Discuss about the Innovations in International Business.
International Business Environment: Haier Analysis
Multinational company can be broadly defined as any small or big company that engages in any kid of international trade (Cullen & Parboteeah 2009). Emerging market multinational companies today are gaining top positions in the market. In 2003 the firms that occupied positions in top 2000 companies of the world were from countries like USA, Japan and Britain. But the recent list by Forbes witnesses the change in trend. Most of the companies in the list are from markets like China, Russia, Brazil and India. According to the data five of top ten companies are Chinese (Frynas & Mellahi 2015). Haier is as example of successful Multinational Corporation from China. The Haier Group was founded in 1984 in China .Company’s headquarters are in Qingdao, China. Current CEO and Chairman of the company is Zhang Ruimin. The company majorly deals in electronic home appliances. It is now world’s leading brand in white goods. Major products of the company include commercial heating and cooling systems, consumer electronics, small and big appliances. The company’s international expansion began from Indonesia. It entered Indonesian markets in 1996. Today the company is spread in almost all the major markets of the world. Haier is committed to provide high standard product quality, technical specification and after sale customers for developing a good brand image in the overseas market. Haier adopted a strategy for international markets which was divided in three steps. These steps were going out, going in and going up. With its ‘Global brand strategy the company is successful in more than 100 countries and regions across the world (Haier 2015).
Strategy plays a vital role in for the success of any firm in international market. A well-developed strategy can bring success to organisation whereas a poorly formulated strategy can result into adverse impacts for the company. Haier had a well-developed strategy to enter international markets. Haier entered global markets not only to earn foreign exchange it entered to build a global brand image. The firm adopted the approach of “taking on the more difficult ones first” for the same it develop the three step strategy of going out, going in and going in. According to the strategy the firm initially focused on building a brand image by entering the market of developed countries like USA and Japan. Later it entered the markets of developing countries by taking the advantage of good brand image from developed countries market. The last was to become a market leader with highly innovative products. Haier was successful in achieving expansion to international markets very quickly because of its differentiated international acquisitions, cultural integration and mechanism innovation. Cultural integration is the most important aspect for being successful in the globalised market. Cultural integration can be understood as frictions created between different cultures. It affects organisation functioning and is a prerequisite for mutual trust and shared goals (Galpin & Herndon 2014). Innovation is another key factor that is responsible for the current market standing of the company. According to Buckley (2012) the main reason responsible for growth of multinational organisation is the shift in structure. The focus is now shifted to technology based goods and more investments are incurred on research and development. Innovation is one of the most essential factors responsible for growth and development of multinational companies.
Globalisation can be described as the process which integrates people, processes and government s of different countries. The main driving force for globalisation is international business and international trade (Dreher, Gaston & Martens 2008). To be successful in business in today’s scenario, every firm needs to have a profound knowledge of its internal and external environment. Firm must be able to analyse different environmental situations that positively or negatively impact the company. Also today’s business environment is dynamic therefore forecasting becomes a tedious task for the company. The firm should make efforts to identify various opportunities and threats in the challenging environment to deal with the changes. Identifying the opportunities and threats enable a firm to deal with the threats turn their impact positive, it also helps to grasp the opportunities ahead of competitors. Globalisation has introduced various opportunities and threats for different firms. Various opportunities are discussed that globalisation has presented for Haier. Haier has various opportunities in the domestic market. The current data reveals that favourable policies of Chinese government are improving the living standards of people. This improvement in the lives of people especially rural population will increase the demand for domestic appliances; this is an emerging opportunity for company in the domestic market segment. Another opportunity for the firm is for both domestic and international markets. The rise in the level of pollution and energy consumption is alarming situation in various parts of world. Now people are becoming more aware towards environment protection this has increased the demand for green electrical appliances. US launched a $40 project for China’s refrigerator manufactures to promote the manufacturing and sale of green refrigerators (CSR China 2006). This type of scenario existing in various countries will create an opportunity for the firms green appliances. This opportunity can be fruitful if the company develops more innovative green products. Globalisation has strengthened economic integration among nations. This integration has resulted into interdependence among various nations around the world. This integration and interdependence has presented the opportunity to the firm to enter into strategic alliance with companies of other countries to gain competitive advantage and strengthen the brand value. The firm’s acquisition over the Japanese brand Sanyo will present more opportunities in countries like Vietnam. The Government’s support to firm is also an opportunity to the firm. Chinese government launched a policy in year 1999 to encourage the local firms to invest in overseas markets. This policy provides all the required support to the domestic firms to enter the international markets (Wang 2016). The integration among various nations have provided the firm with an opportunity to procure raw material and resources from anywhere in the world. This can provide the firm with the advantage of manufacturing cost reduction and increase in profit margins. To grasp this opportunity Haier should make use of the international resources.
Along with the opportunities globalisation also brings various threats or challenges for the firm. The major challenges are discussed ahead. The recent emerging threat to the company is rise in the wages of workers in China. According to reports last year average hourly wages in China were $3.6. These wages were 64 per cent high as compared to the year 2011. Thus the trend of rising wage rates does not make production in China cheap anymore. The reason for this is globalisation, now people have access to jobs in various countries and various foreign companies that invested in China are ready to pay higher prices to workers. This trend of rise in worker’s wages is a direct threat to the company because most of the firm’s production activities are based in China. This factor will ultimately result in reducing the profit margins for the firm. Another major challenge for the company is fierce competition in both domestic and foreign markets. The main competitors of the firm in domestic market are Gree and Midea. In global markets the major competitors of the firm include giant market players like Whirlpool, LG, Panasonic, Sony and Electrolux. Whirlpool is the company which stands at first position in manufacturing home appliances (Whirlpool 2017). Another big name Electrolux stands for innovative products. It launched first talking washing machine in the market. The company also introduced robotic vacuum cleaner in the world’s markets. These are just examples from two competitors; other competitors are also well established players in the market. Therefore the level of competition is very high in the market. This is a major threat for the company. The next threat for the firm that globalisation presents for the firm is price war. Now every company has access to resources around the world. Every company can get the benefit of low production cost therefore the close price war with the competitors has presented the price challenge for the firm. The next threat that company can face in the global markets is negative impact from country’s image. Country’s image plays a vital role in creating the brand image. The companies from countries like Germany, USA and Japan have a positive impact on brand equity of the company. China does not have that good image. Chinese products are usual perceived to be low quality and low price. This is the threat for company’s products in global markets (Yidan 2009). The challenges and opportunities are to be dealt with utmost care in order to survive in the global business environment.
