International Operations Management - Case Study Example

? International Operations Management of the of the of the International Operations Management Introduction The internationalization strategies help organizations to further its businesses globally and compete successfully within the international market. The purpose of this research paper is to assume a hypothetical company that wants to expand internationally. Moreover, the aim is to study the ways and methods it will implement to utilize these international strategies to manage the new international structure in that market. This will then go on to discuss the level of internationalization the company needs to engage in to develop the necessary level of relationship in the new international structure. In this, we will focus on how the level of relationship is affected as the internationalization of the organization broadens. The company selected for this report is Marks and Spencer. Nature of Marks and Spencer’s Business Marks and Spencer was established in UK in the year 1884 and since its inception, the company has been very successful in catering the local market. Now it is planning to expand its operations in a new market internationally. It will offer its textile products including men’s, women’s, and children wear, bedcovers, sheet sets, comforters and ready-made curtains and wall hangings. In the last couple of decades, its clothing line has seen exponential growth (Marks & Spencer 2012). Assumptions Marks and Spencer’s management feels that this clothing line can be promoted internationally, especially in the South Asian market. The company plans to target all age groups especially, new born babies and young kids within the age group of one to twelve years. The reason for selecting this as a target group is because the birth rate in South Asian markets is very high and the range of clothing has a high disposal rate, as they are targeted towards a growing age of children. Marks and Spencer plans to export its merchandise initially and assess the market demand for its clothing products. If the demand is positive, the company plans to build a manufacturing concern, as the setup and labour costs are very low. In addition, the company is already exporting raw cloth from South Asian markets, and by incorporating a factory internationally; they can exploit the availability of cheap raw materials. Furthermore, if the company is able to establish itself strongly within the international market, it gradually plans to introduce its other textile and bedding products in the foreign market, respectively. Internationalization Strategies Internationalization strategies require an organization to undertake observational, economic, learning and networking efforts to understand the foreign market. Once the companies learn a culture and the imperfections of the international market, it allows the company to provide products and services, which are expected to satiate the needs and requirement of the target group within the foreign market. In addition to international knowledge, it helps in assessing the capital and network resources within that market, so that it can use its finances efficiently to be thriving in that market (Bradley 2005). As the process of internationalization entails the company to be motivated to go beyond borders, which allows them to select a profitable market, and develops strategies to enter and sustain the competition in that foreign market. Marks and Spencer has successfully done all of it; with ample research, it has collected various statistics that has inclined them to enter and compete within the South Asian market (Marks & Spencer 2012). Application of Learning Internationalization Strategies The essence of the entire internationalization process can be interpreted through the Learning Internationalization strategies. Any organization planning to expand globally will require its management to conduct various studies and researches to gain knowledge on different areas, for example, business culture and ethics, communication networks and distribution channels, population demographics, trends, fashions, fads, purchasing power of the customer, the gender distribution, and various statistics on birth and death rates. Furthermore, they need to incorporate factors such as political stability, infrastructure, religious factors; and much important than less, is to learn the legal structure prevailing in the country, especially employment regulations and child labour laws, as it may derive from various social, religious and moral values (Hendry 1994). As noted by Cohen and Levinthal (1990), Marks and Spencer needs to implement ‘investigation’ and ‘exploitation’ learning strategies to investigate the international market it plans to enter and decipher ways to exploit the opportunities presented in the new market, respectively. The company manufactures western clothing, and they have learned that there is sufficient demand for western style of clothing in the South Asian market. Furthermore, it uses these strategies to accomplish profitability by offering a variety of clothing options. It also incorporates the favourable cost-benefit analysis of the South Asian market, with a huge middle class, increasing income levels, and sophisticated spending patterns (Cohen and Levinthal 1990). As learning is an ongoing process, Marks and Spencer needs to continue seeking fresh knowledge about the systems and procedures required to sustain profitability in the international market. Furthermore, in the longer run, it requires its management to continually learn about opportunities and threats, so that it can manipulate the current business scenario, as well as, find ways to win customers from competition (Levinthal and March 1993). Therefore, Marks and Spencer requires its management to develop a learning culture within its organization. They should assign a separate team with a task, to provide useful information, required to sustain the aggressive competition to remain profitable in the cutthroat international business market. Moreover, Marks and Spencer cannot be reluctant if they are performing up to its chosen targets, as content organizations lose its market share to bloodthirsty competition in the overseas business environment (Eriksson, et al. 1997). For the company to be successful in the future in this regard, it needs to engage in continuous learning effort, as the internationalization process requires organizations to do so. In addition, the company staffs require motivation on a frequent level, which can be instigated