Reasons Why Chooses To Trade Internationally Business Essay

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Urinary incontinence is a term that describes any loss or involuntary urine from the bladder or bowel movement or wind from the intestine.

Urinary incontinence is the case of large-scale, which extends in severity from "only a small leak" to complete loss of bladder or bowel. In fact, more than 4.8 million Australians have problems with bladder or bowel control for a variety of reasons. And urinary incontinence can be treated and controlled. In many cases, it can also be cured.

Content Incontinence (CI) is an Australian Biomedical Company.

It is a branch of the third-generation family business company. Founders, two German engineering skilled migrants have pioneered unique plastic injection molds in Australia and have a worldwide reputation for injection molds.

They supply worldwide with their products manufactured to precise specifications in Australia. Recently received treatment is urinary incontinence by inserting artificial sphincter around the urinary tract for incontinent patients to control emptying of the bladder. This has been done all the research and development in the parent company in Australia. (Source: Case Study)

Incontinence is common in all parts of the world, and research indicates that approximately 40 million people suffer from this in India alone with the corresponding figure depends on the demographics in all parts of the world. Estimated to be approximately 1 million Australians suffer incontinency.

This report will be discussing about CI internationalizing into the world market like India due to the demand in these two countries and finding the most effective and cheapest way to produce their good. Throughout the Report Several Topics will be discussed within International Business Trade and Recommendations will be given after every Issue.

International Business and Globalisation

Reasons why CI chooses to trade internationally

The reasons for CI to trade internationalize because the Incontinence disease is common throughout the world and they face a huge market in India approximately around 40 million people are suffering from this disease. So Manufacturing and exporting this product from Australia is going to be far expensive because the Minimum wage rate in Australia is far too expensive and the dollar rate too. And we cannot predict what will happen to the Australian market in the long run.

But this business is not only hardware based but it got diagnostic techniques, operations, knowledge and experience too.

So the primary reason for this company to go internationally is because to expand its market penetration and to expand outside of its home country for further growth opportunities because CI has introduced a new Product to cure this disease, so this is a new innovation where there are no competitors currently for them. And the product is more marketable in India and throughout the world due to its demand. (TEXT BOOK)

Types of international businesses & reasons for CI's choice

When looking into the types of international Business CI could go through in the short term and long term basis which is; in the short run it can merchandise export its good until CI sets up a plan to Direct invest in the long run. One of the most effective ideas in the short term is;

Short term- CI can manufacture its good in another country like CHINA (because of the cheap cost of production) and then assemble it in Australia and export it to India and America, So the Major problem CI will face is, this product is not only hardware based it is knowledge based too so they will have to send experts to china to train the labourers there and then to manufacture the product, but in the long run this will be expensive because of the cost which will incur to train them and manufacturing then assembling and exporting.

Long term- In the Long run CI could Direct Invest on China to buy fixed assets because countries like china got a very high unemployment rate the country encourages for foreign direct investment on manufacturing industry and by the time in the long run CI could focus on permanently training their employees.

Globalisation in relation to CI

Because of rapid technological advances, we now live in a small world with the global market. Now things are easily transmitted, ideals of Foreign Affairs and Culture are adapted by indigenous peoples all over the world through television, radio and especially now, Internet and social networking media such as Facebook. This dilemma together is called as globalization. The concept of globalization refers to increasing global connectivity, integration and interdependence. Economic, social and technological, cultural and political and environmental industry has taken globalization and corporate control through which cultural boundaries. Global production markets and increase access to a wide range of products to consumers and businesses is available. Globalization has some positives and negatives. Convergence increases the level of communication between cultures. (M. AYhan Kose, 2003)

One of the major opportunities for CI is the current globalization of the world, the technological advancements, and faster way to communicate and advertise like E-mails, social network websites and so on.

As CI is a health industry the ways its relation to globalization on the production side are the new advanced robots, machines which could manufacture its products faster in a cost effective way. In the Long term CI can buy direct invest on those machines because its only first time payment so they do not need to spend much on labors even if their company is in china.

And currently most of the education is done online due to the advancement of internet and faster internet speeds. So in the short term CI managers can educate their workers online through the internet. So in one way this could too be a cheap way.

And it is only because of globalization which made peoples life easier and time consuming.

