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Question

The development of international operations in Iran

Involve these topics to answer the above question.

  • Introduction to managing operations within an international context. Scope, nature and type of international operations.
  • Emerging patterns and structures of international operations and their implications for managers.
  • Strategies for global business in manufacturing and services.
  • Investment in emerging and developing economies.
  • Managing international supply chains. Design & planning of global supply chain networks. Organisation, contextualisation and management of outsourced operations.
  • International Retailing
  • Cultural issues in location. Operating under different cultural norms, the ‘transplanted executive’ -expatriatism and integrating expatriates and locals. Link this with the result of www.geert-hofstede.com /countries.html

http://www.geerthofstede.nl/culture

  • Environmental, sustainability and energy issues in international operations.

Answer

Introduction to managing operations within an international context: Scope, nature and type of international operations

The study of operations management continues to evolve at a rapid rate. In today’s world of globalization and rapid adoption of technology, issues relating to operations management continue to be addressed from an international perspective. Many markets are becoming increasingly globalized, created the need for business to devise ways of managing various operations from a transnational perspective.

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In this scope, one of the core issues is the determination on how to overcome trade barriers that are imposed at the international level. There is also a lot of focus on the boom that some countries are experiencing in their efforts to dominate the globalized market. For such countries to succeed, the need to modify the existing economic structures keeps arising. For this reason, companies that operate at the international context have to keep changing their strategies in efforts to survive in the contemporary business environment. In this paper, the discussion dwells precisely on the development of international operations in Iran. Various aspects that apply in the context of Iran are discussed, including emerging trends, global business strategies, international retailing, and supply chain networks.

Emerging patterns and structures of international operations and their implications for managers

In Iran, the business environment is increasingly dominated by the tendency to pursue the goal of internalization. This is particularly the case with regard to medium-sized enterprises. In fact, one of the reasons why owners of small enterprises would want them to grow to become medium-size enterprises is because this growth comes with numerous opportunities for internationalization.

Iranian companies continue to face stiff competition from foreign firms. Failure to address this threat may lead to the ultimate collapse of these companies. This would be an undesirable situation given that they help a great deal in creating employment. One of the main ways of addressing this problem is to embrace the economic dynamism that comes with today’s business environment. In today’s globalized world, no market is safe from stiff competition from outside the country. Therefore, no company should authoritatively claim “ownership” of the home market.

One of the main problems encountered as far as the analysis of Iran’s scenario is concerned is the lack of literature on trends in operations management. However, there is ample evidence on emerging patterns and structures of international operations and their implications for managers. For instance, various dimensions of internationalization seem to be taking shape in today’s world. First, the internationalization process is not spontaneous; business managers have to make certain decisions in order to create an environment necessary for internationalization (Adler, 2008). A company should not just have the resources required in the environment of internationalization; the entrepreneur has to desire and trigger the decisions that facilitate the internationalization process.

For a business to consider installing structures for international operations, it must entertain the idea of exporting as a core strategy. The firm has to make a foreign investment decision. Such a decision requires the existence of an intricate structure. Moreover, the implementers of the strategy should develop the attitudes that go with such a business strategy. Introducing this new strategy also entails changing behavior at both organizational and individual levels. Employees’ perceptions would require to be shaped in a certain way so that individuals are able to relate past and present. This way, the firm is able to determine which perceptions to inculcate in the employees as far as the future is concerned.

There are various driving forces for the emergence of international operations in Iran. Driving forces in this case indicate the requirements that a firm needs to meet to facilitate its entry into the international market. At this point, operational managers have to think about the ways in which various interactions as well as relationships impact on their actions, decision-making, and attitudes as far as international operations are concerned.

Strategies for global business in manufacturing and services

One of the greatest steps towards the adoption of strategies for global business operations in Iran may be said to have been made in 1955. During this year, the Iranian government unveiled an “Economic Development Plan” for the very first time (Craig, 1996). In this plan, industry players were categorized into “large industries” and “artisan enterprises”. Artisan enterprises were privately owned while large industries were under government ownership. Each of these industries needed to have a workforce exceeding five hundred employees.

Since the introduction of this inaugural economic development plan, many changes have been proposed in areas of both artisan enterprises and large industries. On the part of large industries, focus is currently on ensuring that they are able to carry out international operations. This has led to the introduction of major changes, particularly in the country’s manufacturing and services sectors.

