Globalisation
Emirates Steel is a company that majors in the production of steel. It is the largest steel company in the Middle East region. The company produces a wide range of steel products. These include wire rods, beams, channels, sheet piles, and columns. The company has its production units in Abu Dhabi, UAE. The company has been looking to expand its production capabilities, and it is set to become a regional producer of steel. The company also has the capabilities of exporting steel to different parts of the world. The company should export its products to India, where the construction industry has created a viable emerging market for steel (What we do, 2015).
The firm is going to export hot rolled structural steel sections. The sections are developed in a manner that makes it easier for the consumers to assemble them into a finished structure. Most construction companies in India have developed the culture of purchasing steel parts to hasten the projects. There are several companies that supply steel to the nation, but Emirates Steel has an opportunity for harnessing a profitable market share in the emerging market.
India is one of the most lucrative emerging international markets for construction and steel companies dealing with ready-to-assemble products. Demand for steel for construction has been on an exponential growth in India over the past several years, and many companies have set into the market to produce the same. Despite this challenge, the Indian market is still quite viable for the introduction of Emirates Steel’s products. The company has various options to export products to the nation indirectly, and it should take the opportunity to harness a large market share before the market becomes saturated with steel producers.
One of the advantages of globalisation is that it has allowed customers to access a variety of similar products. It has also provided companies with the opportunity to freely operate in different parts of the world, where the production of commodities is cheaper. Globalisation has also enabled companies to get wider ranges of markets in the international business arena. The Indian market is one of the emerging markets that have benefited from the concept of globalisation, and it has a viable market for steel for construction. One of the disadvantages of globalisation in business is that it increases competition between companies operating in the same industries. India is an emerging market, and this makes it a feasible market for Emirates Steel because competition for market share is not as stiff as in the developed nations.
One of the factors driving the globalisation of international business is the incentives developed by various host nations to attract foreign investors. Globalisation of business is also influenced by the development of trade partnerships between different nations. Multinational companies have also been actively involved in negotiating with governments to push for their permissions to invest in their respective nations. Globalisation is also influenced by growth in technology and the lowering of operational costs in different business industries. Companies are able to communicate more effectively with their subsidiaries in different parts of the world, and the cost of transporting manufactured products is gradually decreasing.
The Political Economy of International Trade
Governments intervene in markets by developing policies to guide business entities. In free markets, the government has minimal interventions because the demand and supply of products decide the prices of products and the nature of the business. It is, however, common for governments to intervene in business when the market is failing. The government may also intervene to influence the fair distribution of market share, and to boost the economy by introducing new taxes. The government protects domestic firms by developing policies that inhibit the entry of foreign companies in specific markets. The government may also choose to protect domestic firms through the development of licences that limit the business processes that a foreign company can perform. For instance, the Indian government protects domestic companies in the retail business by limiting foreign direct investment on the part of the foreign companies.
Government interventions on a political perspective are actualised to protect employment opportunities and to safeguard positive development in specific industries. For instance, governments must intervene to ensure different industries are not flooded with imported products, whereas the same products are produced locally. The government may also intervene if the nation has political issues with a respective country. It may also intervene to protect consumers from being supplied with low standard products from foreign nations. The most common economic reason for government intervention is to protect domestic firms from the stiff competition associated with multinational companies. The government may also intervene to execute a strategic trade policy to boost economic growth (Lombardo, 2015).
Government interventions in India are all too common because it is an emerging market. Many foreign companies have developed an interest in investing in the nation, and the government has been forced to develop policies to protect the local firms. The main reason for choosing India as a target market is because its market is quite free for investment for international companies. The Indian government has developed incentives to attract more multinational companies to help build the economy. The firm should export ready-to-assemble steel products to the nation to meet the growing demand for quality products. The exports should target the construction industry in India.
Multinational companies are subjected to different political and economic systems in their host nations. There are several political systems, which are described by the mode of governance in the respective nations. These systems include democracy, republics, monarchy, dictatorship, and communism. Democracy is the best political system for business because it grants freedom to companies to control the market, whereas dictatorship is the worst political system for business. Nations apply different types of economic systems to foster economic growth. Traditional economic systems are shaped by the trading practices in a society. In a command system of economy, the government has the power to determine the dynamics of the economy. Market economic systems are controlled by individual entities, and mixed economic systems combine the elements of the market and command economic systems (Anyanwu, 2012).
