How Contemporary International Firms Practice International Management Functions

International Business
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Institutional Affiliation
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International Business
Introduction
Businesses are operating in an ever-changing business environment. Globalization has exposed businesses to more competition. Companies are forced to adopt better strategies to enhance their competitiveness in the market, otherwise, they would make losses. Globalization contributed to an increase in the number of international businesses that want to venture into foreign markets. International markets operate in different countries, exposing themselves to political risks, ethical dilemmas, and staffing challenges. Despite these strategies, international businesses have to find strategies that allow them to overcome the problems. This essay outlines different approaches for managing political risks in business in multiple countries. It also demonstrates how international businesses can employ ethical theories in their operations. In particular, virtue and deontological ethics are examined. Lastly, the essay explores various staffing approaches for international businesses to help managers identify the most appropriate models for their businesses. Additionally, the issue of the choice of women leaders is outlined concerning international businesses.
Explain and contrast the strategies to manage international political risk.
There are several ways in which international firms practice political risk management. First, these firms conduct a risk assessment to evaluate the political risks involved in trading, working with, and or operating in other countries CITATION Ash17 \l 1033 (Ahuja, Syed, & Wiseman, 2017). The risk assessment involves analyzing the political stability of the governments to understand the political landscape and how it could affect their operations. The political evaluation also encompasses geopolitical tensions, hegemony structures, government policies, and government structure. These are some of the factors that determine the political suitability of operations in foreign countries. The firm can avoid or conform to the government's demands for countries with unfavorable terms. For example, most firms that want to trade or operate in China must recognize Taiwan as a Chinese province instead of an independent state CITATION Hsi09 \l 1033 (Hsieh, 2009). Secondly, international companies audit and analyze the regulatory framework to determine the government’s stand on foreign investors in certain industries. Risk assessment allows firms to determine the potential impact on their business operations and how to navigate the issues.
Some firms choose to diversify their operations across many different countries. This approach leads the companies to minimize the concentration risk of operating in one area or region. Firms that spread their operations to different markets and countries or areas reduce their exposure to political risk associated with a volatile political climate CITATION Bab18 \l 1033 (Mariadoss, 2018). If operations are compromised in one area, country, or region, the entities in other countries help offset the losses realized in that region.
Some companies build alliances with foreign governments to gain favor and do business in the respective countries CITATION InS19 \l 1033 (Kim & Milner, 2019). International companies invest in relationship building to ensure strong rapport between the firm and the foreign government. International companies may enter into private or public partnerships or contracts with local stakeholders, government, regulators, communities, etc., to establish a positive working relationship with them. This enables international companies to navigate political risks safely. For the most part, the relationship is symbiotic. While the firm seeks to operate and or trade in the foreign country, the country benefits from foreign direct investment. The country also benefits from positive branding with engaging, collaborating, and working with an international firm CITATION InS19 \l 1033 (Kim & Milner, 2019). When the relationship is shaky and underpinned by distrust, the companies suffer the risk of losses after heavy investment into the country. For example, Huawei suffered heavy losses when it was banned in the United States after years of happy collaborative relationship with the US government in a political fallout with the company and its home country's geopolitics CITATION Dav19 \l 1033 (Goldman, 2019). On the other hand, the NBA has been forced to turn a blind eye to Chinese human rights issues and recognize Taiwan as part of the People’s Republic of China to continue expanding and tapping into its big basketball market CITATION Dan19 \l 1033 (Arkin, 2019). Additionally, international firms can sometimes seek to influence policy-making and regulatory authority in their favor. International firms invest in advocacy efforts, lobbying, and participation in industry associations to influence the political will and government policies in their favor CITATION InS19 \l 1033 (Kim & Milner, 2019). These efforts aim to shape the political environment in a way that is favorable to their business interests.
International companies also employ risk mitigation strategies to reduce their exposure to political issues in their countries. These risk mitigation strategies include political risk insurance and contingency planning to protect against likely political risks CITATION Ash17 \l 1033 (Ahuja, Syed, & Wiseman, 2017). Other companies also use financial instruments to hedge against currency fluctuations from potential political disruptions. In some cases, the companies maintain a fairly foreign structure of operations, i.e., transacting in international currencies to reduce their exposure to potential political disruptions. Additionally, international firms simulate and conduct scenario planning exercises to assess the potential impact of different political scenarios CITATION Ash17 \l 1033 (Ahuja, Syed, & Wiseman, 2017). These drills help the firms identify weaknesses and develop contingency plans. Therefore, plans are developed, and the workforce is briefed, trained, and prepared to respond to different political environments. This is common in countries with volatile political climates, especially during elections.
Some companies also invest in monitoring and early warning systems to alert them of potentially risky political developments CITATION Gor08 \l 1033 (Gordon, 2008). These systems monitor the political climate and create a robust network to communicate political developments. These monitoring and early warning systems also operate intelligence departments to ensure the company stays ahead of any political events, regulatory changes, and social dynamics that could affect its business operations. These systems may be shared between international companies or run by a single entity. They constantly track and assess political developments and proactively identify and respond to potential risks. The information is passed on to relevant individuals for the quick action and used to create risk assessments and contingency plans.
