Impact Of Doing Business Globally Economics Essay
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Published: Mon, 5 Dec 2016
AMD has decided to establish a new semiconductor fabrication facility in the city of Dresden in Germany. It is an action of doing business globally which brought influence to the AMD and the USA and the Germany. This essay firstly discussed the impact of doing business globally from three perspectives, the enterprises, the home country and the host country. Then the impact on the international financial making will be discussed. Last, the report will discuss the impact on the ethical decision making
2.0 The impact of doing business globally
In general, doing business globally refers to an enterprise directly do business to integrate global resources in order to achieve the business objectives. Doing business globally will have an impact to the business, home country and host country.
2.1 The impact on the enterprises
Enterprise is the main international operations with the dynamic of the right to choose international operations. At the same time, company will also be influenced by various positive or negative impacts of international operations. Positive aspects of the enterprise are that it can continue to integrate global resources to help enhance corporate image and competitiveness, thus getting great economic and political gains through doing business globally; negative impact is that the enterprise needs to face more complex environment in which the management of the enterprise face a huge challenge (Deepak Sethi and William Judge, 2009).
In the process of globalization in the business, AMD took advantage of cheap labor resources in Germany. It also found that Dresden was once a technologically advanced place in the history. Setting up production bases in Dresden was able to absorb the local talent, but also it can use advanced technology. It was useful to enhance the core competitiveness of AMD. Second, the local government provided AMD with subsidies, which can help AMD to reduce production costs and improve profits.
2.2 The impact of home country
Home country refers the country of origin or region enterprises engaged in international operations in international business activities. Doing business globally has also brought opportunities and challenges to the home country’s economic development: opportunities mainly refer to in international operations to promote the home country’s economic development and industrial restructuring: first, it is conducive to adapt the home country’s economic construction and improving the quality of national life; second, through specific import and export trade or foreign direct investment strategy decisions, is conducive to optimizing the industrial structure of the home country; and third, to enhance the international status of the home country and provide protection the home country’s political and Foreign; Fourth, with today’s increasingly integrated global economy, doing business globally also take the missionâ€‹â€‹to pass the home country’s culture and values (James G. Coon, 2004).
Challenge is the international operation caused a series of economic, political and social issues and brought difficulties to the home country’s foreign trade and diplomatic and political activities.
AMD set up a new fab at Dresden in Germany. This will increase the value of GNP to the U.S., which help to improve the living standards of the United States. In addition, AMD will improve America’s position in the international business and expand the influence of the brand, but also can pass the culture and values ofâ€‹â€‹ the United States to Germany.
2.3 The impact of the host country
The host country is the foreign country which the enterprise engages when doing business globally. The host country benefits are also influenced by international businesses. Doing business globally can improve the relationship between the host and home countries, and promote economic development in the host country and improve the quality of its people’s life (Miriam Muethel and Martin Hoegl, 2010). AMD building its factory in Germany has played a significant role to address the problem of employment in Germany. It reduced the unemployment rate in Germany. At the same time, it also brought advanced technology into Germany. Besides, it can also increase the tax revenue in Germany.
2.4 Suggestion to AMD and other enterprises when doing business globally
First, the enterprise who wants doing business globally need strategic thinking for long-term development, deal with interests among enterprise, the home country and host country. Second, enterprises should identify their comparative advantage to form an accurate grasp of market positioning, and to take practical measures to change the potential comparative advantage into real competitive advantage. For businesses, the intensity of competition with doing business globally is different from the domestic business. In this case, companies must constantly engage in learning and innovation of international business philosophy and thinking and to get competitive advantage to seek survival and development (Ben L. Kedia and Ananda Mukherji,1999). Third, to accelerate the form change of business organization and build information network are also very important. Doing business globally is a game of interests involved in business, home country and host country. During doing business globally ,for maintaining communication with the home country, host country, and appropriate adjustment of the timing of the operation, the construction of efficient organizational form and adapt to the international information network is an important condition for operation.
3.0 The impact on international financial making
3.1 Impact Analysis
The salient feature of financial activities during doing business globally is its complexity. The source of this complexity is due to system and operational activities of multinational companies located in different countries with different financial environments.
As purely financial activities of domestic enterprises within its scope, the proceeds of capital raise, use, settlement and distribution are not cross borders, and generally do not involve foreign currency, which is relatively simple to manage. And multinational corporations operating in the international arena, involving all relevant economic, political, legal, social and cultural factors, and thus during the financial management, the relevant personnel needs not only be familiar with the situation in the home country, but also involve in-depth understanding of the situation related to the State , and always concern about major changes of the international situation and the country’s political, economic and legal aspects, such as the level of national interest rates, exchange rates, foreign exchange control policy, tax policy, etc., which may have a direct and very significant impact of financial position and profit level.
