Business Development in a Global Market
Developing a business opportunity or introducing a new product into the global market place is a risky business at the best of times. Strong and precise business strategies along with extensive market research are the keys for developing a successful global enterprise. This essay will cover the core fundamentals required to best enter the global market while minimizing the risks. Core fundamentals include, indentifying potential markets, product competition, risks involved, future growth potential, entry strategy and costs involved to enter the market place.
When identifying potential markets we must consider the benefit, risks and costs associated with each market. There are several questions that need to be asked. The first one being, what is the political stability and economic growth rate of the country. This will determine how high the risks are to enter and the future profitability of the market. In less developed nations you will find the risks are greater, the costs may also be greater as there is likely to be less infrastructure, more back handed payouts to the government for entitlements to do business etc. but the potential growth rate may be higher than in well developed political stable nations. Will the product offend or not be accepted by a nation’s religious or cultural environment. Once entered is expansion into surrounding nations accessible with free trade agreements. Is there any legal risk involved and at what cost. Available resources and the product competition must be known. This information is crucial when it comes to making the final decision on entry mode and strategy.
From these questions we can take a closer look at the risks associated in finer detail ...
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There are several modes of entry that need to be considered and the best mode suited to the market and the product needs to be chosen for best future growth and profitability. These modes of entry are exporting, turnkey projects, licensing or franchising to host nation firms, joint ventures and wholly owned subsidiaries. All these modes have positives and negatives, the magnitude of these are determined by the risks related to previously and the costs associated with doing business.
Costs involved
As discussed there are many implications to doing business abroad but in saying this, the global market place provides many business opportunities for new entrants. With a strong business plan and research in the above topic “business development in a global market” it would not be an unreasonable expectation to achieve a successful “global” enterprise.
Globalization can not only affect a company opening an office in another country but it can affect a small local business as well. As the internet brings the world closer together it becomes far more likely that a business that opened with no intention of selling internationally will have customers form different parts of the world asking for their product. For instance a steel company located in Pennsylvania may suddenly find orders coming in from South American factories. How the steel plant chooses to handle this new international customer could mean ...
Over the years there has been a lot of research carried out on the determinants and consequences of foreign market entry mode. For any firm hoping to succeed in meeting its long term goals, the mode of entry is a strategic decision which will consequently impact on the firm’s competitive advantage and its performance. The main goal of any small or midsize business is trying to delve into new markets. This is because with new market comes bigger profits and over time the small business isn’t so small anymore. However, it would benefit the firm more if it had a better understanding of the different entry modes into foreign market in order to ensure its success and in order to ensure its smooth adjustment in the new market (Hutt, 2010).
The important barriers to entry as discussed in Chapter 2 are known as economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of scale. These barriers benefit existing companies already in operation and are significant for many reasons. Economies of scale occurs when a company incurs cost advantages due to it’s size and scale of operation. Since the company can manufacture a large number of products, the price of the item produced decreases with costs being spread across the quantity produced.
Madhok, A. (1997), “Cost, Value and Foreign Market Entry Mode: The Transaction and the Firm,” Strategic Management Journal, 18(1), 39-62.
Firms exist with the purpose of create and deliver economic value (Bensaco et al 2010, p. 365); therefore, business that create better economic value than its competitors will attain an advantage position in market place. Companies might try to improve its sales (profit) through domestic expansion, product diversification or by internationalisation; this report will focus on the reasons of espressamente Illy to expand internationally; additionally, its sources of competitive advantage and, the analysis of three markets in which company want to participate.
When it comes to doing business internationally the decision making is more complex. There are many interactions between each country that need to be addressed. In order for a business to be successful in the international market they need to examine and analyze all the facets of their company. They need
The ease with which firms can enter into a new market or industry is a critical variable in the strategic management process. In some industries the barriers to entry are minimal. In oth...
Investing or venturing into the international market involves critical analysis of the internal and external environment in which the company operates. Usually, a company will decide to venture internationally due to a saturated market or fierce competition in the current country of operation. The demand for a company’s products may have diminished as a result of an economic crisis thus the company will target a foreign market to sustain its sales. In other words, the firms expand internationally to seek new customers for its products. For example, the current Euro zone crisis led to low demand in Europe and many companies extended their businesses to emerging markets where demand was high. A company may also venture in the international market to enhance the cost-effectiveness of its operations especially for manufacturing companies that will benefit from low costs of production in developing world. Global expansion is a long term project as it involves demanding logistics to be successful. Thorough research must be undertaken to ensure that the expansion will create value for share...
Global segment include relevant new global markets, existing market that are changing, important international political events, and critical cultural and institutional characteristic of global market. When company entering the global, it automatically can increasing number of people believe or consumer in the multiple nation and this si...
Entry mode - Management should determine how the market should be entered. Whether by exporting products, franchising, wholly owned subsidy or joint venture. (Johnson, 2014)
Expansion across seas can be very advantageous and lucrative for many companies; however, there are many risks associated with doing business overseas, and companies that intend to expand internationally should be careful and strategic when doing so. Not only do companies run the risk of experiencing a product fail due to differences in cultures, they also face severe political and economic risks as well.
The international business development has heightened the importance of international market selection (IMS) of companies, especially for their exporting strategy. However, not many companies really comprehend the geographical, social, economic characteristics of foreign countries in comparison with their home countries (Cavusgil, 1985). This fact has challenged many studies to create the optimal approach for IMS. The major question is: Which foreign market should a company enter? Thus, this report focuses on providing a practical consultancy to evaluate and determine its most appropriate foreign markets.
All research fully carried out on Entry nodes on the long run remain limited to large manufacturing firms. The foreign market selection and the choice of its entry modes drastically ascertain the performance of a specific firm. Entry mode can be defined as an arrangement for an organization that is organizing and conducting business in foreign countries like contractual transfers, joint ventures, and wholly owned operations (Anderson, 1997). Internationalization is part of a strategy which is going on for businesses and organizations transfers their operations across the national borders (Melin, 1992). The firm that is planning to have the operations across the border will have to choose the country that they are planning to visit. Anderson (1997) argues that the strategic market entry decisions forms a very important part of an organizational strategy. The decision to go international is part of the internationalization strategy of the firm. Multinational Corporations that desire to have international operations will find the strategy to go international, the mode of entry is very important. Even though there are studies which have shown that the main effect of being pioneers in a market promises superior performance in terms of market share and profitability than the late movers, Luo (1997) and other researchers have found out that the effect of the first mover may be conditional and will depend on the mode of strategy that is used (Isobe, & Montgomery, 2000). There are different strategies that MNCs can use to enter new foreign markets; they include exporting, licensing/franchising, full ownership and joint ventures. The mode of exporting entails a company selling its physical products which are usually manufactured outside the...
Potential markets considered for expansion fit into five general areas: Latin America, Canada, Western Europe, Japan, and China. The marketing team, along with Legal counsel, immediately disqualified other areas of Europe and Asia due to political instability. The following table lists the eligible countries, with political and economic stability ratings from Jones-Dillard Rating Service:
The global economy has enabled customers to enjoy a buyer’s market where the company with the most competitive price possible for a product or service receives orders from customers around the world. The burgeoning world ...