Background
International business has grown exponentially since the 2008 global economic crunch (House of Commons 2010, p. 59). From this development, we note that international business is fast picking up and many organizations are quickly expanding their businesses into new borders and unchartered territories. In fact, the World Trade Organization (cited in Cattaneo 2010, p. 31) affirms that “….a faster than expected recovery in global trade flows so far in 2010 has caused WTO economists to revise their projection for world trade growth in 2010 upwards to 13.5 percent”.
The United States is a good example of the extent to which international business is growing because the Bureau of Commerce (cited in Pride 2009, pp. 4-9) reports that at the end of 2010; there was an increased appetite for American foods and services which led to a 17.9% increase in US exports across the globe. Andidas (2006), also explains the increase in international business (from a global perspective) by affirming that:
“One clear indication of the rapid growth of retail transnational companies is that, while in 1993 there were no retailers in the top 100 transnational companies, in 1999 there were four […] [and] by 2003, there were no less than 14 retailers (all but two were food and general merchandise retailers) each deriving over US$10bn of annual sales from international markets.”(p. 2).
Collectively, the increase in global business activities has also increased the appetite of most business entrepreneurs to expand their business transactions into new countries (Diane 2010, p. 30). To a large extent, this defines international business in the first place. International business is normally undertaken by both private and public investors, although both have different objectives in doing so. Private investors are majorly driven by the goal of making more profit but public investors (such as government) are usually motivated to uphold the public good of the general population, or in some cases, accomplish their political goals. Comprehensively, international business encompasses the transaction of goods, services, resources (including capital, skills and people) and the likes, across international borders. Such inputs normally result in increased productivity for companies or countries (whichever the case may be) in terms of an increase in production of goods and services.
Usually, multinational companies are the biggest partakers to international trade because of their widespread business activities across various nations. Such prominent brands in international business include the likes of Mc Donald, Yum Brands, GM motors, Ford, Toyota, Microsoft and the likes. In fact, some of the biggest global corporations in the world today derive their profits from international markets (Brady 2010, p. 76).
However, the manner in which each country carries out its international business varies, depending on the company goals and the mechanisms or strategies through which it expects to attain its objectives. Nonetheless, company operations are also significantly defined by the happenings in the global business environment (especially regarding competitive pressures). Considering each company has its own business model, this study seeks to comprehend how Primark Corporation in the United Kingdom (UK) manages its international operations.
However, before this is done, it is important to understand that Primark has a market presence in over 200 countries across the globe and some of its major markets are Ireland, United Kingdom (UK), Germany, Spain, Portugal and Belgium (Primark 2011). The Ireland based company also has a specialty in dealing with clothing wares (Arnold 2009, pp. 13-18). One of the biggest Primark stores in the world today is located in Manchester, England but before that, Liverpool hosted Primark’s biggest store (in 2008) (Primark 2011). Primark’s main success comes from its popular strategy of making clothes in popular sizes and sourcing its raw materials from the cheapest suppliers in the market (Primark 2011). All of the company’s products are made exclusively for the interest of the company since it has its own brand names under the names of atmosphere (women’s wear), active (men’s wear), rebel (boys wear), girl 2 girl (girls wear) and the likes (Primark 2011).
Since international business is a big component of the 21st century business model, this study seeks to comprehend specific international business dynamics related to Primark Company with a specific emphasis on the motivations of the company to engage in international business in the first place. This emphasis is especially important because international business encompasses the 21st century business model and compliments the increasingly popular global business community that’s being evidenced among companies the word over (Boone 2010, p. 2).
Considering most multinational companies are quickly expanding into global markets, Primark will provide a good case study analysis to determine whether the global business trend is motivated by specific universal reasons or if various companies have different motivations to going global. To get a clear picture of this analysis, this study will incorporate existing literature from international business, economics, economic geography and international marketing, after which, comprehensively, we will compare international business dynamics with Primark’s. From this analysis, this study will increase the understanding of why businesses go global through international business expansion.
Preliminary Review of the Literature
Buchanan (2000) notes that huge volumes of the world’s trade today are characterized by international business. Andidas (2006) observes that this trend picked because of the recent developments in telecommunication, transportation, legal infrastructure, and the increased political will for countries to open up their borders to international trade. To compliment the globalization trend, companies became increasingly obsessed to expand their product and service outreach beyond the borders of their host countries and from this understanding, Andidas (2006), explains that “Today, multinational enterprises which own or control production or service facilities outside the country in which they are based, exhibit a degree of internationality that would not be possible without the facilitating character of globalization” (p. 2).
Nonetheless, companies can still take part in international business even without being multinational in nature. Such a characteristic is exhibited by Nike’s business model which stipulates a strong command of its manufacturers without owning the manufacturing companies in the first place. This control can be exercised through foreign direct investments (FDI) (International Monetary Fund 2003, p. 2).
