9.3 Assessing internationalisation The impact of

9.3 Assessing internationalisation The impact of internationalisation on the functional areas of a business

Learning outcomes You should be able to understand: How businesses can manage internationally and the impact on the functional areas of the business

Operating internationally: impact on the functional areas Operating internationally impacts on all the functional areas of the business: Human resources Finance Marketing Operations management.

Human resources The role and impact of HR depends on which methods of growth the business is undertaking: Exporting – managers may need training or specialist advisors may need hiring. Multinational – setting up in another country would involve hiring a workforce and motivating them – this may cause cultural and legal problems for the new organisation. Franchising – training of the franchisors would have to be thorough so that the culture and quality of the original business was maintained. Offshoring – existing employees may have to be laid off and this could cause resent and demoralise the workforce. For all of the methods of expanding abroad, managers will need thought-out targets, specialised personnel and cooperation with headquarters and other factories in the organisation. Communication will become increasingly difficult as the business expands across borders.

Finance Rapid growth into another region requires a substantial amount of investment. This investment would have to be obtained and returns on that investment monitored. Again the amount invested and the risk levels would depend on the method of the growth: Franchising – this requires minimal amount of investment and therefore reduces risk. Acquisition – this requires minimal amount of investment and because the business is buying a going concern then the risk is reduced. Setting up in another region – this requires a substantial amount of investment and is very risky. Offshoring – this could reduce costs significantly, but there may be hidden costs such as redundancy or closing factories in the UK.

Marketing When businesses enter new markets then extensive market research should be carried out to ascertain if the new product is needed or wanted by the customers. If marketing to a new market then test marketing would have to be carried out to ensure that no offence was caused. If the product is being made offshore for our consumption then the business would want to check what impact that decision would have on customers – some customers prefer products being made in the UK which may even be their USP. A considerable amount of money may be needed to introduce and market a new product in a new market as brand names have not be established. However, there may be limited competition which the business can optimise on.

Operations management The impact depends on the methods of growth: Offshoring – managers must ensure that quality issues are maintained in the manufacturing process. Multinational – managers need to work more collaboratively to ensure that the organisational culture and manufacturing processes are reproduced wherever in the world.

Management One of the biggest impacts on an organisation becoming international is that of managing change (Unit 2). As the organisation is stretch around the globe it becomes increasingly difficult to implement change in a coherent, managed way. Modern communication helps with some of the issues, but managing the process is much more complex for managers.