International business operations are related to the process in which goods, technology and services are traded between the national borders. This is mainly based on the cross-border transactions which are made with the help of different services and goods. The transactions based on different economic resources thereby include skills, people and capital for production of services and goods on an international level. Multinational organizations which are responsible for conducting business operations in different overseas markets need to bridge various national markets in a global marketplace. Two major macro scale factors are able to affect the process of globalization. First factor is based on the elimination of different barriers for making cross-border based trade. On the other hand, the second factor is based on effective technological change which takes place in information processing, transportation of technologies and communication .
The essay will be based on the analysis of differences between international business operations that are performed by organizations which operate in authoritarian regimes and liberal democracies. The differences which are experienced between the ways by which transactions are made between the organizations operating in two types of economies will be analysed in detail. The major levels of issues which are being faced by the international or multinational business organizations in different countries will be analysed in the essay in detail. The advantages and disadvantages of operations of multinational corporations in autocratic and democratic countries will be an important part of the analysis which will be done in the report .
Comparison based on international business operations
As discussed by Lankina, Libman and Obydenkova, cross-cultural business operations or international business based operations have started growing with a rapid pace in the current environment. The levels of awareness based on the usage of internal resources is not able to help the country in order to develop its position. The possession of enough amounts of resources does not exactly mean that the country is able to use the capabilities effectively. The countries require support or services from different external countries in for the proper exploitation of resources. Foreign direct investment or FDI is thereby considered to be highly inevitable for the effective economic progress.
As argued by Bader , globalization is helpful for the countries in order to liberalize different norms and laws which are based on foreign direct investment and international business. Politics is considered to be an important factor which is related to the ways by which investments are made in foreign countries. Business and politics are thereby linked with each other with respect to effective investments made in operations. The business related activities which are performed in autocratic countries are considered to be different as compared to those that are conducted in democratic countries.
As discussed by Dean , international business faces lesser levels of constraints in the liberal economies or democratic countries as compared to the autocratic countries. For example, an American organization will face lesser troubles in their operations in democratic countries as compared to operations in an autocratic country. An organization like Google will thereby face fewer problems in the operations in India in comparison to the operations which are performed in China. The major reasons behind withdrawal of Google from China are based on the censorship policy and the human rights based violations in the country.
According to Ruhs , the business operations that are conducted by Google are based on its duty related to information which is provided to the users. The information which is provided by Google to the consumers in China is not acceptable by the government and their interests. News related to different controversial incidents are not allowed to be provided in China. Google is restricted from providing different information based on news which can be offered to the users as there are chances of major issues which can be take place in the country. The possibility of riots which can take place in the country is also quite high if news is spread among the customers. Google has thereby taken the decision to withdraw its operations from China in spite of the huge growth based opportunities which are offered by the market .
Google has not faced any major difficulties related to spreading news in liberal countries like India. The organization is thereby able to provide effective information based on different issues without any barrier. The news related to criticisms which are faced by the Prime Minister of India related to different steps taken by him in the country have been provided without any barriers to the users in the country. The multinational organizations which have their operations in the country are allowed free trials due to the liberal environment that has been developed in India .
The activities of a multinational corporation like Google in China are affected due to the type of economy which has been developed in the country. Religion is also able to act as a major barrier to the operations of Google in another autocratic country like Saudi Arabia. The organization is also not allowed to provide effective information to the users related to different issues due to the religious environment which has been developed in Saudi Arabia .
According to Connell and Dados , a Chinese organization which operates in other countries like, India and America is a completely different case. The Chinese organizations which have their operations in the two countries are not affected by international relations that are developed between the countries. The organizations are able to operate in a profitable and free manner in both the countries. The Chinese multinational corporations can seek any type of legal help if they face issues while operating in the two countries.
The laws which are developed and implemented in the democratic countries and autocratic countries are considered to be quite different. The international organizations are able to establish business operations directly in the democratic countries like America and India. The establishment of operations in China however requires an effective partnership with local Chinese organizations. Joint venture can thereby be considered to be the only process which can help the organizations to enter China . The partner who is a part of the joint venture may also not receive fair levels of treatment in the country. For example, a major multinational corporation named Volkswagen had to enter China with the help of partnership with a Chinese organization named Shanghai Automotive Industry Corporation or SAIC.
