90% of Global Consumers Outside US: Benefits of Business Internationalization - Free Paper

The forces or incentives that drive businesses towards internationalization stem from the benefits or possibilities that could be realized from such prospects. Some of the forces include new markets, diversification, access to talent, competitive advantage, and the opportunity for foreign investment.

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The U.S Small Business Administration revealed data indicating that over 90% of the global consumers are resident outside America. Opting to internationalize one’s business thus sets it up for exploitation of a bigger market. Such businesses can reach out to more consumers or customers, consequently increasing their sales and profitability. One such example is Nike and the IBM companies (Melin, 2014). While they may be firms affiliated to the United States, their main operations are strategically centered in the Netherlands. The Netherlands guarantees the best connection to all other markets in Europe. Such is its prime position that it guarantees access to 160 million consumers in Europe, who are within a range of 300 miles (Melin, 2014).

Several unforeseen circumstances or challenges have often led to the fall of many businesses. One such way of avoiding or minimizing such occurrences is through the diversification of a business’ assets. For instance, should losses be realized in one region, they can be offset by the profits being made by the company in a different region. As such, the business can withstand different hurdles and stay afloat. Further, new markets present the business with the opportunity to try out unique products and services. Their success helps maintain a positive revenue stream (Melin, 2014). Coco-cola is one such company that has profited immensely from the diversification of its products and services.

Internationalization provides an opportunity for businesses to interact with international labor. Such labor falls under a diverse pool of talents. While expanding, such labor could prove particularly essential in increasing the business’ productivity; their language skills could be integral as well in the business interacting with natives, etc. Most recently, Netflix credited the success of its expansion to Amsterdam to its multilingual employees who were well accustomed to different consumer behaviors as well as cultures.

Competing on a domestic platform could prove quite difficult owing to its limited nature with regard to customers, as well as several businesses offering the same products and services. To gain an advantage over the rest, most businesses often opt for internationalization. Doing so guarantees them a competitive advantage over the rest. Such businesses also establish stronger brand awareness for their consumers and are able to access new technologies which ultimately enhances their operations (Hennart, 2008). Further, an international presence grants the business an image and brand, through which it is recognized by, and any contractual business agreements can be done.

Operating on global markets sets up the business to potential foreign investments. In most instances, such businesses do not receive similar lucrative investment opportunities from their domestic regions. However, at the international level, the situation is different. Some of the investors would want to market themselves through such business brands. In return, they provide lucrative cash investments (Hennart, 2008). The business thus utilizes such investments to grow further. For instance, several governments in the world attract businesses to invest in their countries by providing such incentives.

What are the Various Organizational Situations in Which an HR Manager Might be Involved with Aspects of Internalization?

For an international business to function appropriately, they require effective human resource management that is aware of the various cultural requirements, as well as one that adapts promptly to different business environments. The main role of the HR management in any business operation is to recruit, interview, train and facilitate the development of the employees- all these to realize the business’ goals and objectives. Further, they are tasked with coming up with safe and effective work policies.

In international setups, they ought to ensure the environment within which the business operates is productive. To achieve that, the employees recruited ought to be adequately skilled, and have the requisite knowledge to work effectively (Johanson and Vahlne, 2019). As such, the HR arrange for periodic training targeted at improving the employees, as well as compliance with the state’s regulations.

Further, the HR sees to it that the business’ healthcare costs are manageable, the business has enough employees and is beneficial to the community within which it is established. They also work towards ensuring the business’ competitive advantage is maintained or improved. The ultimate goal is to foster global collaboration. Their roles have diversified from only focusing on internal affairs, to the external relations as well.

While their work may appear to clash, HR is separate from the managers of the business. They answer to the managers. As such, they ought to constantly communicate with the managers and run any business concern or by them first. Doing so stabilizes the business and avoids disagreements (Johanson and Vahlne, 2019). It is the role of HR to ensure that everyone is working cohesively as a team. From time-to-time, they could arrange for team-building workshops, and ensure that cultural diversity is well acknowledged.

During their operations HR could be faced with some of the following concerns: whether to staff the business with local or foreign employees; the appraisal or payment of local employees; compensation policies; how best to incorporate cultural differences without occasioning discrimination, etc. (Kogut, 2007). Some of the main key concerns that HR are faced with in running international businesses include deployment, sharing of knowledge and innovation, and the identification and development of global talent.

For instance, if a business is based in China, they exist special medical insurance for serious health concerns occasioned at the workplace. However, in Russia, the standards put up for a similar medical insurance cover is entirely different. Such difference could be cultural, social, economical or political, and they all pose a difficult challenge to international human resources management with regard to their seamless integration.

In contrast, a business that is only based within the boundaries of the United States deals with limited variables with regard to culture, economics or politics. The United States has different cultures and ethnic variations. However, everyone is bound by their appreciation for democracy- an aspect that takes precedence over every other cultural difference that may be present at the workplace (Kogut, 2007). Further, there is a basic federal framework that supersedes any state or municipal law that governs employment. Such homogeneity makes it easier for HR to conduct their duties, as compared to those who have to preside over international businesses covering multiple borders.

What are the Major Differences Between Domestic and International HR?

International HR is tasked with a bigger range of issues as compared to domestic HR. Such issues revolve around international taxation, management of foreign currencies, as well as their exchange rates, international transfers of various employees, etc. On the other hand, domestic HR deal with a single framework that encompasses everything. Further, international HR deal with employees having dual or more nationalities or citizenship. To incorporate them, they have to come up with non-discriminative HR systems, as well as for different locations as well. On the contrary, domestic HR presides over HR programs that are meant for employees with single nationalities; as such, their management is a lot easier.

The involvement of international HR in the personal lives of the employees is deeper than that of domestic HR. This is because, international HR has to go the extra mile and establish how ready the employee’s family is to shift to a different country with regard to its culture, their education, the existing compensation package, cost of living, taxes, etc. Circumstances are different from domestic HR. Much of their involvement is limited to transport allowances and housing when it comes to domestic transfers.

At the international level, the exposure to various risks is more than that encountered by domestic HR. These risks extend to health and the security of both the employee and their families. In some countries, terrorism is a major concern (Johanson and Vahlne, 2019). Such a factor ought to be considered by HR when tasking employees to move into such areas for business purposes. Mistakes made by HR at the international stage are graver than those occasioned at the domestic level.

External concerns that international HR deal with are more complex and intense. They include foreign government policies and regulations, codes of conduct, culture, religion, etc. Those working at the domestic level deal with less complex concerns.

References

Hennart, J.-F. (2008), A Theory of Multinational Enterprise, Ann Arbor: MI: University of Michigan Press

Johanson, J. and J. E. Vahlne (2019), ‘The mechanism of internationalization’, International Marketing Review, 7, 11-24.

Kogut, B. (2007), ‘Foreign direct investment as a sequential process’, in C. Kindleberger and D. Audretsch (eds), The Multinational Corporation in the 1980s, Cambridge, MA: MIT Press.

Melin, L. (2014), ‘Internationalization as a strategy process’, Strategic Management Journal, 13 (winter special issue), 99-118.