Challenges of International Business-Free-Samples for Students

Question: Discuss about the Challenges of international business. Answer: Introduction With increasing connectivity and rise of globalization across the world it is increasingly becoming important for firms working at the international level to cope up with management of resources and catering to customer servicing standards all over the world. It is basically the framework and system in place that is responsible for handling smooth functioning of all the branches of the company situated in different parts of the world (Twarowska and K?kol 2013). The presence of adequate operational framework and structure is important for catering to the diversified and changing demands of customers and worldwide operations. However, most companies have been forced to shut down or incur huge losses because of the widespread complexity and contradiction involved in the demands of international clients (Cattaneo et al. 2013.). The IKEA group is one of the oldest Dutch based multinational firms that manufacture products in the field of household accessories. Its products primarily includ e furniture, kitchen and other home appliances. Since 2008, it has been recorded to be one of the highest retailers of furniture over the world. The innovation in its designs and the depth of knowledge that they possess has made it easier for them to function smoothly and efficiently internationally (Beule, Elia and Piscitello 2014). The firm tries to invest for the long run scenario by investing its own resources from the revenue it generates. The principles it uses to cater to the demands of its international customers are worth exploring and implementing. In this project, the challenges involved with the international functioning of a firm are explored and analyzed. IKEAs journey and structure involved in the management of overseas functioning is also studied specifically. Project Objective: This project aims at taking a look into the various challenges that firms are increasingly facing while managing operations at a worldwide level. The major objectives of the firm are enlisted as follows: The challenges that IKEA has faced in the past few years or is still facing in the context of overseas operations management Identifying the strategies used to deal with the limitations found and overcome the problem Recommending necessary changes in the structure in place and the management structure to avoid such problems or to deal with new challenges based out of this context Project Scope: The scope of the project lies in the ability to assess the challenges and the circumstances the multinational firms face while operating overseas and implying the same on the functioning of IKEA and tracing the opportunities lying under the challenges faced by this firm. As IKEA is a leading world manufacturer, it is very important to know the challenges it faces and the measures i9t takes to address the same problems ((Moran, Abramson and Moran 2014). With growing globalization, diversifying and reaching out to a larger cohort of customers is increasingly becoming important for firms to exist in the middle of the competition posed by new entrants and ever changing demand patterns. Researches claim that the low cost models of business and the minimization of risk patterns followed by this firm have been immensely copied and used by rivals to generate higher revenues and incomes, however most of these firms have remained within local and domestic markets, where as this firm has broken all geographical boundaries and combated overseas functional problems to cater to the disruptive demands of its customers. There are various aspects that govern the smooth functioning of transnational operations apart from the appropriate management operations. One such aspect is the role of human resources department in analyzing roles and positions of employees specific to different countries and hiring employees with enough efficiency and capability for the job. Numerous organizations find it extremely difficult to take up the risk of expanding operations abroad and failing because of the lack of appropriate talent. Technology and cultures of different countries also govern the functioning of those firms abroad. Apart from these factors climatic factors, political factors as well as energy security issues also play a meticulous role in forming challenges to overseas operations of different firms. Thus, the scope of this project is to assess the challenges of IKEA based on these tangents and also recommend possible solutions to the managing and overcoming of the same array of problems highlighted. The major challenges faced by IKEA in expanding to Asian countries involved reaching out to people through branding, implementation of different marketing strategies and techniques to reach out to people, changing the pricing structure of its products to include the demands of the changed cohort of people and positioning of the firm. India happens to be the most challenging market for this firm. The sizing of the products formed the biggest challenge for the company in China. It became very difficult for the firm to carry put extensive market research and cater to the specialized demands of the population residing in China. The challenges faced in Russia however were very different from these and lied in the context of corruption. The stringent laws in place have also played a very important role in posing challenges to the firm. The firm has undertaken strenuous and rigorous methods to pertain to the customer demands and changing scenario of the trends and patterns in different coun tries across the globe. From undergoing makeovers in the design of furniture to sitting with customers and knowing their preferences, this firm has done it all. Literature Review: The methods and policies involving the working of international operations and addressing challenges based on those operations have changed over time. Earlier only one direction and one method