COMPLEXITY OF ADAPTIVE BUSINESS MODELS BASED ON
DIGITAL TECHNOLOGY AND INTERNATIONAL BUSINESS
NETWORKS
ARIZONA STATE UNIVERSITY
OMT 440 - INTERNATIONAL BUSINESS
WEEK 2
Abstract :
This paper develops a complexity of adaptive business models based on digital technology
and international business network towards a sustainable competitive advantage. Furthermore,
this paper aims to integrate the concept of adaptive organizational design with complex
business models based on digital technology and international business networks. Adaptive
organization design should change consistently with changing technological, ecological,
economic, social, digital technology and international business networks. The theoretical basis
of the concept of business model and relate it to elements of business model, digital
technology and international business network. The complexity of adaptive business models
based on digital technology emphasizes the importance of building change, international
business networks, developing complex and adaptive organizations for innovation in
achieving sustainable competitive advantage.
A.
INTRODUCTION:
The principle of adaptive management in critical safety complex organizations
contributes to safety management by bringing ideas from organizational complexity theory.
Organizations as complex adaptive systems have been focused on how to generate new
innovations or how to improve financial effectiveness. The safety-critical view of
organizations can be considered as complex adaptive systems, and for safety management.
Outlines the issue of what kind of principles safety management should be based on for
complex adaptive systems. Safety management should be adaptive, building on several
different principles.
The new techno-economic paradigm of the information age has developed new
structures and processes in international business. Changes in the place of competitive
advantage, corporate strategy, governance structure of international business networks in the
third industrial revolution in the information age where a new technology-based economic era
is developed. The development of new structures and processes in international business
brings three areas of change in international business activities that can be mapped in an
eclectic paradigm of advantages that benefit the company multinationals: location-specific
advantages, ownership-specific advantages and market internationalization.
Complex uncertainties in the global environment as well as the demands of international
competition in the areas of innovation, product quality, productivity, customer service and
business ethics require companies to increase the acceleration of the pace of change in global
demand and interdependence to make organizations more adaptive and flexible.
The competitive advantage of place pays attention to location advantages from the point
of view of international business. The competitive advantage of enterprises is their ownership
advantage in international business requirements, and the governance of the international
business network structure in the new environment refers to the degree of internalization
advantage in direct coordination with enterprises. Location-based competitive advantage
cannot be separated from the role of clusters, agglomeration, connectivity and globalization.
Agglomeration enables new and innovative long-distance coordination. Geographical and
social proximity is needed to create competence through the internet.
B.
DISCUSSION:
2.1
Adaptive Digital Business Strategy
Adaptive is a form of organizational response to changes and differences that occur in
the environment. The design of organizational adaptation can be in the form of company
maneuvers in the face of change, both internal organizational changes, new technology and
market competition. The dynamics of the results of interactions between organizations and
markets to match environmental changes need to be adapted by senior management at the
company level to achieve a better match. The adaptation process requires several stages with
incremental changes in response to changing environmental conditions. Adaptability is used
to identify and utilize emerging markets and technologies that are indicated by changes in the
company's posture (Plugge et al., 2016).
Adaptive strategy design examines the concept of adaptive advantage, as a new
perspective, and seeks to improve its understanding and application. Adaptive advantage
describes the combination of various factors, which result in the ability of a company to adapt
quickly to a rapidly changing environment. Two important contributions to understanding
adaptability are that the organization undergoes transformation in short bursts, which affects
the whole organization and the sub units of the organization are interrelated and affected by
its environment. As a result of these two points, adaptive organizations regard change as a
global phenomenon that needs to be managed and are able to integrate all organizational sub-
units in the process, while remaining open to external stimulation. In the perspective of
negative aspects adaptation, that its inability to reconfigure internal resources and capabilities
and or lack of development of new competencies will lead to decline (Ramón, et al., 2016).
The success of an organization to meet environmental demands requires the
organization to have resources and skills that become adaptive capacity in adapting to
environmental dynamics, turbulence and complexity. Environmental dynamics reflect
unexpected changes or environmental instability and are difficult to predict. Environmental
complexity reflects the geographical spread of activities. Environmental turbulence is
described as a turbulent environment where the interacting effects of complexity and rate of
acceleration exceed the predictive capacity of the organizational system to the environment.
Environmental shifts and turbulence require the development of dynamic adaptation processes
and adaptive response mechanisms (Vohra, 2015).
The incorporation of digital technologies into products, services and operations has
significant implications for how companies can achieve and maintain competitive advantage.
Traditional strategic models of competitive advantage, such as the industry structure view, the
resource-based view or the dynamic capabilities approach, are built on assumptions that have
no validity in a digital environment. Digitalization radically changes the nature of products,
value creation processes and the competitive environment of companies. Companies can
achieve sustainable competitive advantage in the digital economy through a network view that
explains the competitive environment of companies confronted with digital technology
capabilities. Strategy is aimed at leveraging the unique capabilities of digital technologies
embedded into products to help companies design and create strategies to achieve and
maintain competitive advantage in the digital economy. Sources of sustainable competitive
advantage with increasing digital technology, changing product architecture, alternative
modes of value creation and the shift from relatively static industries to dynamic digital
ecosystems. The interorganizational network structure encompasses a firm's relationships with
suppliers, customers, competitors, across industry or national boundaries as a key source of
competitive advantage in a border-merging industrial environment and digital technology as
the focal point of value creation (Koch & Windsperger, 2017).
Products, services and operations transformed by digital technologies are characterized
by convergence and generativity. Digital convergence is defined as a technical, essential,
pervasive and interactive reconfiguration of the social information infrastructure of modern
society that refers to the convergence of media, storage and distribution technologies, which
brings together previously separate user experiences. It generates new possibilities of
combining re devices, networks, services and content, which were originally created for a
different purpose. Generativity refers to the dynamic change of the design of digital objects.
Generativity is a consequence of the dynamic and malleable character of digital objects,
where designs are considered to be in permanent flux, regardless of their actual intended
purpose (Koch & Windsperger, 2017).
2.2
Digitalization of Complex Adaptive Systems:
Safety management must be adaptive, building on several different principles. Complex
adaptive systems have an inherent capacity to become more adaptable, by generating novelty
from what is expected. The behavior of complex adaptive systems is impossible to predict in
detail and they always act under uncertainty. The uncertainty of a complex adaptive system,
its emergence will always create surprise and novelty (Reiman et al., 2014).
Managing complex adaptive systems requires adaptive leadership, making traditional
hierarchical leadership less useful. Adaptive systems require complex dynamic processes that
emerge interactively between people and ideas. Leaders have an active role in creating
emergence in complex systems. This adaptability can only emerge if there are consistent
constraints on the actions of individuals within the system. Complex adaptive systems are
described as being on the edge of chaos by balancing stability and flexibility of change
(Reiman et al., 2014).
