Introduction
Internationalization and outsourcing refers to the elements of interest in global aspects with contextual respect to business. With the spread of globalization theory, institutions have sought to obtain their resources as well as sell their products in a global perspective.
International trade and outsourcing of an organization’s resources have therefore become fundamental of large as well as medium companies. This paper seeks to discuss challenges facing Coglin clothing company in relation to internationalization and outsourcing. The paper will explore external environmental conditions of Coglin clothing.
Case study
Coglin is a clothing design and manufacturing company in Australia. The firm has been in existence for twelve years and under one chief executive officer. The company has experienced a considerable level of growth though it is currently faced with a number of threats.
Its recent growth has led to changes such as increased level of recruited staff and expenditure on management. The company is also facing increased competition from the global market following the government’s move to liberalize the local market to international trade.
The company is thus faced with the task of copping with the external environment in order to handle its current and future contracts (Case Study, n.d., p. 1).
External Environment facing Coglin Clothing
External environment facing an organization refers to forces that emanates from outside the organization which has the capacity to affect the operations of the particular organization. Factors such as competition facing an organization as well as issues that pertains to regulations and natural factors therefore constitute an organizational environment.
The environment with respect to Coglin Company can be viewed from two perspectives: “task environment and general environment” (Wadolell et al., 2007, p. 83). Task environment refers to the organization’s immediate factors such as its “suppliers, distributers, customers and competitors” (Wadolell et al., 2007, p. 83).
These factors are immediate in the sense that they face the organization in every aspect of its operations. The other category of environment, general environment, consists of widely extensive factors that include “economic, technological, sociacultural, demographic, political and legal, and global forces that affects the organization” (Wadolell et al., 2007, p. 83).
Suppliers to an organization are the parties that make the organizations provisions for resources. Such parties are occasionally subject to variations with respect to elements such as “nature, number and type” (Wadolell et al., 2007, p. 83).
The organization’s suppliers can for example change their structures and terms or relation with their contracting partners such as coglin or their number could change due to closures or entry of more firms in the supplier market.
Any change with respect to the organization’s suppliers will call for adjustments by Coglin’s managers in order to maintain the company’s desired and planned operations. This is because any of such changes will either have an advantage or a disadvantage to the organization calling for a move to either capitalize on cases of opportunities or to counter any form of threat.
A reduction in number of suppliers is, for example, associated with a stronger bargaining power by the remaining parties over the company. Coglin might therefore be forced to endure dictated terms from suppliers if the number reduces to levels that can have monopolistic or oligopolistic influences.
An increase in the number of suppliers on the other hand gives more power to the company through its increased options in seeking supplies. Competition among the suppliers will also lead to moderated terms which will be advantageous to Coglin.
Similarly, distributers have a significant level of impact in a producer company such as Coglin. As a link between the company and its customers, the effectiveness of the relationship between the company and distributers will be reflected in its level of sales.
A reduced number of distributers will have a negative impact on the company in terms of more bargaining power by the remaining distributers together with a threat of reduces consumer servicers in cases where the number of distributers cannot reach all customers.
The company may therefore suffer from reduced sales. An increased number of distributers will on the other hand give more advantage to the company with respect to relatively increased power by the company over the distributers and subsequent customer coverage (Wadolell et al., 2007, p. 87). Customers refer to the parties that purchase products from an organization.
Being a clothing design and manufacturing industry, Coglin’s customers include “individuals, small companies, large companies, government agencies and educational institutions” (Wadolell et al., 2007, p. 83) that might be interested in the company’s textile products for final use in houses and office premises.
The products from the company can be used by these parties for clothes or furnishings. Changes with respect to consumers also affect the decisions made by management of the company. Unlike suppliers and distributers, customers exhibit a wide variety of changes that can include fashion, taste, and income, complimentary and supplementary products among others.
The changes in consumers will also be realized in either an advantageous or a disadvantageous perspective. Competitors also shape the direction of the organization’s decision making in terms of moves to gain or maintain market control (Wadolell et al., 2007, p. 88).
The general environment surrounding Coglin Company is on the other hand diverse in nature and is mostly out of control of the company’s management. Coglin is therefore in response forced to adopt decisions that will align the company to its best advantage following the environmental conditions.
Being a profit oriented organization; the company is highly affected by economic factors in its surrounding. Elements such as “interest rates, inflation, changes in disposable income, share market fluctuation and the general business cycle” are some of the economic factors that affect the company (Robbins et al., 2009, p. 86).
The economy with respect to individual customers is for example directly associated with the level of demand for products in any market. Economic factors such as reduced incomes or increased unemployment rates therefore cause negative effects on the company’s capacity to generate revenues.
This is because such changes causes customers to either reduce or suspend expenditures on non basic commodities in which category, clothing may fall. This effect is also felt with respect to institutions that will be forced to control their expenditures and concentrate on necessities.
Inflation which affects elements of the company such as the prices of its resources also has direct impacts on its management. When the economy realizes inflation prices of resources shoots up raising production costs of the company’s commodities.
