International Business Following International Management Functions

Managing International Business
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Managing International Business
Introduction
International business refers to the activities and transactions between two or more countries. It involves the exchange of goods, services, technology, and capital across borders and encompasses various aspects of business, such as marketing, finance, operations, and human resources (Aon, 2021). International business is a complex and dynamic field that requires organizations to adapt to different countries' cultural, political, and economic differences. Managing a global business is essential for several reasons.
It allows organizations to tap into new markets and expand their customer base beyond domestic borders. By going international, companies can increase their revenues, reduce dependence on a single market, and gain a competitive advantage. Secondly, managing international business enables organizations to access resources and talent that may not be available in their home country (Biegelman & Biegelman, 2019). For example, a company that wants to develop a new product may need to source raw materials from different countries or hire specialists with expertise in specific areas. The company can leverage the knowledge and skills of professionals from diverse backgrounds and improve its innovation capabilities. Thirdly, managing international business helps organizations mitigate risks and diversify their portfolios (Biegelman & Biegelman, 2019). By operating in multiple countries, companies can reduce their exposure to political, economic, and social risks that may affect their operations in a single market. For instance, if a company's sales in one country decline due to a recession or a change in government policies, it can offset the losses by increasing its sales in other countries. Managing international business promotes cultural exchange and understanding (Bower & Gilbert, 2018). By interacting with people from different countries and cultures, organizations can learn about new perspectives, values, and customs and develop a more global mindset. This can help companies to create products and services that resonate with diverse audiences and foster a more inclusive and respectful workplace.
International business is an essential component of the global economy, and managing it effectively is crucial for the success and growth of organizations. By embracing international business, companies can expand their reach, access new resources and talent, mitigate risks, and promote cultural exchange (Business Roundtable, 2019). As such, international business presents opportunities and challenges and requires organizations to adopt a strategic and adaptive approach to succeed in a rapidly changing global landscape.
Managing Political Risk
Political risk refers to the risks arising from political decisions, policies, and events that can impact an organization's financial, operational, and reputational aspects. Political risk is a complex and dynamic phenomenon that affects organizations in various ways, and it can be challenging to quantify and manage (CIPD, 2021). Multiple factors, including changes in government policies, geopolitical tensions, regulatory changes, and civil unrest, can cause political risk.
Types of Political Risk
There are different types of political risks; understanding them is essential for organizations to develop effective strategies to manage them. Some of the most common types of political risks include:
Regulatory Risk
Regulatory risk arises from changes in government regulations and policies that can impact the operations and profitability of a company. These changes can include new laws, tariffs, and regulations that can increase costs or limit market access (Carroll, 2016).
Sovereign Risk
Sovereign risk refers to the risks associated with investing in countries where there is political instability or where the government may default on its financial obligations (Deloitte, 2021). Sovereign risk can be caused by factors such as political unrest, changes in government, and economic instability.
Political Violence Risk
Political violence risk arises from civil unrest, terrorism, and other forms of violence that can impact an organization's operations, assets, and employees. Political violence can be challenging to predict and occur suddenly, making it a significant risk for companies operating in politically unstable regions (Deloitte, 2021).
Expropriation Risk
Expropriation risk arises when the government seizes or nationalizes assets, which can significantly impact an organization's operations and profitability. Expropriation can occur due to government policies, regulatory changes, or political instability.
Strategies to Manage Political Risk
Organizations can adopt various strategies to manage political risks effectively. Some of the most common procedures include avoidance, mitigation, and transfer.
Avoidance
Avoidance is a strategy that involves avoiding investments in high-risk countries or regions. This strategy can effectively mitigate political risk and limit the potential for growth and profitability. Avoidance can be particularly challenging for organizations operating in industries with inherent political risks, such as natural resources and energy.
Mitigation
Mitigation involves taking steps to reduce the impact of political risks on an organization's operations and profitability. This strategy can involve diversifying operations across different regions or countries, building relationships with government officials and stakeholders, and investing in security measures to protect assets and employees (Deloitte, 2021).
Transfer
Transfer involves transferring the risk to another party, such as an insurance company or a joint venture partner. This strategy can effectively reduce the financial impact of political risk but can also be costly and unsuitable for all types of political risk.
Implications of Political Risk Management
Managing political risk effectively can significantly affect an organization's success and profitability. Effective management of political risk can help organizations to:
Protect Assets and Employees
Political risk can significantly impact an organization's assets and employees, and effective risk management can help mitigate these risks.
Maintain Profitability
Political risk can impact an organization's profitability by increasing costs, limiting market access, and reducing demand. Effective risk management can help organizations to maintain profitability in the face of political risks.
Build Trust and Relationships
Effective political risk management can help organizations to build trust and relationships with stakeholders, including governments, regulators, and customers.
Ensure Business Continuity
Political risks can disrupt an organization's operations, and effective risk management can help to ensure business continuity in the face of political risks.