The globalisation not only presents challenges and opportunities for the firm, integration of culture also affects the role of manger in terms of communication, negotiation, decision-making, human resource management, and ethical behaviour. Traditional roles of the mangers include the role of leader, negotiator, figurehead, liaison, communication. Today also the mangers need to perform same roles but with a slightly different perspective. The mangers need to make employees comfortable with the change in culture. They are required to effectively manage the organisation in such a way that supports employees to adapt to the changes and number of conflicts of and issues and issues are resolved (Boundless 2017). Free movement of people and products across the globe have made the job of human resource manager more challenging. The role of HR manger which was once confined to recruitment and solving occasional disciplinary problems now involved more strategic functions to manage the people globally. The changed role involved functions such as effectively handling the labour laws related issues in different countries, deciding an attractive pay and benefits plan depending upon the country, recruitment is become more complex as the pool of talent has widened and the most important function is managing the cultural differences effectively. The manger should be able to understand cultures and traditions of various nations and ensure employee satisfaction of employees coming from different cultures (Scottter 207).
In the context of business home country can be defined as a place where the business was first established or where the headquarters of firm are situated. The host country refers to the country where the firm has expanded its operations outside the national boundaries (Moeller, Harvey, Griffith & Richey 2013). The home country for Haier is China whereas it has more than hundred host countries. There are various differences in the environment of home and host country. Both of the countries affect each other in various ways. Therefore to effectively manage a global enterprise manger needs to learn various lessons. To conduct the business effectively in this borderless world manger needs to learn, that how to maintain relationships with international clients around the globe. The next thing that is required is the ability of manger to navigate through the foreign culture. Having profound knowledge of both home and host country will only enable a manager to effectively mange and resolve issues that arise because of cultural differences. Managers need to understand that qualities and skill set that were successful in managing domestic business can prove to be reason of failure in international business. Today’s international business requires fluent communication skills and negotiation skills. These are the basic skills that cannot be overlooked.
The other skills that mangers require to effectively manage the difference in the home and host country are cultural sensitivity, multilingual and global management philosophy. Cultural sensitivity can be defined as valuing and respecting different cultures. It can also be defined as an ability to work effectively in culture other than your culture (Massen and Kowalewski 2010). Every manger needs to culturally sensitive. Managers need to understand the impact of culture on business relationships. The managers should also learn some of the common cultural practices.
They should now how people of different cultures interpret and assign meaning to voice tones and body language. They should effectively imply cultural considerations in negotiations. The next skill that global mangers need to have is being multilingual. Multilingual means ability to communicate in various languages. Managers are already efficient in the language of host country. But while managing global organisation they need to be able to communicate in more than one language. They should at least know the language of their largest client or trading partner. It is also necessary to communicate in such a way that non-native speaks do not have difficulty in understanding (Bisk 2017). The next skill is global management philosophy. Every global manger needs to have global strategic thing thinking.
To gain a strategic insight manager must be aware about the whole working of the business on a global level. This strategic approach enables him to make best out of best people around the planet (Clawson 2014). Dealing with the uncertainty is another important aspect for manger , which is very essential for managing complex business organisation (Wengrzyn 2017).Some other common skills that a manger who is forking for different countries needs to learn are humility towards every culture, curiosity and desire to learn and ethics and morality in personal life. The above listed skills and qualities are required for every manager to effectively manage an international organisation. This applies for managers of Haier group too.
These skills and qualities can be acquired through the personal experience, learning lessons from other mangers within the same or different company and through professional learning programs designed especially for managers. Knowing about the skills is a different thing but bringing them to regular practice is also very important. The lessons can be brought to practice only by implying them to practical situations.
From the above report it can be concluded that globalisation is a process of integration. This integration has resulted in creating a borderless world. The companies are now engaged in doing businesses round the globe. This has introduced various challenges and opportunities for the firm. Now the social, political, legal, economical, technical and environment implications on business are very dynamic. In case of Haier a Chinese firm that deals in electrical appliances various opportunities and threats are identified both in domestic and international markets. These opportunities include rise in living standards of people, rising demand for green electrical appliances, strategic alliances and government support. The threats for the firm include rise in wage rates in china, fierce competition, price war and country image. Today the firm is major player in the market the credit for the same can be given to the well-developed global strategy f the firm. The strategy provides the direction for working in such a dynamic environment. Globalisation has not only created uncertainties in the business environment it has also leaded to change in the role of a manager and human resource manager. The roles have undergone the transformation in recent decades. Major changes in role are because of cultural integration. Now the mangers are required to manage more complex organisation structures with diverse workforce. To be successful in managing the organisations managers need to learn various lessons. The mangers should clearly understand the interplay between home and host country. The mangers must possess the qualities such as sharp communication skills, good negotiation skills, cultural sensitivity, multilingual and global strategic thinking.
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