Use of global supply chain functions of (a) logistics and (b) purchasing to strategically leverage the global supply chains for a manufacturing company producing mobile phones.(International Business)

The optimization of the global supply chain helps the company to get a competitive edge by achieving its objective. The company that has focused on low-cost strategy would get it through the mass customization and economics of scale and those that have aimed for differentiation would be able to innovative itself in a distinctive way by choosing the well acknowledge sustainable and unique attributes and methodologies. The effective global logistic and purchasing by mobile company reduces the cost, improves the efficiency, delivers the product at the right time and satisfies the parties involved in the supply chain.  Indeed, the purchasing and logistics are intertwined to each other and its good harmonization will create competitive and comparative advantage.

The mobile phone requires numerous parts in its manufacturing process, i.e. mobile screen, battery, charging point, rare earth material et cetera and the global purchasing facilitates manufacture to choose low-cost raw material without compromising the quality. Apple though is an American company, procures its phone casings from China, from Taiwan they procure memory modules and from Japan the company import ceramic capacitor (Seth, 2018). The global supply chain has facilitated or facilitates the phone manufacturer to choose either of the following procuring strategies.

·       Outsourcing: the phone company here procures the parts from other suppliers other than itself.

·       Offshoring: the phone company manufactures and procures the phone parts from the company outside of the country

·       Co-sourcing: it provides the cost cut by leveraging the third part resources.

·       Acquiring company for vertical integration to get hassle-free manufacturing.

The decision of choosing either of the purchasing strategies as listed above for the phone manufacture depends on the factors like

o   The long-term availability of resources,

o   Support of local/state regulation (Amazon slashed its HQ2 due to the opposition from the local communities (CNN, 2019))

o   Availability of workforce et cetera

Similarly, the logistics will allow the seamless flow of the procured raw materials and the flow of finished products.  Some of the benefits of global logistics that could be availed by the phone manufacturer are listed below:

·       Setting a global distribution center: the global distribution center or a warehouse construction in a location that will be nearest to the major markets. It will help in the reduction of the lead time to reach the product in the market. Amazon.com also has 75 fulfillment centers and 25 sortation centers across the USA through which it delivers the products to its globally disbursed customers.

·       Efficient inventory management: the global logistic will emphasize in holding the optimum level of inventory of the raw materials. The higher carrying and ordering cost makes the phone uncompetitive.  The well-managed inventory management finds out economic order quantity (EOQ) which is the best possible amount to hold and order.

·       Reverse logistic helps in the collection of phones that would be no more used by the people. The well manifestation of the global supply chain added with informational technologies will help to collect those phone and could be reused, remanufactured or recycled.

Hence, the optimization of the global supply chain through efficient purchasing and logistics will be a boon for a company. It will economize the forward and backward linkage of mobile manufacturing and also will make the company sustainable by focusing concerns on environmentalism.

References

CNN. (2019, February 14). Amazon cancels plans to build New York headquarters. Retrieved from www.cnn.com: https://www.cnn.com/2019/02/14/tech/amazon-hq2-nyc/index.html

Seth, S. (2018, December 5). 10 Major Companies Tied to the Apple Supply Chain (AAPL). Retrieved from www.investopedia.com: https://www.investopedia.com/articles/investing/090315/10-major-companies-tied-apple-supply-chain.asp

"Countertrade", Scenarios its use might increase further by 2020 and or decline.(International Business)

Countertrade is an agreement between the parties where the trade of goods and services happen in an absence of the money, i.e. the trade occurs with an exchange of goods or services in reciprocation. Nearly 15-20% of the world trade is covered by the countertrade mechanism (Seyoum, 2009).

The countertrade is beneficial when there are no strong and sufficient means to settle trade transactions financially, the parties involved may either exchange or swaps their goods and services ultimately bettering off the parties with an increased level of production as well as consumption.  And, I see these as a humanitarian mechanism to support citizen in the economics havocked by political and economic crises. This may appear in the form of a currency crisis and monetary instability. The Venezuelan currency has all most lost its purchasing power, it could not be used as a mode of international trade anymore, but the country is one of the largest producers of the crude oil, here it can trade its necessities with its trading partner in exchange of the oil. Currently, the country is in talks with India to barter its oil (Retures, 2019)

Except in the case of the political and economic crises, it can also be used in good faith to create a win-win scenario. For example, a company can import raw material from another country setting an agreement that the latter one has to import 35% of the finished goods that are made from them, here in doing so both the parties are benefited.  PepsiCo traded drink concentrate for Basmati rice in India and for silk and mushroom in China, the mushroom was used in PepsiCo Pizza Hut chain and the silk was dyed and sold for the profit (Seyoum, 2009). Similarly,  to lock the sale of $250 million worth of Apache helicopter to the UAE, the US aircraft maker McDonnell Douglas has agreed to equip the Arab sheikdoms against a perky airborne enemy: the whitefly (Seyoum, 2009)

Some of the scenarios which can expedite the countertrade are listed below:

·       If the conventional means of payment becomes difficult, costly or non-existent     

·       If the countries want to settle transaction through the exchange of goods and services ultimately leading to promotes one’s export industry.

