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DIMENSIONS OF INTERNATIONAL BUSINESS ENVIRONMENT

Dimensions Operations and supply chain management Marketing Human resource management (HRM) Accounting and finance Innovation / Research and Development

Operations and supply chain management Organizations aim to configure the supply chain in such a way that it enables them to reduce the costs of production and to improve efficiency. Outsourcing some of the value-adding activities is seen as allowing greater flexibility and the ability to concentrate key resources on what the firm considers as its core competence. Companies are able to switch suppliers and obtain the most advantageous cost structures for materials and components .
Reduction in the cost of resources such as labour, raw materials, energy (e.g. oil) and finance (e.g. global credit) can all be achieved. This does mean that the operations function becomes increasingly dependent on global factors (e.g. in the market for credit, or in rising oil prices).

Operations and supply chain management Advances in transportation in the last half century, e.g. containerization, bulk sea transportation and the growth of mass air transportation, have had a great impact upon the international business environment.

Information Communication Technologies (ICTs) help to facilitate the flow of materials, services and information.
In the contemporary world, networks of suppliers of materials, components and knowledge providing input to products and services are geographically dispersed.E.g. Big Mac as a global product

Operations and supply chain management


Relationships within supply chains are not necessarily formed by equally independent economic agents .E.g. MNEs vs. local suppliers. The freedom to choose the most economically efficient way of configuring the supply chain at a global level enables companies to transfer value-adding activities rapidly from one country to another .

Companies do not need to take into account the economic and social consequences their strategic moves have on the affected countries.E.g. sweat shop labour, race to the bottom, and ethical issues concerning EPZs.

Marketing A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others (Kotler et al., 2002: 5). International marketing research is aimed at finding out about consumer attitudes that are shaped by the language, religion, values and the norms of social behaviour of different cultures. These attitudes can also reflect underlying economic conditions.
Marketing also constrained by the legal and political environment. Regulation can be found either at the national level or through international agreement. These factors affect decisions regarding the extent to which the elements of the marketing mix (product, price, promotion and distribution) will be standardized across markets or adapted to suit local conditions

Marketing
Characteristics of age, gender, race and income can become issues to be addressed in the marketing design either as problems to be overcome or as opportunities to be exploited. Problems with the assumption that through addressing peoples needs and wants, marketing is doing good for them and that it has, therefore, some ethical basis. Western corporations accused of cultural imperialism. E.g. cigarettes, fast food (e.g. the McLibel case). Societal marketing as a response to critiques of mainstream marketing

Human Resource Management Employment legislation differs between countries, but typically spells out the duties of business with respect to: health & safety at work, working hours, paid holidays, maternity/paternity leave, discrimination on grounds of race, sex, religion, etc.
Need to consider government restrictions on access by and employment of non-nationals. A country with comparatively weak regulation may attract investment, e.g. sweatshops and EPZs. However, consumers may react negatively to employment practices perceived as exploitative, by boycotting products.

Human Resource Management The global impact of the new labour market. Flexible employment. HRM has come to represent a move away from bureaucratic structures to more flexible structures. This means that companies are less inclined to guarantee permanent & secure employment contracts.

Accounting and finance


Firms within the international business environment must comply with the accounting and financial reporting practices of the various countries within which they operate. This is defined by the legal environment. Trend towards harmonization of accounting and financial reporting, auditing and stock exchange standards. Especially the case following the global credit crunch. Companies can take advantage of the international environment to minimise their financial costs. This is particularly true in the area of taxation.

Accounting and finance


E.g. tax havens and transfer pricing as means of avoiding higher rates of tax.

Example: The UK subsidiary of a multinational company constructs a bulldozer at a cost of 27,000 but sells it for 300 to another subsidiary in the same group of companies based, say, in Venezuela, which then sells it on for its market price of 60,000. For tax purposes, the UK subsidiary could claim a loss of 26,700 and pay no corporation tax, even though the group made a global profit of 33,000. That profit is generated by using British infrastructure, but is recorded in another country with a more favourable fiscal regime

Innovation
Innovation brings together the functions and provides a strategic focus.

Marketing for information on consumers is vital if new products are to be successful.


Innovative operations required if new products require new machinery & new processes. This in turn may require innovative HRM for changing work methods. Commitment of financial resources also required.

R&D represents a high cost and therefore companies prefer to direct R&D spending towards low-risk and high-return developments not necessarily beneficial for all stakeholdersE.g. health care .

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