Strategies for internationalisation of Aditya Birla Group (ABG) - Assignment Example

?International Business Table of Contents Table of Contents 2 Introduction 3 Strategies for Internationalisation of Aditya Birla Group (ABG) 5 Critical Evaluation of Strategies of Internationalisation 9 Recommended Strategies for Future Strategic Direction 13 Conclusion 17 References 18 Introduction International business is a process in which all the business transactions occur in between two or several countries. International business helps an organisation to develop its growth strategy. This in turn helps to acquire a better product life cycle. It is recognised that at times a company’s products do not receive desired attention in its home nation, however, there are significant demands of them in other nations. International business operations provide certain pertinent benefits to an organisation such as scope to incorporate advanced technologies, increase investment opportunities, and make product or service expansion among others which in turn can provide greater returns than operating in home markets (Wall & et. al., 2009). Aditya Birla Group is a multinational Indian company headquartered in Mumbai, India. Aditya Birla Group is a US$40 billion organisation and it is part of Fortune 500 companies recognised by Fortune magazine. In Aditya Birla Group, more than 136,000 employees are competently working as of the year 2012. The Group was ranked in 1st position, in a survey related to ‘Top Companies For Leaders’, in Asia Pacific in the year 2011. This survey is mainly conducted for studying the organisational leadership. The organisation earns more than 53 percent of revenue from operations in abroad. The Group has been operating in 36 countries which comprise Canada, Australia, Brazil, China, Germany, France, Japan and Russia among others. In its home business destination i.e. India the Group is recognised as a leading name in mobile telephone sector, life insurance as well as asset management, supermarket chains and branded apparel among others. In its global operations, the Group is renowned as one of the biggest aluminium and copper producers, carbon black and Viscose staple fibre producers among others (Aditya Birla Management Corporation Pvt. Ltd., 2012). In this paper, the internationalisation strategies of Aditya Birla Group will be recognised as well as a critical analysis of the adopted strategies would be conducted. Moreover, certain recommendations related to future strategic direction of the company will be made in order to sustain its competitive advantage. Strategies for Internationalisation of Aditya Birla Group (ABG) There are several strategies that are adopted by the ABG for internationalisation of the business. Acquisition Strategy Aditya Birla Group is well renowned for its business acquisition strategy in the global market. The product as well as service portfolio of ABG includes cement, fertilizers, chemical and financial services among others. Acquisition is the process of buying a company’s most of the stakes with the purpose of getting the ownership of the company (Kazmi, 2008). The corporate strategies prepared for internationalisation of ABG has been focused on expansion of the business with the help of acquisition as well as internationalisation of new business by acquisition. ABG prepares strategies for acquisition of major companies related to their most preferable sectors such as mining. ABG adopted this strategy as an aggressive action towards the internalisation of the business. As a part of this strategy, ABG had signed an accord to acquire the assets of Terrace Bay Pulp Mill in the region of North America. According to statement made by the Chairman of ABG, Mr. Kumar Mangalam Birla “The acquisition of the Terrace Bay Mill and its subsequent conversion into a dissolving grade pulp mill is a major strategic move” (Aditya Birla Management Corporation Pvt. Ltd., 2012).This move has been especially useful for attaining global leadership. In Canada, Novelis Inc., a leading corporation related to aluminium rolled products was acquired by an ABG’s organisation Hindalco Industries Limited in 2007 (Aditya Birla Group, 2012). The acquisition process is an important aspect in the internationalisation strategy of ABG. Diversification Strategy Diversification strategy is a significant part of the internationalisation strategy of ABG. Diversification strategy is a risk reducing strategy. Diversification strategy is an integral part of corporate strategy which helps to increase the profitability by achieving a higher sales volume. Diversification is a part of substantial change that occurs in the business process in order to meet customer interests. ABG mainly adopted this strategy for internalisation. Through diversification process, the organisation engages with several ‘unrelated businesses’ such as service related business and product related business. Similar type of products can be offered with different technologies by diversification process. This process significantly helps in entering a new international market. A new product as well as a service can be provided by the related technology. This may enable the organisation to provide similar quality of new products by applying different types of technologies in the international market (Scribd Inc., 2012). Preparing different products by using advanced technologies is an important way for internationalisation. ABG includes a variety of