Report on Contemporary Issues in International Business

This report provides a comprehensive overview of international business, examining contemporary issues such as foreign laws, international accounting, pricing strategies, and currency rates. It delves into the global context necessary for successful international operations, including competitive advantages, import-export dynamics, and cultural differences. The report also explores various methods of entering foreign markets, including exporting, licensing, joint ventures, and foreign direct investments, along with the impact of multinational corporations on both home and host nations. Furthermore, it evaluates country markets and emphasizes the importance of businesses being responsible towards stakeholders and society. The content covers key aspects of international business, offering insights into the challenges and opportunities of global expansion.

INTERNATIONAL
BUSINESSES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Contemporary issues in international business............................................................................1
Global context to run an international business...........................................................................3
Alternative methods of entry into foreign markets......................................................................4
Internationalise and alternative theory of Internationalisation...................................................6
Impact of multinationals on both home and host nations............................................................8
Country markets ..........................................................................................................................8
Conclusion.......................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
The following report focuses on international business. International business refers to
the exchange and trade of various goods services capital technology and knowledge across the
national territories and border (Nakos and et.al 2019). International business speaks about cross-
border transaction of different goods and services. On the international business companies can
sale their products and services between two or more countries. This report provides detailed
information about the contemporary issues which is related to the organization in the
international business. This report also demonstrated Global context in which international
business functions. This report elaborates various alternative methods through which company
can enter into foreign markets. Along with this various ways and methods through which the
company can enter into international business is being explained in this report. This report also
States about various theories of internationalization. The impact of multinational on home and
host Nation is also discussed in this report. This report also demonstrated and evaluates data on
country market as well.
Contemporary issues in international business
Businesses who are operating globally or aspiring to have a global reach face some issues
to get established in the global market. Expanding business overseas can result in associating
with new customers and can boost the profitability but the challenges faced while expanding
globally are not to be taken lightly. The risk factors are the key components which a business
should research on thoroughly as to avoid them. Some of the contemporary issues are discussed
below;
Foreign Laws and Regulations:
The understanding of the host country’s law and regulations governing the target market
is one of the most crucial aspects to be focused on while establishing globally. The tax
implications, trading laws and many more laws are to be navigated for every successful business
to expand globally. Every country has different labour and employment laws and requirements.
Investing in the research of the host country to gather the knowledge of the country’s rules and
regulations can be of great value to the business. Not just abiding by the laws made by the
government, businesses should also familiarize themselves with the cultural norms of the country
(Ferraro, 2021).
International Accounting:
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Many multinational businesses face the challenges of accounting who are liable for the
corporation taxes abroad. There are different tax systems, rates and compliance requirement
which make the function of accounting considerably challenging. Accounting is the major key to
maximise revenue and the location of the business in which it is registered can impact the tax
liability of the business. The awareness of the different tax treaties between countries can benefit
the business in assuring that no double taxes are being paid. The focus on the efficiency on tax is
the major aim of the international efforts of accounting.
Cost calculation and global pricing strategy:
The major concern for every multinational business is the pricing for their products and
services. The pricing strategy is a severe consideration to brainstorm at. The cost is to be
considered to maintain a competitive position in the market and also ensuring profits. The
research for the the local product’s prices and analysing the market can provide a competitive
edge over the competitors. The cost of production, shipping, labour, marketing, distribution and
also the profit margins are to be taken into account for the businesses viability. Pricing of the
products can be determined on how the brand is chosen to be portrayed.
Universal payment methods:
The payment methods which are accepted in the home country might not be accepted in
the host country where the business is aspiring to expand. Determination of the payment methods
which are acceptable and also securing a safe processing should be the major concern of every
international business. Acceptance of global payment methods through companies as well as
accepting local payment methods can be a better choice for an international business. The
international e-commerce websites have made selling products globally way easier and
affordable for aspiring businesses which want to go global (Beugelsdijk, Ambos and Nell, 2020).
Currency rates:
While the businesses are concerned about the pricing strategy and the various types of
payment methods the major consideration is the currency rate. Currency rates fluctuate which is
one of the major challenges which an international business faces while expanding globally. The
proper monitoring of the fluctuations in the currency rates can be the aspect of focus for the
businesses. The rates are unpredictable which makes it hard for the forecasting of profits. One
way to defend the business from the rate fluctuations can be to pay the suppliers and the cost of
production in the currency in which the business is selling at (Johanson and Vahlne, 2017).
