Dr B K Mukhopadhyay
(The author is a Professor of
Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)
It is a reality that today world trade has assumed an importance hitherto unknown to the global community. The modern marketer or manager cannot manage a business without looking at the global arena where economic transactions take place, even if a marketer decides to confine his own business within national borders. The fact now is that while in the past trade was undoubtedly conducted internationally, never before did it have the broad and simultaneous impact on nations, firms, and individuals that it has today. In over three decades, world trade has been zooming. Clearly, the global nature of modern economics influences one’s decisions in any case.
What is more, trade growth on a global level has consistently outperformed the growth of domestic economies in the past few decades, as a result of which many new countries and firms, especially in emerging economies, have practically located it as highly desirable to become major participants in the international market. Global marketing (marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities, and opportunities in order to meet global objectives as defined by the Oxford University Press) has thus emerged as number one—more so since the emergence of computers and the internet has reduced the world to a global village where producers and customers can just log onto the internet to interact and exchange goods and services.
International business essentially covers the international transaction of economic resources as well as the international production of goods and services, and as such, the broad forms of business internationalization cover trade, technical collaboration, and investment.
Clearly, the heterogeneous environment influencing international trade in this age in a big way is required to be scanned simultaneously with framing and implementing strategies so as to fulfil the basic objective of maximizing the country’s wealth both on the part of domestic and international enterprises. For the latter, this is more crucial because of the existence of far greater complexities—situations being totally different between an industrialized country and a less developing country (they are, in general, different in the EU compared to those in other industrialized countries). Obviously, a lot depends on not only the financial strategies or strategies that an international player adopts or should adopt but also on the technological and production aspects, marketing aspects, and human resources management aspects.
Up Above the World So High
Especially, information and communication technologies have affected business organizations in the way they conduct business. While industrial-age business systems were predominantly characterized by bureaucratic procedures and hierarchical and centralized organizational structures, which, in turn, caused delays and inefficiencies, it is e-business-age companies that have virtually flattened organizational structures coupled with flexible and decentralized arrangements—the utmost requirement is to heavily lean on instant information so as to deliver customized products.
This is the main reason why the requirement has been looming large, going from the analysis of the common strategies to sell a product to the analysis of the most important economies in which one international firm competes against others.
Not in India alone, international marketing has emerged as a targeted area of highest priority among the progressive nations globally. International business has expanded at a jet speed in the current decade, with the reasons mainly being rapid growth in technology, the rise of supportive institutions, the openness of the different economies, and an increase in competition. Even minnows like Myanmar are now making a foray into the energy sector in particular. Not only this, even a comparative latecomer like Bangladesh has emerged to be our tough competitor in the field of readymade garments (for which sector even Russia is now interested in learning) making full use of its competitive advantage (a country has a comparative advantage over another if, in producing a commodity, it can do so at a relatively lower opportunity cost in terms of the foregone alternative commodities that could be produced) in the arena of cheap labour. The EU’s internal market is all about removing barriers to the free movement of goods and services, people, and capital. Organizations are also there to encourage the removal of barriers to free global trade.
It is beyond any shade of doubt that the openness of economies has been gaining ground—described as total foreign trade (exports plus imports) as a proportion of GDP—and as such, the degree of openness of an economy plays the dominant role. Openness of the goods market refers to the free exchange of commodities across national boundaries, showing and indicating greater interaction with the global market. Side by side, the openness of the factor market also deserves attention—labour and capital have more freedom to choose between domestic and foreign assets. In fact, MNCs are moving their operations with greater ease around the world in search of lower costs. For example, workers can move freely from one country in the EU to another without facing many restrictions.
Again, the openness of the capital market has been another crucial area as far as international trade in financial assets is concerned. Investors today are more free to choose between domestic and foreign assets, and the progressive elimination of capital controls is a prominent feature of ongoing globalization (the increasing integration of national economies into expanding international markets) the world over. It is also a matter of pride that Indian firms now have greater ability to raise finance abroad to meet investment needs. It is also much easier for foreign investors to acquire assets in India (company’s shares, Government of India bonds, etc.). The international financial environment is, thus, the most crucial factor since trade as well as investment involve different currencies as well as funds that are borrowed or lent in different currencies and in different segments of the international financial markets.
The Change is On
The fact is that for both the developed as well as the developing world, marketing has not only been considered from the point of view of being an integral component in the context of economic development but as a rich gold mine as well (earning foreign exchange, which is described as claims on a country by another held in the form of a currency of that country). If one knows the technique to explore, then the resource is meant for one, of course, in a transparent way as well. Reaping adequately from modernized, highly fluid, and fast-changing global business and commercial environment does depend on its abundant natural, human, technological, and financial resources, as well as crucially on the very ability to undertake the expanded task of adapting to befitting marketing strategies.
What is more, the very management functions in the sphere of international business differ widely from those engaged in domestic business, mainly visible in areas like accounting and finance, personnel, marketing, and production. For example, multinational companies operate in many countries simultaneously, and the different units are linked through common ownership responding to a common strategy (although the degree of integration varies from case to case). During the last five decades, MNCs have registered phenomenal growth. The trend is all set to continue, provided the reputation risk factors (as normally experienced in countries like China) are adequately taken care of.
Naturally, the challenge is to create an exportable surplus (trade surplus referring to an excess of export receipts over import payments as compared against trade deficit, which means an excess of import expenditures over export receipts measured on the current account and also known as merchandise trade deficit) while at the same time producing goods or rendering services at the lowest comparative cost so as to get a strong foothold on the international market in the face of intense competition.
This, in turn, forms the very basis on which ultimate marketing success depends. Valuable customers are acquired and retained, while at the same time, major problems are encountered when offering an intangible product, and thus one has to tackle the same with more confidence.
The upshot: at this very juncture, the size and complexity of international business are required to be comprehensively weighed. It is to be borne in mind that international business, in the true sense of the term, is totally different from domestic business. The former involves more complexities that are related to intra-firm transactions and to an unfamiliar host-country environment—regulatory, economic and financial, political and legal, socio-cultural, and many others. As international business is normally carried on in an unfamiliar environment, it is rather imperative to get acquainted with the various types of environment in which such businesses are transacted—the regulatory environment dealing with the type of trade, FDI (foreign direct investment—outside investments by multinational corporations) regulations at the national and international level, as well as the economic integration schemes in different parts of the globe. Political, economic, legal, and socio-cultural environments that differ from one country to the next influence such businesses to a significant extent.