dissimilar businesses for better internationalisation such as chemical, textiles, telecom and software among others. As a part of growth diversification strategy, the Group focused on textile industry in the initial stage of its operations. Subsequently, it diversified to reduce the risk in its business operations by establishing Hindalco, an establishment to operate aluminium production (SlideShare Inc., 2012). Diversification strategy enables the organisation to ensure a better management as well as cash flow allocation in international market. ABG has adopted the diversification strategy for a suitable return on investment made in international market. Differentiation Strategy Differentiation strategy is mainly prepared for gaining competitive advantages by providing exceptional services as well as new products. Several measures can be taken to differentiate a product such as quality differentiation, features differentiation and price differentiation. Differentiation of products quality is very important when it enters in a new market. For a superior international market response differentiating products’ quality is a significant tool which can improve the brand value in the foreign market. Improved modes of production as well as better material can enhance the quality of the product. The unique features of the product have a great influence on the customer interest. The differentiation of product features has a powerful impact on the targeted market growth. Price differentiation is another significant factor regarding international market. At times, reduction in products’ price of a particular company has a negative impact on the international market. This is because customers may think that the product would be of inferior quality. Without proper price differentiation positive outcome is not possible (International Finance Corporation, 2012). ABG also is giving more emphasis on the customer service differentiation. It has been seen in a recent study that customer service as well as employees satisfaction are the critical driving forces to the business growth of the organisation. Therefore, a developed customer differentiation strategy has been prepared by ABG for achieving remarkable growth in the international market. High level of customer satisfaction is possible by differentiating the service process. ABG has adopted customer differentiation as one of their important strategies (Aditya Birla Minacs Worldwide Limited., 2009). Quality Management Strategy Quality management is another significant aspect of the internationalisation strategy of ABG. Quality management is referred as a series of synchronised activities for improving the business efficiency as along with controlling the overall performance of the organisation. The reason behind formation of quality management is defining the appropriate process of quality production (Department of Trade and Industry, n.d.). ABG has considered quality management as a crucial part of its internationalisation strategy because it assists in setting direction for meeting customers’ experience, reduce wastage, lessen production costs, increase market share, provide higher quality training and raise moral of staffs. All these factors are regarded as significant factors in order to create a positive impact on the international business process (Aditya Birla Management Corporation Pvt. Ltd., 2012). De-Risking Strategy De-risking strategy mainly depicts the essence of alternative strategic aspects which are performed when other one fails. This strategy always prepares for alternative ways by which the targeted growth can be achieved. The alternative strategy can comprise launching a new product, service as well as different products or services to mitigate risks that might arise from failure in any particular sector. ABG adopted de-risking strategy for achieving a sustainable growth when the market condition is not suitable for particular products or services [5] (Aditya Birla Management Corporation Pvt. Ltd., 2012). Managerial Training ABG has adopted the managerial training strategy to develop a high quality management for international business purpose. Many businesses of ABG have been competing in international markets as well as by enhancing their business performance they have achieved a higher business growth in the international market. ABG’s corporate university helps to improve the skills of the managers for better implementation of managerial skill in the international business. They already have adopted the concept of e-MBA for preparing a high quality management. Managerial training is considered to be a significant factor in order to establish outstanding business in the global market (Aditya Birla Management Corporation Pvt. Ltd., 2012). Critical Evaluation of Strategies of Internationalisation The varied strategies identified for the successful performance of ABG in the international market are evaluated on the basis of their effectiveness. Acquisition Strategy ABG has performed many acquisitions in national as well as international contexts which enable it to function efficiently on a global prospect. This strategy is adopted with the motive of expansion of business in different sectors as well as in diverse regions. The company has acquired as well as expanded business with the adoption of acquisition strategy. The acquisition strategy has been adopted by the company for many years and is also implemented in current time phase. Moreover, recently