India is a democratic republic with a mixed economy. The interplay between government regulations and the influence of individuals and companies makes the Indian market viable for foreign investors; hence, the market has been chosen for the importation of steel products.
The Strategy of International Business
Value is created by ensuring the customers are provided with quality products and making deliveries on time. The enhancement of credibility on the part of a business entity adds value to the products it sells. Building confidence among the consumers also creates value. In the modern business world, the use of technology is also a tool for creating value (Magloff, 2015). Technology has made it easier for consumers to retrieve information on products and to purchase them. Value is created for steel products by using technology to design complex parts of construction projects. Technology has also enabled the development of e-commerce in the business. The firm has also focused on perfecting its core competencies through innovative approaches in the production of steel and its products.
One of Emirates Steel’s core competencies is the ability to maintain low prices on the quality products it sells. This has been enabled by the development of an effective supply management strategy. The company contracts various suppliers to deliver raw materials at the lowest costs possible. High-quality products are also one of the core competencies of the company. Despite offering most of the products at low prices, Emirates Steel emphasises on providing its customers with quality products.
Economies of scale is a beneficial concept for Emirates Steel. The production of a single unit of a given product is always quite expensive; hence, the company has developed a supply chain strategy that facilitates the production of items in bulk. This strategy lowers the cost of producing a single unit significantly, and this enables the company to place competitive prices on the products (Killing, 2012). The company also benefits from the implications of the experience curve on the part of its supply chain. Contracting the same suppliers has led to the production of more units within a shorter period, and this satisfies the increasing demand for steel and its associated products. Location economies are also beneficial for Emirates Steel. The firm reduces the cost of production by contracting supplying companies from other parts of the world where raw materials and labour are cheaper.
The pressure of cost reduction entails the challenges associated with the provision of products at standardised and competitive prices. Companies experience stiff competition in various markets, and they are compelled to lower their prices and add value to their products. Supply chain management is one of the strategies that can alleviate this pressure for international companies. The pressure of local responsiveness entails the challenges that foreign companies face when trying to blend into a host market (Pressures for cost reduction and local responsiveness, 2015). These challenges may include differences in tastes and preferences on the part of the target customers, demands from the host government, and infrastructure challenges. Emirates Steel is likely to face the pressure of local responsiveness in India. The demands of the Indian government are quite inhibiting in terms of business incentives for foreign companies in the construction industry.
The firm should look into enhancing its core competencies by securing cheaper supply chains. This will enable the company to provide consumers in the Indian market with affordable products. It is essential for Emirates Steel to continue providing its customers with affordable, high-quality products. The company also needs to negotiating with the Indian government to get access to a direct investment licence.
The Organisation of International Business and Differences in Culture
Institutions and organisations with centralised organisational structures have one individual making the important decisions. The selected individual has the power to influence the focus of the company, and his or her decisions are not challenged by the members of the organisation. This structure means that the leader is responsible for determining the nature of the business processes to be assumed by the entire organisation. Decentralised organisational structures, on the other hand, distribute power to many individuals. The individuals must develop a team approach in handling the responsibility of decision-making. It is, therefore, vivid that the main difference between centralised and decentralised organisational structure is the number of individuals involved in decision-making. The individual-based decision-making strategy in a centralised structure is substituted with team-based approaches (Bartlett & Ghoshal, 2000).
A centralised organisational culture has many advantages. It fosters the development of a vision for the organisation through the leader. The leader has the power to influence the focus of the organisation; hence, he or she can compel the members of the organisation to work toward achieving specific objectives without their resistance. A centralised structure also facilitates fast execution of decisions in an organisation because the decision is made by one individual. The structure also reduces the number of conflicts in an organisation because there is only one individual in power (Bartlett & Ghoshal, 2000). It also gives the controlling power to the leader; thus, he or she can effectively lead the company toward achieving the goals of the stakeholders. One of the disadvantages of using a centralised organisational structure is that power can be abused by the leader because he or she is not accountable to the members of the organisation. A decentralised structure is also associated with several advantages. A decentralised structure empowers the human assets in an organisation because they take part in decision-making. It also relieves the burden for the leaders and managers. There is efficiency in decision-making in a decentralised organisational culture. One of the disadvantages of a decentralised structure is that decision-making may take a long time. There are also many conflicts in such a structure.