Consequently, the management is forced into the dilemma of whether or not the increased costs should be transferred to customers in the form of increased product cost. More complications are realized in cases where production costs in external markets are not affected by inflation and cheaper products are availed through importation (Robbins et al., 2009, p. 86).
Political and legal requirements in a business set up also drives the operations of organizations in their territories. Political stability, for instance, has both direct and indirect impacts on the operations of organizations.
Political instability induces negative impacts on environmental factors such as security, economy and even investor confidence. Instances of politically instigated violence can, for example, disrupt production processes and even distribution of finished products due to curtailed movements of employees, distributors and even customers to Coglin.
Compromised investor confidence due to political instability can also lead to reduced levels of productions in order to avoid loses due to economic instability. Legal issues also significantly affect the organization.
Laws that cover elements such as: “practices regulations, environmental protection laws, anti discrimination policies and industrial relation legislations” (Robbins et al., 2009, p. 86), play a direct role in shaping management decisions making.
Every decision by the management that relates to sourcing of raw materials, recruitment and management of human resource, production processes and relations with other parties are conducted in line with constitutional requirements and bi-laws.
Regulations such as antidiscrimination laws and rights of employees significantly affect decisions with respect to actions against employees who might not be performing or behaving to the expectation of the organization.
Managements may be forced to compromise on the company’s principles and objectives just to avoid legal actions that can be instituted by certain disciplinary actions are taken against employees. Social and cultural factors such as “crime, violence, religion and spiritual activities and lifestyles” (Robbins et al., 2009, p. 86) also affect the organization.
The products of the firm are directly related to religious and traditional believes that are evident on people’s clothing. Lifestyles and fashion in dressing codes and premises’ furniture and decorations are also directly related to the organizations products.
Coglin’s management is therefore obliged to yield to pressure as caused by these factors and align the company accordingly (Robbins et al., 2009, p. 87).
International aspects
The company’s operations especially with respect to international trade are also dependent on forces in foreign countries that affect business transactions. One of the forces in international trade is the fluctuation of currencies of the countries which the trading parties come from.
When the Australian currency rises against currency of an importing country, Coglin experiences a disadvantage with respect to global competitiveness.
This will negatively affect and even limit the company from exploring foreign markets. A fall in value of the domestic currency relative to foreign currencies on the other hand favors the company with respect to international trade.
The economic stability of Australia which categorizes it under developed countries also influences its impact in the international market following the recognized flow of goods from developed countries to developing countries (Bartol et al., 2009, pp. 65, 519).
International business refers to the trade activities that are conducted between countries. With the emergence of globalization, international trade has been realizing a growing trend in terms of the amount of commodities that are moved across boarders in terms of trade.
Data revealing the trend in volume of international trade from the year 1995 to 2004 indicates a general increase in the volume of trade especially after the year 2001. The percentage increment in volume of international trade has also been significantly increasing (IFCBA, n.d., p. 2).
Administrative measures of exploring international markets, identifying and capitalizing on factors such as “mergers and acquisition” are some of the steps to internationalization of business (IFCBA, n.d., p. 7).
A company’s involvement in international trade however enlists more responsibility with respect to managing “delivery of goods and money, bureaucratic hick ups and distance and travel time” (Sercu P., n.d., p. 8).
Factors that would impact Coglin in Vietnam and Thailand
External environmental factors in Vietnam such as cheaper labor and cost of locating a business enterprise, “intellectual property threat” and poor infrastructure contributes to task environmental factors.
Consideration of factors such threat to intellectual property and poor infrastructure in Vietnam can overweigh factors such cheap labor to influence investors away from the country (Nieuwoudt, 2010, p. 1).
The market in Thailand which has a wide advantage with respect to general environment such as government policies is on the contrary not favorable with respect to task environmental factors. The Thailand textile market is also already saturated with both export and import activities that might not make it very attractive for new investments (Report, 2010, p. 1).
Control measures to challenge in Vietnam and Thailand
The challenges in Vietnam and Thailand include both general and task environmental forces that include factors driven by government policies and market forces for resources and finished products.
A firm in these locations will therefore enact decisions to capitalize on the advantages that are offered by market forces such as cheap labor and market liberalization effects as well as adopting policies that are in line with the country’s legislations (Nieuwoudt, 2010, 1).
References
Bartol et al., (2009). Management. Sydney: McGraw Hill.
IFCBA. New trends in international trade, emerging business models, and the needs of small and medium-sized businesses in preparing the Framework of Standards to Secure and Facilitate Global Trade. Web.
Nieuwoudt, T., (2010). Vietnam’s textile industry: Opportunities and challenges. Web.
Report., (2010). Prospects for the textile and clothing industry in Thailand. Web.
Robbins et al., (2009). Management. Sydney: Prentice Hall.
Sercu, P., Managing credit risk in international trade. Web.
Wadolell et al., (2007). Contemporary management. Sydney: McGraw Hill.