The Strategy of International Business
Introduction
International business consists of commercial transactions from transportation, investments, private companies, government, and logistics take place between different nations, countries and regions that are not in their political boundaries. According to Dunning (2012), in most cases, private companies carry out transactions to make profits while governments undertake transactions for either political reasons or to make profits. Therefore, international business are the business activities carried out across borders to transact resources, services and goods between various nations. Such transactions may include transfer of people, skills, and capital. Some of the options of international business include exporting services and goods, establishing a joint venture with another organization, giving licenses for the production of goods, offering managerial services, and opening branches in other countries to distribute and produce products (Doz, 2011). This paper aims at discussing international business strategies applicable to Qatar tendering department and its business partners.
Literature Review
International business is characterized by various factors such as large scale operations. Such a business involves two or more countries or international companies meaning that huge amounts of goods are either exported or imported. Such companies and governments operate in large scale to enjoy economies of scale and to increase the profits earned (Cavusgil et al., 2014).
In most cases, goods are first distributed to the local market while the surplus is exported.
Wild & Han (2014) note that in international business there is integration of economies. Economies of different countries are combined due to business activities. Combination of economies comes as a result of activities such as integration of finance, labor, and infrastructure from different countries. For instance, a product may be designed in one country, different parts produced in another country, and the final product assembled in another. The final product is then sold in other countries across the world.
International business is usually dominated by Multinational Corporations (MNCs) and different countries. Lunvall et al. (2011) assert that at the moment, multinational corporations from Japan, Europe, and USA dominate the foreign market. Such countries dominate the market due their large pool of capital. They also have highly advanced technology to conduct research. Additionally, they have highly trained personnel because they offer a lot of benefits to them including regular training. As a result, such MNCs offer high quality services and goods at low prices enabling them to dominate foreign markets.
Participating countries and businesses benefit from trade activities but the most developed countries get more benefits than the developing ones. Developing countries in such a relationship get foreign technology, capital, and rapid industrial development. People from such countries also get employment opportunities (Cavusgil et al., 2014). Such activities lead to economic development in the less developed countries.
In international business, there is high competition because several companies are involved. However, competition is between developing and developed countries which are unequal partners. In such high competition, developed countries are in a good position because they only produce high quality services and goods at a low price (Wild & Han, 2014). Such countries also get contacts from others who are interested in trading.
Trade between different countries makes technology and science of high importance. The technology and science help companies to carry out production of commodities in large scale thus resulting to economies of scale. When companies specialize in large scale production, they dominate international business (Lunvall et al. 2011). International business also allows such organisations to transfer technological know-how to developing countries.
Cavusgil et al. (2014), notes that there are a lot of restrictions on the outflow and inflow of goods, capital, and technology in international business. Several countries come up with policies that restrict importation of goods. They also restrict international business through tariff barriers, trade blocks, and foreign exchange restrictions. Such kind of policies and laws are quite harmful to trade with other countries. The countries imposing such policies do so that they may protect local industries. Zott, Amit, & Massa (2011) also show that international business is quite sensitive. Minor changes in political environment, technology, and economic policies cause a lot of significant alterations. Marketing research in international business should be carried out to identify the changes and their impacts. Companies and countries concerned should make adjustments to business activities so that they may survive adversities.
Countries carrying out international business earn foreign exchange. This is because the trade involves exporting and importing goods and services across the world. The foreign exchange earned pays for imports. In addition to that, foreign exchange enables companies to become highly profitable to a wide range of market served. Countries are also able to strengthen their economies with the income earned, the technology gained, and acquisition of resources from other countries (Killing, 2012).
International trade encourages optimum utilization of a country’s resources. Beamish (2013) show that effective use of resources is as a result of production of goods on a large scale to serve the international market. International business also encourages utilization of resources from different regions thus encouraging diversification. This type of business uses technology and finance of high developed rich countries, labor and raw material from developing countries hence the mutual benefit among the countries concerned.
Objectives of international business are achieved easily and within a short time. The main objective of carrying out international business is to make large amounts of profits. Huge profits are earned within a short time because the business is done in large scale, highly qualified personnel are involved and the best technology is also used. The best managers are also involved in the production process (Beamish, 2013). High quality goods are sold in different parts of the world leading to high profitability.
