1.5 Context of Business Communication: Global Business Environment

Figure 1.1 describes a paradigm for business communication between two countries or two cultures, which includes context factors yet excludes key contextual elements like organizational strategies, culture and language. This section covers global business environment.

1.5.1 A Brief Introduction to Global Business Environment

The principle of context dependency points out that correct understanding of the symbols depends on location and occasion when and where the communication happens. Yet, the current communicative context has transferred from homogenous culture context to heterogeneous culture context on global business and transnational corporation stages. Globalization, driven by information technologies, has sent competition to the threshold of every country. Fierce competition results in misunderstanding, confrontation, and even antagonism. However, globalization requires cooperation between competitors to remove risks in the global market. There appears a strategy of co-competition, which requests effective and efficient communication between partners to increase and develop trust between them. Only in this trustful context can the co-competition strategies be implemented successfully. Communication to share ideas and information is surely an indispensable tool to increase trust and thus motivate cooperation between international business partners. Cross cultural communication competence turns out to be a strategic rare resource which can be developed into a core competence of organizations. Such a core competence is unable to be imitated or duplicated due to the complex process of communicating with others. Even in an organizational context of a domestic culture background, communication ability can be regarded as promotability. Communication skills are crucial to the managerial effectiveness and efficiency. Successful managers, who are promoted very quickly in an organization, spend 28% of time communicating in form of exchanging routine information and dealing with written tasks, and 48% of their time developing social networks in form of social and political activities, and communicating with outsiders. Effective managers, who achieve good performance and enjoy high level of satisfaction and commitment from their subordinates, spend 44%of their time in communicating （Robbins, 1996）.

In cross cultural business context, communication competence is the key to success in fields of marketing and advertising, international management and international trade. Even there is a well-defined and reasoned business strategy, culture conflicts and language barriers determine the effectiveness and efficiency of implementing the strategy.

Economic globalization has completely internationalized every element in communication process. Thus, it has gone beyond one domestic culture context and gotten involved with different mindsets of diverse culture values. A very important responsive strategy adopted by multinational corporations to cope with globalization is to think globally and act locally. Inevitably, understanding diverse cultures is a critical competence to carry out effective communication in multi-cultural context. Culture offers a thinking framework to encode and decode messages communicated across country borders. Thus it determines the effectiveness and efficiency of communication. Moreover, communication across cultures involves effective use of language, which serves as a tool to decode and encode messages from other culture backgrounds. Yet, language goes beyond a communication tool. It is a thinking instrument as well. Lastly, business communication is initiated to realize business strategic intentions of global business game players who are constrained with legal regulations from home and host countries.

However, overwhelming literature on business communication reveals that business theories and functional activities, and cross cultural communication strategies have be separated from each other. These studies mainly focus on developing language skills in establishing intrapersonal relations in international business context. In essence, they are English language studies. On the other hand, there are researches which are abstractly discussing communication theories on communication elements, process and so-called know-how to realize effective communication. These studies develop no organic and systematic linkage between language skills with business conceptions in relevant functional areas.

Therefore, business communication researches require an overarching framework to organically link together all such elements as business strategies, culture, language, legal regulations in multi-cultural context to effectively carry out well-defined international business functions.

Following these analyses, a cross cultural business communication study should include international business strategies, functional business areas, cultures, and languages as well as communication factors. Accordingly, it is necessary to define the border of international business activities, strategy, culture, language, and review communication framework in order to combine them together to put forward a research model.

1.5.2 Developing Stages of Global Business

There is a variety of definitions on the range of international business activities which lead to confusions about the content of international business. Thus it is necessary to define clearly and precisely the border of these business activities so that a theoretical framework for cross cultural business communication can thereupon be established. In addition, international business evolves into several stages, which are driven by market entry strategies. It is necessary to clarify all such terms as business activities, developing stages, and market entry strategies.

Business activities have evolved through the following six stages driven by the domestic and foreign environmental factors: international business, foreign business, multinational business, global business, international company and transnational corporations.

