International Firms and the International Management Functions

Practices of International Firms
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Practices of International Firms
Introduction
International business has become increasingly complex in recent years, with companies facing various political, ethical, and human resource challenges when operating across borders (Owen, n.dB). Companies need to implement robust risk management strategies that account for these factors to navigate this landscape. International political risk management (IPRM) involves identifying and mitigating the potential risks that arise from political instability, geopolitical tensions, and regulatory changes in the countries where a company operates (Kobrin, 2022). On the other hand, ethical management refers to the practice of conducting business in a socially responsible and sustainable manner, per ethical principles and values. This involves establishing ethical guidelines and policies that govern a company's behavior, promoting transparency and accountability, and ensuring compliance with applicable laws and regulations. Human resource management in the international sphere is crucial for ensuring that a company's workforce is effectively managed across borders (Azizi et al., 2021). This includes developing policies and practices that promote cultural sensitivity, diversity, and inclusivity and ensuring compliance with local labor laws and regulations. Overall, these three management areas are critical for companies operating in the international sphere. By effectively managing political risk, conducting business ethically, and managing human resources, companies can mitigate potential risks, enhance their reputation, and establish a sustainable and responsible presence in the global marketplace.
International Political Risk Management
International political risk management involves identifying potential risks and developing mitigation strategies. Political risk can take many forms, including regulatory changes, currency fluctuations, expropriation of assets, and civil unrest. Companies need to understand the political environment of the countries where they operate and develop contingency plans to manage risks. For example, a company may diversify its investments across multiple countries or establish joint ventures with local partners to reduce political risks. International political management manages political risks associated with cross-border business operations, assets, and trade (Owen, n.d D). Global political management is critical to business abroad in today's interconnected world. It involves understanding a foreign country's political, social, and economic conditions and taking proactive steps to mitigate risks that may arise from changes in these conditions.
International political risk arises from the uncertainty and unpredictability of the political environment in a foreign country. Political risks can take many forms, including changes in government policies, civil unrest, terrorist attacks, and the expropriation of assets (Owen, n.d E). For example, a company that invests in a foreign country may face the risk of confiscation if the government decides to nationalize its assets. For example, the UK's decision to leave the European Union (EU) posed a significant political risk for the country. To manage this risk, the UK government negotiated with the EU to establish a new trade agreement and ensure a smooth transition out of the union. This involved working political relationships with EU member states and assessing Brexit's potential economic and financial impact. Companies use various strategies to organize international political risk, including avoidance, adaptation, and mitigation. Avoidance involves completely avoiding investment in countries that pose a high political risk. Transformation involves adjusting business operations to the political environment of the foreign country. The relief consists in taking proactive steps to minimize the impact of political risks. To illustrate, the UK also faces risks related to international trade disputes. For example, if the US and China were to engage in a trade war, the UK could experience significant economic consequences due to its close ties with both countries. To manage this risk, the UK government must carefully monitor the situation and engage in diplomatic efforts to promote a resolution.
One strategy for managing global political risk is diversification. Diversification involves spreading investments across different countries, regions, and industries. This strategy helps companies reduce their exposure to political risk by not having all their eggs in one basket. For example, a company that invests in multiple countries will be less affected by political instability in one country. Another strategy for managing global political risk is political risk insurance. Political risk insurance is a type of insurance that protects companies against losses caused by political risks. This type of insurance is particularly useful for companies that operate in countries with a high risk of expropriation or political violence.
Political risk assessment is another strategy for managing global political risk. Political risk assessment involves evaluating the political environment of a foreign country and assessing the likelihood and impact of political risks. This information helps companies make informed decisions about whether to invest in a foreign country and how to manage political risks. International political management is essential for companies that operate in foreign countries. Companies that fail to manage political risk may suffer significant financial losses and damage their reputation. By understanding the political environment of a foreign country and taking proactive steps to manage political risk, companies can minimize their exposure to political troubles and maximize their chances of success.