This observation implies that today, most companies are engaged in international business, than any other form of business. Buchanan (2000) further reiterates that “Today, almost all companies, large or small, are affected by global events and competition because most sell output to and/or secure suppliers from foreign countries and/or compete against products and services that come from abroad” (p. 2). This also implies that the business of importing and exporting has become increasingly popular than any other type of business, prompting international business experts to note that the increasingly popular business transaction (import-export trade) is a natural part of understanding a country’s business environment (Seyoum 2000, p. 31).
This, they note happens through developing the right marketing mix, basing a strategic plan (molded from the dynamics of the marketing mix), implementing a given plan defined by the strategy itself and observing that the strategy is well adhered to (throughout the organization). However, the export and import business transactions have been noted to undergo specific changes which accommodate new developments in the market; implying that international business theories explaining how businesses engage in international business, are a changing concept, based on the country of analysis (FK 2010, p. 338).
Buchanan (2000) notes that a company’s growth in overall international business strategy is part of the basic reasons why international business is becoming increasingly popular, in addition to the benefits companies enjoy when they network and interact in the global business community. This point of view basically explains the interaction and networking advantages which give specific companies trade benefits in terms of commercial advantages in the global market.
Buchanan (2000) explains that “the network can be using similar subcontractors or components, sharing research and development costs or operating within the same governmental framework” (p. 3). From this analysis, Buchanan (2000) implies that when businesses network with each other, they actually get rid of any internal business barriers within themselves and therefore create a large business network such as the ones evidenced in aerospace collaborations, vehicle manufacturers, and engineering companies. Through this networking model, Buchanan (2000) notes that businesses are capable of influencing the global business environment by first comprehending how the power of existing players interact and consolidate to influence the business environment.
There are many reasons why companies engage in international trade. Vaguely, Andidas (2006) notes that internal firm specific factors and internal or home specific market issues are some of the reasons why companies do international business; however, from a retailer perspective, he gives an account of how companies are motivated to go into international business with the aim of increasing their profit growth. This motivation is also compounded by financial institutions which avail the funds for doing so, coupled with shareholder expectations which compel managers to go global.
The increased business opportunities brought about by emerging markets, such as China, India, Mexico and the likes is also another factor compelling many companies to go global, considering there is little western competitive influence in such markets, an increased sense of affluence, increased consumer power and many other factors which affect the consumers propensity to spend (Gitman 2008, p. 70). When international business picks up, Andidas (2006) notes that there is no way a local retailer (especially an inefficient one) can stop the increasingly organic influence a western retailer would have on a given local market. This largely explains the increase in international businesses across the globe.
However, there is evidence that international business has increased business complexities for many companies, considering the volumes of trade to be juggled is higher than operating in a controlled market. Suder (2004, p. 223) notes that international business carries with it increased levels of risk for most companies (especially those taking part in international business for the first time) because there is a stronger competitive pressure from other dominant players in the game. For instance, the international business risks for Primark if it operates outside the UK would be the increased dilutive risk of operating in foreign markets, the size of possible acquisitions will increasingly reduce, and a merger with a possible larger European retailer would mean the company is a junior partner and would be more susceptible to the negative effects of an unhealthy aggressive bid.
In addition to these complexities and risks, Primark has to endeavor safeguard its business secrets if it was to merge with another company operating in the retail business so as to maintain its ownership advantages. Moreover, even when engaging in international business, Primark has to still maintain its customer focus and still find a common ground where it can still maintain its production standards in local and international business, and at the same time, establish a central point where it can decide whether internationalization of localization is the best business mix for the company.
Existing literature does not give a comprehensive view of internationalization and why companies prefer it as the new business paradigm in the 21st century, but rather many researchers point to the view that every company has its own motivations for engaging in international business and seldom are such motivations similar (Andidas 2006). However, Andidas (2006) notes that there is an increased need to provide a systematic account of why companies engage in international business in the first place (using an eclectic paradigm, if necessary) although large volumes of literature point out the fact that firm structure, political will, organizational culture and capital markets are some of the biggest motivators for companies to engage in international business (Braithwaite 2000, p. 156). For this reason, more quantitative research needs to be done to establish why companies engage in international business.
Research Questions and Objectives
In reference to the existing literature on international business and why companies take part in it in the first place, this study points out the fact that international business is not a universally applicable concept and each company has its own reasons for taking part in it in the first place.
Research Questions
- What is the biggest motivation for Primark to engage in International business?
- Should companies adopt the concept of international business as the new frontier in business growth?
- Does international business benefit all stakeholders at Primark?
Research Objectives
- To justify the fact that businesses and organizations which engage in international business increase their overall business reputation and image.
- To justify the view that each business has its own reasons for engaging in international business and each company has its own unique motivation in doing so.
- To critically evaluate the benefits companies derive from international business.
- Recommend solutions and recommendations to engaging in international trade.
Research Plan
International business is a new business paradigm that has taken root in most commercial transactions for the past decade or so. This has been facilitated by various types of social, economic and political developments in many countries which have in turn opened up international borders for business (Longenecker 2005, p. 393). Since international business is a dynamic concept, and this study aims at coming up with a comprehensive analysis of its dynamics, I will employ two different types of data collection sources. Also, in connection with the nature of the research, I will be better positioned to understand the motives of companies in taking part in international business through adopting the following data collection techniques to come up with a more accurate and comprehensive data analysis.