was implied for catering to the changing needs and demands of people which included efficiency and responsiveness (Binder 2016). However, now disruptive learning has become very important in the context of both staying in the industry and managing overseas operations for multinational firms. This is so because most of these firms are continuously exposed to a state of transition. To adapt to these changes, most organizations are adopting efficiency and operations related integration and coordination. It is very important for them to introduce technological platforms which are flexible and differentiated in the problem solving capacities and approaches. Initially efficiency based and nationally implied strategies are used to experiment with challenges within the nation which if proven successful are implied internationally (Cuervo?Cazurra 2012). The capability and strength of a firm in extending and transferring knowledge and experience from one department to the other or from one country to the other in turn serve as basis for long term functioning without having to battle many limitations and loopholes in overseas functioning. However, because of the increase in the complexity of international environmental demands, the firms are still exposed to the scenario of undergoing losses or even being shut down completely as mentioned earlier. According to Deresky (2017), many firms are always exposed to the dichotomy of the situation of division of authority of power. In other words, most firms face the dilemma of deciding whether to centralize the power to one branch or to allow the different branches to perform independently under their own authority according to the challenges and situations faced in that country or location. Firms also face the dilemma of producing customized products at the international level while catering to the specific needs of customers depending upon the location or the demographics of the country that they reside in. Studies also suggest that a worldwide linkage between the various managers of various operational units is not only necessary but also very important (Binder 2016). This helps in exposure to a wider cohort of problems and prevents other units from facing challenges that one or more units have already faced. However, for firms that have worked and functioned on the basis of one si ngle administrative unit and structure, it is difficult to introduce administrative collaboration and cooperation among its members as it requires a whole new approach and structure to incorporate the change. It is also important for firms to maintain a strong linkage between the production and manufacturing units and logistics and export departments. Whether a product is to be produced at one centralized unit or at different regional units is also for the managers of the firm to decide with experience and knowledge. The financial working of different firms is also different in different in different countries and this also leads to a significant operations and management gap in the working of firms internationally. Some studies suggest that the handling of international relations and operations is specific to the country where the headquarters of the firm is situated and also on the location of the other firms and the proximity of those firms to the headquarters (Yang 2012). Culture of the countries where a firm operates is also integral in the forming of policies and initiating changes in the management structure (Moran, Abramson and Moran 2014). For example, often in Japan the management of a firm by a non Japanese employee is perceived to be a skeptical idea. This resistance is hard to be overcome for most firms across the world. Other studies claim that the workings and the structure in place of the already acquired firms in different countries also determines how the challenges faced are addressed in that particular country. In fact, acquisitions and mergers make it easier for the host firm to handle overseas demand and solve international challenges as the firms acquired are already expos ed to handling customer demands specific to those countries and overcoming such challenges. Acquiring firms has been proven to be a strategy that also helps in increasing the total market share of firms have expanded internationally. This is so because there are minimized risks due to the already existing set of solutions, infrastructure and faster knowledge gaining. Past researches also assert that the roles of women as managers in handling overseas operations have been positive and reassuring. Increased number of women have been promoted to managerial positions that are held abroad or across a number of unites operating abroad (Barrientos 2013). The number of firms performing this activity is increasing every year and the numbers are even expected to rise further. It has been reported that women find it easier to deal with transnational cultures and varying forms of organizational structures which are followed in different countries. The most important benefit in terms of this context is most countries value women from foreign countries while limiting the scope and functional capacities of local women. It has been reported in these studies that it is easier to use the potentiality women to full extent as compared to men as women are reported to perform tasks and achieve goals set in a differentiated manner for men and women. Researches have also mentioned the importance of the role of entrepreneurial education and knowledge for the founders of the firm that operates internationally or at the overseas level. Extensive knowledge is a crucial factor that governs the workings and the very foundation of the firm (Fletcher and Harris 2012). Knowledge acquisition for the internationalization of the smaller firm: Content and sources. Without the expertise and knowledge most firms are unable to make proper business decisions and build business models that are of a changing nature that caters to the changing demands of customers and trends