Common features of complex adaptive systems, such as self-organization and non-
linearity, that need to be considered in management. Based on the features of complex
adaptive systems, there are key principles of adaptive safety management and illustrations of
the usefulness of the principles in understanding safety management. The main features of
complex adaptive organizations are as follows: First, non-linearity where inputs are not
necessarily proportional to outputs. Small changes in local conditions can have a large impact
on the whole system. The system consists of highly responsive and interconnected feedback
loops that can amplify or reduce inputs. Moreover, all the effects are several parallel
supporting factors, not one or several causal chains as in linear systems. On the other hand,
complex adaptive systems also exhibit time delays between causes and effects, which can lead
to overshoot in intervention. Second, emergence is a result of the pattern of connections
between various agents. As a consequence of these interactions, new patterns of connection,
new system-level properties and structures emerge. The emergence of properties formed from
agent interactions cannot be traced back to the individual agent. However, this pattern has an
effect on the agent. The irreducible nature of emergent properties means that the overall
properties are distinctly different from the properties of the parts. Examples of emergent
properties include awareness in the brain, norms or climate in the work group (Reiman et al.,
2014).
Third, self-organization where self-organization indicates the emergence of new
structures, patterns and forms of behavior in the system as a consequence of agent interactions
and connections. The organization continues to self-organize through the process of
emergence and feedback. Thus, the phenomenon of self-organization is the result of local
collective emergence and not permanent but non-linear interactions between agents. Complex
adaptive systems can self-organize into even greater complexity. However, self-organization
creates order in the system: in complex adaptive systems, order is the result of the nature of
the system itself and the achievement of external controllers that are not intentional. Fourth,
the far from equilibrium state is that complex living systems strive to exist in a balance
between order and chaos, order and disorder, stability and instability, equilibrium and non-
equilibrium. This is sometimes called the edge of chaos, a condition that craves variety and
creativity. It is also the edge of order or the edge of stability. Being far from equilibrium also
means that the system is in a continuous process of change and flow. This change in the
system is a natural tendency, not something initiated by outside forces. This ability also
allows these systems to self-organize and adapt to changes in their environment.
Fifth, coevolution is where a complex adaptive system exists within its environment, but
is also part of that environment. Changes in the environment require changes in the system.
However, since the system is part of its environment, changes in the system will change its
environment, creating a process of change and co-evolution. Furthermore, the environment
including the organization can be considered as a complex adaptive system of its own, which
also learns and adjusts. Sixth, nested systems are complex adaptive systems sometimes called
systems within systems. For example, organizations consist of individuals who themselves are
complex adaptive systems (and their respective brains can be considered complex adaptive
systems). These nested systems increase the diversity and uncertainty inherent in the 'parent
system' (Reiman et al., 2014).
Seventh, history-dependence is that complex adaptive systems cannot be turned back to
their original form and state. Actions are thus irreversible, and the past helps shape current
behavior. Agents learn from their previous experiences and change their actions accordingly.
History dependency also means that solutions can rarely be copied from one system to
another: what works in one organization cannot be replicated in another, because they have
their own history. Also It has been shown that, in general, complex adaptive systems are very
sensitive to initial conditions (butterfly effect). However, such chaotic behavior stems from
the interaction of a small number of non-linear equations. In complex organizations, however,
there are always a large number of component interactions making sensitivity to initial
conditions less important than general history dependence (Reiman et al., 2014).
Maintaining viable alliances and creating network value with the right partners.
Partnership management capabilities should be a core competency that new businesses should
have. Digital technology is changing the structure of social relationships both consumers and
within companies. Digital transformation follows three-dimensional concurrent techniques
that add value chain techniques to enhance the traditional two-dimensional concurrent
techniques of product and process. Digital business strategies then call for the coordination of
companies along the domains of products, processes and services, thus creating a complex
and dynamic ecosystem for growth and innovation (Pagani & Pardo, 2017).
2.3
Advantages of Complex Adaptive Organizations:
Adaptive capacity is seen as a function of the strengths, attributes and resources
available to a system. Adaptive capacity can be viewed as an approach of continuous learning,
experimentation, and long-term, progressive change requiring planned and strategic actions
and modifications in behavior. Adaptive capacity therefore requires changes in rules, norms
and structures that lead to crises, emphasizing the dimension of institutional vulnerability. The
organization's ability to adapt becomes a very important element to encourage the
organization to produce sustainable transformation advantages in a turbulent business
environment. The change from competition to collaboration with partners can be a foundation
in improving sustainable adaptability in creating economic and social value relevant to
stakeholders in the business ecosystem. Adaptability is an important determinant for
organizations to survive in the face of many challenges in competition that puts strong
pressure to use environmentally friendly green technology (Wetering, et al., 2017).
Adaptive advantage is a combination of various factors that result in the company's
ability to adapt quickly to changes in the economic environment that changes consistently.
Flexible companies are needed to deal with market changes quickly. The creation of new
competitive advantages and the adaptive ability to foresee changes in replacing new
competitive advantages. The choice of strategic actions and the search for strategic behavior
formulations determine the success of survival organization. Adaptability as a new
competitive advantage can be generated through the integration of understanding
environmental changes, testing various responses from stakeholders, strategizing dynamically
(Ramón, et al., 2016).
Experienced professionals learn primarily through work, where the work is experienced
and influenced by multiple levels of emergence, agency, complex social networks, and
adaptation. Complex adaptive organizations are used to describe the framework as well as to
distinguish organizations as human social systems from other examples of complex adaptive
systems found in nature such as flocks of birds and computer networks (Lizier, 2016).
Complex adaptive systems are a specific type of complex system containing agents that
adjust their strategies to work within the system increasing their chances of success, usually
through a learning process emphasizing learning and adaptation as critical aspects of the
system. The complexity approach offers a way to consider work and learning simultaneously
from the perspective of collective behavior as well as from the perspective of individuals who
can learn and adapt. Workplace learning empirically demonstrates the interrelated nature of
working and learning in diverse workplaces and the influence of four key elements of
complex adaptive organizations-emergence, adaptation, complex social networks, and
agency-through work and learning experiences.
The first key element, emergence, describes how interactions within the organization
contribute to patterns at the macro level that may have very different characteristics to those
of individual elements (e.g. people, technology, space) and cannot be fully predicted from
their actions and interactions, creating an environment of near constant change and
unpredictability. The second key element is adaptation, referring to the capacity of
professionals to adjust to the emerging requirements of their context (Lizier, 2016).
The third key element is complex social networks, a particular type of network that is
not entirely ordinary and not entirely random. In complex adaptive organizations,
professionals operate within and across highly interconnected overlapping networks. The
fourth and final key element of complex adaptive organizations is agency. In complex
adaptive organizations, agency is experienced as a continuum, with all professionals having a
degree of agency yet no single individual or group having unconstrained agency (Lizier,
2016).
Organizational adaptivity is important for the resilience of socio-ecological systems.