Beamish (2013) also notes that it is important for countries and companies to carry out international business to spread the business risks involved. This prevents the incidence of a company having to bear with total losses incurred. A loss faced by one country or business may be balanced with profits earned in its trading partners. It is worth noting that surplus goods are also sold to other countries thus reducing the chances of undergoing losses (Onetti et al., 2012). The risks involved in this type of business are thus minimized significantly.
There is improved organizational efficiency while conducting international business. Without organizational efficiency, countries and companies may not be in a position to compete favorably. Due to that, companies use modern management techniques so that they may improve the efficiency of their operations. Experienced and qualified managers and employees are also hired to ensure that quality and efficiency are not compromised. Employees are also trained regularly to advance their skills and to learn about emerging issues. Such employees are motivated through provision of good salaries and benefits such as promotions and international transfers among others (Beamish, 2013). These strategies result in high returns and low costs of production.
According to Forsgren & Johanson (2014), a lot of foreign exchange is earned from international trade thus benefiting governments. The government may in return offer concessions and facilities to businesses so that they may increase production. Also, companies may also get tax and financial benefits from local governments to encourage trade. The benefits accrued lead to diversification and expansion of business activities.
Carrying out international business improves the competitive capacity of a business. This type of business produces high quality products with minimum costs. Large amounts of money are spent on other relevant activities such as advertising for services and products across the world (Beamish, 2013). The trade uses marketing techniques, management techniques, and superior technology that increase its capacity to compete with others.
A strategy refers to the integrated, central and externally oriented concept on how a company can achieve its set objectives. Hillier, Grinblatt & Titman (2011) assert that formulating strategies is deciding what will be done, what time, and the people responsible for such actions. Implementation of a strategy is performing activities according to the plan. Each of the above terms is applicable in international business. All the processes are dependent upon each other to provide information about what should be improved to make business more efficient. Leaders of companies come up with strategies while other people are supposed to implement them.
Killing (2012) also notes that corporate strategies refer to how business are supposed to compete favorably. A business strategy states how an organization can achieve its goals and objectives in a specific business. Such a strategy focuses on how it can compete with other multinational companies. In International business a company should formulate ways in which it will carry out its operations to ensure it has a competitive advantage over the rest. Gaining a competitive advantage enables a company to remain profitable and to grow at a high rate.
A corporate strategy addresses how a company plans to compete with others. Purce (2014) opines that in international trade, there is stiff competition from other multinational corporations. Most competitors produce similar products where some are of higher quality than others. Price and quality also differs due to use of different technology and resources. Some businesses and countries especially those from developed countries have a large capital base and advanced technology (Oliveira & Martins, 2011). Since they enjoy economies of scale, they tend to offer products and services at a lower cost than others (Rothaermel, 2015). In international business, it is important to come up with strategies that will enable a business to compete favorably despite the external market conditions.
An international business should identify ways in which it can add value to its products and services. For instance, investing in research will help a business identify new markets, improved ways of carrying out operations, and improving the products (Wild & Han, 2014).
A company may also get market intelligence on which products are selling, the most successful brands, strategies used by competitors, and the prices of commodities in the market (Hillier, Grinblatt & Titman, 2011). A corporate strategy finds ways of creating value through ownership or several businesses and sharing resources.
The other importance of corporate strategy in international business is that it helps to find out how to diversify businesses, enter new markets and industries, and improved ways of competing with others. A company should be in a position to identify emerging trends and the most profitable businesses (Forsgren & Johanson, 2014). A business should also identify which new products it should introduce to the market to increase income.
An international strategy should be designed such that the corporate strategy determines the market of the products, competitors, and the countries where it can establish branches. For companies that do not export products, their international strategy includes off shoring, international outsourcing, and importing (Rothaermel, 2015). According to Hollensen (2015), a business trying to enter an international business should also carry out a SWOT analysis to identify its strengths, weaknesses, threats, and opportunities. The analysis of the business shows what can be done, the objectives of the business, the things expected from them, and what will be done.
Methodology
Analysis of this paper is carried out by using a qualitative approach. The method used to conduct research is based on several steps. The research is conducted using various steps to understand international business, the topic under discussion and to come up with proper recommendations. The topic is first analyzed by collecting relevant literature about international business, the departments concerned and the countries involved. Identification of business strategies, strengths, weaknesses, opportunities and threats of involved business partners helps to determine the current business situation and to predict its future.
