OnDemand Group (ODG) Strategic report - Assignment Example

? Part OnDemand Group (ODG) – Strategic report Table of contents Introduction 3 Reasons for the firm’s internationalization – market vs/or cost 3 2. Environmental - industry analysis 5 2.1 PESTEL analysis 5 3. Capabilities and Competences 8 4. Strategic choice/ mode of entry 9 Conclusion 9 References Introduction The development of firms in the international market is based on the introduction of strategic plans, which have been appropriately checked as of their feasibility – in terms of a firm’s current position but also the available resources for the realization of the relevant initiatives. OnDemand Group (ODG) is a medium size British firm, as derived from its employees – about 140, as the relevant criterion is set in the definition of medium enterprises established by the European Union authorities (Europa 2011); the firm has managed to develop a wide network of activities globally, by continuously expanding the range of its activities and by developing important agreements with competitors in foreign markets. Currently, ODG is a member of SeaChange International, a US Corporation, a fact that has enhanced the internationalisation efforts of the organization. In UK, the media and entertainment industry, in which ODG operates is highly developed; in the future, the ability of the firm to face the market pressures, both in the internal and the external market, will be related with the success of the internationalisation process, an initiative developed by the firm’s managers in order to secure the competitiveness of the organization. 1. Reasons for the firm’s internationalisation – market vs./or cost The internationalisation of firm is usually decided in order for specific targets to be achieved. For example, in the context of the internationalisation theory, the internationalisation of a firm is considered as decided for transferring ‘superior sources to foreign markets’ (Buckley and Casson, 1976 in Krist 2009, p.25). From another point of view, the learning theory suggests that internationalisation is related to the increase of ‘organizational learning and knowledge’ (Hamel 1991, in Krist 2009, p.26), a target which cannot be achieved by firms that operate only locally (Krist 2009, p.26). On the other hand, the potential benefits of internationalisation can be limited by the costs involved. This view is based on the foreign direct investment theories which emphasize on the high costs usually related to the internationalisation attempts of modern organizations; it is noted that these costs can be higher from the expected benefits; for this reason, it is suggested that monopolistic advantages are available to firms entering the global market, in order for the deficits caused from high costs – and entry barriers – to be controlled (Krist 2009, p.26). On the other hand, Prashantham (2008) explains the internationalization of firms by referring to their network relations; it is made clear that firms which have an expanded ‘network of customers, suppliers or support agencies worldwide’ (Prashantham 2008, p.34) are most likely to decide entering the global market, based on this network’s support. Certain firms are likely to choose internationalization in order to enter neighbouring countries; these countries, usually, have similar cultural characteristics with the country of origin, a fact that facilitates the internationalization process. This mode of internationalization is quite common in Scandinavian firms and it is known as ‘sequential development internationalization model’ (Svetlicic et al. 2003, p.11). At this point, reference should be made to the view of Jones (2009) who noted that the internationalization of a firm should be decided at an early phase of organizational life because in this way the expected benefits can be increased (Jones 2009, p.41). The review of the internationalization efforts of OnDemand Group leads to the assumption that the particular process, which has been in progress almost since the establishment of the organization, has been used as a vehicle for increasing the firm’s market share, securing its position in the market. Moreover, the effects of any failure in the firm’s internationalization can be easier handled since the firm is a subsidiary of a US-based MNC, having the funds required for developing alternative schemes of action; indeed, as revealed through the research developed by Karadeniz et al. (2007) the successful entry of a firm in a foreign market is depended on the firm’s ‘age and size’ (Karadeniz et al. 2007, p.387). 2. Environmental - industry analysis The examination of the conditions in the firm’s environment can help to identify those organizational strategies that most contribute in the firm’s internationalisation. At the same time, the obstacles towards the firm’s establishment in the global market can be made revealed and appropriately addressed. 2.1 PESTEL analysis The internationalisation process of the firm is expected to be influenced by a series of factors: a) Political; the political conditions in UK are stable but in the context of the international market, severe political conflicts have appeared; the operation of OnDemand as a member of the SeaChange International could protect the firm from unexpected social or political turbulences in the global market, b) Economic; in UK Graph 1 – Number of businesses/ per sector in UK (Source: Department for Business, Innovation and Skills 2011) business activities are highly developed. The number of firms operating in the arts, recreation and entertainment industry – where ODG operates – has been estimated to 191,000 (Graph 1) – a fact showing the industry’s competitiveness. On the other hand, the performance of the industry’s firm is rather low – compared to other firms in the industry – the turnover of the industry’s SMEs for 2010 