in 1860. The latest addition intheir operating business sectors is the Tata Consultancy Services (TCS) (About Tata Consultancy

2Strategic STRATEGIC CHALLENGES IN INTERNATIONAL BUSINESSServices, 2017). The journey of TCS started in 1968 as a management consulting firm. Later on,they tried their hands in providing information technology solutions. In the later years, theystarted to provide the information technology solutions to the organisations mainly from the firstworld countries. The main competitive advantage for them is the low cost of production whichmade them go ahead of the competition than others. Gradually, the majority of the toporganisations from the first world countries outsourced their managerial and informationtechnology department to TCS. However, various determinants should be considered beforeinitiating the offshoring strategy. These determinants will influence the effectiveness of theoffshoring strategy being implemented. This essay will discuss these factors that should beconsidered by TCS due to offshoring in the first world countries, especially in the Americanmarket. Critical analysis will be done in order to prove the effectiveness and the viability of thesefactors. The first part of this assignment will discuss the brief for Tata Consultancy Service. Inthe later stage, the three core determinants, which the organisations should consider in offshoring their business, will be discussed. At the end, a conclusion will be drawn based on thediscussion. Topic: 1 (Cost Involved in Offshoring)According to Da Selveira (2014), the cost factor is one of the key determinants ininitiating the offshoring strategies. According to him, organisations going for offshoring shouldfirst have to determine the cost involved with the strategy along with the determining the othercomplimentary cost (Da Selveira, 2014). One of the important costs to be determined is thetransactional cost being involved in the organisation in exporting their products from the offshored countries. Da Selveira also has thrown light on the fact that if the cost of the transactionof the items between the home and host market is more than the cost advantage in the offshoring,

3Strategic STRATEGIC CHALLENGES IN INTERNATIONAL BUSINESSthen the strategy will not succeed (Levchenko & Zhang, 2016). According to him, this issue willlead the organisation in incurring more cost compared to their production facility in their homecountry. Thus, organisations should first evaluate that the transaction cost involved intransporting their products from their offshoring facilities is more or less. According to Larsen, Manning and Pedersen (2013), various organisations in the pastmade mistakes in estimating the cost involved in offshoring strategies. According to them,organisations opting for the offshoring strategies consider only the face value of the costadvantage being involved in the offshoring strategies (Larsen, Manning & Pedersen, 2013). Theyevaluate the cost production in their home country and the cost of production in the offshoringfacility. Thus, organisations fail to identify the other hidden cost such as transaction costinvolved in the offshoring. In few cases, these lead to the failure of the offshoring strategies forthe organisations (Denning, 2013). Thus, it is important for the organisations to determine andidentify the overall cost being involved in their offshoring policies. According to Espana, a majority of the organisations failed to determine the hidden andintangible cost being associated with offshoring strategies. This caused loss making scenario forvarious contemporary business organisations (Espana, 2013). Thus, according to him, it isimportant for the organisations to determine and analyze the hidden costs involved in the processalong with the determination of the tangible cost (Espana, 2013). Moreover, he also stated thatthe currency differences and the rate of fluctuations in the currency value of the selected countryfor offshoring with that of the target country should well be evaluated. This is due to the reasonthat if the currency valuation of the offshoring country is less than the home country, then it willbe profitable for the organisations by reducing their cost of production (Berkmen et al., 2012).

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