International business Free Essays

The article chosen for this paper is Andrew Ross Sorkin’s Study Says Private Equity Isn’t Big Job Killer published in New York Times on January 25, 2008. Selection of the publication is beyond any ambiguity. The New York Times is a media company established in America. We will write a custom essay sample on International business or any similar topic only for you Order Now The company is best known world wide for publishing the news paper â€Å"The New York Times† which is its namesake. The New York Times is considered as one among the prominent media companies in the world.   With a total of $3.3 billion revenue in the year 2006, the company became the top media company not only in United States but also in the whole world. The selection of this article is also logical because it presents a timely discussion of theories related to international business and that too on the parameters of global business perspectives. It is widely believed that to survive as a corporate sector in the long term it is extremely important to mould the organization into an international sector. Therefore, it’s that much obvious to plan the strategies of the company in accordance to international trade sequences. It is important evaluate the marketing policies to survive in the international market and analyze the effectiveness of the prevailing marketing plan. It is quite true that the activation of the international strategy would collide with that of the plans implemented while operating in the local market. After reading and analyzing the article it was evident that this piece of text would be used for the paper as it deals with a organizational theory that is extremely important in relation to the principles of international business more so in the parameters of today’s global business perceptions. It is important to understand the positive aspects of private equity and that layoffs and not evident conclusion private equity involvement in sectors particularly in the context of international business of the global economy. (Sorkin, 2008) Over the next 50 years, the BRICs economies including Brazil, Russia, India and China are probable to become a much larger force in the world economy. The rate of GDP growth, income per capita and currency movements in the BRICs economies together shows possibility of their growing larger than the G6 in US dollar terms in less than 40 years. By 2025 they could attain over half the size of the G6. Of the recent G6, only the US and Japan are among the six largest economies in US dollar terms in 2050. The listing of the ten largest economies of the world may seem relatively dissimilar in 2050. The prevalent economies in the world (by GDP) may not continue to be the richest (by income per capita), thus making premeditated preferences for firms more intricate. The only thing growing faster than China is the publicity of China. In January, the gross domestic product (GDP) of People’s Republic of China’s surpassed that of Britain and France, thus making China the world’s fourth largest economy. In December, it was publicized that China substituted the United States as the world’s biggest exporter of technology products. Many economists forecast that the Chinese economy will reach to the second position as compared to the United States by 2020, and may possibly go beyond it by 2050. Western investors sleet China’s sound economic rudiments, such as considerably a high savings rate, vast labor pool, and strong work ethic and capability of glossing over its flaws. Among the Business people China is popular for being concurrently the world’s greatest manufacturer and its big markets. Private equity firms are hunting the Middle Kingdom for achievements. Chinese Internet companies are obtaining prices of dotcom age on the NASDAQ. Some of the world’s foremost financial organizations, including Bank of America, Citibank, and HSBC, have invested billions on China’s fiscal prospect by attaining minority risks in China’s state managed banks, although many of them are precisely bankrupt. Even every large global automobile company has built or is preparing plans to build new amenities in China, in spite of a swamped market and plummeting profit margins. Under such parameters the article Study Says Private Equity Isn’t Big Job Killer presents a timely discussion of international business relation with a focus on the different arguments on the subject of private equity interventions and its relation with layoffs and job creations. It is very relevant because with economy fast becoming global it is evident that international huge players like China would be involved. Thus it is better to convince these counties to allow foreign private equity into business so that multinationals would be able to reap a good harvest out of these economies. References: Sorkin, Andrew Ross; (January 25, 2008); Study Says Private Equity Isn’t Big Job Killer; New York Times; retrieved on 26.01.2008 from How to cite International business, Essay examples International Business Free Essays office, that accured the Japanese government and Fuji of â€Å"Unfair trading practices†. According to the petition, the Japanese government helped to create a ‘ profile sanctuary’ for Fuji in Japan by systematically denying Kodak access to Japanese distribution channels for consumer film and paper. Kodak claims Fuji has effectively shut Kodak products out of four distributors that have a 70% share of the photo distribution market. We will write a custom essay sample on International Business or any similar topic only for you Order Now Fuji has an equity position in two of the distributors, gives large year –end relates and cash payments to all four distributors as a reward for their loyalty to Fuji, and owns stakes in the banks that finance them. Kodak also claims that Fuji uses similar tactics to control 430 wholesale photo furnishing labs in Japan to which it is the exclusive supplier. Moreover Kodak’s petition claims that the Japanese government has actively encourages these practices. But Fuji a similar counter arguments relating to Kodak in U. S. nd states bluntly that Kodak’s charges are