At the outset, it is imperative to point that Iran belongs to OPEC (Oil Producing and Exporting Countries). Moreover, the country holds the second position in this organization in terms of the amount of oil it exports. As a leading oil exporter, Iran has had to face many challenges that led to a decrease in optimal production and exportation. Some of these challenges include the revolution of 1979 and the Iran-Iraq war of the 1980s. Although the country still has many natural gas and oil reserves, prospects remain largely uncertain because there are many international political factors that still need to be put into consideration.

In 1995, Iran faced a new challenge of US-led embargoes that had far-reaching negative implications for the Iranian economy (Lovelock, 1999). The Iranian government had to resort to harsh administrative controls that led to a drop in oil process followed by a debt crisis. This represented a major setback in the country’s efforts to achieve success in international operations in the manufacturing industry.

In the service industry, one of the areas where concerted efforts have been made to develop a global business strategy is the banking sector. This strategy mainly entails the adoption of an e-banking strategy for adoption in different countries. In Iran, e-banking remains a core component of efforts to adopt international operations in the banking sector (Fasanghari, 2008). In this strategy, technology is integrated into business operations with the aim of facilitating communication. Information technology makes it easy for banking institutions to communicate effectively with their customers, partners, and stakeholders both locally and internationally. However, a major problem is that although this approach is beneficial, the pace of uptake of e-banking knowledge is slow, particularly in the case of Iranian customers.

 

Investment in emerging and developing economies

In today’s era of globalization, a dominant trend has emerged whereby developed countries continue to direct a significant proportion of their investments to emerging economies. However, Iran has not made significant efforts towards directing investments to the third world. Although this issue tends to be one of the priority areas in political rhetoric, no significant policy milestones have been achieved. This is not surprising given that Iran is yet to achieve a developed-country status. In literature, Iran is sometimes considered a developing country. In some instance, is categorized as an emerging economy. This is perhaps because for the most part of the twentieth century, the country has been focusing primarily the setting up of infrastructure for development, entrenchment of democracy, and strengthening of institutions.

Managing international supply chains

Within regard to the management of international supply chains, one of the issues that ought to take priority is the process of designing and planning global networks through which supply chains operate. As part of efforts to facilitate the development of international operations, many Iranian companies have been attempting to adopt international supply chains (Ismail, 2006). The objective of these efforts is to look for ways of improving their flexibility and competitiveness. By adopting appropriate international supply chains, the companies are able to respond to environmental changes that may otherwise impact negatively on their operations strategy.

A preliminary step for these companies entails implementing the appropriate paradigm as far as supply chain management. They then embark on efforts to ensure that the selected supply chain management approach is agile. Many Iranian companies use information technology tools to make the selected paradigm optimally agile. This practice is particularly common in the automobile industry.

To cut costs relating to inventory management, many companies in the Iranian automobile industry choose to rely on outsourced operations (Rajabzadeh, 2008). Today’s online communication systems provide companies with an excellent opportunity to enhance the level of interaction with customers. Through information sharing, numerous opportunities are created for the attainment of long-term benefits. One of the areas where online systems are relied on by Iranian companies that engage in international operations is applications for order processing. The costs of processing orders have been drastically reduced through reliance on information technology place orders and check their statuses.

Outsourcing is also a common practice in the management of facilities used by various Iranian companies in foreign locations. According to Taylor (2012), the main reason why these companies outsource these activities is to allow them to dwell exclusively on their core competencies. Moreover, the companies that are contracted to carry out the management work end up achieving greater efficiency because they also get an opportunity to focus on their core competencies.

            However, the inexperience of many Iranian companies that venture into the international business environment exposes them to numerous risks. Whenever supply chains are disrupted, these companies face devastating damage to operations. If the disruptions continue, they end up having a negative impact on the companies’ share price. The greatest challenge in this regard is to ensure that global supply chains are managed in a sustainable manner.

