International Business Chosen Organization

Question: Discuss about theInternational Businessfor Chosen Organization. Answer: Introduction to the Chosen Organization The company selected for analysing and formulating useful information regarding the key concepts of international business is known as Jacobs Creek, as a small creek running through the wine production region of Barossa Valley in South Australia. Considering the company background, Johann Gramp had planted his first vineyard along the banks of Jacobs Creek in 1847. During the foundation of the company, Gramps preliminary aim was to create wines with great tastes reflecting the true nature of the grapes alongside the land (Penrose 2013). Such concept suggests the formation of the vision statement for the company, as the entire wine product process follows the trend of showcasing the variety of grapes produced in the soil and sun of Australia. From the analysis conducted by Dunning (2013), it can be determined that the company is the third highest grossing Australian brand in whole Europe and first in overall Asia with availing more than 23% in the recent year in the Indian market. Som e of the main markets of Jacobs Creek include United Kingdom, United States, Australia, New Zealand, Canada, Netherlands, China, India, Sweden, and Ireland (Forsgren and Johanson 2014). In addition, the reserve ranges including Barossa Shiraz produced by Jacobs Creek are the principal products of the company exported to the global markets. The company produces and distributes nearly 6 to 7 million cases of wines in the international marketplaces each year. Main External Environments and its Sub-components Economic Environment Singapore is an emerging economy as it evolves into a vibrant free market offering lucrative opportunities to the international business. Due to the growth of the particular economy at a significant pace, it positions in the top spot among the other Asian countries. The particular fact is ascertained by measuring the per-capital income of the population termed as the highest on the Asian continent (Jenkins 2013). The fundamental growth and prosperity of the economy are made possible to a major extent due to the continuous support by the corruption-free political environment to the progress of different business sectors. Based on the analysis performed by Killing (2012), Singapore is one of the most competitive countries in the global environment due to the higher rate of education among the population and a motivated workforce assisting the growth of business from different segments. With the application of same study, it is also determined that the recent investment activities under taken by the government in diversifying the economy have significantly flourished the growth and expansion of various industries including the wine and liquor industry. The gross domestic production of Singapore is USD 222,873 million currently with the fiscal and monetary policies designed to attract foreign investment within the country with the combination of moderate level of annual and corporate tax (Johanson and Mattsson 2015). It is further noted that the unemployment, inflation, and FDI inflows of the country are at 2.2%, 2.8%, and USD 0.365 billion respectively suggesting the promising opportunity for the expansion of Jacobs Creek. Political Environment Considering the statement of Political and Economic Risk Consultancy (PERC), Singapore can be categorised as a country with lower level of political risks. The political scenario belongs to a democratic environment where people are accounted for electing the candidate leading the entire nation while suggesting more uniformity in terms of political stability. Such political stability in the recent days has translated into the peace and better standard of living (Suzuki and Okamuro 2015). The transformation subsequently helps to produce lucrative and improved business opportunities for a striving brand like Jacobs Creek. However, the study carried out by Beamish (2013) importantly points out that the value of free speech for the opposition parties is somewhat limited despite being a democratic economy. With the help of the elementary investigation regarding the specific environment, it can be summarised that the political environment of Singapore is bureaucratic, extremely centralised, and socialised in approach (Jeston and Nelis 2014). The growth of businesses is explicitly supported by the national stability and heartening welcome of foreign investment with no imposition of import duties on 99% of imports. Balance of Payment for the Host Country Balance of payment or BOP can be simply defined by the process of recording all economic transaction between the residents of the country and the rest of the world for a certain period. Often, the process is conducted for a quarter of a year or more frequently over the particular year. Cavusgil et al. (2014) have mentioned BOP as the statement generated by a country summarising the economic transactions conducted with the international business environment over a specified time period. In case of the BOP account of Singapore, it summarises the economic transactions between the residents and non-residents. From the record obtained as of 2015, it can be reported that surplus is reflected in the current account at $79.6 billion while contributing 19.8% to the GDP of the current marketplaces (Dunning 2012). At the same time, the capital and financial account demonstrate a deficit in the area of net lending worth $77.1 billion. Figure 1: Balance of Payment Analysis of Singapore for multiple years (Source: Knoema, 2016) Concerning the analysis conducted by Dunning (2012), the balance of payment of Singapore for 2014 reflects a total transactional value worth more than $53 billion, which was accounted for a deficit by 4.43% in comparison to the preceding years value of more than $55 billion. The BOP value in 2015 has shown the sign of recovery through the surplus of 7.74% change in the value with maintaining overall transaction worth more than $57 billion (Verbeke 2013). Therefore, it can be estimated that the BOP of the economy of the host country, i.e. Singapore is consistently striving to post current account surpluses annually. Alternatively, the country has been posting net outflows continuously from the areas of capital and financial accounts on an annual basis since 1994. The overall analysis suggests the status of the countrys economy as a net creditor nation. Identification, Discussion of Foreign Currency Risk Exposure and Appropriateness of Strategy In the rise of international business and the growing importance of international transactions, businesses are continuously becoming liable to stretch their dealings in the foreign currencies leading to the increasing amount of risk exposures for the foreign