The first stage is the business activities across the borders of countries. The second one is to establish business in foreign countries. The third stage is to set up subsidiaries in multi-countries. On the fourth stage, a global company endeavors to find business opportunities in global market and tries to standardize its global business activities. Such a company has a global vision and tries to find similarities rather than difference in multi-cultures market, i.e., to seek similarity and remain the difference. The fifth stage is the international company, which adopts strategies of both global companies and multi-national companies simultaneously trying to seek balance between global standardization and country focused strategies. The latest stage of international business is the emergence of transnational corporations.

International Business International business at this first stage is the business whose activities involve the crossing of national borders. This definition includes not only international trade and foreign manufacturing but also the growing service industry in areas such as transportation, tourism, banking, advertising, construction, retailing, wholesaling, and mass communication.

Foreign Business The business at this second stage sets up the domestic operations in a foreign country. However, this term is sometimes used interchangeably with international business by some writers.

Multinational Business The third stage has brought about a new organization, i.e., multinational company （MNC）. A multinational company is an organization with multicounty affiliates, each of which formulates its own business strategies based on perceived market differences.

Global Business The fourth stage is global business, which develops into an organizational form of global company （GC）. A global company is an organization that attempts to standardize operations worldwide in all functional areas but that responds to national market difference when necessary. A global firm's management searches the world for opportunities in global market, source of products, raw materials, financing, and personnel facing the threats from competitors. In other word, it has a global vision. It also seeks to maintain a presence in key markets and looks for similarities, not difference, among markets of a diverse cultural nature.

International Company The last stage is international company, which develops international business into an organizational form of international company （IC）. An international company refers to both global and multinational companies （Ball & McCulloch, 1993）. An international company practices both global standardization and country focused strategies.

Transnational Corporation The latest developments of business is called global capitalism, which is characterized with transnationalization going beyond internationalization. Internationalization involves the simple extension of economic activities across national boundaries and is essentially a quantitative process that leads to a more extensive geographical pattern of economic activity, whereas transnationalization differs qualitatively from internationalization processes, involving not merely the geographical extension of economic activity across national boundaries, but also the functional integration of such internationally dispersed activities. Transnationalization is a synthesis process of internationalization and globalization （Yalcinkaya & Durcan, 2011）.

1.5.3 Defining Global Business Activities—Global Market Entry Modes

These stages of international business developments are realized through five corresponding modes of international expansion, which are listed in a sequence and are typical in practice. They are global market entry modes, which include exporting, licensing, strategic alliances, acquisition, new and wholly owned subsidiary （Hitt, 2005）

Export Mode The first is export mode. Initial market entry will often be through exporting current lines of products because this requires no foreign manufacturing expertise and demands less investment, which only happens in distribution. It is a common form of international expansion for firms to export products from the home country to other markets. Exporters have no need to establish operations in other countries. Instead, they must establish channels of distribution and outlets for their goods by developing contractual relationships with firms in the host country to distribute and sell products.

However, exporting also has some disadvantages. Exporters may have to pay high transportation costs, and tariffs may be charged on products imported to the host country. Moreover, exporters have less control over the marketing and distribution of their products. Because of potentially significant transportation costs and similarities of geographic neighbors, firms often export mostly to countries that are closest to their facilities.

Small businesses are most likely to use the exporting mode. One of the largest problems with which small businesses must deal is currency exchange rates, a challenge for which only large businesses are likely to have specialists. Currently, Chinese RMB is appreciating against US Dollars resulting in high risks for Chinese exporters.

Licensing Mode The second mode is the licensing mode. Licensing can also facilitate the product improvement necessary to enter foreign markets. Through licensing, a firm authorizes a foreign firm to manufacture and sell its products in a foreign market. Under this mode, the licensing firm （licenser） generally is paid a royalty on every unit that is produced and sold. The licensee takes the risks, making investments in manufacturing facilities and pays the marketing and distribution costs. Licensing is the least costly （and potentially the least risky） form of international expansion because the licenser does not have to make capital investments in the host countries. Therefore, this strategy is becoming popular, especially with small businesses.

Counterfeiting is one risk to licensing strategies. The licensing firm has little control over manufacture and distribution of its products in foreign markets. Licensing offers the least revenue potential as profits must be shared between the licensor and licensee. The greatest potential risk to the licensor is that the licensee will learn the firm's technology and, upon expiration of the license, produce a competitive product that offers sale in multiple markets.

