International business is found everywhere from well-known multinational corporations to brand new startups. Since it is much easy to get involved with international businesses, there are certain sociological forces that an individual should be cognizant of. These sociological forces are technology, culture, and the economy. To start with, technology has experience tremendous impact on the international businesses. Transportation, production, and communication efficiency are some of the areas that have since been enhanced by technological improvement (Heidenreich 56). Computers, for example, have made it easy to maintain records of shipments and inventories. Emails have made it easy for smooth communication in the business world. Transportation technology has made it easy for shipment to be conducted from one company in one county to another company in another country. Manufacturing technology has also improved the rate of production and efficiency.
Secondly, it is the economy. To be aware of more than simply theexchange rates would be of much importance to any person aiming to dobusiness internationally. It is important for one to be aware of thecurrency rates, but also to know more on the reasons behind thepotential currency change, tariffs, and changes in duty. If one isinvolved in, for example, a product-based business venture, then themost competitive advantage could be in better understanding of theeconomic environment (Heidenreich 67). It would not only help in theadjustment of prices accordingly, but also one would be in a betterposition to insulate his or herself from drastic effects of currencychange.
Culture is a broad topic, but one cultural aspect to be focused on isthe ideologies. Cultures come with the few of the unknown.International businesses engage different countries, which in turnhave different languages. One tends to be involved in some languagesand cultures in international business. It is intimidating when oneis not familiar with the basics. Whether perceived, local,generational or ancestral, ideologies in any country should promptone to be aware of its changes. One or companies should educatethemselves on the norms, local nuance, and the belief system beforecarrying out any transaction.
Most countries have a legal system that may impact international businesses. This legal system may be separated or a combination of civil law, common law, and religious law. Every country has a legal force that has shipping regulations and legal requirements that are needed by potential customers. With laws manufacturing laws, one may be forced to have an import license to be allowed to bring in components that are regulated to the country one is in. The law may demand that the factory must have an export license to allow shipment of merchandise out of the country (Rugman & Simon 112).
With the economic integration agreements in majority of thecountries, import laws prompt these countries to demand for GMP, FDA,or certificates of origin for the type of project one is importing(Rugman & Simon 120). The law could demand a quota from the saidcounty one is importing in, and the imported product should becovered by this quota. The law also demands that special licensingfrom trade markets be required to allow restricted goods likealcohol, drugs, and guns.
With laws that guide potential customers, legal rules and forces putin place by the international law demands certifications to themanufacturing standards, for example, GMP, ISO, and QS (Heidenreich70). The law would require that the product should conform to the ULcertification, SAE, the European standards, and the National SafetyHighway Administration. These laws demand the seller to have theProduct Liability Insurance for the protection of the customer fromliability.
Impact on international businesses may be as a result of primary labor forces. These primary labor forces include quality and quantity of labor, mobility of labor, the state of the organization, and cultural differences. These primary labor forces may also have an impact on labor conditions worldwide, unemployment rate within a country, urbanization of the workforce, and aging of the population.
The quality of labor is important, especially when dealing with thesize of the workforce and conditions of labor worldwide. Withworldwide conditions of labor, the labor force must be analyzed todetermine if the right levels of skill are needed to conduct aprofitable business. Several factors affect the quality of laboreducation, proficiency, and experience. These factors affectconditions of labor and the size of the workforce (Heidenreich 89).This is because with high experience and education, the size of theworkforce in company increases, which leads to increase in thequality of labor. However, a large supply of labor lowers the demandof labor and, as a result, may lead to a decrease in the number ofworkforces. Also, Lack of labor urbanization also affects the qualityof labor.
The quantity of labor shares the same factors to that of laborquality. With labor mobility, this consists of changes to worker’slocation, which in turn affect the labor conditions of workers acrossthe world. These changes are both physically, geographically, andalso across a set of occupational mobility (Rugman & Simon 121).Here, the mobility of labor affect child labor and immigrant laborsince where they live do not match their skills. These groups areconsidered as “a relatively small number of people living amonglarge majorities” (Rugman & Simon 122). Hiring of minor groups,apart from child labor, is has proven to be advantageous to theinternational business. This is because, in a foreign country, thereis the immediate availability of work. However, aging of thispopulation may suffer from discrimination since they will be viewedto be a vulnerable group.
There are important international institutions that have impacted on international businesses. These international institutions are the International Monetary Fund (IM), World Trade Organization (WTO), and the World Bank (W): International Monetary Fund ensures that there is stability with international businesses and its financial system, internationally. IMF through its financial assistance, surveillance, and technical assistance, the institution aims at promoting international monetary cooperation across the business world through exchange stability. Also, it helps with the orderly exchange of business arrangements, high level of employment, and fostering economic growth among countries (Heidenreich 101). IMF is known to impact some international businesses through providing financial assistance to those countries aiming to balance their debts and trade.
