Internationalization and Cultural Implication for Joint Ventures in Saudi Arabia

Internationalization and Cultural Implication for Joint Ventures in Saudi Arabia International business text has paid particular interest to the study of internationalization and entry mode approaches of companies in various segments. However, very little studies that consider cultural implications in internalization have been accomplished. This paper shall review different literatures on internalization and cultural implications for joint ventures in Saudi Arabia.Advertising We will write a custom essay sample on Internationalization and Cultural Implication for Joint Ventures in Saudi Arabia specifically for you for only $16.05 $11/page Learn More First, a general explanation of the internalization process shall be presented followed by an in-depth review of joint ventures in Saudi Arabia and the cultural implications of doing business in Saudi Arabia, a nation dominated by the Islam, religion. A conclusion that summarizes the key points shall then be presented. Internalization During the process of internationalization, companies incr easingly spread their business functions and activities outside their national borders (Ahmad and Kitchen, 2008). International extension compels companies to construct three tactical decisions including: which target markets to go into, the right time of entry, and the way to penetrate those preferred markets (Hill, 2008). Besides, a firm has to design a marketing plan with guidelines on how to enter the alien market and lay down a control mechanism to keep an eye on its business progress (Hill, 2008). Foreign market choice is a compound process and is separated into four phases including: state recognition, preliminary viewing, thorough viewing and final assortment (Johansson, 2008). To emerge victorious, firms must identify market prospects and discern appropriate foreign markets. Kirzner (2005) reveals that the market can not be at equilibrium due to the gaps amid the demand and supply. Hence, firms should identify these gaps and monitor the markets vigilantly for investment cho ices. According to Hohenthal et al. (2006), companies face diverse economic, cultural, political and organization’s situation from their home. As a result, firms may choose markets that are related to their state of origin to avoid insecurity in an alien nation (Johanson Vahlne, 2006). Time of entry is another significant decision that influences the cost and profits of investment (Kwon Konopa, 2003; Sivakumar, 2004). Market information plays a very important role in entry timing (Mitra Golder, 2007).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More In case a company accumulates adequate information on the economic and cultural surroundings of alien markets; it is fitting to penetrate those markets. Deficiency of knowledge and risk evasion hinders several firms entering indefinite and risky borders (Griffin Pustay, 2007). An essential subject in international extension is that according to the timing of entry, companies face different stages of institutional insecurity, which influences the competence of the entry plan (Papyrina, 2007). Entry manner is a type of strategy and dedication of resources that a company adopts when it settles on entering an alien market. The selection of the best entry mode is amid the vital strategic decisions for companies in the course of internationalization (Nakos and Brouthers, 2004). Assuming appropriate entry modes can help a company to achieve enhanced performance and endurance in alien markets since it involves diverse threats (Ekeledo Sivakumar, 2005). Entry mode preferences are separated into two features: equity and non-equity modes. Equity entry modes incorporate joint ventures and sole ownership (Wild et al., 2008). According to Griffin Pustay (2007), non-equity modes are further separated into market leaning modes and contractual modes. When a company adopts an equity mode, it’s supposed to make a preference among establishing a business from the start, purchasing an established firm, or a blend of both approaches (Griffin Pustay, 2007; Wild et al., 2008). Every entry mode approach has merits and demerits. Companies may pursue a range of criteria to select an appropriate entry mode. To acquire elevated returns from alien operations, companies may necessitate high resource dedication. Nevertheless, this augments the threat of international venture. Hence, companies must exercise superior control over their alien operations and partners (Blomstermo et al., 2006; Ekeledo Sivakumar, 2005)Advertising We will write a custom essay sample on Internationalization and Cultural Implication for Joint Ventures in Saudi Arabia specifically for you for only $16.05 $11/page Learn More Theoretical Views of Internalization Internationalization Theory As per the internationalization process theory, companies will pursue a regular process to internationalize their act ivities overseas (Johanson Vahlne, 2006). A company’s deeds during the institution of international extension begin from little resources dedication to a following greater dedication and power. Companies chiefly enter the markets that are well-known and have less paranormal space with their local state. According to Andersen ( 2003), this theory supposes that â€Å"for alien activities, a company moves via four phases starting with no consistent export deals, then export through host state mediators, followed by export via a foreign sales subsidiary, and lastly, foreign manufacture by an entirely owned subsidiary† (p. 57). Several scholars have condemned the internationalization process theory (Root, 2004). The series of phases was constrained to a precise state market (Andersen, 2003). The conjecture also ignored joint ventures and other contractual entry modes (Sharma Erramilli, 2006). Besides, this conjecture is too deterministic in character and is only significa nt in the premature stages of internationalization as markets turn out to be homogenous and supernatural space decreases (Melin, 2006). Networks Theory The networks method is usually founded on sociology of organizations. As Zacharakis (2005) proposes, the local state networks are initial point for the worldwide expansion of companies. Enduring competitive advantage is acquired via synergy. When a company has an enduring competitive advantage, its potential and resources are long-lasting, hard to spot and recognize, imperfect, transportable and difficult to imitate. The, theory then stresses the impact of firm-specific resources and trade networks on the global tactics of companies. In line with this theory, a system of interpersonal and inter-organizational associations that form the performance of firms to internationalize is the effect of the business and social systems but not via the internalization system of the market (Malhotra et al., 2005).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More While the network theory presents a priceless approach towards the function of systems in internationalization, it fails to clarify the outcome of environmental aspects. Eclectic Paradigm Theory According to Dunning (1988), the eclectic paradigm also known as the ownership, localization and internalization model stresses that a firms’ global extension and entry tactic relies on a company’s resources together with relational and host state factors. Grounded on this perspective, if the local market has a location advantage greater than the target alien market, making sales to other countries is an appropriate entry mode. In case the host bazaar has a position advantage, the contractual entry mode is likely to be considered by companies (Sharma and Erramilli, 2006). In case the risk of agreement with home partners is elevated, foreign direct investments become the most suitable mode; if not, licensing is assumed (Sharma and Erramilli, 2006). This theory extended to joint venture mode (Agarwal Ramaswami (2000). The theory was expanded by considering the abilities and potential of the partners, spatial amalgamation amid positions and joint organizations (Sharma and Erramilli, 2006). Regardless of its experimental support, this conjecture is unable to offer an incorporated view for the elucidation and calculation of entry mode selection. It fails to explain why two companies operating in an identical business and with parallel rights internationalize. The model also disregard the effect of local state and internal aspects like a firm’s assets and manufactured goods character on the preference of entering alien markets. Additionally, it presumes that in absence of market failure, foreign direct investment does not take place but companies are usually implicated in alliances to enhance their competitive pose (Ekeledo and Sivakumar, 2005). Transaction Cost Theory The evasion mode of action in alien markets is low-control modes, although when compa nies experience elevated transaction costs allied to bargaining, supervising and executing a contract, they will prefer high power entry modes. Transaction Cost (TC) theory, argues that when competition is perfect, companies are synchronized and resources can be relocated among companies (Ekeledo and Sivakumar, 2005). Whilst a market is entirely aggressive, the market will control transactions by price system. This theory supposes that in the market where persons are usually investors, information will be unevenly shared among all trading firms, and asset exactness influences the character of the transaction (Cheng, 2006). The TC is not capable of validating the selection of entry mode in the fresh global business scenery. It is not able to balance foreign direct investment (FDI) with exporting successfully as it focuses on market malfunction situations that outcome in FDI. Besides, the theory does not acknowledge that strategic fears can inspire a firm to use a joint entry mode. Al though this theory gives reasons as to why a company may favor FDI as its entry mode, it neglects the function of location benefits (Ekeledo and Sivakumar, 2005). Resource-Based View to Resource-Advantage Theories Barney (2005) deems that companies have a basis of competitive advantage rooted from their priceless resources like assets and abilities. Firms can battle and attain their long-term aims if they have adequate resources and employ them efficiently (Sharma and Erramilli, 2004). The resource-based view (RBV) theory proposes that a company’s achievement in the market does not solely rely on environmental aspects but also on the company’s role and power on the environment (Barney, 2005). This conjecture argues that companies with precious capabilities and resources support high power modes, particularly when it pursues an international strategy (Ekeledo and Sivakumar, 2005). Hunt (2006) built on the thoughts of RBV in his resource advantage (RA) conjecture. He ass erts that since firm resources are varied and comparatively still, a number of firms may benefit from competitive advantage and improved performance. In addition, the specific manner of function in indefinite markets relies on the sort of resource advantage (Malhotra et al., 2005). Though some scholars view