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The most significant trend in the world, in the past two decades, when it comes to business has been the rapid growth of international business. Market have increasingly become global for goods as well as services. International business involves dealing with multiple foreign stakeholders such as employees, governments, consumers, etc. (Norwich University 2017). Hence, multinational companies ought to take into account multiple factors when conducting business in global markets. These factors include competition, pricing strategy, local consumer culture, supply chain management, etc. (Norwich University 2017). Due to globalization, not just big companies, but smaller ones too have been able to cross national boarders and conduct business outside the state and home nation contexts. It is important to point out and stress of the fact that dynamic factors which are unique to the various business playing fields for with regards to international business impact all the relevant stages of change and evolution and the implementation of business plans (Pondi University n.d.).
When it comes to international business, the feature that sets it apart from the rest is that the business operates in a highly uncertain market where the rules and trends of business are generally unknown or ambiguous. In addition, these unknown market5s are often subject to rapid change in comparison to local markets. Due to the complete newness of the business playing filed and business market of, business managers often find themselves having to learn all aspects of the game which are unique to the field. This helps the business plan a proper market strategy to penetrate the new market (Pondi University n.d.). Strategic management is essential when entering new and uncertain markets where the business does not usually operate and has far less knowledge about various factors of the new market. Strategic management is the process wherein a business determines it’s basic mission, vision and long term business objectives (Bhandari 2018). In the context of international business, a business organization, then, has to conduct extensive business market research in order to understand the nature of the new market. It is important to remember that the culture of the new market may vastly duffer from the host nation or host state. Hence, investment into proper market research is vital.
Using an international strategy entails providing or exporting products to foreign counties. Multinational countries are often headquartered in their country of origin. Two main factors to take into account with regards to expanding into new international markets are local responsiveness and global integration (Business to You 2017). International businesses are commonly highly integrated globally. The aim objective of a business that is highly globally integrated is to reduce costs by creating economies of scale. However, it is equally important to understand and realize the impact of state or host nation context of the development and implementation of a business’s global strategy.
The host nation is a factor which often directly affects the global strategy of the business. The home country is an asset to the firm/business in the sense that individuals coming from the same host country often associate the firm with the perceived home country which is an asset to the company as it brings a sense of pride or homeliness for individuals from the same host county as the firm (Cuervo-Cazarra 2011). However, this sentiment is not relatable for foreign consumers who sometimes do not opt for foreign products or services simply because they are foreign and not produced in their own country. Such individuals often display their nationalist sentiments by choosing only to shop local. Contrary to this are other customers who may believe that foreign products are more advance or developed than those in their own country and hence opt for purchasing from international brands/companies. This understanding is revealed by Cuervo-Cazarra (2011) as something which depends on the global perception of the company’s home nation. In other words, if the reputation of the home nation is a good one, that too can greatly influence foreign consumer choices.
When talking about how the host nation contexts shape and impact a business’s global strategy, a mention of the government cannot be missed. Governments often tend to give a greater preference to certain countries depending on the history of positive relationships with the country. This, too, greatly impacts a business’s global strategy. For example, an American country cannot even think of expanding to countries like Iran or North Korea simply because the governments of the two countries are not on favorable terms. The reputation of the host nation plays a significant role in the business/company’s ability to expand over international waters. Hence the host nation has a direct influence on the company’s global strategy. Since governments and consumers share different relationships with the host country, the global strategy will have to be formulated to work around these factors. How consumers of the host country view the company’s home country will influence how the company chooses to market its products in the host country. Depending on the consumer’s perception of the home nation, a company may choose to highlight or alter the name of the country of origin on the product to appeal to the customers (Cuervo-Cazurra 2011). Contrary to the customer’s perception, the government’s perception has more to do with laws and regulations which generally do not respect the company’s operations. Firms/companies may not choose to expand or operate in countries with restrictions on investments from particular countries.
