Internationalization Strategies: Manufacturing and Service Sectors in Europe and the United States - Term Paper Example

? Internationalisation Strategies The service and manufacturing sectors have been significantly affected by internationalization. However, the sectors respond differently to different markets and market forces. The manufacturing sector which is known to develop products is known for relating directly to consumers. Service sector tends to be agency based and depends on technology and efficiency to achieve competitiveness. With increasing globalization, the sectors have been forced to develop different strategies to different market segments in the international market .This paper analysis manufacturing and service sectors both in Europe and United States. The discussion shall compare and contrast the internationalization process of the both sectors by discussing representative multinationals from the continents. Internationalization is perceived to be the process of enhancing organizational involvement in the international market. Unilever is based in United Kingdom and Netherlands. Unilever has an international presence lasting for decades. The internalization of the manufacturing multinational has been driven by renowned imperatives. They include growth, knowledge, efficiency, globalization of consumers and competitors. The company has a market presence in more than 150 countries and over 220, 000 employees. The company has been labeled as both multi-local and multinational because of a heavy presence in the domestic and international markets. The internationalizations strategy involved adapting local market differences. The strategic team targeted the optimal locations for product launches and resources in the foreign markets. Unlike the internationalization plan for Barclays which involved joint-ventures with domestic firms, Unilever embarked majorly on acquisitions to expand the sphere of influence (Edwards & Rees 2006). The management believed that the company needed to have a direct response to the customers through production of superior products (Altinay & Roper 2007). A telling example is in Latin America where Unilever used the ULA strategy. The Unilever Latin America) strategy involved implementation of common processes, innovation and leadership. This caused the multinational to become the market leader in four countries in the region. However, when it came to opening branches, the Unilever tends to have shared a similar strategy with Barclays. Unilever has head offices in every foreign market location (Hill 2002). These regional branches are semi-autonomous (Boome & Riley 2011). The top level management of the multinational has been trying to review the strategy because extreme decentralizations have been counterproductive in the internalization process. The strategic team is targeting the emerging and developing markets in the internationalization plan. In manufacturing sector it is easier to develop products tailored for consumers than in service sector. Therefore, the multination has been able to target different income groups (Boome & Riley 2011). Barclay’s depended on intermediaries in many emerging markets. This means most of the branches were stationed in major urban centers, where infrastructure supported. Unilever believes that a seamless international development would be effective (Altinay & Roper 2007). This company hopes to use technology to synchronize data and automate systems. The management has been countering threats in specific domestic markets while rolling out internationalization strategy. Some of the solutions have been obtained through transplant learning. Unilever has ensures that the retail stores are close the end user. Internationalization process must address the complexities that arise from ineffective supply chains (Battilossi & Cassis 2002). Banking sectors in heavily dependent of technology. Barclays has been affected be unhealthy foreign laws and extreme exchange rates. Studies show that banking sectors is subject to multiple regulations (Boome & Riley 2011). Unilever has established a rapport with consumers directly. However, both banking and manufacturing sectors have depended on print and electronic media to appeal to local markets. The strategy of Unilever is to develop a strong consumer relationship at domestic level. Barclays has been introducing new and effective technologies to attract subscribers from local markets. The company has a strategy of encouraging corporate customers to invest (Boome & Riley 2011). The challenge for the financial sector has been a poor consumer relationship with lower cadre income earners especially in the emerging markets (Edwards & Rees 2006). Unilever believes that divesting the underperforming brands shall lead to increased revenues and sustained profitability. On the other hand, Internationalization is an important aspect is the Coca-Cola’s marketing strategy. International marketing plan has different targets and focuses to appeal to the uniqueness of the local communities. The company has committed to international expansion strategies. Coca-Cola uses different appeals while targeting different markets. In china, the multinational has a local approach that has led to increased sales (Battilossi & Cassis 2002). The same strategy is used in Peru. The marketing team attaches the local meals to the strategy (Boome & Riley 2011). Coca-Cola has special emphasis in developing markets and several developed markets. This includes addressing the geographic mix and organizational objectives. The company has invested in differentiated products. The company believes that a superior product in the local market leads to better revenues (Edwards & Rees 2006). Coca-Cola has adjusts strategies and approaches to ensure that the different market expectations are met. This includes developing local custom made beverages to compete with local competitors. This has given the company a competitive position and increased the market share (Altinay & Roper 2007). The company establishes a direct connection with consumers (Choi & Click 2006). Unlike the banking sector, the marketing approach is flexible. As part of the internationalization, the company uses its dominance to negotiate lower pricing. The