Resilience and organizational literature are used as contributions to help understand the nature
of adaptive organizations and how external structure changes and in organizational practice
can reinforce each other. Four important factors are needed by organizations to handle
resource dynamics in complex organizations: learning to live with change and uncertainty,
nurturing diversity for reorganization and renewal, combining different types of knowledge
for learning, and creating opportunities for self-organization (Karadzic, et al., 2013).
The development and survival of the company is strongly influenced by aspects of
organizational learning, organizational intelligence, entrepreneurial learning, and the dynamic
ability of the organization to adapt to changes in the fast-paced business environment.
Changes in the environment allow professionals to change the paradigm in view following a
paradoxical management perspective, which assumes that humans tend to understand change
in terms of opposing pairs such as cooperation and competition (Ricciardi, et al., 2016).
The adaptive nature of complex organizations and adaptive decision-making processes
in human behavior. It focuses on developing to identify and assess the loops that enable
organizational adaptation. From this perspective, adaptive loops in complex organizations can
be divided into four stages adapted from the OODA (Observe-Orient-Decide-Act) loop. The
extension of the OODA loop to the organizational scale is included with the assumption that
information flows, which are involved in the adaptation process, can be formed through
different organizational components. Furthermore, the OODA loop can be presented as a
series of actions created by independent components of the organization and its environment.
Applying this approach to complex organizations requires mapping a functional definition of
the different organizational components in each step of the adaptive loop. While functional
organization can be performed using existing organizational analysis tools (organizational
structure, functional decomposition, architectural frameworks, etc.), the main goal of the
proposed methodology is the determination of adaptive loops at the organizational scale
(Omavora, et al., 2012).
2.4
Adaptive Business Model: Triple Configuration
A firm's performance in a turbulent business environment is highly dependent on the
adaptive regeneration of the firm's business model. Review the literature on dynamic
capabilities, on organizational ambidexterity, and Lewis' view of organizational paradoxes to
build a dynamic organizational model that includes seven dimensions: three pairs of
paradoxical constructs (competition-cooperation, exploitation-exploration, and conformity-
agency) and dynamic capabilities. These organizational dimensions describe adaptive
business model innovation. Adaptively, the business model must change consistently with the
company's evolving economic, ecological, social, and technological environment. Dynamic
capabilities enable Companies capitalize on these feedback flows and opportunities and
concretely activate adaptive processes (Ricciardi, et al., 2016).
The Internet and digitization, together with major news and information companies,
have disrupted the traditional corporate business model, and raised serious concerns about the
future viability of the print newspaper industry. Prominent corporate entrepreneurship adopts
disruptive business model innovations, and affects business model performance. While
autonomy, risk-taking, and proactiveness have a positive relationship with the adoption rate of
disruptive business model innovations, innovativeness does not. Disruptive business model
innovation adoption has a non-linear relationship with business model performance.
Entrepreneurs and technology managers can use it to customize their corporate
entrepreneurial activities in their quest to successfully implement disruptive business model
innovations (Karimi, et al., 2015).
Business models allow theory to develop systematically and provide coherent guidance
to managers. Value configuration is a contingency variable that must be included in the future
theming and model building. Each of the business model elements is affected by the value
configuration of the company depending on whether the company is a value chain, value
shop, or value network. The business model for organizational design shows how
organizational design is influenced by value configurations and how new collaborative
organizational forms enable open and agile business models (Fjeldstad, et al., 2017).
With the influx of the contemporary generation (Gen Y) into the workforce,
organizations are interested in leveraging Gen Y's technological preferences when designing
their information systems. In particular, motivated by Gen Y's reliance on their personal lives,
organizations have started the implementation of corporate social networks to facilitate
collaboration and knowledge sharing within the organization. However, these initiatives have
not been received with the expected enthusiasm from Gen Y employees (Shirish, et al., 2016).
2.5
Digital Technology-Based Business Model Adaptation:
Information technology capabilities as an effort to measure the organization's ability to
utilize their information technology asset base. Information technology capabilities embody
capabilities that utilize technology to differentiate from the competition. It has been argued
that a particular constituent of information technology capability, namely the flexibility of the
information technology infrastructure, determines the value of that infrastructure to the
organization. Recent studies have shown information technology flexibility to increase the
level of strategic alignment-the balance between different organizational dimensions in a
stable state (Wetering, et al., 2017).
Unique characteristics can facilitate constant adaptation and timely responses in terms
of information technology-based competitive actions directed toward sustainable
organizational advantage. Although the strategic management literature has evolved
considerably over the past two decades, there seems to be a growing consensus over the
fundamental attributes that characterize successful organizations. Recent lines of thought
argue on flexibility, adaptability- the ability of organizations in a rapidly changing economy,
and collaboration with business partners as the basis of sustainable competition. Although
information technology flexibility may to some extent strengthen an organization's arsenal of
digital options and accommodate frequent changes, it is conceivable that this dimension in
isolation may not be sufficient to drive sustainability and organization-wide innovation
capabilities (Wetering, et al., 2017).
The existence of strong collaborative capabilities has also been associated with
increased levels of innovation while being highly dependent on contingent factors. In this
regard, collaboration capabilities reflect an organization's ability to organize and manage
information technology-enabled business relationships with internal and external business
partners. In the same vein, it is also important to be able to respond quickly to operational and
market adjustments, and to take various external environmental factors into account. In this
context, little attention has been paid to organizational innovation, information technology-
enabled business transformation, and the need to reduce the harmful value of abundant chain
activities, i.e., sustainable work practices under different envi-ronmental conditions and
complexities (Wetering, et al., 2017).
Organizations assess opportunities by developing, delivering products or services, and
interacting with customers and other stakeholders digitally. Mobile phones, social media, and
databases are driving the workplace, and other digitally-based technologies are experiencing
major economic and social impacts, including increased competition and collaboration. This
design is based on the current state of digitalization in various sectors of the global economy
(Snow, Fjeldstad, & Langer, 2017).
Such a design requires alignment of digital technology strategy and culture within the
organization and externally with stakeholders. Performer-oriented principles of designing a
digital organization, if implemented correctly, can result in a workplace where organizational
members are highly engaged and productive. Digital organizations are increasing in numbers
and sophistication. Digital technologies can be integrated into organizations and show how
actor-oriented principles and design can be used to organize and conduct digital
organizational activities. Digitalization is happening at a rapid pace, successful leaders must
do the following synchronize their organizations to lock in digital speed (Snow, Fjeldstad, &
Langer, 2017).
Product form and capability are closely related to the organizing logic of the firm.
Organizing logic is defined as the managerial rationale for designing and developing specific
organizational arrangements in response to environmental needs and corporate strategy. Value
creation through generativity is distinctly different from other sources. Innovation occurs in
an unexpected way and ignores the pre-established value chain. Value is the mutual
comparative appreciation of skills or services exchanged to obtain utility or use value. The
dynamic and flexible nature of products makes it necessary to rethink them through a value-
added approach. Generativity is a key source of value creation. Companies engage in an
increasingly dynamic, complex, and diverse network of relationships to find ways to create
value (Koch & Windsperger, 2017).