has been estimated to 26.3 millions (see Graph 2 below). The internationalisation of the firm would allow the increase of the firm’s prospects, offering access to other markets globally; c) Social; Graph 2 – Performance of SMSs/ per sector in Britain (Source: Department for Business, Innovation and Skills 2011) c) Social; entrepreneurial activity is highly developed in Britain. In accordance with a recent report, in the beginning of 2011, ‘4.5 million private sector businesses were established in the UK at the start of 2010, an increase of 48,000 (1.1 per cent) since the start of 2009’ (Department for Business, Innovation and Skills 2011). It would be assumed that the development of business initiatives are welcomed in Britain at the level that the interests of the public (and of the entrepreneurs are secured). The above assumption is verified by the following fact: the level of spending of households in Britain is kept at high levels – despite a period of downturn, between 2008 and 2009 (UK Statistics, Consumer Spending 2011, see Graph 3 below). Graph 3 – Consumer spending trends in UK (Source: UK Statistics, Consumer spending 2011) d) Technological; the media and entertainment industry is highly based on technology. At the same time, the involvement of technology in daily human activities has been increased; specifically for Britain, this trend is reflected in Graph 4, below; in order for the firm to keep its competitiveness it would be necessary to continuously update the Graph 4 – Digital technology in households across Britain (Source: Office for National Statistics, Use of ICT at home, 2011) technology used in its services; in accordance with Zhang et al. (2007) the use of advanced technology in all operational sectors of a particular organization can secure the organization’s performance; ODG has become part of SeaChange International, a MNC focusing on software applications; it is expected that the technology involved in the operations of ODG has been improved since the firm’s entry in the above Group, e) Environmental; in the last decade, the awareness of businesses on environmental issues has been increased, especially because of the initiatives undertaken by governments worldwide; f) Legal; most firms in Britain are SMEs; in fact, it has been proved that ‘small and medium-sized enterprises (SMEs) together accounted for 99.9 per cent of all enterprises’ (Department for Business, Innovation and Skills 2011). It is expected that the legal framework for the regulation of these enterprises is highly integrated and detailed, securing the interests of the stakeholders and the third parties. 3. Capabilities and Competences The success of the firm’s internationalisation would be depended on its capabilities, as they could offer to the firm an advantage towards its competitors and increase the chances for the successful operation of the firm in the global market. These capabilities could be described as follows: a) ability to alternate strategies in order to meet the market’s demands, b) an expanded network of alliances in Britain and in the global market, c) wide range of products/ services, including marketing, advertising, market research, evaluation of software solutions, cable network services and so on, d) important performance within the markets of many countries, about 14 internationally (ODG 2010). The competences of the firm could be identified in the development of successful agreements with global competitors and the continuous increase of the firm’s activities, covering new sectors of the market (ODG 2010). 4. Strategic choice/ mode of entry The success of the efforts of organizations for internationalisation is depended on a series of factors. On the other hand, in regard to key strategic plans the evaluation of time and cost required has to take place in advance, i.e. before the commencement of the relevant project. This fact is emphasized in the study of Zucchella et al. (2007) where reference is made to the different interpretations of the term ‘time’ when describing an internationalisation plan: in such cases, time can refer to the period before the beginning of the plan, the ‘speed of international growth, or to its pace and rhythm’ (Zucchella et al. 2007, p.268). Moreover, Forsgren (2008) notes that internationalisation is ‘an inside-out phenomenon’ (Forsgren 2008, p.104) meaning that an asset already existing within the organization is used both in the local and the global market. The entrance of the firm in the global market has been developed through, a series of different modes of entry: a) the establishment of joint – ventures with local organizations (Vissak 2009) - as in the case of Germany where ODG developed a joint venture with Tele Munchen Gruppe, b) by establishing directly its own branches, as in the case of Spain or Greece, c) by the acquisition of competitors, for instance the acquisition in 2008 of the firm Mobix Interactive, a mobile services provider in the greater Middle East region (ODG Group, 2011). In any case, the direct involvement of the parent company, the SeaChange International, in the successful completion of ODG’s internationalisation process cannot be ignored (Buckley 1999, p.147). Conclusion Internationalisation projects can be quite demanding. The choice of the appropriate mode of entry is vital for the successful internationalisation of firms with different operational and structural characteristics. In any case, managers of firms that are interested in entering the global market can choose among the existing theories on internationalisation – for securing the feasibility of their plans. In the case of ODG, the internationalisation process has been used for increasing the organizational performance – by expanding the firm’s activities globally. The fact that the firm is a subsidiary of a MNC, based in US and well established in the global market is a key factor for the successful expansion of ODG internationally. References Asgari, M., Syed, A., Gurrib, M. (2010) Explaining the Internationalization Process of Malaysian Service Firms. International Journal of Trade, Economics and Finance, Vol. 1, No. 1, pp.68-73 Buckley, P., Ghauri, P. (1999) The internationalization of the firm. Belmont: Cengage Learning EMEA Department for Business, Innovation and Skills, 2011, available from Europa. 