The Strategy of International Business
International business consists of commercial transactions that take place between different nations, countries, and regions, which are not within respective boundaries of states. According to Dunning (2012), in most cases, private companies carry out transactions to make profits while governments will often focus on both the economic and international relations and benefits accrued from such interactions. Therefore, international business includes income-generating activities carried out across borders to exchange resources, services, and goods among various nations (Dunning, 2013). Such transactions may contain transfer of people, skills, and capital between two countries. Some of the options of international business are 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 manufacture products (Doz, 2011). This paper is going to discuss international business strategies applicable to the Ministry of Municipality in the state of Qatar with a focus on tendering department and its economic partners.
Literature Review
Importance of Internationalization
Cavusgil et al. (2014) assert that international business is characterized by various factors, such as largescale operations. To be more specific this type of business involves two or more countries or international companies meaning that huge amounts of goods are either exported or imported. Moreover, they operate in large scale to capitalize on economies of scale and increase the profits earned (Cavusgil et al., 2014). In most cases, goods are first distributed to the local market while the surplus is exported. According to Cavusgil et al. (2014), participating countries and businesses benefit from trade activities, but the most developed nations get more returns than the emerging markets. In most cases, developing countries in such a relationship get foreign technology, capital, and rapid industrial advancement. In turn, people from these countries also obtain employment opportunities, which often lead to economic development (Cavusgil et al., 2014). Therefore, largescale operations are essential for international business to benefit both developed world and emerging markets.
As discussed by Beamish (2013), the main objective of carrying out international business is to make profits. reason is that great revenues are earned within a short time because the business operations are done in large scale, highly qualified personnel are involved, and the best technology is used. The best managers are also involved in the production process that leads to selling high quality goods in different parts of the world, thereby, ensuring the high profitability (Beamish, 2013). Hence, it is evident that the main goal of such a type of international cooperation is ensuring high returns since each process is characterized by the highest efficiency, as well as all required parties are involved for contributing to the best results.
Beamish (2013) also notes that it is important for countries and companies to carry out international trade to spread the business risks involved. This prevents the incidence of a company having to bear all losses incurred: a loss faced by one country or business may be balanced with profits earned on the regions of its trading partners. Moreover, surplus goods are also sold to other countries; thus, reducing the chances of undergoing losses (Onetti et al., 2012). Therefore, the risks involved in this type of business are minimized significantly due to the appropriate allocation of profits and residual stock.
Moreover, Wild and Han (2014) illustrate the role of integration of economies in international businesses. To clarify, e systems of different countries are combined due to business activities, which is attributed to integration of finance, labor, and infrastructure from various regions. For instance, a product may be designed in one country while its complement parts can be produced in another, and the final product assembled in the third state. Then, the final product is sold across the globe. Therefore, globalization of economic systems is crucial for international business due to the facilitation of manufacturing and distribution of products and services.
Additionally, Multinational Corporations (MNCs) and certain countries usually dominate international business. Lunvall et al. (2011) assert that currently, multinational corporations from Japan, Europe, and the USA dominate the foreign markets due their large pool of capital. The authors also record that most developed countries also attribute their success to a highly advanced technology to conduct a research. Additionally, they have highly qualified personnel because they offer many benefits to them including regular training (Lunvall et al., 2011). Consequently, such MNCs offer high quality services and goods at low prices around the world; therefore, it enables them to dominate foreign markets because of the global and precise attention to capital, personnel, and analysis off markets.
Wild and Han (2014) record that high competition remains a common phenomenon in international trade because many companies are involved. However, in most cases, there is competition between developing and developed countries, which are unequal rivals. In such a fierce competition, advanced countries are in a better bargaining position than markets because they mostly produce high quality finished services and goods at a low price (Wild & Han, 2014). These states also get contacts from others who are interested in trading. Therefore, any country focusing on trade with another must identify the economic strengths and weaknesses of its trade partner to stay competitive under the current conditions of intense rivalry.
