Global Enterprises

Introduction

In the recent past, the world has experienced a rapid growth of international trade. This can be reflected by the number of multinational enterprises that are engaged in international trade. In order to undertake global enterprises successfully, there are various issues that management of an organization should be aware of with an aim of managing and taking advantage of them. These issues can have a negative impact on the performance of the enterprise/ organization and, at the same time, if carefully understood and analyzed they can be used to the advantage of the organization.

This paper seeks to understand the effects of various issues on an organization that is conducting international business. The essay also strives to understand how these issues affect management of international/ global enterprises and how the management can use these issues to the advantage of the organization. Issues will be discussed individually, and analysis of their effects on the organization will be provided.

General Understanding and Importance of "Global Enterprises

Globalization

Globalization can be defined as economic integration of various economies across the glob. It involves free movements of labor force, technologies, and human capital among other factors of production across borders. Globalization has played an important role in opening up various regions of the world. It has enhanced social, political and economic cooperation across the planet. Many countries now can share expertise in various fields with an aim of improving their economic activities⁵. Therefore, globalization has resulted in an increase in investment opportunities, enhanced international communication and made it easier to move factors of  productions across borders.

Countries Differences in Political Economy

The political economy can be defined as various legal, political, social and economic systems that co-exist in a given country and can be measured by their eclectic influence on economic activities in that country. Countries across the glob have different political economy tendencies. Every country has legal, political, economical, as well as social systems that differ comparing to other. Some countries may be advocating for capitalism while others may be advocating for socialism in their economic system. Political economy differs in terms of government system that is in place. Understanding political economy is very important for any particular organization. It helps to understand the system of government that takes lace in different countries. It also enables the investor to be well equipped with knowledge of the legal, political and economic system of the country that he/she intends to invest her/his funds.

Differences in Culture

Culture can be defined as set of values and ways of doing things that have been adopted by a certain group of people. Cultures are different in various regions of the world. Therefore, it is important for international investors to understand different cultures because what work in their home country may not work in other countries.

International Trade Theory

In order to understand the effects of tariffs and various trading patterns theories of international trade have been developed. The theories of international trade include; specific factor model, Ricardian model, gravity model and Heskscher-Ohlin model. These models play a crucial role in international trade as they enable participants to understand and predict various international trading patterns. They are also providing with ways of studying the effects of various tariffs on companies’ products.

Foreign Direct Investment

Foreign direct investment is the situation when companies or individuals instead of investing in local venture invest in foreign countries. Foreign direct investment can take the form of new venture in a foreign country or investment of fund into existing businesses. Foreign direct investment is very important to any particular economy. It is a source of needed capital which may not be available in the domestic market, and a source of new workplaces for the citizen in the country of investment. It also helps in reducing competition and externalities found in the domestic market.⁴

Political Economy of International Trade

Political economy of international trade is the study of international relations between political, social and economic fields. It involves the study of how politics influences economic activities in the world. It is important for international trade investors to be able to understand how international politics shapes trading activities across the glob.³

Regional Economic Integration

Regional economic integration is a situation where countries come together to form economic block, which enables economic factors flow from one country to another within a particular block. Regional economic integration is very important as it has brought with it many opportunities. It has enabled the free flow of good and services from one geographical region to another. It helps in reducing cost of goods and services across borders as import duties are waived through economic integration. Global enterprises are able to take advantage of the large market created by economic integration.  High demand for labor created by market forces causes the reduction of unemployment rates within the various regional economic blocks^.3

Foreign Exchange Markets

Foreign exchange market is a market where currency of one country is an exchange to a currency of a different country. Foreign exchange markets facilitates the exchange of currency from a given countries currency to a different currency. They play an important role as it makes international business processes easier to conduct². A trader can easily buy or pay for his goods using any currency in the world. Foreign exchange markets are, therefore, important component of international trade.

Global Monetary System

Global monetary system is a set of globally recognized agreed conventions and rules, as well as supporting institutions that are used to facilitate cross border and international trades. Institutions such as International Monetary Fund and World Bank are the most recognized monetary systems as for today. Global monetary systems are very useful as they ensure that there is price stability on international markets. Their task is also to make sure that there is enough currency for trading activities in the world. They also play a critical role of ensuring that there is stability in exchange markets across the glob.

