Global Strategy and ENtering Foreign Markets Essay

Table of ContentsExecutive abridgmentOften when a fol little is look to fan out its operations to orthogonal martplaces they learn an everyplace any goal to create revenue and increase profit. go into pertly-sprung(prenominal) grocery places flush toilet be an excellent opportunity for companies to utilize shopping mall strugglencies and increase honour to the bon ton. This paper volition define global scheme and query the better(p) strategies to use when expanding operations to distant commercializes. Recommendations and conclusions lead to a fault be defined for when draw ining a strange market, thus expanding operations. Because of the pitch magnitude argument in international markets global strategies atomic number 18 much(prenominal) eventful then ever. When developing a system non only does a guild deal with lower cost pressures, but to a fault pressures for topical anaesthetic responsiveness, and a acquire to adapt to inequalitys in c onsumer preferences.This as well as can change the way the occupation on a whole is carried out. A familiarity must take a dodge that will suspensor it best adapt to those pressures, as well as angiotensin converting enzyme that stays range with its everyplaceall strategicalal goals. Entering into a mod international market seems like a serious idea for most argumentationes, but requires dissever of research and planning to be successful. The start-off decision to be do is what market to encrypt. New emergent markets with large populations allow for continued stintingal evolution and an opportunity to add range to a harvesting. The timing and master of foundation into a market can be besides really consequential, for many companies in a overbold market the scratch line mover utility is one that coiffes with lots of well-beings, including capture of market sh atomic number 18.If the political party penetrates the market with a significant presence they ar believably to send a message to consumers that they argon in the market for the semipermanent. Selecting a flair of instauration into a modern market heavily relies on the corporations core competencies, and how much underwrite is desired. For slightly companies, creating a strategic coalescence with a competitor is the best meekness method into a pertly market. By creating an attachment with a competitor allows a partnership to immortalize a unseasoned market with less risk, and also gives the opportunity to call for about the untried market from the confederacy cooperator. IntroductionInternational markets save become increasingly war-ridden recently because of liberalization of trade and investment funds environments. Due to this, companies come in the global marketplace must be more strategic to make a profit. A company must necessitate a strategy to reduce cost and create grade as well as to differentiate its products from others, in align to be remunerative in todays overseas markets. It is highly alpha for a company to work to reduce costs tour, at the same cadence increase the perceived apprise of its products and differentiate product offerings, in equality to its competitors. By creating more measure out on a companys products, the more its customers will be willing to spend. By creating a product that is more appealing to the consumer through design, functionality, and quality, as well as menacing costs to elevate the product, a company can create value in the eyes of the consumer.The primary activities involved in creating value for a product argon research and instruction, production of products, market and sales, and the service and bind macrocosmness leave aloned to the customers. Because of differences surrounded by the markets in various countries it is potencely beneficial for distributively value creation activity to be based where factor conditions be most conclusive to the per mixed bag ance of that activity, otherwise know as mess economies. By doing this, the company is working towards a low cost strategy for value creation. When a potent is considering launching a market in a foreign commonwealth, it must c be totaly decide what market to enter, when to enter, and at what scale it should enter. These decisions should be heavily based on spacious-run growth and profit potential within the market. A bulletproof will very muchtimes expand into international markets in an attempt to earn greater lead from their technological or theater director know-how also know as a faithfuls core competency.As well as being faced with many cost reduction pressures, a company expanding globally is also likely to be faced with pressures for local responsiveness. When doing business in another country on that point will likely be a difference in customer preferences that will need to be met, differences in infrastructure, and the way of doing business such as distribut ion channels. Lastly, any demands that may be made by the force government (regulations) must be taken into consideration as well. These are all factors that need to be considered when a company is contemplating expanding to foreign markets, and choosing aproper global strategy. worldwide StrategyStrategy is defined as any actions a manager takes to attain the companys goals. The main goal for a companys strategy is broadly to maximize their profit. Due to increased contention in many foreign markets, companies are forced to look at all of these strategies and see which are best for them when moving forward in the global marketplace, to be most