Evaluations and Implementations of International Business Strategy - Research Paper Example

International Business Strategy: T&T into South Korea - Evaluations and Implementations Table of Contents Table of Contents 2 T&T STRATEGIC ALTERNATIVE 1: INTERNATIONAL JOINT VENTURE WITH E-MART 3 T&T STRATEGIC ALTERNATIVE 2: FRANCHISING 6 T&T STRATEGIC ALTERNATIVE 3: STRATEGIC ALLIANCE WITH E-MART 10 Alternative “the Chosen One" (Strategy Selection) 14 References 17 Bibliography……………………………………………………………………………………..19 T&T Supermarket is a company based in Canada that is specialised in Asian food products. Customers purchasing products from T&T might have an exceptional experience as the super market includes certain food products that have been brought from different parts of Asia. Recently, the company has been planning to expand its business in South Korea through entry mode strategies that would ensure its successful expansion. Correspondingly, in order to facilitate the smooth entry of the company in the prospective market of South Korea certain alternative strategies have been propounded. The alternative strategies that have been proposed for this company are joint ventures, franchising and strategic alliance (T & T Supermarket Inc, 2014). T&T STRATEGIC ALTERNATIVE 1: INTERNATIONAL JOINT VENTURE WITH E-MART A) Arrangements: It has been proposed that T&T can expand its business in South Korea by using a joint venture strategy with E-mart which has been quite successful in South Korea as it was the first discount store established in the region. This can be termed as a corporate level strategy. E-mart has a good brand value in the region and it is recognised by the customers for its valuable service along with high quality commodities and its low price. In this regard, low price is the key business level strategy of T & T Supermarket which has facilitated it to ensure greater prospect of success in its internalisation venture to South Korea. E-mart Every day was created in the year 2011 and it has rapidly developed in the South Korean region. As T&T is already specialised in food products across Canadian and Asian regions, it would be quite profitable for the company to export its raw materials in South Korea and get its final product manufactured in the nation because of the low labour cost and abundant availability of labour. Under this joint venture, it has been proposed that T&T should use its manufacturing competencies and export its raw materials in South Korea so as to get its products manufactured by low wage labours in the region. On the other hand, as E-mart has already established its brand recognition in the South Korean region and it is considered that E-mart should use its sales and marketing strategy and sell its product in the market through wide distribution network and supply chain (Shinsegae, 2010). T&T can select E-mart as its joint venture company as the marketing competencies and brand recognition are quite high in the South Korean region. Likewise, the market competencies of E-mart involve that the company is going through a phase of rapid development and the track record of the company is in a good position wherein the company has enjoyed a good brand reputation that has resulted in attracting end number of customers for its product. The company is financially stable and it is specialised in managing its assets in such a way that provides steady growth to the company in respect of product sales and assets. Moreover, it has been viewed that the company has a good customer base in Korean region and it is recognised for providing excellent services to its customers that is mostly a result of high qualitative service being pursued by the company. The wide range of products offered by E-mart makes it certain that the company has witnessed development in its business operations in South Korea. As a private retailer, E-mart provides private label goods to its customers that have added up to its competency level which in turn has resulted in E-mart’s operational effectiveness. The suppliers used by E-mart help the company to maintain its lower cost of production, hence resulting in cheaper product cost (Shinsegae, 2010). B) Strategies: It has been observed that T&T is operating successfully both in Canada and Asian regions, which provides an understanding that the strategies used by T&T have been quite productive in its business operation. Therefore, it is considered that a global level strategy must be used by T&T in its process of joint venture with E-mart wherein the products developed by the joint venture would be standardised across both the domestic and international market (Hitt & et. al., 2006). The supply chain management previously used by both the companies is required to be effectively combined along with inventory management strategies. It is considered that the products that would be sold in the stores of joint venture must be assembled from Asian regions that would serve the customer expectations and cater their requirements. Moreover, the staff hired for this joint venture must be of Asian descent that would ensure that the customer requirements are well understood and accordingly the service is provided. In addition, the joint venture can expand its range of products that would target customers of different background in relation