The firm selected a centralised organisational structure because it embraces visionary leadership. The hierarchy of power in the firm provides accountability for the members, and the leader has the power to influence the focus of the company. The competence level of the leadership function in the organisation facilitates effective decision-making, and it has led to the tremendous growth recorded by the firm. The centralised organisational structure is also instrumental in fostering accountability on the part of the employees; hence, it is a source of motivation. The firm requires a centralised organisational structure for fast decision-making (Csaszar, 2012).
Cultural differences are one of the major issues facing multinational companies. The firm had to consider the cultural differences between the consumers in the UAE region and the Indian consumers. There are many cultural requirements that the company requires to meet in the host market, but there is a strategy in place to solve the problem. The strategy entails outsourcing labour from the host nation. The top leadership and management functions will be manned by experts expatriates, but other positions will be reserved for experts in India. This will facilitate an easier blending process into the market for the organisation. The leaders and managers will also be taken through training and development programs to acquaint them with the business ethics associated with the Indian society.
Entry Strategy and Strategic Alliances
Before entering a foreign market, its viability with reference to the products produced by a given firm, should be evaluated. The firm chose to invest in the Indian market because its conditions are favourable. Foreign markets are favourable when investment risks in the host nations are minimal, and this occurs when the interplay between the business environment is receptive. The business environment in a foreign market is determined by the social, economic, and political conditions of a nation. Economic factors include the growth potential for companies, demand for commodities, competitive rates, and general stability in the macroeconomic status of the economy. Social factors include the responsiveness of the consumers, requirements on sustainability, and the purchasing power of the target market. Political issues include government policies on foreign investors and the stability of the nation. When the economic, social, and political factors are negative, the market becomes undesirable to foreign investors (Factors influencing foreign investment decisions, 2015).
Foreign investors can enter a market early or later depending on the viability of the market at the respective times. Companies should enter foreign markets with ample knowledge about their business industry. This strategy enables the organisations to calculate their risks when entering a market. The environmental conditions of a nation should be considered before entry. If the environmental conditions for business are conducive, the company should enter the market. If the environment is not conducive, companies should wait for the market to stabilise to eliminate the risk of acquiring losses at start-up. Companies may also enter a market first to gain the first-mover advantage (Ripolles, Blesa & Monferrer, 2012). This strategy gives a competitive advantage to the first companies in a given industry. Entering a market first may translate to a company being the first to fail; hence, sometimes it is important to wait till later to enter a market. If a company has limited knowledge about the dynamics of a business industry in a foreign market, it should investigate the same before entering the market.
The Indian market will be entered on a small-scale basis. There are advantages and disadvantages associated with entering a foreign market on large or small scale. Entering on a small scale minimises the risks of incurring heavy losses if the market does not respond positively. Investing on a small scale basis means that an organisation does not allocate large amounts of money to the business. It helps in testing the potential of the market. However, entering on a small scale may give the consumers the implication that the associated company is not in the market to stay, and this could result in a negative response. Entering a foreign market on a large scale is beneficial because it harnesses a larger market share, and it gives an implication that the organisation is in the market to stay. This strategy can attract heavy losses if the demand for the products involved is not high (Ripolles, Blesa & Monferrer, 2012).
Some of the factors that affect the entry of a foreign market include the market growth, government regulations, business risks, and the level of competition (Ripolles, Blesa & Monferrer, 2012). Companies can enter markets through partnerships or direct investment. The firm in question has chosen to enter the market through a partnering retailer because government regulations in India have made it quite difficult for direct investments, although negotiations are underway for the same. A strategic alliance is a partnership developed between two companies to enhance their chances of success in a market. The partnering companies enhance each other’s chances of survival in a competitive market. The firm will work with foreign business partners to introduce ready-to-assemble steel products before it can establish its stores in the nation. Working with strategic partners will help in adding value to the products, and the partners will help the firm in acquiring a profitable market share.
