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Globalization is a culture in which a country becomes less powerful when compared to other countries. It is a method of communicating with different countries and people to set up a business on an international scale. There are basically three types of globalization which are political, social and economic globalization. Global market refers to doing business across boundaries in which a company takes a commercial advantage which includes global operational differences, opportunities and similarities so that they can meet targets and objectives of global market place. This report is based on meeting local needs is an important factor for performance of a business in Siemens'. It is a global electrical and electronics business whose turnover is £53 billion. Company is headquartered in Munich, Germany and its products are power generation technology, industrial and buildings automation, medical and many more. From Munich, executives oversee work carried out in name of Siemens across different countries. This assignment analyzed key factors of globalization and strategic complexities associated with operating in global environment (Apăvăloaie, 2014). Influence of globalization and influences of global market on an organization's structure, functions and culture is been discussed.
P1 Key factors which drive Globalization
Globalization refers to change in domestic activity according to geographical boundaries across different countries and away from its own country. It is also defined as non dependence of economies by medium of exchange of goods, services technology and capital across the countries. This can also be termed as integration which can be observed by multinational companies when they do their business expansion into different new regions. There are basically four main elements which drive globalization which are cost, market, environment and competition. These are external drivers that impact crucial conditions for capacity of globalization within different countries and these do not have a control by firms (Axelrod and VanDeveer, 2014).
Recently, as there is penetration in new markets and human capitals with help of advantage of cost drivers, a firm can have competitive advantage by providing economies of scale through importing and outsourcing at higher quantities and determining importance of low cost production. In context with globalization, increasing their capital will be helpful for many international companies. With this regard it has evaluated that Siemens' is not capable enough to provide other subsidiaries countries with economies of scale. Then its aim is to gain mileage from investment cost. Along with this advertisement and promotion should be done across countries so that people can have knowledge and can learn about products and services available. Opportunities of cost will result in tough decisions related to markets, concentrating on product positioning, customer segments and proper strategies to be followed while doing international business. Siemens' provides products which are similar to their competitors but comparatively at a lower price which lead in investing in economies of scale and having control over costs that includes overheads, research and development and logistics (Belás and et. al., 2014 ).
Drivers in market which affect globalization involves factors like similar customer needs and transferable marketing where stepping up of global markets for branded products has helped corporations to supply demands in new market place with its current products. Nowadays customers are aware about basic topics such as education, lifestyles, income, aspirations and utilization of their precious time. Siemens' analyses customers in different countries who are willing to spend high and have a developed infrastructure. They do not provide products all over the world but they decide areas where can spend resources and can hang back. Company does regional grouping by selecting different regions and then countries within them. Information from markets are helpful in conditions where an organization is combining markets related to current structures and frameworks (Belás and et. al., 2015).
Drivers in business environment that affect globalization involves imitation of pollutants and wastage that is harmful for environment. With an increase in wealth and mobility information is rapidly transferring across different countries which eventually leads to promotion of importance of globalization and revolutions of technologies that will increase demand for products and services of an organization. The new bureaucracy allow companies which are born globally to easily penetrate had conquer in new market place and manufacture new products or change their strategies as per the requirements of a condition or situation. Siemens' should produce and manufacture electrical appliances which is Eco friendly and should make products that can be recycled. They are making products which has less fuel consumption and do not pollute environment (Carneiro and Brenes, 2014).
Competitive drivers such as increasing of trade among nations and Foreign Direct investment at a same time has benefited in gaining interdependence between countries and organizations and revealing companies in front of new competitors. To have sustainability in competitive market place, Siemens' launched, modified and sell new products quickly and they do not believe in remaining ahead of risks faced in competition and observing that their research ideas are not being utilized by other competitors within market place. They have manufactured many global brands and a demands for those brands and a supply chain which helps a company to fulfill those demands in a market place (Cavusgil and Knight, 2015).
P2 Strategic Complexities Associated with Operating in A Global Environment
Strategic complexities means pressures that extract influence of decision-making process within an organization which help in future success of a business. There are basically two types of strategic challenges which are external strategic challenges and internal strategic challenges. When Siemens' trade globally they face strategic complexities which are mentioned below.
- Physical Distance:Though people have internet and mobile phones to interact with people across different countries but it can match or give results when compared to live communication of people. When people communicate with prospectus and distribution partners they will determine costs that will spend on doing business at a long distance. In context with Siemens' since they are not able to connect directly with people they fail in acquiring cost for their electrical appliances and sometimes are not able to analyze requirements of different countries market and people.
- Unfamiliar cultures:As business is expanded in other country many business are not familiar with other countries cultures. In Siemens', they are not aware about common behavior of people of different countries where they need to expand their business and ways in which people communicate with each other in a social setting. To overcome this challenge company has acquire people who can become their customers (Cohen and Kietzmann, 2014).