2.6
Complexity of International Business Networks:
The locus of value creation as well as organizational form has shifted from individual
firms to international business networks. International networks include a firm's relationships
with suppliers, customers, competitors or other entities across industry or country boundaries.
Different forms such as strategic alliances, joint ventures, franchises, long-term marketing and
licensing contracts, reciprocal trade agreements, R&D partnerships, buyer-supplier
relationships, investment bank ties, personnel movement relationships. Companies can
deliberately influence network structures and ties to produce superior outcomes by accessing
valuable and inimitable resources and capabilities, gaining power and control, building trust,
and signaling status. The only source of true competitive advantage is the ability to
understand the whole system that creates value and make it work (Koch & Windsperger,
2017).
In a world that is increasingly connected through organizations, people, technology, and
social media, successful companies leverage the interconnection between local and global
networks. The decentralization observed in international research and development
management, and the increasing role of geographically dispersed technology sources through
globally integrated international business networks. Companies have led to a greater focus on
assets that require foreign direct investment motives. Changes in social structures, the
development of new technologies and production methods are having systemic business
impacts, across countries, companies and industries, signaling the beginning of the third
industrial revolution era. The impact of the information age, especially the spread of e-
commerce has accelerated changes in communication and information technology (Alcácer,
Cantwell, & Piscitello, 2016).
Companies that are adaptive to change need to have the internal ability to manage and
adapt new sources into strategic assets such as sources of innovation, advanced technology,
knowledge exchange and combination. The company's core ability to adapt and innovate is a
key factor to improve the company's innovation performance. Innovation capability is a
special asset or source that includes knowledge, experience, organization, process, product
and technology. Innovation capability is the capacity to develop and adopt products and
technologies to satisfy future market needs (Cheng & Yang, 2017).
C.
CONCLUSIONS:
A complex adaptive organization is one that displays, and is shaped by, four key
elements, namely emergence, adaptation, complex social systems, and agency. These four
identified elements of complex adaptive systems and workplace learning have the greatest
potential for insights into work and learning in contemporary organizations.
To create value becomes more complex through adding product features to improve
product quality. Contributing to value-adding activities, the co-created value creation process
in the digital environment is based on stakeholder contributions that integrate resources. The
potential for innovation has increased through the combination of digital product and service
capabilities allowing companies to combine resources across industry boundaries relating to
the physical product. Companies are seen not as single members of an industry but as part of a
business ecosystem that crosses multiple industries. A digital ecosystem can be understood as
a network of companies and other institutions interlinked by a common interest to create and
sustain value around a digital platform.
Organizational sustainability and a leading role in digital technology-based innovation
need to emphasize information technology flexibility, as a key information technology quality
attribute, is an important facilitator that enables organizations to develop innovation
capabilities and overcome many internal and external problems to gain a competitive
advantage.
Building adaptive management and self-organization based on international business
networks requires that managers delegate authority and trust employees to create new things
within the constraints of the overall organizational goals. One of the prominent values of the
organization is safety, security and the need for an effective self-regulating system. Successful
complex adaptive organizations can be seen in their ability to self-organize without
centralized control because they have a shared core purpose and simple basic principles that
guide them in their daily actions.
1.1
What is International Business for Agribusiness:
With the potential of Indonesia's natural resources that can be utilized and can be used
as export commodities, then with international business capabilities, Indonesia can take
advantage of opportunities to take a greater role in the world of world trade. Indonesia's
natural resources are primarily agricultural resources that are oriented towards the
preservation of nature and the environment.
1.2
Purpose of Studying International Business for Agribusiness:
The purpose of studying international business is:
(1)
for a country to increase competition in the domestic market and introduce new opportunities
to foreign markets. Global competition encourages companies to be more innovative and
efficient in the use of their resources.
(2)
international business can increase the number of consumers/users of various goods and
services. For a country that is actively producing goods and services, international business
can improve the standard of living of producers as more consumers use their goods and
services. International business also increases exposure to new ideas, new devices, new
products, new services, and new technologies.
(3)
International business can improve agricultural businesses that are now the world's food
products. By studying international business, it opens up insights into wider opportunities to
improve agribusiness products.
1.3
Benefits of Studying International Business for Agribusiness:
By studying International Business, one can understand the concept of Comparative
Advantage. Participation in international business allows countries to take advantage of their
comparative advantage. The concept of comparative advantage means that a nation has an
advantage over other countries in terms of access to affordable land, resources, labor, and
capital. In other words, a country will export products or services that utilize multiple factors
of production.
Companies with sufficient capital may seek out other countries that are abundant in land or
labor, or companies may seek to invest internationally when their home market becomes
saturated.
Participation in international business allows countries to take advantage of specialized
expertise and many factors of production to deliver goods and services to international
markets...This means international business has the benefit of increasing the variety of goods
and services available, to be launched to international markets so that countries can benefit
from foreign exchange for the country.
II. INTERNATIONAL BUSINESS AND AGRIBUSINESS GROWTH:
International business has grown dramatically in recent years due to strategic
imperatives and environmental changes. Developments in communication technology,
business confidence, freer borders (reduced barriers in many ways) and increased global
competition. Technologies such as email, conference calls and video conferencing are one of
the main reasons for the growth of international business.
2.1
Matters Affecting the Growth of International Business:
Some of the things that affect growth in international business are:
(1)
Domestic Market Saturation
In most countries producing similar products for many years will experience market
saturation. For example in Japan 95% of people own all kinds of electronic equipment so
there is no wider market to reach. In other words, there is no market growth. As a result, they
have to look for new markets overseas.
(2)
Seeking to increase sales and profits in international markets.
By trying to break into the world market, it can have a great opportunity to increase sales and
profits by selling their products in markets in other countries.
(3)
Generate sales of new products.
With the domestic market saturated, it triggers producers to create new products demanded by
the market and there is often a market condition that has a higher level of product demand
than before.
(4)
Availability of Low Cost Labor.
The comparison of labor costs in developed countries with developing countries is quite high
and significant so that producers begin to shift production in countries that have cheaper labor
costs. This means that producers can aim for lower production costs so that the continuity of
the company can be maintained and can be used to increase profits.
(5)
For competitive reasons
Overseas manufacturers are expanding their operations in other countries, in a move to
increase competition.
(6)
Increase in demand
Some countries with improving economies (including Indonesia) have an increased demand
for high-quality products due to their improving economies. This is an opportunity for
countries that are able to compete and enter the domestic market in other countries. This is an
opportunity for them to have new markets in other countries.
(7)
Diversification
To counter the cyclical pattern of business in different parts of the world, most companies are
expanding and diversifying their businesses, to gain profits and open up new markets.
(8)
Technology Development, especially Robotics
The rise of Robotics is playing a bigger role for companies looking to increase
productivity, yet remain globally competitive. Examples include countries like China, which
has used robots as a way to keep wages under control from rising. An analysis by the Bank of
New York Mellon advises. The International Federation of Robotics to sell more robots and
has sold 225,000 robot units in 2014, or 27 percent more than 2013 (Xavier, 2017). It also
said that the automobile industry remains the top user of robotics, with further growth
anticipated in education, healthcare and leisure.
