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Theories and Paradigms of International Business Activity - Essay Example

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Managers need to master the ‘rules of the game’ that appear to determine success or failure of alliances and acquisitions around the world. Critically discuss the key factors, which you consider are involved in reaching a strategic decision that is ‘right’ for an organization…
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Theories and Paradigms of International Business Activity
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Download file to see previous pages Being a master of the ‘rules of the game’ or, more specifically, the rules in the alliances and acquisition entails an ability to navigate, solve and work around these variables otherwise the objective of globalising the organizational operations is doomed to fail. This paper will explain some of the most important variables why forging alliances or partnerships and the acquisition of foreign companies are legitimate and effective strategies. Leveraging Reputation Alliances and acquisition are tools for companies to leverage their brand and their reputation (Kotler and Pfoertsch, 2006, pp.255). For example, when Lenovo acquired IBM’s personal computer (PC) business, the organization was able to enhance its reputation, establishing its own global brand in the process. IBM is a global leader in the technology industry and its products such as the ThinkPad laptop series, enterprise technologies, and other patented technologies are popular the world over and equated with quality, premium branding and innovation (Gupta, Wakayama and Rangan, 2012, pp.195). This is explained by the theoretical model called “springboarding”. The idea is that for companies to effectively expand overseas, it is necessary to design a strategy that is typified by activities that can capitalize on the reputation of others in order to compensate for its absence in the organization, its products and its global brand. It is equivalent to the concept of exporting of goods through “piggybacking” or taking advantage of the “carrier”, in order to successfully enter a market, survive in it and claim sizable market share (Gilligan and Hird, 1986, pp.103). “Springboarding” or “piggybacking” work during an acquisition and is also achieved when forging alliances with established companies in a location that the organization intends to penetrate. This strategy is more important for companies located in non-traditional FDI countries. The reason is that these economies do not have well developed institutions as well as a viable domestic market necessary to support an outward expansion. China has recognized this dilemma especially when it took into consideration the fact that it lags behind major global economic players in terms of outward FDI (Taylor 2002 and Zhang and Filippov 2009). What distinguished the country from other non-traditional investing states is the manner by which the country aggressively pursued a policy of internationalisation for its national firms (Bell 2008, pp.254). Favorable business, political and financial landscapes, featuring state support, has lead to a conducive environment that fosters the growth of MNCs. Other developing economies do not have this advantage. That is why there is huge opportunity for MNCs coming from these countries because the strategy allows the high degree of exploitation of the ownership-specific competitive advantages in foreign countries (Luo and Tung, 2007, pp.485). When Lenovo started expanding in Japan, its market share was estimated to be around 5 percent but when the forged an alliance with the Japanese firm NEC, which commenced in January of 2011, the figures ...Download file to see next pagesRead More
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