Custom «Strategy in International Business» Essay Paper Sample
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Firms competing at an international level face the pressure for cost reduction and the pressure to be locally receptive. The pressure for cost reduction arises when the companies try to lower the unit expenses incurred. On the other hand, the pressure to be locally receptive occurs when the businesses try to distinguish their merchandises and marketing approaches in different nations in an effort to accommodate various demands arising from native differences in client preferences, trade activities, delivery networks, competitive locations, and government guidelines. The ability of the firm to differentiate the products is a great determinant of success.
The four strategies that organizations utilize to compete in global markets include international strategy, the localization strategy, the global standardization strategy, and the transnational strategy. The global strategy deals with products from a global standpoint. It is opportune in situations of low pressure for local responsiveness and decreased expenses. The global standardization strategy involves using standard marketing in international countries. It is suitable in circumstances of high pressure for decreased costs but little pressure for local responsiveness. The localization tactic makes firms adjust their merchandises mainly based on the local market. It is suitable in circumstances of intense pressure for national receptiveness and little pressure for decreased costs. Lastly, the transnational method involves placing a greater focus on global trends while regarding local market scenarios. It is applicable in situations of high pressure for decreased expenses and national receptiveness.
When the competitive edge of the enterprises is based on control over exclusive technology, licensing, and start-up procedures should be eluded so that the threat of losing rights over that technology is reduced. In addition, for businesses with a competitive edge derived from management principles, the threat of losing rights over the managing capabilities to franchisees or local businesses is not substantial. Consequently, many businesses prefer a mixture of franchising and affiliates to govern the franchises in a native country. The affiliates may be wholly-owned or act as joint ventures. However, companies have recognized that collaboration with national partners serves best for governing affiliates.
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Roberto switched from a strategy that emphasized localization to a global standardization strategy, since globalization enforces branding. The benefits of this strategy include efficiency and lower operating costs. The efficiency arises from the centralized management, whereas the costs reduction arises from economies of scale. Buying raw materials in large quantities significantly reduces the operating costs of the company. Moreover, the economies of scale also reduce labor, packaging, and marketing expenses.
The major limitation of the globalization strategy is the macroeconomic risk. Pursuing a global strategy does not apply to all markets. Certain markets have precise tastes and are sensitive to pricing. Daft shifted from the global standardization strategy, since he wanted to implement an approach that would grant more autonomy to individual countries. Nevertheless, Daft’s localization strategy did not attain the desired results since it involved higher operational costs and had no decentralization coordination.
The approach adopted by Isdell aimed at responding to nations in alignment with their particular tastes and preferences. The benefits of this approach include attaining an equilibrium, retaining local flexibility, reduction of operational costs, receptiveness to organizational structures, and embracement of national preferences. ON the other hand, the major risk of the current approach is that the competitiveness is not guaranteed automatically. Furthermore, it is difficult to sustain high standards.
Consumer’s tastes and preferences are always changing. Therefore, it is the responsibility of a firm to conduct periodic researches that will identify such changes. Consequently, the company can restructure the products and services to ensure that they are in a high demand amongst the consumers. Globalization has intensified the changing preferences. It is caused by the fact that clients have a wide variety of service providers to choose from and they can order products from anywhere in the world using the organizations’ websites and have the products delivered to their homes.
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Licensing and export regulations in the global market often hinder the formation of new companies. It is hectic and costly for a foreign firm to begin operations in a host country as a new corporation. Nevertheless, when the firm acquires a wholly-owned subsidiary that is already operational, it will not face any hindrances in delivering products and services.
The benefits that Cemex brought to the host country include the transfer of technology and skills. The firm has attained a competitive advantage due to the embracement of technology in mapping production with customers’ demands and services. These resources are availed to the host country, while its economy benefits from the jobs created and the spending made by the company.
Cemex decided to expand globally, since the local market was volatile. Furthermore, the company’s product was greatly required by developing nations that had not yet fully attained their potential.
Cemex decided to make acquisitions since it prevented the company from overcoming the market entry barriers, while simultaneously ensuring that local responsiveness is sustained. The acquired company usually has its customers already. Thus, Cemex obtained a sufficient client base from every acquisition it made in various countries.
Majority control is important to Cemex, since it ensures that local companies cannot take away their technological and skill resources without the firm’s permission.
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In India, McDonald’s does not offer burgers with beef or pork, since the people in this region do not eat these products due to religious reasons. The Big Mac is replaced with the Chicken Maharaja with two chicken patties.
In Germany, the McCafes serve macchiato with tiny and attractive tarts. Moreover, McDonald’s in this region serve beer. Localization in Brazil has been achieved by creating a family experience. All members of the family in the country tend to dress good-looking attire and spend most of their day at McDonald’s.
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