Introduction
In an expeditiously globalising world, new small business organisations are increasingly operating on a global scale. In order to do so effectively, they face a dilemma that, on the other hand, they have to operate globally whereas on the contrary they must be firmly rooted in local cultures, markets and power networks and also they must adhere to local laws. (Witter, 2015)
This brings us to the comparisons between global standardisation strategy and localisation strategy. Finding the balance between standardisation and localisation is one of the preeminent dilemmas that companies face when tapping international markets. (Singh, 2016)
A couple of questions arise when trying to determine the strategy a multinational company should
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(Johnson, 2014)
• geographically and firm- Specific advantages, the International strategy whereby if advantages and drivers are strong enough to warrant an international strategy, then a whole lot of strategic approaches can open up. (Johnson, 2014)
• Market selection - This is based on the wide range of issues from economic to political and cultural. (Johnson, 2014)
• Entry mode - Management should determine how the market should be entered. Whether by exporting products, franchising, wholly owned subsidy or joint venture. (Johnson, 2014) Figure 1: International Strategies: five main themes
(Johnson, 2014)
For this report, we will focus only on the internationalisation drivers.
Internationalization drivers
The framework below in figure 2 is derived from Yip’s globalisation framework sees international strategy’s potential as determined by market similarities, economies of scale and scope, regulations and competitive advantage. Figure 2: Internationalisation drivers
(Lessard,
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(Johnson, 2014)
Section B
Global standardization strategy pros and cons
Finding the balance between standardisation and localisation is one of the towering problems that companies encounter when tapping international markets. So many times companies choose to standardise their marketing mix for international markets, either for cost efficiency reasons or the lack of reasonable global marketing strategy. (Singh, 2016)
Pros
• Efficiency – Global strategy enables the company to leverage on the economies of scale and scope. (O'Farrell, 2005)
• Life Cycle – To maximise profit through movement of old products to newer markets and introduction of new products to developed markets.(O'Farrell, 2005)
Cons
• Macroeconomic risk – The one size fit all approach does not work in all markets. Some markets are quite sensitive to pricing and have extraordinary tastes. (O'Farrell, 2005)
• Operational risk – Global strategy has operational risks. Change of government laws in a country where its global products are manufactured can ruin everything.(O'Farrell, 2005)
• Loss of uniqueness – Some customers value unique niche products, standardising products can lead to a loss in customer base. (O'Farrell,
The rise in globalization over the last few decades has helped facilitate and encourage corporations to expand into international markets. This paper will review the five common international expansion entry modes, and the pros and cons of each method. Finally, my employer is in the technology industry and I will breakdown and recommend which entry mode would work best for international expansion.
Companies always face a limitation of financial resources; however, they have to keep investing in order to improve their profitability, market share and consequently the capital base. Such activities that the company does to improve the core value of their products is referred to as the core activities. As compared to the peripheral activities which add minimal value to the organization, core activities are strategic activities that provide competitive advantage for the business (Jacques, 2006). Most companies have decided to invest in the global market in order increase their market share. However, the global competition has become more complicated with the reduction of international communication and transport costs. New markets continue to open and the global landscape has created new threats as well as opportunities. According to Fletcher & Seminara, (2014) in order to achieve maximum profitability; multinational companies should be organized into divisions or geographic locations in order to assist the company to achieve its goals and objectives. The company must also be willing to have joint partnerships with other companies so as to strengthen its base in the international market.
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 ...
Hill, C.W.L (2005). International Business: Competing in the Global Marketplace (5th ed.). McGraw-Hill/Irwin. New York, NY
Today, many companies enter the global market, and some companies have become extremely successful in the global marketplace and others still struggling. In Theodore Levitt’s article “The Globalization of Markets”, he states that a well managed corporation focuses on selling standardized products with high quality and low priced instead of focuses on selling on customized products with high cost. Levitt defines the differences between multinational corporation and global corporation, and adopts many specific examples to proves his view. He defines the multinational corporation who operates in many countries and adjust its product based on the taste of specific region. This will result in a high cost to produce the product because company have to input more resource into each individual product. However, global corporation sells similar product worldwide at relative low cost. According to Levitt, the cultural differences are becoming more and more “homogenized”; therefore, becoming a global corporation will lead to the successful of the company in the global market.
