Global Business and, National Differences in political economy and culture
Question No. 1: Multinational enterprises are supported by strong and effective institutions to succeed in business.
1-What do you understand by the concept “institutional framework”?
Institutional Framework:
By the concept “institutional framework”, means a system integrated with different factors and bodies shaping socioeconomic activity and behaviour. It includes laws, regulations, rules, norms, processes, and relevant stakeholders to shape an activity at the social and economic stage. It means that it covers every aspect, factor, and entity that can affect and is affected in a socioeconomic and behavioural setting (García-Ramos et al., 2017).
The understanding of the framework reveals that one institution is not there to shape the regulatory environment for a firm or a business. Instead, it is the combination of different bodies to shape the institutional framework.
2-Certainty of a business environment determines a firm’s success. Examine how the various types of institutions that reduce a firm’s uncertainty
The business environment is indeed uncertain, and a firm has to work under uncertainty. For this purpose, there are various types of institutions to reduce the level of uncertainty for a firm.
The most important institution is the central bank in a country or a region. For instance, there is a single central bank for the European Union bloc, but each country has one in the best part of the world. A central bank shapes economic and business policy by regulating the interest rate and money supply. Monetary policy is the most prominent decision made by a central bank in which it determines the flow of money and level of investment. A decrease in the interest rate increases the investment and spending pattern. It helps a firm to know the macroeconomic indicators (Montes & Gea, 2018).
The government and its various institutions in the finance ministry develop fiscal policy. It relates to making policies to guide and pave the way for a firm. The fiscal policy defines the priorities of the government towards trade, money flow, and inflation. These indicators are important to understand the business environment for a firm. Its knowledge reduces the level of risk for an organization (Aye et al., 2019).
There are also international bodies like the World Trade Organization and others that inform about international business trends. These are institutions rich in information that can help reduce the level of uncertainty for a firm. International bodies and reporting practices present an international picture of the business that helps a firm to eliminate the level of uncertainty.
Foreign direct investment and regional economic integration
Question No. 2: All countries across the globe have joined the race to attract foreign direct investment. Examine the merits and demerits of foreign direct investment to specific sectoral communities in Australia as a host nation.
All countries like to have foreign direct investment because it makes a pool of investment and resources in the home country. As a result, the home country can enjoy plenty of financial resources to invest in different economic sectors.
Australia has different sectoral communities, which include charities, organizations in the housing sector, education sector, and religious fields. These sectoral communities rely heavily on donations because they have to focus on volunteers and the efficient use of resources.
Merits of foreign direct investment for sectoral communities working in the housing and employment sector are numerous. These are high investment sectors that can get a boost through FDI. Moreover, religious charities can also benefit from FDI because of large religious support and missionary institutions across the world. Therefore, Australia can benefit from FDI in these sectors. However, the direction of funds and investment into sectoral communities can also link them with their respective communities around the world. As a result, Australia can benefit from international expertise in these communities. It would result in growth and support for nonprofits and private welfare organizations. These merits should welcome foreign direct investment in these communities (Simon & Merrett, 2020).
However, some sectoral communities are specific to Australia, like those working for Aboriginal and Torres Strait Islanders. Therefore, more reliance on FDI can have a negative impact on these communities as they can lose focus. Moreover, FDI can also change the orientation of charitable activities in Australia because the flow of information can redirect attention and priorities from one sector to another. Specific attributes of sectoral communities in Australia and over-reliance on foreign direct investment can cause problems related to financing (Sabrine & Anis, 2020).
Therefore, it is better to search for a balance between the merits and demerits of FDI so that these options end at maximum benefits.
International Competitive strategy
Question No. 3: The COVID 19 Depression can be noted as being worse than the 1928 World Great Depression. Indeed, many firms across the world have closed their businesses.
As an advisor to the President of Happy-land Republic:
1- Examine the survival strategies you would provide to enable firms to survive the effects of COVID 19
Effective of the COVID-19 pandemic are visible because the pandemic has closed many businesses worldwide. It is worth focusing on survival strategies. The following is the examination of chosen survival strategies in this context.
