International Business Environment: Assessment Using Five Forces Analysis

Introduction

"Bribery and corruption is a way of life in many countries. These practices affect the way international business is regularly conducted. However, in most of these countries, it is illegal to offer or receive bribes or engage in corrupt practices. Yet corrupt practices are a part of the culture of doing businesses. Unless companies conform to such practices, in many cases, international business cannot be transacted."

This quote speaks its overview on the politics and how it can affect the international relationship and transaction of an organization. The impact of the politics in one country might indicate threats in the profitability or stability of the country. The acts of bribery and corruption do not only reflect on the attitudes of politicians that running an office but also on the higher personnel in the management. For most of the times, the illegal actions of people are the result of their negligence in terms of monitoring and handling necessary transactions.   

The aim of the paper is to investigate the international business environment in the existence of bribery and corruption in the system. In order to appropriately investigate the modern approach in the international business environment, there are objectives that need to be considered. First is to address the environment when it comes in international business as well as discussing the opportunities and challenges that can be faced in the management. Second is to recognize the extent of bribery and corruption and the associated impacts that it can produce for the organization. Third is to identify the reasons on why do people turn on bribery and corruption. And fourth is to address the solutions and other recommendations that have the potential in resolving the bribery and corruption in the management.

Competing in the International Marketplace

International business fully investigated the foreign country before they pursued their expansion plan. The idea of international business does not describe the global trend in making business outside the countries but instead, using the globalization in a more significant business practice. The exploration of the business in creating business can be due to the existence of the international trade that exists among the borders. Because of the relationship promoted by the international trade such as partnerships and allies, the tensions among nations are eased and their respective economies can boost up. In the developing countries, the possible result in their relationship is to promote the standard of living and the quality of life. However, in the situation of a most developed country is to realize a strong the stable economy. All of the nations concerns in participating in the international trade affects the different organizations and therefore use this very same relationship in establishing businesses across the other countries. It is expected that aside from the profitability, the business will also engage in contributing in the country by increasing its potentials (Gitman & McDaniel, 2008).

By participating in the international business, the organizations can gain the competitive advantage. And by strengthening the competitive advantage, the country realizes the comparative advantage wherein each country holds and specialize the certain good. Part of the advantages is to produce the product readily and cheaply among the other nations. With the means of international businesses, the expertise of the country can be widely recognized. However, before entering in the commerce of nations, the businesses might recognize and provide timely solutions on the three major barriers in international business environment known as the natural barriers. These barriers are identified to be the distance and the language factor, tariff barriers such as the taxes on the process of importation, and non-tariff barriers which include import quotas, embargoes, national regulations, and exchange controls.

Bribery and Corruption

Bribery according to the law is a form of corruption that can be direct or indirect according to the provisions of compensation in favor of the employee of an organization. In return, the government employee acts in a manner advantageous to the company or refrains from acting to the company’s disadvantage. Enterprises use bribery to obtain or retain business, receive patronage, or obtain an unwarranted advantage over other businesses. In business ethics, part of the responsibility of the entire organization and their commitment that is enclosed in the core values and principles. The business ethics is also a guideline that the business and their leaders can use in generating sound decisions. This is because the business ethics comprised the standards articulated in law and regulations, internal policy, and procedures. Being honest, working with integrity, respect, and fairness, and aligned according to the principles are the most perceived actions of the organization towards their employees and customers in terms of product quality, health, safety, and efficiency.

There are many issues that included in the business ethics coming from the practical to the philosophical views of the organization until to the relationship of the organization with their customers and employees. The organization should keep the welfare of the community and committed to the environment and nourishing the societal values (USDEC, 2004). Enhancing integrity in business transactions and reducing bribery will help the entire organization overcome the part of development problem. Through the specific measures there is a promotion on transparency, accountability and ethics and to effectively deter bribery in business transactions are feasible ways to improve the attractiveness (Wehrlé, 2004).  The employee satisfaction means answering the needs of the person and as an employee, the organization should build different strategies. Commitment, on the other hand, of the employees is the effort of the employees to have controls wherein the entire organization has an influence in their job. The importance of the job design and job involvement can also increase the job satisfaction and performance because when the employee is fits his educational background on the nature of his work; there is a significant result on the process of performing that specific job (Baker, 2001).

