Purpose of Global Expansion
First, the company will have new revenue potential as it obtains access to a broader customer base. Given that the company discussed produces cellphone cases, the demand can be relatively high because most people have cell phones today. However, the competition may also increase if there are some acknowledged case producers in the Argentine market. The second key benefit is the diversification of markets, which means increasing the number of revenue sources. This advantage is crucial, especially when business encounters some difficulties in the home country. Finally, it is the opportunity to hire employees from a new country. They can have specific knowledge and skills that may be difficult to find in their home country.
Business Impacts of Global Business
Before entering a new market, any enterprise should comprehensively assess probable effects on its operations. The company will need to conduct thorough market research before developing a strategy because markets of other countries may work differently. The corporate strategy will be more potent if it is adequately informed regarding the market environment, possible competitors, supply chains, and so forth. The changes also concern marketing strategy, requiring learning the cultural specifics of potential customers. Supply-chain management will need to find new, reliable partners who can provide materials at less cost.
Societal Impacts of Global Business
Global expansion may lead to adverse effects in a particular country, though it depends on the industry. For instance, Dorn and Ruiz Peyré (2020) describe that lithium mining supplied two thousand jobs in the Argentine province of Jujuy. Meanwhile, it also raised social tensions between local communities and mining enterprises in terms of the environment and water.
Cultural Considerations for Global Business
Culture is a multi-component phenomenon that determines how people live. Without a comprehensive knowledge of a different culture, doing business is impossible, as it is doomed to failure in a foreign country. It is necessary to pay attention to language regarding workplace etiquette and customers. Religion and traditions also play a critical role, but it would be more relevant to consider what is currently popular in a new country, namely singers and bands, football stars, memes, jokes, and so on. Finally, one must consider history to avoid politically and socially sensitive matters, such as colonization, discrimination, LGBTQ rights, and others.
Market Profile
Cultural Profile
There is a great focus on family, community, and tradition in Argentine culture, which may be traced back to the country’s European roots. The Argentine way of communicating is more formal and indirect than the more casual way of talking to people in many other countries. Argentina also has its own unique power gap, individuality, and masculinity. Argentina has its own unique business culture, with a focus on personal connections and getting to know one’s business colleagues. Argentina is also known for its love of sports, its enthusiasm for cuisine and wine, and its strict adherence to formality and punctuality.
The majority of the U.S. population is Protestant, and Catholicism is a dominant in Argentina. The difference may impact the values and attitudes of Argentine customers. Contrary to the U.S., collectivism is higher in Argentina, emphasizing the importance of belonging to a community or family. The UAI index is higher in Argentina, which suggests that people in this country need clear rules to handle their practices (Hofstede Insights, n.d.). These implications are crucial for human resource management and work arrangement for local employees.
Political and Economic Profile
Argentina has a democratic government that is currently led by President Alberto Fernández. The country’s political system is relatively stable, but the economic environment is facing challenges due to high inflation, currency devaluation, and a high level of public debt. The government has implemented several policies to address these issues, including currency controls and price controls. Argentina has a mixed economy with both private and public ownership. The country has a high level of public debt, and a high level of inflation, and a high level of unemployment.
There is a difference in trade affairs, though the U.S. and Argentina have international trade agreements with many countries. The U.S. is more connected to the trading world because it is a member of the World Trade Organization and has many free trade agreements. Argentina is more localized due to its membership in the Southern Common Market. In addition, the GDP per capita in Argentina is lower compared to the U.S., so it may affect the purchasing power of potential buyers.
Legal and Regulatory Profile
Argentina has a legal and regulatory environment that is generally similar to that of other South American countries. However, there are some specific requirements and regulations that businesses operating in Argentina should be aware of. Businesses operating in Argentina should also be aware of the country’s labor laws, which are generally more favorable to employees than those in many other countries (Friel, 2021). Additionally, businesses should be aware of Argentina’s tax laws and regulations, which can be complex.
The U.S. has a more developed framework for trade and investments, which simplifies the import-export processes. On the contrary, Argentina requires Non-Automatic Import Licenses for various product categories (International Trade Administration, 2022). Moreover, import license applications are now reviewed for a longer time. Finally, such delays can significantly influence business operations and planning.
