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Opportunities That Globalisation Creates For Decision-Makers

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Question:

Analysis of the Opportunities and Threats that Globalisation Creates for Decision-Makers.
 
 

Answer:

Introduction

In the current 21st Century, globalization and internationalization is very vital when operating a commercial industry (Gunnarsson, 2011).  There are several motives for a company to prefer to operate abroad, for example when there are sales abroad while there is stagnation in the home market. Companies have a risk of losing their home markets when they fail to internationalize (Daniels, 2007). Firms also operate internationally due to development potentials, and to subside the cost of manufacturing and expenditures (Sergi, 2007).  Firms are able to come up with new ideas and different methods for problem solving when they internationalize. Managers can be effective, innovative and develop their own expertise through implementation of wider horizons (Bennett, 1995).A company may decide not to internationalize but later on they may lack the home market since there is no domestic market that can be prevented from the invasion of competitors and foreign companies (Cullen, 2002). Local market can be threatened by the world economy however; the home companies will benefit due to the steady development in the global markets.

Internationalization comes through the maintenance and establishment of connections in foreign countries (Jansson, 2007). The relationship is centered on trust and it is crucial that the participants trust one another (Gunnarsson, 2002). Studies shows that trust is the most significant factor in any business relationship in relationship marketing (Hunt, 1994). When parties understand one another’s problems, and come to know each other better, then the understanding of why the goods should be of good quality and why the consignments must be delivered on time is understood clearer. Emerging economies are countries that are regarded as underdeveloped in the past years but have now attained an economic development. Governments reformation and reduction of limitations in the foreign markets are the major contributors of emerging markets.

 


Countries are transforming their economies, and in the coming decades developing markets will have a high segment in the growth of the world (Cavusgil, Ghauri & Agarwal 2002). Entry strategy and negotiations are being carried out for countries that are interested in operating business in the developing markets (Cavusgil, 2012). Knowing the characteristics of a country market it is vital to have a suitable strategic entry in these developing markets. To be able to attract clients in these economies several strategies must be applied. Companies that cannot account for variability and rapid developments in these markets will lose.

Developing market countries can be referred to as countries with the aim of reforming their economy through reduction of problems like poverty, infrastructure, and overpopulation while enhancing their GNP per capita. Internationally, these countries and economies are expected to play a significant purpose in business in the coming decades (Cavusgil, 2012). Despite of recent setbacks and some difficulties in the developing markets such as financial issues in Asia they remain to be centers of attention for firms striving for chances in the world market.

These countries’ economies represent long-term development and extended trajectory (Atsmon, 2011). There has been a tremendous influence in the developing markets from the experience attained from Western markets. The developing markets have an opportunity to be on the same level with the developing countries through importation of technologies and knowledge and educating their students in abroad (Cavusgil, 2012). States in developing markets are good centers for investments since difficulties for direct investment are disappearing (Cavusgil, 2012). MNCs, multinational cooperation´s suggest that firms possess distributions, manufacturing and other units in overseas market have been established in the emerging markets like China, India and Russia over the past few decades (Jansson, 2007). There is growth and enormous demand for various goods such as phones and automobiles in those countries hence being considered as one of the main nations in developing markets.

As stated by various studies, regarding internationalization, there are prospects and challenges in venturing international markets. The opportunities of growing international is that over half of the world populace are in the developing markets hence the chance of growth are very high as the developing rates of the Western markets. There is rapid industrialization and modernization in these economies. There are plenty of business prospects for firms created by the middle class in these economies (Cavusgil, Ghauri &Agarwal, 2002). It is essential to have an understanding and a clear understanding of the approach of doing business in the emerging markets in order to be successful. It is also important for the Western countries to understand that there is no competition between the underdeveloped economies and them, and that these markets do not pose a threat to their success.

 

Volvo Group

Volvo is the leading global multinationals corporations that manufactures marine equipment, buses, construction equipment, aerospace components trucks, and industrial applications. It sales in more than 181 markets globally and has facilities in 20 countries (Thakkar, 2017). Their mission is to be the world leading transportation solution provider through the following four factors: creation of value to clients in specific segments, quality driving, environmental and safety care, construction of modern goods and services for infrastructure industries and transport. The four factors are also the core values of Volvo Group. The group also values working with zeal and energy and reverence for humanity

It was in 1928, when the first Volvo truck was manufactured. Currently it is the second greatest constructor of heavy trucks which has created trust in solutions regarding transport worldwide.  Worldwide Volvo trucks are serviced and sold in more than 130 countries, has 1,460 workshops and over 660 dealerships (Thakkar, 2017). Generally, Volvo has eight factories owned locally and nine assembly plants in the world. Volvo Group Trucks Technology is responsible for handling distribution of complete vehicles and services. Is also supports the goods in the aftermarket. It has over 10,000 labor force working under global terms. The main concern of Volvo team is the delivery of topnotch engineered products and services.

