International Business Management Essay Sample
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Introduction of TOPIC
A Local company find it beneficial on going global. The going of global enable the company to expand its market size through the access of foreign markets. This will have an adverse positive impact of increasing the company’s level of sells, that imply increased profitability level in the situation where a company is profit maximizing. The decision for the company to go global require an evaluation of the possible market opportunities that are certain to improve the company’s productivity. Therefore, going global by a company become significant only if the company is likely to improve its overall performance.
Other than improving the company’s performance, going global can be perceived as a risk management strategy. This follows from the fact that different market locations face varied market conditions that are certain to affect the company’s performance in varied ways. Following these mixed effects on the company’s performance, the company can be able to enhance sustainability in the long-run on the reason that, it can depend on other markets when some markets do not seem to be performing as expected (El-Said and Becker, 2002). Therefore, it can be perceived as a policy that is meant to reduce the risks associated with market changes.
Going global by a company can also be perceived as a means over which a company is meant to improve its competitiveness. This follows from the fact that, going global will pose greater competition challenge to the company, that will provide an incentive over which the company will improve its efficiency and at the same time, promoting its competitiveness in the local market. Therefore, portraying the going of global as a strategy to move a company to a higher gear of competition that is meant to improve the company’s market share in the local market(Alon and Shenkar, 2003).
The act of going global by any company does not just happen arbitrary for it to realize the benefits of going global, but it requires the designing of strategies in a rational manner. The rationality of designing the strategies need to be guided by the designing officers looking at a number of issues. The issues need to be considered include the market condition at the targeted foreign market, economic policies in the foreign country, business practices and also the culture of the societies in which the company is intending to venture among other issues as they will addressed in the rest of the paper.
The paper aims at addressing on the possible strategies that PALTEK Company should take in it extending it operations to foreign countries. The paper starts at providing the overview of the company on identifying its operations and the nature of the industry in which it is operating. This will provide a basis over which the possible strategies will be formulated in relation to the conditions in the foreign market. All this will be guided by the possible attempts that can be put in place in overcoming the challenges that are certain to arise in an effort to go global. The paper then provides the possible remedies that can be put in place on ensuring that the strategies are effective as provided, and the multiple execution of strategies does not compromise with the intended results of each strategy. The paper then provides recommendations on what is best for PALTEK Company following its current state. Lastly, a conclusion is provided that sums up the discussion by highlighting main points as given in the paper.
PALTEK is a manufacturing company, that produces both high mix and low volume printed circuit boards. It is based in Bedfordshire county in England, with an employment base of 70 persons. The company hits a turnover of $5 million annually. PALTEK imports a number of its components from the international market. It is products are mostly supplied to the participants in the B2B market. It also serves clients from other sectors that include Information technology and the military sectors. Currently, the company is serving the United States market. The company has been making attempts to enter into the international market, but its has not been having it a success. The failure to enter successfully into the international market is attributed to the deficits that are within its overall strategies. That is, the strategies are oriented in a direction that is not certain to address the required measures to enhance a breakthrough into the international market.
The current objective of the company is to go global. The target market is the G7/8 countries. The aim for targeting this market follows from the advanced economic state of these countries. The company has however been trying to venture into the European markets including the United States. The choice for to expand its operations to the European market follows from the reason that, in these markets, there are an intensive utilization of electronics and the existence of a reasonable military manufactures that imply a potential market that is certain to improve its sales volume. The presence of potential purchasers is also another reason that supports the venture of this company into these markets. International market seem to be the way forward for realizing desired performance, and for that matter, the company is aimed at providing the very products supplied in the United Kingdom market to these foreign markets.
PALTEK company had received a proposal from a Swedish company, TONEX, to form a partinership that was meant to provide TONEX company an opportunity to enter into the Nordics market. The TONEX company is larger than Paltex. They provide similar services. The partnership did not however materialize following the changes that occurred in TONEX management that thrashed the proposal. PALTEK has operations in Asia but mainly with the suppliers.
