Question

Nestlé has found changes in China a challenge to deal with. Explain why change management is important for international business, and what changes in the host country’s environment can affect the company’s overseas operations.

Answer 1

In a global business environment that is experiencing a constant and rapid transformation in almost every conceivable operational aspect and function, it is absolutely imperative for every international and multinational business organization to implement an effective and comprehensive change management process. In general, change management is a procedure that facilitates the smooth and effective organizational transition mainly from a commercial and operational point of view in accordance with the ever-changing and dynamic business and commercial environment and conditions around the world. Therefore, change management is a prescriptive measure or business strategy to implement positive changes in the internal organizational culture and entire operational functioning and structure in conjunction with the changing commercial needs, demands, requirements, and environment in the international business scenario. For example, the rapid and progressive technological transformation of the entire business operational process and environment across the world essentially requires all the international business organizations and MNCs to effectively adapt to such comprehensive technological changes in respective operational areas and structure which can subsequently contribute to the commercial success and growth of the companies or organizations. The change management process can immensely assist individual organizations or companies in easing and smoothening of this transitional mechanism or endeavor. This also involves ensuring that company employees, staff, and the concerned managerial team is open to such widespread change and operational transformation and a successful staff and employee training to better adapt with this process can significantly improve the productive work efficiency and promote an innovative and dynamic work environment in individual organizations or companies in conjunction with the dynamic global business environment.

In this context, several contingencies in the host country's economic, political, and social environment can evidently influence the overseas operational activities and business decisions of any business organization or company. The changes in the economic environment primarily play a decisive role in determining or influencing the overseas operational functioning of any organization or company. In this regard, any modification in the business or corporate tax policies or investment-related policies implemented by the government in the host country would affect the overall profitability and solvency of the companies or organizations which can further affect their operational functioning and decisions in the host country. Any tax relief or credit and subsidy provided by the host country government can encourage international companies or organizations to enhance operational functioning in the host country. Furthermore, relevant changes in the factor or input markets in the host country such as fluctuations in the overall supply of factor inputs, factor or input prices or costs, government regulations in the factor or input markets, market mobility of the factor inputs etc. can practically impact the total or overall operational costs or expenses of the organizations or companies in the host country thereby influencing their business and operational decisions. Additionally, changes in consumer demand for the relevant or concerned goods and services in the host country can also potentially affect the revenue generation and profitability of the international organizations or companies in the host countries impelling significant modifications and adjustments in their operational activities and functioning in the host country.

Aside from the important and main economic factors, certain political and social factors and components in the host countries can also dictate the operational activities and decisions of international businesses and enterprises in the host country. The prevalent and potential political environment and structure of any country would significantly determine the level of international investment and capital inflow in that particular country. International business organizations or companies generally prefer a democratic political environment characterized by economic and commercial freedom and minimum and/or favorable government market interventions and regulations which would be operationally suitable and economically beneficial. In this context, shifts in political governance in the host country after any political election can practically influence international business investment and capital inflow as the political ideologies of the incumbent political party in the host country can either favorably or inimically coincide with the business and commercial objectives of the organizations or companies. Political instability in any country usually exemplified by weak and inflexible political governance, high level of political distrust among citizens of the host country and instability, increasing public discontent regarding the political incumbency, etc. can negatively impact the overall international business and capital investment into the host country. Moreover, some of the social factors or components such as the demographic and cultural characteristics or features of the host country can widely affect the consumption preferences and habits of the local public or consumers pertaining to various goods and services thereby determining the existing and potential commercial and economic success of the international corporations and businesses. Hence, social and cultural changes in the host country can significantly impel adjustments or modifications in consumer tastes and preferences and to ensure sustainable economic and commercial success, any international business organization has to be mindful of these transformational aspects and adjust or adapt their operational activities accordingly such as McDonald's, Pizza Hut, or Samsung.