Discuss the various barriers of trade.

Skill Level of Workforce in Farm and Construction Machinery Industry

Areas where the skill level of the workforce is low, the firm spends additional resources to train the workers, and this process consumes time another resource the business may not have in their budgets. However, before establishing the firm in an area, it is essential that the firm research the clientele so that they know if they will require new skilled workforce to help in the machine operations in their preferred areas of the establishment (Nahmias & Olsen 29). A business entity such as Alamo Group prides itself in skilled workforce and invests heavily on training of its employees so this factor may not heavily weigh in on the firm.

In conclusion, demographic and economic factors play a major role in the growth of a business. Factors such as age, income, and geographic region determine the kind of clientele the business acquires and if the business will be in operation for a long time. People with low income are very sensitive to prices unlike those with a high disposable income. The age bracket also determines the spending habits of the consumers. The Alamo Group has a broad age distribution clientele because anyone can choose to venture into agribusiness and other agricultural related activities despite their age. Economic factors such as inflation, interest rates, and government interferences among other factors also directly affect the management decisions to venture into new horizons. Taxes imposed on manufactured and processed goods and services can negatively or positively influence the profit margins of the business making it favorable or not. Therefore, it is important that businesses do thorough research before going to international frontiers.

2. Political and Legal Environment

Political factors often play a critical role in determining the factors that directly influence Alamo Group in terms of long-term profitability in their specific country or market of operation. Operating farm and construction machinery in so many countries, the firm exposes itself to different forms of political environmental system risks. One advantage of such operations however, is that the business achieves diversification of these risks. Some of the political factors that businesses such as the Alamo Group should consider include;

Political stability and importance of Farm and Construction Machinery sector in the country’s economy. The agricultural sector is a critical part of any country’s economy because every government endeavors to feed its population. Therefore, the political stability of the country will attract more investors into the sector to help in production of adequate food supply to the population. An unstable political climate raise the concerns for investors and most shy away because the country is considered very risky (Gupta 13).

Bureaucracy and interference in Farm and Construction Machinery industry by the government of the host country may influence the operations of the business either positively or negatively. Most firms do not want to invest in countries where the government often interferes with their activities by imposing too many regulations. While some processes are easy to follow others, make it hard for investors to venture into the market. A simple, straightforward bureaucratic system encourages more firms to enter the industry raising the level of competition, which ultimately guarantees consumers quality products and services.

Trade regulations and tariffs related to industrial goods can be a turn off for corporations such as Alamo Inc. too many tax charges and trade laws restrict the operations of the business and do not offer a thriving environment for businesses. For instance, cases, where the trade laws discourage mergers and acquisitions, would make it difficult for Alamo to venture into various countries because purchases are their entry strategy.

The legal framework for contract enforcement that controls the minimum wage and overtime employee payments and other employee benefits may not favor the business. In regions where companies spend so much on labor, the industry discourages growth and investor relations are weak. While the employees should be compensated adequately for their skills and time, most firms would prefer to operate in countries where such agreements are open for negotiations between the firm and the employees instead of the government imposing such contract terms to them. To foster loyalty on the employees, a corporation such as Alamo has invested in several employee growths benefits a factor that makes the company successful.

Industrial safety regulations in the industrial goods sector may be too stringent for companies to adhere negatively affecting the relationship between the government and the company. Every firm involved in manufacture and production of industrial products and services is required by the federal law to have some specific measures of safety in place for both the society and its employees. Laws that safeguard the environment against pollution among other negative influences should be taken seriously. Product labeling and other requirements in Farm and Construction Machinery are different vital rules that businesses within this sector should put in place to safeguard the stakeholders.

Legal factors influencing a firm’s decisions of operations include all regulatory and law determinants that can affect the results of market actions and decisions of the management. In most of the countries, the legal framework and institutions are not as robust as investors would want them especially in matters of protecting intellectual property rights of an establishment. Firms should therefore carefully consider before venturing into such markets as it can cause legal constraints on the overall competitive advantage of a company (Ho 6480). Factors such as anti-trust laws in Farm and Construction Machinery industry, discrimination law especially during the recruitment process of employees, consumer protection and e-commerce, employment laws, health, and safety law, data protection laws, among others are critical for the overall operations of a business such as that of Alamo Inc.

It is critical that a business willing to expand its operations understand the necessary legal requirements from governing authorities to avoid legal suits that can be derailing and costly to the establishment. Accounting laws, for instance, vary from country to country among other issues. The management should be aware of the tax requirements for both the company and the employees, the general economic policy of the state, and all the laws and regulations connected to employee protection.

As seen from the above discussion on the legal and political factors, it is very crucial that businesses understand the impact these forces will have on their companies before venturing into new markets. Some of the legal issues such as accounting requirements can bring a business to its knees if the financial statements do not adhere to the laid down procedures and a legal suit is filed against the firm. The political environment is another major factor that an investor such as Alamo Group should consider. A politically stable country encourages international investors as they offer a stable economy for businesses to operate and grow unlike areas frequently hit by army invasions.

3. International Environment

Alamo Group, being a multinational company, is affected by international factors. According to Jankovic, Mihajlovic, and Cretkovic, the success of a company is determined by how well it adapts to the environment which it operates in (32). The authors continue to give a scenario of successful companies having the ability to adjust to changes in government policies (32) quickly. Alamo Group has a global presence as it has multiple plants spread globally in North America, Europe, Australia, and Brazil. Reuters reports that by December 31, 2016, the total number of plants in the regions mentioned above totaled to twenty-four. Alamo sells a majority of its products through dealers in the agricultural sector and other contractors. Various marketing organizations are tasked with the critical role of marketing the products. They include Terrain King, Schwarze, Henke, Bomford, Twose, and Rivard trademarks, among a host of other trade names. Throughout its international operations, Alamo Group is affected by several global factors.

a) Trade Barriers

Many countries impose trade barriers on imports while trying to regulate trade or cash in from global business. Some countries try their level best to protect their local industries by imposing heavy tariffs on imports. The agricultural sector has quite a good number of players producing commodities such as machinery to increase productivity. In the quest to acquire as many clients as possible, Alamo Group has to deal with many barriers such as high tariffs, ban on importation of certain commodities, and other policies which are a hindrance to international trade. Raising of tariffs affects profitability level of a company. At times, when the duties are too high, there is a high likelihood that a company will make losses. Alamo Group has an objective of maintaining its growth pattern through selling its machinery in nations which offer incentives and have favorable trading policies. Trading blocs are increasingly changing the volume of global trade. They also affect Alamo Group’s operations since they shape the trade patterns among member states and in the long-run, the result in controlling the import of agricultural and industrial merchandise from non-member states. The United States of America is not a member of all trading blocs in the world. Therefore, Alamo’s products are taxed higher in countries where the country is not a member state in an attempt to regulate the flow of international trade.