The most effective strategy is to go online, which means firms should adopt the digital and online business model to survive. It is evident from the boom of online and e-commerce sales during the pandemic while traditional businesses have faced a hit. Online and digital platforms for existing firms are going to rise where firms are imitating the Amazon Inc business model. This business model was a prominent and attractive one before the pandemic as well. However, the pandemic has made it more attractive and viable. Therefore, the online strategy for any traditional business must be the priority (Aburumman, 2020).
Another effective strategy is to be dynamic in developing the business model. Each business and a firm should be dynamic in light of changes in the environment. Almost every business has to adapt to changes that occurred during the pandemic. Otherwise, the business has lost its ground to competitors. Online and digital strategy in the business has changed consumer behaviour forever. Once a change occurred in the consumer behaviour cannot reverse back because customers link them with that specific behaviour. Therefore, a firm must relate to changing and evolving consumer behaviour to never go obsolete or irrelevant (Aburumman, 2020).
The third effective strategy is the support and supervision of the government in the area of innovation and technology. For this purpose, the Government of Australia should set up a policy and central regulatory authority to guide businesses, especially start-ups. Government support should be at the assistance level only. It does not go at the micro level, but the regulatory and legislative framework must support the above two strategies (Aburumman, 2020).
2- You understand that for each strategy, challenges exist. Accordingly, you believe that the Prime Minister should be aware of these challenges. What challenges do you think would arise as a result of adopting each of the strategies you have provided to the Prime Minister.
Each strategy discussed above has challenges associated with it. Prime Minister must be in the knowledge of these strategies and challenges associated with them. However, there is a description for convenience.
Challenge for the strategy to go online and digital might need investment and inability to introduce the model to traditional business models. Many organizations could not go online and digital despite having resources. Therefore, the government has to support and guide businesses in adopting online and digital business models. Technology advancement is the most prominent reality these days. Even if an organization adopts new technology, it does not mean that it is for the final time. It is the reason; online-based firms usually up and down in business. It is because of the increasing level of competition they face (Pató & Herczeg, 2020).
The research and development department of each organization should be functioning actively. For this purpose, they should be having a close connection with their customers and their changing consumer behaviour. It would save businesses from being isolated and be relevant to their customers. Close connection with customers is the key to success for today’s firms and their research and development activities. Customer-perspective of any firm guarantees the success and well-being of that entity. However, it is always challenging to have recent and personalized data on customers (Omar et al., 2020).
The third strategy can be a challenging one because the government cannot guide businesses and the economy alone. For this purpose, it has to adopt a common point’s agenda to help businesses adopt dynamism and technology so that they can have assistance and convenience in this transition phase. The government should assist businesses and firms through legal and legislative support. Moreover, establishing a technology and innovation city can also be an idea worth pursuing in an organization.
Organization design and control
Question No. 4: Employees of a firm are the source of knowledge who enable enterprises to implement he planned activities.
1- Examine the main elements of knowledge management that enable firms to succeed using experts.
Knowledge management is a process that continuously defines structures, retains, and shares knowledge and expertise within employees of an organization. It is the process, but the main elements of doing it include people, processes, and technology. People share and absorb knowledge while processes make it happen. The use of technology makes it smooth and efficient so that everyone can have information and knowledge being shared.
These elements become a part of the process where employees or members of the organization generate knowledge. They adopt a process to transmit and share that information with others. It is because of the technology that enables this transfer faster and more efficiently. Moreover, components of knowledge management must be in consideration as well that include knowledge retention, sharing, and transferring across the organization (Prusak, 2019).
2- Explain the challenges and obstacles that are likely to affect a firm’s knowledge management.
Knowledge management seems to be a simple process, but it faces several challenges and obstacles. These obstacles and challenges can affect a firm’s knowledge management.
In the absence of qualified and competent employees within an organization, knowledge management cannot achieve its objectives and purpose. Therefore, it is a challenge to attract and retain qualified employees. If the organization does not make it happen, it becomes an obstacle. In this manner, knowledge management has to work closely with other departments and activities running in an organization. For instance, it has to share components and rules of knowledge management with human resource management to keep hiring competent employees. It has to link with other departments to make sure they keep having qualified staff. In the absence of this mechanism, a firm can have challenges and obstacles in implementing knowledge management principles (Jayawickrama et al., 2017).