Global Production, Outsourcing and Logistics
The production unit for the company will be in the developing nations where there are sufficient raw materials to produce the end product. The company will contract global suppliers with the most affordable prices for their products. The company will manufacture the ready-to-assemble steel products and import them to India, but it will negotiate with the Indian government to develop a manufacturing unit in the market. If the company develops a manufacturing unit in India, it will export steel directly from its suppliers to India, where it will be processed into various products. The company will outsource labour in its business entities in India. The labour force will be entirely made of qualified Indian locals to ensure the company blends into their culture smoothly. The factor considered while deciding the location of the production units is the cost of production (Christopher, 2012). The firm will need to find ways to reduce the production cost. This strategy ensures that the company remains competitive on the basis of prices for the quality products. Eliminating unnecessary costs in manufacturing also reduces the cost of production.
The company is committed to apply innovation to the manufacturing process. This process would be quite costly for the company because it operates from the UAE, where there is a scarcity of the raw materials required to produce ready-to-assemble steel products. It would be very expensive to import steel from different international sources to Dubai, then to India. It would also be very costly to build the required infrastructure to facilitate the manufacturing of steel products. The cost would be even higher when the cost of labour is considered. Dubai is one of the most developed regions in the UAE, and the cost of labour is extremely high. The company will, therefore, enter into supply contracts with independent foreign companies that have access to raw materials. The companies will supply steel to India if Emirates Steel is granted the licensure for operation in the nation.
Logistics in global trade is an important process for the international companies because it influences their efficiency in reducing costs while increasing profits. Logistics in global trade entail the process of decision-making to determine where to purchase supplies, where to position the manufacturing units, transportation, and where to sell the finished products. The cost of logistics is an important factor in propagating competitiveness for international companies (Leunig, Minns & Weinhold, 2009).
The cheaper the logistics, the more competitive a company becomes because it can offer its products at lower prices than the rival companies. Technology is also an important element in the global trade. Technology enhances the quality of products, and it also helps in increasing the quality of the finished products. Technology is also instrumental in the increment of the quantity of products that a company produces on a daily basis. As the demand of a product increases, technology enhances the capability of the company to satisfy the demand. Technology also enhances communication channels between the company and the suppliers and the consumers. For instance, technological growth has enabled companies to develop interactive websites and online stores. The internet has also facilitated the development of social media platforms, which are essential for marketing purposes. Technology has facilitated the reduction of the financial liabilities associated with the traditional marketing avenues.
Global Marketing and R&D
The attributes of a product include the physical appearance of the raw materials and the finished products, size, and colour, among many other factors. The attributes of a product influence the marketing strategy used to sell it. The marketer must provide the target market with the most appealing attributes of the product. The attributes must be delivered in a manner that persuades the potential consumers to purchase the products. For instance, the firm markets ready-to-assemble steel with different attributes. While marketing these products, the consumers have to be provided with this information. The firm has to give the relevant attributes of the products to appeal to the customers (De Mooji, 2013).
The firm focuses on psychographic and behavioural segmentation. Steel products sale requires the company to identify its target market in the host nation. Steel is purchased on the basis of taste and preferences of the consumers. Psychographic segmentation entails targeting consumers on the basis of their lifestyles. The firm produces affordable products that target the construction industry. The company also produces custom-made products for construction companies and individual developers. There are customers who believe that steel-based construction is the best, and the company has ensured it satisfies their needs. The firm is also keen to target the market on the basis of the behaviour of the consumers (De Mooji, 2013). There are customers that require to physically visit the firm, and there are some who prefer online shopping. The firm provides both types of shopping avenues. The company will incorporate an electronic distribution system to monitor the provision of products from the suppliers to the consumers. The products will be delivered directly from the suppliers to the business units. Customers can access the products directly from the stores or purchase them online and wait for deliveries.