·       If countries lack the hard currencies and foreign exchange reserve

·       And if the countries do not have as easy access to the forex market.

Whereas the following scenarios may decrease over-reliance on countertrade:

·       If the countries have strongly defined monetary system

·       If there is less chance of happening of the political and economic cult that may dampen the value of currencies

·       If the countries work together to decrease the barriers of the trade.

The countertrade has played a pivotal role in the occurrence of the global trade, it has also become a kind of marketing strategies between the nations where the parties contractually agree to deliver some non-financial facilities and transactions. And it could be a cent percent barter of goods and services or a mix of barter and cash.

References

Retures. (2019, February 11). Venezuela's PDVSA seeks to barter its oil with India. Retrieved from www.finance.yahoo.com: https://finance.yahoo.com/news/venezuela-open-barter-trade-india-095320313.html

Seyoum, B. (2009). Export-import Theory, Practices, and Procedures. New York: Routledge.

The need for control over foreign operation varies with the firm’s strategies and core competencies.and the implications for the choice of entry mode(International Business)

Whenever the company plans to go for the foreign operations it has to be equally creative as well as sensitive in protecting itself from its competitors. The euphoria of first-mover advantage may often be taken by the competitor with its second mover advantage. Expanding the business is not only about gaining the opportunities, but it is also coming across the multi-dimensional threats that may come across. Indeed, lots of company that has done their best domestically had faded away when they went foreign boundary.  Walmart lost in Germany and Best Buy was too big in the United Kingdom (Seale, 2015).

If the competitive advantage of the company is based on the technological know-how or the new kind of innovation that other firms are also looking for, it is better to avoid licensing and joint ventures. Mitsubishi was the pioneer in car engines, with its plans to expand the business in the 1980s, it licensed to Hyundai (DeMatio, 2008), ironically now Hyundai is far more ahead than Mitsubishi. Whereas, if the company is in infancy state, lacks enough funds to acquire the firm in foreign than exporting could be a viable option for the company; globally, most of the SME’s uses the export mechanism.

Coco-cola is a multi-national company and it expands through greenfield investments. It does not like to disclose its century-long drink formulae, if the company had expanded through licensing or franchise, it would have lost its strategy. The subsidiary has allowed the company to tailor its activity as per the localized demand if the company has a strong international brand, high financial capital, and technological know-how, Greenfield is best to incorporate. 

In contrast, Walmart rather than opening its own subsidiary acquired Indian e-commerce giant Flipkart for the expansion of its business in India, the grocery business indeed does not entail technological innovation that should be protected, its management driven. So, the acquisition will hold a good for Walmart to use its management expertise to compete in the world second largest populous country and countervail competitors like Amazon which is also eying Indian grocery market. 

Hence, the entry strategy to be adopted by the company depends upon the various political, economic, legal, cultural and social factor. Always greenfield would not be a worthy investment, sometimes exporting is a necessity and sometimes acquisition will be better off, indeed the global expansion is reconciling the company’s vision through the resources it has in the most efficient and optimum manner.

References

DeMatio, J. (2008, May 8). Hyundai: from borrowing engines from Mitsubishi to providing them for Mercedes-Benz. Retrieved from www.automobilemag.com: https://www.automobilemag.com/news/hyundai-engines/

Seale, A. (2015, January 27). Seven epic fails by businesses that tried expanding into foreign markets. Retrieved from www.firmex.com: https://www.firmex.com/thedealroom/seven-epic-fails-by-businesses-that-tried-expanding-into-foreign-markets/

Organizational issues while implementing transnational strategy(Global Business)

The transnational strategy is the tactics to be assumed when the degree for local responsiveness as well as the price sensitivity is high.  The companies come across the price sensitivity through gaining economies of scale and location scales which comes along due to the experiences effect manifested in their positive learning curve and for the local responsiveness the company localizes its strategy.  In comparison to other strategies like international and local responsive strategy, it is challenging because often the direction of cost and local responsiveness are tradeoffs.