agencies. According to Verbeke (2013), a rising number of global firms are exposing to the economic risks due to the shift in competitive strengths associated with importing and exporting activities. Translation risk is one of the most common economic risks faced by the global enterprises that cause a significant level of changes in the values of assets, liabilities, equities, or income of the overall international business segment as a result of the changing exchange rate (Beamish 2013). The particular type of exchange rate risk is also known as the accounting exposure, which typically occurs when the organization denominates a portion of its assets, liabilities, equities, or income in foreign currency as part of the internation al business. Hence, translation risk possesses the tendency to change the overall value of foreign held assets or liabilities of the firm thereby forcing the firm to regenerate its strategies to mitigate the unfavourable impact while designing the international operations. Citing the example demonstrated by Suzuki and Okamuro (2015), the assets of the foreign subsidiary will be less valuable in its consolidated accounting statements if the currency of the host country is relatively weaker than the home turfs. In this case, there are multiple strategies a company can employ with the aim of downsizing the impact of such risk exposure from the international business proceedings. One of such technique dictates the firm to purchase a substantial amount of foreign currency for hedging the potential exposure to the translation risk (Cavusgil et al. 2014). At the same time, the business should need to involve the use of currency futures or currency swaps for prolonging the risk mitigation. Comparison and Analysis of Hofstede Five Dimensional Culture between Home and Host Country By measuring the Australian culture through the 5-D Model designed by Hofstede, a deep and insightful picture can be depicted suggesting the comparison of the specific culture with other cultures in the world. At the power distance level, Australia scores low (36) due to the establishment of hierarchy in the society is defined for stretching the convenience. From the individualism, Australia depicts a high score (90) due to the presence of extremely individualistic culture leading the population to look after themselves and their immediate families (Dunning 2013). From the masculinity index, Australia scores 61 reflecting it as a masculine society, where the entire society is driven by the key factors like success, achievement, and competition. In the context of uncertainty avoidance metric, Australia shows an intermediate score of 51 suggesting the nation possessing a neutral feeling regarding the ambiguous or unknown nature of future situations (Killing 2012). In case indulgence, Australia refers to as an indulgent nation with scoring 71 where the population exhibits a willingness to realise their desires and impulses. Figure 2: Hofstede Five Cultural Dimension Australia (Source: Australia - Geert Hofstede, 2016) Alternatively, exploring the Singaporean culture with the 5-D Model of Hofstede, some clear and precise overview can be extracted regarding its culture. Initially, it must need to mention that the Singaporean culture is a multi-ethnic society with the coexistence of Chinese, Indian, Malay, and expatriates. Singapore scores a high value (74) in power distance with a Confucian (Chinese) approach leading to a syncretic approach to the religion (Dunning 2012). Therefore, the host country is totally contrary from Australia at this level. From the individualism, the countrys score is 20 due to the collectivism nature of the society and prioritising families and groups. It is also contrary to the situation of From the masculinity context, Singapore scores 48 referring to prioritising both masculine and feminine side. In comparison to the host country, Australia is more masculine in terms of its societys nature of approach. Singapore scores 8 on uncertainty avoidance scale, as the society is strictly committed to abiding by the rules, which is exactly dissimilar to the scenario of Australia. Lastly, the similarity between Australia and Singapore can be observed in the indulgency dimension, as the later obtains an average score of 46 (Johanson and Mattsson 2015). Figure 3: Hofstede Five Cultural Dimension Singapore (Source: Singapore - Geert Hofstede, 2016) With the help of another graphic representation, the overall comparative view between Australia and Singapore regarding the cultural dimension can be demonstrated. Figure 4: Comparison between Australia and Singapore related to cultural dimensions designed by Hofstede (Source: Geert-hofstede.com, 2016) References Australia - Geert Hofstede. (2016).Australia - Geert Hofstede. [online] Available at: https://geert-hofstede.com/australia.html [Accessed 2 Dec. 2016]. Beamish, P., 2013.Multinational Joint Ventures in Developing Countries (RLE International Business). Routledge. Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014.International business. Pearson Australia. Dunning, J.H., 2012.International Production and the Multinational Enterprise (RLE International Business). Routledge. Dunning, J.H., 2013.Multinationals, Technology Competitiveness (RLE International Business)(Vol. 13). Routledge. Forsgren, M. and Johanson, J., 2014.Managing networks in international business. Routledge. Geert-hofstede.com. (2016).Geert-hofstede.com. [online] Available at: https://geert-hofstede.com [Accessed 2 Dec. 2016]. Jenkins, R., 2013.Transnational Corporations and Uneven Development (RLE International Business): The Internationalization of Capital and the Third World. Routledge. Jeston, J. and Nelis, J., 2014.Business process management. Routledge. Johanson, J. and Mattsson, L.G., 2015. Internationalisation in industrial systemsa network approach. InKnowledge, Networks and Power(pp. 111-132). Palgrave Macmillan UK. Killing, P., 2012.Strategies for joint venture success (RLE international business)(Vol. 22). Routledge. Knoema. (2016).Singapore Balance of Payments Capital financial account Net financial account (BoP, current US$), 1960-2015 - knoema.com. [online] Available at: https://knoema.com/atlas/Singapore/topics/Economy/Balance-of-Payments-Capital-and-financial-account/Net-financial-account-BoP-current-USdollar [Accessed 2 Dec. 2016]. Penrose, E., 2013.The Large International Firm (RLE International Business). Routledge. Singapore - Geert Hofstede. (2016).Singapore - Geert Hofstede. [online] Available at: https://geert-hofstede.com/singapore.html [Accessed 2 Dec. 2016]. Suzuki, S. and Okamuro, H.I.R.O.Y.U.K.I., 2015, May. Determinants of Academic Startup's Orientation toward International Business Expansion. InDRUID 2015 conference proceedings. Verbeke, A., 2013.International business strategy. Cambridge University Press.