the resource based conjecture as the most outstanding clarification for the international development of companies, it fails to account for the selection of some entry mode policies including joint venture. Additionally, gauging some insubstantial assets seems tricky (Malhotra et al., 2005). Factors Affecting Internalization of Firms In general, business organizations do not pursue any exclusive model to internationalize their processes since they face diverse environmental surroundings. They may go into an exacting target market via different entry approaches based on their definite resources, abilities and tactics. Two sorts of factors control the international tactic, market c hoice and the selection of entry mode that is external and internal aspects (Quer et al., 2007). Internal aspects incorporate tactical considerations and firm-specific resources which can be controlled by companies. External aspects like industry factors and country factors are typically outside the power of the company (Ekeledo Sivakumar, 2005). Koch (2004) recommended that market choice and entry mode selection are influenced by several internal features, for instance the tactical concerns, a company’s resources , alien business practice and networking, and external features including latent and risk, target market and comparison amid host and home markets. Joint Ventures in Saudi Arabia Joint ventures are the leading type of multinational business in Saudi Arabia. Besides, joint ventures are commonly favored by most industrial investors in Saudi who are in search for foreign allies. A joint venture in Saudi Arabia normally involves a business amid a company that has super ior business and technical abilities and a company that boasts superior local acquaintance and broad commercial potency (Mababaya, 2002). One of the toughest pleas of joint ventures is that they significantly decrease, by the sum of the partner’s input to the business enterprise, the fiscal and political threats which are the chief barriers to direct foreign investment. Most entrepreneurs feel that the existence of a home partner in a business enterprise overseas safeguards absolute expropriation in the more wobbly nations in the globe. Similarly, some other emerging nations do not allow a subsidiary run by an alien licensor to pay royalties. An additional benefit of joint ventures is that they ease admission into a novel market and access to market data. Joint ventures are also beneficial in pooling the required capital, knowledge and skills, which are feasible amid local and alien partners (Ali, 2009). Jointly, the partners provide capital which either one solely would not afford or fear to risk. With the increasing demand for private investment among other motives, most people believe that the all-inclusive joint business venture will eventually turn out to be the most vital means of private foreign investment in the world. In the emerging world, Saudi Arabia included all types of joint ventures lead international activities (Mababaya, 2002). Actually, joint ventures are employed four times more often in less industrialized nations than in industrialized nations. Nevertheless, all these does not mean that joint venture in the less industrialized nations, counting Saudi Arabia, does not pretense any possible disadvantage. From the stance of multinational businesses, one general problem they encounter is finding suitable partners in the alien nations, who have both administrative talent and funds (Ali, 2009). Some global companies favor totally owned subsidiaries overseas as they are not ready to sacrifice sovereignty of action in their fabrication and marketing actions either locally or overseas. For them, joint ownership means joint administration, takings and control. A number of companies may try to evade joint venture due to the complexities occurring from disparities in cultural values and principles of business, which force them to compromise so as to persist and do well (Ali, 2009). In some emerging nations, joint ventures may equally be negatively affected by detrimental business environment occurring due to substandard communication services, poor infrastructure and bad market projections. Apart from the need to deal with cross-cultural disparities, the abovementioned problems of cross-region joint ventures do not exist in Saudi Arabia. Actually, a joint venture amid an alien entrepreneur and a Saudi partner is deemed the best, in addition to being the most common method of doing business in Saudi Arabia (Mababaya, 2002).Multinational organizations having joint ventures in the territory profit from the accessibility of first-class infrastructure, up to date communication amenities and low-priced public services. Similarly, Saudi Arabia’s strategic position being in the middle of West and East allows it to be an excellent base for supply in the close bazaars of the Middle East and other places. Joint ventures with Saudi partners are as well striking due to the existence of an established economic and political atmosphere; knowledgeable personnel in marketing and administration; good fiscal, credit and borrowing services from banks; as well as tax holidays (Ali, 2009). Fresh incentives to alien investors have additionally been established in the Foreign Investment Act. Under this fresh act, alien investors are permitted have complete ownership of ventures and to enjoy liberty to send back profits and capital (Mababaya, 2002). Similarly, a licensed business venture mutually owned by a Saudi resident and an alien partner or entirely owned by an alien investor shall have all the motivations, ben efits and securities of a national venture consistent with all relevant policies and orders. In every joint venture, the alien partner should be set to realize and consider the desires of his local complements in the business. In fact, practicing a joint venture across state borders requires trust, thoughtfulness, taking several risks, setting-up connections, conciliation skill and tolerance on both parties concerned. Trust is an essential requirement for the collaborating group to fruitfully pursue their joint aims. Equally, partners’ dedication must be there for the joint venture to thrive. Alien companies should also consider investment guidelines of the regime in the host nation. In several Asian states and in many other places, foreign direct investment is permitted but foreign impartiality is limited to less than 49%. In Saudi Arabia, the regime does not bar the institution of a 100% alien controlled company, although pursuing it will deny the global business a chance t o get incentives that are typically given to joint ventures in Saudi Arabia. Generally, joint venture agreement or the wider notion of coalition capitalism is regular with the concept that synchronization is made on an arm’s length center or inside the open market structure. Joint ventures match with liberated private enterprise economies, where harmonization of fiscal activities takes place through non-coercive deliberate collaboration, so that the parties concerned can take lead of the recent science and knowledge. Joint venture in Saudi Arabia is registered as a disconnect joint-stock business, which is take care of just like other home joint-stock businesses with both collaborating firms fairly embodied in the board of executives (Mababaya, 2002). Concerning tenure, decision-making and management, the capacity of the alien colleague to manipulate the joint venture is directly relative to its capital contribution to the enterprise (Ali, 2009)..similarly, the costs of commo dities delivered from the joint venture to the collaborating firms are resolved freely in relation to the market relations of supply and demand. Depending on the contract amid the joint venture partners, experimental prices may be used to ease smooth stream of goods and services amid the joint venture and the collaborating firms. Similarly, experimental prices may be made rigid for the supply of production from the joint venture to some contracted cross-boundary market channels, including associates of any of the two partners. In reality, the experimental prices will later be outmoded by final prices dogged in relation to some pricing formula that is grounded eventually on the open market price method. Following this logic, the survival of joint ventures cannot be explicated via the presumption of international production or internalization theory of multinational activities (Ali, 2009). This is the case since the internalization theory deems the propensity of multinational companie s to internalize a market, for instance through vertical integration, as a way of overriding the price system or the free market system. A joint venture can also be preferred in Saudi Arabia as a subsidiary of the Saudi fiscal counterbalance program. Counterbalance programs are types of counter-trade actions used by growing economies usually in an attempt to decrease the heavy load of contract-founded imports (Mababaya, 2002). The counterbalance scheme amid contracting members may entail joint ventures, skill transfer and goods exchange. In addition, it could also contain foodstuff importation, building projects, arms procurements and supply of administration services. For instance, the Peace Shield I, a pact signed amid Boeing Co and the Saudi government is a counterbalance project. The verdict by any multinational firm doing or preparing to do trade in Saudi Arabia relies on several factors. Generally, these factors consist of: the charisma of the host nation’s location-spe cific advantages, the want to develop market shares and the want to make more gains (Ali, 2009). The organization’s propensity towards shielding and utilizing its personal company-specific advantages, such as the ownership of a relatively advanced techno logy, also manipulates its plans and resolutions to invest in a foreign country. similarly, the strategic powers and core values of a company, particularly the one that merits the title of a futurist firm, pressures the success of its policies, strategies and activities at home or globally. In Saudi Arabia, international business activities cover all types of commercial, value-adding actions outside the boundaries of global production (Ali, 2009). Some of these include: setting up global marketing agencies, appointing managers, comprehending direct import/ export, planning project administration, and seeking certification. In Saudi Arabia, main multinational car manufacturers enter the market through their selected local dist ributors or via opening their individual marketing and maintenance agencies. Car producers such as Chrysler, Mercedes Benz, Ford, Toyota, Nissan and General Motors are all embodied in the Saudi market via their individual sanctioned local agents or brokers (Mababaya, 2002). Famous multinational businesses such as Mitsubishi, Shell and Mobil have chosen to form joint ventures as a way of acquiring shares in the Saudi bazaar and close area markets. These multinational firms do not have their individual manufacture subsidiaries in the realm, despite their personal ownership-specific advantages such as machinery, administration