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Global context to run an international business
For a business to be successfully established globally is dependent on some factors such as
competitive advantage, which may be of different forms. When a country decides to engage in
international trade it is because of the country’s efficiency in producing the specific products or
services than other nations in the world. Due to the comparative advantage, a country effectively
competes in the global market due to the demand conditions, factors condition, supporting
industries, organisational strategies, rivalries, and structures. Some more influential factors
which effect the international businesses are import-export and currency exchange rates and etc.
While deciding to commence an international business, firms and organisations must
research thoroughly and determine that the there is a market for their product globally or not,
whether the existing form is acceptable or some changes may be beneficial for the global
markets. The adaptations may or may not be suitable for the foreign demands and in such cases
the businesses should assess whether they have the appropriate expertise in the managing the
international trade. The firms must evaluate decisively the conditions of the countries in which
they are planning to set up their operations in. Many businesses do not carefully assess the
situation and fail to commence the businesses globally (Seemann, Stofkova and Binasova, 2020).
Once the businesses decide that they want to enter the international trade the company
should evaluate and decide on how to effectively and efficiently manage the business. To decide
on the levels of involvement range to import-export, to organise as an international firm, to
operate as a multinational company. The level of the company’s global investment will directly
have an impact on the organisational strategy of the company. The options to choose from the
are independent agents, license agreements, branch offices, direct investment and strategic
alliances. The company’s international organisational strategy may vary from country to country
depending on the local conditions of the country.
There are several barriers while trading globally such as social and cultural differences like
language, social values and the traditional buying patterns of the customers. The economic
differences of countries may compel the companies to form a relationship with the governments
of the countries in which the companies are aspiring to get involved in. There are also political
and legal factors which impact the decisions and can be of different form such as Quotas, tariffs
and the local content which are formed to guarantee the safety of the local businesses. The local
businesses practices which involve laws may be considered as illegal in some different country.
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Organisations which aspire to go global can utilise the resources of the society in which
they are commencing their business in order to gain productivity and profit. This makes a
dependable relationship between the company and the society. Thus, the company entails certain
responsibilities towards the society and the stakeholders also. The governments have also started
putting emphasis on such responsibilities and for a company to successfully commence in
another country it is important for it to be responsible towards its stakeholders and the society.
These government regulations include equal employee rights, legal consumer rights.
Customers are the most important stakeholders for a company and must be respected and
their responsibilities are to be surely accomplished. These responsibilities may include provision
for good money value, products which are durable and reliable, a well-managed after sales
services and a sufficient supply of merchandises. The organisations are also responsible for
providing good working conditions for the employees, fair employee promotion programmes,
specific working hours and progressing opportunities for the employees. For the local people the
global businesses tend to be much more friendly which is just a business strategy which is used
by many multi-national companies.
Alternative methods of entry into foreign markets
There are a lot of alternate methods for the entry in the foreign markets which are to be
considered by the companies which aspire to trade globally.
Exporting:
Exporting means the sale of products or services in another country. It is the most
popularized method of entry into the foreign market. Exporting involves lowest risk
comparatively to other entry methods. It is a much more cost-effective process as there is no
need to invest in the chosen country for the production facility. In this method the products are
produced in the home country and then is sold to other countries. The rising delivering costs is a
risk factor for the method but the government of every country wants to promote exports and
hence provide various subsidies to promote exporting. Exporting is better for both, the
organisation and as well as the government as more the export better the economic conditions of
the country.
Licensing:
Licensing is the process in which another company uses the property of the company in
the target country. The word property in this method may be derived as trademarks, production
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techniques and patents. The person or company which is going to use the property is known as
the licensee and is to pay a fee in order to be allowed to use the property. Licensing requires a
fairly small portion of investment and can provide high returns on investment. The licensee takes
care of the manufacturing and the marketing costs in the foreign market.
Joint Venture:
A joint venture involves two companies who establish a jointly-owned business together.
One of the owners may be the local business in the country in which the target to get established
is. The two companies will commence a new business with a new team in management and
together will share the control over the business. There are many benefits in this type of venture,
it lets the company to gather the knowledge of the host country and also to share costs. Although
there may be conflicts relating on how the profits are to be shared and who invests what.