In an attempt for PALTEK to extend its operations to the G8 countries, that is, France, Italy, Germany, United Kingdom, United States, Canada, Japan and Russia, the company is likely to face a number of challenges that require the designing of specified strategies that are meant to enable the company to overcome the challenges. The possible strategic challenges that are certainly to emanate following the varied social, economical and political situations that are inherent in respective countries are as follows;
In an attempt for PALTEK to global, its likely to face a competition from other international and multinational companies in the industry operating in the target market. There is also a possibility of their being a competition from the domestic companies that are operating in the same industry. The competitiveness of the company is what that will determine its command in venturing into the market (Rugman, 2002). Competitiveness can only be earned by the company if the company is capable of providing the goods at a competitive price and still realize profits. That is, the products should be offered in the market at a competitive price if the company expected to realize sales that are certain to enable it enter into the market. Despite the ability to provide the products at the market price, the company should also not compromise with the quality of the product, that is, it should be a reflective of the economic sacrifice by the consumers, otherwise the demand for the products will be low.
Therefore, in PALTEK attempting to enter into the industry in these foreign countries, it should ensure that it is competitive enough both in the price war and also in providing high quality goods. This follows from the reason that the incumbents have already established, and they may be having their respective market share that they have build overtime. For the company to enter the market dominated by incumbents, the company should be prepared to provide its products into the market at a price that should be slightly below the market price, and products of good quality so as to sway the market into the buying of its products (Tulder and Zwart, 2006). The providing of products at a low price will require the company to maneuver the methods of manufacturing that are certain to enable it to produce the products at a low cost compared to the incumbents in the industry. The low costs of production impacts the profit margin positively, thus advantaging the company to sell the products at a low price while maintaining the desired profit margin. Even after entering into the market, the company should ensure consistency on enabling market sustainability that will enable the company to be profitable in its operations in the future.
- Creating loyalties
The other strategic challenge that the company is certain to face is the ability to create loyalties among its clients. This challenges follows from the nature of the consumers. Consumers may continue to consume the products that they are used to than taking a risk of attempting to consume a product that they have little knowledge concerning its ability to meet their needs (Czinkota, and Ronkainen, 1999). This will pose a challenge to the PALTEK company on the reason that, they are introducing their products in a foreign country, whose citizens are used to be using a particular type of product that is either produced locally or internationally. The consumers in these countries will be skeptical in consuming the products produced by the company on the reason that they have never had an experience to justify the product’s ability to meet their needs. Therefore, regardless of the superior quality of products compared to the ones provided by the incumbents of the industry in these countries, the company is likely to face a challenge of convincing the consumers that their products are worth for consumption, that is, they are likely to meet the expected utility. Thus, the company is expected to design strategies that are to overcome the consumers skepticism, that will enhance the company to realize the desired level of sells.
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Bad human relationship in an organisation undermines the effort for the company to attain its goals. The cultural conflicts will arise in the sense that, some cultural practices and values that are regarded as being good, might be offending to persons from other cultural backgrounds as they may be among the practices that are regarded as either unethical or disrespectful. For example, it is very comfortable to tell someone ‘no’ according to the culture of the persons from the west but it is offending on using it among the persons from the east. The persons from the east feel frustrated when told ‘no’ as it is perceived as a crude way of answering, otherwise, one is expected to use a lesser strong word other than ‘no’ which will imply the same meaning as ‘no’. Another example is of the Latinos who do not use the wording ‘ I don’t know’. They rather lie than saying the wording as it sound embarrassing to them (Punnett, 2005).
Language as part of the culture is also another Cultural factor that is certain to affect the efficiency of the company in these foreign countries. Each and every country has its own national language, that are also used in most business transactions. This will pose a challenge of communication failure. Communication is important in enhancing good performance (Fayerweather, 1990). Therefore, the company is required to lay strategies that are meant to overcome the challenges that are certain to arise following the possibility of the company’s employees having a different cultural orientation compared to the culture of these foreign countries.