The complexity of financial environment increases the difficulty and risk of management. The contradiction of different regulations in different countries to the coordination and control of multinational companies scattered all over the world. For example, for the same transaction, the tax laws of different countries, the tax consequences of the transaction may be different in different countries. Procedures available in one place, in another place may have to give up. Meanwhile, foreign exchange management as an important area of multinational financial management, which is in the management of domestic enterprises in many ordinary does not exist, even if it exists, its importance is much lower. Factors such as these, the high demands are put forward to multinational financial management capacity (Charles V. Trappey, Tsui-Yii Shih, Amy J.C. Trappey, 2007).. If the financial mismanagement, enterprises will suffer financial risk. If the risk of exchange rate changes, changes in interest rates and inflation risk, leading multinational real value of assets and liabilities of a change, but also increase the multinational subjected to political risk, legal risk, risk exposure, such as capital allocation so that the company improperly subjected to the influence of local nationalism, there double taxation, tax discrimination.
On the other hand, system and business activities of multinational companies located in the different financial environment of different countries create a potential opportunity to avoid disadvantages, access to additional financial benefits. National political and economic situation is different, mixed hard and soft currencies, interest rates ranging, different government intervention, light or weight the tax burden provide wide variety of choices during doing business globally from this unbalanced world environment (Anna Nagurney, Ke Ke, 2006).
On the current situation of AMD, it faces the continuous depreciation of the dollar, other currencies like the Euro continues to rise. On the one hand, changes in exchange rates bring financial risk to AMD, on the other hand it provides a financing opportunity.
3.2 Inspiration to AMD and other enterprises when doing business globally
Multinational corporations can rely on their network in the world economy and information sources to achieve rational management and ingenious arrangements of financial flows.
First, they can take the use of multi-national operations to reduce financial costs and improve efficiency potential offered, especially from different funding sources in the capital and obtain economies of scale with financing for low-cost. Second, adaptation according to different countries and regional environmental constraints can achieve the international movement of capital and income. Third, enterprises should protect the value of assets and income to make transnational business interests from the erosion of financial risk, which usually caused by national currency devaluation or appreciation or different rates of inflation (José M. Merigó and Anna M. Gil-Lafuente, 2010).
4.0 Impact on ethical decision making
4.1 Impact Analysis
And corresponds to the general definition of ethics, corporate ethics refer to the conduct and values the company and its employees should be followed in the business activities. Ethical decision-making has penetrated into all aspects of organizational life (Russell Haines and Lori N.K. Leonard, 2007). For instance, “whether the company should lay off when it fall in profit or loss? These employees who are dismissed can not get new revenue to come in living within a short time.” “Whether the company should produce decorative materials which are harmful to health, although these materials are large market demand?”
Ethics decision making is a special topic when doing business globally faced by multinational companies. As differences in social culture and system, multinational corporations often encounter embarrassing situation caused by ethical differences due to different cultural values â€‹â€‹and social system. It means that people can not always reach a total consul in “should do”. Values â€‹â€‹or standards of conduct applicable in a country may be resisted in another country (Maria L. Roxas and Jane Y. Stoneback, 1997).
AMD was very cautious in the choice of employees when faced cultural differences between the United States and Germany. It just selected the appropriate company staff. In addition, it gave staff a lot of freedom. AMD also launched the concept of cultural education and training for staff to accept and identify corporate culture.
4.2 Recommendations to AMD and other enterprises when doing business globally
Multinational corporations need to pay attention to the followed standards and principles in the business process. First, respect for fundamental rights and freedoms. Mainly multinational corporations must respect the basic human right to life, liberty, security, rights and privacy; not introduce discrimination because of race, color, sex, religion, language, occupation, ethnic origin, political beliefs; respect for individual freedom (such as religion, opinion); respect local cultural values â€‹â€‹and standards. Second, multinational corporations avoid the negative impact of local economic policy. This is mainly manifested in the activities they must be consistent with local economic development policies; to avoid adverse effects of currency and balance of payments to the host country; to provide true information when paying taxes (Samuel Knapp and Leon VandeCreek, 2007).
From the case of AMD doing business globally, it can be seen that the process will impact the company and the home and host country. It also impacts the international financial and ethical decision making. It brings both advantages and disadvantages so the company should take measures to utilize the good aspects of doing business globally.
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