Paper Example. Role of World Trade Organizations in the Global Trade

In the present world, products are built out of a supply chain that crosses several national borders resulting in international trade (Escaith, 2011). Therefore, the World Trade Organization (WTO) must play a critical role in international trade by providing a forum for trade negotiations among its member countries (Escaith, 2011). Items like mobile phones and other electronics depend on a network of factors in different countries that involve many steps in production and delivery, which may bring about disputes among the countries involved in regard to trademarks and benefits (Escaith, 2011). As a result, WTO has the role of settling such disputes amongst the member countries by establishing rules and regulations.

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Besides, with many value-added steps, there may be imbalances, like mobile is said to be made in China, although it has involved many countries. Therefore, WTO has the role of facilitating implementation, administration as well as smooth operations of trade agreements among such countries to eliminate those imbalances and to bring cohesiveness.

Challenges Faced by Giant Companies Like NESTLE While Expanding in Other Countries

Expanding a company to other countries is usually not an easy task since there are challenges and variables that should be considered. Firstly, there is a challenge brought about by local competition. This might be heavily disadvantageous, and the expanding company must be very aware of what the competitors are doing. For example, Nestle company faced a challenge from the Page brothers’ company, which was a local competitor in British Empire as well as in other countries like the US where Nestle was expanding its sales (Patreon, 2017). Secondly, companies face the challenge of low supply. There are times when the demand for a new product in a new country goes so high such that there are huge supply shortages.

Nestle faced the challenge of supplying low Nescafe in Brazil since the ongoing World war had resulted in high demand for the product, and the company could not much they needed, which resulted in shortages (Patreon, 2017). Additionally, huge companies also experience compliance issues in various countries. These challenges include marketing as well as trading standards and regulations that the company should follow in the given country. When the company fails to follow, there may be conflicts with the regulatory bodies or the public. For example, nestle company faced a great controversy in the US when the activists accused Nestle on the use of predatory marketing strategies in promoting their breastfeeding substitutes. This resulted in boycotts as Nestle tried to comply with the World Health Organization regulations. Additionally, political uncertainty is another critical challenge that companies face. Ill-defined, as well as unstable policies and corrupt practices, may hugely be problematic to a company. For example, World War one resulted in the Great Depression which affected many international companies like Nestle.

Factors that Influence an Organization’s Choice of Entry Mode

There are external, internal, transaction-specific, and desired mode characteristics factors that influence an organization’s choice of entry mode into a foreign market (Wayde, 2018). External factors include sociocultural distance, Demand and uncertainty market size, trade barriers, the intensity of competition, and the number of relevant intermediaries (Wayde, 2018). Large market justifies modes of entry with long-term commitment as wholly-owned subsidiaries. For example, French businesses located just outside of Paris will consider the availability of restaurants and cafes within the foreign market, UK. Trade or legal barriers will influence the choices since the imposition of tariffs and quotas on foreign imports, together with tough regulation, leads to an equity entry mode like a joint venture. Internal factors are company size, international experience, product complexity, and product differentiation advantage. The other factor is transaction-specific, comprising the tacit nature of know-how and opportunistic behavior. Desired mode characteristics are the factors that involve risk aversion, control, as well as flexibility. Some of these factors lead to a move towards internalization with hierarchical modes, while others will lead to externalization using export or intermediate modes.

References

Escaith, H. (2011, September 26). Made in the World [Video]. YouTube.

https://www.youtube.com/watch?feature=player_embedded&v=KMkJu8S8ztE#at=99

Patreon. (2017, May 25). Nestlé: 150 Years of Food Industry Dominance [Video]. YouTube. https://www.youtube.com/watch?v=MYGZZKTA2qI

Wayde, J. (2018. October 17). Entry mode decision - Internationalization - Global Marketing [Video]. YouTube. https://www.youtube.com/watch?v=D8-PkFgw2Yk

Fernando, M. (2018, October 25). City of God [Video]. YouTube. https://www.youtube.com/watch?v=IA-sLspA_Jg

Lerner, A. (2016). The Killing Consensus: Police, Organized Crime, and the Regulation of Life and Death in Urban Brazil.

Vox. (2016, August 1). Inside Rio’s favelas, the city’s neglected neighborhoods. https://www.youtube.com/watch?v=c3BRTlHFpBU&feature=youtu.be