On the other hand, the corruption can be run particularly in the government. Corruption, like bribery is a cunning action of such individuals in which they distort the decisions to make the result favorable in their needs (The Economist, 2006). For an instance, the project manager wants to gain 10% commission in the proposed project. Since the companies opens the bid for the contractors, sub-contractors and other service providers, the project manager usually consults these companies and in order to be chose in the bidding, the project manager makes a demand to fix the deal in an instant. Usually this move is done without consulting the company’s performance portfolio. This is where the decisions are distorted. If there is a continuous corruption within the organization, there can be depletion in the financial health. The transition of the economies highly affects the outcome of the corruption. The confusion within the organization might exist and can increase the financial crises that might exist in the economy. Another is, it can erode the public confidence in political institutions and leads to contempt for the rule of law. It also distorts the allocation of resources, increases the spending, and undermines the competition (OECD, 2000).

Generally, the corruption affects the investment, growth, and development. Furthermore, it oppresses the poor that pressures the financial market and seeks the international fight against the corruption. In international business environment, both bribery and corruption are highly possible to exist because of the easy way it offers particularly in gaining competitive advantage. Bribery and corruption affects the international business directly especially when it is regularly conducted and the management is lacking of clues to implement the investigation of ethical behaviors among its officers. Although it is illegal to offer or receive bribes or be part of the corruption activities, it appears that these illegal actions have been part of the culture of doing businesses.

Causes of Bribery and Corruption

There are personal motivations that lead to bribery is first to gain advantage over the other. For example, the company might pay lower taxes to get the contract thus offering the bribes to avoid fine or penalty. Others seek bribes in order to stop arguing against the other party; to gain the “insurance” in their positions; to provide quick funds with their own personal agendas; to maintain their standard of living although they are experiencing financial commitments; to justify the unfair management; to gather alliances within the organization and seeking higher status that anybody can admire him because of the outwitting authority. Meanwhile, the causes of corruption are clearly about the opportunity that the individual saw. Second, because of the opportunity, there is a little chance of getting caught that arrives of the organization’s lack of transparency and weak enforcement of organizational ethics. Third are the incentives that the persons involved can gain. And fourth are the attitudes or circumstances that make the average people disregard the law (World Bank Org., 2001).

In the organization, there are largely unintended human problems which arise when organizations are structured and run in a manner strictly following the classical and bureaucratic principles. The problems discussed centered on such structural characteristics as specialization, centralization, job standardization, and formulization. The recent theories in organizations appeared and been applied in the international businesses. In general view, the problem arises because of the lack of capacity of the nation in demonstrating the ethical behaviors. This means that if the country cannot emphasize the strategies in defeating the increasing number of corporate issues, many organizations and people will suffer because of the illicit actions of someone in order to fulfill their interests.

One of the primary reasons in why do bribery and corruption exists is the given fact that it is already part of the business culture. Therefore, if the organization did not practice the bribery and corruption and other associated activities, the international business cannot be transacted. The problem in the government adds to the dilemma in managing business in international setting. The standards of the government and companies to use the legal basis for ethical behavior are weak which makes the illegal activities possible. In addition, the laws vary between nations and if the company did not provide in-depth research and analysis, the degree of bribery and corruption manifests. The research and analysis is important in order to measure the moral values that are part of every culture which holds the legal and ethical practices of the foreign country. In this way, the business starting in international setting can be prepared in facing such difficulties.     

Apparently, the difficulty in enforcing the laws against the bribery and corruption is a bad news for the international firms (Financial Times, 2007). In tracing the actions of the companies in expansion, the merging and acquisition strategies have more potential towards the actions of bribery. The activities takes place because of the reason that the business needs to find a business that have a market share in the target foreign land; and to gain the advantage in easy way, one party will make an agreement that will usually end in either bribe or corruption.

What’s within the International Business?

Although the offering and receiving bribes and/or engaging in the corruption practices are illegal and punishable by law once proven, still it is present no matter how much control the government or the internal management implemented. As we trace to the existence of the bribery and corruption among the international businesses, it appeared that in many cases, the transactions of the most of the large companies are impossible without offering bribes. In return, those bribes received by the other party are considered as a form of corruption.

In the international business environment, the expansion project of the organization seems to be lacking of closed monitoring. For an instance, the market research done by the organization is not strong enough. The chances of an organization to be engaged in the illegal activities are very high. Using the Five Forces Analysis, there is a possibility that the international organization be involved in the bribery and corruption.

