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Technology and internet has led to huge interconnectivity in the world of business. Additionally, the business arena is awash with cutthroat competition because of interconnectivity and the emergence of developing nations. This means that consumers have the ultimate power in influencing decision-making in companies.
Therefore, many businesses are looking for viable options to increase market relevance and to bolster their profitability. It is also crucial to note the ever-increasing accessibility to information. International trade has been growing upon this bedrock. This paper analyses two recent articles that touch on important concepts in international trade.
These concepts include globalization, national economy, and political decision-making, the influence of culture on international trade, and the ethics surrounding the conduct of business internationally. While it is crucial to look for ways to cut down on costs to increase shareholder value by looking at cheap options, it is also crucial to consider the stakeholders involved. This is the decision that Telestra Sensis, a directories company based in Australia, is grappling with.
The company wants to outsource and restructure its directories business to cut costs. On the other hand, Qantas, an airline company based in Australia plans to increase its competitiveness through strategic partnerships with an international airline (Emirates, based in United Arab Emirates). The content of the articles will shed light on the nature and intrigues of international trade. The analysis will also include a discussion on the most relevant international trade theories found in the articles (Kay, 1993).
Implications for Australian Businesses- Domestic Firms
The partnership between Qantas, the Australian airline firm and Emirates, based in United Arab Emirates has the potential to have several implications on the domestic firms in the same industry in Australia. One of the preliminary moves is to go to boardrooms to assess the implications on a business from the competitors’ viewpoint and from the industry viewpoint.
The firms are likely to observe the growth of the deal and the results that Qantas is likely to register in the subsequent months to make a move. However, some may make that move even before the operations start after concluding that it will have a huge impact on their business.
However, considering the many routes that Qantas will now enjoy and the expected price reductions and ease of interconnectivity to other world destinations, the highly expected likelihood is a fall in profits of domestic firms. This may trigger a case where the firms look for similar deals internationally to compete favorably with Qantas. This will result in mergers in the airline industry and possible takeovers. It is also a highly probable scenario for many domestic firms to go under because of such deals (Financial Review, 2013).
The Telestra plan to outsource a huge chunk of its operations to a different country may not resonate well with the locals. It may also not be favorable in the eyes of the Australian government considering the comments of the prime minister in one of the radio stations. The locals will most likely refuse to buy products associated with the company and opt for other substitutes.
This may have even deeper consequences towards the operations of Telestra. The company will spend so much money on Public Relations to ensure their image remains intact. On the other hand, the government may refuse to grant the wishes of Telestra. This will save the 400 jobs the union staff members are crying for but will have ruined, albeit not so much, the image of Telestra. Hence, it will have to spend some money to mend it.
The question that Telestra is facing is highly ethical. It does not resonate well with locals that a company they have so dearly associated with may use such bad language while addressing the issue. Additionally, the operation that the company wants to improve on is quite logical.
However, when companies want to make such transitions, it crucial to do it a sensitive way. Domestic firms may have a leaf to pluck from this unfolding chapter in Telestra long history regarding ethics in handling internationalization and globalization in a technological world (Goncalves, 2013).
Just like domestic firms, international corporations’ resident in Australia and beyond will have a crucial lesson to learn. The corporations may have to revise some of their strategies. For example, reduction in prices may not auger well with them as they may be forced to cut down prices.
Additionally, the cost structure of Qantas will be highly adjusted considering improving purchasing economies of scale: all these points towards a bolstered competitiveness. Hence, globalization and international trade brings about better and improved services for clients and has the potential to bring about innovativeness (Johnson, Whittington & Scholes, 2011).
The Telestra planned outsourcing move has been tried internally with sometimes-unfavorable consequences. Hence, Telestra is not treading virgin grounds and the manner in which it is handling the issue may suggest as such. Outsourcing means that jobs are lost in the country in which it happens.
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A highly publicized case of outsourcing such as the one Telestra is facing ruins public image of the company and benefits the competitors. This is likely to play out in Australia. The resentment may have the potential to help other companies that have similar operations been outsourced by Telestra and beyond.
Implications for Australian Government
Following the Australian Competition and Consumer Commission approval of the Qantas-Emirates deal, it is logical to conclude that the government is confident that the deal has the best interests of citizens at heart. Qantas in trying to finalize the deal is trying to remain relevant in the international airline market by forming an alliance it deems fit to increase shareholder value and entrench the interest of its customers.
The government will also be a beneficiary of a stable firm, as it will continue to receive tax benefits. However, the government’s most important interest in the deal is to protect the interests on its citizens. Additionally, the commission mandated with this has the noble importance of safeguarding the internally sanctioned principles of fair competition.
Hence, it acts as a referee to the acts of various stakeholders in business operations and strategic moves. If the deal results in operations that may hurt the welfare of either international or domestic firms, then the government will be to blame (Bateman & Snell, 1999).
In the Telestra move to relocate some of its operations to India and the Philippines with the aim of cutting down costs, the government is likely to be the major player as both an arbiter and shepherd of wellbeing of businesses in Australia. However, the plan, which is yet to materialize, is likely to be halted by the government considering the weak case Telestra has.
