GLOBAL ISSUES IN STRATEGIC MANAGEMENT
During the recent past the number of firms engaged in business beyond the borders of their country had risen. Trade names and trademarks are becoming common over the world. Corporates operate their affiliates or subsidiaries in various countries and the numbers increase more and more, and are expect to continue further.
Operating in different countries make the strategies to look for new issues. “Different countries” make you think of different nations, cultures, rules, regulations, economics, etc. Strategists have to look for these aspects when making strategies to work in the countries beyond their borders. Therefore, there is a need for understanding the international management to help you when studying these issues related to global strategic management.
Business going out of the boarders
a) International Business
Organizations those conduct business operations across national borders are referred as international firms or multinational corporations (MNCs). The operations beyond the borders are conducted by way of business subsidiaries or business affiliates which engage in all types of operations including purchasing, warehousing, manufacturing, transporting, marketing and advisory services. Business organizations select various strategies to enter into other countries. You are already familiar with some of these strategies. Purchasing of local companies, open branches, joint ventures with local investors, invest in solely owned companies are among recent Sri Lankan business experiences. Why companies want to go beyond their countries? A firm operates in a small village wants to expand its operations beyond the village: firm operates in a province wants to expand its area of operations further. Likewise, you are already familiar with many instances where organizations want to expand their business. The need for expansion make businessman to look for new markets, new production facilities and profit making opportunities. When a business operates within a certain geographical location, they encounter limited market opportunities. They may find competition, limitation to access certain resources etc, which in turn will limit their profitability. Therefore, companies start looking into the opportunities which are beyond the limits of their region or country. They may find large markets and resources which can be used for expanding their income and profits. Further, such expansions can help the businessman in reducing their business risk and increase business stability.
b) Growth of International Business
When discussing the international operations in the strategic management process. It is required to understand what is meant by international management. International management involves the performances of management activities across the national borders where the business is located. This can be as simple as importing certain resources from foreign countries or marketing a product in a foreign country or as complicated as collaborating with foreign partners to manufacture (wholly or partly) and market products throughout the world. The technological advancements in transportation, information technology, communication (including television and other mass media) along with the developments in the economics, political, legal and cultural components of the business environment, have helped the organizations to expand their business beyond the borders of their country. The mission statements of certain organizations show that they have included components with regard to markets outside their country or invest in foreign countries to expand their business operations.
These international business operations have affected the day to day lives of many people.
The local market prices of Sri Lankan products such as
rubber, tea and many other agricultural products get their prices from
international markets which affects the income of those who engage in those
industries. The imports, specially with fuel are again affected by
international market prices, which directly affect the cost of living of people
of this country. With the changes in the international economics and political
situations, you would have experiences on the changes underwent in Colombo
stock exchange (withdrawals of funds from Sri Lankan share market by foreign
investors)
The managers today operate in an international environment and its international components tend to increase. This increase in internationalization pave way for more international trade, and demand less barriers for international trade such as high tariffsand duties imposed by the governments, this has even gone as far as duty free trade zones established by certain countries enabling them to facilitate international trade. As organizations try to organize themselves to be in line with the emerging international trends their managers have to evaluate and monitor the economic and political forces that drive the trends and their influence on the strategic management processes. Increasing trend for expanded international trade environment (less restrictions on international trade by the governments) demand managers to evaluate threats from competitors across the world. When carrying out the environmental scan, several additional information may be looked for international concerns: and amongst them are;
• What rule may govern the actions of competitors?
• What resources are available to minimize the damage (loss)
from the actions of Competition?
• What government policies strengthen competitors?
• How can firms
influence these government policies?
However, you should note that the multilateral and regional
trade agreements from a foundation for all international business operations.
You will understand them when studying this lesson further.
In carrying out business across borders, firms may expand gradually and the organization may grow from one step to another. Let us look at these expansions.
C) Different forms of international organizations.
You are familiar with
domestic business organizations. They deal with activities within the borders
of their home country. From the perspective of domestic business, business operation
made outside the home country are international business. Eg. A Sri Lankan garment
manufacturer who distributes his product outside Sri Lanka is in international business.
International trade is concerned with the flow of goods, services. Knowledge and capital across the borders of the home country. The focus of the international trade is on commercial and monitory conditions that affect balance of payment and resource transfers. A strategic has to give due concern on the international trade since the decisions of the governments have an impact on the economics of the international trade. In the case of international business, its literal sense signifies business takes between nations. Therefore, the world international can thus imply that a firm is not a corporate citizen of the world but it operates from home base. Therefore, multinational (or global) business is a preferred term, since nothing is foreign or domestic about the world market and global opportunities. (As far as this material is concerned our emphasis is on multinational organizations)
The domestic
organizations face set of uncontrollable derived from the home country. Multinational organizations face much more
complex environment since the managers are more sets of uncontrollable
variables originating from various countries. They have to cope up with
different cultural, legal, political and monitory systems. However, there may be
similarities of certain uncontrollable factors in certain countries (e.g.
Markets in certain European countries) with this perspective let us look at
some common elements.