A very common global strategy used widely by multinational companies is using the country of origin as an advantage to the business or business expansion. Companies which has this advantage use it to the fullest in the process of their internationalization. This can be used to demand higher prices due to the positive image if the country of origin and the marketing process includes highlights and mentions of the country of origin extensively to catch the attention of the customers and attract them towards the product/company (Cuervo-Cazurra, Luo, Ramamurti and Ang 2018). This may, however, work in the opposite manner as well in cases where the country of origin is not very well perceived among consumers of the host nation. Cuervo-Cazurra, Luo, Ramamurti and Ang (2018) further explain that it has been found that consumers do tend to discriminate against produces and commonages originate from less developed countries as they do not view the country of origin in good light and may not think the product is advance enough or good enough. Another factor would be the history the home country shares with the host country. For example, Japanese products often do not do well in China because of the history of Japanese invasion into China during World War II, hence Chinese customers do not opt for Japanese products even though they are reputed to be developed through advanced technology. In such cases, companies may opt for remedial action to repair the reputation that is harming the expansion potential of the business by creating offers on sale or reducing the prices of products.
An example of a successfully globally integrated firm/company which develops a global strategy which accommodates the requirements of the individual nation states and environmental contexts, whilst still achieving the business mission is the chain restaurant Nando’s. Nando’s was originally founded in 1987 in Johannesburg, South Africa an, today, it operates over 1000 outlets in 35 countries worldwide (Nando’s n.d.). There are multiple companies to have successfully integrated into new global markets such as Nando’s, Spar, H&M, etc. The biggest driving force for companies to invest in trade in other countries is the urge to exploit the market opportunities in other countries. Additionally, companies have also see other opportunities such as production opportunities were the production activities have the potential to be conducted more efficiently (Welch 2007). The risks associated with a bad or mediocre global business strategy are far reaching. Although internationalization and international expansion is often viewed as a a necessity for remarkable corporate success, it may not always be the case. Companies such as L’Oreal, McKinsey, UBS and HSBC, etc. have paved the foundation for profitability and growth and have seemingly mastered their global business strategy. However, risks are sometimes a lot highly due to over ambitiousness. It is the overambitious ness of companies such as Marks & Spencer, Saatchi & Saatchi, and Daewoo which led to their international corporate decline (Welch 2007).
When formulating a global business strategy, a company has much to take into account. Factors such as competition, potential entrants, rivalry among existing firms, bargaining power of buyers, etc. Conducting an in-depth SWAT analysis and Porter’s Five Forces analysis is probably only a part of the process. Taking other factors into account such as consumer behaviors, consumer attitude towards international firms, consumer prejudice towards home country of firm/product, etc. are some other factors to consider. For many industries, the main resource for international expansion is the presence of supporting industries in the host nation. A mutually exclusive cluster among industries can aid a company towards successful integration in a new market. Some industries depend on other industries for work. For example, a mutually supportive cluster between textile machinery, chemicals, synthetic dyes, and textiles.
Also, when analyzing the success or failure of a company, it is important to take into account the Porter Diamond Model. The Porter Diamond Model fundamentally explains the success of some companies/industries in certain countries more than others (Vlados 2019). For example, companies such as Porche, BMW, and Mercedes may be more successful than other companies due to the German love for quality engineering and high sped cars, or the preeminence of Swiss watches because of the Swiss attribute and quality of punctuality. Some industries do a lot better only in some countries not because of poor pr high quality products, but simply because of the local consumer demand. Also, the same high-speed and well-engineered cares that do outstandingly in countries such as Germany may not do as well in countries such as India bt only because of the lack of interest or difference in taste but also due to the geography of India where high-speed cars would simply not be the most practical purchase. For the same reason, electric cars do better in Europe than they do in the East, simply due to the lack of appropriate infrastructure which cannot be supported in the East as compared to the West.