Practical screening has been carried out to get reliable data from peer-reviewed articles. The perception of the author is that most of the data used in the study is collected from appropriate sources found in the internet. After collecting a wide variety of information, a quality appraisal criteria was used. Information from the available sources was sifted on the basis of quality and relevant of data contained. Formulation of results was the last activity. After the performance appraisal was conducted, the presented literature was scrutinized to identify solutions and business strategies given in the literature.
Practical screening was done to identify the most appropriate study materials for this paper. The sections are written by searching for existing and relevant issues regarding international trade. Newspaper articles and blogs were eliminated because some of them are not reliable and credible. The sources that are not relevant to international business and business strategies were eliminated. Peer reviewed articles were mainly used for this study. Sources that are older than five years were eliminated to ensure that the information given is up to date so as to make appropriate conclusions and recommendations.
Analysis of Case
The department of tendering in Qatar offers services, maintenance and supplies for the entire ministry. Oil is the major income earner in Qatar because it includes a huge proportion of the amount of money earned from exports. Oil accounts approximately 85% of earnings from exports, more than fifty percent of Gross Domestic Product, and 70% of revenues earned by the government (Jarkas, Kadri & Younes, 2012).Oil is a resource that is not available in most countries. Before engaging in international business, the tendering department should identify the potential market, the prices of oil, price fluctuations, the cost of production, what it can benefit from the companies and businesses it trades with, and the laws and policies governing the foreign market.
Agriculture in Qatar is limited to livestock, vegetables, and fruits. Fishing is only done at a small scale thus it does not account for large incomes. Some of the developing industries in Qatar produce crude oil, petrochemicals, natural gas, steel, ammonia, and steel. Other companies offer ship repairing due to the extensive use of water as a mode of transport. Oil gives Qatar a per capita Gross Domestic Product that can be compared to that earned by the most developed countries in Western Europe. The major exports in Qatar are fertilizers, gas and oil products as well as steel. Some of the major imports include; chemicals, transportation equipment, machinery, and food (Jarkas, Mubarak & Kadri, 2013). Qatar’s major trading partners are the most developed countries such as France, Japan, the United States, and South Korea.
Qatar has a specific business strategy that it applies on international trade. It mainly trades with developed nations so that it may benefit from what it does not produce. On the other hand, developed nations trade with Qatar so that they may gain from what they do not produce. For instance, Qatar benefits from industrialized nations by acquiring advanced technology, machinery, chemicals, and food among others (Jarkas, Mubarak & Kadri, 2013). Developed nations benefit from oil and oil products since they do not such resources. This type of trade is of mutual benefit since it is advantageous to both parties.
According to Jarkas, Kadri & Younes (2012), the tenders committee of Qatar oversees activities of the government that are related to awards processes, tenders, and contract bids. Some of the economic activities that this department deals with include; oil and gas, construction of real estate and infrastructure, finance such as banking, markets, and project finance, tourism, healthcare, and education, transportation through roads, railways, aerospace, shipping, and ports, power and water, and industries such as mining, manufacturing, and defense among others.
This department is quite diverse because it offers a wide range of services and products. Most of the commodities are produced in large scale leading to surplus goods. Selling of surplus goods to other countries results to international business. For the department to become successful in such operations, it should formulate business strategies to govern trade activities and implement them accordingly. Once the department comes up with appropriate strategies, it can lead to the success of economic activities thus increasing the revenue earned through foreign exchange.
According to Jarkas, Mubarak & Kadri (2013), the central tenders committee has different sectors which include; the supplies department, the technical department, and committees. The tender committee is responsible for of central tenders worth more than QR5000000 and local tenders that are less than the same amount of money. Others include the evaluation and inspection committee and the contractor’s classification committee. Other departments are; audit and evaluation, tender announcement, sales and distribution, supplies, and store management.
The tendering committee has a significant influence on the type of business carried out. For instance, the department may come up with strategies that ensure that international business is carried out appropriately. The department ensures transparency, neutrality, and fairness of trading activities thus increasing the efficiency of operations. The department is also neutral because it preserves equal rights to interested companies, governmental entities, and bidders (Jarkas, Mubarak & Kadri, 2013). It, therefore, ensures that bids are not excluded without legal or technical reasons. Doing so ensures that fairness is not compromised.