through the learning environment. It has also been noted that learning initiatives increases motivation in overseas business operations and provides guarantees for thriving against competition (Shah and Gardner 2008). Application of Economic Internationalization Strategies Marks and Spencer has successfully survived the severe debt crunch that hit the western market in 2007. Dealing with the economic crisis, the management of the company has studied the South Asian market and developed strategies that, allows them to tackle potential economic and legal litigations. The company has also researched the competition it faces in the international market, and has therefore selected the target market very carefully. Young kids and New Born clothing apparel are market segments full of huge profits opportunities, with minimum competition (Marks & Spencer 2012). Furthermore, the rate at which clothes are disposed off for these target group is exponential, which in turn gives course to high turnover of exports and later, high volumes of manufacturing orders. In addition to this, it anticipates the financial conditions of these economies to be highly unstable. Therefore, it has conducted serious research to consider these factors, and have concluded that investment in South Asian market will reap greater profits than the prevailing interest rate, despite the threat of political instability and existing infrastructure available in these countries (Johanson and Mattsson 1988). Application of Networking Internationalization Strategies The Networking theory of Internationalization strategies will engage Marks and Spencer to develop extensive networking and distribution channels both, within the country of operation, and the headquarters of the organization. Since the networking is done on a global scale as well as within the local market of operations, it requires too much controlling efforts for Marks and Spencer to be successful during the internationalization process of its organization (Johanson and Vahlne 1977). It involves the exploitation of activities, and various subsidies and incentives; these countries offer to promote export and investment to enhance its business market (Johanson and Mattsson 1988). Since Marks and Spencer plans to launch its clothing line for now, it has plans on promoting its bedding products as a subsidiary if the initial investment incurs promising returns. The company can exploit various factors present in the international economy. For example, in Pakistan the company can easily find factors in its favour such as: highly competent and English speaking human resource, extensive natural resources, with cotton as one of the major crop productions, and the country’s location as a central hub connecting the Middle East, Central Asia and the South Asian markets (Baxter and Woodside 2011). Marks and Spencer may initially outsource its handling of export merchandise. The company may use two or more companies for distribution of its products within the country. This would enable the Company to assess its efficiency and then may sign a distribution and networking contract with one of the companies temporarily, until it sets up its own distribution networks. Once they have enough knowledge about the market they are operating in, they can build a manufacturing enterprise locally. This could enable it to procure the raw materials and cotton from the local suppliers and using cheap labour make the same quality standard products. Since the South Asian markets provide these incentives, Marks and Spencer can make huge profits by exploiting these international opportunities (Johanson and Mattsson 1988). Conclusions Finally, it can be realized that both Economic and Networking Internationalization Strategies are based on the level of information acquired and the learning culture of Marks and Spencer. Based on the company’s plans to make it position stronger in the South Asian markets learning and economic implications for the new international structure has been laid out in this report. It has been suggested in this report that the existing network of the company will enable it to obtain useful information regarding the operations of business in the international market. Various suggestions have been made through this report for the company to make use of its economic and financial resources to gather information about different opportunities and adopt most appropriate international business structure. Drawn from the company’s international experience in developed countries, which are presently facing difficult economic conditions, it has been suggested that the company extends its business in the new market by selling its clothing line. It has been proposed that the company can initiate its business in the South Asian markets by exporting its products however this may have high cost implications. At later stage of business in the targeted markets the company can establish its own factory outlet making use of the resources which are already being exported from this region to the company’s production facilities in other countries. Since, the targeted market will be new for the company therefore, it will be required to engaged in continuous learning process to exploit the opportunities in an efficient manner. List of References Baxter, R. and Woodside, A.G., 2011. Interfirm Networks: Theory, Strategy, and Behavior. Bingley: Emerald Group Publishing Limited. Bradley, F., 2005. International Marketing Strategy. Financial Times/Prentice Hall. Cohen, W.M. and Levinthal, D.A., 1990. Absorptive Capacity: A New Perspective on Learning and Innovation. Administrative Science Quarterly, 35(1), pp.128-52. Eriksson, K., Johanson, J., Majkgard, A. and Sharma, D.D., 1997. Experiential Knowledge and Cost in the Internationalization Process. Journal of International Business Studies, 28(2), pp.337-60. Hendry, C., 1994. Human resource strategies for international growth. London: Rouledge. Johanson, J. and Mattsson, L.G., 1988. Internationalization in industrial systems - a network. Croom Helm, pp.303-21. Johanson, J. and Vahlne, J.E., 1977. The internationalization process of the firm - a model of knowledge development and increasing foreign commitments. Journal of International Business Studies, 8(1), pp.23-32. Levinthal, D. and March, J., 1993. The myopia of learning. Strategic Management Journal, 14(S2), pp.95-112. Marks and Spencer, 2012. About us. [Online] Available at: [Accessed 13 May 2012]. Shah, J. and Gardner, W., 2008. Handbook of motivation science. New York: Guilford Press. Read More