expertise and profuse capital (Ali, 2009). Some multinational firms have diverse sorts of businesses in Saudi Arabia. For example, some firms offer consulting and technology services while still serving as suppliers for government ventures. Key multinational firms have practically no wholly industrialized subsidiaries in Saudi Arabia, since the state policy does not actually support it. What the regime encourages is for alien firms to have mutual business enterprises with Saudi firms or Saudi habitats. In isolation, multinational firms select other business paths other than worldwide production. However, this does not imply that alien companies are banned from having entire subsidiaries in the realm. As revealed before, the Saudi administration adopted the Foreign Investment Act which permits alien investors to have full tenure of ventures and grants them freedom to send back capital and labors. It is important to note that alien firms, covering no direct foreign investment in Saudi Arabia, can typically export their goods to the realm without major hurdles (Ali, 2009). Thus it is quite usual to see key brands of eminent American firms such as Hewlett Packard, IBM and Compaq in Saudi Arabia. These goods are neither formed in Saudi Arabia nor in America, but in South Korea, China or in other places. These firms choose to export their goods t o Saudi Arabia from their subdivisions in other places, rather than internalizing the Saudi souk. In theory, internalization happens only if the profits outpace the equivalent overheads (Janssen Sandberg, 2008).Foreign government rules and boundaries need to be reflected on also while internalizing a market. Internalization is the practice of creating a market inside a company. The interior market of a firm takes alternates for the missing customary or peripheral market. Economic allotment and sharing inside the internal market occurs via executive fiat, together with transfer pricing. The internalization method accounts for the rationale behind internal and domestic fabrication. Also in theory, when the business costs of the usual market are extreme, a strong incentive for firms to make interior markets will come to existence (Janssen Sandberg, 2008). Similarly, firms institute entirely owned subsidiaries across state borders so as to conquer or reduce qualms and instabilities in the provision of expected raw materials. They also wish to reduce transaction costs implicated in looking for and procurement of unrefined resources; to reduce qualms related to post- procurement sustenance; and to reduce overheads of organizing inputs. Global firms can be enticed to invest in an alien state, if the alien state has competitive advantages proportional to other states (Hamilton, 2009). In the instance of Saudi Arabia, competitive advantages include: existence of up to date airstrips and seaports; existence of outstanding inter-city public roads and good road network; and enhanced communication amenities. These benefits are quite inspiring and among the finest in the globe. Actually, Saudi Arabia has many determinants of state benefits. For example, with respect to the factor surroundings, current fundamental industries in Saudi Arabia have in past years attracted key multinational firms to venture in the realm. Big international companies such as, Mobil, Shell and Ex xon formed joint ventures in the kingdom (Johanson Vahlne, 2006). The investment income from these businesses has been extremely good. Plentiful low-cost materials are united with up to date infrastructure and low-priced skilled manual labor supply from Asia and other countries. Concerning demand situation, the Saudi bazaar for consumer and industrial commodities is the leading in the Middle East, and continues to expand every day. There is also the existence of allied and sustaining industries in Saudi Arabia, which are globally aggressive. Similarly, the situation of competition in many consumer goods sold in the whole territory is enough to cause global firms to react competitively and sensibly. In other words, how multinational firms function in Saudi Arabia and in other areas of the sphere is part of internalization practice which takes the shape of worldwide trade and joint ventures allowing entirely owned ventures among other elements (Janssen Sandberg, 2008). It is a pract ice where the groups of actors concerned have to pact with a dynamic atmosphere where the operation of change is the custom, but not exclusion. It also engrosses international co-ordination and combination of actions, if the condition dictates and there is receptiveness to market-specific necessities and circumstances. Global business players require strategic views, tactical positioning and all kinds of appropriate management practices to tackle globalization inclinations and transformations (Hamilton, 2009). They can not fuse to merely one cross-border trade option, similar to that of entirely owned global production. Sometimes, they have to make very hard choices, such as decisions related to: purchases, joint ventures, unions and licensing, for them to endure and developing the modern business environment (Hamilton, 2009). Similarly, the matter of control and ownership of transnational business is a hard decision since it is not regarded as a monopoly. At times, business partner s disintegrate and become rivals while at other times rivals turn out to be friends through joint ventures. Key business players at times fight on the international face by distributing similar goods and services while other times they work as partners through joint ventures which creates and markets similar or different goods. Hence, in the current business globe, it is difficult to come across a global firm that lacks a joint business partner in the vicinity or globally. Joint ventures constantly feature in business news. In prospect, the same tendency may persist, provided that the players find shared satisfaction and gains in their tactical decisions and dealings. Nevertheless, as nations stick to the globalization economies growingly, blockades to foreign investments may all ultimately vanish. If international ventures do not have to fret about alien government intrusion together with host state nationalization force and policy restrictions in prospect, they may be lured to lea ve joint ventures and may turn to entirely owned business procedures ( Mababaya, 2003). This situation may be coaxing, considering that joint ventures are not usually the best alternative for multinationals as it requires hard decisions regarding ownership arrangement, administration constituents and sharing profit. In Saudi Arabia, the joint venture course is still overriding, and is projected to stay so in the near future. Cultural Issues and Implications Saudi Arabia acts as the center for all Muslims in the world, since this is where the two holy cities of Makkah and Madinah are located. This implies that Islamic culture and moral values are considered central to be understood by multinational firms doing trade or preparing to venture in Saudi Arabia (Whetherly Otter, 2011). In the business area, multinational firms doing or preparing to do business in alien nations such as Saudi Arabia will have better competitive advantages and will be in a position to improve their competiti ve stances and benefits as they get more acquainted with the Islamic culture ( Mababaya, 2003). On the trade and industry front, Muslims are directed by open cultural principles, which have significant implications to real business existence. Allah instructs Muslims to be honest and not to leave justice in all interactions with people, including trades dealings. Business actions or transactions, particularly but not restricted to those bearing potential executions, are required to be documented into written agreements appropriately signed by them and their observers (Whetherly Otter, 2011). The subjects involved in the business must devotedly abide by the documented contracts and accomplish all commitments they have settled upon (Mababaya, 2003). Like a cost-effective man, committed Muslims exactingly adhere to these basic business-legal principles, and those who transact with them are required to act in a related manner. This must be borne in mentality by those who have business c oncern in Saudi Arabia or in another place in the Muslim environment. Both vendors and buyers are required to be precise in weighing commodities (Mababaya, 2003). Debtors are also compelled to compensate their debts. In case a Muslim passes on, his bequest can only be dispersed to his legitimate heirs upon compensation of any debts.similarly a Muslim lender is expected to be moderate to his debtor. He must give his debtor adequate time to reimburse him. However if he decides to decline the debt and regard it as a donation to him or her, that will be healthier for him. Appreciating the Islamic veto of usury is vital for multinational firms doing or preparing to do trade in the Muslim environment (Mababaya, 2003). Parties implicated in trade must stay away from usury. In addition, the parties concerned in business must shun corruption, hoarding and monopoly (Whetherly Otter, 2011). A few Islamic guiding principles for commerce include: openhandedness of both the vendor and the consum er; evading going into a transaction when someone else is already undertaking the deal; common consent; support of importation of merchandise and restriction to hoarding; censure of taking vows in business; and promotion of income sharing and partnership (Beekun, 2008). Islam forbids theft or burglary and regards it as a capital crime. Islam also forbids land seizure. Betting together with the buying, selling and use of liquors are all banned (Shoult, 2006). Selling of images with animated items is also not permitted in Islam. Selling of liberated individuals to slavery is as well prohibited. Other prohibited commerce includes making prophecies in exchange for money and practicing prostitution (Whetherly Otter, 2011). Islam bans all these and other illegal business dealings as they cause harms, differences and insecurity in the world. They also unlock doors to wicked actions, which make people to commit more sins. When it comes to meeting the essential wants, a Muslim is obliged by Allah to eat just what is legalized and fine. For instance deceased meat, pork and blood are not legalized by Allah the Almighty. In fact, the ban of flesh from swine in Islam is categorical and strictly observed by all practicing Muslims. Muslims should also not consume anything that is used for sacrifice or meat from any animal that is murdered by choking or by being blushed to demise (Beekun, 2008). Muslims are also not permitted to consume anything that undomesticated animals have partially consumed and any flesh alienated by raffling with bullets. Prevention of smoking in Islam is founded on the fact that Allah counsels people not to let their own hands add to their annihilation and not to consume up their possessions in prides (Ali, 2009). A multinational corporation that is conscious of all these restrictions will have the benefit of not hurting the Muslim clients. It will be in a position to shun