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International Business Expansion and Functions of International Management

November 07, 2011  by: rekhas  Points: 12   Category: Others  Earning $1.00   Views: 680

ith a global presence, companies can increase the potential of their product growth and strength in international markets. However, companies need to remember that global business activities require adaptation to the culture, customs and traditions that differ from one country to another.

         

Organizations compete in a rapidly growing environment due to globalization. Thus, expansion on a global scale is a main growth strategy for organizations in order to serve customers in foreign markets too. With a global presence, companies can increase the potential of their product growth and strength in international markets. However, companies need to remember that global business activities require adaptation to the culture, customs and traditions that differ from one country to another.

Reasons for Going International

Companies prefer to expand internationally for defensive or aggressive reasons. These include -

Exploring new market regions
Earning higher profits
Bringing more products for domestic markets
Upholding the top-level management's needs to expand the existing business
Protecting domestic market front by expanding globally
Gaining a good position in foreign markets and protecting the brand image internationally
For reliable raw material supply
To learn about new technology
Geographical diversification and seeking politically stable shores to expand the business


In 1950s, many countries had a closed-door policy and imposed trade restrictions to control imports of products and services. This was the time when companies began expansions at international level. They began setting up own subsidiary units in foreign countries to produce and market their goods. Hence, this falls under the defensive reason for international business expansion.

After this process, companies began actively expanding internationally, in search of new markets, for cheap labor, raw materials and for setting up profitable business units in new countries.

Stefan Robock and Kenneth Simonds Six Motives for going International

Robock and Simonds gave six chief reasons that companies used for going international. These include-

Seeking new markets
Seeking new resources
Seeking production efficiency
For efficiency in technology
To avoid risks or interruption in production
For defensive threat[I]

Functions of International Management

Managers need to consider both home and host country while performing various managerial activities. International management process needs to focus on all aspects of planning, organizing, staffing, leading and controlling.

Planning

When organizations plan for international expansion, they must assess thoroughly, the external environment, for threats and opportunities. Then, they can try to balance the internal strengths and weaknesses to make best use of opportunities and to avoid the threats and risks.

Technocrats largely dominate the foreign countries, mainly in areas of organization planning. Technocrats are the staff specialists (financial analysts and engineers) who have high influence in bureaucracy and are specialists in the field of economic planning. Hence, international managers need to understand and develop good relations with these technocrats so that their firm can succeed in the international shores. National economic plans of a country provide the main framework to these international managers to consider better expansion of the firm.

Organizing

While expanding globally, firms need to adapt to the external and internal conditions of those countries. Organizational structures vary in different countries. It is essential to group various activities of the firm based on geographic locations. Hence, firms need to consider and analyze merits and demerits of various organizational structures before selecting the best option. Multinational organizations may choose to use more than one organization structure to handle the multiple products and managing various units of the firm in different regions.

Staffing

A key responsibility of international managers includes staffing. Multinational companies have three main sources of managerial talent. These are- managers with home-country nationality; managers with host country nationality and managers with a nationality of a third country.

Managers with home country nationality are nationals or citizens of the country that is also the main headquaters of the organization. These managers also represent and supervise the branches of the firm in foreign countries.

Managers with host country nationality are those who are residents or citizens of the country where the organization plans to set up a branch. Being locals of that country, these host country managers have better idea about the culture, language, customs, education, economy, legal and politcal environment.
Third country nationals are those managers who belong to a different country and not to the host or home country. These managers have rich work experience and can easily adjust in different cultures or work environment.

Leading

Leading involves two elements- motivating and communication. Leadership styles also differ according to a country's cultural environment. It is important for managers to understand the cultural traditions of employees in the different geographical locations in order to motivate and communicate efficiently with them.

Controlling

[I]During evaluation and controlling, managers should keep in mind the following elements-

Different countries have different standards to measure revenues, cost and profits

Ratios between currencies are constantly fluctuating and change without prior notice

Accounting and financial reporting practices also differ from one country to another

When companies expand internationally, there is a small delay in measuring performance or delay in detecting deviations or delay in taking correct action.




Comment(s)
Author: Abhijit Bangal        
Posted Date: 11/09/2011    Points:1    

This really seems to be a thoughtfully written article with great details. Good work. Keep it up!

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