The firm will use electronic communication systems. The marketing strategy of choice is the use of social media as the primary marketing channel. The company has an interactive website with an online store where customers can purchase different products. The firm will also invest in traditional marketing channels like radio, television, and magazine adverts. The company had to consider language barriers of communication in the international markets. The firm will use standardised marketing to appeal to a diverse market in the international market (De Mooji, 2013). Since the firm is targeting two market segments in the foreign market, it will use the competitive and high-end pricing for the respective market segments. The company will focus on standardisation to ensure the products it offers are aligned with international standards in terms of quality and price. New product development helps in differentiating products from the competitors, and it can be actualised through innovation and listening to the demands of the customers.
Global Human Resource Management as Well as Accounting and Finance in International Business
The process of human resource management in the firm will entail the development of an organisational culture that will accommodate a diverse human asset base. The company intends to use expatriates in India, and a large number of employees from the host nation. This means that the firm will have to embrace cultural diversity and familiarise with the social requirements of the people in the target market. The firm will provide training and development programs for the human resources to enhance their skills in developing interpersonal relationships. This will increase the efficiency of team play in the firm. The management of the human resources will involve the development of a learning organisation, whereby the employees will be compelled to help one another to grasp the ideas on multicultural work settings. The company will assume espoused values that will enforce the required codes of conduct on the part of the employees (Price, 2011).
Foreign markets require companies to be actively involved in meeting the requirements of the people. Cultural barriers pose business risks for companies; hence, they have to investigate the needs of the people, with reference to business processes. The firm has to understand the behaviours associated with business etiquette in India, and it needs to ensure the entire human resource base is acquainted with this information. The human resource management function will ensure that inter-employee conflicts are limited. It will also be essential for the human resource management function to ensure the human assets are competent in dealing with customers from different cultural backgrounds (Price, 2011). The presence of business risks has a negative effect on investments. When there are too many risks in a business industry, investors exit from the market. Risks influence companies to withhold their resources. The firm in question faces the risk of competition from local companies in India.
Conclusion
The Indian market is one of the most lucrative emerging markets in the modern world. While the developed markets have reached a point of saturation in business, emerging markets are providing multinational companies with feasible market zones for their products. Emirates Steel is one of the leading steel companies in the UAE, and it should look into exporting some of its products in India. India has a high demand for ready-to-assemble steel products, and the firm should take the opportunity to supply the same before other international companies flood the market. The company will export standard-price products, as well as high-end products.
The company will enter the foreign market through strategic partnerships with retailers that have already established business entities in India. Negotiations will be executed to acquire licensure for direct investments. The company will source labour from India, and it will contract international suppliers to deliver processed steel. The firm will manufacture products directly and employ mechanisms to reduce the cost of logistics. This will enable the company to offer its products at competitive prices within the target market. The company will implement this strategy by developing a business plan that encapsulates the logistics, human resource management, and strategic partnering with the companies in the target market.
References
Anyanwu, J. C. (2012). Why Does Foreign Direct Investment Go Where It Goes?: New Evidence From African Countries. Annals of Economics and Finance, 13(2), 425-462.
Bartlett, C. A., & Ghoshal, S. (2000). Transnational management (Vol. 4). New York: McGraw Hill.
Christopher, M. (2012). Logistics and supply chain management. London: Pearson UK.
Csaszar, F. A. (2012). Organizational structure as a determinant of performance: Evidence from mutual funds. Strategic Management Journal,33(6), 611-632.
De Mooij, M. (2013). Global marketing and advertising: Understanding cultural paradoxes. California: Sage Publications.
Factors influencing foreign investment decisions. (2015). Web.
Killing, P. (2012). Strategies for Joint Venture Success (RLE International Business) (Vol. 22). London: Routledge.
Leunig, T., Minns, C., & Weinhold, D. (2009). International trade, express logistics and globalization: part and parcel of the solution to current economic problems. Web.
Lombardo, J. (2015). International Trade Policy & Strategic Trade Policies. Web.
Magloff, L. (2015). How to create business value. Web.
Pressures for cost reduction and local responsiveness. (2015). Web.
Price, A. (2011). Human resource management. Boston: Cengage Learning.
Ripolles, M., Blesa, A., & Monferrer, D. (2012). Factors enhancing the choice of higher resource commitment entry modes in international new ventures. International business review, 21(4), 648-666.
What we do. (2015). Web.