- Political polities
Political policies are also certain to affect the effort of the company to enter into the G8 countries market. This follows from the restrictive measures that are taken by various governments on barring or discouraging foreign investors from some countries following the differences in their respective political ideologies (Selmer, 1995). This implies that, acceptance of investments into respective countries will depend heavily on the diplomatic relationship that exist between the countries and the United Kingdom for example, which is the country of origin of PALTEK. The company should expect a cold relationship, more especially in the countries in the east as they seem to be in a political conflict more often with the countries in the west, mostly concerning the issue of terrorism.
This situation will pose a challenge that is certain to undermine the company’s legibility to access these foreign market, thus requiring the need to design strategies to overcome the challenges that arise as a result of political ideology differences between the company’s country of origin and the foreign countries that affect their diplomatic relationships.
- Economic policies
Every country normally has its own economic policies that are meant to improve the economic performance of their respective economies on promoting both economic growth and and economic development, with an aim of improving the welfare of the citizenry (Granstrand, 1992). Some of these policies include the taxation policies and the protection of domestic industries among other policies. Various governments adapt a particular type of taxation policy depending on their respective economic agendas. They use taxation as an economic management tool, that is meant to provide a direction over which economic events should flow. Governments use taxation to discourage or encourage investments in some sectors of the economy, on the basis that, the sectors that are to be promoted by the government are taxed less or exempted from tax compared to the sectors that are to be discouraged. PALTEK being a foreign company is certain to fall short on attaining the gains, otherwise, the company is likely to suffer from the taxation policies on the reason that it is a foreign company.
The essence of the company considering taxation arises on the scenario where the foreign government may make a move of imposing high taxes on foreign companies operating in their land compared to the tax that is imposed on the domestic companies that are operating in the similar industry, like in the case of the United States where foreign companies are double taxed (Korth and Hays, 1985). In the United States, a foreign company is expected to pay tax at branch level and also at co-operate level. This will have a negative impact on the company’s profitability in the foreign market, as its competitiveness in the price war is certain to decline. This calls for the company to design strategies that will enable it to survive in the foreign market regardless to the tax burden.
The offering of subsidies to the the local domestic companies by the foreign governments is also another factor that is certain to disadvantage the company in it’s operations in the foreign countries. This will enable the domestic companies to provide their products at a lower price compared to the foreign companies in the foreign markets. Therefore, requiring the company to device strategies that will enable it to overcome such induced unfavourable competition.
Following the above possible strategic challenges, the company requires to design some specified strategies that are meant to solve the challenges that the company is likely to face on going global. This follows from the concept that, strategies are meant to enable the company to overcome the probable challenges that are certain to occur in the future on ensuring sustainability in the market and also improved performance. There are a number of possible strategies that can be used to address the aforementioned strategic challenges. They include the following as provided below;
- Innovation and inventions
Following the strategic challenges that the company is likely to face as pertains to the competition, taxation and subsidies, the company should invest on encouraging inventions and innovations. The innovations and inventions will enable the company to improve its competitiveness in the foreign market in both enhancing market sustainability and also profitability both in the short-run and in the long-run (Brewer, 1985). Innovations and inventions can only be realized within the organization if the company allocated a reasonable emphasis on research and development as pertains to the operations of the industry. This require the company to devote resources in research and development, and also identifying and utilizing the talents in the company’s labour force that are certain to enhance the desired breakthrough.
In making the inventions and innovations beneficial to the company, the researchers should focus on three main objective when carrying out their operations. The objectives include; they should try to reduce the costs of production, the innovations should address customer needs, and they should focus at making the company’s products unique compared to the other competitors on the positive side. Innovations that are directed to reduce the cost of production will have an impact of enabling the company to compete favourably with the incumbents in the price war when entering into the foreign markets, and it will also enable the company to survive in the market even when the economic polices in the foreign markets are unfavourable. For example, through the producing of the products at a low cost, the company will be able to survive after it has been taxed heavily or after the domestic competitors receiving subsidies.
