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The key to conducting international business effectively

Dr Boojihawon, Senior Lecturer in Strategy and Programme Director for the Online MSc International Business, Birmingham Business School, explains the key to conducting international business effectively. Listen to his podcast and read the transcribed interview below:

 

 

Interviewer: What would you consider to be the main areas of business that differ internationally? For instance, operations, corporate governance – what are big areas of difference?

I think this question to me is really about ‘how do you learn to conduct international business effectively?’

To me, if you are talking about operations or corporate governance, they are different subject-based lenses which one can apply to question and study international business issues.

Let me give you an example, so if we consider the global value chain of a multi-national company. So, a global textile company, for example, might have its headquarters based in Germany. It might be sourcing its raw materials from markets in Africa, which travel to a factory in China where they are put together. They are processed and then they are sold around the world. That is a very simplistic value chain.

Now, for an international business manager, the question is to look at the global value chain and ask, ‘[W]hat is the most cost effective - or most efficient - way to organise that business around the world?’ Because you’ve got moving conditions around the world and different conditions in different markets; you will need to understand how those conditions present a strength or a weakness, a risk or an advantage for the company.

Now that’s taking an operational perspective, in terms of organising the processes that would enable this global value chain to move in an effective and efficient way. Now if you superimpose a governance perspective in all of that, you will see that across all of the operations that the company has set up around as well, the company needs to align its corporate behaviour and responsibilities around those operations around the world. So, governance implications will look different in the different markets.

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There are local rules and regulations and expectations of company behaviour that they will have to abide by. The company needs to be organised and considered to respond to those accordingly.

Similarly, if you apply subjects like HRM and strategy, accounting and finance – all of these are providing different insights into how these issues mean slightly different things for the business - or bring a different point of emphasis in how the organisation is ultimately configured and organised.

Now the challenge for the international business manager is to be able to bring those lenses together: to work out management solutions and manage them within the context in which they operate. The quest with all of this is around how you keep the organisation responsible and profitable at the same time.

Interviewer: Can you, just those two points. Profitable I’m fairly clear on, but what do you mean by responsible, specifically?

So, to illustrate that, look at cotton from Africa, for example. Now, there are various ways of doing that. You have so many stories of organisations which have been using wrong practices in order to exploit the sourcing of the raw materials or the sourcing of the cotton from those parts of the world.

If you are an organisation which is being responsible, you would make sure that those farmers, those growers or the suppliers of those raw materials are going to be dealt with in a responsible way. That they receive their share of the profit, that they are recognised for their potential, that their communities are enabled and that they are being fairly treated. This is where the whole concept of Fair Trade originated in that respect.

While this may have been taken lightly in the past, now there is a real sense of ownership on the company to behave responsibly and profitably at the same time. This is where the University of Birmingham and particularly the business school puts this into context because its motive is to be around anything responsible business or responsible management.

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Interviewer: Is there an element then of balancing the responsibilities - because if I’m thinking I’m responsible to adhere, pure owners are responsible to my employees, I’m responsible to my suppliers, and I’m thinking ‘[W]ell, I want to get the best possible return for the shareholders but at the same time, I want to behave ethically, I want to ensure that I don’t expose my brand, and my legal reputation and risks. Is that the kind of 360-degree view of responsibility? Would that be a fair understanding of it?

Yes. So, as part of that responsibility, if you look at in the past, a lot of research was around profit – or was profit dominated. The responsible element was surface level – or none in that respect.

But today, we can easily hold companies accountable for their operations and their actions around the world. We’ve got strong lobbying organisations around the world – watchdogs who are looking at how those companies are operating. The biggest watchdogs are the consumers themselves.

Until recently, for example, Walkers had to deal with the idea of their customers posting them back their plastic packets of crisps. It means that anyone can question a company’s activity – wherever they are based. It’s easily an advantage of the company – it is a competitive advantage of a company now – to start to behave responsibly and be profitable.

If you’re looking to conduct global business effectively and would like to find out more about the 100% Online MSc International Business, download a brochure today and a member of the recruitment team will be in touch to discuss your interest.

Can you think of any industries or companies which are leading the balance of responsibility verses profitability? Leave a comment below:

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