One significant change in international political risk management has been the increasing focus on sustainability and corporate social responsibility. Companies recognize that their actions can impact the environment, human rights, and the broader global community (Owen, n.dA). As a result, companies are incorporating social and environmental considerations into their risk assessments and developing strategies to mitigate these risks. Similarly, the increasing use of technology in political risk management marks another notable change. Companies use advanced analytics and predictive modeling to assess political risks and anticipate potential disruptions. This allows companies to take proactive measures to mitigate these risks, such as diversifying their supply chains or relocating operations to less risky locations.
One approach within the political risk field is assessing a country's political climate before making investment decisions. This involves analyzing factors such as the stability of the government, the legal system, and the level of corruption. However, this approach can be problematic as political situations change rapidly, making it difficult to predict future developments accurately. A corporate example from the UK would be the British oil company BP, which invested heavily in Russia during the 1990s and 2000s. The company believed that the Russian government was becoming more stable and that there was a growing market for oil and gas. However, in 2014, the Russian annexation of Crimea led to economic sanctions against the country, significantly impacting BP's operations in Russia.
Ethics Management in International Business
Ethical management is also crucial for successful corporate operations in foreign countries. Companies must adhere to ethical standards and respect local customs and laws. Failure to do so can lead to reputational damage and legal consequences. Ethical management also involves considering the impact of a company's operations on the environment and local communities (Rayer, 2020). For example, a company may implement sustainable practices to reduce its carbon footprint and promote social responsibility. Utilitarianism and deontology are two ethical theories commonly used to manage ethics within international business. While both of these theories aim to promote ethical behavior, they differ in their approach to achieving this goal and the implications of their application in international business.
Utilitarianism is an ethical theory that focuses on the greatest good for many people. The basic idea is that actions should be evaluated based on their consequences and the overall happiness they bring to society (Dodd & Nicole, 2021). In the context of international business, utilitarianism would require companies to consider the impact of their actions on all stakeholders, including employees, customers, suppliers, and the environment (Anonymous, n.d H). The goal would be to maximize overall happiness and minimize widespread harm. One of the implications of utilitarianism in international business is that companies may need to sacrifice their interests to promote the greater good. For example, a company may need to invest in more environmentally-friendly production processes even if it increases costs and reduces profits. Similarly, a company may need to pay its employees a living wage even if it reduces profitability. In the UK context, this can be seen in the efforts of companies like Unilever to reduce their environmental impact and promote sustainable production.
Another implication of utilitarianism is that companies may need to consider the long-term consequences of their actions rather than just the short-term benefits. For example, a company may need to invest in employee training and development even if it does not immediately lead to higher profits (By & Burnes, 2023). A skilled and motivated workforce will likely lead to higher productivity and profitability in the long run. In the UK context, this can be seen in the efforts of companies like the John Lewis Partnership to invest in employee ownership and training. On the other hand, deontology is an ethical theory that focuses on actions' inherent rightness or wrongness, regardless of their consequences (Rayer, 2020). According to deontology, some activities are inherently right or wrong, and companies must follow these principles. In the context of international business, deontology would require companies to follow a set of ethical rules and regulations, regardless of the impact on stakeholders or the overall happiness of society.
One of the implications of deontology in international business is that companies may need to prioritize the rights and dignity of individuals over other considerations. For example, a company may need to respect the human rights of workers in its supply chain even if it reduces profits. Similarly, a company may need to avoid doing business with countries with poor human rights records, even if it limits potential profits (Azizi et al., 2021). In the UK context, this can be seen in the efforts of companies like Marks & Spencer to ensure the ethical sourcing of its products. Another implication of deontology is that companies may need to follow ethical principles even if they conflict with local laws and customs. For example, a company may need to avoid doing business in countries that permit child labor, even if it is legal in that country. Similarly, a company may need to avoid participating in corrupt practices, even if it is common practice in a particular market. In the UK context, this can be seen in the efforts of companies like BP to avoid corruption in their international operations.
Utilitarianism and deontology are two ethical theories that can be used to manage ethics within international business. Utilitarianism focuses on the optimum yet positive outcomes for serving the maximum number of common people (Owen, n.d I). It also demands that firms ponder upon their operations' related results. Deontology focuses on finding the logical reasoning behind every firm action. It considers the extent of rightfulness and wrongfulness concerning the company's operations...