mistakes and problems that it may encounter in trading with its Saudi ally on a cultural foundation. A global firm can augment its competitiveness by investigating on what the Muslim consumers’ desire (Ali, 2009). Any company that always holds to meeting consumer necessities will be successful in the long term. In fact, these restrictions in Islam have very significant implications to global firms. Conversely, Islam requires people to do what is good and legitimate. It motivates fortification of the environment, planting seeds and trees, preservation of natural resources and the security of individual and other’s possessions (Mababaya, 2003). To pass on while defending possessions is a form of martyrdom among the Muslims. This means that Muslims do not accept unfairness, treachery, scams, deceit, cheating, fraud, and other outlawed business dealings in their economic hunt. Allah expects faithful Muslims to take pleasure in the rewards that He has given them in legitimate ways. Simultaneously, He cautions them not to be profligate or to commit ov erindulgence in their consumption of resources. The law is toward self-control in spending. Islam stresses and pays hard efforts. A person has to labor hard to make his living. Islam also supports donations to the deprived and the disadvantaged. However, Islam dejects begging and stinginess (Beekun, 2008). Begging as vocation is forbidden. Incentive and reimbursement programs must be proportional to worker’s pros, productivity and assistance to the enterprise. Managers are required to pay wages and salaries of workers on time. The importance of time is also a component of Islamic experiences. Muslims are obliged to pray frequently; five times each day. They are also required to give Zakat occasionally in each year. They should carry out fasting and pilgrimage throughout the set periods. Time should be spent sensibly to do good deeds and bond to those who teach the traditions of Islam. Time must never be shattered in unlawful trading. When commerce is carried out with extreme honesty, justice and impartiality, it turns out to be a kind of worship (Beekun, 2008). For Muslims, everything that delights Allah is a type of worship, provided that it is conducted earnestly for Him, and provided that it is conducted in agreement with the Sunnah and the Qur’an. Muslims are required to be vibrant and progressive, as Allah cannot transform their circumstances if they themselves have not agreed to change. Both consumers and vendors have to be precise in weighing commodities and must be solid in avoiding dishonesty. The position of women in the whole Muslim humanity is actually intertwined with Islam (Shoult, 2006). In Islamic religion, sacred and moral responsibilities are similar for both women and men. A small number of exclusions subsist in this respect, although they favor the part of a woman. For example, she is excused from some sacred responsibilities like fasting and prayer during her normal monthly periods. She is too not expected to attend the compu lsory prayers held in the mosque. This happens because Islam religion considers a woman’s key roles to be that of taking care of the family and maintaining the homestead. On the money-making face, Islam does not forbid women from laboring remote to the household setting. In contrast, it has given them the freedom to own and run their personal enterprises (Shoult, 2006). Regarding the matter of women in the Saudi Arabian labor force, a huge number of them are in employment. The regime is also preparing to open the private segment so as to provide work for Saudi women aligned with the kingdom’s plan towards making employment public. In this view, constructing markets and shopping centers that are special for women are a few of the strategies to create employment prospects for women in Saudi (Shoult, 2006). In conclusion, Joint ventures are the leading type of multinational business in Saudi Arabia. A joint venture in Saudi Arabia normally involves a business amid a compa ny that has superior business and technical abilities and a company that boasts superior local acquaintance and broad commercial potency. Among the benefits of joint ventures is that they ease admission into a novel market and access to market data and pool the required capital, knowledge and skills, which are feasible amid local and alien partners. Joint venture in Saudi Arabia is registered as a disconnect joint-stock business, which is take care of just like other home joint-stock businesses with both collaborating firms fairly embodied in the board of executives. In assumption, internalization happens only if the profits outpace the equivalent overheads.Foreign government rules and boundaries need to be reflected on also while internalizing a market. Global firms can be enticed to invest in an alien state, if the alien state has competitive advantages proportional to other states. In the instance of Saudi Arabia, competitive advantages include: existence of up to date airstrips and seaports; existence of outstanding inter-city public roads and good road network; and enhanced communication amenities. Actually, Saudi Arabia has many determinants of state benefits. For example, with respect to the factor surroundings, current fundamental industries in Saudi Arabia have in past years attracted key multinational firms to venture in the realm. Saudi Arabia acts as the center for all Muslims in the world, since this is where the two holy cities of Makkah and Madinah are located. This implies that Islamic culture and moral values are considered central to be understood by multinational firms doing trade or preparing to venture in Saudi Arabia. In the business area, multinational firms doing or preparing to do business in alien nations such as Saudi Arabia will have better competitive advantages and will be in a position to improve their competitive stances and benefits as they get more acquainted with the Islamic culture. On the trade and industry front, Muslims a re directed by open cultural principles, which have significant implications to real business existence. For instance, Muslims are expected to be honest and not to leave justice in all interactions with people, including trades dealings. Islam also forbids theft or burglary, land seizure, betting, buying, selling and use of liquors, selling images with animated items, fortune telling and prostitution. When commerce is carried out with extreme honesty, justice and impartiality, it turns out to be a kind of worship. For Muslims, everything that delights Allah is a type of worship, provided that it is conducted earnestly for Him, and provided that it is conducted in agreement with the Sunnah and the Qur’an. A multinational corporation that is conscious of all these restrictions will have the benefit of not hurting the Muslim clients. It will be in a position to shun mistakes and problems that it may encounter in trading with its Saudi ally on a cultural foundation. A global firm can augment its competitiveness by investigating on what the Muslim consumers’ desire. Any company that always holds to meeting consumer necessities will be successful in the long term. In fact, these restrictions in Islam have very significant implications to global firms. References Agarwal, S. Ramaswami, S. N. (2000).Choice of foreign market entry mode: impact of ownership, location and internalization factors. Journal of International Business Studies, 23 (1), 1-27 Ahmad, S. Z. Kitchen, P. J. (2008). Transnational corporations from Asian developing countries: the internationalization characteristics and business strategies of Sime Darby Berhad. International Journal of Business Science and Applied Management, 3 (2), 21-36. Ali, A. (2009). Business and Management Environment in Saudi Arabia. New York: Routledge Andersen, O. (2003). On the internationalization process of firms: a critical analysis. Journal of International Business Studies, 24 (2), 209-231. Barney, J. B. (2005). Strategic factor markets: expectations, luck, and business strategy. Management Science, 32 (10), 1231-1241. Beekun, R. (2008). Islamic Business Ethics. 2nd Ed. Herndon: International Institute of Islamic Thought. Blomstermo, A., Sharma, D. D. Sallis, J. (2006).Choice of foreign market entry mode in service firms. International Marketing Review, 23(2), 211-29. Cheng, Y. M. (2006). Determinants of FDI mode choice: acquisition, Brownfield, and Greenfield entry in foreign markets. Canadian Journal of Administrative Sciences, 23 (3), 202-220. Dunning, J. H. (1988).The eclectic paradigm of international production: a restatement and some possible extensions. Journal of International Business Studies, 19 (1), 1-31. Ekeledo, I. Sivakumar, K. (2005). Foreign market entry mode choice of service firms: a contingency perspective. Journal of Academy of Marketing Science, 26 (4), 274-292. Griffin, R. W. Pustay, M. W. (2007). International business: a managerial perspective. 5th ed. N ew Jersey: Pearson Education Inc Hamilton, L. (2009). The international business environment. New York: Oxford University Press. Hill, C. W. (2008). Global business today. 5th Ed. New York: McGraw-Hill Hohenthal, J. Johanson, J. Johanson, M. (2006) Market discovery and the international expansion of the firm. International Business Review, 12, 659-672 Hunt, S. D. (2006). Foundations of marketing theory. Armonk, NY: Sharpe Janssen, H. Sandberg, S. (2008). Internationalization of small and medium sized enterprises in the Baltic Sea Region. Journal of International Management, 14, 65-77. Johanson, J. Vahlne, J. E. (2006). The internationalization process of the firm a model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8 (1), 23-32 Kirzner, I. M. (2005). Competition and entrepreneurship. Chicago: University of Chicago Press Koch, A. J. (2004). Selecting overseas markets and entry modes: two decision processes or one? Marketing Intelligence and Planning, 19 (1), 65-75. Kwon, Y. C. Konopa, L. J. (2003). Impact of host country market characteristics on the choice of foreign market entry mode. International Marketing Review, 10 (2), 60-76. Mababaya, M. (2002). The role of multinational companies in the Middle East: the case of Saudi Arabia. London: University of Westminster. Mababaya, M. (2003). International business success in a strange cultural environment. USA: Universal Publishers Malhotra, N., Agarwal, J. Ulgado, F. (2003). Internationalization and entry modes: a multi-theoretical framework and research propositions. Journal of International Marketing, 11 (4), 1-31. Melin, L. (2006). Internationalization as a strategy process. Strategic Management Journal, 13, 99-118. Mitra, D. Golder, P. N. (2007). Whose culture matters? Near-market knowledge and its impact on foreign market entry tinning. Journal of Marketing Research, 39, 350-365 Nakos, G. Brouthers, K. (2004). Entry mode choice of SMEs in central and Eastern Europe. Entrepreneurship Theory and Practice, 3, 47-62. Papyrina, V. (2007). When, how, and with what success? The joint effect of entry timing and entry mode on survival of Japanese subsidiaries in China. Journal of International Marketing, 15 (3), 73-95. Quer, D., Claver, E. Andreu, R. (2007). Foreign market entry mode in the hotel industry: the impact of country- and firm-specific factors. International Business Review, 16, 362-376. Root, F. R. (2004). Entry strategies for international markets. Lexington: D. C.Heath Sharma, V. M. . Erramilli, M. K. (2006). Resource-based explanation of entry mode choice. Journal of Marketing Theory and Practice, 4, 1-18 Shoult, A. (2006). Doing Business with Saudi Arabia. City: GMB Publishing Sivakumar, K. (2004).Simultaneous determination of entry timing and involvement level: an optimization model for international marketing. International Marketing Review, 19 (1), 21-38. Whetherly, P. Otter, D. (2011). The business e nvironment: themes and issues. Oxford: Oxford University Press Wild, J. J., Wild, K. L. Han, J. C. Y. (2008). International business: the challenges of globalization. 4th Ed. New Jersey: Prentice hall Zacharakis, A. L. (2005). Entrepreneurial entry into foreign markets: a transaction cost perspective. Entrepreneurship Theory and Practice, 23-39.