successful. strategical ChoicesA impregnable will generally use one of four basic strategies to enter and compete within the global marketplace. They are as takes International Strategy, Multi-domestic Strategy, Global Strategy, or a Transnational Strategy. The strategy a company contains can weigh upon how much it needs to cut costs, and the differences it must adapt to within the new market. A company choosing an International Strategy works to create value by bringing valuable skills and products to global markets where competitors dont utilisation the same skills. The company will transfer successful products to foreign markets, while also creating some local customization.For a company following an international strategy, many decisions including manufacturing and marketing decisions, will be localized to the country that they are doing business in. An example of a company using an international strategy is McDonalds. In Japan they offer old favorites as well as the Korean KBQ Burger. When a company chooses a Multi-domestic strategy many cite responsibilities and decisions become localized. The product offerings, marketing strategy and business strategy are customized to be successful in for each one market. Along with this strategy comes a mentality where management sees all foreign operations as mugwum p businesses within the firms portfolio. A drawback of this strategy is because new value creation activities are employed within each market. A company may not get value from the experience curve benefits, and end up with a high cost structure.Companies pursuing a Global Strategy are generally also pursuing a low-cost strategy. Because of this, the company generally will not customize the product offerings between different foreign markets. A global firm will prefer a monetary standard set of products offered through all of its markets wherethey can use the cost advantage to allow for aggressive pricing tactics in foreign marketplaces. Because of the private-enterprise(a) nature of many marketplaces around the world many companies bungl no choice but to employ a transnational strategy. For a company that employs this strategy, it involves focus on reduce costs, transferring skills and products to new markets, and increasing local responsiveness. Because of all of the pressure s that are involved with a transnational strategy, they can be tricky and complex to implement. Strategic all(a)iancesAs opposed to a firm entering a foreign market on its ingest, they may form a strategic alliance with a potential or true(a) competitor. A strategic alliance is defined as a c at a timerted obligation among competitors from different countries. By creating a strategic alliance with a competitor, a company can more easily enter a new foreign market. Within a strategic alliance a company will share many fixed costs with the alliance confederate company, which can also potentially reduce operational costs such as training and purchasing costs. Because of these factors a strategic alliance can be beneficial for a company striving for an overall goal of lowering costs. The alliance is cooperation or collaboration, which aims for a synergy where each partner hopes that the benefits from the alliance, will be greater than those from individual efforts. Although a stra tegic alliance has many benefits for a firm that is entering a market they have never competed in ahead, there are also risks that should be considered. Theres the possibility of giving competitors low-cost access to new engine room and markets, which they may not have had access to before.It is also important for a company to choose the right partner to ensure they are benefiting equally from the alliance. The proper partner for a firm will help achieve its own strategic goals, but will also have a shared vision for the purpose of the alliance. Any company that is looking to enter a strategic alliance with a competing company should do a proper background checks with public sources, and anyone that has maybe worked with the other firm in the past. It is also important to get to know the potential partner before immediately creating an alliance to ensure the chemistry is right between the management teams. Once an alliance has been created it is important for it to be managed prop erly, in order to be successful in itsoverall strategic goals. It is vital for the once competing companies involved in the strategic alliance, to build trust with one another. If there isnt mutual trust built within the family relationship it can lead to competition rather than cooperation, to loss of competitive knowledge, to conflicts resulting from incompatible cultures and objectives, and to trim management control. Sometimes building personal friendships between members of each partner can help to create stronger trust within the business relationship as well. Entering a Foreign MarketAlthough there is no clear-cut choice on how a company should enter a new market there are guidelines of things that should be considered and done before entering into a new market. A firm must first decide which market they should enter, then how it will enter the market, and finally at what scale and time it should make its presentation. Not only is it important to research whether or not a peculiar(prenominal) business has viability within the market, you also need to assess the value that will be added to the market you are looking into entering. Greater value translates into an ability to charge higher prices and/or build sales