The other challenge is to structure a process that can enable knowledge management to happen continuously. For this purpose, the organization has to ensure automatic and integrated knowledge and experience sharing mechanism. Knowledge management should not be a separate activity that has to be initiated with special effort. Instead, the organization has to make it a more natural and self-initiating process. For this purpose, every department has to be in line with the overall organizational policy, and it is a big challenge before an organization (Butt et al., 2019).
The use of technology and assisting it with these processes and people is also challenging because technology enables it. An organization has to make sure that technology does not become a burden instead; it should assist and make the process smooth and transparent to make knowledge management possible. These challenges and obstacles lead an organization to be perfect in the field of knowledge management and sharing. Technology should not be a burden, or it must not result in an extra burden on employees. Instead, it should assist them and motivate them to be more effective and productive.
Entry modes, export and import practices
Question No. 5: Internationalization can be viewed by small and medium enterprises as a slow stage- by-stage process. As a business expert:
1- Examine the various options you would adopt for your firm to engage in international business.
Small and medium enterprises do not need plenty of financial resources and a wide range of options to go international. Therefore, internationalization is a stage-by-stage process for them. Therefore, they should be choosing the least risky method to engage in international business (Giudice et al., 2017). There might be different options that can be adopted, and the examination of each option is in the following.
Exporting:
It is one of the least risky options for international business. Under this option, SME can easily get its products and services in a foreign country. However, there must be demand for its services and products; otherwise, this option can be costly.
Licensing:
Under this option, the SME can award a license to a party in the foreign country to use the rights of the SME. It can charge a fee against this permission of using patent and copyrights. It is also less risky, but the party getting the license must trustworthy.
Franchising:
It might be similar to licensing, but it requires more control to the party in the foreign market. However, the SME can have strict control over the party getting the franchise to ensure that works under the SME rules.
Joint Venture:
If the SME has expertise and excellence in its business model, it can enter into a joint venture with the other company in a foreign market. It requires trust between parties; otherwise, it cannot be a suitable option.
Other options like a foreign direct investment and establishing a wholly-owned subsidiary are not suitable for an SME because of the involvement of large capital and risk. It is better for SME to start with exporting because it is the best way to assess risks in the foreign market.
2- Use an Equity Control-Growth matrix to explain the various equity entry modes used by small and medium enterprises to internationalize.
Entry mode to a foreign market can be based on equity or non-equity. Small and medium enterprises can use them to internationalize their business. The following has the explanation of equity entry modes only that SMEs can use for internationalization. Chosen equity entry modes in the following are two, i.e., joint venture and direct investment through a wholly-owned subsidiary.
The joint venture is a less risky equity entry mode by the small and medium enterprises. It has to enter into an agreement with a company in the foreign market so that the SME does not need to establish its market presence. It reduces the level of risk because the SME enters the market based on the other organization’s knowledge and expertise in the host country. However, it has challenges because the host country might not trust the SME because of its reluctance to physically enter the market (Schwens et al., 2018).
Wholly-owned subsidiary or direct investment is a full-fledged entry mode where an SME enters the market with investment. It brings assets, financial resources, hires manpower, and acquires land to establish its presence. It establishes a wholly-owned subsidiary to offer products and services for the host market. It is riskier than the above option, but it brings more revenue to SME because of direct investment in the host market (Schwens et al., 2018).
Global operations
Question No. 6: Buderim Group, Australia’s oldest ginger processing and agritourism business has received an $8.3 million takeover offer from Global Foods. It was noted that “The proposed deal includes the Buderim Ginger brands, all land, plant and ginger processing equipment at Yandina and the Ginger Factory tourist attraction, as well as
a 1,619-hectare macadamia orchard in Hawaii”.
During the takeover of Buderim Group, the Executive Director observed that “We are in a unique position to invest the required capital and expertise to enable the ginger division to continue into the future, and for the company to profitably grow with a renewed focus on the macadamia industry. He also noted that they would rebrand to Health and Plant Protein Ltd.