Strategic Alliances Mode The third is the strategic alliances mode. Strategic alliances have been popular because they allow partnering with an experienced player already in the targeted market. Strategic alliances also reduce risk through the sharing of costs. These modes therefore are best for early market development. Strategic alliances enable firms to share the risks and resources required to enter international markets, and facilitate the development of new core competencies that yield strategic competitiveness.

Most strategic alliances represent ventures between a foreign partner, who provides access to new products and new technology, and a host country partner, who has knowledge of competitive conditions, legal and social norms, and cultural characteristics that will enable the foreign partner to successfully manufacture or develop and market a competitive product or service in the host country market. Strategic alliances also present potential problems and risks due to selection of incompatible partners and conflict between partners. Alliances are more favorable in the face of high uncertainty where cooperation is needed to bring out the knowledge dispersed between partners and where strategic flexibility is important.

Acquisitions The fourth is acquisitions. Acquisitions are better in situations with less need for strategic flexibility and where the transaction is used to maintain economies of scale or scope. To secure a stronger presence, acquisitions may be required. Acquisitions are likely to come at later stages in the development of an international diversification strategy. Additionally, the strategy tends to be more successful when the firm making the investment has considerable resources，particularly in the form of valuable core competencies. Acquisitions can provide quick access to a new market. In fact, acquisitions may provide the fastest and often the largest initial international expansion of any alternative. International acquisitions also can be quite expensive. It requires difficult and complex negotiations due to different corporate cultures, and often requires debt financing, international negotiations for acquisitions, more complex problems of merging the new firm into the acquiring firm.

Wholly Owned Subsidiary The fifth is wholly owned subsidiary, which includes foreign direct investment. Firms that choose to establish new, wholly owned subsidiaries are said to be undertaking a greenfield venture. This is the most costly and complex of all international market entry alternatives. The advantages of establishing a new wholly-owned subsidiary include achieving maximum control over a venture. It is potentially the most profitable alternative if successful in maintaining control over the technology, marketing and distribution of its products

Establishing a new wholly-owned subsidiary is also a risky venture. On the one hand, this alternative carries the highest costs of all entry alternatives since a firm must build new manufacturing facilities, establish distribution networks, and learn and implement the appropriate marketing strategies. On the other hand, the firm may have to acquire knowledge and expertise that is relevant to the new market. It has to hire host country nationals often from competitors and costly consultants.

Thus, there are multiple means of entering new global markets. Firms select the entry mode that is best suited to the situation at hand. Different entry modes can be adopted at the same time. The decision regarding the entry mode to use is primarily a result of the industry's competitive conditions, the country's situation and government policies, and the firm's unique set of resources, capabilities, and core competencies The selection of these international business functional activities depends on the choice of market entry strategies.

1.5.4 The Latest Development of Global Economy—Global Capitalism

Global capitalism is a theoretical approach to the phenomenon of globalization which emphasizes the economic dimension while linking to social-cultural and political dimensions. In a sense, global capitalism is a new social formation or a system of global production relations, and that firms are global in character, instead of monopoly or competitive firms. However, globalization is regarded as culturally Americanization of the entire world （Thomas Friedman, 2000:31）. The main feature of globalization is transnational practices instead of international practices in the context of global capitalism. This part discusses dimensions of transnationalization, features of global projects, economic and cultural dimensions of globalization.

Transnationalization consists of such three dimensions as transnational production, transnational capitalists and transnational state. Flexible methods of productions such as outsourcing, subcontracting, merge and acquisition generate a production network which can be reached any local area at world scale in terms of transnational production. Global production network emerges in conjunctions with new technologies such as the emergence of internet, robotization, containerizations, intermodal transport, refrigeration, computer-aid design, computer-aided manufacturing, and with novel organizational forms such as vertical disintegration, just-in-time, small-batch production, subcontracting, outsourcing and formal and informal transnational business alliances. This understanding of transnational production causes new power relations based on class relations: while there is global flexible working, namely global causalization or informalization for labor, capitalists retain the power of property, decision and control over global resources and means of production within the hands of transnational corporation. And the class relations influence the understanding of the state: Global bourgeoisie and its project within that is aimed to build a global capitalist bloc bring about transnational state （Robinson, 2007:130）.

