Drivers of Internationalization of Business - Essay Sample

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University of California, Santa Barbara
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Many large and small enterprises from either developed or developing countries are either in the process of going global or are already global. There are many factors that drive the internationalization of businesses. These factors include rapid and extensive global communication, rapid development and transfer of new technologies, search for new markets and reduced costs, trade agreements and improving global education and a global talent pool among many others (Rask, 2014).

The first driver of internationalization of business is the trade agreements. Inter-regional and inter-country trade is gradually increasing regionally and globally through trade treaties. Government policies have enabled the decrease in trade barriers and have also opened markets thus increasing the rate of economic growth all over the world (Rask, 2014). In addition to that, the support from both the local and national government encourages both foreign investment and cross-border trades.

The search for new markets and reduced costs is also another driver for internationalization of business. Due to global competitions, organizations are forced to look for new markets with better revenue costs in other countries. Most companies aim to minimize costs by moving the production activities out of the country using the Low-Cost Country Sourcing strategy whereby companies cut operation costs by sourcing materials from other countries offering lower production costs and labor. Companies can also minimize material, marketing and legal costs which help in achieving a high-scaled economy.

The rapid and extensive global communication is also one of the key drivers of internationalization of business. Technological revolutions such as the internet has made communication faster, easier and cheaper globally by enabling the spread of information about people from a certain region regarding their needs and way of life.

The rapid development and transfer of new technology also drives business internationally. New technologies are being developed and made available throughout the world making it possible to manufacture and deliver products and world-class quality services globally. The rapid development and transfer of new technology across the world is mainly due to the modern education system which focuses on transforming the world technologically hence allowing every country to participate in the global economy.

Improving the global education and talent pool also drives the internationalization of business by improving education systems throughout the world thus enabling companies to produce quality products and services. Every country in the world has equal advantages in the global economy due to the existence of a global talent pool which allows companies to operate from anywhere in the world.

Both internalization and globalization refer to the continuous increase in the level of interaction, integration of cultures, countries, companies and people and the level of interconnectedness of the people. 50 years ago, U.S. accounted for more than half of the percentage of globalization; today, however it only accounts for less than 28 percent of the total. In 2010, over 82,000 multinational enterprises are from many different nations according to a research conducted by the UN. According to business rankings in publications such as the Bloomberg Business Week which rank large and publicly traded firms, the global economy includes a variety of products and services throughout the entire world. For a company to attain its rank, The Human Resource department has to select a workforce that is willing to achieve internationalization and compete globally. The United Nations Conference on Trade and Development is in charge of tracking the Worlds Transnational Corporations and analyzing their importance to the global economy. The organization developed a Transnational Index which is based on the companys average percentage of its foreign employment, sales and assets to its total employment, sales and assets.

The internationalization of Human Resource Management takes place in a variety of settings which include the head quarters of multinationals, domestic firms, government agencies and non-governmental organizations and in the home country subsidiaries of foreign owned firms. Most Human Resource managers are found in the head quarters. Head quarters may either use policies from the parent company or those used by the host country to its foreign subsidiaries. In the domestic firms setting, the complexities of international business relating to IHRM are confronted. The setting is also in charge of recruiting talent from abroad to fulfill the need for specialized skills. However, hiring immigrants may lead to many internationalization concerns hence the matter should be handled carefully. In the home countries subsidiaries of foreign-owned firms, the HR managers are based on their home countries but are however employed by a local subsidiary which requires the integration of the local culture and the organizational culture during operations. The government agencies and non-governmental organizations are also global in nature because they are also in charge of sending hundreds of people to operate overseas and employing people from the local or the developing countries as their staff.

The HRM managers usually contribute a lot of expertise knowledge to internationalization since they are well educated in issues concerning IHRM which determines the success or failure of an enterprise depending on how well the IHRM issues are handled. The International Human Resource has a variety of responsibilities among which include; dealing with a wider range of employees, the external factors influencing the enterprise, getting involved in peoples lives and having a wider perspective. The IHRM is however new in terms of profession and also in the academic area.

Reference

Rask, M. (2014). Internationalization through business model innovation: In search of relevant design dimensions and elements. Journal of International Entrepreneurship, 12(2), 146-161.

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