International companies also manage exposure to political risks by adhering to ethical practices and respecting the ethical values of the local community in foreign countries CITATION Don96 \l 1033 (Donaldson, 1996). Adhering to ethical and moral practices observed in the host country reduces friction between the firm and the locals/governments. Adhering to ethical practices also helps realize exposure to possible scandals involving corruption, human rights violation, and environmental concerns. While adherence to ethical practices does not necessarily give an upper hand to any company operating in a foreign jurisdiction, failure to adhere to these rules can quickly destroy the brand image. Thus, adherence to the ethical code and respect for local cultural values aids in gaining favor in the eyes of the public as a firm that understands and respects cultural and ethical values in the respective community/society/country. Secondly, companies invest in Corporate Social Responsibility (CSR) to buy a positive image, especially in the local community CITATION Pet03 \l 1033 (Petkoski & Twose, 2003). This aids in preventing potential backlash in the community, which could become a political weapon against the firm. Maintaining a good brand image in a foreign country also involves strict compliance with local laws. International firms ensure compliance with local laws and regulations to mitigate political risks associated with legal and regulatory violations. This can involve conducting regular audits, implementing robust compliance programs, and seeking legal advice to ensure adherence to local laws and regulations.
Two ethical theories for managing ethics within international business.
Deontological Ethical theory
Deontological ethical theory is a moral framework that focuses on the inherent nature of actions and the principles or rules that govern them regardless of consequences CITATION Ale21 \l 1033 (Alexander & Moore, 2021). The organization needs to have a guiding framework for decision-making in international businesses, and deontological ethical theory serves their interest differently. First, it creates a framework to ensure ethical decision-making consistency. Deontology is guided by rules and hence not negotiable irrespective of the consequences CITATION Ale21 \l 1033 (Alexander & Moore, 2021). For an international business, this makes global operations easier because they only have to follow established rules based on moral principles. Thus, the ethical standards and principles of the company become consistent across all cultures, countries, and regions they operate or trade in. Having a clear universal structure of rules and principles is important for international businesses because they operate in diverse cultural settings.
Secondly, the deontological ethical theory also provides a structured decision-making approach. International businesses must create a consistent brand image pegged on the internal cultural values of the organization. This promotes honesty, integrity, fairness, and accountability even in a challenging business situation. The company remains true to its principles rather than focusing on short-term business interests. Deontologically inclined organizations compel their decision-makers to consider and promptly follow the rules of their actions and choices, irrespective of the consequences. This creates a culture of ethical leadership and management, and key decision-makers become role models and take moral responsibility for their actions.
Deontology emphasizes creating a structure that informs all aspects of the approach to all stakeholders. International businesses have partners and stakeholders who require consistency. Since deontology is based on rules and principles, it ensures uniformity in how all the stakeholders are treated across all countries CITATION Ala13 \l 1033 (Zimmerman & Blythe, 2013). It encourages a broader approach to stakeholder involvement in the business. This creates a more inclusive, sustainable, and responsible approach to all stakeholders, and the organization remains principled in a challenging business environment.
Virtue Ethical theory
Virtue ethical theory is a moral framework that emphasizes developing and cultivating virtuous character traits in individuals to guide their behavior during decision-making CITATION Hur22 \l 1033 (Hursthouse & Pettigrove, 2022). It is an essential approach to developing a moral character based on virtues. International businesses can draw their ethical framework from ethical theory to promote ethical behavior and responsible conduct amongst all stakeholders. One of the purposes of adopting virtual ethical theory in international business operations is to create consistency of culture and esteemed valuesCITATION Jan14 \l 1033 (Dutton & Spreitzer, 2014). The diverse international business environment requires a rigid ethical framework to build an international brand. While it is important to accommodate and respect different cultures, it is incumbent on international organizations to create a consistent brand and basic cultural values across all countries.
Secondly, virtue ethics inform leadership and managerial style of the organization across all entities. Pegging leadership and managerial approaches on this theory compel leaders and managers to serve as role models and embody virtuous character traits. Virtuous leaders inspire and influence the rest of the workforce, partners, and stakeholders to adopt and adhere to ethical principles and values within and without the organization. This is reflected in the culture that develops within the organization and how it reaches beyond the organization CITATION Kar21 \l 1033 (Schroeder, 2021). This culture can even extend to other stakeholders and help build a strong brand image pegged on virtues.
Virtue ethics also help to create a culture that is not focused on short-term business interests but promotes long-term responsible and ethical business practices CITATION Chr161 \l 1033 (McLaverty & McKee, 2016). Its strategic decisions are pegged on sustainability and consider the interests of all stakeholders, including local communities and their cultures, employees, shareholders, customers, suppliers, and the environment. Virtues are about doing good, and the business entity ensures all decisions stem from virtuosity.
Explain and contrast the various approaches to staffing
Staffing entails hiring and recruiting workers for a particular role within an entity (Ployhart, 2006). Employees are the most valuable asset a business has. Without employees, organizations cannot achieve the set goals and objectives (Siddiqui, 2014). Staff members are responsible for implanting a company's vision and strategies that navigate an organization in the right direction. Organizations need to identify the right people with the right skills and experience to occupy particular roles (Mamoon, 2013). A business needs to identify a proper staffing strategy for the following reasons. Firstly, staffing should meet organizational goals. Businesses should recruit and select the right candidates who are motivated and willing to work towards achieving the set goals. Secondly, staffing determines the level of mo...