According to union chief, the company has enjoyed cordial relations with the Australian and such a move is considered an insult. If the government halts the outsourcing plan, it risks been labeled communist and the other options will result in loss of jobs in an already ailing economy. The latter also borders on ethical disregard of international trade principles. Hence, the government is likely to tread a dangerous and tricky ground on this Telestra move (Barney, 2002).
Relevant International Business Concepts for Articles’ Analysis
In the Telestra case analysis, the theory of comparative advantage is quite evident. Although the theory does not champion for existence of complete free trade, it posits a beneficial situation in which countries foster efficiency in the production of a particular commodity or service while another country fosters production of another different service or commodity. Subsequently, the two countries benefit from the mutual relationships developed to fast track economic growth (Hitt & Hoslisson, 2008).
The World Trade Organization is the sole global body that deals with fairness in trade among nations. It designs rules to ensure that large economies and small economies are at par in economic growth. However, its policies and propositions are not popular with most nations.
Its aims are to facilitate demand and supply by ensuring that producers of goods and services find a way to export their products and those that do not produce find a way to import what they need. Through its membership, World Trade Organization facilitates two major world forums. The Doha Development Agenda is a trade negotiations forum. It is designed to achieve groundbreaking reforms in the manner in which world economies conduct their trade.
The forum’s agenda is to inject revised rules and to improve the international trade system through systematic introduction of minimal trade restrictions. It was officially launched in Qatar in 2001.
Ministers of respective countries tasked with commerce, trade, and sometimes finance attend the forum. Each minister goes to the table to air their countries’ views. The Doha development agenda covers around 20 critical areas of world economy, which include agriculture, services, imports, exports, intellectual property, among others (Haberberg & Rieple, 2007).
World Trade Organization’s advocacy for free global trade has not been popular with majority of the nations. Although free trade has many benefits as opposed to closed trade, many countries perceive free trade negatively and bring down any attempts at making the world economy free of national and regional barriers.
For example, in 2003 during the talks that were held in Caucun Mexico, the world witnessed massive protests. This was the third ministerial meeting with the same agenda: trying to break the deadlock that had been experienced in the last two sittings since the first round in Qatar (Cai, 2013).
The second major forum facilitated by World Trade Organization is the World Trade Forum. This forum seeks common ground on how countries can work together in tackling common global problems that go beyond the need for economic integration. This includes the need for development in major areas such as education. Major economies and their leaders normally attend it. They review goals and targets such as millennium development goals.
This forum is generalist compared to the Doha round of negotiations. However, it is important to note that they both champion for a more developed world, which caters for the need of everyone. Although WTO is an effective organization, its influence is dwindling in light of the mistrust that is growing among many countries towards effectiveness of applicability of the organizations principles (Mintzberg & Ghoshal, 2003).
In the second case of the merger between Emirates and Qantas, the modernization theory takes center stage. This theory advances a ‘copy-paste’ method of propagating development. It says that underdeveloped and developing nations can grow by copying the methods that developed nations employed. It lays out stages in development that its proponents believe are applicable to any nation.
Additionally, this theory advances the belief that states are the greatest agents of change in the lifestyles of their citizens. This highlights the need to have stable and working structures of governance and leadership to enable development. Hence, it points towards the fact that many developing countries lack stability in politics and their social systems. This reduces their chances of development since the environment is not conducive for it. Conclusively, this theory advocates for democracy largely (De Wit & Meyer, 2004).
According to this theory, there is a glimmer of hope in the development of many countries. This is because many countries in the world continue to embrace the concept of democracy. The belief is that this will stabilize their nations and create environments for future growth.
However, it is important to note that this stability is sometimes cyclical. Additionally, many countries are still stuck in problems experienced many years ago. This includes coups, revolutions and reprisals as people seek to stamp democratic rights. This is set to continue in the 21st century (Bartlett, Ghoshal & Beamish, 2008).
The ‘copy and paste’ concept advocated by Modernization Theory is not entirely applicable to many countries. Developed countries have infrastructure and capital intensive acquisitions that many developing nations may take a long time to acquire. Additionally, they have stability in education, which means that they have better generational succession.
It is also important to note these countries are the masterminds of the leading world lending institutions, which they also head. This makes the entire process favorable for the continued dominance of these states. Hence, it is going to be the same old setting where these nations continue to develop at a faster rate than other countries.
The fact that this theory advocates for developed nations to aid developing nations to play catch up is laughable. This is because these countries are in contention of world’s leading resources, including human resource, and assisting them means losing competitive advantage (Bamford & West, 2010).
The paper presents a classical analysis of international trade from the viewpoint of a changing market. The change is because of internet and globalization. The paper critically analyzes the impact of the strategic alliance between Emirates Airline and Qantas on multinationals in Australia, domestic firms and the Australian government.
This similar analysis is repeated in the case of Telestra. Both analyses conclude that both multinationals and domestic firms will have to come up with new strategies to counter the competition. The government will have to grapple with an ethical issue when resolving to simmering dispute between union members in Australia and the employees of Telestra. The paper concludes by highlighting some of the most prevalent theirs in international trade found in the articles.
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