Data Collection Methods
Secondary data
Secondary data will be used and obtained from published sources such as journals, books, newspaper articles/extracts and the likes. In addition, this study will include data obtained from the Primark Company itself and probably other data from the World Wide Web. Comprehensively, this data will encompass a greater part of the literature review of the research proposal, considering it will be a review of existing literature accumulated from the works of other researchers who have done related research on the topic. Most of the data obtained at this point will assist in helping answer a majority of the research questions and also assist in achieving the objectives of the study. The advantages associated with obtaining data from secondary sources will especially be useful in coming up with comprehensive data to answer the research questions and achieve specific research objectives.
Interviews
The staff of Primark will be interviewed in this study to answer specific research questions on international business, but such an initiative will also be extended to the top level managers if such a need arises. The questionnaires to be used in the interview will be semi structured, meaning that the questions to be asked will not only be defined by the initial interviewing template, but also extend to questions asked according to the appropriateness of the answers provided (Matthaei 2010, p. 211). In consideration of the busy nature of the managers and some of the employees, each interview will only be limited to thirty minutes.
Questionnaires
Questionnaires will be used to source for data from the immediate communities where Primark is in operation. Emphasis will be made to the benefits the community enjoys from the company, with a special reference to the company’s global nature and its perceived benefits. The questionnaires will be structured in the most basic way so that even illiterate people can be able to answer it. However, I will strive to seek literate people so that the data obtained can have a high credibility. To come up with a representative sample of the population, I will interview 20 respondents. The findings of this data collection tool will be used to evaluate the aims of the company in going international. I believe this analysis will be crucial in determining whether international business is relevant for most companies and if the specific companies derive the benefits they intended to enjoy in the first place. This will be important in enabling me to arrive at the right conclusions or come up with the appropriate recommendations for this study.
Data Analysis
Data analysis will be done with the aim of making the findings as reliable, conclusive, valid and transparent as possible. Data analysis for the information obtained from the interviews will be of a qualitative nature because of its semi structured nature. The information obtained from this data collection method may be recorded for the purpose of future referencing. However, this will be done with the knowledge of the interviewee. The sampling technique meant to come up with a list of respondents would not be based on any probability methods. The snow ball method will be used to obtain data from companies or employees who have gained from taking part in international business. The questions to be asked will be quantitative and therefore closed ended questions will be used.
The biggest limitation expected in this study will be the difficulty to be experienced in gaining access to top level managers of Primark as well as scheduling an interview. The difficulty is further expected to be compounded by the busy nature of their schedule and the limited time they are expected to have for interviews. To overcome this barrier, I expect to be tactful and seek prior appointment to gain access to the managers. Moreover, I will be very persuasive and persistent, till I get an appointment to do an interview.
Ethical Considerations
The research to be undertaken will be compliant to relevant rules of the university which stipulate research undertakings. All the information obtained will strictly be used for the purposes of the research and consent will have to be obtained before any information is obtained from the participants. I will also ensure the research obtained is compliant with the data protection act. Since interviews will be a primary source of data for the research; I will endeavor to ensure that the respondents do not feel compelled or coerced into answering questions. I will therefore ensure the data obtained is done through free will and the respondents feel as comfortable as possible when doing so. After the development of my interview template, I will seek approval from the supervisor before I use it in the research. The same will also be done for the questionnaires.
References
Andidas. (2006) Why do Companies Go Global?. Web.
Arnold, C. (2009) Ethical Marketing and the New Consumer. London, John Wiley and Sons.
Boone, L. (2010) Contemporary Business. London, John Wiley and Sons.
Brady, D. (2010) Essentials of International Marketing. New York, M.E. Sharpe.
Braithwaite, J. (2000) Global Business Regulation. Cambridge, Cambridge University Press.
Buchanan, K. (2000) Understanding the Importance of International Business. Web.
Cattaneo, O. (2010) Global Value Chains in a Postcrisis World: A Development Perspective. London, World Bank Publications.
Diane. (2010) International Transportation: Moving the Global Economy Forward. New York, DIANE Publishing.
FK. (2010) Indian Business Environment. New Delhi, FK Publications.
Gitman, L. (2008) The Future of Business: The Essentials. London, Cengage Learning.
House of Commons (2010). House of Commons – Business, Innovation and Skills Committee: HC 266-II Exporting Out of Recession – Volume 2. London, The Stationery Office.
International Monetary Fund. (2003) Foreign Direct Investment Statistics: How Countries Measure FDI 2001. London, International Monetary Fund.
Longenecker, J. (2005) Small Business Management: An Entrepreneurial Emphasis. London, Cengage Learning.
Matthaei, E. (2010) The Nature of Executive Work. New York, Gabler Verlag.
Pride, W. (2009) Business. New York, Cengage Learning.
Primark. (2011) Primark. Web.
Seyoum, B. (2000) Export-Import Theory, Practices, and Procedures. London, Routledge.
Suder, G. (2004) Terrorism and the International Business Environment: The Security- Business Nexus. London, Edward Elgar Publishing.