Introduction
Culture is an integral part of every society. While some countries use their cultural assets to become economically prosperous, some of them experience economic stagnation because of cultural problems (Walker, Walker, & Schmitz, 2003). The most common difference in culture that affects general business practices is the concept of time. In some countries, time is sacrosanct. Lateness for meetings and appointments is considered a sign of disrespect. A cultural commitment to timekeeping in countries such as Japan many explains the ability of the country to develop very efficient systems and products. Elements of culture that guide interaction with strangers can enhance or inhibit business.
Entrepreneurs usually seek opportunities to meet other business people in order to strike deals. A cultural barrier that inhibits such meetings, or delays them, increases the cost of business for entrepreneurs (Walker, Walker, & Schmitz, 2003). Two countries with a strong reputation for international trade are the UK and China. These two countries have a different concept of time and handling of appointments. In China, appointments made early in advance tend to succeed. In the UK, the time of booking the appointment is not a decisive factor. In China, a meeting with a high-ranking official demands for more stringent timekeeping. In the UK, there is a grace period allowed for lateness because of the known difficulties associated with moving around the big cities. Failure to observe these norms in the two countries can make it impossible for an entrepreneur to do business.
Main Body
The costs involved in the globalization process include the following. First, countries can pay a huge political cost when their citizens interact with people from other countries (Ab Hamid, 2008). For example, the forces of globalization helped to fuel the Arab Spring. Economically, competition from international players stifles businesses in poor countries, while wages in rich countries fall because manufacturers have access to cheap labor overseas. Socially, foreign culture invades local societies and can upset the social stability of a country. The environment also plays a price because of the greater demand for natural resources. In a recent survey reported by Forbes, the company with the best CSR reputation is Microsoft.
Microsoft had the best aggregate scores on a raft of indices revolving around philanthropy, leadership, innovation, and financial performance. Microsoft seems to be benefiting from the work of its founder in the Bill and Melinda Gates Foundation, which works towards alleviating some of the biggest problems in the world today. One famous project done by the foundation is financing the fight against Malaria. Businesses and governments that are not responsible enough in light of globalization deserve condemnation. The forces of globalization keep proving that the world is a small ecosystem, which requires everyone to cooperate (Dalic, 2007). Economic boycotts can help to dissuade irresponsibility in this era of globalization. In addition, international rating agencies can help to show the world which countries and businesses are not cooperative when it comes to managing global challenges.
NAFTA has played a big role in making Wal-Mart’s operations in Mexico successful. NAFTA leveled the playing field for Wal-Mart because it reduced the import duty on products from outside countries. However, Mal-Marts inherent competitive advantages made it possible for the retail giant to take advantage of the leveled playing field. Wal-Mart is known for competitive pricing, the ability to negotiate large deals as a larger buyer, and efficient product delivery (Walker G., 2004). The first positive effect of Wal-Mart’s success in Mexico is that it led to the lowering of retail prices. Secondly, Wal-Mart created very many jobs for locals. The first disadvantage associated with the success was that it put the jobs of employees working for rival firms in jeopardy. If these firms collapse, there is no guarantee that these workers will get alternative jobs. In addition, success may lead to the creation of a retail monopoly in Mexico. Comerci took steps to secure its market share by entering into an alliance with other local retailers to give them the competitive muscle they need to negotiate better prices. Comerci has the option of differentiating itself to serve a niche market.
The main comparison between the factor-proportions theory and the country-similarity theory is that they both address trade relations between nations. Their common foundation is the need to explain the choices that countries make in relation to their needs. The contrast drawn from the two theories is that one offers a complementary model of trade, while the other offers a cooperative model. The factors proportions theory postulates that countries buy what they do not have from each other to complement one another (Faulkner & Segan-Horn, 2004). The country-similarity theory postulates that two similar countries have similar environments, hence the efforts one country puts into meeting its needs can as well produce enough goods and services to meet similar needs in a partner country. Israel has very few natural resources. On the other hand, the Congo is well endowed with natural resources. Israel’s natural advantage is the cultural heritage that has given it a strong national identity. Congo’s natural advantage is its vast mineral wealth, lush arable land, and abundant forests. Israel’s acquired advantage is its highly skilled human resource. Congo’s acquired disadvantage is its political instability.
Table 1: Comparison Table.
Sony has suffered from changes in the currency markets at various points in its history. There is a good reason for it to consider manufacturing more products in the United States and Europe to reduce the impact of currency fluctuation on its international business. However, it is important to calculate whether there is a higher risk to the company if it transfers operations to the United States because of higher labor costs. In addition, buying more from Asia will minimize the impact of the Yen-Dollar fluctuations on the company. This decision should bear in mind that the other Asian countries are not immune to global financial pressures, which may also affect their suitability for business (Froeb & McCann, 2009). The major forces that affected the Yen prior to 2008 were the first and second medaka and an increase in competition. The first and second end aka represent periods where the dollar weakened significantly against the yen. This made Japanese exports very expensive. A bit of relief arose from the reduced cost of inputs because of the lower cost of imports. The Japanese Tsunami had the greatest impact on the Yen in the post-2008 period because it stalled the Japanese economy. The Japanese Yen is likely to strengthen in the future because Japan has very strong economic fundamentals. In addition, it is a very resilient country. This will partly arise from the impact of a weakened dollar caused by the current debt structure of the United State.