organization uses economies of scale, experience in the international market and reputation to retain dominance (Boome & Riley 2011). The multinational has expanded through mergers and acquisitions in local markets. Just like in the financial sector, the organizational structure is aligned to the international strategy (Edwards & Rees 2006). Coca-Cola products are said to be developed through a globally recognized but hitherto unknown formulae (Battilossi & Cassis 2002). This gives the multinational a competitive advantage. Different local markets have different raw materials differentials, trade barriers and communication links. The management ensures that a combination of tactics and strategies are used to deliver optimum results (Brennan 2011). Coca-Cola is perceived to have a better reputation in the beverage industry compared to Unilever. Most of the Coca-Cola products have a direct fulfillment to the consumers (Edwards & Rees 2006). The marketing strategy for the beverage multinational emphasizes of the quality of the drinks (Choi & Click 2006). Unilever has multiple strategies while marketing multiple products (Choi & Click 2006). However, both manufacturing multinational use regional distribution centers and retail stores. Unlike in the finance sector, the manufacturing industry appeals to the domestic market by appealing to the local and patriotic attitudes. Coca-Cola hopes to increase market share, product usage, frequency of use and quantity through international penetration strategies. Depending on market research, Coca-Cola has product improvement strategies and has embarked on expanding product lines in the foreign markets. This means introducing new products in the same markets depending on the consumer perceptions (Brennan 2011). The internationalization strategy for the multinational involves expansion of markets for existing products. Coca-Cola has been targeting new market segments. The financial sector is limited in the diversification efforts in the foreign markets. Service sector attracts customers through excellent service delivery (Edwards & Rees 2006). However, the diversification realities are not as flexible. The service multinationals are limited to investing in better technologies and introduction of customer friendly programs of a facilitative nature. Coca-Cola and Unilever easily appeal to the lower income earners in the international markets (Choi & Click 2006). Coca-Cola has embraced diversification into related businesses leading to increased market control. The service multinationals tend to offer specialized services which target the middle to upper income earners (Choi & Click 2006). The market penetration strategies by the manufacturing multinationals appear to be superior compared to be service companies (Brennan 2011). Coca-Cola has broadened its definition from a carbonated drinks operator to packaged liquid refreshments. Therefore, the multinational is expanding from traditional markets. Internationalization of banking has increasingly become acceptable in the European economies. The business environment is highly volatile (Juul 2008). Barclays believes that internalization is vital for growth and survival of the modern service industry. The increased competition has caused mergers and acquisitions in an effort to expand markets and raise revenues (Jones 2005). The management of the bank has created extensions through representative offices in the international markets. This is considered the simplest form of extension. These officers are investigative in nature and are used to conduct market research in the foreign markets (Hornell & Vahlne 2013). Barclay’s top level management uses market research to understand the cultural aspects of the targeted market segments. This is crucial before the service launch. Some of aspects considered include the economic activities of the local communities and the societal values that affect the flow of revenues. The strategy offers a costs effective approach to conducting research in the banking market. The office maintains direct link with the mother bank. The bank has opened branches in foreign markets. These branches carry out the banking services just like the mother branch and retain control from the same. The internalization strategy of the bank includes using subsidiary companies that have accountant and legal independence (Jones 2005). This makes it easy to extend incase the legal environment in the foreign market is against foundation of branches. These subsidiary companies understand the local market, are autonomous legally and in accountancy. The management of the banks has uses agency banking in the process of internationalization. The agency acts as the intermediate between branches and representative office (Pearce & Papanastassiou 2009). This is important in financing international transactions, development of industrial credits and commercial viability (Marinov & Marinova 2012). The strategy allows joint ventures in which shareholders from several banks work together (Jones 2005). These shareholders come from different countries. The consortium bank allows multinational firms to co-work with domestic firms to ensure productivity. Under this venture, the multinational firm, in this case Barclays, offers technological knowhow, access to finances and capital to domestic firms or banks (Juul 2008). The local banks reciprocate by giving knowledge of domestic distribution channels and local conditions (Marinov & Marinova 2012). The multinational banks offer superior technology to local microfinance companies or banks in order to promote the internationalization strategy. The management of the bank is aware that internationalization of the financial sector provides significant progress to cross-border fiscal services (Juul 2008). This has profoundly reduced the need for physical presence. Cross-border services have been complementary to offshore banking. This is a case where the mother company installs banking services in the foreign markets with an aim of offering services to non-residents of the country. This makes the banking activities off-shore. The plan may include a native bank and non-physical agents (Pearce & Papanastassiou 2009). The dispersed global organizations have replaced the traditional