In addition, trade between different countries makes technology and science of high importance. According to Lunvall et al. (2011), technological development helps companies to carry out a production of commodities in large scale, thereby, resulting to economies of scale. Similarly, when companies specialize in largescale production, they dominate international business (Lunvall et al. 2011). International business also allows such organisations to transfer technological knowhow to developing countries to capitalize on it. Hence, it is evident that under the conditions of intense international business, technology and science are crucial for the enhancement of profitability.
Countries carrying out international business also benefit from foreign exchange. The trade involves exporting and importing goods and services across the world; therefore, the foreign currency earned pays for imports (Killing, 2012). In addition, foreign exchange enables companies to become highly profitable as there is a wide range of markets served. Besides, states are able to strengthen their economies by the income earned, the technology gained, and acquisition of resources from other countries (Killing, 2012). According to Forsgren and Johanson (2014), much of the foreign exchange earned from international trade allow governments to offer concessions and facilities to companies to increase the production. Additionally, Forsgren and Johanson (2014) illustrate that companies may also get tax and financial benefits from local governments for encouraging the trade. The benefits accrued lead to diversification and expansion of business activities. Thus, the operations with foreign exchange significantly contribute to the enhancement of the international oragnisations’ progitability.
International trade encourages optimum utilization of a country’s resources. Beamish (2013) shows that effective use of resources emanates from production of goods on a large scale to serve the international market. Global business also encourages utilization of resources from different regions; thus, intensifying diversification. This type of trade uses technology and finance of developed countries and labo and raw materials from developing countries; hence, the mutual benefit among the countries concerned.
Previous research has also showed that there is an improved organizational efficiency for both businesses and countries that take part in international trade. Beamish (2013) shows that without organizational efficiency, states and organisations may not be in a position to compete favourably. Consequently, companies use modern management techniques to improve the efficiency of their operations. Experienced and qualified managers and employees are also hired to ensure that quality and effectivness are not compromised. In addition, workers are trained regularly to advance their skills and learn about emerging issues. Such employees are motivated through provision of high salaries and benefits including promotions and international transfers among others (Beamish, 2013). These strategies result in enhanced organizational efficiency that lead to high returns and low costs of production.
Carrying out international business improves the competitive capacity of a business. Beamish’s (2013) study show that international trade produces high quality goods with minimum costs. Therefore, large amounts of money are spent on other relevant activities, such as advertising for services and products across the world (Beamish, 2013). The trade requires relevant marketing techniques, management approaches, and superior technology that increase the organisations’ capacity to compete with others.
Challenges Facing Internationalization
Nevertheless, despite the benefits of international trade, Cavusgil et al. (2014) note that there are many restrictions on the outflow and inflow of goods, capital, and technology. Several countries come up with policies that restrict importation of goods and international business through tariff barriers, trade blocks, and foreign exchange bottlenecks. Although such policies are often geared towards protection of local businesses, the resultant effects on international trade cannot be ignored.
Zott, Amit, and Massa (2011) also show that international trade is significantly sensitive to minor changes in political environment, technology, and economic policies. Marketing research in international business should be carried out to identify the changes and their impacts. Moreover, companies and countries concerned should make adjustments to business activities so that they may survive adversities. Thus, it is crucial for international players to conduct appropriate investigations in order to avoid various obstacles attributed to the internal environments of countries.
Strategies in Internationalization
Hillier, Grinblatt, and Titman (2011) define a strategy as an integrated, central, and externally oriented concept on how a company can achieve its set objectives. Hillier et al. (2011) assert that formulating strategies is deciding what will be done, in what time, and the people responsible for such actions. The implementation of a strategy involves performing activities according to a 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.
Similarly, Killing (2012) asserts that a business strategy states how an organization can accomplish its goals and objectives. Such an initiative focuses on how an organisation can compete with other multinational companies. While venturing a new market, a company should formulate ways in which it will carry out its operations to ensure that it has a competitive advantage over its competitors. Killing (2012) opines that gaining a competitive advantage enables a company to remain profitable and to grow at a high rate, thereby, reaching its aims and objectives.
