Internationalization Of Companies And The Challenges Faced
Internationalization of a company can be seen as a process that enables the company to operate in the foreign markets besides the domestic markets for example, Shell and B .P and the Coca-Cola Company. There are various reasons why companies internationalize but there major reasons for this are company growth and expansion. Usually the companies internationalize to grow an increase the out puts, low numbered employees which are available in other countries, resources and ideas and the most important one is the relocation to the source of raw materials which are available in the home markets.
The challenges faced in the internationalization of the companies
Though companies seek to internationalize, there are various challenges facing this companies when achieving this process. One of the challenges facing the growth of the companies in the international business arena is the problem of communication whereby cultural misunderstandings arising from the mis-communication are of the biggest challenges which the foreign companies faces in China (Tan & Xianfao 2007). Although there are high numbers of the Chinese people who are of high proficiency in English, it is uncommon to find someone who understands the sub titles of the language and possesses a strong enough understanding of both Chinese and the western culture to navigate delicate business negotiations. For example in the communist era of Mao Zee Dong, the Coca-Cola Company had a lot of challenges while opening up their company in China (Tan & Xiaofang (2007).
Political factors, according to Jackie and Svetlici (2003), challenge the internationalization of the companies whereby the political decisions, whether in laws made or the policies concerning the business adversely affects the company’s profits and the goals. The political actions can range from being detrimental to the such as revolution , like in the case of the Shell oil company In Libya during the Anti-Gaddafi uprising to those of amore financial nature, such as creation of laws that prevents the movements of capital.
There are two type of the political risks, macro risks which refers to the adverse actions that will affect all foreign forms, such as expropriation or insurrection while the micro risks refers to adverse actions that refers to that will only affect certain industrial sector, or businesses such as corruptions, for example the Fidel Castro’s government when it came into power in 1959, a lot of American-based investments worth millions of shillings were confiscated by the government (Etemad 2013).
According to Gerald (2007), export factors challenge internationalization of companies. Export problems like the one faced by the Finnish Firms are usually finance related like delays in payments, high commission costs with foreign clients and high labor costs productions. For instance, there was a problem of poor marketing strategies that didn’t focus on the individual customers and capabilities with inadequate personnel’s and in additional and one of the companies involved were the Nokia company (Vedavalli 2007).
Solutions to the challenges of these dreams
In order to avoid the problem of communication it is important for the all nations in the world to adopt at least one or two official languages that are internationally understood that international transactions can be made without any difficulties. Most of the Asian companies where there are only the national languages being used such as India, China and Japan need to adapt to other languages such as English is the commonly used worldwide, which will help in the communication between the international clients and the local producers bearing in mind that these countries are known to export large amounts of commodities to other countries especially Africa (Jackie & Svetlici 2003).
The companies that seek to extend their growth in other nations should carry out an extensive research that will help them to determine the political situation of particular economy (Suisman 2007). This would enable them strategize what actions to take if the host nations formulates policies that does into favor business environment of the international companies that could lead to confiscation of the assets and the increased taxation that affects the revenue generated. Understanding of the political situations of foreign countries is an imperative aspect in internationalization.
According to Etemad (2013), companies should also work on the marketing strategies so that their products will have high demands in the market. The mother company that controls the payment of the employees in the host nations should also have an automated system that generates salary in the required time to avoid delays in the payments. The prices should also be standardized so that they do not face stiff competitions from other local products.
Etemad, H. (2013) The Process of Internationalization in Emerging SMEs and Emerging Economies. Northampton: Edward Elgar Publishing Limited
Jackie, A. & Svetlici, M. (2003) Enhanced Transition through Outward internationalization: outward FDI. Hampshire: Ash gate Publishing Limited
Suisman, G. (2007) Small and Medium-sized Enterprises and the Global Economy. Massachusetts: Edward Elgar Publishers
Tan, T. & Xiaofang (2007) Proceedings of the International Conference on Chinese Enterprise Research. Singapore: World Scientific Publishing Co.
Vedavalli, R. (2007) Energy for development: Twenty First century challenges of reform an liberalization in the developing countries. London: Anthem Press.