Each strategy is based on being high or low in the following two categories global integration and national responsiveness. To have a low global integration it means the company doesn’t operate in every country. If the company is low in national responsiveness it means your customers use the product in the same way – no matter which country they are in and vice versa for high. International strategy is low in both global integration and national responsiveness. While, global strategy is high in global integration and low in national responsiveness. This particular strategy is low in cost. Next, Transnational strategy is high in both global integration and national responsiveness. This strategy is considered high in costs, but the most common strategy companies pursue. Lastly, multi- domestic strategy is low in global integration and high in national
The same can be said about a localization strategy. Localization may give a firm a competitive edge, but if it is simultaneously facing aggressive competitors, the company will also have to reduce its cost structure, and the only way to do that may be to shift toward a transnational strategy. This is what Procter & Gamble has been doing. Thus, as competition intensifies, international and localization strategies tend to become less viable, and managers need to direct their companies toward either a global standardization strategy or a transnational
In recent decades, the process of globalization has accelerated and the world economy has become increasingly interdependent. The rise in the number of businesses that extensively operate in more than one foreign country, which is known as multinational corporations, plays an important role in the ongoing procedure of globalization. The United Nations has reported that multinational corporations hold one-third of world’s productive assets and control 70 percent of world trade (Schermerhorn et al., 2014). As there is a considerable growth in international businesses, worldwide economy is becoming more highly competitive. The global economy not only offers great opportunities for multinational enterprises but also on the other hand, creates many difficulties for them. Therefore, success in the large-scale economy requires a number of elements. One of the major determinants is dependent on global managers. In the operation of organizations, managers may encounter different international management challenges that restrict their business development. These challenges often include issues associated with the host countries, the global workforce diversity management, management across cultures, difficulties in competitive global business environment as well as in the process of global planning and controlling. This essay is going to discuss the above international management challenges in a broad sense and giving illustration in aspects of each challenge.
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...
Global strategy refers to the conscious and tactical plans laid by organisations in a bid to fit into worldwide business arena (David, 2012, p. 49). Companies have embraced different methods and views of how to exert authority and gain the upper hand in terms of competitiveness on the global platform. The two commonest approaches are the competitiveness and resource-based views of global strategy. Despite their effectiveness, both differ enormously in terms of foundational principles. More importantly, resources used to help organisations acquire a favourable state as touching global strategy can easily become weakness or liability that propels companies in the unexpected direction (Ghemawat, 2013, p. 80). This paper contrasts the competitiveness view to the resource-based approach and critically assesses the opinion that resources can actually turn into liabilities to pull organisations down, providing examples for both occasions.
Product differentiation – Even though consumers are getting more and more aware about differentiated products but still i...
It bears no surprise that a company’s global strategy is an integral part in its quest to globalization. Therefore, a company must pick a strategy capable of productively and coherently conveying the idea behind a product or service so that it chimes with the local cultural aspect of each targeted country (Roudometof, 2016). Glocalization does exactly that; it blends the international initiative of a product or service with the needs and preferences of local markets as a method of gaining high levels of appeal from their customers. It is based upon the fact that the chances of success of a product within a certain local market are higher when it is adapted according to its cultural element and national identity (Ramona, 2010). There are multiple advantages of glocalization, namely: it appeases customers from all walks of life and therefore yields high profits, it is flexible and capable of staying in touch with the changing needs of varying cultures, and it curbs the emergence of ethical challenges and the costs they portend (Roudometof, 2016). In contrast, glocalization does have some disadvantages as well, mainly: it is time consuming and lengthy; it requires expert advice in a large range of disciplines; and it has been criticized that, although it is
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