In turn, a corporate strategy addresses how a company plans to compete with others. Storey (2016) opines that in international trade, there is stiff competition from other multinational corporations. Price and quality also differ due to a use of different technology and resources. Some businesses and countries, especially those from developed , have a large capital base and advanced technology (Oliveira & Martins, 2011). Taking into account that they enjoy economies of scale, these players tend to offer products and services at a lower cost than others (Rothaermel, 2015). Therefore, Rothaermel (2015) suggests that for any international market, it is important to come up with strategies that will enable a business to compete favourably despite the external market conditions and often business environment that differs from one host country.
Furthermore, 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, as well as to improve ways of carrying out operations; as a result, it enhances the products (Wild & Han, 2014).
In addition, a company may also get market intelligence on which products are doing well, the most successful brands, strategies used by competitors, and the prices of commodities in the market (Hillier et al., 2011). Hence, a corporate strategy finds ways of creating value through ownership, cooperation among several businesses, and sharing resources.
The other importance of corporate strategy in internationalization is that it helps to find out how to diversify businesses, enter new markets and industries, and improve ways of competing with others (London et al., 2012). It means that a company should be in a position to identify emerging trends and the most profitable businesses. Forsgren and Johanson (2014) also suggest that a business should also identify which new products it should introduce to the market to increase income. Hence, a corporate strategy represents new opportunities regarding expansion, diversification and competitive enhancement of an organisation.
According to Rothaermel (2015), an international strategy should also be designed such that a corporate strategy determines a market of the products, competitors, and the countries where it can establish branches. For companies that do not export products, their international strategy includes offshoring, 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 a business shows what can be done, possible objectives of a company, expected from them, and what can be achieved through it.
Methodology
This paper is based on available secondary data. The researcher analysed the paper by collecting relevant information from literature about international business, the departments concerned, and 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 was carried out to identify 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, intelligence from the available sources was sifted based on the quality and relevance of data contained. The presented literature was then scrutinized to determine 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 avoided because some of them are not reliable and credible. The sources that are not relevant to international business and business strategies were eliminated. Nonetheless, peer reviewed articles were mainly used for this study. Sources that are older than five years were excluded to ensure that the information given is up to date to contain appropriate conclusions and recommendations.
Oil is the major income earner for Qatar because it makes up a major part of an amount of money earned from exports. This commodity accounts to approximately 85% of earnings from exports, which is more than fifty percent of Gross Domestic Product, and 70% of revenues earned by the government (Jarkas, Kadri & Younes, 2012). Moreover, oil is a resource that is not available in most countries. Before engaging in international business, the tendering department should identify a potential market, prices of oil, price fluctuations, cost of production, which benefits it can obtain from companies and businesses it would trade with, and laws and policies governing the foreign market.
It would be appropriate to note that 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 Gross Domestic Product per capita 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.
Additionally, Qatar has a specific business strategy that it applies during international trade. To be more specific, it mainly cooperates with advanced nations so that it may benefit from it manufacture and obtain what it does not produce. Conversely, developed countries 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 (Jarkas et al., 2013). Developed nations capitalize on purchasing oil and related products since they do not manufacture such resources. This type of trade is of mutual benefit since it is advantageous to both parties.
The department of tendering in the Ministry of Municipality in Qatar offers services, maintenance, and supplies for the entire ministry. According to Jarkas, Kadri, and Younes (2012), the tendering committee 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, gas, construction of real estate and infrastructure, finance, such as banking, markets, and project finance, tourism, healthcare, education, as well as transportation through roads, railways, aerospace, shipping, and ports, along with power and water, and industries, such as mining, manufacturing, and defence.
