Strengths And Weaknesses Of Global Business Forms: An Essay On Organizational Behaviour Global Management.

Exporting: Strengths and Weaknesses

Question:

Discuss About The Organizational Behaviour Global Management?

Global business is referring to the purchase and sale of the products and services within various countries. A global business is an organization that is having its operation in majority of the countries across the globe. While the organization might be having its headquarters as well as major operations centre in one country, its products as well as services are used all over the world. Certain examples of global businesses take into consideration the Coca-Cola Company and Sony Electronics (Alfes 2013)

In regard to importing and exporting, it can be stated that importing or exporting or both is considered to be the most basic and largest global business activity. It is the simplest process of making an entry to a market with a small capital outlay. Exporting is to make a product at a domestic location of the organization and conducting its sale in a different country. Importing is to bring products, services as well as capital into the home country from abroad. For instance, automotive organizations such as GM, Toyota, and Volkswagen do the exporting of cars to various countries across the globe. Food retailers do the importing of global products and sell them in domestic stores (Morgeson 2013).

There are several strengths associated with exporting. The organization will be able to make significant expansion of its markets, leaving it less dependent on any individual market. Moreover, rise in production will be leading towards larger economies of scale and better margins. With the development of the organizational business in the foreign market, the company will be having increased flexibility for improving or redirecting its marketing endeavours (Wagner 2014).

On the other hand, there are certain weaknesses associated with exporting as well. One of the weaknesses is associated with extra costs. Since, it will be taking more time for developing extra markets, and there exists longer periods of pay back, the up-front expenses to do the development of new materials for promotion, allocation of personnel for travelling and other administrative expenses in relation with the marketing of the product, will be restraining the financial resources of organizations. Another weakness is associated with market information. To find information regarding global markets is undeniably more challenging as well as time-consuming in comparison to finding information as well as evaluating local markets. In underdeveloped countries, for instance, steadfast business practice information, market traits, barriers regarding cultural aspects might not be available (Luthans 2015).

Importing: Strengths and Weaknesses

There are certain strengths associated with importing. To import raw materials and products is considered being one of the paths to increase the margins of profit. Also, an importer will be having the accessibility of resources that are considered to be regionally exclusive as well as cheap labour towards the production of goods. However, certain weaknesses are also there in respect of importing (Chmiel 2017). One of them states that the importing of products will be leading towards the aspect of the local market getting eroded and in particular, national economies when there will occur a deficit regarding trade, i.e. there is higher import in comparison to export.

In regard to licensing it can be stated that, it is an association between organizations of various countries. An organization will be allowing another one to do the utilization of its brand name, copyright, technology, patent, trademark or other assets in exchange for an amount depending upon sales. Licensing of intellectual properties like patents, copyrights, processes of manufacturing or trade names is abounding across the nations. Organizations might be choosing to do the manufacturing or selling of their products under licensing when there exists very high transportation or domestic costs of production, regulations of governments restricting the activities of business of foreign organizations or the organization wants purely to do the production as well as selling of similar quality at all places (Wilson 2013). For instance, Starbucks throughout the world is selling same-quality beverages in similar-looking stores under the contracts of licensing.

There are certain strengths associated with licensing. To issue a license will be providing immediate as well as definite revenue in respect of the licensing organization. The license agreement will be requiring various kinds of payments, which includes a definite license payment or inconsistent payments depending upon the profits incurred by the licensee business. Either way, the licensee is making the payment in respect of the right for holding the license that is producing revenues in respect of the licensing organization. Another understated strength to do the licensing of a business process is promoting the aspect of brand recognition (Goetsch 2014). This will assist in providing credibility for the brand as well as recognition advantages in respect of the licensing organization, since more individuals are becoming alert that the licensing organization is having the responsibility towards the production regarding the licensee business.

On the other hand, there are certain weaknesses associated with licensing. One of the key weaknesses to issue a license is that it does the creation of competition. A licensing organization, might be attempting towards limiting the competition by restraining the opportunity of the license to the utmost. Another weakness associated with the aspect of licensing is that it increases the exposure of the company’s confidential, proprietary process of production. When more number of individuals will be having the knowledge of the organizational process, the greater will be the threat that someone might be breaching the confidentiality (Alfes 2013). This is particularly correct where the licensing organization is being unable to control the staffs directly as well as contractors who are working with the licensee business.

Licensing: Strengths and Weaknesses

In regard to franchising, it can be stated that it is an option in which a parent organization will be granting another organization the right for conducting business in a fixed way. Franchising is different from licensing based upon the fact that it normally requires the franchisee to do the following of much stringent guidelines to run the business in comparison to licensing. Moreover, franchising is having more popularity regarding service organizations such as hotels, restaurants as well as rental services (Luthans 2015).

There are certain strengths associated with franchising. To create an effective model of business is considered being one of the means for launching a business that is considered to be successful. In this regard, it can be stated that one of the strengths of franchises is that they are depending upon the business models that already exists and are considered being successful (Alfes 2013). For instance, there are McDonald’s franchises throughout the globe, so when a new McDonald’s location gets opened, there can occur absolute confidence that there already exists a sound business model, and there is no requirement for spending time as well as effort to craft a business model from the beginning. Another aspect of strength is associated with the fact that the franchisees are selling products as well as services that might already be having familiarity with the customers (Miner 2015). Customers might be having more affinity for using the products or services that have been used by them in the past or which is having a reputation that has been established. For instance, franchises like Taco Bell, Subway are having strong recognition of name that can assist in attracting customers.

However, there are certain weaknesses relating to the franchises as well. One of the weaknesses is that most of the time, franchisors will have the requirement for someone to pay a certain minimum amount for opening at a new location. Franchisors might as well be taking a portion of the profits, requiring the individual to make the payment of partial management fees, or do the purchasing of products from them. As a result, to start as well as operate a franchise might be considered being more costly than to start a small business. Another weakness regarding the franchises is that an individual is subjected to the franchisee agreement terms that will possibly be containing a number of rules that will be restraining the ways by which the business could be run (Cameron 2015).

Franchising: Strengths and Weaknesses

In regard to Foreign Direct Investment (FDI), it can be stated that it is referring to operations in one country that are being administered by entities in a foreign country. The meaning of FDI is to build new services in a different country. There exist two kinds of foreign direct investment such as joint ventures as well as wholly-owned subsidiaries (Reynolds 2017).

The strength regarding FDI is that it is considered beneficial in respect of the global economy, and also for the investors as well as the recipients. There occurs investment of capital into the business with the optimum prospects for development, anywhere across the globe. The reason for this is that the investors are seeking optimum return with the minimum amount of risk (Armstrong 2014).

The weakness regarding FDI is that the countries should not be allowing excessive foreign ownership of organizations in industries that are considered being strategically significant. This might be lowering the country’s comparative advantage.  

To conclude the assignment, it can be stated that there are various forms of global business that has been discussed and each of the global business form is having its individual attributes that are associated with certain advantages as well as disadvantages

Reference  

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