International Strategy
Background to Study
The concept refers to a situation in which an organization ventures into the global market to sell part of its merchandise with a rationale to gain access to new opportunities in the international setting. The notion offers businesses a substantial opportunity to get resources at affordable costs and due to the emerging markets; it is a chance for the multinational organization to prosper. There are numerous benefits attached to the concept of international strategy and include an opportunity for a firm to increase its market share beyond the domestic boundaries, hence, make more profits. An example in place is Coca-Cola, which is a multinational organization whose headquarters is in the USA but has China as one of its significant markets that have rapidly grown compared to the home market. As aforementioned, the approach is beneficial to an organization as it is an opportunity for the business to realize more than average returns, which are significant for the business growth. Venturing into the global market at times offers a business an opportunity to produce at a lower cost as firms can quickly gain access to cheap labor and resources (Laurens et al., 2015). Moreover, the concept provides business organizations a competitive benefit due to the strategic location, a feature that stimulates the growth of the firm.
There are three critical approaches which include the multi-domestic, global and transactional strategies, each using a unique tactic to enhance efficiency in the market so as to respond effectively to changing market demands in the international market. Firms using the multi-domestic approach appreciate the fact that markets are different and thus should be segmented to gain a country competitive advantage. The tactics and operation decision made to run the business varies from one country to another as the products are tailored to meet consumer needs in each region more precisely. Although the strategy helps expand the local market, it is faced with a lot challenges such as high cost of production due to differentiation.
On the other hand, firms that abide by the global approach are guided by the concept of standardizing all of their products across the markets with a rational to achieve efficiency and leverage innovation. An example in place is Coca-Cola as it has the same taste in different parts of the world, an aspect that has made it gain popularity (Yemini & Giladi, 2015). The strategies are advantageous to business as it faces small risks in the international market but has to forego opportunities to develop in the local markets.
Transnational, as the third strategy, capitalizes on achieving both national and global efficiency in the market which is achieved through flexible coordination. One of the advantages of the above approach is that it is very flexible based on market requirement, but can quickly lose standardization goals due to the desire to meet the local needs.
Macro-Environmental Analysis
The PESTLE analysis is often sought by researchers in understanding the external environment of an organization, especially in a foreign market. A firm requires understanding its macro environment so as to develop effective strategies that will be in harmony with the various forces of the market influencing business performance. Moreover, the concept plays an essential role as it helps managers to avoid inefficient strategies that might contribute to the failing of the firm in the foreign market environment. Some of the political issues considered in the evaluation include the stability of the country politics, taxation policies and how they influence business, involvement of the government in the trade agreements in a region and the various regulations concerning foreign trade. Some of the economic aspects evaluated include the economic stability of a country, interest rates prevailing in the market and inflation state and the expected changes. Other issues such as the exchange rates are also evaluated as they play a role in assessing the profitability of business. The socio-cultural aspects considered in the analysis of the macro-environment include the lifestyle of the local people, demographic characteristics to evaluate market demand, the living standard of the people and other cultural values. The technological aspects help assess the extent of innovation in the foreign country hence vital in determining competition level, and the government role in contributing to technological advancement (Yemini & Giladi, 2015). Two other aspects that are based on the understanding of the macro-environment issues include assessing the environmental issues and other legal requirements to operate in the international market.
Implication of Global Competition Industry Analysis
The analysis of the global business industry is achieved through the use of Porter's five forces which helps understand the intensity of competition experienced. Some of the issues that are taken into consideration include the various barriers to entry, bargaining power of buyers and suppliers and threat aspects. The international industry experiences a high rate of competition with pressures to exploit the current opportunities using various tactics such as price and product differentiation (Ning, 2013).
International Entry Mode
Different approaches are utilized for internalization. First, exporting, as one form of entry, include shipment of goods from one country to another and is common in countries with home-based advantage. Licensing, as the second mode of entry into globalization, allows a business firm to purchase the rights to business operations of a different company in a set of countries. Strategic alliance as another approach involves sharing of risks and resources amid firms in the international market and leveraging of technological innovation. Acquisition as a form of entry allows firms to expand into the international market by virtue purchasing all the rights of the foreign market despite its high costs. Although the approach is very costly as compared to the other forms of international expansion used by the multinational organization, the owners have the ability to make abnormal profits as well as overall control of the firm operations (Chen et al., 2016).
References
Chen, P.-H., Ong, C.-F., & Hsu, S.-C. (2016). The linkages between internationalization and environmental strategies of multinational construction firms. Journal of Cleaner Production, 116, 207–216.
Laurens, P., Le Bas, C., Schoen, A., &Larédo, P. (2015).Internationalisation of European MNCs R&D: "deglobalisation" and evolution of the locational strategies. Management International / International Management / GestiónInternacional, 19(4), 18-33.
Ning, S. (2013). Internationalization Strategies of Chinese It Service Suppliers. MIS Quarterly, 37(1), 175-200.
Yemini, M., & Giladi, A. (2015). Internationalization motivations and strategies of Israeli educational administration programs. Journal of Studies in International Education, 19(5), 423–440.