Similarly, when companies from other nations attempt to enter new markets, local competition may also perceived as a drive for creativity and innovation. When companies such as the Bugatti Veyron, Ferrarri FF, and Lamborghini Aventador enter a market such as Dubai, the dominant factor is not just the local flair for fancy cars, but also the richness of the country and the local ability to spend on such purchases. Much research has been conducted around international business and there reflects a clear contrast between the focus on open national countries in terms of activities, and the activities focusing on trying to penetrate barriers impost the governments and laws. However, contrary to popular belief, there is no concrete evidence that strategic planning does indeed pay off. Many multinational companies are convinced that a global strategic planning will set the business ahead of its competitors hence have plans as long as 5 to ten years ahead (Bhandari 2018).
Bhandari further points out the various approaches that multinational businesses often opt for or consider during the development and implementation of their global business strategy. These include political imperative, economic impetrative, quality imperative, and administrative coordination. Firstly, political imperative refers to using a country responsive-political approach in strategic planning for the host nation. An example of a country centered strategy by Thums Up in India which Coca-Cola bought in 1993 from an Indian bottler. Thums Up was created in India soon after Coca-Cola left India. The taste of Thums up is similar to that of Coca-Cola but local buyers have been more interested in Thumbs Up.
Bhandari (2018) explains the economic imperative as a strategy focusing on cost leadership, segmentation, and differentiation. This strategy is more relevant in modern times as prove plays a vital role in consumer interest and a major contributor to the consumer’s purchasing decision. Thirdly, as part of an effective global business strategy, taking into account the quality imperative entails the business’s commitment to consistent improvement in the product or service. However, this is dependent on the attitude of the consumer in terms of the rise in expectations and service quality. With the rise of expectations, the company ought to keep up with providing more improved or advance products in order to stay competitive in the host nation. Lastly, Bhandari (2018) talks about the administrative coordination approach. In this approach, the firm makes strategic decisions on the basis of advantages and merits in each individual situation rather than applying a one-size-fits all strategic decision making process. An example of this is Wal-Mart which has successfully managed to spread its branches into South America. However, the business continues to face multiple challenges in terms of adaptation not only to local consumer taste but also to other factors such as finding the right suppliers who can supply products according to the Wal-Mart specifications of packaging that is easy to handle and quality control. Other challenges include struggling with timely delivery in places of consistently heavy traffic.
Multinational companies combine these approaches (economic, political, quality, and administrative) in the company’s global strategic plan. Also, strategic position plays a vital role in strategic business planning for a host nation. The intervention and participation of the host country’s government plays a significant role in the market policy, hence, these laws and regulations control the entrance or penetration of the multinational company. A business may opt for an international or cross boarder ventures to create strategic alliances. However, such joint ventures need to have a dominant parent company and the other one a dependent company. In other words, joint ventures with both companies sharing the responsibility of management have a greater risk of failing than those which do not. Join ventures such as Sony-Ericsson, Renault-Nissan, HP and Canon have proven to be a success, however, others such as BT and AT&T’s, GM-Fiat, etc. have proven to be quite a disaster. The key reason behind the success or failure of such ventures is the way management responsibility is shared (Welch 2007). Additionally, there is a much greater risk of friction or conflict in alliances over disagreements on sharing the contributions and returns. Such alliances often result in a sense of competition among themselves where one sought to access the capabilities of the other.
The institutional environment of the host nation exerts regulatory pressure on the firm which can be generated by the state or even the host notion society. Certain types of institutional environments offer better opportunities and advantages for certain activities. In the context of institutional environment and to encourage direct forging investments, it is important of a country’s government to make the host country’s prevailing institutional environment an attractive one (Hitt, Li and Xu 2015). A company’s entry into markets is greatly affected by the host institutional environment as it partially influences the way or the mode of entry of the company. The more restrictive the host nation’s institutional environment is, the more the chance of the company take the joint venture root instead of wholly owned subsidiary. Such a limitation is often the host nation’s government’s attempt to aid local development and the development of local businesses through joint ventures with international companies. Such a partnership with local firms can help multinational companies obtain legitimacy while also helping local partners to fill in the gap between local resources and the MNC. Joint ventures with international companies are often a win-win situation where the foreign company can successfully integrate into the local market with the help of a local company and the local company, on the other hand, can gain better business and better recognition thanks to the foreign company. Ventures also often tend to ease the foreign company’s pressure in the context of culturally distant markets.
