GBE Week 1 QUESTION 3 Essay

Submitted By nadaffa
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QUESTION 3: “Ultimately, the study of international business is no different from the study of domestic business. Thus, there is no point in having a separate course on international business.” Evaluate that statement.
A separate course on global business is important because the study of international business differs from the study of domestic business. According to Hill 2013, the reasons that make these studies different are: the fundamental differences among countries, the greater complexity in managing international business, several limits that should be faced regarding with different government policies, and different currencies among countries involved in international transaction. This opinion will only discuss about the first three reasons that stated above.
First, countries are different in many ways. These differences cover cultures, economic, legal and political systems (Hill 2013). Schief 2010 said that the organisational framework of every country is a key factor for multinational corporations. An example of cultural difference is between the eastern and western countries. Eastern countries have a unique “eastern values” that influences the way of its people in conducted business. Two important values that should be considered when doing business in eastern countries are harmony in relationship (Guanxi) and save-face concept. Harmony can be regarded as the goal of “Confucian life” and has had a major influence in China, Korea, Japan and so on (McNaughton 1974), while save-face concept is the most important aspect in eastern culture which must be keeps in mind by the business people in Asia (Reeder 1987). Pride and dignity are culturally protected and “losing face” in Asia is equal with physical assault in the west (Reeder 1987). Good awareness of these predominated values in Asian countries will help business people to get the understanding of how eastern people think and live with daily lives.
Second, a greater complexity in managing international business compared with the domestic one. Around 95% of businesses go bankrupt because of their failure to control their fixed costs (Willis 1991). Therefore, managers of international business should know how to choose the right site production to maximize profit n minimize cost (Hill 2013). Several questions occurs when we doing this strategy, for example, “Is it ethical to adhere to the lower labor cost in developing countries?”, “Is it best to export its products to foreign countries?” or “Should the company give license for production to local firms?”. These questions can be answered if international business took as a specific course study that different with the domestic one.
Last, International business must worked within several limits such as government rules in international trade and investment. Specific government interventions are sometimes caused problems, for example, the Qantas case. Qantas suffered $244 and $246 million loss for the year 2012 and 2013 respectively (Qantas annual report 2012 & 2013). Currently, Alan Joyce-the Qantas’ CEO, announced a $2 billion cost reduction program including 5000 job cuts, 50 aircrafts to be sold and $1 billion capital expenditure review (The daily telegraph 2014). This problem was caused by the uneven Australian aviation rules between Qantas and other airlines companies. Virgin Australia may receive a large foreign investment that can supply them with capital (more than $300 million investment from three foreign airlines companies), while Qantas cannot receive any foreign source capital due to the Qantas Sale Act. This Act was introduced in 1992 and imposes strict limits on foreign investment to the airline (Flynn 2014). The strict government regulation has caused a significant decline in Qantas’ revenue during the past half year. This case shown that international business course is need to be specifically learned, so managers are able to examine the problems, focused to find the best solutions and analyzes