In the year 1984, Shanghai Volkswagen was established in China with the help of this partnership. Volkswagen had started facing major issues related to the manufacturing based operations which are to be performed in China. Shanghai Automotive Industry Corporation later ended its partnership with Volkswagen and formed a new partnership with General Motors. Volkswagen had later faced huge levels of competition from the organization which had previously developed a partnership in order to operate in the same country. The new alliance which was thereby developed by the Chinese organization with the biggest competitor of Volkswagen was not questionable in the courts in China .
As discussed by Mastanduno , the intellectual property based rules which are developed in the autocratic countries are not good in comparison to the laws formed in democratic countries. The organizations which are a part of different autocratic countries do not have issues in stealing technologies from other organizations. For example, China is famous for the duplication of different products that are offered by different organizations. Legal system which has been developed by autocratic countries are not free as compared to the liberal countries.
According to Juncos , the interests of local organizations are provided more importance in the autocratic countries. This is considered to be a major reason behind the issues which are faced by the international organizations that operate in autocratic countries. The business based climate which has been developed in the autocratic or democratic countries are considered to be different. The various challenges which are faced by the international organizations in the autocratic and the democratic countries can be analysed with the help of two models namely, Uppsala model and Dunning’s Eclectic paradigm.
As discussed by Kobrin , the principles of Uppsala model based on internationalization suggest that the organizations try to internationalize the operations to countries which are psychically closer as compared to the distant markets. The American organizations search for opportunities which are available in India as compared to those that are available in China. This choice of American companies is mainly based on psychological closeness of the two countries. China however is a communist country and principles which are followed in the country are also communist in nature. China has also been able to provide high levels of competition to America with respect to the organizations which operate in the country. The organizations of America are thereby not able to operate in a comfortable manner in China as compared to that in India.
According to Lankina, Libman and Obydenkova , the effective levels of cooperation are possible among the firms which belong to the countries which are psychically similar in nature and further they move to the markets which are psychically distant as well. For example, the giant of British supermarket industry, namely Tesco has been able to establish different business units in various major Asian and European countries before the company decided to move to the distant markets.
Another major model which can be used for the analysis of international business operations is Dunning’s Electic paradigm. This model has been able to explain different opportunities and challenges which are faced with respect to international business operations in the democratic and autocratic countries. Dunning has stated that an organization which operates in the foreign country can face many issues which include, the lack of information and poor access to the distribution based channels. It has also been pointed out by Dunning that an organization which operates in the foreign country can face many cultural, spatial and linguistic issues as well .
As discussed by Balaam and Dillman , the work based culture which has been developed in the democratic and the autocratic countries is different. Trade union based rights are thereby allowed to the workers who are a part of the organizations in the democratic countries. On the other hand, the trade based rights and labour rights are not provided to employees in autocratic countries. International organizations which operate in the democratic countries can face high levels of demands from employees as compared to those from the autocratic country. The employees in autocratic countries are thereby exploited quite easily as compared to those who are a part of organizations which operate in the democratic countries.
The international or multinational organizations have to face huge number of challenges as compared to the opportunities in the autocratic countries or the authoritarian regimes. The business based climate, legal system and business principles which are developed in the autocratic countries are not highly favourable for the international organizations. The different principles which are developed in these countries are mainly based on the ways by which the organizations aim at safeguarding the needs and interests of the local organizations as compared to those of the international organizations as well.
The international organizations on the other hand are able to receive fair levels of treatment in the democratic countries. The judicial system and laws related to business are able to provide effective levels of support to the multinational corporations which operate in the countries. Different issues which are faced by the multinational corporations in democratic countries are lesser as compared to those in autocratic countries. An organization which originates from a democratic country faces major issues in the operations which are to be conducted in an autocratic country. The highly globalized market in autocratic countries on the other hand cannot be ignored as they are able to provide effective levels of opportunities.
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