(9)
Communication Technology is getting more sophisticated.
The expansion of the Virtual Workforce such as email, instant messaging, and video
conferencing makes it possible to interact across different time zones without sharing the
same workspace, like previous generations of workers. For example, about 20 to 30 million
people in the United States now work at least one day a week at home, says a PI Worldwide
report posted by the International Association for Human Resource Information Management
(Xavier, 2017). Companies, in turn, can increasingly vary schedules and priorities according
to their own production needs.
(10)
Personalized Marketing
The increasing diversity of the population requires companies to rethink previous assumptions
about the basis of service to customers. Now with the diversity of customers, it is necessary to
make products that can fulfill each customer's desires and how to reach them. Companies that
learn this can better capitalize on the spending habits of certain demographic groups, which
are otherwise very difficult to reach.
(11)
There is a New Supply Chain Management Model
The vulnerability of production lines by companies in the past has prompted many businesses
to rethink the traditional concept of supply chain management - which focuses on tight
inventory and limiting production. For example, Toyota used to produce its parts only in
Japan, and during the earthquake disaster in Japan, it lost most of its parts facilities, causing a
29.9 percent drop in global production (Xavier, 2017). Furthermore, it is said, Toyota
responded by spreading its production across more facilities, and re-engineering many of its
vehicle components to enable the use of more common parts.
2.2
How to Grow International Business:
(1)
Reducing Trade Barriers
. Most developing economies are now relaxing their trade barriers and opening their doors to
foreign multinationals and allowing their companies to set up their enterprises abroad. This
has stimulated cross-border trade between countries and opened up markets that were
previously unavailable to international companies.
(2)
Develop communication and Technology
Over the past few years there have been tremendous developments in communication and
technology, which have made it possible for people sitting in their homes in one part of the
world to know about product and service offerings in other parts of the world. This reduction
in transportation costs and increased efficiency has also led to people expanding their
businesses.
(3)
Consumer Pressure
The existence of many innovations in various matters, especially transportation and
communication, leads to the development of consumers who are more aware of how they
want something more efficient and effective. This then causes consumers to demand new and
better goods and services, thus creating a pressure by consumers. This pressure causes The
company should be more conscientious, incorporate other products or enter new business
zones, and so on.
(4)
Global Competition
With the development of increasingly sophisticated technology and communication,
more and more companies are operating internationally with new products quickly becoming
globally recognized. The impact of this condition is that many companies without exception
become global, including domestic companies. Domestic companies that can take advantage
of this condition can then develop as multi-national companies. For example, Jco, a doughnut
outlet, is thought by many to be a multi-national company from overseas, when in fact it is a
domestic company.
2.3
Improving International Business for Agribusiness:
As the number of people in the world increases, so does the need for food. In addition
to food, other products from agriculture that can be consumed by humans, such as rubber,
castor oil, essential oils and others.
Indonesia has been known as a producer or producer of agricultural commodities,
which have been exported, such as palm oil (CPO), coffee, chocolate, cloves, pepper and
others.
However, many products have not been developed, even though they have bright prospects as
export commodities.
With annual exports of $140 billion, Indonesia is currently ranked the 24th largest
export economy in the world (commodity.com, 2020). Said further, Indonesia enjoys a
positive trade balance of $8.07 billion after deducting annual imports of $132 billion.
Indonesia's current GDP is
$932 billion, which means their GDP per capita is $11,600 (but the World Bank's record is
USD 4,100). Indonesia's exports have declined at an annual rate of -3.08% over the past five
years, falling from annual exports of $224 billion to $140 billion. Imports have also reduced,
with annual imports falling from $173 billion to $132 billion (commodity.com, 2020).
The largest recorded agricultural commodity for export is palm oil, even though there
are still many agricultural commodities that have the potential for export. This means that
Indonesia's agricultural commodities can still be improved. Moreover, according to Indonesia
Investment (2020), since the mid-1980s the number of cultivated land has increased by almost
25 percent until the end of the 1990s. Subsequently, in 1998, another surge (due to the
opening up of large-scale plantations - particularly oil palm) saw this figure reach its current
level of 30 percent. Yet it is said that between the mid-1960s and mid-1980s the percentage of
Indonesia's land area used for agriculture remained constant at around 21 percent of the
country's total land area.
Hopefully, the land expansion will not disturb the environment, which is becoming a global
issue.
Indonesia investment (2020) also revealed that Indonesia's agricultural sector is expected
to continue to grow, albeit at a lower rate than the industrial and service sectors. This is
expected due to the utilization of agricultural technology factors that are already used by other
developed countries. It is hoped that the future government will be able to see opportunities in
international business on agricultural commodities, because with the condition of Indonesia's
agricultural sector with vast and abundant fertile land, Indonesia is a major global producer of
various tropical agricultural products.
The utilization of technology should be considered to boost the production of agricultural
products. This is due to the declining contribution of the agricultural sector. Although the
agricultural sector still contributes to gross domestic product (GDP), the amount has declined
sharply over the past five decades. Yet the agricultural sector still provides income for the
majority of Indonesian households today. Indonesia investment (2020) notes that in 2012 the
sector employed around 49 million Indonesians, representing 41 percent of the country's total
labor force. But while in absolute terms the agricultural labor force continues to grow, its
relative share of the total Indonesian labor force has declined significantly from 55 percent in
the 1980s to 45 percent in the 1990s and currently to 41 percent (Indonesia Investment, 2020).
It was only during the Asian Financial Crisis in the late 1990s, he explained, that this share
increased significantly as unemployment in the industrial and service sectors was absorbed by
the (mostly informal) agricultural sector.
It is time for Indonesia's agricultural sector to rise up and take a more concrete role in
international business. Although the condition of Indonesia's agricultural sector still consists
of several large plantations (both state-owned and private) and smallholder plantations. Large
plantations tend to focus on commodities that are important export products (palm oil and
rubber), while smallholder plantations tend to focus on smallholders. People focus on rice,
soybeans, corn, fruits and vegetables. The government has not yet given full attention to
potential agricultural products such as chocolate, coffee, spices etc. With the advancement in
international business for agricultural products, it is expected that Indonesian agribusiness
will be able to bring significant changes as well. In the future, bright prospects await in
international business in agribusiness, apart from palm oil, namely: rubber, chocolate, coffee,
tea, cassava, rice and spices.
The government has placed self-sufficiency in certain agricultural products at the top
of its agenda, but the application of advanced agricultural technology has not been fully
implemented. As a result, with the highest per capita rice consumption in the world (around
139 kilos per capita per year - Indonesia Investment,2020), Indonesia still relies on rice
imports from Vietnam and Thailand to secure domestic rice supply. Other food crops targeted
by the self-sufficiency program are soybeans, corn and sugar, but so far none have been
achieved. The program that was highlighted by the government in2014-2015 was touted as
the years of achieving food self-sufficiency, but in reality has results that are still doubtful
whether the program can really make significant progress (Indonesia Investment, 2020). Since
2007 the government has also started a revitalization program for farmers as smallholders to
increase production, but so far it has brought dubious results due to the intake of technology
that has not been fully utilized. Nevertheless, it is not too late to start the effort again more
seriously, capitalizing on the still very open international business opportunities for
agricultural products.