One of the Iranian companies whose supply chains have been disrupted in the past leading to serious losses is National Iranian Oil Company (NIOC) (Brumberg, 2007). These disruptions were largely attributed to the fact that the company’s operations have traditionally been intertwined with the country’s politics. NIOC is one of the three leading oil companies in the world. It is responsible for managing and exploiting billions of barrels of oil from Iran. This creates the need for the company to operate on a global scale. Such operations call for a high level of efficiency and sustainability in terms of the chains management system. If all aspects of efficiency and sustainability had been adhered to, NIOC would not have suffered major serious supply chain disruptions. Towards this end, it perhaps would have been necessary for the company to disentangle itself from Iranian politics.

International Retailing

International  retailing is a relatively new phenomenon in Iran. However, within the country, different formats have been introduced particularly in the country’s cities. The most common formats include the so-called super stores and farmers’ markets. In most cases, these retailers are situated within suburbs as well as in urban areas. The decisions on whether to locate retail businesses depend primarily on availability of land and population. The big question is on whether the domestic retail business has been replicated in the international environment. The trend towards international retailing is yet gather momentum in Iran. Most retail enterprises prefer to concentrate on the domestic market. This is perhaps because international retailing ventures are considered very risky. One of the factors that contribute to this high risk is cultural differences between home-country market and the host-country market.

Cultural issues in location

Many cultural issues come into perspective whenever companies make efforts to pursue international operations. The situation in Iran as far as the development of international operations is concerned has not been any different. The problem of cultural incompatibility creates a scenario where Iranian companies are forced to transplant executive members to the host country. In this undertaking, one of the greatest challenges is on the integration of expatriates and locals.

The difficulties in integrating expatriates into the local environment arise largely because of cultural factors. Hofstede (1991) defines culture in terms of the way human mind is programmed. This social programming creates distinctions between members of one social group and those of a different social group. According to Hofstede (1991), culture tends to have a tremendous influence in the workplace particularly with regard to the values that people regard as most important.

One of the situations where the transplanted executives have to deal with the problem of culture is during market selection. The executives have to put into consideration aspects of “psychic distance” (Hofstede, 1991). Psychic distance encompasses factors such as cultural differences, linguistic differences, and political structures. By understanding psychic distance, firms promote the development of international operations in those markets where there are many aspects of cultural similarity. In Iran, this phenomenon is common, whereby most companies direct their operations in Arab countries (Hofstede, 1991). Iran is an Arab nation, and it is understandable that most of the companies originating from that country would direct their international operations towards other Arab countries.

Environmental sustainability and energy issues in international operations

The issue of environmental sustainability is one that Iranian companies cannot afford to ignore. This is particularly the case for those operating in the petroleum industry. As a major oil exporter, Iran has traditionally been at the center of energy issues and their contribution to the development of the global economy (Atabi, 2004). Moreover, it is difficult to find Iranian oil companies that have no trade links with foreign companies. Such relations bring to the fore the question of compliance with both home-country and host-country standards of environmental sustainability.

 

References

Adler, N. (2008). International dimensions of organizational behavior. Thomson Publishers, London.

Atabi, F. (2004). Renewable energy in Iran: Challenges and opportunities for sustainable development. International Journal of Environmental Science & Technology, Vol. 1, No. 1, pp. 69- 80.

Brumberg, D. (2007). The National Iranian Oil Company in Iranian Politics. Japan Petroleum Energy Center, Tokyo.

Craig, C. (1996). Developing strategies for global markets: An evolutionary perspective. The Columbia Journal of World Business, Vol. 31, No. 1, pp. 70–81.

Fasanghari, M. (2008). Assessing the Impact of Information Technology on Supply Chain Management. World Applied Sciences Journal, Vol. 4, No. 1, pp. 87-93.

Hofstede, G. (1991). Cultures and organizations. London: Routledge.

Ismail, H. (2006). A balanced approach to building agile supply chains. International Journal of Physical Distribution & Logistics Management, Vol. 36, No. 6, pp. 431 – 444.

Lovelock, C. (1999). Developing marketing strategies for transnational service operations. Journal of Services Marketing, Vol. 13, No. 4, pp.278 – 295.

Rajabzadeh, A. (2008). Designing a generic model for outsourcing process in public sector: Evidence of Iran. Management Decision, Vol. 46, No. 4, pp. 521-538.

Taylor, S. (2012). Outsourcing facilities management: The effects on building maintenance. Heinemann, London.

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