The department should also provide bidders all the information they require before they submit their tenders. This enables companies and governments to make well informed decisions since they will have a clear guide and understanding of what is expected from them. The individuals, companies and governments bidding should attend opening of tenders so that they may understand why they are not included (Jarkas, Kadri & Younes, 2012). This also promotes transparency of operations and ensuring that the right method of selection is used to prevent any irregularities.
Additionally, the submitted prices should be submitted on the department’s website for everyone to see. The department also publishes the companies or governments that have been awarded tenders on its website including the award value and the bidder’s name. The department should also request the bids to be given in financial and technical envelops to make sure that they are evaluated on technical grounds. Evaluating bids on technical grounds ensures that the decisions made are not based on the prices.
While searching for a market for its goods, the department may make several considerations to determine whether the target market is appropriate or not. The decisions made by the tendering committee in the initial stages may have enduring consequences on the future of the business with a foreign market (Zott, Amit, & Massa, 2011). It is, therefore, important for the department to have sufficient market understanding and sufficient forward planning to determine the future of the business. Other important considerations in the targeted market include taxation, operational and commercial issues, and employee regulations (Verbeke, 2013). Other important factors that should be considered in the target market include the market route, supply chain, pricing, and innovations.
Brazil is a good target market for Qatar’s tendering department because it is among the most promising markets in the world. Brazil is ranked among other promising economies such as China, India, and Russia. Brazil’s currency is also of high value when compared to the United States dollar. The other important thing about Brazil is that inflation is highly controlled and that Brazilians are now in the middle class category. In 2016, Brazil had the world’s largest stock exchange. Unemployment in the country is also declining significantly. Population is also steadily growing thus increasing demand for products (KPMG, 2016). The fact that there are stable input costs shows that Brazil’s market is attractive.
During the world economic crisis of 2009, Brazil’s GDP only declined by 0.3%. Inflation rate also stands at 4.6% per annum which is a moderate level (KPMG, 2016). Inflation is kept under control by the interest rates which range at 8.5% per annum (KPMG, 2016). The commercial arena of Brazil is rapidly changing due to government initiatives, and competitive markets. Several target companies lack sufficient and reliable operational, financial, tax, historical, and commercial information. This shows that there is potential in Brazil’s market because it is not highly exploited by multinational corporations.
According to Holtbrugge & Baron (2013), Brazil is also rich in natural resources thus indicating that it is a good business partner. Despite exploitation of hydroelectric power, the country is still covered by forests and farmland in Central West, Southeast, and South of the country which are suitable for agricultural activities. Additionally, Brazil has large iron deposits and other precious stones, metals, and minerals. Qatar’s tendering department therefore has a wide range of minerals and metals it can trade with Brazil. 80% of Brazil’s total population lives in highly developed urban areas such as Rio de Janeiro and Sao Paulo meaning that there is high demand for power, oil products and oil (Van, 2014).
According to Van (2014) the government of Brazil also focuses on improving business activities of both government and private sectors towards economic growth and rapid industrialization. The government’s policy includes measures to protect local industries that are of high economic importance. The tendering department should note the protected industries so that it may not interfere with them. Protection of some local industries helps to maintain foreign exchange and to check on inflation.
Brazil can also be a good business partner because it produces a lot of commodities that Qatar imports. For instance, Brazil is among the leading countries in the production of minerals and food (Holtbrugge & Baron, 2013). Other highly developed sectors in Brazil include wood pulp, textile industries, steel, chemical industries, aerospace, and automobile. Due to the large number of processing and manufacturing industries, Brazil needs consistent flow of oil and other means of power production (Van, 2014). Qatar’s tendering department may consider trading its resources with machinery and food among other products from Brazil. Brazil is also a good choice because it has a desirable economy. As of 2010, Brazil had made a lot of foreign exchange to settle all its private and public debt (KPMG, 2016).
Among other strengths of investing in Brazil is that it has well developed distribution channels and well established transportation networks. The fact that it also has a friendly business environment shows that it is suitable as a trading partner. Little or none expenses may be incurred in establishment of new distribution channels because the already existing ones are highly developed (Van, 2014). This means that the company trading with Brazil earns high profits due to the reduction of production costs.