III. MULTI-NATIONAL COMPANIES:
3.1
Meaning of Multi National Company
Multi National Company or often abbreviated as PMN or MNE (MultiNational
Enterprise) is a term for large companies from abroad that open branches in other countries to
expand their business as an effort to make a worldwide approach to the production market and
/ or operations in several countries. They are said to be carrying out the internationalization
process of multi-national enterprises. Multinational enterprises are not only companies that
produce food, but from any kind of business activity or market, from consumer goods to
automobile manufacturing. Examples of MNEs are KFC, McDonald's (MCD), Starbuck
Cofee Company (SBUX), Microsoft (MSFT), Ford Motor Company, General Motors (GMC),
Samsung, LG and Sony, Exxon Mobil, etc.
A multinational corporation (MNC) or a company originating from another country,
generally worldwide; is a corporate organization that owns or controls the production of
goods or services in at least one country other than its home country (Anonymous1 , 2020).
Revealed by Black's Law
(Anonymous 2, 2020) that a company or group should be considered a multinational company
if it derives 25% or more of its revenue from overseas operations. It goes on to say that a
company that owns and controls 51% of a foreign subsidiary also controls the production of
goods or services in at least one country other than its home country and would therefore also
meet the criteria, even if that foreign affiliate only generates a few percent of its revenues A
multinational company may also be referred to as a multinational enterprise (MNE),
transnational enterprise (TNE), transnational corporation (TNC), international corporation, or
stateless corporation. (Anonymous 2, 2020). There is a subtle but real difference between the
three names mentioned above, as well as multinational corporations and worldwide
corporations.
Most of the largest and most influential companies in modern times are publicly traded
multinationals, including Forbes Global 2000 companies (Anonymous2 , 2020). That said,
multinational corporations have been the target of criticism for not having ethical standards. It
was also mentioned that multinational corporations became associated with multinational tax
havens and the impact brought about fundamental tax erosion and profit shifting tax
avoidance activities.
According to Anonymous2 (2020), multinational corporations (MNCs) are usually
large companies incorporated in one country that produce or sell goods or services in multiple
countries. The two main characteristics of multinational companies are (Anonymous2, 2020):
(1)
large size. MNCs are generally large companies
(2)
has worldwide activities centrally controlled by a parent company.
(3)
Importing and exporting goods and services
(4)
Making significant investments in foreign countries
(5)
Buying and selling licenses in overseas markets
(6)
Engage in contract manufacturing - allow local manufacturers to produce their products
(License)
(7)
Opening manufacturing facilities or assembly operations overseas (Recedes Benz, Honda,
Suzuki, Yamaha, etc).
3.2.
Benefits gained by MNCs (Multi National Companies):
MNCs can benefit from a global presence in other countries in various ways, which
Anonymous2 (2020) outlines as follows:
(1)
Multinational companies can benefit from economies of scale by spreading their R&D
expenditure
(2)
Multinational companies can benefit from efficient advertising costs on their global sales,
(3)
Multinationals can pool the global purchasing power of suppliers
(4)
Multinational companies can utilize their technological and managerial know-how
globally at minimal additional cost.
(5)
Multinationals can use their global presence to take advantage of low-cost labor services
available in certain developing countries, and gain access to specialized R&D capabilities
located in foreign countries.
(6)
Having a legal domicile: Multinational companies may choose from a variety of
jurisdictions for various subsidiaries, but the ultimate parent company can choose a single
legal domicile; The Economist suggests that the Netherlands has become a popular
choice, as its corporate laws have fewer requirements for meetings, compensation, and
audit committees, and the United Kingdom has an advantage due to its laws on dividend
withholding and double tax treaty with the United States (Anonymous2 , 2020).
Companies can legally engage in tax avoidance through their choice of jurisdiction, but
must be careful to avoid illegal tax evasion.
(7)
May be stateless or transnational: Companies that are broadly active around the world
without concentration in any one area have been called stateless or "transnational"
(although "transnational company" is also used synonymously with "multinational
company"). As of 1992, however, a company must be legally domiciled in a particular
country and involved in other countries through foreign direct investment and the
establishment of foreign subsidiaries.
(8)
Have geographic diversification that can be measured across multiple domains, including
ownership and control, labor, sales, and regulation and taxation.
(9)
Keep up with international taxation and extraterritorial jurisdictions: Multinational
companies may be subject to the laws and regulations of their domicile and additional
jurisdictions where they engage in business. In some cases, however, jurisdiction can help
avoid burdensome laws, but regulatory laws often target "companies" with legal language
around "control" (Anonymous2, 2020).
In 1992, the United States and most OECD countries (The Organization for Economic
for Co-operation and Development) had the legal authority to tax a domiciled parent company
on its worldwide income, including subsidiaries; in 2019, the US implemented its corporate
taxation "extraterritorially", which has motivated tax inversions to change states of origin. As
of 2019, most OECD countries, with the exception of the US, have moved to a territorial tax
where only income within the borders is taxed; however, these countries typically scrutinize
foreign income with controlled foreign company rules. (In practice, even under an
extraterritorial system, taxes may be deferred until remittance, with the possibility of a
repatriation tax, and subject to foreign tax credits. Countries generally cannot tax the
worldwide income of foreign subsidiaries, and taxation is complicated by transfer pricing
arrangements with parent companies. The OECD is an international organization that works
to build better policies for better lives. OECD members are 36 countries namely: Australia,
Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania,
Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak
Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom, USA. The
additional tax revenues collected to date are carried out by administrations participating in the
Tax Initiative Without Border (TIFWB).
(10)
In the event of a dispute, it is handled by international arbitration
(11)
The actions of multinational corporations are strongly supported by economic liberalism and
the free market system in a globalized international society. According to the economic
realist view, individuals act in a rational manner to maximize their self-interest and
therefore, when individuals act rationally, markets are created and they function best in a
free market system where there is little government interference. As a result, international
wealth is maximized by the free exchange of goods and services.
(12)
For many economic liberals, multinational corporations are the vanguard of the liberal order.
They are the embodiment par excellence of the liberal ideal of an interdependent world
economy. They have taken national economic integration beyond trade and money to the
internationalization of production. For the first time in history, production, marketing, and
investment are organized on a global scale rather than in terms of isolated national
economies. Thus, the move to open an MNC in another country is an act of business
expansion that can be shared with other countries rather than just being in one's own
country.
(13)
International business is also a specialist area of academic research. Economic theories of
multinational corporations include internationalization theory and the eclectic paradigm,
also known as the OLI framework.