2011. Small and medium size firms. Definitions. Online, available from Forsgren, M. (2008) Theories of the multinational firm: a multidimensional creature in the global economy. Cheltenham: Edward Elgar Publishing Jones, M. (2009) Internationalization, entrepreneurship and the smaller firm: evidence from around the world. Cheltenham: Edward Elgar Publishing Karadeniz, E. & Gocer, K. (2007) "Internationalization of small firms: A case study of Turkish small- and medium-sized enterprises", European Business Review, Vol. 19 Iss: 5, pp.387 – 403 Krist, M. (2009) Internationalization and Firm Performance: The Role of Intangible Resources. Frankfurt: Gabler Verlag Office for National Statistics, Use of ICT at home, 2011, available from OnDemand Group (ODG). 2011. Available from Prashantham, S. (2008) The internationalization of small firms: a strategic entrepreneurship perspective. London: Routledge Svetlicic, M., Rojec, M. (2003) Facilitating transition by internationalization: outward direct investment from Central European economies in transition. Aldershot: Ashgate Publishing Statistics UK, 2011, Consumer Trends, Qu 1, 2011, available from < http://www.statistics.gov.uk/downloads/theme_economy/CT2011Q1.pdf> Vissak, T. (2009) Research on knowledge, innovation and internationalization. Cheltenham: Emerald Group Publishing Zhang, M. Y. and Dodgson, M. (2007) "A roasted duck can still fly away": A case study of technology, nationality, culture and the rapid and early internationalization of the firm. Journal of World Business, 42 3: 336-349. Zucchella, A., Palamaraa, G. and S. Denicolaia (2007). The drivers of the early internationalization of the firm. Journal of World Business. Volume 42, Issue 3, pp. 268-280 Part 2 - Critical Analysis of article Table of contents 1. Introduction - Purpose of the study 2. Key themes of the article 3. Internal and External Coherence 4. Plus and minus of the article 5. Improvement 6. Conclusion 1. Introduction - Purpose of the study The expansion of globalisation has led theorists to search for theories that can explain the phenomenon. Most commonly, the findings of the research developed in the particular field reveal the inability of theories and models to reflect the exact conditions of business environment and to highlight the effects of non-appropriate decisions in regard to critical business issues. Current study aims to present the key issues discussed in the article entitled as 'The Central Challenge of Global Strategy', an article published in Harvard Business Review in 2007. The aspects of globalisation as presented through the above article are critically examined and evaluated taking into consideration current market conditions but also the challenges that firms operating globally are likely to face. The significance of the particular article – compared to other articles of similar themes, is the following one: the article refers to non-common aspects of globalisation, as these aspects have been identified through the research on the particular field. Traditional studies in regard to globalisation are likely to emphasize on the ability of the firms to respond to the demands of economies of scale and to align local needs with the organizational resources and potentials. However, the article analysed through this paper aims to present an alternative approach for explaining globalisation. Emphasis is given on the ways available to firms in order to face the geographical obstacles that firms that decide to expand globally are likely to face. An innovative strategy, the AAA Triangle is proposed for developing the above task. The specific approach as explained below, offers a series of advantages to the firms that choose to adopt it as a method for designing their strategies before going global. 2. Key themes of the article As noted above, the article under analysis indicates ways for identifying strategies that would offer firms that operate in the global market – or those which aim to expand their activities globally, to become more effective. The key theme of the article is the presentation and the analysis of a unique approach for identifying effective globalisation strategies, the AAA Triangle. The specific approach is based on the following three concepts: Adaptation, Aggregation and Arbitrage are presented as identical strategies available to firms that already operate or those which plan to enter the international market. These three approaches are analytically explained, especially in regard to specific issues, meaning their role in the increase of competitive advantage, the development of coordination and the promotion of change within such organizations. At the same time, suggestions are made regarding the most appropriate modes of control and corporate strategy of the firms that need to monitor their activities in the global market. Case studies of organizations which are well known and successful in the global market, such as P&G and IBM are presented aiming to prove the value of the suggested theory – even if this target is not fully achieved, as explained below. 