At one extreme a centralization is required to maintain the efficiency for the cost minimization whereas a decentralized approach is required for the local responsiveness. Also, the localization issues come from the differences in culture, communication process, level of trust, consumption patterns, language barrier. Walmart though succeeded in India and China, it was not able to localize well in the Germany market, the German consumer preferred small neighborhood stores than impersonal chain which consumes a lot of time in shopping (Macaray, 2017), here though Walmart came across the cost sensitivity of Germany market, it cannot mold itself well with the local expectation.

But, MacDonald’s entry to India has been phenomenal apotheosis of transnational strategy, it revised its menu, eliminated beef items and added vegetarian burgers, the strategy ran well, and Mac is a big fast food chain in India. A similar case of successful strategy was adopted by Caterpillar to compete with low-cost competitor Komatsu, Caterpillar redesigned its product so that it can use identical products in few large manufacturing facilities(to gain economies of scale) and came with the product feature addressing the local requirements(as there could be differences in government regulations across the countries) (Hill, 2011).          

Hence, it would not be wrong to say that the transnational strategy is different and challenging than other global business strategies, but it is of core importance for the global companies and ultimately the transnational is proven to be a sustainable one.

References

Hill, C. W. (2011). International Business : Competing in the Global Market Place,8E. New York: McGraw-Hill Irwin.

Macaray, D. (2017, July 14). Why Did Walmart Leave Germany? Retrieved from www.huffingtonpost.com: https://www.huffingtonpost.com/david-macaray/why-did-walmart-leave-ger_b_940542.html  

The reasons of raising global capital market and its future trend(International Business)

The global capital market which comprises of investor, seeker of the financial fund and intermediating institution is on rising. The globalization and liberalization have been a major factor to bring all diversely scattered resources into the mainstream of global financial platform and disruptive technological innovations along with liberalization have facilitated the flow of funds across the borders. The global stock market raised from $ 3600 billion in 1990 to $33,913 billion in 2012 and in the same way the international bond market raised from $3515 billion in 1997 to $21979 in 2012 billion (Hill, 2011) and the global stock market alone reached a record of $76.3 Trillion (Baccardax, 2017).

In the future, I think the growth will be even higher, Accenture in their report entitled “Technology for Digital Capital Market in 2022” has emphasized the amalgamation of technology as more disruptor for such ramification. It would be through intelligent and automated technology, big-data analysis along with open and accessible platforms.  These technologies are making financial transaction real time and are running 24*7.  On the other hand, liberalization and deregulation are providing ample opportunities to individual investors as well as to the corporate investors move across the border. The systematic, tech-savvy real-time stock exchange platforms like NYSE(USA), HKEK(Hongkong), LSE(London) are helping the free and fair flow and transfer of the primary and secondary capital.

Except this, multi-national banks like JP Morgan, Bank of America, Standard and Charters, Soft Bank et cetera are globally collecting and investing in promising projects along with bond equity markets.  With the members count reaching 162 countries in WTO, which comes with the promises to open financial market in the global arena, I can fell that there will be more flow of funds and rise in the value of the capital market.

Seamlessly, need for higher innovation to come across the expectation of global customers, the rise of the fourth industrial revolution, the use of artificial intelligence, blockchain technologies, new mode of virtual currencies like cryptocurrencies, all are creating a need for investment in the gigantic level which is only possible through the well matured and maintained capital market.

Bibliography

Baccardax, M. (2017, July 14). The Global Stock Market Is Now Worth a Record $76.3 Trillion - And That's Terrifying. Retrieved from www.thestreet.com: https://www.thestreet.com/story/14229200/1/global-stocks-are-now-worth-more-than-the-global-economy-and-that-s-worrying.html

Hill, C. W. (2011). International Business: Competing in the Global Market Place,8E. New York: McGraw-Hill Irwin.

Dilemma and paradox of fixed and floating exchange rate regime(International Business)

In the fixed exchange rate regime, the exchange rate between the home and trading countries’ currencies are kept constant, the rate is kept fixed by the regulatory for which they constantly buy or sell the foreign reserves to maintain that exchange rate.  Whereas in the context of the floating exchange rate regime, the exchange rate hovers as per the demand and supply of the currency in the forex market.  Principally, whenever the demand for the currency increases, the value of currency appreciates and when the supply increases in the forex, it depreciates.

And, as per my understanding, the exchange rate regime depends upon the state of the economy as well as the fiscal and monetary objective set by the country.  The bigger economies like the USA, the UK apt for floating exchange rate regime as it helps in automatic stabilization of the currency rate, for example, if there is a deficit(trade deficit) in the balance of payment, then it will depreciate the currency and make its export cheaper and import expensive, this will ultimately restore the balance of payment to the equilibrium and in the same way the government can control the monetary policy of the country, whereas, the rate changes daily in the floating regime which encourages speculation in the forex market. 