(14)
Another theoretical dimension of the role of multinational corporations concerns the
relationship between the globalization of economic engagement and national and local
response cultures. This has a history of self-conscious cultural management going back at
least to the 60s. For example: Ernest Dichter, an architect, who conducted Exxon's
international campaign, writing in the Harvard Business Review in 1963, was fully aware
that the way to overcome cultural resistance depended on "understanding" the countries in
which the company operated.
3.3.
Benefits to the Country
(1)
If a country is entered by an MNC, it means that there is direct investment in the
country, which will create jobs and open up a larger market in world trade (if the
product is exported).
(2)
There is the possibility of international investment agreements that facilitate direct
investment between two countries, such as the North American Free Trade Agreement,
which all started with US investment in Mexico, followed by the North American Free
Trade Agreement, an agreement between the US, Canada and Mexico.
(3)
As more foreign investment comes into a country, its status as the most favored country
increases.
3.3.
MNC Risk:
(1)
Generally, Multinational corporations have the problem of moral and legal constraints
on their behavior, given that they are effectively "stateless" actors (Anonymous2 ,
2020). This, it is argued, is one of several global socio-economic problems that emerged
in the late 20th century.
(2)
In addition, companies may be prohibited from various business transactions by
international sanctions or domestic laws. For example, domestic Chinese companies or
citizens have limitations to make foreign investments outside China, to reduce capital
outflows.
(3)
States can impose extraterritorial sanctions on foreign companies even for doing
business with other foreign companies, which happened in 2019. At that time, the US was
in trouble with Iran, and the US issued sanctions against Iran. The sanctions affected other
companies working with Iran, so European companies faced the possibility of losing access to
the US market if they continued to trade with Iran.
(4)
For small companies, registering a foreign subsidiary can be expensive and complex,
involving fees, signatures, and forms. As a solution, there are professional entrepreneur
organizations that are sometimes advertised as a cheaper and simpler alternative, but not
all countries have jurisdiction (official power to make legal decisions and judgments)
with laws that accept this kind of arrangement.
3.4.
MNC Analysis Concept:
The best concept to analyze the limits of societal governance over modern
corporations is the concept of the "stateless corporation". The concept was coined around the
beginning of 1991 by Business Week and the concept was theoretically clarified in 1993,
which revealed that the empirical strategy to define the stateless corporation is with analytical
tools at the intersection of demographic analysis and transportation research. This
intersection is known as logistics management, and illustrates the rapidly increasing
importance of global resource mobility. During the observation of Anonymous 2 (2020), over
25 MNCs entered the stateless corporation era, suggesting that MNCs produce and customize
products for individual countries.
3.5.
MNC History:
One of the first multinational business organizations, mentioned by Anonymous 2 (2020) was
the East India Company. After the East India Company, came the Dutch East Indies
Company, founded March 20, 1603, which would become the largest company in the world
for almost 200 years. Presumably the East Indies Company was the VOC, which once
colonized Indonesia.
3.6.
Characteristics of MNCs:
The main characteristics of multinational companies are (Anonymous2, 2020):
(1)
In general, there is national power of large enterprises as the main body, in terms of foreign
direct investment or acquiring local enterprises, setting up branches or having branches in
many countries;
(2)
It usually has a complete decision-making system and the highest decision-making center,
each branch or branch has its own decision-making body, according to its different features
and operations to make decisions, but its decisions must be subordinated to the highest
decision - made by the head office;
(3)
MNCs seek worldwide market and rational production layout, professional fixed-point
production, fixed-point sales products, to achieve maximum profit;
(4)
Due to strong economic and technical strength, with rapid information transmission, as well
as funding for rapid cross-border transfers, multinational companies have stronger
competitiveness in the world;
(5)
Many large multinational companies have varying degrees of monopoly in some areas, due to
economic and technical strength or production advantages.
3.7.
MNC Basic Theory:
3.7.1.
Hymer Theory
One of the first scholars involved in developing the theory of multinational firms was
Canadian economist Stephen Hymer (Buckley, 2010). Throughout his academic life, he
developed theories that sought to explain foreign direct investment (FDI) and why firms
become multinational.
In international business, a company internationalizes in the economic sphere, which is
the process of increasing the company's involvement in international markets.
Internationalization is an important strategy not only for companies seeking horizontal
integration globally but also for countries addressing the sustainability of their development in
various manufacturing and service sectors especially in higher education which is a very
important context that requires internationalization to bridge the gap between different
cultures and countries. The explanation of internationalization theory is elaborated on why
there is international activity.
There are three phases of internationalization according to Hymer's (1960) work:
(1)
The first phase of Hymer's work was International Operations of National
Firms outlined in his 1960 dissertation (Hymer, 1960). In that dissertation, Hymer departed
the notion of international business from neoclassical theory and opened up a new area of
international production. At first, Hymer began analyzing neoclassical theory and financial
investment, outlining that the main reason for capital movements is interest rate differentials.
After this analysis, Hymer analyzed the characteristics of foreign investment by large
companies for direct production and business purposes, called Foreign Direct Investment. By
analyzing the two types of investment, Hymer distinguishes financial investment from direct
investment. The main distinguishing feature is control. Portfolio investment is a more passive
approach, and the main goal is financial gain, whereas in foreign direct investment, the
company has control over overseas operations. Thus, traditional investment theory based on
differential interest rates does not explain the motivation for FDI. According to Hymer, there
are two main determinants of FDI, once it is recognized that the market structure is imperfect
(and this is a key element in FDI):
(a)
The first is a company-specific advantage developed in the home country of a particular
company and, favorably, used in a foreign country.
(b)
Second is the removal of control where Hymer writes: "When firms are interconnected, they
compete for sales in the same market or one firm may sell to another," and because of this "it
may be advantageous to substitute centralized decision-making for decentralized decision-
making".
(2)
Hymer's second phase was his neoclassical article in 1968 that encompassed
internationalization theory and explained the growth direction of firms' international
expansion.
(3)
In the third phase, Hymer took a more Marxist approach, explaining that
MNCs as agents of the international capitalist system cause conflicts and contradictions,
causing, among other things, inequality and poverty in the world. Hymer is the "father of
MNEs theory", and explains the motivations for companies doing direct business abroad.
3.7.2.
John Dunning's theory:
Among the modern economic theories of multinational corporations and foreign direct
investment are John Dunning's internalization theory and OLI paradigm (OLI stands for
Ownership, Location, and Internationalization). Dunning is widely known for his research in
economics on international direct investment and multinational corporations. His OLI
paradigm, in particular, remains as a major theoretical contribution to the study of
international business topics. Hymer and Dunning are considered the founders of international
business as a specialist field of study.
3.8.
Factors MNCs Should Consider
Multinational companies range from any kind of business activity or market, from
consumer goods to machine manufacturing; a company can be an international business.