a clear case of the pot calling the kettle back. (a) What was the critical catalyst that led Kodak to start taking the Japanese market seriously? (b) From the evidence given in the case do you think Kodak’s charges of unfair trading practices against Fuji are valid? Support your answer. CASE 2 (20 Marks) Two Senior executives of world’s largest firms with extensive holdings outside the home country speak. Company A : â€Å"We are a multinational firm. We distribute our products in about 100 countries. We manufacture in over 17 countries and do research and development in three countries. We look at all new investment projects both domestic and overseas using exactly the same criteria†. The execution from company A continues, â€Å" of course the most of the key ports in our subsidiaries are held by home country nationals. Whenever replacements for these men are sought, it is the practice, if not the policy, to look next to you at the lead office and pick some one (usually a home country national) you know and trust†. Company B : â€Å" We are multinational firm. Our product division executives have worldwide profit responsibility. As our organisational chart shows, the united states is just one region on a par with Europe, Latin America, Africa etc, in each division†. The executive from Company B goes on to explain, â€Å"the worldwide Product division concept is rather difficult to implement. The senior executives incharge of this divisions have little overseas experience. They have been 3 | P a g e promoted from domestic ports and tend to view foreign consumers needs as really basically the same as ours. Also, product division executives tend to focus on domestic market, because it generates more revenue than foreign market. The rewards are for global performance, but strategy is to focus on domestic. Most of the senior executives simply do not understand what happens overseas and really do not trust foreign executives, even those in key portions? Questions : 1 Which company is truly Multinational ? Why? 2 List three differences between Company , Multi National company and Trans Multi National Company How to cite International Business, Papers International Business Free Essays string(102) " middle class Chinese people would create an explosive growth opportunity for the amusement industry\." Abstract Walt Disney is a well diversified amusement company with global presence and China is a blooming market and the global economic engine. With the theme park business in both the US and Europe already saturated, and a dwindling number of visitors affecting the profits, it is an opportunistic moment for Disney to enter China. The proposed joint venture with the State owned ‘Shanghai Shendi Group’ would definitely guarantee the government support and remove any possible administrative hurdles that would otherwise hamper any new business investment in a foreign land. We will write a custom essay sample on International Business or any similar topic only for you Order Now The prevailing climate of political stability, economic viability and significant growth prospects that China offers and the comparative economic stagnation in US and Europe, offer strong economic reasons for Disney to venture into China which holds great possibilities for future business growth. Introduction The Walt Disney parks and resorts is one of the leading entertainment businesses in operation across the world. With more than 66,000 employees and well over $1.2 billion in annual payroll, Disney is most visited theme park and recreational resort in the US. (Kok, 2009) Originally started as Disneyland in California 1955, Disney’s business has today rapidly expanded with several theme parks and resorts across America, Canada, Europe, Japan and Hongkong. With the theme park business virtually saturated in the US and Europe, Disney is now actively looking for expansion of its multi billion dollar entertainment business into mainland China. The robust economic growth of China and its growing middle class population present an opportunistic environment for Disney, the leading entertainment theme park in the world. However, opening a theme park and successfully running it in a different country is not so easy. Disney’s own past experience reveals the phenomenal success in Ja pan while the parks in Paris and Hongkong are reportedly running loses. (SMG, 2009) This paper would address the international business issues, discuss the market conditions and recommend an entry strategy that is most conducive for Disney’s breakthrough into China. Disney in China China presents a huge business prospect for Disney. Chinese GDP has been growing at an average of around 10 % every year over the last decade or so. (Holmes, 2011) Particularly with the backdrop of the economic stagnation in the US and Europe, the thriving economic growth makes China the engine of the global economy in the years ahead. Also, China has the largest population in the world and with this phenomenal surge in its economy a great number of Chinese people are now within the middle class section of the society. Furthermore, since the entertainment industry is one of the fastest growing industries, tapping into this section of the population that is willing to spend a lot for entertainment is a judicious business policy. Disney has been trying over the last two decades to gain entry into China but had been rejected by the protectionist government polices. Currently however, Chinese government has approved Disney to set up theme parks and stores across the country. Disney has to capitalize on this new window of opportunity and commence its Chinese operations as early as possible. The next few sections will discuss the political, socioeconomic and technological factors present in China as well as the strength and weaknesses of Disney and the opportunities and threats that the company has in setting up its entertainment business in China. PEST analysis Political Factors Political factors are crucial for the establishment of any business as they directly impact the macro environmental variables. China has remained a politically stable country since the 1980’s and also the previously strong communist centric focus is now slowly giving way to the possibility of a democratic transition. Even the Chinese premier Mr. Hu openly expressed his thoughts about this when he said that â€Å"There is a need to †¦ hold democratic elections according to the law; have democratic decision-making, democratic management, as well as democratic supervision; safeguard people’s right to know, to participate, to express and to supervise.