This department is diverse because it offers a wide range of services and products. Most of the commodities are produced in large scale, which leads to surplus goods. In turn, selling of surplus goods to other countries results in international business. For the department to become successful in such operations, it is necessary to 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 et al. (2013), the central tenders committee has different sectors, which include the supplies department, the technical department, and committees. The tender committee is responsible for central tenders worth more than QR5000000 and local tenders that are less than the same amount of money. Other committees consist of the evaluation and inspection committee, as well as the contractor’s classification committee. Other partsare audit and evaluation, tender announcement, sales and distribution, supplies, and store management departments.
Case Analysis
The tendering committee has a significant influence on a type of business carried out by the Ministry of Municipality to prevent corruption and unfairness attributed to the assignment of tenders. For instance, the department may come up with strategies that ensure that international business is appropriately. Moreover, the department ensures transparency, neutrality, and fairness of trading activities, thereby, increasing the efficiency of operations. The branch is also neutral because it preserves equal rights to interested companies, governmental entities, and bidders (Jarkas et al., 2013). Therefore, it ensures that bids are not excluded without legal or technical reasons; as a result, this ensures that fairness is not compromised.
The department should also provide bidders with all the information they require before they submit the tenders. This enables companies and governments to become well-informed during a process of decision-making 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 et al., 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 via the department’s website for everyone to see. The department also publishes the companies or governments that have been awarded with tenders on its website including the their 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. Hence, 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 operations with a foreign market (Zott et al., 2011). Therefore, it is important for the department to have sufficient market understanding and forward planning to determine the future of the cooperation. Other important considerations in the targeted market include taxation, operational and commercial issues, and employee regulations (Verbeke, 2013). Moreover, Lundvall et al. (2011) suggests that it is crucial to include details about the market route, supply chain, pricing, and innovations to ensure enough information to form the complete understanding of a situation on the market.
Brazil is a good target market for Qatar’s tendering department because it is among the most promising developing countries 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 (KPMG, 2016). Furthermore, Brazil’s Central Bank has developed policies to control inflation, which has contributed to the country being categorized as a middle class economy. In 2016, Brazil had the world’s largest stock exchange. Unemployment in the country is also declining significantly. In turn, population is steadily growing, thus, increasing demand for products (KPMG, 2016). Along with the previously stated arguments, 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% (KPMG, 2016). Inflation rate also stands at 4.6% per annum, which is a moderate level, because of the stable interest rates, which range at 8.5% per annum (KPMG, 2016). The commercial arena of Brazil is rapidly changing due to the government’s initiatives and competitive markets. Several target companies lack sufficient and reliable operational, financial, tax, as well as historical, and commercial information. This shows that there is Brazil’s market possesses a huge potential because despite of positive tendencies in the indicators, it is not highly exploited by multinational corporations.
According to Holtbrügge and Baron (2013), Brazil is also rich in natural resources, thus, it indicates that the country is a promising business partner. Despite exploitation of hydroelectric power, the state 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. Therefore, Qatar’s Ministry of Municipality’s tendering department has many options as there is a wide range of minerals and metals it can obtain by trading with Brazil. Moreover, approximately 80% of Brazil’s total population live in highly developed urban areas, such as Rio de Janeiro and Sao Paulo, meaning that there is a high demand for power, oil products, and oil itself (Van Noorden, 2014).
According to Van Noorden (2014), the government of Brazil also focuses on improving business activities of both the 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. In turn, the protection of some local industries helps to maintain foreign exchange and to check on inflation, thereby, enhancing business environment.
Brazil can also be a good business partner because it produces many commodities that Qatar imports. For instance, Brazil is among the leading countries in terms of the production of minerals and food (Holtbrügge & 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 , Brazil needs consistent flow of oil and other means of power production (Van Noorden, 2014). Furthermore, Qatar’s tendering department may consider trading its resources to import machinery and food among other products from Brazil.. As of 2010, Brazil had made a huge amount of foreign exchange to settle all its private and public debt (KPMG, 2016). Therefore, the country is a promising trading partner because it has a market economy, which is rapidly developing
Among other strengths of investing in Brazil, there is a fact that it has well developed distribution channels and well established transportation networks. In addition, there is a friendly business environment, which shows that the country is a completely suitable as a trading partner. Little or none expenses may be incurred in the establishment of new distribution channels because the already existing ones are highly developed (Van Noorden, 2014). This means that a company trading with Brazil earns higher profits due to the reduction of production costs.