Transfer pricing case Coursework Example | Topics and Well Written Essays - 1250 words

Transfer pricing case - Coursework Example The company’s management decided to expand its product line and consequently many new and innovative products were developed. As a result a broad array of cell phone products developed among which the Energy Saving System or ESS was most significant. The company’s growth enabled it to reach the broader markets including international markets and diversification. In 2003, the company’s management decided to diversify internationally into Asia-Pacific markets which were expected to experience the highest growth retain cell phone usage in near future. The management team at Prime Co. decided to discuss the possibility of expanding into international markets. They decided to enter the Asian-Pacific market as it was expected to experience the highest growth in cell phone usage in near future. Some of the strategies that were being considered by the Prime Co’s management team include exporting, licensing, contract manufacturing, strategic alliances, or starting a wholly owned subsidiary. Exports mean to transfer goods and services outside domestic borders. Exports can be favorable when the domestic market’s demand has stabilized and there is huge demand in the developing countries for the target products. The benefits of exports can be reduced by the foreign government by introducing trade and tariffs which act as barrier for importing foreign goods in developing countries. The foreign governments generally adapt such policy to protect the domestic markets from foreign competition. In these kinds of situations the company does not have direct control. Licensing is the granting of permission by licensor to the licensee as an authorization for carrying out activities by the licensee and also use the licensed material of licensor. The biggest advantage of licensing is that it involves less cost of investment on R&D with limited financial risk. So, if the product fails in foreign country

Role of information Technology in the implementation of Business Research Paper

Role of information Technology in the implementation of Business Process Reengineering in government institutions in the UAE - Research Paper Example The proper implementation refers to the fulfillment of the business objective by reorganizing the whole business system. The research study also revealed that the employees’ sustainability is directly related to the dependence of the new system. The new system, which has high dependence on information technology resulted in highly successful firms in terms of employee satisfaction level. In addition to this, customer satisfaction level can also be improved with the help of proper implementation of business process reengineering. The research did not only highlight the satisfaction of employees, in fact the data analysis suggests that the overall business health improved. This improved business can be shown by comparing ‘before and after’ business performance. The overall performance of company has proved to be much better than the performance evaluated before the implementation of the business process reengineering. Therefore, as per the data analysis conducted for the research work, the business reengineering process should be inculcated among all the Govt. Institutions of the

Abb Essay Example for Free

Abb Essay As a result the front-line profit center managers’ performance is getting affected. * The conflict between long-term technical development and short-term profits is making the situation worse. As per the Business Area’s concern, the COMSYS project should be given priority over other activities as this project, if successfully implemented, would enhance the operations and efficiency of our relays business across the world. However, the development of the project is affecting the daily activities of the company. The problem spilled-over to the regional transmission performance and thus allocation of funds to the project COMSYS (in this case investing in RD) rises as an important issue to be discussed. * Such an issue increases the difficulty in reaching to a decision. The more time we take in reaching to a conclusion; more will the performance of the company get affected. First of all, we need to ensure that the development of project COMSYS doesn’t affect the operations and performance of the company. Second, we need to allocate suitable resources like funds, workforce etc. or project COMSYS separately. Moreover, from the short-term perspective we need to implement the project as soon as possible as the resources allocated to the project would then be available for daily operations, and from the long-term perspective we would be able to eliminate the compartmentalized framework of the profit centers and thus form a common base of software and hardware. * In the current situation it would be difficult to achieve this goal as the priorities within the organization doesn’t coincide. Project COMSYS is important for long-term development of the organization and, thus, needs sufficient resources for its implementation. I would, therefore, request the committee to take the afore-mentioned points into consideration and carry this discussion forward and helps us to reach to a decision. 2. ABB’s Global Matrix: As mentioned in its annual reports for the year 1988 and 1989, the Chairman(s) has(ve) clearly mentioned about the strategy of â€Å"think global, act local†. Since the merger the ABB group has been following the philosophy of decentralization; its aim to be close to the customer, to have short-lines of communication and decision-making and clearly defined accountability, all are reflected in its matrix structure. The matrix structure was proposed by a 10-person top management so that it enables the group to achieve a balance between its global business focus through its 58 business areas with the market created by the 1300 local companies under the umbrella of several country-based holding companies. The structure focuses on the principles of decentralization and individual accountability with clearly defined responsibilities from business areas heads to regional and front-line profit center managers. The business areas were responsible for carving out strategies while the local companies were responsible for implementing the strategies and achieving the objectives. All the business area heads had additional responsibilities of their national company’s operations. Thus, the overall goal of the top management was to develop managers who can take leadership roles as a result of which â€Å"a self-driven, self-renewing organization† would be formed. One of the main reasons for the success of the matrix structure in ABB was proper communication of the philosophy by the top management to every single employee of the organization. Communicating values to the managers was given priority based on the belief that managers are loyal to values rather than to the company or a particular boss. The core values included quality not only in products but also in the organizational processes and relationships. The management emphasized on dedication to productivity and performance at all levels of the organization. The structure implemented was well in line with the overall strategy of the organization. With rapid acquisitions after the merger ABB grew bigger, spreading its operations throughout the world. The matrix structure, therefore, provided a platform for ABB to absorb the acquired companies and made implementation of its strategies in them easier. One of the important initiatives taken by the top management was to translate the company’s philosophy to specific task requirements for managers at all levels. Throughout the internal restructuring process it was ensured that the organization was not distracted from the market place. Important issues were delegated to teams consisting of front-line managers. The company also had a unique philosophy of resolving of problems wherein the problem, if escalated to the higher level manager, was pushed back to the team to resolve and to reach to a conclusion. This process enabled and enhanced the problem solving capabilities of the managers. In order to implement individual accountability, a transparent reporting system named ABACUS was developed to collect performance data for all the 4500 profit centers in dollar denomination. The business area heads did not stop with just crafting strategies, rather they were personally involved up to some extent in implementing the strategies and policies. The top management, also, was well informed of the daily activities as well as the performance of all its companies. In case any business underperformed, the top management would step in and demand explanation and offer help if needed, thus, giving proper attention to all its businesses. All the above mentioned points explain why ABB was successful with the matrix structures while many could not. Having explained the advantages of the matrix structure, I would like to mention few disadvantages which were prevailing in ABB too. 1. The complex structure with dual hierarchy sometimes leads to confusion and conflicts within the organization resulting in decreased productivity as is visible in case of the COMSYS challenge faced by Don Jans in ABB. . It is sometimes time consuming and delay in taking decision may affect the organization’s performance largely. 3. In such a structure it is difficult to ascertain accountability. The larger the organization, the complex the structure, thus, more difficult is individual accountability. 