5 Main Complexities which are Faced in International Business

1. Dominance of Regional over Global strategies. While we talk much about going global and global companies, the study by Rugman and Verbeke have found that there are only 9 truly ‘global’ companies- IBM, Sony, Philips, Nokia, Intel, Canon, Coca-Cola, Flextronics and LVMH. Only these companies are having at least 20% sales in each of the three triads – Asia, the EU and North America. It means vast number of companies have a strong home-region bias. If a firm really wishes to get worldwide customer acceptance than it must balance its geographical distribution of sales.

2. Many of such international business firms, particularly from China (through aid and diplomacy), Russia, India and Brazil, are making large scale investments even in politically volatile environments. They are entering not only with entrepreneurship at hand but even creating the brand names – like the Korean firms. Offshoring and outsourcing firms are going far beyond conventional cost reduction purposes. Many Indian IT companies have established their firms in the US to have contact with the local users.

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3. Increasing opportunities for business abroad has led to geographic diversification on a large scale. It has created a problem of balancing between the geographic expansion and control over operations, i.e., parent control over subsidiaries. ‘Final decisions on what to do and what not to do, what to internalize and what not, may need to be taken centrally, but subsidiary managers can and must be allowed to play a vital role in ensuring these decisions fully reflect locally available knowledge.’ These subsidiary managers should not be treated as a source of ‘bounded reliability’.

4. Corporate Social Responsibility refers to good citizenship. And as a citizen the international firms must ‘do well and do good’ simultaneously. Business firms must help eradicate global poverty and health pandemics. Change cannot take place without a capable network to support it. Some of the MNEs take corporate responsibility role to supply chain partners’ interaction relating to hazardous working conditions, poor wages and child labour.

5. Sustainable Development is not synonymous with economic growth.-It is a tragedy that more than half of the world population is still plagued by the worst forms of poverty, hunger and disease.

According to UNDP, 10% of the richest adults in the world own 85% of the world’s household wealth, while bottom 50% have to contend with only 1% of household wealth. These widening disparities are giving birth to problems like social unrest and terrorism.

Developing countries’ poor have more worrisome problems. In less than half a century, the world has lost one-fourth of its topsoil and a third of its forest covers. In the last 35 years alone, a third of global biodiversity was forfeited.

It now takes the Earth one year and four months to regenerate resources used in a single year. And if it continues apace, the equivalent of two earths will be needed to support humanity’s resources requirements by 2030. The current global economic model is, therefore, clearly unsustainable.

Global warming is the mother of all challenges. Global warming exacerbates the challenge of poverty and environmental degradation and together they pose a threat of far reaching consequences to societies around the world. The ability of a business corporation to adopt low carbon operations as well as sustainable business practices will be one of the key determinants of competitiveness in the years to come.

According to Porter and van der Linde, it can trigger to two kinds of innovations. First relates to technologies that reduce the costs of dealing with pollution. The second relates to address the root cause of pollution.