Among the strategies he indicated was that they “would transfer” over with the ginger division and take on a non-executive director role with the macadamia arm of the business. He stated “We’ve been working with ginger growers on the Sunshine Coast since 1941 and I don’t see any change to that.” Therefore, he said “Buderim Ginger and the Ginger Factory are part of the fabric of the Sunshine Coast, we are Australia’s leading ginger company, and we’ll continue exporting Australian ginger around the world”.
Finally, the Executive Director said “We are doing this to act in the best interests of the shareholders; certainly, we wouldn’t be doing this if we didn’t think it was for the right reasons,” ABC News Posted; Tuesday 16 June 2020.
Suppose you are the Executive Director and have just graduated from Holmes
Institute. Answer the following questions that are related to Global Foods takeover of Buderim Group.
1- What do you think would motivate you as the Executive Director of Global Foods to take over Buderim Group?
There are plenty of motivating factors to go into for taking over Buderim Group. Global Food is a prominent player in the international food industry, and this takeover would help it to retain this position. Looking into the profile of Buderim Group, it is clear that the company has expertise in ginger processing and agro-tourism business. This expertise is its strength. This strength is the biggest motivation to enrich Global Foods with it.
In terms of assets, the Buderim Group has never been a less previous business. The takeover offer is for $8.3 million that is because of the assets of the group. The Buderim Group has ginger brands, land area, plant and ginger processing unit, ginger factor, and macadamia orchard. These assets are costly enough to attract any company in the industry to take them over. Moreover, it is in line with the future ambitions of Global Foods as it wants to rebrand the company to Health and Plant Protein Ltd. It has not gone to stop the present business model of the group; instead, it is going to capitalize on it. Further, Global Foods has plans to expand the business using its strategic priorities. Therefore, these motivations support the takeover decision.
2- Explain the assessment steps you would take to guarantee the stakeholders that the Buderim take-over is profitable and in their interest.
Stakeholders can be concerned about the takeover because they have been part of an organization that is there for decades. It is the oldest ginger processing and agri-tourism company in Australia. Its strengths in macadamia are also worth noting where it is strong in comparison with competitors. It has close contact with growers of ginger as well. These attributes have been strength for stakeholders, but now, a takeover can put them in danger. Stakeholders can have these concerns that must be solved.
A stakeholder analysis is suitable that should be there with the change process. Stakeholders need assurance that the takeover is not going to hurt their stakes and interest in the new company. Global Foods is not going to change the business model or strategy, but it only wants to capitalize on the strength of Buderim Group. Furthermore, it would extend the benefits and usefulness of the business model to new heights and effectiveness. A renewed focus on the macadamia industry, as well as rebranding to Health and Plant Protein Ltd, are also growth areas. The emphasis on these areas is not causing pessimism or the risk of hurting a relationship with stakeholders. Instead, it would keep them motivated and encouraged to work with the company into the future (Rajhans, 2018).
Therefore, a guarantee of sticking to the related activities to the existing business model and growth-oriented business model would guarantee stakeholders to remain committed and motivated with the new company.
3- Examine the challenges you would encounter during and after the acquisition of Buderim Group.
There must be challenges that have to be encountered during and after the acquisition of Buderim Group.
Challenges during the acquisition would link to how the company is going to deal with existing employees and stakeholders. Present executives can also face uncertain scenarios because acquisition can change their position within the company. They can develop pessimism, and they can also lobby for an uncertain future. However, it is useful for the company to consider their concerns and views so that they do not lose motivation. Especially, executives can develop insecurity because they can lose their higher position in the new company. It is better to keep them engaged and out from uncertainty (Järlström et al., 2018).
After the acquisition, Global Foods has to be concerned about implementing the change process. For this purpose, the company should unfreeze existing norms and practices, and then, it has to introduce change. It is going to focus on the macadamia industry and the health and plan protein business. It has to communicate this message in the change process. Otherwise, employees can develop insecurity and lack interest in the new company and its vision. It can distort the objectives and purpose of Global Foods that are associated with the takeover of Buderim Group.
A proper change management process in consultation with stakeholder management is essential to deal with challenges after the acquisition of the group. Global Foods has to be aware of the importance of stakeholders and employees in making the change happen and materialize.
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