Over the last couple of generations, the world of business has gotten much more global and advanced. Technology, transportation and other advances have made the importation and exportation or goods much easier, much quicker and much more financially lucrative. Perhaps the best example of this is the heavy use of importation from China that Wal-Mart engages in with a litany of partner firms on the other side of the ocean. Wal-Mart is but one example of this phenomenon but it is certainly a major one that exist. This report shall explore international strategic alliances that businesses engage in and some of the details behind them. While some international business arrangements are ill-advised, a good many of them can be quite profitable and lucrative.
International Business Explored
The introduction of this report mentioned China, so this report will first explore them as a test case and example. Indeed, doing business with a host country on the other side of the world is no easy thing and it is a task that should not be taken lightly. For example, Wal-Mart has very established and entrenched operations in China. It is to the extent that they actively cater and ingratiate themselves with the locals in China. Further, Wal-Mart and other firms that engage in the same behavior obviously benefit in other ways. As explained by Matusitz and Leanza (2009), globalization "has the capacity to enchance scholarly understanding of globalization with reference to global agency and cultural differentiation." Further, "not only is China a nation where Wal-Mart had to globalize the most, China is also the fastest growing market in the world" (Matusitz & Leanza, 2009).
However, the effects of such a vast and lucrative arrangement are not necessarily good. It does depend on one's opinion and perspective. As stated by Matusitz and Leanza, "one of the consequences of Wal-Mart's strategy of globalization is that it contributes to its status of "cathedral of consumption" even more." The authors then explain that a cathedral of consumption refers to a situation where a global success (like the Wal-Mart/China relationship) gives birth to a "consumer religion" and an overall display and rendering of abundance and excess. Even so, the flow of goods between Wal-Mart and China is certainly not limited to China exporting goods to the stores that Wal-Mart has in countries besides China. Indeed, there are more than one hundred stores within China itself so both Wal-Mart and China actively benefit in another way as it relates to their joint business venture. Obviously, Wal-Mart gets more benefit from its importation of goods into the United States and other non-China countries because they have so many more stores in those other locations. Even so, establishing a retail store footprint in China is just another prong in Wal-Mart's system of success. The lesson to be learned is that international business ventures can take on many different forms and this can include the creation of new countries of operation rather than just being limited to getting goods for an optimal price as compared to getting them from more developed countries (Matusitz & Leanza, 2009).
Wal-Mart is obviously able to benefit from the way in which it is oriented and positioned in China and perhaps other developing markets as well. That overall subject was covered by Xiaoyun, Xin and Zheng (2014). Those three authors actually covered three different subjects, those being strategic orientation, foreign parent control and differentiation capabilities. Perhaps the lesser known of those three would be the concept of differentiation capability. This would be the firm's ability to provide unique product or service offerings that are deemed valuable by customers. Indeed, it is critical for a form to achieve a strong competitive advantage and this has been ensconced in the academic literature out there since at least 1985. Further, this concept of differentiation capability is even more critical for multinational enterprises (MNE's) in emerging markets. This would be because the firms foreign to the emerging markets are typically far more advanced in terms of technology, resources and so forth. As such, if these emerging market firms do not have a unique product offering to show, their chances of becoming or remaining competitive are quite small. Strategic orientation dovetails and interfaces with this topic quite neatly because it has a lot of the same implications. Strategic orientation can have a lot to do with things like technology use and customer interaction strategies. These are drivers of how competitive a business is a well (Xiaoyun, Xin & Zheng, 2014).
While a lot of the factors that influence the efficacy and success of an international business venture are external and competition-based, there are also some internal factors and details that should be assessed and kept in mind as well. One factor is the issue of control. One study on the subject, as authored by Pangarkar and Klein (2004) theorize that "the exercise of control increases the performance of international joint ventures only when the transaction costs are high and when there are large differences between partners and no prior business relationships" (Pangarkar & Klein, 2004). This conclusion was garnered through survey responses and secondary data collected for the purposes of the study. Within that data, the authors found support for a "contingent-control performance relationship." However, the data is far from conclusive when it comes to the use and exertion of control. Indeed, the authors note that there have been a lot of studies on the subject including the work of Calantone and Zhao (2000), Lee and Beamish (1995), Parkhe (1993) and Yan and Gray (2001). The impact of control, at least in terms of the results of those and other studies, has been found to be "conflicting and inconclusive." Pangarkar and Klein modulate that opinion by saying that control can indeed work in some cases but it has to be done in the proper manner and for the right reasons. Pangarkar and Klein argue that "the relationship between control and performance is contingent; that is, control has a positive impact only under particular circumstances; not otherwise" (Pangarkar & Klein, 2004). To be specific, those two authors focused on multinational corporations operating in the country of Singapore. Indeed, Singapore is a newly industrialized country (NIC) and that is obviously a factor when it comes to who does business there, why they do business there and what level of control they would desire or need to exert or wield (Pangarkar & Klein, 2004).
A final source that will be consulted for this report was authored by Yui-Tim Wong in 2012. His treatise was published in a 2012 edition of International Journal of Human Resource Management. The specific topic that he covers is job security and justice as it relates to international joint ventures in countries like China. The impetus for the study keys on the widely known and studied social exchange theory. To be specific, the authors study that paradigm vis-a-vis when "a model that links trust, job security is developed." That model, as proposed by the author, considers job security and procedural justice as "antecedents" of any trust in the managers of a firm and interactional justice as an antecedent of trust in a given supervisor. The Wong study had a data set consisting of more than two-hundred fifty employees in there different international business ventures that exist in China. The study made use of a LISREL analysis and the overall results seemed to support the hypothesis posed by Wong. Wong found that "trust in management is found to have a significant effect on employees' turnover intention, whereas trust in supervisor is found to have a significant effect on employees' organizational citizenship behavior" (Wong, 2012). Put another way, if the employees in a firm feel that their jobs are secure and that they are not being stonewalled by management, they…