Doing Business Across Culture and Boundaries
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Published: Tue, 27 Feb 2018
Almost every country in the world, among other things governments are the centre of taking in to accounts macroeconomic conditions. By doing so the country will in turn into economic wellbeing and giving more opportunities to the citizens. As far as daily money-making activities are concerned, laws, rules and institutional measures are given attention. These measures can be applied through the small as well medium sized companies in the course of their life circle. Until very recently, however, there were no globally available indicator sets for monitoring these microeconomic factors and analyzing their relevance (The International Bank for Reconstruction and Development / The World Bank, 2008). As also acknowledged in The International Bank for Reconstruction and Development / The World Bank, 2008, doing businessand the standard cost model initially developed and applied in the Netherlands are, for the present, the only standard tools used across a broad range of jurisdictions to measure the impact of government rule-making on business activity. Therefore the government can be benefited on business but the most important thing taking into account in achieving specified target, its environment must be improved.
1.1. FEATURES OF DOING BUSINESS
As far as small as well as medium size enterprises are concerned, in doing business either domestic or abroad, some features are appropriate in both. These features which grant a quantitative measures of regulations including for starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.
In addition to that a fundamental premise of Doing Business is that economic activity requires good rules. These include rules that establish and clarify property rights and reduce the costs of resolving disputes, rules that increase the predictability of economic interactions and rules that provide contractual partners with core protections against abuse. While these regulations always intended to be efficient in such a way that, it will be very easy in the implementation as well accessible for those who need to use them.
However rules and regulations are differing from one country to another. Such that for those countries having burdensome regulation resulted to have large number of informal sectors and unemployment, as well as economic slowdown. From this stand many countries recently have smooth business start-up. Taking the example from Azerbaijan from the graph below, in 2004 introduce the maximum time for the registration procedure and it took 122 days for starting business. As far as time goes on, in 2007 and 2008 government set up a one-stop shop. This resulted to reduce the time by 87% for registration up to 16 days. In addition to that easier set up business mostly can encourage not only higher output among the existing firms in the market but also increase the per capital income.
Alternatively as of the case in the figure below the by reducing entry cost will lower the output production of the firm. This may due to the fact that many firms are encouraged to enter in to that particular market. Thus it seems that the prices of goods reduced, and finally per capita were goes down from 14.4% in 2004 and 3.2% in 2008.
In view of that, doing business does not measure all aspects of the business environment that matter to firms or investors—or all factors that affect competitiveness. It does not, for example, measure security, macroeconomic stability, and corruption, labor skills of the population, the underlying strength of institutions or the quality of infrastructure. Nor does it focus on regulations specific to foreign investment. Doing Business does not cover all regulations, or all regulatory goals, in any economy. As economies and technology advance, more areas of economic activity are being regulated (The International Bank for Reconstruction and Development / The World Bank, 2008).
2.0. REASONS FOR ENTERPRISES GOING GLOBAL
The majority of enterprises try to move and doing their businesses to outside countries by going global for the different reasons. At the same time in order to remain to the lead in the competitions, mass of the enterprises usually implement both reactive and defensive approach so as to increase their competitions strength. While others few take either reactive or defensive in achieve the same functions. From these reasons the enterprises usually move faster as possible to safe and sound a tough position in either developed or rising markets with their goods adapted specifically for the customer demand of those particular markets. However nearly all global markets are drawing enterprises together with new assets or resource investments with good encouragements.
Among of the reactive or defensive reasons for doing business globally first trade barriers; because of the burden for the restrictions such as tariffs, quotas, policy of by-local and others that create manufacturing and exporting of goods too expensive, encourage many enterprises move from exporting their goods in a foreign country so as to avoid such troubles. Second, customer demands; based on customers demand, enterprises follow this opportunity for effective operations, product assurance and reliability, as well as logistical problem solutions. This will in turn to the most of the customers ask for foreign suppliers to stay and supply in a local market in order to enhance the flow of the production. On the other side enterprises follow that request to both catch-up and avoid losing the business. Third, globalization of the competitors; in this aspects companies are aware that if they leave companies overseas too long without challenge or competition, their investments or foreign operations in the world market may be so solid that competition will be difficult. Therefore, they try to act quickly. Lastly, regulations and restrictions; most companies’ home government may have regulations and restrictions that are so inconvenient and expensive, thus limiting the expansion, encroaching in the companies’ profits, and making their costs uncontrollable. Hence the reason for the companies moving to different market environment with few foreign restrictive operations.
Apart from above reactive or defensive reasons, other proactive or aggressive reasons including growth opportunities, economies of scale, incentives and resource assess and cost savings.
3.0. CHALLENGES IN DOING BUSINESS
Because of the globalization nowadays many things become easier and the world is so much busy. Such that, it takes a few hours travel away by plane and for example the factories shipping materials from one place to another around the globe. Which promote the production and the relationship also is increased more widely. So far the business is developing so fast, while the market is growing internationally and it reached the point where all businesses are as a global business, particularly if we consider the amount of goods coming from different corners of the world.