Market Considerations
Monetary Considerations
The exchange rate between the U.S. dollar and the Argentine peso is relatively volatile and has seen significant fluctuations in recent years. As of 2023, 1 U.S. dollar is equivalent to 190.5 Argentine pesos (Google, 2023). The exchange rate may impact the organization’s decision to expand into the Argentine market by affecting the cost of doing business and the profitability of its operations. For example, a fluctuation in the exchange rate may result in higher operating costs or reduced profits, which could make the expansion less attractive. There have been large swings in the value of the Argentine peso, which may affect the price of imported goods and make it difficult for exporters to budget for their incoming goods.
In an effort to maintain a stable exchange rate, the Argentine government has previously instituted currency restrictions. Companies’ ability to acquire foreign money for use in international commerce and investment may be hampered by such limitations.
Nevertheless, both countries offer a range of tax incentives and benefits for businesses, making it attractive for companies to invest and operate there.
Management and Logistics Considerations
Companies operating in Argentina should be familiar with the country’s employment legislation and regulations. Companies must be aware of national overtime, rest breaks, and minimum wage laws. The country’s social security and insurance regulations may impact a company’s ability to hire and manage workers.
The typical workweek in Argentina is 44 hours (Bronstein, n.d.), but in the United States, it is just 40 hours. Furthermore, workers in Argentina enjoy two days off in a row once a week, whereas their counterparts in the United States normally receive just one day off.
Whereas in the United States, the minimum wage is defined at the federal level, each state in Argentina sets its minimum pay and reviews it periodically. The US federal minimum wage is $7.25 per hour as of January 1, 2019. However, the minimum pay in each US state is different.
Employment Contracts in Argentina must be in writing and contain precise provisions pertaining to the employment relationship, including but not limited to the following: hours worked per week, pay rate, and benefits. Although written contracts are not generally necessary in the United States, many companies still give them.
In Argentina, workers are guaranteed four weeks of paid vacation every year, but in the United States, employers are not required to provide any paid time off to their staff.
Paid parental leave in Argentina gives mothers and fathers time off work: 14 weeks for mothers and five days for fathers (Calero, 2016). There is no federal legislation in the United States that requires employers to pay employees during a leave of absence for the birth or adoption of a child. However, certain states do have laws requiring or allowing paid leave.
There are more safeguards for employees in Argentina than there are in the United States, including longer breaks, higher minimum wages, and more paid holidays. Organizational hiring and management in Argentina might be more difficult and costly as a result of these rules compared to the United States.
Mode of Entry Considerations
Exporting, licensing, franchising, and establishing a subsidiary are all tried-and-true options for companies looking to get into the Argentine market. Each of these entrance methods has its own set of pros and downsides; before deciding on one, businesses should seriously consider their specific circumstances. An organization’s capacity to manage its operations and brand in the market may be compromised by a low-risk alternative like exporting, for instance. While establishing a subsidiary might give you a greater say over operations and branding, it could also be more expensive and time-consuming.
References
Bronstein , A. (n.d.). National Labour Law Profile: Republic of Argentina. International Labour Organization. Web.
Calero, A. (2016). Universal maternity protection: Argentina. Web.
Dorn, F. M., & Ruiz Peyré, F. (2020). Lithium as a strategic resource: Geopolitics, industrialization, and mining in Argentina. Journal of Latin American Geography, 19(4), pp. 68-90. Web.
Fleck, A., & Richter, F. (2023). Infographic: Minimum wages in Latin America for 2023. Statista Infographics. Web.
Friel, D. (2021). Breaking the looking glass: Understanding how emerging market multinationals develop unique firm-specific advantages. Journal of International Management, 27(3), 100831.
Google. (2023). USD/Ars Currency Exchange Rate & News. Google Finance. Web.
Hofstede Insights. (n.d.). Country comparison. Hofstede Insights. Web.
International Trade Administration. (2022). Trade barriers. International Trade Administration. Web.