Foreign direct investments:
Foreign direct investments are when an investment is made directly into the facilities in a
foreign market. There is a huge amount of investment in this method as there is a lot of capital
required to cover the costs of premises, staffs and also technology. Foreign direct
investment(FDI) can be done either by establishing a new venture or by acquiring an existing
company.
Wholly owned subsidiary:
A wholly owned subsidiary (WOS) is particularly similar to the foreign direct investments, in
foreign direct investment money goes into a foreign company but in the case of wholly owned
subsidiary the foreign business is bought completely instead of just investing the money. After
taking over it is up to the owners to choose whether the organisation runs as before or needs
some quality change or take more control of the wholly owned subsidiary.
Piggybacking:
Piggybacking refers to as when there are two companies and they are competing together to
cross-sell each other’s products or services in their home country respectively. There is low risk
involved in this method as there is involvement of low capital. Some organisations may not be
on board with this method as it involves a great amount of trust amongst the two companies
involved in the venture. Allowance of the partner company to access the company and take a
high degree in control over how the marketing of the company’s product is conducted (Rahman,
Uddin and Lodorfos, 2017).
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Internationalise and alternative theory of Internationalisation
There are many reasons that for company choose Internationalization. One of the
common reason when company started working on international level is that two companies and
business want to expand and the food to increase the profitability as well. As companies want to
serve them product in services throughout the world, and they want to serve all the consumers of
this world. Internationalization helps the business and companies and provides opportunities to
explore them products and services and also differentiate them as per the reason culture of
different countries so that overall their productivity can be enhanced.
Increased sales and profitability
Enhanced profitability is the end goal of every business and Company (Tade and
et.al2018). Whenever company sell their products on local markets then their profitability and
sales becomes limited to that market only but when a company started selling their products on
global market then there is high chances that their sales revenue and profitability will get
increased and Company can also reduce the overall operational cost. In the global level company
can easily attract large customer base so the sales can easily increase. Whenever any company
started selling their products on global level then their Technology and various techniques also
get improvised. By using such technology company can easily mitigate the cost and also improve
the overall operational efficiency. This is one of the common reasons which impact the company
to operate on international level.
Entrance into new market and spread of risk.
Internationalisation has become very popular among the countries because it is opening
various trade barriers and also many countries have reduced tariff so that companies can easily
come to their country and expand their business (Borg and et.al 2020). Apart from these
companies can also diversify their production services as per the demands of consumers from
different countries. When company started operating in various countries than it also provides
various opportunities for that company may further invest Innovation and Technology so that
they can provide more variety of products and services which helps the company to reduce the
risk.
Attracting new talent
When company started working on international level then it attracts new talents. All the
people who have relevant skills and knowledge they always wanted to work with such
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companies who operate on international level and it becomes easy for the company as well
because when they hire people from international level they will multiple languages, and they
can get easily comfortable with different cultures and regions.
Greater economies of scale
Some companies have desired to expand their products and services because they want that the
entire world accepts them with their products and services. Therefore, expansion to international
market will definitely benefit the company when they achieve better economies of scale. This is
helpful for those companies who operate on small domestic Markets and when there starts selling
their products and services on international market the get various opportunities, and they can
easily do product extension as well.
Theories of internationalization
The Uppsala internationalisation
This theory is popularly known as the stage model it is totally based on Swedish study
and University of Uppsala. This model states that internationalisation is a slow incremental
procedure through which sometimes organisation may face loss due to lack of market knowledge
and uncertainty. This modern states that before entering into the international market it is the
responsibility of companies that the make sure about culture norms and various religion of
people of different countries before offering them products and services. If the company get fails
in research investigation of different markets then definitely company will face loss.
The transaction cost analysis
This model gives various suggestions to firms and companies who want to operate on
international level. This model suggests that companies should choose such locations which are
less costly and if they get profitability and growth in such countries than they should expand
their business on rich countries (Williams and et.al 2019). Transaction cost of the company gets
failed when the entire market moves downward then company has to face loss in the
international market. Apart from this in international market companies have to face a lot of
competition as well and the need to improve their quality of services and products that they can
survive in international market. So this theory states that companies must enter into less costly
countries so that they do not have to waste a lot of money on marketing and promotional
activities apart from this they can easily open their branches physically on such countries and
increase the revenue and sales. So in those countries where the transaction cost is low then the
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cost of operation is also equal to zero so that companies not have to face a lot of difficulties in
such countries in the can easily operate in international market.