Global Strategy

These are strategies which are developed with the aim of making global enterprises achieve their international trade goals. Global strategies cover all organizational areas: marketing, human resource and financial sector. Global strategies are very important as they enable organizations to take advantage of expansion opportunities that arise around the world. It also helps in increasing enterprise’s efficiency as well as pool of resource from the foreign markets.

Entering Foreign Markets

When entering foreign markets in most cases companies use foreign direct investment method. Entering foreign markets is important as it helps in expanding an enterprise market for existing products. It also provides an opportunity for expanding enterprise’s activities by starting production facilities abroad.  Foreign markets may attribute as a source of cheap capital and labor compared to the domestic markets.

Exporting, Importing and Counter Trade

Exporting involves selling domestically produced products to foreign countries. Importing involves purchasing of goods and services from foreign markets. Counter trade is international markets where exchange of goods and services a takes place. These components of international markets are of a great importance for the world’s economy. They facilitate the exchange of goods and services on international level

How "Global Enterprises" Affects Modern Day Business Management

Globalization

Globalization has brought a lot of changes in the way management of businesses is run. Due to increased competition, changes in consumer preferences and tastes, management of various cultures among many other factors have contributed greatly to the way international businesses are conducted today. The major change that today managers have to get familiar with is the issue of managing businesses across cultures. They are required to undergo some training and gain new skills to manage businesses across various cultures. Globalization has brought up changes in management of human resource. Human resource managers are now supposed to be trained on how to treat and manage international employees. Therefore, globalization has brought up a lot of changes in management of modern businesses.

Countries Differences in Political Economy

Political economy has impacted modern management in many ways. With many political revolutions across the world where people demand for social responsibility from businesses, managers have to ensure that their businesses adhere to code of ethics. The ever changing legal and political systems forces managers who are proactive in nature to avoid problems that may have negative impacts on their businesses.

Differences in Culture

Differences in culture have brought about many changes in the way modern management is run. Due to failure of many managers in foreign assignments they are supposed to undergo some training on how to handle foreign assignments. They are taught on how to handle business affairs in different cultural settings, other from their home country⁶. They also learn about different attitudes toward international operations such as polycentric, ethnocentric and geocentric.

International Trade Theory

International trade theories have transformed the approach of modern management to international trade. As modern managers are actively involved in international trades, they have to understand how tariffs impact the earning of their enterprises. They have to take into consideration the impact of international trading patterns and understand the effects of trading tariffs on their operations while planning on company’s behalf.

Foreign Direct Investment

The issue of direct foreign investment has shaped modern management in various ways. Modern managers are expected to consider labor conditions for their workforce. They also have to take into consideration the issues of externalities such as pollution. All of these factors have transformed management roles from the traditional roles to more complex roles that involve greater participation. It has brought the issue of social responsibility to the table, and companies are expected   to express concern about the communities’ interests rather than being concerned about maximization of the shareholders wealth alone.

Political Economy of International Trade

Political economy of international trade encourages managers to be informed of various patterns of international politics. Politics of economic blocks shapes business activities thereby calling for modern managers to be well informed of those patterns. This calls for managers to be geocentric by their nature.

Regional Economic Integration

Regional economic integration has resulted in changes of the way modern managers perform their functions. They know have to think regionally other than thinking in terms of their home country orientation.  Managers have now adopted geocentric attitude toward management of global enterprises.

Foreign Exchange Markets

With emergence of foreign exchange markets change in the role of a modern manager emerged. The manager concerned with exchange of currencies should be a ware of various foreign exchange risks. Therefore, managers are expected to be qualified risk managers in order to help the organization manage the impact of exchange risks. They advices the organizations on various risk management approaches to adopt.

Global Monetary System

In the current age of global monetary systems managers, roles have changed from their traditional roles to more complicated roles. They have to ensure that their organizations are well conversant with international conventions and rules. This calls for managers to adopt geocentric attitude toward managing global enterprises.

Global Strategy

Emergence of global strategy in international business has transformed modern management in a great way. Managers of global enterprises are supposed to ensure that they develop global strategies for their businesses in all areas of operations; that requires them to help greater knowledge and responsibilities. 