centralized approach. The strategy has led to increased revenues as more potential customers are targeted (Pearce & Papanastassiou 2009). The local branches apply different marketing strategies depending on the needs and the culture of the domestic markets (Jones 2005). Internationalization of banking has led to increased effectiveness and capital flow. This happens through convergence of interest rates. Internationalization of banking has been a product of market research, acquisition of local banks and microfinance and consortium banks which facilitated the entry of multinational banks into the international market. The multinational has expanded to international markets. This has been a consequence of increased regulation and market saturation in the local market. The strategy for internationalization entails leveraging brand equity, standard products and hygienic conditions (Hill 2002). The multinational has been forced to remodel to accommodate the foreign markets. This includes changing the product line to incorporate the local tastes. The management of McDonalds is determined to adapt to the needs of every foreign market in terms of tastes and design. The multinational is using strategies that eliminate fast foods. The brand is committed to increasing the market share by diversifying production and competing with Starbucks. This company has diversified into restaurant business with more comfort and upscale services (Hornell & Vahlne 2013). The multinational is offering healthier and palatable foods to the locals. Furthermore, the strategic team has endorsed the issuance of rental iPods and Wi-Fi. The challenge of internationalization has caused the company to compromise the brand equity while adapting to local tastes. The service industry has been accused of moving from the core competence (Hill 2002). The European market has accepted the strategic change. Unlike the financial service sector, the food and hotel sector depends much less on technology. Rather, the multinational targets a direct connection with consumers. The company has conducted market research and is more flexible than the financial or manufacturing sector (Hornell & Vahlne 2013). However, the internationalization strategy entails remaining relevant in the foreign markets just like Unilever and Barclays. The four multinational companies are heavily dependent on the market research (Juul 2008). The companies have adopted local strategies to win market share in the foreign market. However, the financial service sector seems to use multiple intermediaries making (Hill 2002). This has negatively affected the appeal to the consumers. The internationalization strategy for Unilever and Barclays has not affected the core missions and vision of the company (Marinov & Marinova 2012). However, the case is different with McDonalds. The fast food company is using different strategies in different markets occasionally deviating from the core competency. The financial sector has come under pressure from local banks that fully understand the needs of the local markets (Juul 2008). However, the manufacturing sector have managed to ensure consumers through domestication of products and manufacturing (Hornell & Vahlne 2013). Governments have been cautious in their approach to international service firms. The contractual agreements and licensing affects the operations of the multinationals in these two sectors. Strict controls and language barriers have a profound effect on foreign involvements in manufacturing and service sectors (Hornell & Vahlne 2013). The service and manufacturing sectors consider the consumer attitudes, government policies and the level of competition while conducting business in the international market. Location-boundedness has made it necessary for parent firms to depend on local facilities (Vos 1997). The nature of the foreign market and the sector involved determine the success of the multinational firms. In some cases, competitiveness has caused manufacturing firms to launch unplanned products to counter the domestic competition. Unilever has attempted to use autonomous regional departments to address the local market concerns (Hornell & Vahlne 2013). However, extreme decentralization has led to ineffectiveness. Internationalization has been faced with the challenge of unpredictability and unhealthy political interference (Hill 2002). Market size is of consequence in the management of the marketing process. The market size is measured from the perspective of the host company market. The responsiveness of the locals and the level of adaptation have been at the center of internationalization in the four cases. In conclusion, Service and manufacturing sectors tend to have similar fundamentals when it comes to the internationalization process. However, the process of marketing is different. The service sector tends to be sensitive to the nature and quality of services delivered. This includes using the latest technologies and strategies to enhance affordable and quality services. The manufacturing sector has embarked on international marketing strategies which are customized to meeting standards and needs of the local markets. A casing point in the marketing strategy by Unilever which uses commercials and social media to appeal to potential consumers. The internationalization process is expected to cause both sectors to diversify marketing strategies that ensure sustainability and profitability. This might include convincing consumers to start perceiving services as products. References Altinay, L., & Roper, A. 2007. Internationalization of services firms. Bradford, England: Emerald. Battilossi, S., & Cassis, Y. 2002. European banks and the American challenge: Competition and cooperation in international banking under Bretton Woods. Oxford [England: Oxford University Press. Boome, A., & Riley, A. 2011. Secrets of the superbrands: Food: serving up superbrands. New York: Films for the Humanities & Sciences. Brennan, L. 2011. The emergence of southern multinationals: Their impact on Europe. Basingstoke: Palgrave Macmillan. Choi, J. J., & Click, R. W. 2006. Value creation in multinational enterprise. Bingley, U.K: Emerald. Edwards, T., & Rees, C. 2006. 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