Globalization projects have three main characteristics, i.e, outsourcing, displacement, informalization and recolonization. Automation and outsourcing contribute to structural unemployment, while displacement resulting from the active informalization and casualization of labour provides flexible and cheap labor around the world as labor migrates between and with countries. Mechanism of accumulation, dispossession and neglect constitute a global recolonization whereby the states do not control their institutional capacity and natural resources, and occur under neoliberal policies and conditions of flexible production, profit repatriation, crippling debt repayment and a lack of financial and organizational aid （McMichael, 2008）.

The cultural dimension of globalization is closely entwined with economic dimension of globalization. The global capitalism features individualism, competition, utilitarianism, competition and consumerism and so forth. These features emerge within collective understandings and values that societies founded or transmitted from other societies. Three tendencies are observed in the cultural dimension of globalization, as homogenization （culture convergence）, heterogeneity, hybridization （Robinson, 2007）. Homogenization outweighs the other two tendencies, and can be observed on homogeneous modes and methods of productions, exchange and consumption at world scale.

Relation between the economic and cultural dimensions of globalization is one of the leaning modern sociological themes and is particularly observable in the process consumption. So while transnational production is clearly an aspect of the economic dimension of global capitalism, consumption should also be considered sociologically and qualitatively in the cultural dimension.

Consumption is the main component in the cultural-ideological dimension of global capitalism. Hegemonic control in any societal system lies not in the economic nor in the political sphere but in the realm of culture-ideology, where it is realized in consumerism. Consumerism is shaped and institutionalized by global cultural elite- the media, advertising industry and consumer goods manufacturers-with needs manipulated and goods imbued with a cultural meaning that signals elitism rather than providing economic meaning. Consumerism has three dimensions, i.e., the textualization of everything, ideology-centredness and anti-elitism. Textualization of everything means that goods are consumed as texts having potential meanings. People signalize their life manners to social environment by means of consumption goods; as regards, the texts written by consumers are read by others. Hence, consumption becomes a social narrative. In addition, reproduction of developed capitalist societies is based on the fact that hegemonic ideology manipulates society. Therefore, consumption is seen as an ideological arena founded by commoditized meanings. Moreover, hegemonic ideology makes ordinary individuals on the grounds of consumption of popular things. Individuals regard consumption as the field of freedom and see themselves ironically as elite in terms of consumption identifying people. Americanization realizes by the way of dissemination of Anglo-American values and consumption goods （Yalcinkaya &Durcan, 2011）.

When the entire world is Americanized, there appear another new culture dimension of globalization, i.e., Confucianization through globalization. The influence of Confucian philosophy has penetrated to the US workplace with East Asians individuals joining the workforce, who still keep their culture identify and hold their traditional values at various degrees. As the US workforce became increasingly diverse, Confucian value has been blended into the American workplace （Chuang, 2012）. The Chinese government takes advantage of its second largest economic body to set up Confucius Institutes and Confucius Classrooms all over the world. It tries to introduce Chinese language and Chinese traditional cultures to the global village where many business persons try to find business opportunities in Chinese marketplace.

1.5.5 Defining cross Cultural Business Activities

After discussing different stages of international business developments and different international market entry modes, this study defines international business functional areas as follows: international trade involving import and export, foreign investment, international marketing and advertising, international negotiations, international settlement, international disputes and settlements.

More often than not, international business is defined as business activities that involve the crossing of national boundaries including: Import and export of commodities and manufactured goods; Investment of capital in manufacturing, extractive, agricultural, transportation and communications assets; Supervision of employees in different countries; Investments in international services like banking, advertising, tourism, retailing and construction; Transactions involving copyrights, patents, trademarks and process technology. All these activities can take place between individuals, firms, and other public private bodies （Taggart &McDermott, 1997）. Some scholars think that international business and international trade are different in that international trade consists of exports and imports while international business is a broader concept and include international trade and foreign production. International business and foreign production are increasingly managed on a global basis （Kotable & Helsen, 2008）.These researches justify that the key functional activities of international business include marketing, advertising, international trade, international investment and international banking. Because international trade and foreign production are systematic and independent disciplines, and so are international settlement involving banking system and international dispute settlements involving international law, this study exclude them from research paradigm so as to focus the discussion on the communication theory. Thus, this study selects international marketing, advertising and negotiation as its core business functions to bridge communication with culture and language in their contexts because they are communication-intensive business activities.