Competitive Force 1: Rivalry among Existing Firms

In general, the rivalry in the foreign country is high particularly in two primary reasons: first there are many companies that offers the same services or products within the same industry, and second which is also related in the first reason is that the market is saturated because of the large number of organization fighting over the competitive advantage in the market. In order to gain the advantage in the competition, the channels of distribution should be strong as well as the strategies. For an instance, the firm might place an order in one site wherein the billboard of the organization is the only material that the people may find. Or, the organization may increase the number of its distributors by offering higher bids to the distributors (wholesaler, retailers, agents, etc.) to ensure that the products are promoted and within the consumers’ reach.

Competitive Force 2: Threat of New Entrants

Because of the large economies of scale and the intensity of the performance within the industry, the new entrants may have difficulty in establishing the distribution channels because of the competing large companies (Gilliam, et al., 2005). The companies might pressure the government to impose policies such as increase in the duties and taxes. The role of government in the country and any parts of the world significantly plays in the resource allocation within the market. Part of the country’s economic development is the intervention of the government in terms of resource allocation which appears to be very controversial. And thus, in every type of economic system, the government places control over the allocation of resources. With the nature of the government being authoritarian, their decisions established that pubic firms should participate in the economic activities. However, governments primarily relied on private firms for the success of the industrial policies and appear to be in favor among the private firms (Allemik, 2009).

Competitive Force 3: Threat of Substitute Products

Obviously, because of many players in the same industry, there is a high competitive market and consumers can easily find substitutes (Gilliam, et al., 2005). Therefore, the companies are looking for the most effective way in gathering competitive advantage. In the organization haven’t establish the brand image yet, they may find difficulty in gaining the market share. Other than offering briberies among the suppliers, there is also an indication for the breach of confidence which can be associated with the corruption. For example, because of the poor performance of the international organization, the financial health of the organization can be affected. In order to gain the trust of the investors, the information is not publicly addressed. The information is corrupted as well as the money of the investors. In other form, a manager might sell the information to other companies in order to gain a sum of money (Cabrillo, 2007). This is an ethical issue that the organization should face and if not given proper attention, might lead to the firm’s downfall.

Competitive Force 4: Bargaining Power of Buyers

Due to the enormous contribution of the organization in the same industry and the impact they created in the market such as delivering the quality products, the firms who have the appeal in the market can have the power over the buyers. However, if there is a great numbers of competitors, the influence of firm in the market is somewhat decreased, which provided an opportunity to other competitors in exercising their business operations. The bribery might exist in the form of pirating the other organization’s best employee. For example, an engineering firm has a great rival and the impact of its rival’s “core team” plays a significant role in the organization. Due to the decreasing market share, the desperate measure of the organization is to pirate the “core team” by offering higher positions, incentives, higher compensation, and other good-to-the-ear offerings, which are clearly a form of bribery. They can also influence the buyers to buy their products through distorting the information and over-emphasized marketing which might affect the performance of other organizations through comparing one product to another.    

Competitive Force 5: Bargaining Power of Suppliers

The suppliers can be the most important part of the supply chain (Gilliam, et al., 2005). The companies mostly fight over the suppliers and in order to win the favor of the suppliers, offering bribes exists to close the transaction and have a control in the supply chain. In addition, it adds to their competitiveness to be the trendsetter in the market if the suppliers will be loyal in their relationship. As a result, the industry became lively than before and enough to encourage the high turnover and surpassing the other industry rivals.  

The increasing problems in the bribery and corruption exist in the international organizations because of their reason to survive in a close competitive world. The organizations promoted this kind of activity because of the competitive advantage that they might gain and the fact that it is easier than the traditional way.

Conclusion

The problems of bribery and corruption that exist in the nations and can affect the international organization. Most of the actions of the international business include the illegal actions that lead in the bribery and corruption in order to gain advantage in the market or gain the interest from the organization. The lack of the control in the organization as well as monitoring increases the degree of the illegal activities. The responsibility of the people should be emphasized because the officers are the one who tends to commits organizational felonies.

On the other hand, there are recommendations that can be used in order to monitor and establish the functions of the people. The theories of bureaucracy and theory of configuration are based on the classical teaching of Max Weber and Henry Mitzberg which the modern organizations pay a little attention. However, many criticisms attacked the bureaucracy and its use as a model for the organizations because the researchers identified that its applications in the organizations may produce dysfunctions or unintended negative results, which rendered the organizations inefficient and ineffective.

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