Object Required
Understanding of international business through an Abrasive Organization who wants to do business in China.
Principle
International business consists of trades and transactions at a global level. These include the trade of goods, services, technology, capital and/or knowledge. It involves cross-border transactions of goods and services between two or more countries. Transactions of economic resources include capital, skills, and people for the purpose of the international production of physical goods and services such as finance, banking, insurance, and construction.
Theory
INTRODUCTION
International business refers to all the commercial transactions that occurs between two or more regions, nations and countries beyond their political boundaries. Further, globalization has positively affected every company operating in the market and it is possible for business enterprises to operate in different types of market where opportunities can be grabbed easily by performing better. The term international business is linked with all the business activities that take into consideration cross border transactions of services, goods and resource sharing between two or more nations. By expanding into the international market, it is possible for firms to serve large number of customers and can lead to rise in overall satisfaction level of customers in the market. For understanding we will take an example of Abrasive Product Manufacturing Organization
INDUSTRY ANALYSIS
At the time of expanding at foreign level, it is necessary for an Organization to consider various factors that can directly affect its operations at global level and in turn can lead to decline in efficiency level. Further, various challenges are present at global level due to which companies are not able to perform as expected and are acting as hurdle in accomplishment of desired goals and objectives. Factors that can influence operations of an organization are discussed below.
· Threat of New Entrants: Threats of new entrants mainly influence the organization at the time when their greater possibility of higher returns and ease in operation of business. An Organization have to consider the factor of threat which may attract the new entrant of the abrasive industry while entering in China. In consideration to business of Abrasive, the company already operates in more than 100 countries of the world and expansion of its business in foreign market will not make any major threat of new entrant. Only the threat of new entrant which can be face in China by Abrasive Organization is from the entrant of other Abrasive companies who are also expanding their business at global level.
· Threats of Substitute Products: In Abrasive industry threat of substitute products such as Non Abrasive and other Polishing products is low in China. An Organization does not have to face any major threat regarding substitute products. Though Organization has to face some problems while expanding its business in foreign market regarding availability of substitute products.
· Bargaining Power of Buyers: Bargaining power of buyers in Abrasive industry is medium in China. An Organization do not have face any significant effect regarding factor of bargaining power of buyers in foreign market expansion. There are two different buyers in Abrasive industry, first are Industrial and second are Home utilities organizations. The intensity of bargaining power of Industries is medium in China as they do not have much options to buy the Abrasive at lower price or any substitute. An Organization has advantage of this factor while expanding its business in foreign market.
· Bargaining Power of Suppliers: In context to factor of bargaining power of suppliers in Abrasive industry, the intensity is low. Number of companies which deals in this sector is not very huge in China. Expansion of business of Organization in China market will not create any major issue of bargaining with the suppliers of this industry.
· Intensity of Competitive Rivalry: The degree of rivalry among the Abrasive industry at global level is high. There is greater level of competition among the companies as there is not higher number of companies in China market. Change in prices of the Abrasive or introduction of new product makes direct impact on the business operations of an organization in foreign market.
Conclusion
The above report has concluded that to enter into the international business it is very essential to carry out industry analysis through which various factors that can affect the business operations can be determined. The current report has also been discussed about various foreign market entry mode available for an Organization, as it is planning to enter into the new potential market. For this it can use various theories such as international life cycle and network analysis of internationalization that has explained in above section of the report.
Published Date
03 Jun, 2018