to their tastes and preferences (Shinsegae, 2010). C) Articles: It can be ascertained that there are certain advantages and disadvantages associated with joint venture that would result in issues relating to business functioning of the joint venture. Based on the article of Nguyen & Meyer, advantages of joint venture include aspects such as opportunistic advantage of gaining new expertise and capacity, technology of Joint Venture Company would get upgraded, resources can be accessed to a greater extent and it would provide more flexibility in its business operation (Nguyen & Meyer, 2004). Conversely, disadvantages in joint venture include that the objectives are often not clear, goals are not communicated effectively, imbalance might occur depending upon the level of expertise, conflicts might arise due to cultural differences and differences in management style and in certain cases the partners might not provide equal contribution (Beamish & Lupton, 2009). Therefore, these advantageous and disadvantageous factors would result in emergence of certain issues when two companies undertake joint venturing. Corporate structure might be an issue in the process of joint venture wherein it is important for the venture to define its type of structure such as whether it would be a partnership venture, a limited partnership venture or limited liability corporation. Governance is also an issue that might relate on the issue of ownership percentage or share in its business operation (Duerr & Duerr, n.d.). Contribution of investment also requires to be given certain consideration because if a joint venture agreement does not state the extent of capital contribution then there is a possibility that an issue might arise. Operational issues are also regarded as a major factor in joint venture and it is important for the joint venture of T&T and E-mart to determine its operation and manage its function. It would be worth mentioning that the business venture of T&T and E-mart would be successful if the issues are appropriately managed and the objectives are clearly communicated in the business units of the venture (Beamish, n.d.). T&T STRATEGIC ALTERNATIVE 2: FRANCHISING A) Arrangements: It can be mentioned that T&T can expand its business in South Korea through franchising its business, which can be termed as a different sort of corporate level strategy for international expansion. It is considered that franchising is a beneficial approach for a company to expand its business globally. Therefore, it is considered before franchising its business in South Korea, T&T must analyse the market situation and accordingly decide the perfect time for its entrance in the market through franchising. In relation to T&T, it has been viewed that the company has already gained expertise of functioning in the Asian market so it can be ascertained that franchising its business in South Korea would turn out to be quite profitable for the company. T&T can expand its business using franchisees that have profound knowledge of local market which would help in providing support to its expansion (Chan & Justis, 1990). With the help of franchising, T&T can directly export and sell its foods products by granting a licence to its franchises in order to sell the product in the Korean market (Williamson & Raman, 2011). In this case, T&T will have to provide a trade licence to its franchises and these franchises would function under the trade name of T&T wherein continuous assistance is provided to these franchisees from T&T. Besides, it is regarded that royal fees obtained from these franchises must be decided in advance (Preble, 2001). Moreover, T&T must follow a systematic model to franchise its business wherein it is considered that the company must evaluate whether its business is actually ready to get franchised (Christensen & et. al., 2011). A concept of franchising must be developed that would provide the customers something unique beyond their expectation. T&T must undertake a complete market research that would provide an understanding of its competitors and determine the demand of customers in relation to the food products. It is regarded that T&T through market analysis must determine customer tastes and preferences and accordingly develops their products, which would be a vital business level strategy. After market analysis, T&T must get prepared for change in its business operations wherein the company would outsource its business through franchising activities and establish control within these franchises. In addition, T&T must understand the legal requirements for franchising its business in South Korea wherein it is important for the company to analyse the current political situation and government policies which would provide an idea about whether the policies would be supportive in its franchising business operation (Hitt & et. al., 2006). T&T must decide how its business would operate as a franchisor and it is necessary to decide the term of franchising contract. The company will also have to go through certain paper works in the Korean region and register itself as a franchisor in Korea. The next step for T&T is to hire local personnel for marketing its products and selling them to the customers and finally when the franchisee is established it is very important for T&T to provide