- Mastering Markets:An organization must be aware of the buying strategies followed by customers of countries where they need to expand their business. In Siemens' it is important for them to learn about perspective of customers. It will help them to understand needs of customers which will lead to successful international trade of business. One of most important factor for being successful in international market is trans creation. This will help in adjusting a company's strategy or content in a new foreign market.
- Organizational communication: Successful international trade of a business depends on the way an employee of a workplace communicate, report and track their efforts. In Siemens' they need to have a proper system and combination of protocols within an organization so that it can monitor the process of international expansion because there no individual as a person is involved in this to manage (Crane and Matten, 2016).
- Tariffs and export fees:There are many countries which takes exporting charges from companies to bring goods into their region. Siemens' must be aware about tariffs and export charges of countries where they need to do expansion so that they can incorporate them into plans related to finances element while making plans for globalization. Also company needs to pay various kinds of charges for transportation as well as shipping depending upon logistics laws in place of that particular country.
- Human Resources:When a company trades globally they must be aware about human resources they will need in operating in a different country. In Siemens', company must recruit new employees who can trade across global markets which will lead to an extra investment by a firm. In case, company will utilize their existing employees to trade globally they need to fill up vacant places for roles that will be emptied.
- Choosing right countries:For a successful international trade of a business one must be aware about countries where they can expand their business for growth. Siemens' need to determine drawbacks and benefits of exporting products to foreign countries and should also analyze markets which are most appropriate for business expansion within that country. This will help them in growth of a business and also to meet requirements of customers (Doh, McGuire and Ozaki, 2015).
P3 Influences of globalization on organizational governance and leadership, structure, culture and functions.
Globalization is a process in which a business can be expanded in international markets. With help of globalization different countries people interact and come in contact with each other to do business internationally. There are various influences of globalization on organizational governance and leadership, structure, culture and functions which are been discussed below.
It is set of rules, regulations and practices according to which a company is monitored and controlled. In Siemens' they need to know ethics of business so that they can trade globally. For operating business internationally a firm needs to be aware of combination of rules and regulations where they need to do their business. As every company has its own set of ethics to be followed while operating a business they need to change their rules and regulations for doing international trade. Every country has its own set of rules and regulations which is needed to be followed by every company for doing business within specific region (Epifanova and et. al., 2015).
It is a process of directing and monitoring a group of members within a workplace. In globalization as various country follows different leadership styles, it is not usual that a leader of a specific country will prove to be good leader of another country as well. As different countries have their own culture, beliefs, customs and social trends and it is benefited for a leader to acknowledge and relate to them. An individual who is aware of with country's customs, ethics and traditions will gain an effective leadership to business. In Siemens' an employee must be trained according to specific culture of a country where they need to do expansion so that they can be respected in country and do successful trade of business.
Structure refers to organizational structure of a business. Structure includes top level mangers, middle level manager and lower level managers of an organization. When a company trade internationally they tend to have a change in their structure. In Siemens' when lower level mangers does work of a higher level managers their structure changes. As higher level managers are given roles for trading international their vacancy needs to be fulfill by lower or middle level managers which eventually leads to change in structure of an organization.
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For trading globally company needs to recruit people from various backgrounds will have diversified culture of people that will have their own way of solving problems. As New employees will have new skills and knowledge and old employees will have nominal skills and knowledge there will be gap analysis between employees. In Siemens' employees with different culture will give new ideas and has different perspective of risk obsolescence or termination (Ferraro,and Briody,2017).
Globalization has impact on different functions of an organization. Trading globally will have change in marketing as well as operating function of an organization as new technologies need to be introduced for doing business globally. Moreover, human resource function will also be impacted as new employees must be hire for trading internationally or filling vacancy within a workplace. In Siemens' globalization has influenced marketing function as when company needs to export across countries they need to make promotional strategies according to culture of specific country where they need to do expansion. With help of this they will get to know about country's market and can make products according to requirement of customers or market (Huhtala and et. al., 2014).
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P4 Influence of ethical and sustainable globalization on organizational structure
Business ethics is a method of implementing ethics that analyses ethical problems that are aroused in a business environment. Ethical decision making can be treated as hurdle in business, in government and even in daily lives. Recently companies have faced many ethical issues which gave growth to business and environment which provide more markets and business opportunities but has also lead to duplication of products, child labour, malpractices of business, environmental issues and money laundering. To resolve such issues business must implement business ethics as an element of programs and alliances of business. Along with involving ethics in a part of decision making process. Business ethics helps a company to have a competitive advantage as well as to have sustainability within market place.