After looking at the strengths of doing business with Brazil, it is also necessary to identify the weaknesses to make a well informed decisions. The distribution of wealth is not evenly spread across Brazil since there are some areas that are under poverty. The productivity growth in such regions is also slow, which means that foreign investments 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. In some 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 sides 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 such as a change of plans or methods. It would be more efficient to continue operating in Qatar because the procedures are well set, and market conditions are well understood; thus, it would reduce possible interruptions (Wild & Han, 2014). Working with multinational corporations in Brazil may also be beneficial across the areas where they can trade commodities that are not available in their respective countries.
Conclusion and Recommendations
International trade remains a major economic generating activity for most countries. While the advantages of such trade relations have enabled many countries to benefit, developed markets stand a better chance in gaining an improved competitive advantage as compared to developing ones because of the production of high quality goods and services, as well as focusing on finished goods. Nonetheless, emerging markets in such a relationship get foreign technology, capital, and rapid industrial development. The provision of quality services and goods also brings about high competition among multinationals and various countries. International trade is also an opportunity for transitioning states to earn foreign exchange, encourage optimum utilization of a country’s resources, help to achieve business objectives, spread risks, thereby, reducing the chances of undergoing losses, and improving organizational efficiency. Moreover, international business activities enhance the competitive capacity of a business. The
However, despite the benefits of venturing into international markets, there are many restrictions on the flow of goods, capital, and technology among countries. Limitations on importation and consulting expatriates has been seen as a major challenge fac by international trade. In turn, tariff barriers, trade blocks, and foreign exchange restrictions imposed by many countries are tailored as policies that protect local industries and reduce unemployment. Consequently, research is necessary to identify these challenges and their impacts on business to avoid various issues negatively affecting international cooperation.
Hence, companies and governments engaging in international business should come up with corporate strategies to determine how a cooperation should be established to compete favourably. Formulating such strategies helps organisations to decide what measures have to be taken, in what timeframes, and what people must be responsible for this. In addition, a corporate strategy introduces ways of creating value through ownership and sharing available resources. In turn, a company’s international strategy should be formulated because a corporate strategy determines a market of the products, possible competitors, and the countries where an organisation can create its branches.
Brazil can be a great international trading partner for Qatar 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 citizens, indicating that people have relatively good standards of living. The country is not only agriculturally productive but also has large deposits of minerals and metals. Therefore, exporting products, such as oil, to Brazil and importing products including food and machinery to Qatar would be extremely beneficial for both countries.
Nevertheless, the tendering department should make sure that it engages in sustainable business activities. It should adopt relevant business strategies and operational methods, monitor trade approaches, and implement changes that would remain relevant for 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 and do not facilitated by corruption.
Private business owners and companies should be encouraged to participate in tendering processes so that they may raise concern in case if they detect issues that would negatively affect them. These companies 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. It will provide exceedingly positive effects on the overall development of the system of international cooperation of Qatar.
The department should also invest in carrying out the intensive research. The reason is that changes regularly occur in international business, and it may be quite challenging to take note of all alterations. Some changes may seem negligible, but they cause detrimental effects on business in the long-run. Carrying out regular and intensive investigations helps organisations to remain proactive and find solutions to issues before they result in negative consequences.
Investing in technology may also be essential for the department. To be more specific, the use of advanced technology will improve the efficiency of operations, as well as increase the accuracy of applied methods. In addition, the application of technology reduces the workload and enhances reliability because there are fewer errors made during the tendering process. Eventually, the performance will be well-monitored; thus, it would be easy to benchmark with other economies.
References
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