Impact of multinationals on both home and host nations
There are many impacts of multinational companies on the Host countries. It impacts of
multinational companies on the host country both positively and negatively. Some positive
impacts on the Host country are that it provides the host country significant employment and
training to the labours. The quality of the Multinational company helps to develop the quality of
labour in the country. These companies add to the GDP of the Host countries from their
operations. The competition from the MNC influences the domestic companies to grow. MNCs
are the reason for expansion of business and industries in the country (Cohen and Frieden, 2019).
The profit earned by these companies become a source of tax for the host countries. Some
negative impacts of MNC on the Host countries are that Due to the multinational businesses
which have more resources and better structure the domestic businesses fail to compete in the
market. Multinational companies do not feel the need of meeting the needs of host countries
ethical and social responsibilities. Some MNCs are accused of imposing the foreign culture on
the employees of the Host country. The profit earned by the MNC is remitted back to the home
countries rather than getting invested in the country itself.
The impacts of MNC on the home nation is that it enables other foreign investments to
enter the country. It is very important for bridging the gap between the required foreign capital
and the increasing foreign investment in the country. These companies in the home countries
reduces the burden which is raised by the external debt and debt services payments. MNC create
non debt capital inflows which helps in avoiding the debit servicing payments (Mukherjee,
2021). These companies also bring technologies from foreign companies to the home country.
Importing of new equipment and machinery with the help of new technologies. The success of
such companies also influences other companies to export which is very beneficial for a
company. These companies invest a lot in the infrastructure of the home country.
Country markets
When an organisation is ready to expand on the international platforms, it must first find
the steps to pursue the international markets and the process of entering these markets. There are
wide range of countries to choose for the market to expand in. This selection can become very
overwhelming for the companies. It can be done by analysing the markets of country based on
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their economy, politics, culture, the operation of the company, business goals and even the
marketing strategy (CHAKRAVORTI, 2019). There are many large and small companies which
are working in the international businesses. Such companies have contributed to the countries
and their respective markets a lot. Unilever is a British multinational company which is
specialised in the industry of consumer goods which are the products to be sold quickly and at
reasonable prices. These products include household products, packaged foods and many more.
This organisation is one of the world's largest consumer product companies which has taken the
notice of growing movements. the company is dedicated to serve consumers with the required
commodities. the company employees more than 11000 people in United States and when
talking about number of employees working for Unilever globally are more than 155000 people
(Masry, 2017). The revenue coming from sales is more than £8 billion. the turn over rate of the
company is more than £113 billion. This shows that this industry has a high influence on the
economy of UK. There are many subsidiaries of Unilever known as Ben and Jerry's specialising
in premium ice cream and frozen yogurt. Another is Hindustan Unilever which is based in India.
The seventh generation homes provides broad spectrum of disinfectants against the virus. The
market share of the company is an increasing graph with 4370 GBX. It can be analysed that the
numbers of employment rate by Unilever is decreasing with increasing years of service. Another
company operating international is AstraZeneca which operates in the industry of pharmaceutical
and biotechnology. Pharmaceutical industry develops and produces market drugs which are used
for medication purposes, to vaccinate people and so on. the operating income of AstraZeneca
groups is increasing and is currently more than 162 billion US dollars. The number of employees
are more than 76000 with a subsidiary known as MedImmune (Webb, Gibson, and Strutt,
2019). This industry is contributing to the economy of different countries in a huge aspect.
During the pandemic times, the only industry generating revenue for economy was the
Pharmaceutical industry. The turnover of AstraZeneca is more than £104 billion while the
market share is currently falling but are still profitable which is more than 8361 GBX.
Conclusion
After analysing the entire report, it can be concluded that the entire report demonstrated about
international business. How a company has to face various issues in the international market is?
being explained in this report. Along with this evaluation of global context for the perception of
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company is also being described in this report. This report also provides various methods
through which any local company can get operated in foreign Markets and earn hi profitability
and revenue. This also provides various reasons through which company started operating on
international level along with this where is alternative theories of internationalisation is also
being explained in this report. This report also provides impact of multinationals on home and
host Nations and how this Nations also get profit by internationalisation is elaborated in this
report.
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