Article 1 brief “Australian PM defends banning of Chinese company”: China is Australia’s largest trading partner to the extent that the Australian government is considering entering into a free trade agreement with China. Huawei, the technology giant in China, which has nurtured business relations with Australia since 2004, was refused to work on Australia’s project to build a national high-speed Internet network in Australia over a period of three years, owing to the security concerns that were highlighted by the Australian Intelligence Officers.
1. Implications on the Australian government: Though Australia claims to have had severe security reasons due to which it had to bar Huawei from bidding on the network project in Australia; the country is not too keen on briefing upon the exact issues concerning the security. Instead of an 8 years healthy business relationship with Australia, China still could not convince Australian government on its version to the issue which has placed the business relations between the countries under a crucial scanner. The ban has also disappointed Huawei to a considerable extent in view of its work relations with the major telecom companies in Australia. One of the significant reasons that contributed to the economic boom in Australia was the demand from China for the iron ore and other minerals reserve in Australia (the investment done by the Australian government in the mining industry is recorded at 14% of the country’s gross domestic product in the year 2011). A recent interview with the industry analysts by Global Times reflects that, “There will be some negative impact on investments from China. The China Chamber of Commerce in Australia has already stated its concern about the likely consequences” (Global Times, 2012). The Australian government shall be in a better position if it presents the details of the security threats that it is scared of from a business association with Huawei.
2. Implications on the domestic firms in Australia: The implication of the ban on Chinese companies is a two way sword for the domestic companies in Australia. The demand from China for the iron ore and other minerals might see an adverse effect as a result from the disappointment caused to the Chinese government. The domestic firms shall need to work harder to find new customers for the iron ore and minerals reserves whereas the domestic telecommunications and networking companies might take it as the fall of a strong competitor for the National Broadband Network project.
3. Implications on the international firms in Australia: Considering the significant role that Chinese market plays in the export domain of Australia, the present ban can result in a momentous hit on the international firms operating in Australia. It has been noted that “Hardest hit could be Fortescue. Australia's largest pure-play iron-ore producer has hooked its cart firmly to the China growth story. Standard & Poor's says 96.8% of Fortescue's sales are to China” (The Wall Street Journal, 2012). The display of Australia’s distrust in Chinese firms through this ban has the potential of disturbing the healthy trade between the two countries by forcing the Chinese companies to think twice before venturing into the Australian markets. At the same time, this could also serve as a valuable lesson for the international firms operating in Australia to consider the political risks while operating in the country.
4. The most relevant theories or concepts of international business in the process of analyzing the implications of the article discussed above: The fact that a country’s political, legal and economic systems bear an inevitable impact on the prospects and conditions of conducting international business is undeniable. “Managerial political connections represent a unique type of managerial resource in emerging economies. Particularly in those economies where the formal institutional framework has not been well developed, political connections play a more important role in facilitating economic exchange” ( Li, He, Lan & Yiu, 2011). Similarly, the legal and economic systems in the country where the firms seek to exploit the business opportunities have a significant dictate on the terms on which the business operations are performed.
Operating a business on a global platform is analogous to handling an adventurous mission of adjusting to the varied social, political and economic conditions existing in the latent countries where the business is to be set up or expanded. Therefore a thorough understanding of the risks associated with the political, economic and legal risks related to the host country needs to be established for the successful enterprising of a global business. “You cannot predict the future, but you can position your company to be successful in a changing global business environment. Positioning the company globally and having the right lens through which to view, forecast and interpret market developments is crucial” (Pearl, 2012).
In the present article, Australia’s open display of distrust in the Chinese companies in spite of 8 years of business association implies the need of assessment of the political and legal systems of Australia by the Chinese firms.
Australia’s decision to ban the Chinese telecommunications giant that had worked with almost all the major telecommunications and networking companies in Australia from bidding on the National Broadband Network Project has definitely provided an opportunity to both the countries towards having a better assessment of the political and legal needs and priorities of the countries. Australia does not wish to come forth openly on the exact security threats involved in the business association with Huawei, which projects its unjust nature in treating the Chinese firms with which it shares a strong and mature trade relation.
Similarly, the prominence of acts in relation to Protection of Intellectual Properties also comes to the light of the day in this case. Recently, the Chinese firm’s relations with the western governments have been stressed due to the complaints that were lodged with the respective governments with regards to the hacking being traced to China. As a result, most of the businesses in the country have received a hard hit. According to Business Day, “Moody’s report says Australia's mining and airlines industries would be the hardest hit by a slowdown in China. Moody's predicts the price for two of Australia's largest revenue earners - iron ore and coal - could drop by 40 per cent” (Cai, 2012).
The political, economic, and legal systems of a country contribute significantly towards the considerable ethical issues which can have grave inferences during the process of operating a business on a global platform. In other words, it is the flexibility of the political, economic, and legal environment of a country that has a clear bearing on the projection of the charisma of the country which offers opportunity for international trade.
The Chinese government has urged the Australian government to come up with a clear understanding of the issue rather than just trying to foresee the occurrence of a security threat. Subsequently, the Chinese government also wishes to extend its full support and cooperation to the trade relations between the two countries, provided they both reach a consensus on the current issue. Though many industry thinkers foresee no serious trade barriers as a consequence to the current ban imposed by the Australian government, there seems to be considerable disturbances in the trade relations between the countries.