A weakened Peso made it easier for exporters to sell their products from Argentina. However, it made it difficult for importers to buy goods because of the high exchange rates (Lavigne, 1999). The loss of value of the Peso increased business opportunities for traders in the export sector. On the other hand, it reduced the business opportunities for those importing goods to Argentina. While the immediate impact of a weaker Peso is an increase in export activity, the other result is that imported goods become too expensive. Since Argentina is a net importer, a weaker Peso will make the situation more unbearable for its citizens. In addition, investors interpret a shifting currency as a sign of a weak economy. Investors want predictability, which they can only get if the price of the Peso stabilizes. At this point, it is extremely difficult to predict how the Argentine economy will perform. The decision to leave Argentina should be based on whether HSBC’s management feels confident that the bank can handle the worse the economy can bring. It may be a strategic blunder to leave Argentina now because of the strength of the HSBC brand. Coming back will be very difficult. In conclusion, HSBC should not leave Argentina.
The decision to manufacture the wireless device will depend on three broad issues. First, it will be necessary to determine whether the company has the financial capacity to handle the production, marketing, and sales of the wireless device. In addition, there is a need to determine whether the company’s liquidity ratio can support a full-scale production operation. If the company has the financial capacity to support all the production requirements, then it should consider making the wireless device internally. The second criteria will be brand related. By choosing to manufacture the product internally, the company will control all the design and manufacturing processes (Arson & Gray, 2011). However, external manufacturing may result in quality problems if the partner is not willing to invest in new production facilities to handle the product. If the company does not have a trusted partner, then it should avoid giving its designs to an external manufacturer. The third criterion is the technical capacity of the firm. The manufacture of technological products usually requires strong technical capabilities for successful production (Walker G., 2004). The company needs to evaluate its existing technical capacity, which includes the number of engineers and their specializations, the capacity of process managers, the capacity of manufacturing equipment among others. If the company has the technical capacity, then it should consider producing the wireless device internally.
The three MNEs value collaboration as part of their corporate culture. The three MNEs have decision-making organs that require the collaboration of key personnel to succeed. The most visible difference between the three MNEs is their expansion philosophy. Johnson & Johnson has the strongest dedication to local markets, followed by Coca-cola, and finally Carrefour. This shows that MNEs have different values in regards to market commitment (Lavigne, 1999). Carrefour looks at profits as the sole guide, while Johnson & Johnson simply does not move once it has established itself. Carrefour has a strong centralized system.
The organization uses the performance of its branches as the main criteria for remaining in a market. Johnson & Johnson uses a collaborative approach that encourages autonomy on market issues, but centralization on corporate issues. Coca-cola uses a franchise model. The organization retains minimum control over operations but implements a global branding process. Each bottler operates autonomously and is free to make operational decisions. Decision making in Carrefour is centralized because of its business model. The company controls all expansion decisions based on its market entry philosophy. Johnson & Johnson has a mixture of centralized and decentralized decision-making processes. Local managers are free to respond to market conditions, while the headquarters takes the lead in strategic decisions in areas such as human resource management, product development, and government relations.
The major sources of influence on Ericsson’s accounting standards and practices include the following. First, Ericsson seeks to be in compliance with the EU International Financial Reporting Standards (IFRS), and the IFRS issued by the International Accounting Standards Board (IASB). The second source of Influence is the Swedish GAAP, which has been replaced by the EU IFRS. Thirdly, the company tries to comply with the US GAAP. In addition, the company’s financial reports must take into account the provisions of Swedish law. This situation arises because the company is cross-listed in London, New York, and in Sweden. In order to raise capital in the capital markets, the company must comply with the rules of that particular market. Ericsson should strongly consider using full IFRS because this will make it easier for it to comply with the requirements of more capital markets. In fact, full compliance with IFRS will make it easy for the company to meet the requirements of the US GAAP because full IFRS is more comprehensive than EU IFRS requirements. While taking this decision, it is important to note whether compliance to full IFRS may expose the company to more taxes at home and to compare such exposure with the ability to raise more capital in worldwide capital markets.
Conclusion
An ethnocentric approach to staffing is one where the company believes that managers from the home country are the ones best placed to hold management positions (Mamoria & Gankar, 2009). Associated advantages are ease of communication and ease of establishing a corporate culture. Disadvantages include vulnerability to accusations of racism and the loss of high-quality employees who want management positions. A polycentric approach to staffing is one where the company believes that the locals are the ones best placed to hold management positions because of their knowledge of local conditions. The advantages of this approach include leveraging local knowledge for decision-making, and fewer social tensions in the company.
A Disadvantage of this approach is greater difficulty in establishing a corporate culture. A geocentric approach to staffing is one where a company believes that good managers can come from anywhere (Mamoria & Gankar, 2009). There are no restrictions on who can join management teams. Advantages include the ability to get the best talent, and getting the reputation of being an equal opportunity employer. Disadvantages include more communication challenges and the high cost of deploying staff. A geocentric model is preferable in the global environment (Mamoria & Gankar, 2009). Stressing local or ethnic superiority is dangerous for race relations in the world today. In addition, talent is the main source of competitive advantage for companies today. It does not matter where someone comes from.
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