Hitt, Li and Xu (2015) further reveal that in situations where the culture of the home nation is vastly different from that of the host nation, firms will be less likely to dive into direct investments due the market being culturally distant. However, some companies may see the cultural gap/difference as an opportunity to communicate or interact with host nation consumers to not only understand consumer behavior but to also use the culture difference to their advantage and be innovative in new predict launches or advertisements which will help the business develop a personal relationship with the local customers (MIR-AOM 2016). An example of this is the Multinational American company McDonald’s. McDonald’s has successfully managed to integrate and operate in 118 countries worldwide with about thirty four thousand restaurants in the world (McDonald’s n.d.). The key elements to the enormous success of McDonald’s lies in the brand’s global branding strategy. The company been consistent throughout the years and in each country it operates in. There has been a sense of uniformity in the quality and the experience in all McDonald’s branches regardless of the location. Additionally, McDonald’s has proven to be a very culturally conscious brand. It is well aware that the consumers ate the bps and the biggest players, in the United States, the largest target market is children and hence the invention of their “Happy Meals” with the image of the happy clown Ronald McDonalds.
Part of the global success of brands such as McDonald’s is the ability to adapt to local needs, culture, and trends. Not just McDonald’s but others such as KFC, too, change their menu to suit the taste of the local consumers. For example, both KFC and McDonalds have adapted to a vegetarian option in their menu to cater to the large vegetarian population in India. At the same time, recognizing rising consumer trends, McDonald’s introduced healthier meal options such as salads in the United States due to increase in the trend of a healthy lifestyle, also, in Croatia, they serve the Tzatziki wrap and in Thailand they offer the Samurai Pork Burger – both of which are unique to their respective locations (Filice, kirk and McVicker 2018). Since the success of the company’s global business strategy has been proven time and time again, companies such as McDonald’s may not need to venture with local companies in order to successfully launch themselves in a new market. However, other companies which have a more specific target market, unlike McDonald’s (which has a large target market since most of the population of any country does tend to eat out once in a while if not regularly), cannot simply enter markets as easily.
Companies offering luxury brands and luxury cars have a more specific target audience and hence cannot fully operate in all corners of the world. Hence, it is important to not only take into account the host nation’s comer trend and culture, but also the feasibility of the product in the host nation. Fast cars are not feasible in over populated countries such as China, similarly, high-end luxury cosmetics may not perform very well in third world or poor countries where the majority of the population struggles to make a living. Hence, the mode of entry is an important factor to consider as part of the host nations context and the company’s global business strategy. While joint ventures and merges may be the practical step forward, acquisition, too, may work for other companies. Companies such as Coca-Cola have acquired companies such as Tums Up to deal with competition and to gain a greater market share. However, it is important to also take note that cross boarder acquisition, or international acquisition can be a tricky situation as the cross boarder performance of the company may suffer die to the distance between the company’s home nation and the host nation (Hitt, Li and Xu 20015).
The international market has been ever growing especially in the past decade. With the increase of globalization, the world has been better able to connect across boarders and oceans. Companies have been and continue to be better able to expand outside their home nations to conduct business in host actions. However, although globalization has made accessibility a lot easier, conducting cross boarder business continues to remain tricky. Having to take into account host nation context in terms of consumer taste, consumer trends, and consumer loyalty towards their won local companies and brands. Additionally, government and political relationships between the host nation and home nation. The image of the home country of the business or product plays an equal role in the success or failure of the company in the host nation. If the product comes from a well reputed and developed country then it may be well received as opposed to the opposite. Multiple other factors play a significant role such as local culture and the firm’s adaptability, etc. For a business to successfully mark its entry into a new international country, it has to keep the consumer at the center and market/modify the product according to local taste and trend.
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