International Economic Environment

The Country CI is focussing on is India to sell its product, because of the demand in both these countries. In the Short Run if CI exports its product from Australia to India the Barriers it needs to face are;

CI's Barriers to international trade in India;

Although India has opened its economy steadily, tariffs remain high when compared with other countries, and investment rules are still limited. This leads us to see a bit of India as a "fast globalized", while others still see the economy "very protective". (Associates, 2012)

Even in the 1990s, India was a closed economy: average tariffs exceeded 200 percent, and quantitative restrictions on imports were extensive, and there were severe restrictions on foreign investment. The country began to cautiously reform in the 1990s, and edit only in extreme need.

Since then, trade reforms produced remarkable results. And the increase in India's trade to GDP ratio of 15 percent to 35 percent of GDP between 1990 and 2005, and the economy is now one of the fastest growing in the world.

Average non-agricultural tariffs had fallen below 15 percent, a have implemented quantitative restrictions on imports. However, India reserves the right to protect when needed.

Arguments for and against protection of international trade influencing CI

Reasons for protection in International Trade

One of the main arguments for protection on International trade is that, when trade introduces lower cost international competitors, it puts domestic producers out of business. Other examples are

Unfair competition; foreign companies may obtain subsidies or other government benefits. They may be dumping.

Balance of payments- Reduction in imports improves the balance of trade.

To protect declining companies from creating more structural unemployment.

Reasons against International Trade

Free trade does not reduce employment in some sectors, but also creates jobs in other industries. This dynamic is caused by the presence of each of the industries that generally local producers ultimately be exporters (thus increasing employment opportunities) and increased income, because the contract by foreigners who have benefited from free trade, at least partially used to buy domestic products, which also increases employment opportunities.

And in the case of CI, CI is a health industry focusing on the disease Incontinence and the product which it produced is a new product in the market and throughout the world the disease is familiar, so all countries demand for cures for e.g. India where there are around 40 million victims for that disease. This is one of the major advantages for CI is that since it's a new innovation and the product is in demand they can try to maximize their profit.

Political Environment

Republic of India is a huge country that existed in one form or another for thousands of years. Cultural similarities bound, India is the second largest country in the world and the seventh largest country in land mass pure. After liberalization of the Indian economy in 1991, India has seen unprecedented growth, and has become an integral part of the global economy. India is currently the 4th largest country in the world has been growing at an astounding rate of 7.8% annually since 2002.

As a past British colony, India relied on common law based legal commercial laws are similar to those of other Commonwealth countries. The legal system of India is therefore based on mixture of legislation and case law. India is a constitutional republic with a federal system of government in part. Union and the States, both in legislation subjects as stipulated in the Constitution, like the United States. For this reason, and there are a lot of laws and authorities, to make the practice of law on both the original complex and well designed. (KRUEGER, 2008)

Types of political and legal risk affecting CI's operations in India

Indian law and enforcement is feeble. Corruption has gone into police and Law departments due to Delay and Unfair in justice. The economic cost and time spent on legal cases are high, they continue up to twenty years or more. Therefore, public attitude towards legal obligation is lax. India is in a Position that all illegal activities are fine until they are arrested. However, the incidence of large huge attracts media attention. At present, it is a risky proposition to break the rules in India. Companies that have taken named senior officials in the fraud on market prices have gone into major beatings. Indian corporate world is very nervous.

So if CI is exporting to India it will need to face many political and legal risks as stated above because of the weak law of enforcements. (RODNEY SEBASTIAN, 2006)

CI's strategies to manage political and legal risks

As before CI starts to export its product to India the first thing it has to do is to learn and adapt the most effective way to evade from the risks which it might face in future. One of the examples is that it needs to have many influences of many Ministers and Rich people within India to do business, because it's the local Ministers in India who control the state given to them and to be frank through the researches what I did in Internet. Indian Ministers are open for Bribery so it's just money which speaks in India to do Business.

Pay them under the table to get the job done so in future there would not be any conflicts by the local people or by the government on clearing the goods from the port. (RODNEY SEBASTIAN, 2006)

Cultural environment

India is a country of diversity and stability because of globalization. It is a combination of creative cultures and religions, races and languages. India has been under continued protection of the nation's identity and social structure, rich cultural history dating back at least 5,000 years, making India one of the oldest Countries in the world. India is the largest democratic country in the world, a political consensus on reforms and a stable democratic environment in more than 50 years of independence. With consistent growth performance and redundancy, a high degree of efficiency provides tremendous opportunities for investment. One of the basic components of the Indian culture is to understand the traditions and ways to communicate with others that form the basis of Indian society. Understanding of the advantages and the internal dynamics in India is essential for doing business in the country and politicians.

