GSPLO 1
The process of global economic integration draws significant attention to global markets and competition. While many organizations seek to get benefits from the global competition, they still fear that is more prone to harm them, rather than to benefit (Gerber, 2012, pp.1-2). Therefore, the rationale for becoming a global competitor or refusing from this idea requires careful consideration.
First of all, being a global competitor means that a company will have access to new customers. This advantage is especially important, if the company’s products are already well developed at some markets, and the demand slows down. If the products by Friend-Z already successfully compete with others at the U.S. market (e.g, with Starbucks), the company may ensure growth by expanding to other markets. As the company already had experience in analyzing the external and industry context and subsequent development of a marketing strategy, it has a chance to be successful in other countries.
Secondly, expanding to other markets means that a company will face adaptation-related challenges, and, consequently, become able to make best use of its core competencies. If Friend-Z management views competition as a challenge, it can become a useful strategy to strengthen the company’s competencies. At the same time, functioning at different markets can help to spread business risks, so that fluctuations within an initial market are not fatal for a business.
Finally, global competitiveness reduces a threat of being overplayed at the domestic market. If Friend-Z does not go beyond their domestic market, it may happen that a strong competitor enters the U.S. market, threatening the position of Friend-Z. Global competitiveness mitigates this risk.
The major disadvantages of global competition deal with the interconnectedness of the world’s markets and the need for local adaptation (PwC, 2012, pp.1-3). In the modern world, the events, happening in one country tend to extern significant influence upon situation in other locations. The interconnectedness of world markets levels the risk-mitigating advantage of global competition. Thus, if going global will not help Friend-Z to mitigate risks, stemming from possible instability at the U.S. market, the better option may be to strengthen the company’s position at the domestic market. Secondly, expanding to new markets is always associated with adaptation-related risks and costs.
GSPLO 2
When becoming a global competitor, it is crucial to determine the market to be entered first. A range of factors needs to be taken into account with regard to the determination of a destination for growth. Apart from considering various industry-related factors (e.g., barriers to entry, bargaining power of suppliers and customers etc.), it is important to analyze external environmental differences between a domestic and destination markets.
The most helpful tool to do so is PESTEL analysis. The abbreviation PESTEL stands for political, economic, social (or socio-cultural), technological, ecological and legal. Firstly, Friend-Z needs to consider the destination from the standpoint of political regime and stability. In this regard, it is especially important to determine an extent to which the government tends to influence the business. For Friend-Z, functioning in the U.S., it may be rather hard to adapt to the challenges, stemming from political instability and excessive governmental intrusion into economy.
Secondly, the type of economy needs to be taken into account. For Friend-Z it will be hard to get adapted to plan-based approach. Furthermore, the general state of economy needs to be envisaged.
Socio-cultural factors play an important role in growth-related decisions. It will be easier for Friend-Z to operate in a country, where culture, language, traditions and attitudes are similar to the ones within its domestic market. Crucial technological issues, influencing the choice of a destination for growth, may deal with the extent of infrastructural development in a country. Ecological factors do not exert significant impact upon the choice of a market to expand to. Finally, legal issues are of great significance for choosing a new market, especially with regard to the regulatory environment, taxation and sanitary norms. Based on the above analysis, it is possible to state that expanding to other regions of the U.S., Canada and EU countries can be viewed as best options for Friend-Z.
GSPLO3
Defining the mode and time of entering a new market is an important element of the company’s growth strategy (Roberts&Berry 1984). The peculiarities of Friend-Z business allow considering launching a joint venture or using foreign direct investment as major possible strategies for growth. The most important advantage of a joint venture approach deals with the fact that it allows making best use of local knowledge and understanding of business environment. In this regard, it is worth emphasizing that partnership is viewed as one of the crucial determinants of success under modern globalization circumstances (Schmitz, 1999, p.628).
At the same time, in case Friend-Z selects launching joint venture, it will face the difficulty of adapting to the new mode of cooperation and share revenues. However, joint venture is also a useful tool for sharing risks. The choice of whether or not to engage into a joint venture shall be based on the availability of an adequate local partner and a thorough analysis of legislation, governing the functioning of joint ventures. Foreign direct investment means controlling assets in one country, being physically located in another one. It is highly useful to avoid costs, associated with exports. Furthermore, FDI is often associated with significant taxation-related preferences. At the same time, there is no element of risk-sharing, and Friend-Z will have to manage all the adaptation-related issues itself. An FDI-related decision shall be based on the individual assessment of a given market, especially in light of differences between it and domestic market, and respective laws.
GSPLO 4
As it was already mentioned, a good idea for Friend-Z is to expand to Canadian market. In this regard, it is important to take into consideration the recent change of government, and current economic mild recession. In socio-cultural terms, Canada is close to the U.S. They share the language, and people may have common views, attitudes and traditions. Furthermore, Canada has highly developed technological and legal infrastructure for business development, making it rather easy to enter Canadian market. As Canada highly favours FDI in legal terms, it is worth considering the FDI approach to entering Canadian market (Nazareth, 2016).
Conclusion
Becoming a global competitor allows companies get access to new customers. The challenges of market interconnectedness and adaptation need to be specifically addressed with regard to a company’s entering a new market. It is also important to ensure that a variety of external environment factors are taken into account. FDI and launching a joint venture represent major options for entering new markets by Friend-Z. It is advised that the company tries expanding, starting from the Canadian market.
References
Gerber, D. (2012). Global competition: law, markets and globalization. Oxford: Oxford University Press
Nazareth, L. (2013). Foreign investors love the developing world – and Canada. Retrieved 17 February 2016 from http://www.theglobeandmail.com/report-on-business/economy/economy-lab/foreign-investors-love-the-developing-world-and-canada/article12871328/
PwC. (2012). Growth in new markets. It is all about how. Retrieved 17 February 2016 from https://www.pwc.com/gx/en/consulting-services/globalisation/assets/pwc-globalisation-growth-in-new-markets.pdf
Roberts, E.B., Berry, C.A. (1984). Entering new businesses: selecting strategies for success. Alfred P. Sloan School of Management WP, 3 (84), pp.1-82
Schmitz, H. (1999). Global competition and local cooperation: success and failure in the Sinos Valley, Brazil. World Development, 27(9), pp.1627-1650