It will survive as its profit margin will still be realized even after incurring a large expenditure (. The Innovations and inventions should be aimed at enhancing customer satisfaction as the first priority. The aim for ensuring customer satisfaction is to ensure that the company’s products are relevant according to the market conditions, that is, the company can only attain market sustainability if its products are relevant according to the requirements of the potential consumers, otherwise, all the company’s operations will be regarded as being irrelevant which posses a threat to closing down. The innovations should aim at differentiating the products offered by the company in order to enable the consumers to easily identify the products. The differentiating features should however be pleasant to the consumers on an attempt to gain market share.
- Advertising and public relation building
Other than the company producing superior quality products, the company is required to create public awareness concerning the existence of such products, and on how to identify and access them. This should be attained by the use of relevant forms of media that are certain to transmit the information in an effective and efficient manner to the public. The choosing of the media should be guided by the cost effectiveness of the media in enabling the company to realize its goal (Fatehi, 2007). The most appropriate forms of making advertisement include the using of local radio and television stations, business directories, daily news papers and Internet. All these should be done separately at the local level of each country.
Public relations should also be enhanced. This can be attained by the company designing feedback channels from the public. The channels should include the providing of the company’s contacts to the public on receiving the public opinions concerning their desires. This is best attainable by providing telephone numbers on the adverts done and designing of the company’s website in a manner that makes it easy for the public to access the company information, and also sending of information. The information will be useful for the purpose of decision making that will enable the the company’s decision making agents to make rational decisions that are certain to address the needs of the company comprehensively in respective countries.
- Cultural practise
The company should deploy personnels in these countries who are acquitted to the cultural practices in each respective country. That is, persons who have had an exposure to the culture in each of the countries. The challenges that are posed by cultural diversities can also resolved by the company engaging the locals in these foreign countries into its operations, that is, they should allocate them with responsibilities. The responsibilities allocated to the locals should be guided by the sensitivity of the posts in relation to public relations. They should be allocated responsibilities that mostly involve the ‘one on one’ interaction with the customers. This will reduce the possibility of their being cultural conflicts that may impact the customer base negatively, and the effort to create loyalties.
Remedies to ensure the effectiveness of the strategies
Despite the clarity of the strategies provided above, the company is expected to take some remedies that are meant to ensure that the expected results are optimized. The possible remedies that the company should take include the following; measures should be constructed to evaluate the impact of the various strategies both in the short-run and in the long-run. Necessary adjustments should be made on the strategies on timely basis if the conditions change that are certain to affect the effectiveness of the strategies. The strategies should not also be so rigid (Haak, 2004). The company should copyright its innovations and invention at all times on ensuring that their practices are not imitated by the competitors. This will in turn enable the company to take advantage on the market changes on ensuring market sustainability and profitability. In the case for making advertisements, cost effectiveness of the various modes of advertisement should be evaluated and scheduled in times when they are likely to reach a large audience. That is, advertisements should only be run of popular radio and television stations, and the scheduling of the advertisements should be done at times when most people are listening to radio or watching television. Advertisements on Internet should be done on the sites that are frequently visited, that include sites for companies like goggle and yahoo
The PALTEK company should proceed with the plans of entering into the identified potential foreign markets. The entering into these markets should follow after the company undertaking due diligence about the viability of the various markets, and on the best strategies to adapt on ensuring success. This is meant to eliminate the tendency of making decisions and designing strategies in an arbitrary manner as the market conditions are certain to vary from one market to the other, posing the risk of the company’s operations becoming irrelevant in respective markets.
The company should not enter into the markets at once, that is, it should first start by entering into one market after the other. This will enable the company to monitor the success steadily by avoiding mixed reactions that may confuse the strategy refining procedures. The scale of operations should be small as the start as an experiment and then later expand gradually by making the necessary strategic changes in relation to the expansion requirements.
PALTEK company’s move to go global is valid following the nature of the industry. The target market is also relevant because of the market condition. On going global, the company is certain to face some strategic challenges that include; competition from the incumbents, hardship to create loyalties, cultural diversities, political issues, and economic policies. The Strategic challenges can be overcome through innovation and inventions, creating an affective public relation, and incorporating the locals in the business operations. On ensuring success from the strategies adapted, the company should take some remedial measures that include the assessing of the results of the strategies timely, right choice of the public relation practices among others.
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