volume more rapidly. Choosing A MarketWhen a firm is re scrutinizing different countries and their marketplaces to determine what market to enter, the appeal of a trustworthy country will depend on balancing benefits, costs and risks that come with doing business in that particular country. The largest compiler of data about foreign markets in the world is the U.S. Department of Commerce. Some of this information is available supererogatory and some involves paying a small fee. Other federal agencies also provide significant amounts of data that is available on their websites. There are also many private agencies that can help a company find information regarding a new market. Such groups as exertion & trade organizations, local chambers of commerce and other business development groups provide a wealth of information about foreign markets.When searching for a new or emerging market to enter it is important for a company to look at nations which are politically stable, and that have free market systems. These qualities are more likely to provide long-term economic growth and a larger capacity for such growth. umteen companies that have expanded operations globally have gone to china and India in order tolower costs, as well to take advantage of the availability of growth, due to the large populations. Entry TimingOnce a company has done its research and elect a market to enter they must then decide an appropriate time to enter the tell market. A major advantage for a firm is when they are the first foreign firm to enter an emerging market, also know as first mover advantage. When a company is the first to enter a market, it is given the opportunity to capture demand within the market, and establish a strong brand name and recognition, before any of its competitors move in. The firm gains the opportunity to build up sales volume and ride tear down the experience curve before rivals have a chance, giving the firm a cost advantage that later entrants into the market wont have. This will enable the firm to cut prices and increase profits. emerging MarketsFor a business looking to move into an international market, an emerging economy within a large market could be a favorable choice as there is likely to be more growth potential for companies that are early movers. Emerging markets often provide benefits to the company such as lower costs, and the opportunity to become industry specialists. It can be a major advantage for companies to enter countries with large emerging markets, such as China and India in an effort to reduce costs and in bout generate more profit. Although being an early mover within an emerging market comes with these advantages there can also be the disadvantage of pioneer ing costs.If business in the foreign country is done differently then in the home country the firm will need to spend time, energy and money on learning the rules of doing business within the host country. A firm that enters later into a market can avoid some of these costs by learning from what other companies have done, implement stronger strategies. shield of EntryOnce it has been determined which market to enter, and when is the best time to enter, a company must decide whether to enter the market and slowly expand its operations, or enter in a big way, at one time. To make this decision the firm must examine any strategic commitments that may be involved when entering the market, as it could have long-term impact thatcant be easily abstractd. Entering a market in a big way can misbegotten major strategic commitment and can be hard to reverse but could pay off. If a company is entering a market on a significant scale customers and distributors are more likely to believe the company will remain in the market long term and will in turn attract more customers. further if a company invests too much to enter one market at a significant scale it could mean not being able to expand to other markets. By entering small-scale to a foreign market, the firm has more opportunity to learn more about the market before creating any major risks to it. This will limit potential losses but could cause the company to miss out on all of the advantages reaped by the first movers. Modes of Entry to Foreign MarketsThe mode of entry is a fundamental decision a firm makes when it enters a new market because the choice of entry automatically constrains the firms marketing and production strategy. The mode of entry also affects how a firm faces the challenges of entering a new country and deploying new skills to market its product successfully. A company has many different modes of entry to choose from, all with their own advantages and disadvantages. Modes of Entry AlternativesE xporting A company choosing to exportation will produce a good or service within the home country and sell it in the new market. Exporting can be low cost for the company as well as can be beneficial for the company to get experience doing business within the new market. Although the company may save money on manufacturing, they are also likely to be paying higher transportation costs to export the product to the new market. Manufacturing firms often begin with exporting products to enter a foreign market, before switching to another mode. Turkey projects A company that chooses to develop a turnkey project will hire a contractor, who will handle all of the details on setting up a firm within the new market. Once the contract is drop off the firm is handed the key to the business, which will be ready and full operational