I do not want my house to be walled in on all sides and my windows to be stuffed. I want the cultures of all the lands to be blown about my house as freely as possible. But I refuse to be blown off my feet by any." - (Mahatma Gandhi)

Hofstede's cultural dimension

In the 1970s Hofstede created dimensions of culture on the basis of extensive survey of executives at IBM and of more than 50 countries for the values ​​of work, developed in the later of these dimensions of culture in a manner consistent with the business practices. Hofstede defines culture as the collective programming of the mind which distinguishes the members of one group or category of people from another. According to the results individual behavior is determined by your mental programming, however, have the ability to get out of this and respond in many ways that are different from their culture. The four dimensions to culture:

Individualism/Collectivism

Power Distance

Uncertainty Avoidance

Masculinity/Feminine and

Long Term Orientation

Understanding of these five dimensions will give CI business managers the knowledge to the meaningful and effective interactions between the two cultures. (Hofstede, 2010)

Strengths and weaknesses of Hofstede's framework relevant to CI's managers.

The Strengths- The managers in CI can get background knowledge about the country and the culture they live in that they are going to start business on by the Hofstede's theoretical ratings and study. And they can educate their employees by giving lectures about it or practicing it before sending their employees or managers into that country.

The Weakness- Sometimes it can lead to fear before entering into to business and overreact on something and end up in violence for example if they go to learn more about it and concentrate more on the cultural differences they might even have the fear to do business with that country.

Ways on how cultural characteristics influence patterns of communication for CI's managers in USA and in India

Individualism/Collectivism

India is a collective culture according to Hofstede. In India, there is no standard to reward individuals in the community who are proactive in their careers. This concept is CI managers in India to apply for a decision of the employees in a company without contact someone from the highest authority. According to our research, religion is not an individual case. Some religions have a higher set of rules that must be followed.

Doing Business in India involves building relationships. Indians deal positively with only those they know and trust - even at the expense of lucrative offers. It is important to establish a good working relationship with potential mates.

The United States has the highest individualism ranking according to Hofstede and demonstrates the community with a more individualistic attitude and comparatively loose bonds with other people. People are more independent and ensure only themselves. A country with high individualism, success is measured by personal attainment. Americans tend to be confident and ready for discussions on general topics, however, they maintain their personal. Always keep in mind that all company dealings which involve in negotiations are slow. If the trust is not established then efforts should be place to build a good relationship. The decisions are always taken at the highest level. If the owner or manager of the Indian company is absent, it is likely that the negotiations have reached an early stage. (Hofstede, 2010)

Power Distance

Hofstede analysis for India refers to the presence of large power distance society and all other measures are relatively mild. This would be an indication of the fact that India is in the midst of change. The traditional caste system is banned, but the large power distance score states that the attitudes still exist. This requirement does not necessarily sabotage the population, but accepted by the population as a cultural base. In India, social hierarchies are well in place and even in the work it is not easy to be friendly with your boss at work in most organizations. Calling the boss by his first name is rare in India. In fact, the abuse of the elderly as is common and usually the employee to do something and the only way is to leave.

American power distance is low according to Hofstede. This authority indicates relatively greater equality between segments of society, including governments, organizations, and even within families. This approach promotes a cooperative interaction between the energy levels and creates a more stable cultural environment.

Masculinity/Feminine

India has a masculinity and the third highest rated in the dimension of Hofstede at 56, with the world average only slightly less than 51. Higher the ranking in Hofstede's dimension, more the gap between male and female values. Application of the concept of manhood in America and dozens of crude indicate similarities with the global average, indicating a balance between firmness and humility.

United States has similar points with regard to the control of uncertainty at 43. It is similar for both countries represent a warning to the regional directors, who must understand that there is a different thought process employee minimum in America and India in the future.

Collaborating on major problems it will be much easier as long as you have established authority.

Long Term Orientation

The Last dimension of Hofstede analysis of culture is long Term Orientation. The Long Term Orientation Dimension rank of India is 61, where the world average is at 48. A long-term trend at a higher degree may be indicative of a culture that is perseverant and parsimonious. India has a very high degree of what is more continuous culture and frugal. India has a sense of shame that is shared among a group of people and relationships and considered for registration. It is expected that Indian businessman wants to plan another in their plans because they need long-term trends. Interestingly, even when traveling abroad Indians work hard and sacrifice much in the long term benefit, which is the education of their children. Staying in the workplace is also an indication, so long-term trend this time it was very common in India, but this is changing as a result of economic growth. Rows United States is low in this dimension in 23, compared with an average 45. This indicates the low-order belief companies to meet their obligations, and tends to reflect the recognition of cultural traditions.

