International business is one of the significant elements of the modern-day global economy. The resolution to venture abroad includes the evaluation of unconventional entry modes, having in mind the amount of risk involved and the appropriateness of the industrial environment in a prospective host country or region. Political, legal, economic and cultural factors are some of the most important elements to consider. Businesses venture in a foreign country for a range of reasons and fundamentally, an organization’s mission and objectives motivate this decision.
The general purposes, determination and the comprehensive objectives the company sets in order to achieve its aims constitute the primary motives for going global. However, the overall international environment as well as the conditions within specific countries significantly influences the accomplishment of the aims and objectives. For this reason, it is essential to think through the way a business environment affects a firm’s decision to internationalize its operations. A variety of definite factors, comprising of access to markets and resources and the need to cut costs, also influences this decision (Fao.org, 2015).
With reference to political and legal systems in the United States and India, common law influences the decisions made by General Motors to venture abroad. Common law is the basis of the legal systems in the United Kingdom and its ex-colonies, including the United States and India. The basis of common law is on the amassed wisdom of magistrates’ decisions on distinct cases through history. These cases produce legal patterns, which other magistrates use to decide analogous cases.
Common law has progressed in different ways in both countries. Such laws touching on General Motors business performances contrast to some extent among these countries, thus generating potential difficulties for international business. For instance, if at all there are defective cars manufactured for either markets, the company will be more susceptible to lawsuits in the United States than in India due to evolutionary transformations in the two countries’ case law. Besides the evolutionary transformations in case law, statutory laws passed by judicial action, also show a discrepancy between the two common law countries. For instance, many business dealings between companies and the colonies of the British government are protected from public inspection as well as the interference with competitors. This protection comes from the British Official Secrets Act that extends into both countries. Hence, this law protects more facts about transactions between businesses with both India and the federal government of U.S. (Fao.org, 2015).
General Motors faces challenges of external environment in United States, for example, high gas prices, weak economic environment, huge adjustment in housing policy, and constantly drop in the buying power of customers. However, the company struggles to commit itself in building their future and keeping ongoing essential actions simultaneously, as they take action concerning problematic U.S. market environments. Additionally, the United States businesses have amplified protection from the whistle blowers exclusively for abuse of regulatory laws by loose company policies. This has forced General Motors to harmonize their business policies in both India and the U.S. for the smooth flow of business. This is because non-US companies have the upper hand on informal control mechanisms within the company (Barney, 2011).
In July 2013, GM India declared the revoking of the Chevrolet Taveras mass-produced between 2005 and 2013 to address matters relating to emission and specification. These pre-selected engines, rather than the standard random selection, were placed for collection to visiting inspectors. With reference to the Motor Vehicles Act, any violations and indiscretions to this Act is illegal and may result in a slap of a huge monetary fine as well. If extensive collusion was proven, then more severe provisions of the Indian Penal Code could be summoned. Investigations on GM India concluded that some vehicles were passed off as marginally heavier ones that enabled them to pass less severe standards as the lighter vehicles have to meet more severe emission norms. Within a week of this incidence, GM India has expelled top officials, for “violating company policies” (Arnold, 2014).
Another critical area is that American businesses incline to consider that the American measures and rules should be universally functional. This universalism creates a dissimilarity between the United States and India as well as other foreign nations, in which the American corporate culture treats every business and even individuals in the same way. This causes discrepancies especially when it comes to laws relating to mutual association in business dealings. For instance, bankruptcy is viewed differently in various countries. Every nation has its own laws concerning bankruptcy. In India, those businesses, which are incapable of paying their unresolved obligations, may not be allowed to run their commercial activities and forced to liquidate.
Whereas in USA, the federal government gives a leeway for such companies to reorganize their business activities under a law called bankruptcy proceeding. Some people and businesses mishandle bankruptcy laws for fraudulent activities. However, the rate of recurrence of bankruptcy generally increased in recession. It is argued that the economy is considered to be officially in recession, if the growth rate goes negative for two consecutive quarters (Arnold, 2002). It is argued that recession has a direct connection with nations’ GDP and varies around its original tendency that follows a consistent pattern, which is called business cycles.
Others businesses, in contrast, outline their ethical responsibilities in which they put less value on handling everyone equally and attribute more importance in satisfying the obligations to those organizations that they have long standing dealings. The presentation of business ethics in any state of affairs of global incorporation needs better appreciation of these variances in the legal and political context of the business setting especially, in this case, between United States and the Asian economies like India (Ansoff, 2006).
