Samenvatting IHRM Hoofdstuk 1 International business
1.1 Internationalization and globalization
Internationalization is used to indicate that a company had expanded beyond its
home country without a set minimum number of countries or limitations in type of
foreign activity.
Globalization means that a company and the company’s environment are
internationally orientated and affected by changes from abroad. The environment of
companies becomes more globalized because of:
- Companies that have become global players
- BRIC countries becoming future economic leaders
- Availability of the internet
The global industry assumes all companies that are active in the same field are
active worldwide.
A global player refers to a company that makes most of its profits outside its home
country.
Opposite of the global industry is the multidomestic industry with insurance
companies as an example. Their market position in one country is independent of
their market position in other countries.
Gross Domestic Product represents the total value of all products and services
produced within one country within a certain period of time, in this case a year.
Contributing to increasing globalization
According to Ebbers, more and more companies are affected by globalization. The
factors contributing to this are listed below.
1. Companies that become global players
2. Relatively small domestic markets
3. 3 BRIC countries becoming future economic leaders
4. The availability of the internet
5. Reduced costs of transport
6. Reducing barriers for trade and moving of people
,1.2 Economic models
The Anglo saxon model of capitalism originates from the 18th century scholar in the
field of economy, Adam Smith. Countries where English is the dominant language,
such as the United States, United Kingdom, Ireland and Australia, have economies
sculpted according to the models’ values of:
Limited government interference by limiting regulations
Low tax rates
Services preferably left to commercial parties rather than appointed as public
responsibilities
Strong emphasis on privately owned properties and businesses
Favoring free trade, opposed to trade limitations
The Rhineland model relates to capitalism as well, but basic values of the
economies differ from those of the Anglo-Saxon model. Government interference is
values and accepted, allowing a higher level of social security provided to those not
able to provide for themselves, such as unemployed and disabled people.
Employees and employers are expected to work together to enable
businesses to become successful.
It differs from the Anglo-Saxon model in allowing widescale collective
bargaining and employee representation.
Communism: the government is considered to be the center of all economic
activities. The government strives for equal distribution of wealth between its citizens
and therefore eliminating unemployment. Healthcare, education and such are
government-rub, and ownership of the country’s assets, such as companies and
ground materials, is shared by all.
, 1.3 Going abroad
According to Brewster, companies will look for opportunities abroad because of one
or more of these three reasons:
1. Market
2. Cost advantages
3. A foreign government favorable to companies
1. Market
If a company had identified a customer market outside of its current market that
would be interested to a target with its current product range, the company could take
that opportunity and expand its business.
2. Cost advantages
Producing in western countries is often expensive when production requires labor. In
order to reduce costs, production can be relocated to a country with lower wages.
The company will sustain its focus on its existing customers in the company’s home
country but can offer these customers a more competitive price.
Relocating production abroad is called outsourcing. The type of work being
outsourced by companies has changed over time. Three waves can be distinguished:
1. Low skilled labor: sowing t-shirt and putting together mobile phones are
examples of outsourcing low skilled labor abroad.
2. Medium skilled labor: outsourcing concerns customer service handling
customer complaints by phone.
3. High skilled labor: employees abroad develop for example software for the
online payment of web shops.
3. A foreign government favorable to companies
The majority of countries around the world obligate companies to pay taxes on the
profits they make. For large companies the total amount of tax owed can add up to
millions of euros a year. Choosing a country with a tax scheme favorable to
companies is a way to save money.
Internal motives
This can be seen as reasons to go international but are not based on specific
opportunities abroad but on the company’s situation in its home country. Ebbers
details the following internal motives for companies to go abroad:
Surplus of financial means
Reducing risks
Creating a global image
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