Entering Foreign Markets

Entering of various enterprises into foreign markets has transformed modern management in terms of the attitudes adopted for managing international businesses. In most cases managers are forced by circumstances to either adopt polycentric or geocentric attitudes of managing multinationals.¹ Managers have now moved away from ethnocentric attitudes.

Exporting, Importing and Counter Trade

Exporting, importing and counter trade in international business has transformed modern management in a great way. Managers of global enterprises are supposed to ensure that they develop global strategies for their businesses in all areas of operations.

How an Organization can Apply "Global Enterprises" for Positive Results

Globalization

Businesses should come up with policies that will enable them take advantage of the various opportunities that have been brought up by globalization. They should take advantage of economies of scale by selling their products at a lower price rate but in larger quantities. Businesses should employ internet marketing to reach out to various global markets. Internet is beneficial in terms of reducing cost marketing costs: such as promotional and advertisement costs. Businesses should come up with good rewards system in order to attract highly qualified human resources from various parts of the world.

Countries Differences in Political Economy

Political economy can be used in a way that global enterprises benefits from it. They should ensure that they adhere to the rules and regulations concerning running of businesses in different countries to avoid legal suits, which may be costly. The global enterprises can take advantage of various governments’ incentives as well as subsidizes in the countries of their operation.

Differences in Culture

Differences in culture can be used by investors to produce positive results for their international transaction. They can adopt the geocentric attitude toward managing their business. Managers should be world oriented in the way they manage their businesses. It helps to raise a highly motivated labor force which in turn evolves to high standards of performance within an enterprise.

International Trade Theory

Managers of global enterprises should use the international trade theories to predict the impact of global trade pattern and their impact international operations. They should focus their operations in areas with favorable trading patterns. They should also be able to plan well on how to deal with trading system changes in advance. Failure to do so may negatively impact their trading activities.

Foreign Direct Investment

Foreign direct investment, if well analyzed by any enterprise, can be used to yield positive results for the enterprise. Manager should focus their funds on direct foreign investments in areas where good utility facilities, good infrastructure, availability of market, politically stable environment among other crucial factors are available. If these factors are taken into consideration foreign direct investment, may yield positive results.

Political Economy of International Trade

Global enterprises should come up with policies that will enable them to benefit from various political economy policies for international trade. The management should be engaged in development of trading policies that will enable enterprises to take advantage that is brought up by economic and political blocks. Enterprises should develop geocentric policies that will enable them to come up with ways of acquiring highly qualified personnel from various parts of the world.

Regional Economic Integration

Global enterprises have to develop both marketing and human resource policies that will enable them yield positive results from regional economic integration. The company adopts production strategies where they set up production plant or distribution plants within member countries of the regional economic block.

Foreign Exchange Markets

The organization can adopt a foreign exchange policy that can help in managing negative impact of foreign exchange fluctuations. They can adopt hedging strategies that can be used to hedge the enterprise from negative fluctuations in foreign exchange rates.

Global Monetary System

It is up to global enterprises’ managers to decide on the development and adoption of the new strategy that aimed at ensuring an enterprise benefits from global monetary systems. Instead of borrowing from domestic markets, global enterprises should approach global monetary institutions which lend venture capital at low interest rates compared to other financial institutions, especially those from domestic markets.

Global Strategy

The management of any global enterprise can adopt marketing strategies that encourage expansion of the enterprise global markets such as opening distribution centers in every region of the world. This can help in increasing the sale volumes of the company. An increase in the enterprise sales volume translates to increase in sales revenues as well as into profit.

Entering Foreign Markets

Global enterprises have to globalize their strategies and attitudes in order to integrate with a foreign market successfully. It will cause the increase in company’s name recognition and range of influence. This will help in expansion of the existing market share. It is thus, important for enterprises to go global by entering in foreign markets using direct foreign investments method.

Exporting, Importing and Counter Trade

Global enterprises can adopt global strategies aimed at expanding their activities in the area of importing and exporting. This will help in expansion of the existing market share as well as improved quality of production. It is thus, important for enterprises to go global by entering in foreign markets.