Critical Evaluation of International Business: Regional vs. Global

This report critically evaluates the international business environment, contrasting regional and global business strategies. It begins by defining globalization and its impact, including economic growth, competition, and the role of organizations like the WTO. The report then explores the mechanics of ...Read More

International Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
Impact of globalisation...........................................................................................................1
PART 2............................................................................................................................................2
Mechanic of business going Global.......................................................................................2
PART 3............................................................................................................................................4
Concept of Regionalization and globalisation........................................................................4
PART 4............................................................................................................................................7
Production strategy.................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Globalisation is a procedure of interaction as well as integration within companies,
people and governmental bodies of different nation take place. Concept of Regionalization aim
toward benefiting the companies that generally operates their business with a particular region.
This report is going to critically evaluate that international business is more regional or global
level business. Because there are several factors which affect working of the organisation at
international as well as global level. Further, implication of production strategies for chosen level
of business will going to be highlighted in the assignment.
PART 1
Concept of Globalisation
Globalisation simply means the process by which companies, government and people
expand beyond national boundaries. Its concept have been emerged with the thought of
enhancing trade between countries in order to improve accessibility of products and services to
the customers. It also open- ups variety of opportunity for organisation as they with this concept
they can reach more number of customers, access cheap resources (employees, raw materials).
Concept of Globalisation has been easily accepted people, organisation and government
because it has improved standard of living of citizens. Additionally, Globalization have also
raised competition among business organisation which encourages them to bring innovation in
their product in order to sustain longer at market. This is beneficial for customers too as these
companies tries to provide best quality product to customers in less prices.
Impact of globalisation
Globalisation give wide impact on every aspect of modern life and still continue to be a
growing force. Impact of globalisation can be seen in positive manner over the economy of
countries which influences growth of countries. It has been analysed globalisation have reduced
production cost of countries as the business organisation can now set up their production plant
where labours are skilled and less expensive as compared to their own country. Positive impact
of globalisation can be analysed with the help of example. Apple has its production offices in
China as the country is successful in providing skilled labour in less salary. This increases
productive rate of business organisation and allow helps them in maximising their profitability
with excessive production level (Meyer and Peng, 2016).
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It has been analysed that Globalisation have mainly enhanced economic growth of
countries like China as the country is having huge range of labours which gets ready to work at
low wage rate. This influences interest of many countries establish their business units there in
order to produce maximum of production rate. It also enhances employment rate of China
because its citizens easily gets job in their native country.
Globalisation is good for world economy but still it has some problems which includes
shifting of local money to another countries, taking away job from domestic workers and
mismanagement of companies confidential details.
Problems of globalisation are not negligible but as a whole globalisation have embraced
world economy and contributed in development of whole world together in monetary terms.
Globalisation has increased competition among the producers as with global environment
companies have indulged into ventures and other collaboration for covering maximum market
place. This have increased options for buyer too as they will now purchase product from those
companies who provides best products in less prices (Ferreira and et. al., 2014). This have
enhanced demand for improvement in product and services for companies in order to create more
value for their customers. As a result, this brings more innovation at market place and also avail
hug range of products and services to customers which influences them to purchase it (Stahl and
Tung, 2015).
PART 2
Mechanic of business going Global
Concept of globalisation also supports concept of least cost location which mainly
suggest companies on reach market beyond neighbour countries in order to contribute global
economies. Concept of least cost location is not only focuses on contributing in global economy
but it is also beneficial for their own job role too. Globalisation also supports international supply
chain system work that helps in managing all required resources in less period of time with
minimum costing. It has been observed that companies performs business activities at global
level finds several ways to increase their profitability ratio (Falkner, 2017).
A2 Membership of World Trade Organisation(WTO)
World Trade Organisation is intergovernmental association which controls international
trade. This association was commenced in 1995 and has 164 member nations which is also seen
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as world's largest international economic organisation. The main role this association is to
resolve disputes among member country. It also disallow discrimination in terms of trade,
environmental protection, national security and many other things. It also analyses that member
countries are performs their business and governmental activities within the pre decided
agreements. Last but not the least, WTO maintains transparency among the members related to
formulation of trade policies.