3. Management roles and responsibilities in ABB and Don Jansâ€℠¢s performance in ABB The management of ABB has been playing a vital role in the post-merger restructuring of ABB. The structure evolved as a pathway for the management to achieve its goal of operating in a global scale. It provides managers the flexibility and autonomy in taking decisions. The management was driven by policies made by the CEO, Percy Barnevik. The frameworks set by Barnevik were well implemented throughout the hierarchy, for example, Barnevik implemented â€Å"7-3 formula† which says that it is better to decide quickly and be right 7 out of 10 times than delaying action in search of a perfect solution. This policy was driven by the principle that the only unacceptable behavior is not doing anything. Under his leadership, the company grew rapidly with numerous acquisitions across the world. Nevertheless, the same philosophy, values were implemented in each of its companies. The matrix structure of ABB defined responsibilities for business area heads to work on the strategy whereas the front-line managers were held responsible for the daily operations of the local company. The managers were provided autonomy to the extent that they had control over their company’s balance sheet such that they inherited their results year to year and, thus, the top management had no say in the decisions regarding their company’s operations. This particular autonomy motivated many managers to perform better and better. As ABB was acquiring companies, it became important for ABB to ensure that the acquired companies imbibed the culture and values of ABB. The management took this as a challenge and ensured this by communicating the strategies and goals of the organization to managers from corporate level to business area heads to country level managers. One such regional manager for the relays division in the Coral Springs, Don Jans, who became part of ABB after the acquisition of Westinghouse in early 1989, had well-received the communication from the head of the ABB’s power transmission segment, Goran Lindahl, where he emphasized on the responsibilities of the local companies to implement the plans and achieving positive results. It was not an easy task for Don Jans and his team from Westinghouse to adapt to the culture of ABB, however, he found the management of ABB much supportive and involved as compared to that by Westinghouse’s. When first exposed to the philosophies of ABB, Don Jans found it to be much different than Westinghouse, where the decisions were taken by the top management, unlike ABB where he had the autonomy of taking the decisions. He found ABB to be much more flexible as the decisions were very much delegated and the organization was result oriented, i. e. he top management continuously monitored results of each of its companies, and would interfere only when the results were not satisfactory. Proper communication of the organization’s strategies to the managers was given importance as they were the ones who were responsible for achieving results. For Don Jans this experience was exhilarating, as he mentions once in a meeting where the corporate managers(for relays business) were presenting to his team â€Å"about how the industry was developing, where ABB wanted to be, how it was going to get there, and so on. †. Such meetings were received in a positive manner as they educated his team about the organization. Moreover, the meeting did not end there, the proposals for investing in relays business by his team were given proper attention, which further encouraged Don Jans to provide better performance. The matrix structure provided Don Jans with the flexibility of operations and taking decisions. Due to which the performance of relays business (of which Don Jans was in charge) had improved. With clear communication from the top management, he was aware of what was required to deliver. He used his experience in the industry to invest in a small-scale in microprocessor relays technologies as he had financial resources at his disposal. He used his freedom to improve the product lines of the relays division by broadening the microprocessor technologies experiment to solid state devices, and thus gave ABB a competitive advantage in the market where other players were taking advantage of the technology. Thus, Don Jans tried to improve the performance of the relays division by leaps and bounds by regular investment in newer and better technologies.

Japanese Internment Essay -- Internment Japanese Americans History Ess

Japanese Internment The 1940’s was a turning point for American citizens because World War II was taking place during this time. Not only was America at odds with other countries, but also within its self. America is a huge melting pot full of diverse cultures and people from all nations. People travel from all over the world to the United States of America. These people had one goal in mind, a life of freedom and equal opportunity; or so they thought. The Japanese first began to immigrate to America in the 1860's in Hawaii. â€Å"Until the 1880’s only a handful settled in the United States. From then until 1924 when the United States excluded Japanese immigrants, less than 300,000 had settled in American territory.† (Davis, 1982) These people saw America as land of "freedom". So when they came to America they did everything they could as to not be associated with the likes of the Chinese culture, which were also migrating to America at this time. â€Å"Anti-Asian activists, who had first mobilized against Chinese immigrants when they began arriving in California in the 1840’s, employed the same â€Å"yellow peril† imagery to attack Japanese immigrants in the late nineteenth century.† (Murray, 2000) To the naked eye of Americans, the Japanese and Chinese people seem to be physically the same. Actually these were two totally different cultures. One of the first groups of Japanese who came to America was known as Gannenmono; who mostly resided on the west coast and Hawaii. They earned a rough living while working on sugar plantations. Because of the horrible working conditions, many of the immigrants often went on strike. The workers complained to the Japanese government, which in response sent an ambassador to settle the problems. The American born children of these immigrants are known as Issei; in other words, the first generation. This generation of people did everything they could to Americanize themselves. The second generation of children is known as Nisei. Even though these children were American, their families still wanted them to remember their culture. Therefore, many children of this generation had dual citizenship between Japan and America. Children were often sent back and forth over seas to stay with grandparents. Third generation Japanese-Americans are known as Sansei. There was also a generation called Kibei. These were American born citizens that m... ... the U.S. government. The Civil Liberties Act of 1988, signed by President Ronald Regan, provided an official apology from the U.S. government and an individual payment of $20,000 to each Japanese internee that was still living in 1988. Works Cited †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Daniels, Roger (1971). Concentration Camps USA: Japanese Americans and World War II. New York: Holt, Rinehart and Winston, INC. †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Daniels, Roger. (1972). Concentration Camps USA: Japanese Americans and World War II. New York: Holt, Rinehart and Winston, INC. †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Daniels, Roger. (1981). Concentration Camps: North America. Malabar, Florida: Robert E. Krieger Publishing Company, INC. †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Davis, Daniel S. (1982). Behind Barbed Wire. New York: E.P. Dutton, INC. †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Hatta, Julie. (2002). Jainternment, http://www.jainternment.org/ †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ikeda, Tom. (2003). Densho, http://www.densho.org †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Murray, Alice Y. (2000). What Did the Internment of Japanese Americans Mean? Boston: Bedford/St. Martin’s. †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Spicer, Edward H. (1969). Impounded People. Arizona: The University of Arizona Press. †¢Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Yu, John C. (1996). The Japanese American Internment, http://www.geocities.com/Athens/8420/main.html

Cameron Auto Parts Essay

Cameron Auto Parts was founded in 1965 in Canada by the Cameron family to seize opportunities created by the Auto Pact (APTA) of 1965 between the United States and Canada. The APTA allowed for tariff-free trade between the Big Three American automakers and parts suppliers and factories in both countries. The one caveat in the APTA to qualify for the zero-tariff trade was that companies must maintain assembly facilities on both sides of the border. Cameron Auto Parts specifically manufactured original equipment parts (OEM) such as small engine parts and accessories based upon design specs created by the Auto manufacturers and then sold these parts to the auto makers. Alex Cameron took the reins in 2001 and was immediately faced with a financial crisis. Sales in 2000 had dropped to $48 million and were only $18 million for the first six months of 2001. Cameron lost $2.5 million in 2000 and the same amount in the first six months of 2001. This decline was primarily due to declining auto sales of American cars and trucks and the increased presence of Japanese automakers. Market forces were driving the American firms to find ways to cut costs and modernize plants. Cameron used $10 million of its $12 million credit line to reinvest back into the firm by modernizing equipment and computer-assisted design and manufacturing systems. However, Cameron did not have its own design engineering team and relied on specs from the Big Three automakers for its products. This left Alex Cameron with an uneasy feeling that expansion into product design was essential for the long-term survival of the firm. In mid-2001, Cameron took the steps necessary to design and develop its own parts line. Cameron hired four design engineers and, by 2003, came up with a flexible coupling idea that would entice international buyers and not just the Big Three automakers. Cameron was then faced with the dilemma of how to market and sell the product. Projected sales of the new product in 2004 were between $35 and $40 million which was terrific but they weren’t sure they had the capacity to handle the production. They needed to decide if it was better to expand  current facilities, buy/ build a new facility, or license the fabrication of the product to outside companies. While on a vacation trip to Scotland, Alex went to check in on a local customer, McTaggart Supplies, Ltd, who convinced him that the flexible coupling product was in high demand in the U.K. and that more production was necessary to keep up with the demand. Alex decided at that meeting that Cameron would exclusively license the production of the flexible coupling to McTaggart in order to gain a stronger foothold in the U.K. for relatively little up-front investment. 