† (Hill, 2011) Both the domestic policies as well as the international relationships of China over the last decade or so attest to the inclination of the Chinese government to create a stable and secure national structure as the basis for propelling its continuing economic growth. With the Country entering the WTO in 2001, there has been a string of policy changes that led to lesser government intervention in developmental projects and greater encouragement for industrial investors. Economic Factors China is the fastest growing economy in the world and as mentioned earlier, the country has witnessed stable GDP growth averaging around 10% over the last two decades or so creating a favorable economic climate for new investment. By the measure of GDP, China currently ranks as the sixth biggest country in the world. (Cui, 2009) Availability of resources, low cost labor force and the infrastructural improvements including mega projects that guarantee availability of power to match the growth pace of new industries are some of the favorable factors that sustain this continuous economic growth in china. These are also factors that encourage foreign investment. China’s entry into the WTO and its subsequent open policies that allowed 100% FDI in many sectors including the energy and retail sectors saw the phenomenal surge in foreign direct investment into the country. The following table released by the Chinese government indicates the latest figures about the number of FDI proj ects as well as the investments during the previous year. The strength of the Chinese economy could be measured by its continued ability to attract FDI inflows even when the developed economies of the US and the Europe were reeling under recession. In 2011 during the recession in Europe, China attracted a record $116 billion in FDI. (Edwards, 2012) Also, as the industrial progress and the continuous economic growth of China continues, the standards of living of the huge Chinese population also continues to increase which only translates to increased purchasing power and increased demands for amenities. In particular, the entertainment spending of middle class Chinese people would create an explosive growth opportunity for the amusement industry. You read "International Business" in category "Essay examples" Social Factors Social factors should also be assessed before any investment venture. China has a huge population in the middle aged segment. Currently the population segment in the range of 15 and 64 represents the majority in China. (Banister et.al, 2010) A significant number of Chinese people are still in their twenties and middle age which is the target population for the theme parks. Also, traditionally Chinese are a nuclear family and hence theme parks are usually visited as a family. Also the huge population of China implies that the aging population does not create an economic stagnation as retiring workforce is rapidly replaced by skilled workers. (Banister et.al, 2010) Technological Factors China is a technologically advanced economy and hence there is immense scope for innovation in the amusement market. Even in the local amusement market there is a constant surge of innovative amusement themes and new facilities to entertain the public. There would be no dearth of talent and lack of scope for the application of technology into the development of the theme parks. Only last year an international ‘Theme parks expansion Summit’ was organized in the country and several new technologically innovative solutions were disclosed. For instance, Nanotron technologies, one of the main sponsors of the conference introduced the ‘Child Loss Protection System‘(CLOPS) and spoke about its introduction into the Chinese Theme parks, while another company, Dynamic Motion Rides, introduced the 4D simulation effects into the Theme parks. (Blooloop, 2011) So the Chinese theme park industry is a technologically thriving and competitive industry. SWOT analysis Strengths Financial Might Disney has a powerful financial base and there fore could invest significantly for innovative attractions and features in the proposed Theme park. Disney already has a dedicated channel in China which it could utilize for marketing purposes. Already the company has proposed to invest as much as $3.8 billion for setting up its Shanghai theme park. (Rapoza, 2012). Disney’s huge experience (almost 80 years) in the entertainment industry is one of it’s main plus points. (De Groote, 2008) Brand Recognition Disney is a well established brand across the world. Even in China Disney’s Mickey Mouse and Donald Duck characters are well known among the public. Disney could capitalize on its brand value to attract public to its theme park. For a new entrant into the Chinese market, Disney’s brand recognition would definitely ease the difficulties which any new and unrecognized brand would face. One other advantage for Disney is the qualified and educated workforce that it employs. Disney also has a variety of attractions and thematic features that would help bring more people into the theme parks. (De Groote, 2008) Opportunities Globalization and the easing of barriers of entry in many countries provide Disney the ideal opportunity for expansion and with its financial muscle Disney can easily carve a niche market for its amusement parks in the global arena. Since China has already given the green signal and allowed Disney to enter the market it is the ideal time for the company to establish itself and gain a significant share of the growing Chinese amusement industry. Its diversified products and established brand power give it a clear advantage compared to any other international entrant into China. Weaknesses Disney is