the necessary resources as per the requirement of the franchisees along with adequate support. Therefore, these measures must be taken into consideration before T&T decide to franchise its business (Doherty, 2006). B) Strategies: In relation to franchising, T&T can use a global strategy for its franchisees in which interdependency would be provided to these franchisees and more emphasis would be given to the economies of scale. In this global strategy, there would be a cross border sharing of resources between T&T and its franchisees that would help its franchisees in using the technical expertise of T&T in its domestic market (Hitt & et. al., 2006). T&T in its franchising activity must use these strategies so as to get a competitive advantage in the Korean market. The franchisee must be segmented into two parts wherein one segment would cater the needs of individual customers and the other segment would cater the needs of families who walk into the franchisees and buy products. Hence, this segmentation can be termed as a key business level strategy. T&T must use a differentiation strategy while selling its products under franchises wherein unique products are offered to various customers based upon their requirements which would bring loyalty among customers and help in retaining them. Moreover, the services provided to the customers must be improved that would provide an exceptional experience to the customers. It is also important for T&T to bring improvement and innovativeness in its products that would help both the franchisor and franchisee in achieving a greater market share. Moreover, through product differentiation which would be a vital corporate level strategy, T&T can assure its customers that there would be no substitutes for the commodities offered under the franchising of T&T. Low cost leadership strategy must be used in these franchisees that would differentiate T&T franchisees from other existing franchisees in South Korea. In addition, the products must be developed in the Asian region that would ensure that the cost of production is relatively lower and affordable for T&T to franchise its products (Shinsegae, 2010). C) Articles: In relation to the franchising of T&T business, it has been viewed that there are certain issues that T&T might face while franchising its business as there have been recent amendments made in the government policies of Korea. As per the amendment, it is necessary for the franchisor that it must share its remodelling cost of franchising and there must be reduction in the working hours of franchisee. These aspects can be viewed as a disadvantageous factor for T&T while franchising its business. However, in light of the strategy proposed, it has been viewed that the company with the use of differentiation strategy can actually cater the distinctive requirements of the customers along with providing a competitive advantage to T&T in the South Korean market (Fane & et. al., 2003). Based on the article of Doherty, it can be affirmed that differentiation strategy would act as an advantageous factor as differentiation in products would act as a medium for targeting a wider group of customers in the market and differentiate T&T franchisee from other brands that already exist in the market (Doherty, 2006). Moreover, as proposed, the company i.e. T&T can use a low cost leadership strategy and with the help of this strategy it can be assured that the franchisee of T&T would be able to attract more Korean customers and sustain in the market. Using low cost leadership strategy would benefit T&T in selling its products to the Korean customers who have the tendency of purchasing high quality goods that is lower in price. Thus, it can be asserted that effective use of these strategies would be advantageous for T&T to a significant extent and provide brand recognition. T&T STRATEGIC ALTERNATIVE 3: STRATEGIC ALLIANCE WITH E-MART A) Arrangements: T&T can understand the market potential of South Korea through strategic alliance with E-mart which is one of the largest retailers of food products and electronics in the nation. E-mart offers high quality products at low price and is known for providing exceptional service to its customers that has good brand recognition to E-mart in South Korea. Thus it can be asserted that strategic alliance for T&T with E-mart would be quite productive as E-mart has established its market presence in South Korea which in turn would help T&T to penetrate the South Korean market successfully. In addition, both the companies can combine its core competencies and resources which in turn would provide a competitive advantage to the alliance in the South Korean market. It has been viewed that most of the strategic alliances result in simulated integration of two partners through part-equity ownership and in some situations strategic alliances finally result in integration through a process of acquisition (Takeuchi & et. al., 2008). To be precise, the main purpose for strategic alliances is to collaborate or integrate among two or more companies without undertaking mergers and acquisitions (Hitt & et. al., 2006). It is considered that strategic alliances might turn out to be productive for T&T as it would help the company in gaining experience of the market situation through this approach. Strategic