Globalisation benefits to participating company and Country
Concept of Globalisation also provides additional benefits to those countries who actively
participates with it. Some of its benefits for these countries are defined as below:
USA: Being part of Globalisation it's more beneficial for USA as this country can easily
import oil from Canada and Mexico with minimal trade barriers. It has also increased economic
growth of this country by around $80 billions after executing its business activities at global
scale. Benefit of globalisation to company as well as countries can be well understand with an
example. Apple is one among popular company whose designation and technological part is
done in USA as the country owns highly technical staff which can easily execute its work. But,
in order to produce its products with minimal expense, the company have established its
production plants in China and India. As in these countries, Apple gets workers at very nominal
wage rate which directly reduces its production cost.
C1 Benefits to companies
International trade have increased numerous of benefits to business organisations. In
relation to Mexico, it has been analysed that with the enrolment with NAFTA the Mexican
companies were now able trade with Canada and US with minimal trade barriers. They also
governmental support within these 3 countries region. These benefits were not only limited to
large scale companies but, it was beneficial for small scale companies as it was easier for them to
expand in other countries with less restriction. As a result, small Mexican companies are now
eligible to reach more number of customers with less investment and more chances of
profitability.
3 Benefits to company and country
It has been observed that this expansion is beneficial for the company as well as country
to which it belongs and operates its business activities. This could be well understood with the
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example of General Motors. This company belongs to US but has its main production in Mexico.
It's benefits for company as well as countries are defined as below:
Benefit to company
In relation to General Motors, having production department in Mexico is beneficial for
the company as they can tap the advantage of cheap raw material for producing good car. Along
with company can also take benefit of relaxation in trade barriers that directly raises their
profitability ratio.
Benefit to country
It can be said that if an country have more number of companies in their geographic
location then it will also contribute in enhancing their economic growth. It will also reduce
unemployment percentage with the country.
Therefore, it can be said that the company which plans to expand its business in
international market is required to initially go with low cost first. Because by adopting low cost
strategy the company can easily grab attention of customers and sustain longer in the market.
Further, it is suggested to the company to expand its business in nearby market because company
will require less cost in nearby area. As they have basic information about nearby area like taste
of customers, availability of raw material, availability of human capital etc.
Familiarity with targeted countries
It is beneficial for company to expand its business in another country, as it is important
for them to initially target neighbours countries as they are familiar with them, their policies,
trade restrictions, labour wages rate etc. The business operations are performed at global level
then they are having strong relationship with the neighbouring countries in order to know the
plans and the strategies which are adopted so their operations can be easily expanded at
international level.
PART 3
Concept of Regionalization and globalisation
Concept of Regionalization focuses on providing benefits to only those companies who
operates their businesses within the boundaries of Regional economic integration. It has been
analysed that companies who works at small scale initially focuses on entering into regional
countries in order to expand their effectively and settle it in a new market positively. But, it is
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expected by these businesses only that establishing their business they should focus on going
with the actual concept expansion that is to go global and contribute in the growth of whole
world (Janssens and Steyaert, 2014). It can be said that by having this kind of thought business
organisation can grow themself as well as develop world economy. Some of the common
example of economical regional integration are ASEAN(Association of South-East Asian
Nations), NAFTA (North America Free Trade Agreement), EU(European Union), APEC(Asian
Pacific Economic Cooperation Forum). Maximum of regional countries removes their trade
barriers, taxes, import-export duties and many other additional barriers that may affect growth of
countries. This helps the businesses to expand easily while entering into the global market of
regionalisation.
NAFTA(North American Free Trade Agreement): It is an agreement between
collaboration of USA, Canada and Mexico (North American Free Trade Agreement, 2019). It
has been analysed that companies who operates in these countries are free to trade their goods
and services within the specified region of three countries.