The earliest Volvo truck, moved out of the plant in, India (Bangalore) in 1998 (Thakkar, 2017). The plant is armed with Volvo’s global quality standard norm, systems, tools, people who are dedicated, programs dealing with trainings and culture that is unbeatable driving towards a common goal: Production of outstanding quality Volvo trucks. The plant meets ISO 14,000 certification and ISO 9000 quality ethics for Environment standards (Thakkar, 2017). Volvo Group also has Volvo Powertrain, which produces motor vehicle components. It is the leading manufacturer of engine worldwide, and a focal point for Powertrain (Thakkar, 2017). Volvo is also among the leading heavy-duty diesel engines 9-18.5 liters manufactures in the world. Volvo Group operates in North-South America, Japan, France and Sweden.

The Powertrain business unit, involves manufacturing and development activities with over 9000 workers globally (Thakkar, 2017). A joint venture company was launched in India in 2008. VECV vehicle is a shared venture between the Eicher motors and Volvo Group in India. Through this agreement Volvo Group sells trucks and buses under the Eicher brand in India. The joint venture is a 50:50 between the two firms. The point is to cooperate on development of the product, aftermarket support and purchasing. Mainly, from India there are 3000 workers working for VECV, although there are also experts from Brazil and France (Thakkar, 2017). The accomplishments within Volvo 3P, Volvo Technology, Volvo Powertrain, Nonautomotive Purchasing and Volvo Parts are collected from 1st January by Volvo Group Trucks Operations and Volvo Group Trucks Technology as the organizational department.

Opportunities and challenges: Volvo Group

Social/ cultural environment

There were major reasons for the launching of Volvo 3P supplementary in India. One of the reasons was that, there was possible and large reservation of competence in the engineering field in India. Björn Flood saw many engineering university graduates every year. According to him this created a base for recruitment for the growth of a company. Therefore, India is definitely a place where plants need to be to get the skills they require and seek the future (Vira, 2015) The Indian people were the opportunity for Volvo Group. The Indian people are focused, energetic and wanted to have something in life and gain at the end of the day. Also, the people India are respectful when it comes to administration and law. India is also a complicated country with not so educated, poor but skilled people in various areas hence being an opportunity for a company.

 


Big turnover of people is one of the biggest challenge in India. Volvo 3P has 10% to 15% turnover of employees per annual therefore recruitment is severe due to the population pressure. In India is difficult to get competent people despite the high population. In India, the average age is 30 whereas in Europe is 42 therefore all young people are in need of in getting new, high salaries and wages and good jobs which makes the recruitment process very hard (Vira, 2015) Whenever the company wants to increase 100- 200 people per year they only have a turnout of 60. There is also a low level of experience due to low average age in India. This means that Volvo 3P has to internally train the recruits to reach their competence level which places pressure on their system. Therefore, in order to deal with these challenges the company has French supervisors and Swedish administrators in India who are trained to handle the systems and law regulation

Legal environment

There are few legal aspects in India. This makes Volvo Group to have little legal matters to handled. By the fact that Volvo is a big company with a lot of knowledge and people the task is not done by one individual but through the contribution and participation of various people. Hence disputes and conflict resolution are easy to reach (Vira, 2015) Volvo as a company made sure that all the legal procedural issues are handle before the opening of the company.

Economic environment

The most significant reason and one of the opportunities for starting Volvo 3P in India, was that India and especially Asia was in a developmental phase (Vira, 2015). Volvo 3P required a place they could begin production activities which was the major task of Volvo Group. Another opportunity is that there is cheap labor in India and the salaries have stagnated for the last 10 to 15 years (Vira, 2015). The major challenge for this company is the way of sending money. There should be safety precautions put in place when transferring money especially to other countries which involve India. The company has managed to deal with this challenge through the creation of a special department handling this issue. The special department is contacted by Volvo 3P and they tackle the issue Therefore. it is no longer considered an issue any longer.

Political environment

Volvo has established a good relationship with the local government therefore, they do not have any issues with the government. Additionally, Volvo has many connections with the local administration of the area (Vira, 2015). There are also several things occurring among Sweden and India. The fact that Indian people understand the people of Sweden well becomes a positive implication to both the parties. The king of Sweden has visited India on many occasions and there is also cultural collaboration amongst Gothenburg and Bangalore. Volvo also has offices in Sweden (Vira, 2015). Because the government need more companies to be established it is complaisant. The challenge that Volvo has is the process of establishing other company through the government procedures which is tiring and very complex to handle.