the company has acquired Domsjo Fabriker AB which is a Swedish Pulp making and bio-refiner company for US$340 millions (HT Media, 2012). It has also acquired Terrace Bay Pulp Mill which is situated in Canada for US$110 millions (Living Media India Limited, 2012). These are a few acquisitions performed for business expansion in international market. Diversification Strategy ABG has adopted the strategy of diversification with the motive of diversifying business among different sectors from manufacturing to service. Moreover, the company has invested in variety of businesses for spreading out business related risks among different sectors. The company has diversified its business for minimising as well as to spread out risks among different segments. Diversification is considered to be one of the major strategies adopted by ABG. The manufacturing business consists of textile, mining and cement among others and the service business consists of telecom, insurance as well as outsourcing among others. The diversified business strategy assists the company to perform better in international level as well as to mitigate risks [1] (Aditya Birla Management Corporation Pvt. Ltd., 2012). Differentiation Strategy ABG has taken measures in providing differentiated services for developing more competitiveness in the market. The company has taken initiatives of offering enhanced customer services for better performance in different market segments. Moreover, the company has opened many supermarkets as well as hypermarkets which provide its customers products or services with truth and value [2] (Aditya Birla Management Corporation Pvt. Ltd., 2012). Furthermore, the company has adopted latest technologies with the aim of providing better services for enhanced performance of the company in the market (Aditya Birla Nuvo, 2012). The company with better quality services will develop competitiveness for enhanced performance in global prospects. Quality Management Strategy ABG has been operating in the international market with better quality services or products which has enabled the company to perform in an enhanced manner. Moreover, the company has developed corporate research as well as development centre for assisting the company to perform in a superior manner for businesses which are performed [3] (Aditya Birla Management Corporation Pvt. Ltd., 2012). Furthermore, the company has acquired developed technology for improving quality of products as well as for reducing cost involved with production. The company has emphasized much on the quality of products as well as services which are offered for building competitiveness and to perform with superiority [4] (Aditya Birla Management Corporation Pvt. Ltd., 2012). De-Risking Strategy De-risking strategy assists ABG to perform operations or functions in a better manner. The strategy enables the company to perform functions individually as the failure of a business segment will not affect the other businesses which are executed by the company. For example, if the textile business is suffering losses and has failed to perform in an effective manner then the other businesses of the company such as cement or insurance sectors will not be affected [5] (Aditya Birla Management Corporation Private Limited, 2012). Moreover, Kumar Mangalam Birla who is the Chairman of ABG stated that almost 50 percent of revenue of the company is generated from international acquired companies and considers that internationalisation of businesses form a de-risking strategy for ABG [6] (Aditya Birla Management Corporation Pvt. Ltd., 2012). Managerial Training ABG provides varied training programs for grooming the performances as well as the personalities of the managers to perform activities in a competent manner. Moreover, the company has started LEAD (Leadership Programs for the Experienced) for training special individuals for being future leaders of the company [7] (Aditya Birla Management Corporation Pvt. Ltd, 2011). Furthermore, the company has also commenced ‘Global Manufacturing Leadership Program’ with the purpose of developing the middle as well as senior managers for performing challenging activities in an efficient manner [8] (Aditya Birla Management Corporation Private Limited, 2012). The training programs are conducted for boosting up the performance of managers as well as skilled employees for performing activities with more competencies. Moreover, the middle as well as senior level employees are trained for performing role of leaders in varied manufacturing as well as technical segments of the company. These are the strategies which are implemented by the company to perform activities effectively on a global basis. Recommended Strategies for Future Strategic Direction The strategies to be recommended for maintaining competitiveness of ABG to perform all its operations in an effective manner on an international level are as follows: Cost Reduction ABG is required to perform operations at a reduced cost with the motive of generating more profits. Cost reduction strategy will also assist the company to possess additional market share for acquiring more competitive advantage due to reduced costs of products or services. Moreover, reduced cost of products or services will also aid the company to be performing as a leader with competitiveness in the global concept (Tanner, 2006). In the international market, there is huge pressure for reducing cost for competing with international competitors. Furthermore, the