As per the demand of global market, it is expected by the companies who have
successfully established their businesses in regional country to now focus on globalisation
(Sleuwaegen and Onkelinx, 2014). The main concept of global approach mainly supports to
concept of globalisation instead of regionalisation because only by having support of regional
countries a company succeed at global market.
One of example regional integration can be seen by exploring functioning of General
Motors. The company deals in automotive industry and has established its maximum production
process is executed in Mexico and they are assembled in Canada. The main reason behind this
strategy is benefits of NAFTA that is free trade between Mexico, USA and Canada. This have
influenced interest of General motors to establish maximum of its production in these countries
only. It can be said that this regionalisation is also motivated with political and economic factor
which are described as below:
Political: In terms of political condition, it can be said that because of NAFTA Mexico
and Canada has now have to pay lower import-export duties. That is quite beneficial for them it
has made functioning of government policies liberal for General Motors. It is favourable
condition for General Motors because of NAFTA.
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Economic: It's cheaper for General Motors to execute its business within these countries
as the company can freely trade here with less trade barriers. With the help of this agreement
General Motors can maximise its revenues.
One of its major example is Ford motor, a Multinational company which belongs to
automotive industry. Ford is one among leading company whose owes maximum of its sales in
APEC region. The main reason behind the chosen area by Ford is APEC has also reduced cost
for exporters and importers within Asia pacific region which is the influential motive behind
operating its operational activities in this country.
Impact of Regionalisation on production
Regionalisation leads to integration of nations whereby they agree to cooperate with each
other for the purpose of work and operations. It help cooperation members to take advantage of
cheap labour and materials to carry out the production processes in an effective manner. This
leads company to trade across the countries associated with this process so that they can get
strategic advantage in marketplace. Also, it is often seen that organisations which trade in such
regionalised countries require less initial investment as they can take assistance from other
companies that are part of this process.
B1 Case of country
Mexico is a developing country, which also comes under NAFTA as well as APEC too. It
has been analysed that Mexico can be seen a case as before enrolling into these regional
integration, the country was not much developed and have less involved in business activities
across nations. But with its engagement overall growth of country have been completely
changed. This growth can be seen in various aspects like employment rate, economy and many
more. The main reason behind this trade is very few trade restriction, low import-export duties
etc. GDP rate of Mexico in last 10 years are explained below:
Year GDP (in billion
US $)
GDP growth rate
(%)
Per Capita
income (in US$)
Unemployment
(%)
2008 -1779 1.1 15984 -3.9
2009 1697.7 −5.3 -15044 -5.3
2010 1806.5 5.1 15811 5.3
2011 1911.3 3.7 16522 5.2
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2012 2017.5 3.6 17235 4.9
2013 2077.8 1.4 17549 4.9
2014 2175.2 2.8 18170 4.8
2015 2270.7 3.3 18765 4.4
2016 2366.7 2.9 19356 3.9
2017 2458.4 2.0 19902 3.4
As per the above specified table, it has been analysed that GDP of Mexico was $-1779 in
2008. But after enrolling with NAFTA its GDP have been reached to $2458.4 that is very
positive. The growth rate of Mexico has only declined once in past 10 years that is by 5.3% in
2009. Further, this table also depicts that regional integration among countries has been raised
continuously except 2009 that is - $15044. Unemployment rate has been raised that impacts
negatively on country's economy and citizen. But, it has been analysed that regionalisation have
reduced unemployment rate regularly.
Examples of Regional Companies as MNC
A remarkable example of a multinational corporation that is marketing globally yet
conducts their production activities at different places is Apple Inc. This company is operating
all across the globe but the regional production units and logistics of entity takes place in India
and China. This reflects that there multinational companies are largely being assisted by the
concept of regionalisation when it comes to operational activities like production as those
countries provide cheap labour and material. Both of these are pre-requisites for a company to
manufacture its products and market them effectively in marketplace at global level
PART 4
Production strategy
Production plays an important role in improving performance level of the company at
market place. Production strategies are consider as a long term action plans that may help in
attaining set goals and objectives in appropriate time frame. Mainly, production strategies tell
business organization that what the production department have to do for attaining desired aims.