3. Internal and External Coherence The subject of the article is quite important. This reason, itself, is of critical importance in order to decide on the value of the article. However, the presentation of the material – theory and examples – would be more appropriately organized. In fact, the following issue should be highlighted: the internal coherence of the article seems to be quite effective – supporting all issues discussed in the paper, meaning that the analysis of the article's themes is quite effective. However, the external coherence of the article seems to be problematic, an issue discussed more analytically below. When referring to coherence of a study, emphasis is given to all the study's elements, including presentation, sequence of ideas, adequacy and appropriateness of material and so on. The particular article seems to meet all the criteria of a successful study with the following exception: the categorization of material is poor; the reader cannot fully understand the strengths and the weaknesses of the firms that operate in the global market, particularly in regard to the potential effectiveness of the AAA Triangle strategy – if being used in the particular organizations. 4. Plus and minus of the article The article has a series of important points: a) the key advantage of the article compared to other studies of similar content is the following one: the article refers to a unique approach for supporting firms to internationalize their operations; in other words, effort is made so that not the common issues of globalisation to be discussed. Instead, reference is made to organization not as a unit operating globally but rather as a unit of unique character; of course, the involvement of the organization in the global market is not ignored. However, emphasis is given not to the potentials of the firm to align its strategies with the local demands and ethics but rather to face a series of barriers related to the geographical characteristics of the region involved, b) another important advantage of the above article, similar to the one mentioned above, is the following: an important approach is suggested, the AAA Triangle; this model can be used by all firms that are interested in operating globally; in this way, an additional tool of support is introduced for managers of firms which are interested in adopting the rules of globalisation, c) the article provides a series of options, available to managers of firms in the global market; these options are appropriately customized meeting the requirements of the three different approaches/ phases of the AAA Triangle model, i.e. of the Adaptation, Aggregation and Arbitrage strategies – which are part of this model, d) the article also inform the managers and stakeholders of global firms on the existence of three effective strategies in order to ensure the effectiveness of their firm's operations in the global market: the Adaptation strategy – appropriate for organizations which focuses on the needs and the ethics of a particular country, the Aggregation strategy, for firms that is most appropriate for firms which are likely to organize their operations in units/ groups of companies, in accordance with the local market conditions and the resources available. The cons of the article can be identified to the following point: despite the fact that a unique approach is proposed for the development of effective globalisation strategies, still no reference is made to other strategies of similar scope which have been already used for some years. There is a short reference to the overall context of these theories, but no specific theory supporting the development of strategic planning for firms that operate globally is presented. This fact is consider as a major weakness of the paper – there is no chance for the reader to proceed to a critical analysis of the suggested theory with other theories published in the particular field. 5. Improvement As noted above, the article is already well structured; it contains a series of examples for explaining its theoretical content - meaning especially the AAA Triangle strategy. However, there would be chances for further improvement. The structure of the article can be characterized as not quite effective. Indeed, though the beginning of the article is quite effective giving the key aspects of the issues under discussion, the rest of the article is rather problematic, not in terms of its content, but rather of its structure. Examples of theory presented in the first part of the paper are presented – reference is made to specific organizations like IBM, P&G and TCS – the presentation and the analysis of the case studies – as related to the article's themes is not effective. The actual problems of these organizations are not made clear, particularly in regard to the historical development of these problems, as reflected in the current situation of these organizations but also to the challenges that these firms faced through the years. In the above context, it is suggested that the above article is improved in regard to the following elements: a) the hierarchy of themes, b) the analysis of themes – as combined to case studies and c) the recommendations of the article should be also characterized as problematic; despite the fact that the theory – the AAA Triangle – is sufficiently analysed and it is criticized using appropriate case studies/ examples, still the relationship between the case studies and the suggested theory is not clearly described. 6. Conclusion The development of effective theoretical models for explaining the behaviour of businesses worldwide is particularly valuable at the level that such initiatives – global operations of firms – are quite common in the modern market. However, the effectiveness of these models is usually difficult to be established. In the article under analysis, the value of the AAA Triangle for supporting firms to design effective strategies in the context of the global market cannot be denied. It seems though that the organization (layout) of these studies should be carefully reviewed in advance aiming to ensure their effectiveness in practice, which should be the key reason for their establishment. Read More