Technological environment

 In the past decades, the company had some issues in terms of infrastructure in India which is a small airport. However, the nearness of the small airport to Bangalore was still an opportunity since it assisted in transportation of small deliverables. Currently India has big airports that are better than the old ones. Knowing that the government was constructing bigger and better airport was among the reasons why Volvo decided to operate in India. Having one direct flight coming from Europe to Bangalore was the other challenge (Vira, 2015). Today there are three flight, Lufthansa British Airways and Air France. The planes are always full since the city is among the famous places worldwide hence the need for early booking.

It is very important to note that the challenges are being deliberated on by the government to foster development. Due to infrastructure issues, there is almost limited places for other companies’ construction. The fact that India is a big city there is traffic since people commute to work hence taking a longer time going and coming from work (Vira, 2015). To handle work and travel problems they apply flexible time whereby, the workers can select depending on their work hours to come late or early and complete work late or earlier. They also offer special transport for their worker taking them to work and back to their various destinations.

 

Lessons for International Business Managers.

World business manager’s role for the displacement of essential resources and assets is close to the shaping of an integrated strategy. Business manager, usually depend on the effort of functional and regional heads. The business manager is the initiator and leader of debate on where major factories, sales offices and technical centers should be situated and which ones should be shut down. In multinational corporations, access to strategically important assets and information, control over has driven country managers into handling central roles (Sergi, 2007).  In the current multicultural global business society, managers often encounter cultural disparities, which frequently hinder the completion of successful projects. However, the efficient application of cross cultural groups can offer a source of inventive thinking and knowledge which can boost the competitive stand of a firm.

In order, to attain project aims and prevent cultural misunderstandings, project managers should encourage creativity and culturally sensitiveness and flexible leadership motivation. World project management can be successful through cross-cultural communication, mutual respect and effective leadership (Sergi, 2007). Without the three aspects, the company is destined to collapse. To settle potential communication barriers international business managers should effectively use cross-cultural teams.  Several projects are being implemented by multicultural teams. It is important for international business managers to learn that in order to attain the project goals and prevent possible threats they should be sensitive to people’s culture, encourage creativity and enhance good leadership. This means that global business leaders should try to create a good environment where multiple voices are listened to and their opinions and views valued and regarded as important.

Conclusion

Globalization and internationalization is very vital when operating a business. Through internationalization, firms are able to come up with new ideas and different methods for problem solving. Internationalization comes through the maintenance and establishment of connections in foreign countries. Countries are transforming their economies, and in the coming years developing markets will have a high stake in the growth of the world. There are prospects and challenges in venturing international markets. Therefore, it is essential to have an understanding and a clear understanding of the approaches of doing business in the emerging markets in order to be successful. In multinational corporations, access to strategically important assets and information, driven international business managers into handling central roles. Hence, to attain project aims and prevent cultural misunderstandings, project managers should encourage creativity, culturally sensitiveness and flexible leadership motivation. This means that global business leaders should try to create a good environment where multiple voices are listened to and their views and opinions should be valued and regarded as important.

 

References

Atsmon, K. &. V., 2011. Is your emerging-market strategy local enough, s.l.: McKinsey & Company.

Bennett, 1995. International Marketing–Strategy, Planning, Market entry & Implementation., London: Kogan Page Limited..

Cavusgil, K. &. R., 2012. International business, The New Realities, New Jersey: Pearson Education Inc.

Cullen, J. B., 2002. Multinational Management: A Strategic Approach , Cincinnati, OH.. 2 ed. Cincinnati: South-Western College Publishing.

Daniels, R. &. S., 2007. International business environment and operations. 13 ed. Edinburgh: PEARSON Education.

Gunnarsson, A., 2011. The selection of Entry Modes When Penetrating Market. 1st ed. [ebook] pp.3-18. Available at: https://www.diva-portal.org/smash/get/diva2:421070/.

Hunt & Morgan, 1994. The Commitment-Trust Theory of Relationship Marketing. Journal of Marketing, 58(1), pp. 20-38.

Jansson, 2007. International Business Marketing in Emerging Country Markets-The Third Wave of Internationalization of Firms, Northampton USA: Edward Elgar Publishing Limited.

Sergi, A. &., 2007. Global business management: A cross cultural prospective., Unknown: Ashgate Publishing Ltd.

Thakkar, K., 2017. Volvo seeks to be an established brand in India’s luxury car space: Tom Von Bonsdorff, Volvo MD. [online] The Economic Times. Available at: https://economictimes.indiatimes.com/opinion/interviews/volvo-seeks-to-be-an established-brand-in-indias-luxury-car-space-tom-von-bonsdorff-volvo-md/articleshow/50114709.

Vira, D., 2015. Volvo Plans To Bring Performance Polestar Brand To India. [online] MotorBeam. Available at: https://www.motorbeam.com/2015/07/cars/volvo-cars/volvo-plans-to-bring-performance-polestar-brand-to-india/

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