Managing Ethics
Business ethics refers to the moral principles and values that govern the behavior of organizations and individuals in the business world. It encompasses the principles of honesty, integrity, fairness, and responsibility in all business activities. Ethics is an essential aspect of any business, as it helps to build trust and credibility with customers, employees, investors, and other stakeholders. Ethical behavior in business is crucial in maintaining a positive reputation and avoiding legal and financial consequences.
Ethics plays a crucial role in international business, where organizations operate in diverse cultural, political, and legal environments. Ethical considerations may differ from country to country, and organizations must navigate complex cultural and legal norms to avoid ethical conflicts. Companies that engage in unethical practices, such as bribery or environmental violations, can damage their reputation, face legal action, and lose market share.
To manage ethics in business, organizations can adopt different approaches. One approach is universalism, which posits that certain ethical principles apply universally across cultures and societies. This approach suggests that there are fundamental ethical principles that all people and organizations should follow, regardless of cultural or social differences (Epstein & Buhovac, 2014). The universalist approach is based on the idea that certain ethical values, such as human rights and dignity, are universal and should be upheld by all organizations.
Another approach to managing ethics is relativism, which posits that ethical principles are culturally and socially relative. This approach suggests that ethical values and norms vary across cultures and societies and that ethical behavior has no objective standard. The relativist approach is based on the idea that cultural and social norms shape ethical values and that organizations should adapt their ethical standards to local cultures and customs. Integrative social contracts theory is a third approach to managing ethics (Lebaron, 2020). This approach suggests that ethical behavior is based on a social contract between organizations and society. The social contract is based on mutual expectations and obligations and governs the relationship between organizations and society. This approach suggests that organizations must consider the interests of all stakeholders, including employees, customers, and the broader society, when making ethical decisions (Gomstyn, 2018).
The implications of ethical management are significant for organizations. Ethical behavior can help to build trust and credibility with stakeholders, improve employee morale and motivation, and enhance the organization's reputation (Business Roundtable, 2019). Ethical behavior can also help to reduce legal and financial risks, as organizations that engage in unethical practices may face legal action and financial penalties. On the other hand, unethical behavior can lead to a loss of trust and credibility with stakeholders, damage the organization's reputation, and create legal and financial risks.
Business ethics is crucial to any organization's operations, especially in international business. Ethical considerations may vary across cultures and societies, and organizations must navigate complex ethical dilemmas to avoid conflicts and legal consequences. Organizations can adopt different approaches to managing ethics, such as universalism, relativism, and integrative social contracts theory. Ethical behavior can significantly affect organizations, including improved stakeholder relationships, enhanced reputation, and reduced legal and financial risks (Business Roundtable, 2019). Therefore, organizations need to prioritize ethical behavior and integrate ethical considerations into their decision-making processes.
Staffing Managers for International Management Posts
Staffing managers for international management posts is crucial to managing international operations. Staffing managers refer to selecting and managing individuals to fill international management positions (Bower & Gilbert, 2018). Effective staffing managers for international management is essential for ensuring the success of international operations.
Importance of Staffing Managers for International Management
Staffing managers for international management is essential for several reasons. First, international operations require individuals with specific skills and knowledge of the culture, laws, and customs of the countries in which they operate. Second, staffing managers for international management can help develop local talent, improving the organization's reputation and reducing costs associated with expatriate assignments (Freeman, 2010). Third, effective international management staffing managers can help improve communication and coordination between the global operations and the parent organization.
Approaches to Staffing Managers
There are several approaches to staffing managers for international management positions, including ethnocentric, polycentric, and geocentric staffing.
Ethnocentric Staffing
Ethnocentric staffing is an approach to staffing managers for international management positions in which individuals from the parent organization are selected to fill international management positions. This approach assumes that the parent organization's culture, values, and practices are superior to those of the host country (Lebaron, 2020). Ethnocentric staffing can help maintain control over international operations and maintain the parent organization's values and practices. However, this approach can also lead to cultural misunderstandings and resistance from local employees.
Polycentric Staffing
Polycentric staffing is an approach to staffing managers for international management positions in which individuals from the host country are selected to fill management positions. This approach assumes that the host country's culture, values, and practices are superior to those of the parent organization (Fombrun & Riel, 2019). Polycentric staffing can help to improve communication and coordination between international operations and the local community. However, this approach can also lead to a lack of alignment between the parent organization and the international operations.
Geocentric Staffing
Geocentric staffing is an approach to staffing managers for international management positions in which individuals are selected based on their skills and experience, regardless of nationality. This approach assumes that individuals from any country can fill international management positions effectively. Geocentric staffing can help ensure that the organization's values and practices are maintained while respecting local culture and customs. However, this approach can also be challenging, requiring a deep understanding of local culture and customs.
Implications of Staffing Approaches
The staffing approach adopted by an organization can have significant implications for its international operations. Ethnocentric staffing can lead to cultural misunderstandings and resistance from local em...