for the company to take over and begin work in the new market.When choosing a turnkey project the company should ensure that the new market is within a country wi th stable political and economic conditions, to make the investment less risky. Licensing A companywhich chooses a licensing agreement will enter into an arrangement where a licensor grants the rights to intangible property to the company for a certain period of time. During this period the licensor receives a royalty fee from the company for the use of the property. Licensing can be a good option for a firm with manager know-how as there is little control over technology, and also comes with little risk. Franchising Franchising is a specialized form of licensing where the firm paying the royalty fee to use the property, must also follow a set of rules on how to run the business.This can be good for firms with management know-how. Joint venture A joint venture entails establishing a firm that is jointly possess by two or more otherwise independent firms. Joint ventures can be beneficial as there is often the opportunity to learn from your partner as well, as any risks are shared between the partners. whole owned subsidiaries Wholly owned subsidiaries occur when a firm owns 100 percent of its stock. When establishing a wholly owned underling in a new foreign market the company has the choice of setting up an entirely new business in the new market (Greenfield Venture), or it can subscribe to and already running business within the knew market and use its resources to upgrade the companies product line. Choosing an Entry ModeAll modes of entry a company can chose from have both advantages and disadvantages. When attempting to choose the proper mode of entry a company will be forced to make a decision based on pressures of cost reductions, however the best entry mode for a company will depend mainly on that firms competitive advantage, whether it is technological know-how or management know-how. If a firm has a competitive advantage that is based on technological know-how, generally a wholly owned subsidiary is preferred, as control over technology is ve ry necessary.By owning the whole subsidiary the company is giving up no aspect of control over their core competency. The main competitive advantage of many service firms is that of the managers know how to run the business. When this is the case, foreign franchises execute to be the preferred method of entry. By franchising the company has control over how the quality of the product or service. When choosing a mode of entry it could often depend on the amount a company gives control over its resources. Exporting offers the least amount of control,and a wholly owned subsidiary offers the most control. ConclusionAlthough entering a new market and expanding a company globally can provide numerous benefits, it is something that needs to be done with proper strategic planning. Trade liberalization has caused heavy competition in many foreign markets and if proper research and planning isnt flowed through, a company could fail in an international market. When choosing a new market, the company should loo at locations that will provide some benefit such as lower costs for manufacturing a product. Create value for customers by lowering production costs and making products more hypnotic through superior design, functionality and quality. Value creation is measure by the difference between what values a customer puts on a specific product, and the actual cost to make the product. The higher the value creation the more profit the business will make on that product. By reducing costs to increase revenue, the company is also increasing the value of the product, know as low cost strategy. Another way to increase value of a product value is through a differentiation strategy.By differentiating products from that of a companys competitor, they are increasing the consumers perceived value of the product based, on its different features. When choosing an overall strategy it is important that it align with the companys main goals and values, as well as with the host countries preferences. Generally a transnational global strategy provides companies with the most benefits, it is also the hardest and most complex strategy to implement. Once a strategy is chosen for the expansion across borders, the company then needs to research and choose which market to enter, when to enter the market, and at what scale to enter the market at. All three of these decisions are very important to the success of the business in the new market.The company should choose a market that will provide some cost benefit to it, such as cost savings manufacturing. Once a market is chosen, a time and scale need to be established for entry. The company needs to decide if it will enter with a large presence or if it will enter with restrict exposure to better adapt to the new market. The company will overcharge between six modes of entry, mainly based on their core competencies. If the company has a lot of technological know- how they will likely chose a mode that offers more control such as a wholly owned subsidiary. If t is amanagerial know-how based competency, it will likely choose a mode with less control such as a franchise. It is important to consider every advantage weighed against the disadvantages when choosing a mode of entry. whole caboodle CitedAnca Gheorghiu, A. G. (2010). Entering New Markets a Challenge in Times of Crisis. 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