After looking at the strengths of doing business with Brazil, it is also helpful to identify the weaknesses so as to make well informed decisions. Distribution of wealth is not evenly spread across Brazil since there are some areas that are under poverty. Productivity growth in such areas is also slow which means that foreign investments made in such areas may grow at a slow rate. Some of the sensitive industries in Brazil are guarded by strong protection taxes that restrict importation (KPMG, 2016). Most of the family-owned businesses in the region lack adequate financial reporting and corporate governance. Among other developed nations, transparency is not quite evident leading to incidences of corruption. It is also important to note that there are various bureaucratic rules for some industries and businesses. Having understood Brazil’s negative side in terms of economy and developments, it is easy to set strategies for foreign investments.
Exporting of products to Brazil can be advantageous because manufacturing is based in Qatar meaning there are less risks involved. Production and manufacturing processes will be carried out normally since there are no disturbances due to change of plans or methods. It is also easy and more efficient to continue operating in Qatar because the procedures are well set and market conditions are well understood thus reducing possible interruptions (Wild & Han, 2014). Working with multinational corporations in Brazil may also work where they can trade with commodities that are not available in their respective countries.
Conclusion and Recommendations
International business is usually dominated by Multinational Corporations (MNCs) and different countries. Participating countries and businesses benefit from trade activities but the most developed countries get more benefits than the developing ones. Developing countries in such a relationship get foreign technology, capital, and rapid industrial development. In international business, there is high competition because several companies are involved. In such high competition, developed countries are in a good position because they only produce high quality services and goods at a low price.
There are a lot of restrictions on the outflow and inflow of goods, capital, and technology in international business. Several countries come up with policies that restrict importation of goods. They also restrict international business through tariff barriers, trade blocks, and foreign exchange restrictions. The countries imposing such policies do so that they may protect local industries. Marketing research in international business should be carried out to identify the changes and their impacts.
International trade is important because countries earn foreign exchange, the trade encourages optimum utilization of a country’s resources, business objectives are achieved easily, risks are also spread thus reducing the chances of undergoing losses, and organizational efficiency is improved. International business activities improve the competitive capacity of a business. The trade uses marketing techniques, management techniques, and superior technology that increase its capacity to compete with others.
Companies and governments engaging in international business should come up with corporate strategies to determine how the business will be run to compete favorably. Formulating such strategies helps to decide what will be done, what time it will be done, and the people responsible. A corporate strategy finds ways of creating value through ownership and sharing available resources. A company’s international strategy should be formulated such that the corporate strategy determines the market of the products, competitors, and the countries where it can establish branches.
Brazil can be a great international trading partner due to various reasons. The country has a promising economy and its currency is of high value. Inflation in Brazil has also remained controlled for the last decade. Most Brazilians are middle class indicating that people have good standards of living. The country is not only agriculturally productive but also has large deposits of minerals and metals among others. Exporting products such as oil to Brazil and importing products such as food and machinery to Qatar is appropriate for both countries.
The tendering department should make sure that it engages in sustainable business activities. It should adopt business strategies, operational methods, monitoring strategies and make changes that will remain relevant with new developments either in business or technology. Tenders should also be thoroughly evaluated and audited before they are approved to make sure that they are sustainable.
Private business owners and companies should be encouraged to participate in tendering processes so that they may raise concern in case they detect issues that may affect them negatively. They may also raise concerns requiring government intervention thus improving the business activities. By interacting with the public, the department will improve its operations and develop various innovative strategies of responding to market needs by making transformational; changes when they are needed.
The department should also invest in carrying out intensive research. Changes regularly occur in international business and it may be quite challenging to take note of all changes. Some changes may seem negligible but they cause detrimental effects to business in the long run. Carrying out regular and intensive research helps to remain proactive and to find solutions to challenges before they result to negative consequences.
Investing in technology may also be importance to the department. Use of advanced technology will improve the efficiency of operations as well as increase the accuracy. Use of technology also reduces the workload and increases reliability because there are fewer errors made during the tendering process. Performance will be well monitored thus making it easy to benchmark with other economies.
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BRAZIL
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