Among other things in generally, the complex and difficult thing in dealing and manage the business globally is that, looking for the right person who fit with the right skills. This is because, things like strategic orientation, customer focus and market knowledge is very hard task in dealing with business. Situation like this for instance Mr Rick Wang, the managing director of Retail Co Inc., the master franchisee for the Athlete’s Foot in China, faced when he was the first move in opening the first store on the Huaihai Road in Shanghai during the year of 1998. While team leadership, change the leadership and staff development are the simplest issues. Therefore experience, IQ and EQ are three element capabilities in business; low EQ is the most impact determiner of collapse. But many people are hired according to their IQ and simply excited as the case of EQ (emotional intelligence).
Here again, doing business as well as dealing with people and even market outside your border which almost in connect with risks, is something very complicated and it needs to learn some lessons to avoid them. According to http://smallbusiness.dnb.com/sales/international-trade/740-1.html, there are various techniques that can help business persons in reducing certain number of risks in doing business globally which include:
- Do plenty of homework. You should learn your target country´s credit and accounting practices, cultural nuances and export restrictions.
- Treat all suppliers the same. Take the same disciplined approach to bargaining with foreign merchants as you do with domestic suppliers. Resist goods you don´t want and keep from being overcharged for items you like. Deal in goods within your own specialty and know your bottom line — the highest amount you can afford to pay and the lowest price you can reasonably accept.
- Hire a freight forwarder. Using a freight forwarder to handle packing and customs-clearing paperwork will reduce shipping costs.
- Purchase insurance. Generally speaking, the importer and purchaser take legal possession of the goods when they leave the factory, whether or not they actually arrive. Most small importers or exporters buy “all risk” insurance, and many smaller dealers buy insurance from the freight forwarders or shippers.
- Indeed, there are not only motives to get into and benefits from global markets, but also risks drown in locating companies in certain countries. Each country may have its potentials and woes that are associated with doing business. Where also in acknowledge to http://EzineArticles.com/?expert=Sidney_Okolo some of the risks in international business are:
- Strategic Risk: The ability of a firm to make a strategic decision in order to respond to the forces that are a source of risk which impact the competiveness of a firm like bargaining power of suppliers and consumers.
- Operational Risk: This is caused by the assets and financial capital that aid in the day-to-day business operations. Such as breakdown of machineries, shortfall of the goods and services, lack of perfect logistic and inventory will lead to inefficiency of production.
- Political Risk: The political actions and instability as well things like governments’ policies, economic conditions, security factors, may make it difficult for companies to operate efficiently and cannot effectively operate to its full capacity in order to maximize profit.
- Technological Risk: Lack of security in electronic transactions, the cost of developing new technology, and the fact that these new technology may fail, and when all of these are coupled with the outdated existing technology, the result may create a dangerous effect in doing business in the international arena.
- Environmental Risk: Air, water, and environmental pollution may affect the health of the citizens, and lead to public outcry of the citizens. These problems may also lead to damaging the reputation of the companies that do business in that area.
- Economic Risk: This comes from the inability of a country to meet its financial obligations. The changing of foreign-investment or/and domestic fiscal or monetary policies. The effect of exchange-rate and interest rate make it difficult to conduct international business.
- Financial Risk: This area is affected by the currency exchange rate, government flexibility in allowing the firms to repatriate profits or funds outside the country. The devaluation and inflation will also impact the firm’s ability to operate at an efficient capacity and still be stable.
4.0. MINIMIZING CHALLENGES IN DOING BUSINESS ACROSS CUTURE AND BOUNDARIES
What manager should do?
Good management skills and negotiating capabilities are the most important things when dealing with business across culture and boundaries. Countries are differing in cultures, beliefs and rituals which can create difficulties. Therefore managers need to learn those differences one by one in order to conduct a successful negotiation efficiently and effectively for the sake of profit making among them are:
Cross-cultural negotiations require careful preparation in order to stay ahead and take advantage of the other party. To avoid problems, managers need to be aware of the issues like cultural differences, language, beliefs, behaviors, family environment, differences in time, work habits, and religion. Different regions have different negotiating styles. So, when managers familiarize themselves with these important negotiating tactics, they may understand the negotiating styles of their counterparts.
Also building relationships; managers should look for strategic partners not only are familiar with cultures, behaviors, and languages but also can trust, respect, and be comfortable working with.
Shared information; a focus group of businessmen and women is recommended in order to discuss the issues that matter to each party. In this capacity, playing role reversal prior to attending the session is recommended. Usually, questions are asked by both parties to address their concerns, the issues that matter to them, and answers are provided by both parties in response to those issues and concerns. In capitalist countries, such as the United States of America, companies use direct approach in negotiations, while in other countries, an indirect approach is used (http://ezinearticles.com/?Doing-Business-Across-Cultures-and-Borders&id=1148192).
Therefore in order to be successful Companies should learn how to adapt to each environment.
Part of the business growth is exporting goods to abroad, even if it can create a number of challenges. Indeed the company should first find the help from expert who understand the set of laws of export and import as well as shipping methods and regulations in foreign countries. On the other hand means for goods transportation, best shipping rates, examine the necessary documents from foreign destinations are necessary.
However on a certain situation, the benefits can exceed the risks. Therefore, companies should take an assessment for that risk in each country together with intellectual property, human resource and ownership restrictions before undertaking in to any of the countries.
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