Therefore, in order to conduct business abroad, a company must know all the factors that can
affect any business activity, including:
(1)
differences in legal systems,
(2)
political system,
(3)
economic policy,
(4)
Language,
(5)
accounting standards,
(6)
labor standards,
(7)
standard of living,
(8)
environmental standards,
(9)
local culture,
(10)
company culture,
(11)
foreign exchange market,
(12)
rates,
(13)
import and export regulations,
(14)
trade agreements,
(15)
climate, and
(16)
Education.
(17)
Physical and social: Physical and social factors arise from business competition and the
social environment. Physical and social factors include the conduct of international
operations which depends on the company's objectives and the way they are conducted
carry it out. A company's operational factors influence and are influenced by physical and
social factors as well as the competitive environment.
Each of these factors may be addressed differently in the way a company operates from one
country to another.
For example:
IV. PRODUCTS IN INTERNATIONAL BUSINESS:
As already stated, international business refers to the trade of goods, services,
technology, capital and/or across national borders and global or transnational life (life
between countries). The goods in question are usually tangible (but not always), such as cars,
bags, fruit, and others. Services are activities provided by competent labor, which include
doctors, professional workers, nurses, cooks, barbers, waiters, agricultural experts or online
servers, books, digital videogames or digital movies and others. Overall, the goods and
services produced, then distributed, and consumed by consumers, underpin all economic and
trade activities, including for the international economy and trade. According to economic
theory, consumption of goods and services is assumed to provide utility (satisfaction) to the
consumer or end user, although business also means consuming goods and services in order to
produce other goods and services. This can then be studied in distribution marketing, which is
principally how goods and services produced by producers anywhere get to consumers
somewhere far from the place of production.
In international business, transactions occur across national borders, for goods and
services traded between two or more countries. In other words, trade is conducted across
borders. Borders are the geographical boundaries of political entities or legal jurisdictions,
such as governments, sovereign states, federated states, and other subnational entities. Borders
are established through agreements between the political or social entities that control the
territory; the creation of these agreements is referred to as boundary delimitation. Some
borders - such as internal administrative borders of a country, or borders between countries
within a region, are sometimes not created as borders. For example, an area in continental
Europe, the Schengen area, is open and completely unguarded. While other borders are
partially or fully controlled, and can be crossed legally only after going through designated
border checkpoints and border zones made to be controllable. Geography is a field of science
devoted to the study of land, features, people, and phenomena of the earth and planet.
Geography is an all-encompassing discipline that seeks an understanding of the earth and its
human and natural complexities - not only where objects are located, but also how they are
populated and related matters in the context of geography.
Products in international business include:
1. Economic resources:
Transactions of economic resources including capital, skills, and labor for the
purposes of producing international physical goods and services such as :
a. Finance,
b. banking,
c. insurance, and
d. Construction.
e. Etc.
Because many businesses are involved in resource transactions, this condition is referred to as
international business as well as globalization.
However, the unbeatable economic resource is the natural resource that can produce
economically and is needed by most people, namely food. Food is needed by almost all
humans in all countries. Even in many countries, food availability is very limited, leading to
hunger and poverty.
Products that are commonly traded in international trade:
1.
Agricultural products
Agricultural products are generally food products that are needed by anyone in any
country because food is the main source of life. In supporting Indonesia's economic progress,
there are a number of food-oriented products that can be improved in international business,
including:
2.
CPO (Crude Palm Oil)
CPO is palm oil that is 58% produced by Indonesia and is Indonesia's flagship product
and the only Indonesian agricultural product whose shares have penetrated the Wall Street
Journal market. This shows the capacity of CPO as an internationally oriented product and
provides benefits for those who play in the stock market. Palm oil products have been
successfully processed by Indonesia from raw materials to finished products (palm oil), which
shows that Indonesia can get added value from the beginning from raw materials to finished
products and other products are expected to follow suit. CPO finished materials can be
utilized into various food products, medicines, cosmetics, energy materials and others.
3.
Cocoa
Cocoa or chocolate fruit is Indonesia's flagship product because Indonesia is the world's
third largest cocoa producer. The first largest producer is Ivory Coast (Cote d'voire) and the
second is Ghana. Both countries are located in Africa, which has a tropical climate. Indonesia
has the advantage of higher rainfall and better infrastructure. With a more fertile soil structure
compared to Africa, Indonesia's cocoa products should be further encouraged to increase so
that cocoa production can increase and improve Indonesia's ranking in cocoa achievement.
In contrast to palm oil, Indonesian cocoa is still exported to the world's largest processing
countries such as the Netherlands, Germany, Switzerland, Belgium etc. If Indonesian cocoa
can be processed like palm oil, Indonesia can undoubtedly take part in the value-added of
cocoa and have a greater role in the world cocoa trade.
4.
Coconut
Coconut (cocos nucifera) is Indonesia's main product as the world's largest producer.
The existence of many islands in Indonesia makes Indonesia the largest source of coconut and
has bright prospects in the world coconut trade. Like other products besides palm oil, coconut
products have not been fully processed into finished products, so some are still exported in the
form of raw materials. In the future, if coconut can be fully processed into finished products,
which means that Indonesia can take added value, then Indonesia's coconut economy will
become brighter. The benefits of consuming fresh coconut water, which can be consumed
immediately, have not been fully exploited by Indonesia. Likewise, the product of coconut
into coconut milk that is ready for consumption, the coir is used as a variety of sustainable
industrial materials (mattress / bed fillings, mats, dampening materials, heat insulation
materials, etc.) making coconut a product that has bright prospects in international trade.
5.
Coffee
Indonesian coffee ranked 4th largest in the world
6.
Seafood
The most common seafood offered today is sustainable seafood, meaning that it is caught with
simple boats, so as not to cause the extinction of natural resources, this kind of fishing method
is called sustainable fishing method. Examples of what is not sustainable are using technology
that is so advanced that it causes fish in the ocean to become extinct, using fish poisons, etc.
With a fully integrated vertical network and state-of-the-art facilities, the company is a global
seafood leader. With over 35 years as a trusted name, the company excels in customer
support, education and safe sourcing tools. Seatrade remains one of the top suppliers of
lobster and scallops in North America (Seatrade, 2020). A sustainable business is deeply
committed to sustainable practices, responsible business, and unparalleled quality (Seatrade,
2020). Seatrade guarantees the value of seafood around the world to all partners, through
ongoing education on wise use of the ocean and by going beyond industry standards to be
socially and environmentally responsible. The company plans 5 Green principles that focus
on five areas of change: (1) energy, (2) waste, (3) community, (4) education, and (5)
sustainability. Seatrade's Green Principles offer a unique educational opportunity that
connects the production environment with the natural environment and connects buyers and
communities.
The company above is Seatrade based in Boston (USA), while there is another
company with a similar name based in Antwerp, Belgium. Seatrade is an international
transportation and shipping company based in Antwerp that specializes in the transportation
of perishable goods and other sensitive product loads. Seatrade is the world's largest
refrigerated specialty shipping company operating a fleet of nearly 100 vessels.
100 specialized refrigerated ships (Seatrade.com, 2020) that started in 1951 (Seatrade.com,
2020).