Such trade disturbances thus reaffirm the importance of developing a conceptual understanding of the relevant political, economic and social conditions of the countries where international trade has to be set up. In the face of the current issue, the Chinese firms which plan to invest in Australia shall get a chance to practice the assessment of the relevant legal and political risks associated with conducting business in Australia.
Article 2 brief “Australia plans $288M subsidy for General Motors”: With the aim of making a strategic investment that is potential enough to boost the Australian economy, advance modernization, explore fresh business opportunities and encourage the implementation of new technologies that are safety and savings oriented, the Australian government has announced a subsidy worth $288 million to General Motors. The subsidy would serve as a motivation for the company to continue its operations in Australia which has the potential of guaranteeing the jobs in the industry. This step is also perceived as a provision of the relevant certainty aspect in the field of auto manufacturers and the like.
1. Implications on the Australian government: Prior to the announcement of this subsidy, General Motors had considered to shut down its design and manufacturing operations in Australia which could have lead to a group of 12,000 unemployed people in the country. The announcement of the subsidy has not only pressurized General Motors to rethink on its closure decision but also made it commit regarding the investment of more than $1 billion in the process of car manufacturing by the year 2022. The government shares the responsibility of gathering the amount of subsidy to be provided to General Motors. While the federal government shares responsibility of providing for the major chunk of the total subsidy, the state governments of Victoria and South Australia also make their contributions towards such provision. Through the provision of this subsidy the Australian government has not only ensured the current employment opportunities from getting lost but also promised the generation of many new opportunities to the country.
2. Implications on the domestic firms in Australia: The subsidy announced by the government can bring along with it some news of concern for the domestic firms in Australia. While the stance of General Motors’ has become stronger as a consequence of the subsidy, the local firms may face fierce competition from the auto manufacturer giant. However, if the domestic firms are capable of providing resources to General Motors and can be of certain aid to the company, they shall subsequently not fall under the tag of competitors competing with General Motors and hence might prosper with the flourishing business of General Motors.
3. Implications on the international firms in Australia: The decision of the Australian government to provide subsidy to General Motors was with the aim to foster the development of innovative growth opportunities in the field of auto sector in the country. As a result the international firms in the country shall definitely face very conducive environment for their further growth and advancement within the country. This would thus result in the strengthening of the economy as a whole, while creating multiple business opportunities for the firms that seek to set up international trade relations with Australia.
4. The most relevant theories or concepts of international business in the process of analyzing the implications of the article discussed above: As had been reported by the International Business Times, “The melting of barriers among nations and their increasing interconnectedness, accelerated by technology, has led to a change in the world order that has had a profound impact on global business” (International Business Times, 2011). The Australian government in the article above had exhibited the theory of globalization of market by extending its support to General Motors through financial assistance. Such concept of globalization of markets is practiced by minimizing the trade barriers, promoting international firms to trade in the country according the needs, tastes and preferences of the inhabitants of the country.
In the absence of such subsidy as provided by the Australian government to General Motors, there would have been dire consequences which the country would have had to face. Loss of employment, reduction in the standard of living and broader exposure and advancement of auto manufacturers in the country can be listed as a few among the dire consequences that would have otherwise occurred.
In the words of : Lazzaro “Globalization -- basically, free markets and the transfer of jobs to lower-cost labor/production centers -- has lifted more than 1 billion people out of poverty, and united nations, peoples, and cultures. But globalization, at least in its initial stage, contains a contradiction that, in time, could undermine not only the uniting of markets, but trade and global GDP growth itself” (International Business Times, 2011).
According to McGuirk “Australian manufacturers including Holden have been losing exports due to the strong Australian dollar, which has been bolstered by record Chinese industrial demand for minerals and energy” (Bloomberg Business Week, 2012). This implies that the move made by the Australian government in relation to providing subsidy to the auto giant, General Motors was a very relevant decision with regards to the globalization of markets in Australia.
In order to make a company’s existence sustainable as well as profitable the environment in which the company survives needs to be sustainable as well. It is this concept of existence of the factor of sustainability in the external environment that has had a lasting impact on the way globalization had been perceived. This indicates a time to come where the relevance of application of the prominent and prevalent management standards shall be resorted to with the objective of seeking concrete solutions to the problems relating to social, environmental and energy aspects of performing business operations. The increased focus of the business organizations on the sustainability factor of the external environment is due to the recent increased practices of coming up with creative methods to involve themselves (business) in the environment for a profitable existence.
The Australian government also aims to provide the much needed conviction among the auto manufacturers and the contributory businesses in the country. In the face of which compelling the retention of General Motor’s operations in the country was indeed very much desirable. This move on the part of the Australian government to provide subsidy to General motors’ was initiated to create a favorable external environment which the company would feel to be conducive enough to continue its operations. It was the provision of this subsidy that compelled General Motors to also make a substantial investment in the two major locations (Melbourne and Adelaide) of the company within Australia to strengthen the manufacturing capacity of the company in these areas.
Therefore, the provision of subsidy by the Australian government can be concluded to be a very far sighted and concrete decision that has the latent to contribute significantly to the economic development of the country, its trade and its people.
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