Sustainable globalisation describes a breakthrough and fundamental modification on the way people trade across different countries. It raises from a zero sum, selfish, approach of win lose into one which will consider full account of short and long term impacts of actions of people in context with ecosystem on a larger system which consider human as a part and value effective and efficient use of natural resources. This encourage local communities in creating their careers. It is a principle which is centred and operates on foundational values of service, triple bottom line and collaboration. These influences of ethical and sustainable globalisation helps to have a competitive advantage over other rivals and to maintain its resistivity in market place (Kasemsap, 2015).
P5 Various ways through which decision making can work effectively in global context
Globalisation helps an organisation in enhancing their overall growth and also in increasing its customer reach at a global level. In this regard, the main function of leaders and managers of the chosen organisation Siemens is planning, organising, directing and controlling various business activities. It is also essential for an organisation to make effective decisions because globalisation increases competition in a business market. Effective decision making helps Siemens in sustaining their productivity for a longer run as compared to their competitors in a business environment. There are different ways of decision making which will helps Siemens in working effectively in a global context, which are described below:
It is the way in which one organisation take decisions by coordinating with another one. It is an helpful way as decisions are taken with the mutual understanding of two or more parties as a result they are able to take right decision. As a result, organisation can take effective decisions while performing business activities at international level.
This term is also seen as the way of influencing another organisation by having good command over the same thing. It can be said if an organisation performs their business activities at global level then it is important for them to convenience another business related person for taking effective right decision which is beneficial for both of them.
Decision making can also be taken in effective way if organisation have command over the market where they are performing business activities in international market. This command can be in the form of monopoly as it helps in taking right decisions.
So according to the above scenario, collaboration, convenience and command are beneficial for chosen organisation Siemens to work effectively in a current business environment.
P6 Various routes to internationalisation an organisation may adopt, including key barriers
Globalization is a process doing international trade across different countries. There are various key barriers involved in globalisation along with routes top internationalisation an organisation which an be adopted by a company is being discussed
Different key barriers such as lack of funds, culture and lack of innovation are being mentioned below:
Lack of funds –
Funds are foremost factors of business. They depict overall health of company and are important in growth of managing business. Growth reciprocate to capitalization, location, employees, innovation of new product or services being offered, these all depend on funds. If proper funds are not available then this can lead to decline of products being offered by company and decline in shares. To build capital current liabilities should be lesser than current assets (Kolk, 2016).
Difference in culture will help in determination of whether business will be successful or unsuccessful. If product do not meet requirements or desires of local market then there is no use of being in market. Value of market and community is foremost thing which Siemens AG will have to understand. Culture include understanding of following aspects -
- Lack of information of of emerging market or profitable market.
- Problem with respect to entry in foreign market. Distribution and promotion of product overseas.
- Desire and requirement of locals for your product.
- If cultural and language differences are present then how these can be overcome.
- Management of time with respect to different time zone.
- Affect of religious or lifestyle or diet on business.
- Negotiation of agreements and contracts.
- Limitations with respect to business.
- Promotion of product in market (Peng, 2016)
- Rude or offensive behaviour when considering local consumers.
Lack of Innovation –
Profit depend on ability of employees to generate solutions and implement those solutions. Diffusion, scaling and shared vision, purpose or strategy are foremost factors which are responsible for lack of innovation. Lack of resources, new ideas, systematic innovation process is absent, shifting priorities are important factors which affect innovation (Savrul, Incekara, and Sener, 2014).
Routes of Internationalisation
To drive growth, international expansion plays an important role. Basically it refers to involving business at international level. Domestic market has become deficient due to scale of economy and various opportunities available at international market. Successful executive will always expand their business in any other country to increase revenue or capital investment. Franchise and joint ventures are effective for ambitious market entrants but they should plan exit.
It is merging of capabilities and resources to obtain distribution, strategic marketing and sales goal of a franchisee. Franchising refers to decrease dependence on domestic business. By using franchising there is less risk of expanding business and requires minimum investment. Foreign master franchise pay a lot of amount to achieve a specific position in a geographic area.
Joint Venture –
It refers to pooling of resources for completing specific task by two or more companies. Task can be anything like working on new project or business activity and each partner is responsible for loss or profit and cost associated with each project. They are defined by shared ownership (Wild, Wild and Han, 2014).
Acquire new venture –
Acquisition is situation when company buy shares of other company to acquire it. Company gets ownership of other company when they acquire 50% of their shares. Buying a company in international market will change company's status to local and all benefits which are given by government to local market will be given.
From this assignment it can be concluded that doing international trade helps a business in increasing sales as well as performance of an organization. Moreover it helps in gaining profits for a company and having a competitive advantage within a market place. But to expand their business globally it is important for an organization to determine its internal as well external factors of environment. As these factors can have tremendous impact over a business in a negative and positive manner. By implementing rules and regulations in business of different countries will help in successful trade of business globally and can have a competitive advantage where they want to expand their business. It also includes key barriers and routes of internalization an organization may adopt.
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