in the technology used by multinational firms all over the world. There are a number of methodological and theoretical streams that govern the establishment and working of a firm of which the most appropriate ones are to be chosen by the founders and the entrepreneurs. A comparison of national cultures through rigorous research is also important before the penetration of a compa ny into other sectors or countries (Ruggie 2017). This is so because such a study helps to understand the challenges a prior and helps in specializing and customizing products based on the preferences of the clients residing in the foreign country. Many researches claim that the faster an innovative and creative firm extends its functional limits and penetrates into other countries, the lesser are the number of barriers faced and the higher are the chances of thriving in the international arena. The learning advantages of the newer firms and entrepreneurs are also much larger as compared to firms that have been functioning for ages and are now too reluctant to introduce any new changes. Another tangent of complexity involved in the international functioning of most firms is the difference in the educational and employment levels o0f the working force (especially the youth) in different countries of the world. There is a widespread difference in the skills acquired and employment levels of youth in the developed and developing countries (Vaiman, Scullion and Collings 2012). Market efficiencies and strategic asset diversification becomes difficult because of these differences. Human resource analytics are being increasingly employed to address the concern of employing the perfect fit of population for a particular job role. The differences in the educational and skill acquirement pattern causes ambiguity in decision making for the hirers of multinational firms. Such decisions also require incorporating strategies like cross border engagement of employees, providing extensive training and international workshops to the hired employees. Promoting extensive knowledge and training programs for executives and managers that are moving to a foreign country is also to be developed and taken care of by the human resources department of a firm. This method has been proven to be the best method for filling the intercultural and skill gaps of the workers across different nations. In this context, the maintaining of corporate social responsibility also becomes important for overcoming the road blocks that are created by social and societal differences (Vance and Paik 2014). It has been asserted by previous studies there are certain values like command control mechanisms that be changed according to the local or regional patterns and then there are other factors like human rights policies and integrity and in built cultural values that cannot be modified or changed according to the values of the firm. Just like the difference in talent and skills of different demographical populations across the world, there also exists an immense gap in the technology and innovation used by firms to cater to the needs of varied customer bases across different parts of the world (Ruggie 2017). The better the technological expertise of the host firm, the easier it is for it to expand to regions with lower levels of technological infrastructure. This is so because implementation of those techniques in a new place only improves the market ranking of the firma and increases its value to the customers (Davis, Kingsbury and Merry 2012). However, when a firm operating in a developing country with lower levels of technology tries to expand to a country where the technological expertise is too advanced, it finds it very difficult to cope up to the existing technological trends in that country. The increased convergence of cultures through expansion of business only means that more robots are being put to u se and this is leading to simplification of jobs and automation leading to lowering of the number of jobs and job creation. Some other studies posit that international movements of firms and functioning across transnational challenges cause the firms to increase their tenacity of handling disruptive situations and handling complex problems (Cavusgil and Knight 2015). With expansion of international functioning limitations firms increase their capability upgrading criteria which is essential for evolution and creation of new bundles or cohorts of resources. To undergo sustained and stable success the evolution and accumulation of new assets is very crucial. Transnational expansion also helps firms to gain competitive and comparative advantage that helps firms to exploit opportunities with the help of implicit strategies. Another important aspect of expanding to other countries is the aspect of capacity deployment that helps firms to formulate structures for combating the various disadvantages of operating in a new environment. All these factors together help in bringing about globalization and integration of business values. Conclusion: To conclude it can be summed up that in todays world of fast moving technology and reducing gaps of culture and fast advancements in technology, the world is getting integrated in the sector of business as well as other ideas and innovations. As firms try to capture the global market and bring about changes in the customer servicing and profit making techniques, it faces a new array of challenges regularly which are addressed by the managerial level of employees. IKEA is a firm that is leading the global market through its extensive use of disruptive business models and cost minimization techniques. This project aims to bring to light the challenges it faces at the international level and the processes it applies to solve the same problems. References: Barrientos, S.W., 2013. Labour chains: Analysing the role of labour contractors in global production networks.The Journal of Development Studies,49(8), pp.1058-1071. 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