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The main purpose of production strategies is to plan the whole schedule of production within the
time constraints and limitation as well. It is suggested to companies initially satisfy demand of
local market, then regionalisation market and at last it should go with the internationalization.
This sequence of expanding business is considered as the best way which will contribute in
leading international market in effective manner (Gaur, Kumar and Singh, 2014). Thus, when
business will global with regional countries then it is important for them to adapt production
strategy of competitive advantage and competitive priorities to remain successful. Some of these
strategies are described below:
 Price/ cost strategy: In this, company sell their products at affordable and low cost. In this
customers can not be differentiate company products as compare to rivals products.
 Quality strategy: Under this, company focus on the producing as well as selling high
quality products and services to their customers for attaining their satisfaction level. By
this, company enhance their productivity and profitability level as well within the
regional countries.
 Low cost strategy: This type of strategy is effective and helps in grabbing massive market
share. In this, company sell their products and services at low cost and at the same time
also maintain its quality products as well (Teece, 2014). As a result, this strategy helps in
businesses to expand in neighbour country with low price but quality products.
As per above stated production strategies, it can be said that these are beneficial for the
company as at the time of expansion in regional or neighbour area. At this level of expansion
businesses initially uses resources of neighbour area as it is economically feasible for them. It is
also cheaper for them to setup a plant in regional country in order to supply manufactured
products to local citizen of that area only.
It has been evaluated that if the company has successfully established its business among
regional countries then it can further proceed for expanding business at global level. For this, it is
essential for the companies to adapt some business strategies in terms of production strategies in
order to capture customers of whole market place at global market (Malhotra and Gaur, 2014).
The best production strategy that is successful at international market place is international
supply chain concept.
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CONCLUSION
From the above mentioned report, it has been analysed that it is important for businesses
to its expands business in regional countries first and then plans for expanding it at international
level. As it avails benefits like free trade duties, no restriction of trade barrier and other monetary
benefits which makes it easier for them to expand with more profits. It has been analysed that
companies can adopt low cost strategy at the time of expanding it at international scale.
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REFERENCES
Books and Journals
Cavusgil, S. T. And et.al., 2014. International business. Pearson Australia.
Meyer, K. and Peng, M. W., 2016. International business. Cengage Learning.
Ferreira, M. P. And et. al., 2014. Mergers & acquisitions research: A bibliometric study of top
strategy and international business journals, 1980–2010. Journal of Business Research.
67(12). pp.2550-2558.
Stahl, G. K. and Tung, R. L., 2015. Towards a more balanced treatment of culture in
international business studies: The need for positive cross-cultural scholarship. Journal
of International Business Studies. 46(4). pp.391-414.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Meyer, K. E. and Peng, M. W., 2016. Theoretical foundations of emerging economy business
research. Journal of International Business Studies. 47(1). pp.3-22.
Young, C. and Ghoshal, S., 2016. Organization theory and the multinational corporation.
Springer.
Janssens, M. and Steyaert, C., 2014. Re-considering language within a cosmopolitan
understanding: Toward a multilingual franca approach in international business
studies. Journal of International Business Studies. 45(5). pp.623-639.
Sleuwaegen, L. and Onkelinx, J., 2014. International commitment, post-entry growth and
survival of international new ventures. Journal of Business Venturing. 29(1). pp.106-
120.
Falkner, R., 2017. Business power and conflict in international environmental politics. Springer.
Gaur, A. S., Kumar, V. and Singh, D., 2014. Institutions, resources, and internationalization of
emerging economy firms. Journal of World Business. 49(1). pp.12-20.
Teece, D. J., 2014. A dynamic capabilities-based entrepreneurial theory of the multinational
enterprise. Journal of International Business Studies. 45(1). pp.8-37.
Malhotra, S. and Gaur, A. S., 2014. Spatial geography and control in foreign
acquisitions. Journal of International Business Studies. 45(2). pp.191-210.
Online
North American Free Trade Agreement. 2019. [Online]. Available Through:
<https://www.britannica.com/event/North-American-Free-Trade-Agreement>
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