1. Should Cameron have licensed McTaggart or continued to export? Cameron Auto Parts should license to McTaggart in the UK. It was one of Cameron’s key goals to penetrate foreign markets and the licensing agreement with McTaggart would be a swift way to begin executing this business strategy. McTaggart was in a superior position to penetrate the U.K. market due to a good cultural understanding and close proximity to potential clients. Once this business arrangement was proven successful, Cameron Auto Parts would be able to form similar agreements with other companies and expand to other foreign markets. McTaggart is an excellent licensee, as they are a reputable company in the U.K. with excellent credit, cost saving manufacturing practices, good market contacts, and 130 years of service in the business. They are also assuming most of the financial risk by paying Cameron Auto Parts the startup costs as well as a percentage of sales. Embarking on a licensing strategy would also eliminate the prohibitive cost of developing and maintaining a sales force in a foreign country that likely wouldn’t perform as well as a local company like McTaggart since customers had cultural ties and existing relationships with them. Additionally, orders can be filled more quickly as the product would be made locally reducing shipping costs and travel time. It was also a good decision for administrative and economic distance reasons. Since the product would be produced in the UK, it would not be subjected to excess cost of import duty, freight, insurance, or the value added tax. This would allow for the product to be sold at a more attractive price. Lastly, the value of the dollar fell during the original five year contract and the percentage of sales in pounds produced a higher dollar income for Cameron without changing the price of the products sold. The disadvantages of continuing to export are loss of  profits due to shipping costs, currency values, taxes and tariffs. The five year contract allows Cameron to evaluate the effectiveness of the licensing strategy and determine whether this is a profitable venture for the company. 2. Was Mc Taggart a good choice for licensee? Yes, McTaggart was a good choice as a licensee. They have all the tools necessary to successfully produce and sell the flexible couplings. †¢ McTaggart was already familiar with the product and had bought over U.S. $4,000 in the first four months in 2004. They had been able to sell the product as fast as it could be shipped and built a solid working relationship with Cameron as well as good credit. †¢ McTaggart has production experience that Cameron may benefit from and substantial room to increase production capacity. †¢ They have a solid reputation with great financial standing, excellent credit, and a capable sales staff to market and sell the product. †¢ They have manufacturing capacity and are willing to invest and develop the manufacturing capability to efficiently produce the flexible couplings. In addition, they have established a client base. 3. Was the royalty rate reasonable? A royalty rate is the money that must be paid to the owner of products (â€Å"the licensor†) from a buyer (â€Å"the licensee†). The amount of royalty fee is considered the fee for acquiring a patent or a copyright. In most businesses, a royalty fee applies when two or more companies have licensing agreements or sell the products in foreign countries. [i] In U.K., the normal rate of the royalty for licensing is around one and a half cent on each sale. However, Cameron Auto Parts was asking three per cent of sales from McTaggart. Although it was dropped down to 2 percent with a 5 year contract after negotiations, it is still higher than the normal rate. This seems reasonable as Mc Taggart will save a considerable amount of importation expense and will be able to sell the products at a lower rate than they can by importing. Cameron will have established an ongoing royalty income without incurring the overhead cost of production and sales expense. Cameron Auto Parts asks a higher royalty rate than normal rate because the company helps McTaggart choose equipment and provides training of operation  and production. Although McTaggart would like to pay these services separately, Cameron Auto Parts points out the benefits of getting services to keep higher royalty rate. With this five-year agreement, the royalty rate of two per cent is ensured in the first five years, but it will be down to one and a half per cent when the techniques of choosing equipment and operation have been acquired by McTaggart after five years. In conclusion, the royalty rate is reasonable for both parties involved. Cameron Auto Parts was able to enter the U.K. market expeditiously through McTaggart’s sales force, cut down on lead-times, save on duties, freight, and insurance and not be subject to currency fluctuations. McTaggart was able to sell a product already in demand, obtain training, focus on increasing sales and gain valuable insight into Cameron’s manufacturing process. Both companies would benefit from the shared knowledge they could provide each other, thus make the licensing agreement valuable for everyone involved. 4. What about the alternatives to licensing? The alternative to licensing would be to continue production and sell directly to McTaggart and other customers. This would involve dedicating a certain amount of production floor space to a market that is culturally and geographically distant and unpredictable. There is risk involved as the production space ties up cash flow and is not certain to produce profit. Travel expense would be incurred as company representatives would have to travel often to the U.K. in order to resolve issues or sell products. The sales side expense would be higher as well. More sales people would have to be employed to serve that region. They would either have to travel often or be based there and paid in pounds, which are currently stronger than the dollar. Instead of receiving a check from one contact that represents all sales for the whole area, Cameron would have to maintain relationships with various customers, which requires personalized attention to each and exposes him to having to perform collections and write off bad debt. Since unit production costs were estimated to decline 20% as annual sales climbed from $20 million to $100 million and Andy felt that the $20 million  mark was easily obtainable in the coming year, the continued value of exporting to Europe would have grown along with the European market. Looking at the pricing index, we can see that importing to Europe results in a cost of 113 to the importer. Since Cameron Auto Parts sell the flexible couplings at the same price to domestic and foreign distributors, licensing is an effective strategy to penetrate the European market while eliminating import and other logistical costs. Cameron Auto Parts would benefit most from a licensing agreement with McTaggart Supplies Ltd. Other options exist besides exporting or licensing such as a joint venture / wholly-owned subsidiary, selling through an agent, or selling through a distributor. Benefits to these strategies include reduced manufacturing cost, higher sales volume, and better market penetration and in some cases shared risk. The drawbacks to these methods include loss of price control, unpredictable sales volume, and loss of profits. [ii] Case Update Cameron Auto Parts enjoyed rapid growth during the 2004-2005. In 2004, the company undertook a major plant expansion for $10 million, adding 200,000 square feet to the company’s production capacity. Royalties from McTaggart during the first year of the licensing agreement were  £20,000; this grew to and  £100,000 the following year. High overall profitability left Cameron in a strong financial position in 2006. In 2006, Cameron was presented with an opportunity to purchase a 40 percent interest in Michelard & Cie., a family-owned distributor organization in France, which would allow Cameron to break into the continental European countries. Cameron agreed to the deal for $4 million and a royalty of 4 percent on sales of all flexible couplings. The deal enraged McTaggart, who had been selling flexible couplings in Europe and would now be competing with Michelard. Partly to appease McTaggart, Cameron agreed to a proposed joint venture in Australia. McTaggart would own 60 percent of the plant and be responsible for managing the venture.  According to McTaggart, local assembly in Australia could triple volume of current sales to around  £10 million. An investment of  £2 million could make around  £400,000 a year after Australian taxes while avoiding tariffs imposed on shipping finished products. This agreement would also position the firms to benefit from Australia’s free trade agreement with New Zealand. [iii] Cameron Auto Parts is very likely a pseudonym for Fernco, Inc., a flexible coupling manufacturer based outside of Detroit with a very similar history to that of Cameron Auto Parts. Fernco, Inc. is lead by Chris Cooper who, like Alex Cameron, took over the company from his father after graduating from Michigan business school. In addition to manufacturing facilities in Canada, the U.K., Australia and Germany, Fernco has expanded distribution to the E.U, New Zealand, Mexico, Puerto Rico, and China. [iv] ———————– [i] â€Å"Valuation Resource†Royalty Rates and License Fees.† Retrieved June 29, 2011 from < http://www.crucial-systems.com/dmbr/Mechanical_Royalties> â€Å"Mechanical Royalties.† Time. 05 December 2004. Retrieved June 29, 2011 from < http://www.crucial-systems.com/dmbr/Mechanical_Royalties> [ii] â€Å"Use These Top Five Strategies for Selling in International Markets.† Retrieved July 1, 2011 from [iii] Beamish, Paul and Crookell, Harold. â€Å"Cameron Auto Parts (B) – Revised.† Richard Ivey School of Business. University of Western Ontario. Jan 10, 2006. [iv] Ferno Company Website. Retrieved July 1, 2011 from . ———————– It is best NOT to start with a recommendation. I would first discuss the pros and cons of the issue on hand Cameron can simply do what it has been doing: Exporting. It is important that you should show licensing would be superior to exporting in order to advocate licensing These are good points. You realize the resources and capabilities of Cameron are limited. That is also a good point but that point supports the â€Å"exporting† option. There are other options as well: Joint Venture (JV) and foreign direct investment (FDI) are others to be considered. Take a look at the posted answers, especially, slide # 5 where a table lists pros and cons of each option in terms of various resource based factors. I must indicate my preference for such tabular presentations. They are simple, neat and to the point. All of your points are good. But they are one-sided. I am ALWAYS interested in a â€Å"balanced† analysis detailing not only points that support your perspective but also counter perspective. Please see the posted answers for such a perspective There is NO precise way of determining the royalty rate. Please see the posted answers for some guidance Not sure I understand this last point. Cameron is an Exporter. Why would they worry about import costs? Please take a look at the posted slides for this question. Good update. There are 2 things I suggest to improve your analysis: 1. Provide a balanced perspective. Nothing in this class is a clear pro or con. Every issue has both pros and cons. Both need to be studied carefully. 2. Incorporate other assigned readings into your analysis to provide evidence of learning. Some of the assigned readings could have easily been cited to support your viewpoint.