known to suffer from management problems. Its international diversification has furthered its management woes. Managing over 1, 37,000 employees across the world is not an easy job and it leads to communication problems and administrative bottlenecks. (De Groote, 2008) With the proposed expansion in China there will be a significant addition to the workforce which would complicate the management still further. Corporate officers are frequently shuffled across which also contributes to management difficulties. Chinese customers though they are huge in numbers and willing to pay could not be expected to spend as much as American customers would. The increasing fixed costs which directly relates with expansion and the increasing operating costs due to its large workforce imply that Disney has to spend considerably with any new venture. Furthermore, in the case of Disneyland in Paris the French government contributed over a billion dollars to help out Disney during the initia l struggling phase. The same could not be expected from the Chinese government if Disney ventures alone. (De Groote, 2008) Its main threats are from a growing number of Chinese theme parks that are more culturally oriented and cater to the tastes of the local population. Disney has to modify its themes to make them appealing to the cultural tastes of the Chinese people. The Chinese currency value fluctuation is one other major issue to be considered. Strategic Entry Entry into the Chinese market involves huge amounts of investment. As already indicated, Disney plans to invest as much as $3.8 billion into the Chinese venture. Though Disney has the financial might to bear the expenses by itself it would be a prudent risk management strategy to involve a large number of outside participants to cover the initial investment costs. In fact, Disney employed such a strategy when it entered the European market. The Saudi Prince Alwaleed owned 10% of the company stocks while the 50.2% were owned by others while Disney itself owned 39.8% of the stocks. (De Groote, 2008) In the case of Disney in Japan it was a Licensing agreement between Walt Disney and Oriental Land Corporation of Japan with Disney getting 7% of the sale proceeds in exchange for transfer of technical and managerial knowledge. (Misawa, 2005) Unlike the retain industry or the energy industry , the Chinese government is not opening up for a 100% FDI in the entertainment industry and has so fa r only agreed to a joint venture. This is however, a welcome opportunity for Disney as not only the cost is shared but also a joint venture with the State owned ‘Shanghai Shendi Group’ would definitely guarantee the government support and remove any possible administrative hurdles that would otherwise hamper any new business investment in a foreign land. (Bloomberg, 2010) With risk sharing also divided between the two, Disney can look forward to capitalizing on the great market prospects that China promises. Disney’s entry into the blooming Chinese amusement park industry with the government backing (as a joint venture) would be an ideal entry strategy for the Company. Conclusion Walt Disney is a well diversified amusement company with global presence. China is a blooming market and the global economic engine. With the theme park business in both the US and Europe already saturated, and a dwindling number of visitors affecting the profits, it is an opportunistic moment for Disney to enter China, the economic powerhouse of the world. As indicated by both the PEST analysis as well as the SWOT study, Disney is well poised for a successful venture into china. Since 100% FDI is not permitted in the Chinese entertainment industry, the proposed joint venture with the Chinese State owned firm, is a good entry strategy for Disney in China. Such an approach shares the investment costs, promotes equal interests in the operation and removes any possible administrative hindrances as well as contributes to equal risk sharing. The prevailing climate of political stability, economic viability and significant growth prospects that China offers and the comparative economic st agnation in US and Europe, offer strong economic reasons for Disney to venture into China which holds great possibilities for future business growth. References Bloomberg (2010), Walt Disney signs joint venture to build first mainland China Theme Park, viewed march 28th 2012, http://www.bloomberg.com/news/2010-11-05/disney-signs-joint-venture-contract-with-shanghai-for-first-park-in-china.html com, (2011), China Theme Park Expansion Summit : A Shanghai Success, viewed Ma 28th 2012, Lam Hing Kok, (2009), Walt Disney employees training participation and its effect of employees’ intrinsic motivation, job satisfaction and affective commitment. Viewed March 26th 27th 2012, Frank Holmes, (2011) Four Examples of China’s amazing growth, viewed March 27th 2012, Judith Banister, David E. Bloom, and Larry Rosenberg, (2010), Population Aging and Economic Growth in China, PGDA Working paper no 53. Kennet Rapoza, (2012), Shanghai Disneyland driving foreign investment into the city, viewed March 28th 2012, Mitsura Misawa, 2005, Tokyo Disneyland, Licensing vs. Join Venture, University of Hong Kong, Harvard Business Online†¦ Patrick De Groote, (2008), Globalization of Commercial Theme Parks Case: The Walt Disney Company, Agroinform Publishing House, Budapest. Viewed March 28th 2012, Steven Hill, (2011), China’s tentative steps towards democracy, viewed March 27th 2012, cn (2009). Disney: five theme parks in a different operating condition. Viewed November 4, 2009, http://www.smgbb.cn/zixun/shishi/2009-11-04/342208.html Nick Edwards, (2012), China FDI fall puts potential policy response in focus, viewed March 27th 2012 , Invest in China, (2012), Statistics about utilization of Foreign investment in China from Jan to Dec 2012, viewed Mar 28th 2012, http://www.fdi.gov.cn/pub/FDI_EN/Statistics/FDIStatistics/StatisticsofForeignInvestment/t20120119_140572.htm Xiaojun Cui, (Nov 2009), In depth analysis of PC industry in China, International Journal of Business and Management, Vol 4, no 11, How to cite International Business, Essay examples