International Entrepreneurship and Management Journal

ISSN: 1757-1938 SJR : 0.847 SNIP : 1.89948

The Potential Organizational and Managerial Problems for the Subsidiary Operating in the New International Environment

QS Economics

Amangeldy Alipbaev  (International al-Farabi Kazakh National UniversityAssociate Professor of the Faculty of Relations)

Bakyt. Byuzheyeva (International al-Farabi Kazakh National UniversityAssociate Professor of the Faculty of Relations) 

Anargul. Rakhmetzhan (International al-Farabi Kazakh National UniversitySenior Lecturer of the Faculty of Relations)

Globalization refers to intense economic, political and personal interconnectedness between countries, companies and consumers. Simultaneously, the process of internationalization has become easier than before (Cavusgil et al. 2014). Therefore, Once talking IKEA`s product form host country to third country, main company has to cope with organizational and managerial problem. IEKA  is going to enter new market in the Sri Lanka, Albaum, Strandskov, and Duerr (2002) outline that it should be challenging circumstance in order to different marketing mix strategies, cultural environment, government intervention in international business, international monetary and financial environment and also human resource management in host country environment. However, on this point of view, Murry (1986) argues headquarter needs to analyse global maker and market research in terms of not only customers behaviour but also importantly managerial problems. 

  • Trade of product is generally based on international exchange activities: exporting (New venture). Our strategy is producing and sourcing IKEA`s products in host country UK, and bring them into third country Sri Lanka, which is absolutely low control strategy. Because in terms of figure XXX exporting provides the least control over Sri Lanka operation. Therefore, controlling the foreign operations, resources commitment, risk and flexibility are minimized (Cavusgil et al. 2014). 

Figure XX: a classification of foreign market entry strategies based on level of control resource commitment flexibility and risk

(Source: Cavusgil et al. 2014)

  • Scholars have well documented that culture also influences the various potential organizational and managerial problem in the international market. Therefore, in this case cultural problem demonstrate through different value, ideas, attitude, behaviour and symbols between Sri Lanka and home country. Ultimately, IKEA could develop products and customers service, preparing advertising, promotional materials and communicating  in terms of Sri Lank cultural research, which should add value to structuring international business and interacting potential Sri Lanka`s consumer (Baker, 2012; Griffin and Pustay, 2013; Griffin and Pustay, 2014). Despite, a quick scan through Hofstede`s research on national culture: Figure XX illustrates that a lower score of individualism dimension means that Sri Lanka is collectivism country. At the same time, a higher score of 80 in this dimension relatively illuminate that hierarchical society. As a matter of fact that, in this international business operation of IKEA and also HRM aspect, in terms of Figure XXX, company in third country nation (TCNs)seems to have different strategy and management process compare to host country nations (HCNs)and parent country nations (PCNs). The design of furniture is taken example to analysis one of cultural issues in terms of Hofstede`s dimension, of course in UK, company try to design a variety of style to target different category of people, however, basically, most of furniture designs as private and fashion. But when we target country like Sri Lanka in some point me may try to design bigger design to target collectivism country. Moreover, importantly, from HRM point of view, managers have to understand differences between domestic and international HRM. 

Figure: XXXX: a comparison between Sri Lanka and United Kingdom Hofstede`s  Research

Source: (John et al. 2014)

  • Political, legal system and Government intervention in international business: Foreign market differs in terms of political and legal system (Hollensen, 2015). Therefore, managers must be able to navigate difficult regulation and avoid negative circumstance (Barney and Hesterly, 2010). However, Hill (2014) argues that political risk expose potential and effects in company operation and profitability (Chartered Management Institute, 2014). Moreover, government intervention, political legislation can be harmful business interest too. So ultimately, the problem is how prevent is country risk in this case?

Political system: Sri Lanka is multi-party system; of course both the government and parliament vest power (Rugman and Collinson 2012). 

Figure XXX: Source of company risk 

Source: (John, 2014)


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