In regards, the fixed exchange creates financial stability in international trade and minimizes the speculations, but it compels the country to hold a huge volume of foreign currency to play when required to maintain the fixed rate. As stated by the term, “Trilemma”, also called an impossible trinity, a country cannot achieve the free flow of capital, a fixed exchange rate, and independent monetary policy simultaneously, at each time they have to choose two letting the third one go (Kenton, 2018).

My country has pegged its currency with the Indian currency at 1.6 Nepali currency = 1.0 Indian currency. Since 60% of our international trade occurs with India, pegging has helped us to nullify the currency speculation risk, my country is a net-importing country and we are already in billions of dollars trade deficit, if we had the floating rate regime and if our currency has depreciated against the Indian currency further, then the deficit would have skyrocketed. Except, Indian currency, we have a floating rate regime with other countries.  But as stated above in impossible trinity, we do not have hold in our monetary policy.  Similarly, the Chinese government has pegged its currency with the USA currency which has indeed supported the Chinese export by devaluating its currency against its USA dollar (Bovaird, 2018) but the American government is blaming China for devaluating its currency creating currency war between the countries.

Hence, the fixed and floating exchange rate regime have their own pro and cons. Depending on the economic, political, socio-cultural and trade status of the country, they choose the currency rate regime. The model that fits best for one economy may be impractical for another and we should also take care of the rule of impossible trinity.

Bibliography

Bovaird, C. (2018, October 19). Why Is the Chinese Yuan Pegged? Retrieved from www.investopedia.com: https://www.investopedia.com/articles/forex/030616/why-chinese-yuan-pegged.asp

Kenton, W. (2018, February 28). Trilemma. Retrieved from www.investopedia.com: https://www.investopedia.com/terms/t/trilemma.asp

Should government consider human right of host country before granting preferential trading rights?(International Business)

Preferential trading right is a preferential treatment given to members of the group in the form of reduced barriers (tariff or non-tariff) which it would not have received otherwise if it were out of that bloc. And definitely, it is a big yes from my side that the country should look at the current status of human right with its trading partners before legitimating any trade agreements.  The human rights are the basic rights and freedom to which all the human are entitled, it comprises domains like freedom of expression, gender equality, right to information, race equality, women’s right et cetera.  And the violation of human rights may come due to the vicious circle of poverty, prevalent illiteracy, lack of infrastructure, unstable government, corruption and taboos along with ignorance which signifies not a good place to do business so forth.

The home country(the government which is giving the preferential right) can help eradicate the poverty, stop child labor, remove corruption and protect women rights in the host country and ultimately make the overall trading mechanism-free, fair and transparent.  It is often seen, these are strictly guided by the developed nations to it's developing and least developing trade partners. The European Union banned the import of carpets and garments from Nepal after knowing the use of the child as the labor in the garment industry (Clark, 1996), these pressured Nepalese government to abolish the unregulated practice of child labor, now Nepal has profoundly crafted “Rugmark” brand which testifies the products are child labor free.  In the same way, the business sanctions to North Korea and Venezuela from international human right watchdogs; UN is putting pressure through sanctions on these countries dictators to respect human right (Merchant, 2019).  The USA has strongly vocal against the human right issue in China, these have pressured China to take care of various issues like an intellectual property right, business rights, subsidies which are creating a geopolitical disturbance.

On the other hand, it is often impliedly seen trade requirements and protocol are used by the developed nations as the trade negotiations tools, to discourage the exports from the developing countries which otherwise will dominate the world with cheap production.  China by the means of welcoming foreign direct investments from developed countries like the USA, Japan is infringing their intellectual and property rights.  And also, often, the preferential trading rights comes with limited time period and uncertainty, after the end of multi-fiber trade agreement given to Nepal by the USA, the overall garment industry jeopardized, billions worth of investment ruined.

But equal cautions have to be taken, in the vide to maintain human rights, countries are blatantly using sanctions. And sadly, I think, it would not impact the regime a lot, it even degrades the life of innocent citizens.  US sanctions on North Korea, Russia, Venezuela has negatively impacted ordinary citizens rather than the regime.

Hence, the government of the home country should see the human right condition of the host country before providing the preferential rights, but equal care has to be taken as some time the uncertain and stern measure put forth by the home country even can degrade the condition of the preferential rights receiving countries.

Bibliography

Clark, C. S. (1996, August 16). Child labors and sweatshops. Retrieved from www.library.cqpress.com: https://library.cqpress.com/cqresearcher/document.php?id=cqresrre1996081600

Merchant, K. F. (2019, January 15). New Year Sanctions Roundup: Where Do We Stand? Retrieved from www.natlawreview.com: https://www.natlawreview.com/article/new-year-sanctions-roundup-where-do-we-stand