Ways on how CI's managers improve cross-cultural communication

CI can try to cultivate special training programs to meet the international trade as a means to reduce the size and effectiveness of "culture shock." Therefore, the goal of cross-cultural training programs is to give international shops skills and strategies that will help them through this adjustment process. The training will contain 3 parts.

The first part is a basic introduction to cultural differences. For those who have never been on board and work in a different culture, surprised that he has a strange culture very different standards and basic assumptions.

The second part presents some models of intercultural management (Shin model, five Hofstede dimensions, and MCI model) and theories that can be applied to different cultural backgrounds in general.

Finally, the last part is to be specific on Indian cultural training, which includes basic concepts and values ​​and ethics of the practical training for Indian businessmen (management style and communication methods) and Indian training. This training helps workers in CI understand the differences and gaps and manage these differences. And can also provide training for family members traveling overseas. While the employee has the support and structure inherent in their work, and the husband and children often more difficult in the process of cultural adaptation, because they may have more daily with the host community. (Sivakumar, 2001)

International Trade Organisations

In the Short Term CI is going to Manufacture in China then assemble it in Australia and then Export to India and USA. So the International Trade organization between Australia and America is Asia-Pacific Economic Cooperation (APEC) and India has submitted its entry to this APEC and the entry is still on progress. On the other there are two ways CI can make use of this International Trade Organizations between India and Australia.

India and Australia are under the World Trade Organization (WTO) and Joint Free Trade Agreement (FTA). Since India is not a member under APEC let me take WTO into consideration because under WTO India, Australia and America all three are members of it.

Ways on how CI can use the range of international trade organisations

So with the use of WTO the agreements under it are;

WTO agreements are the result of negotiations among members. The current group is a result of the Uruguay Round negotiations 1986-1994 which included a major review of the GATT.

Through these agreements, WTO members conduct non-discriminatory trading system that determines their rights and duties. Each country receives guarantees for the treatment of their exports to fairly and consistently in the markets of other countries. (Wade, 2003)

The Banks, insurance companies and telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad now enjoy the same principles of free trade and fairer than initially applies only to trade in goods.

Countries can create a free trade agreement, which applies only to goods traded within the group to discriminate against foreign goods. Or they can give developing countries access to their own markets. This is one of the major advantages for CI because the country where CI is trying to expand its business is a developing country yet. Some of the agreements in WTO are;

Treating imported goods and domestic goods.

Imports and domestic products should be treated on an equal footing at least after the goods have entered the marketplace. The same applies to foreign and domestic services, and domestic brands and foreign copyright and patents.

National treatment only applies once a product or service or item of intellectual property has entered the market. Therefore, the application of customs duties on imports does not constitute a breach of national treatment. (Shell, 1995)

 

Freer trade

Reducing trade barriers is one of the most obvious means of encouraging trade. These barriers include tariffs and measures such as import bans or quotas that restrict quantities selectively. Occasionally, other issues such as red tape and exchange rate policies have also been negotiated.

So with all the above statements we can clearly see that CI has a various different types of opportunities to go through WTO where they could be a layoff on tax or less Tariff.

And whatever strategies bought under WTO should be considered on all countries so that all members under WTO are treated equally. This is one of the major advantages for CI because it can get the same compensation when exporting to India and USA.

Conclusion

As discussed earlier on the report on different stages the strategies used on CI to manage its International Business and expand its Business in India.

The most effective advice for CI to do business in India is;

First, choose the part or parts of the country where it needs to do business carefully, given how vast and varied India is. It's complicated to do business in India as the research findings above in the report on what I found due to the political and legal risks. There are many different cultures within religious group the language is different and so on. So CI needs to be credible here and take every step carefully.

Second, CI needs to be patient. If CI cannot have a one night stand in India because of the cultural differences and cross communication culture. India is a place to make Business and earn to the maximum.

And take Advantage of all of all services given by the Federal government and provincial government.

And watch out for the Media and have your attention always on the media because it's the media which decides new businesses in India.

References

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