PPQ Parts Global Expansion Plan, Research Paper Example

When a company decides to expand globally, it means that subsidiaries will be opened all over the world. By so doing, PPQ Parts becomes a multinational which sells its merchandise in different countries. The decision to expand globally may cause different issues to emerge in the foreign host country and the repercussions may be either positive or negative. If PPQ Parts decides to expand then the host country may realize increased government revenue because a multinational has to pay taxes, levies and fees before repatriating the profits to the parent country. Again, the host country may be in a position to alleviate the situation on unemployment levels. This arises due to the fact that PPQ Parts will set up business outlets in the country that will require labor. The local population in the host country may benefit from the emerging job opportunities. Moreover, there will be increased national income that will arise from the new investments ploughed by the business. These investments may include buildings and machinery which will increase the total output of goods and services. To add to that, the host country may be faced with a positive balance of payments because of reduced imports (Moffett, 2009). Once PPQ Parts sets up in the country, the goods will be produced in the country meaning that they will no longer be imports. If production is superfluous, then the extra quantity may be sold as exports thus correcting any balance of payments deficits that may have prevailed.

On the other hand, the host country may realize negative issues by the expansion of PPQ Parts. The local industries may be forced out of business since PPQ Parts may be more efficient. Efficiency may be determined by the technology that allows them to produce at very low costs. Again, the country suffers a loss of income when the company repatriates the profits back to the parent country. If that profit remained in the host country it would generate more revenue that would be used for other developmental purposes. Multinationals like PPQ Parts often use up the resources in the country and are sometimes involved in environmental degradation. The problem arises when such companies are not ready or willing to pay for the cost of cleaning up the environment. Since multinationals have large in influence on the economy of a country, they may use this to manipulate the government. They may demand the government to lift some of its restrictions or offer them large grants in order to remain in their country. This may in turn cause problems because the government may abandon national priorities to save the income from the multinationals.

Cultural Barriers and Diversity Issues by Multinationals

When multinationals expand to other countries, they may be faced with problems that pertain to culture of the host country. The customs of the host country may vary from the norms they are used to. The personal appearance of a person depicts about his personality and some countries are strict in the codes of appearance (Moran, 2007). The kind of dressing may also differ as some countries like Islamic ones do not allow women to dress scantily or provocatively.  The laws may also be different making life hard for the management or employees. Some countries have rules on labor relations that should be adhered to strictly. Lastly, culture may differ in terms of social ideology where certain personal freedoms, religious views, or sexual relations are curtailed. All these variations in culture must be considered carefully especially when marketing the products. Cultural barriers like role and status bring problems concerning social hierarchy. In many countries, the roles of women and men vary completely. Women are expected to be submissive and give men a certain exaggerated kind of respect. The management of the multinational may be ready to employ both women and men but the customs may not allow women to work very closely to men. The management should therefore find ways of understanding the sexes and their roles in the foreign host country to build good interactions. Personal space also matters because some cultures do not allow people to be so close to each other when conversing. In America, it’s a liberal case where people can stand very close but Japanese and Germans prefer to be distant when talking. In lieu of this, greeting protocols are very different in various countries where hugs, kisses, handshakes and waves form part of the communication styles.

Importance of Diversity in the International Arena

Diversity has become important in the international arena because of many factors. Companies want to diverse to other countries with the hope of producing goods at low costs especially in terms of wages. Some countries have abundant and cheap labor which cuts the overall cost of production. Other firms also expand to other countries to be closer to the raw materials and avoid transportation costs or other supply related expenses. Companies have also sought ways to get nearer to their potential markets (Richard, 2008). It also helps to reduce barriers to trade created to stop importation by domestic residents. In addition, firms have realized that setting up subsidiaries in different countries is a way of spreading their risk potential. If sales fall in one country, they many still reap from others who still adhere to brand loyalty. In addition, companies have diversified by being multicultural organizations. They have hired employees from different countries to embrace a plethora of cultures. This is because the management will have higher chances of having a wider talent pool. Different people are endowed with different talents influenced by cultural traits. Employees may share knowledge on market demographic or socioeconomic trends of their different countries. They also learn new languages by interacting with each other making them more efficient.

Problems of Ignoring Multiculturalism and Diversity in a Multinational

Cultural differences can create problems for production synergies because it inhibits management from exploiting venues for expertise. It makes sharing of activities through team building to be very difficult. Language barriers also inhibit employees from interacting with their peers or customers in the foreign country (Moran, 2007). This lack of cohesion and misunderstanding can prevent the business from satisfying the customer preferences. Cultural variations also prevent innovation by a company because of consumer sensitivity. It is hard for customers in foreign countries to embrace new products since they fear the loss of patriotism. As aforementioned, if management takes time to embrace multiculturalism then employees may teach each other different things. They may be in a position to embrace the best traits from different cultures making them more efficient. They will all be exposed to unique information on market responses from different countries thus helping them to expand their market share.  When they mingle, they form a sense of camaraderie n that will brew better relationships between them and eventual success to the company. The company will also be seen as embracing globalization which may prompt many investors or new ventures from other countries just because of respecting different cultures.

Political and Economic Issues of Global Expansion

During the expansion, PPQ Parts may face political problems industries in the host country. Other multinationals in the same league may lobby from the government for restrictive competition that would deter their ease of entry into the industry. They may also be forced to support a political ideology in their advertisements which many ruin their market share in other countries. The best way to address the issue of lobbying is by apply for patents which will also curb the forces of competitors. On the other hand, the management should insist on putting its priorities above all other needs by government or individuals (Aart, 2005). Supporting any political ideology may not be embraced by other countries which may sabotage its subsidiaries. Despite political issues, the company may find economic challenges like heavy taxes on their income which makes their profit share to lessen. Again, the host country may not be in a position to offer skilled labor thus forcing the company to import workers. This may be very expensive to the company which may address this by lobbying for friendlier tariff structures and training the locals to be efficient instead of searching for expatriates.

Implication and Importance of PPQ Parts Expansion Plans to Germany and Japan

The Japanese market is flooded by high caliber employees thus the company should be prepared to pay huge sums of wages. The Japanese Corporate culture demands quality and flexibility in delivery. The Japanese are a bit conservative and have rules regarding business appointments. It is thus important for PPQ to learn the cultural aspects of Japanese market have better chances of success especially in the technological upgrades. Global expansion to Germany means that PPQ would have to understand how they charge taxes. Different taxes are charged depending on the business and the magnitude of the risk. The Germans are liberal in the dress code but only a small percentage of the people are bilingual. It is important that PPQ finds ways to incorporate the cultures of these two countries before implement the expansion plans.

References

Aart, J. (2005). Globalization: A Critical Introduction. New York, NY: Palgrave Macmillan.

Moffett, M. (2009). Multinational Business Finance. New Jersey, NJ: Addison Wesley.

Moran, T. (2007). Managing Cultural Differences: Global Leadership Strategies for the 21st Century. New York, NY: Butterworth-Heinemann.

Richard, B. (2008).Working with Cultural Differences: Dealing Effectively with Diversity in the Workplace. Massachusetts, MA: Praeger.