The World Bank impacts international businesses through theirdevelopmental assistance. With their loans and a broad range ofprograms, which also include business, the institution has improvedthe living standards of most developing countries. One of theprograms given high priority is to strengthen economic management ofnations through business. The bank main aim is to help countries toimprove on and sustain fundamental conditions to attract new businessinvestments. WTO is a global institution that deals with the rules ofbusiness and trade between nations. At the center of itsmulti-lateral business system are the institution’s agreements.These agreements are negotiated and then signed by the world’strading majority. The institution has impacted on internationalbusinesses through helping the producers, importers, and exporters totransact by ensuring the business flows smoothly, freely, and in apredictable manner as expected.
A mode of entry of businesses into foreign markets refers the channel in which the organization of the business institution, applies to gain access to a new foreign market. These modes of entry are franchising, licensing, join venture, and Foreign Direct Investment (FDI). Franchising is suitable when replicating a business format or model, for instance, a fast-food retail menu (Rugman & Simon 125). Since there are fixed guidelines and operating models, this entry mode is limited to its adapting ability. As a franchisor, while a license agreement is limited to things that involve intellectual property and trading secrets that enter another country, franchising is familiar with operating know-how and trademarks of the international business. Franchising, however, must be recognized with the presence of product-market that ensures customer tastes are the same across the trading countries. Franchising mode has advantages that include low costs, low political risks, allows expansion across different regions, and financial investments are brought by selected partners.
Licensing is a mode of entry that permits a business institutionwithin the target country to incorporate licensor’s property. Suchkind of property is usually intangible, for example, patents,trademarks, and different production techniques (Heidenreich 98). Thelicensee, on his/her side, is required to pay a fee in exchange ofrights to be used on intangible properties and possible, fortechnical help. Since small investment on licensor’s side isrequired, this mode of entry has the potential to offer very largeROI. Moreover, because the licensee generates and markets the wholeproduct, some of the potential returns acquired through manufacturingand marketing, may be lost in the process. Expansion of internationalbusinesses through licensing has its advantages. Licensing ensuresextra income is obtained to be used for services and technicalknow-how. Also, there is a quick expansion on business withoutincurring many risks and large amounts of capital investment.
In a joint venture, there are five objectives that are common. Theyinclude market entry, risk or reward sharing, joint productdevelopment, technology sharing, and conforming to regulations fromthe government. Other benefits to international business arepolitical connections and access to distribution channels thatdepends on the countries’ relationships (Rugman & Simon 123).Such kind of alliances favors these joint ventures in that thestrategic goals of the partners converge while there is divergence tocompetitive goals. In a joint venture, key issues to put intoconsideration are control, ownership, pricing, length of theagreement, and technology transfer.
Foreign Direct Investment refers to direct ownership of the countriestarget facilities. It involves the transfer of resources, whichincludes capital technology and business personnel. FDI could be madethrough already acquired entity or through new and established anenterprise. For FDI, it ensures a direct ownership provide a highdegree of controls during business operations. Also, FDI guaranteesbetter knowledge of consumers in a competitive environment. FDI,however, requires a high level of commitment.
In a supply chain that involves a bottled water company, primary components include demand management, communication, and integration. Demand management, to begin with, is an important component in a bottled water company. The company should aim at meeting the demands of the consumers as far as the quality of water is concerned. Bottled Water Company in a supply chain ensures that the partners are well acquainted with consumers’ needs. This encourages them to minimize the component of the supply quality by adding value to the water. Through awareness and increased collaboration, this company would be in a position to improve the competitiveness of the supply chain.
Better communication in a bottled water company helps in improvingcompetitive productivity and efficiency through its operations. Thisis by enabling all the members to share the same operational anddemand information (Heidenreich 75). Communication within the bottledcompany guarantees informed and clear developments, which impacts oncontribution to the company’s supply chain. This will be byenabling them to adjust quickly to the operations within the companyand the changing conditions of demand. Here, a drop in communicationwould be a subject for improvement. Improvement on communicationenables activities within the bottling company to improve(Heidenreich 76). Also, communication will also facilitate productionsection of the company to respond rapidly to the quick integration ofthe bottled water into the market. Communication would also demand anincrease to supply levels after a successful campaign to market theproduct. Integration would be a component of the supply chain thatwould have to be improved continuously. This is because it would helpeach member, which is part of the company, to minimize the inventorycosts. This costs are known to be successful to chain management.
Heidenreich, Martin. Innovation and Institutional Embeddedness ofMultinational Companies. Cheltenham: Edward Elgar Pub, 2012.Internet resource.
Rugman, Alan M, and Simon Collinson. International Business.Harlow, England: Prentice Hall Financial Times, 2009. Print.