Similarities Between Hinduism And Buddhism - 843 Words

Religion seems to structure the way people think, but not necessarily change a person’s life, like magic. The only realistic thing we can say that’s close to magic, is science itself! However, It’s interesting to see that although Western culture is surrounded by the thought of Christianity, we can clearly see that the religion itself is fairly young. Take Hinduism and Buddhism, for example, which might be considered very similar in the fact that Buddhism was born from Hinduism. Although in Western context, Hinduism is referred to as a religion. Hindu traditionalists on the other-hand call it â€Å"Sanatana Dharma† and consider it a culture or a â€Å"way of life†. When we analyze the facts and break the two religions down, we can depict that both Hinduism and Buddhism have differences in views, practices, and beliefs. Although both religions originate from India, the views in both religion are quite different. Hinduism which has evidence that dates back to 10,000 B.C. focuses on understanding existence from within the Atman or â€Å"eternal self†, whereas Buddhism, beginning during the 6th century B.C. founded by Prince Siddhartha underlines finding the Anatman—â€Å"not self†. In other words, Hinduism views reality as all things united as one divinity, while Buddhism perceives reality as nothingness. The fact that one correlates to â€Å"nothingness†, while the other is â€Å"everything†, shows completely opposite views of both religions. Whether one chooses between everything or nothing, it’sShow MoreRelatedSimilarities Between Hinduism And Buddhism948 Words   |  4 PagesBoth Hinduism and Buddhism came from the region called India. Hinduism was the dominant one in the subcontinent, while Buddhism had to flee to other regions to spread its belief to th e people. The creation of Hinduism will eventually give birth to Buddhism later on. Even though both â€Å"religions† came from the same region, they have some similarities and differences between them. Hinduism from the start was a combination of different beliefs or ceremonies from the Indus Valley Civilization. All ofRead MoreSimilarities Between Hinduism And Buddhism995 Words   |  4 PagesCompare and Contrast Essay Hinduism and Buddhism There are more than seven billion people living across the world and about 19 major religions with about 270 subgroups. In many states and countries, there are two or more religions that are being practiced by its residents. Hinduism and Buddhism are two of the 19 major religions, that are widely practiced. Hinduism and Buddhism both have common origins, and share similar beliefs. Both Hinduism and Buddhism are religions that focus on the way to liveRead MoreSimilarities Between Hinduism And Buddhism856 Words   |  4 PagesLearning about both Hinduism and Buddhism, particularly about the art and architecture of both cultures made me realize they are not that different as I thought first. Both cultures are beautiful and rich, and if someone takes a deeper look can see that they are depending on each other. Many people forget that Buddha was born into a Hindu society, and his views and beliefs which led to a brand new culture are based on Hinduism. Of course I am not saying the two are the same because that wouldn’tRead MoreSimilarities Between Hinduism And Buddhism863 Words   |  4 PagesPHIL 2120 Paper #1 Xinyang Wang Comparison of Permanence between Hinduism and Buddhism Hinduism and Buddhism have common origins in the Ganges culture of northern India around 500 BCE. We have to admit that they share a lot of similarities, but also involve tons of differences. For example, as Hinduism claims that Atman is Brahman, Buddhism reject the existence of Atman. Hindus think that the way to becoming enlightened is to union with God, but Buddhists pursue a throughout understanding of theRead MoreSimilarities Between Hinduism And Buddhism975 Words   |  4 PagesHinduism and Buddhism have a connected history as both of these religions use similar teachings and terminologies to maintain order among their respective followers and societies. Ideally a society’s religious teachings should contribute to its political, social, economic and cultural discussions. However, correlating this way of thinking to a political theology may prove to be difficult because most people have more important matters to be concerned about than adhering to morale. Various peopleR ead MoreSimilarities Between Hinduism And Buddhism1351 Words   |  6 Pagesreligions, Hinduism and Buddhism, that came out of India thousands of years ago. Though these two religions are old, they are still practiced today by millions of followers within the continent of Asia and the West. First, I would like to introduce the religion of Hinduism. The term Hinduism was derived a river of South Asia, the Indus. This term was used by the ancient Persians to classify the people of that region of the North-West territory of the subcontinent. Indian religion, Hinduism, was theRead MoreSimilarities Between Buddhism And Hinduism1404 Words   |  6 Pages Buddhism and Hinduism are closely related when comparing the two. Buddhism was created based on the ideologies of Hinduism. There differences on their views with the idea of self and transmigration. They compare with one another with the problems of having senses, desires and anger. Hinduism believes in everything being unified together as one ultimate reality, which is Brahman. Brahman is the truth of all. Atman is considered as the true and pure self. Atman and Brahman are identical with oneRead MoreSimilarities Between Hinduism And Buddhism942 Words   |  4 PagesCCOT Essay Hinduism and Buddhism were both founded and popular in northern India by 600 CE. Although Hinduism and the Hindu caste system maintained a strong influence in South Asia throughout 600-1750 CE, the Hindu majority eventually gave way as Buddhism, Islam, Christianity, and syncretic faiths gradually moved in and across the Indian Ocean basin by 1750 CE. Even then, Hinduism did spread from northern India through southern India to Southeast Asia. The caste system was maintained from 600-1750Read MoreSimilarities and Difference Between Hinduism and Buddhism. Essay2345 Words   |  10 PagesSimilarities and difference between Hinduism and Buddhism. Buddhism believes in the process of reincarnation based on deeds of the present life. Hinduism also believes that everyone is a part of an impersonal world and therefore, ones soul reincarnates into another body of any being, based on the deeds of the present life. One has to work for salvation oneself and therefore, cannot blame others for the same. The salvation depends on the good deeds of a person. In Hinduism also, one attains salvationRead MoreThe Similarities and Differences between Buddhism, Jainism and Hinduism1194 Words   |  5 Pagesteachings: Hinduism, Jainism and Buddhism. These three sects in religious thinking have many similarities as all recognize the life-cycle and the need of liberation, they worship one central deity that used to be a human who gained enlightenment and they all recognize the existence of the eternal soul and after-death re-incarnation. However, they also share a lot of differences that mark the underlying principles of practicing them. I will identify the scope of differences and similarities in these