company is required to adopt latest technologies for providing products or services at minimised cost (John & Letto-Gillies, 1996). Target Appropriate Market Segment ABG is required to target those market segments where it can perform all activities in an effective manner. The company should conduct a market survey for identifying the preferences of customers as well as requirements of that market segment. Products or services which are offered in those market segments should be able to develop brand loyalty as well as should be capable of retaining customers (Grunig & Morschett, 2012). In the international market, there are lot of competitors and for which the company is required to target appropriate market segments for enhanced performance in those segments. This strategy will enable the company to develop competitiveness in those foreign market segments (Oxford University Press, 2012). Transnational Strategy ABG should adopt transnational theory for developing more competitiveness as well as to improve performance. The transnational strategy will assist the company to offer products as well as services at low cost and in accordance with the preferences or needs of foreign market. Moreover, this strategy will enable the company to differentiate products as well as services from that of competitors in the different target market segments. Furthermore, it allows the subsidiary foreign companies to perform in a most enhanced manner. The company will be able to meet the requirements of the foreign customers in an enhanced manner as well as will be able to perform operations with competitiveness. It will also assist the company to improve sales and profitability (Hill & et. al., 2009). Barrier to Trade ABG is required to formulate plans as well as take measures for minimising the factors which are affecting the performance and operations of the company. The factors are related to taxes as well as exchange rates of the different countries where the company is operating or planning to operate in future prospects. The company is required to initiate measures for minimising the influences of these factors which may hamper the performance of the company (Anderson, 2004). Reallocation of Production ABG is required to reallocate its production process in appropriate geographical regions where the company will be able to perform operations in a more enhanced manner. The company is operating in many foreign countries and for which the company is required to possess labour at a low cost for improving profitability. Moreover, with low labour cost the company will be able to perform in an efficient manner in those market segments with competitiveness. The company will also be able to minimise barriers of trade as well as provide products or services to customers effectively for developing production plant in those segments or regions (Zuggs, 2011). Multi-Domestic Strategy ABG is required to adopt multi-domestic strategy which will assist the company to delegate authority to managers of the foreign acquired or merged companies. Moreover, with this strategy the foreign acquired companies will be able to perform operations in an independent manner as well as in accordance with the requirements or preferences of local customers. Furthermore, this strategy will enable the acquired companies to perform with their own management practices (Scribd Inc., 2012). These are the varied strategies which are required to be adopted by ABG for improving performance as well as competitiveness of the company at international level. Moreover, these strategies will assist the company to perform effectively with reduced cost structure and in accordance with the preferences of customers. The company with the assistance of these strategies will be able to acquire economies of scale for expanded network of manufacturing as well as service units. Furthermore, the company is required to utilise all available resources in an effective manner for successful performance in the international market. Conclusion International business depicts the business transaction as well as the business activities performed throughout the world. Exchanging the products as well as services around the world is the activity performed in the international business. ABG group is a well-known organisation in the international market. They have been growing their operations on a global basis with advanced techniques as well as managerial skills for a long time. In recent times, ABG has been successfully sustaining its business in the international market by taking several significant steps to improve their managerial skills. Different strategies have been taken by ABG for better implementation of the internationalisation strategy. There are several future strategies that have been recommended for the Group which can be extremely crucial for capturing the international market. References Aditya Birla Management Corporation Pvt. Ltd., 2012. Aditya Birla Group. About Us. [Online] Available at: http://www.adityabirla.com/the_group/index.htm [Accessed November 22, 2012]. Aditya Birla Minacs Worldwide Limited, 2009. Customer Service as Differentiator. Driving Customer Service Differentiation. [Online] Available at: http://minacs.adityabirla.com/LinkClick.aspx?fileticket=SYEw_1cNflk%3D&tabid=137&mid=569 [Accessed November 22, 2012]. Aditya Birla Management Corporation Pvt. Ltd., 2012. Unlocking Value. Features. 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