alliances help the companies in pooling together their competency and investment so as to achieve the business objectives (Gomes-Casseres, B., 2003). Therefore, it can be asserted that E-mart would be the best company for T&T in relation to strategic alliance as E-mart has already established its brand recognition in the Korean market. It has been viewed that E-mart is recognised for providing qualitative services and products to its customers and the products are mostly priced at a lower rate which has been the main aspect for attracting the customers. Moreover, E-mart has been operating in South Korea since 1993 due to which it can be considered that the experience of E-mart would provide a huge contribution to T&T in its strategic alliance with E-mart which in turn will help T&T in expanding its business in Korean market. Strategic alliance will also make both the companies to function independently wherein both the companies would share their products, supply chain network, manufacturing capacity, equipment, expertise and knowledge (Pekar & Margulis, 2003). Strategic alliance often results in transfer of technology within both the companies with the ultimate aim of achieving the business goals with shared risks and investment. Consequently, it can be ascertained that through strategic alliance both T&T and E-mart would have a competitive advantage and attain greater market share (IESE Business School, 2008). However, before strategic alliance between two companies, it is considered that T&T must understand whether E-mart would provide the required support for expanding its business operations in South Korea. B) Strategies: In relation to the strategic alliance of T&T with E-mart, it is considered that T&T must develop certain strategies so that the strategic alliance between both the companies is effective and advantageous. It is considered that T&T must use a multi-domestic strategy in its strategic alliance with E-mart wherein the products are customised based upon the customers’ preferences in South Korea. This strategy would provide a competitive advantage to the alliance as the decision regarding the business operations would be decentralised which would result in innovativeness of the products developed (Hitt & et. al., 2006). It is considered that innovation strategy must be developed in advance by T&T that would provide a competitive advantage in strategic alliance of both the companies and help in delivering innovative service delivery to the customers. Innovation strategy is a significant aspect for T&T that would help it in realising the objectives of the alliance (Govindarajan, 2012). Moreover, the strategy would result in creating actions plans and mobilisation of resources so that the alliance meets its purpose and the long-term objectives of the alliance are attained. Additionally, this strategy would help T&T in gaining more knowledge about the customers and the market as well. Likewise, T&T should also use a multi-domestic strategy that would help the company in customising its products and marketing strategy based upon the preferences of customers in South Korea. This strategy would also provide a contribution in obtaining economies of scale through sharing the expenses of production along with profit derived from market (Hitt & et. al., 2006). With the use of this strategy, the alliance can carry out its production and marketing activities as per the requirement in the Korean market. C) Articles: As it has been proposed that T&T can use a strategic alliance mode of strategy with E-mart so as to enter into the market of South Korea thus T&T can be subjected to various problems or issues wherein both the companies might have a difference in their opinion and values due to which there is possibility that conflicts might arise amid the companies. Moreover, it can be asserted that these conflicts might result in creating rivalry between the companies in the future which can disadvantage both the companies in its business operation. Based on the article of Pekar & Margulis, communication process can be problematic in strategic alliance as it would consume more time to communicate the goals (Pekar & Margulis, 2003). In keeping with Gomes-Casseres (2003), at times, there might be a situation wherein conflict would arise due to difference in company cultures and there is a possibility than an organisation might depend on the other for its technical expertise on the long run. Mistrust between two companies might also arise in strategic alliance as it takes a lot of time to build trust amid both the companies. Therefore, strategic alliance can at times turn out to be disadvantageous and result in losses for both the companies. However, on the other hand, there are certain advantages associated with strategic alliance wherein it has been revealed that this mode of entry strategy helps in triggering innovation within the alliance and encourages it to expand its business if in case the business is profitable. Moreover, strategic alliance helps in creating a good relationship between the companies that involves building of trust and devotion in supporting the business operation. Additionally, T&T will get improved access to the South Korean market that would help the company to import its product in the Korean market and market it so as to obtain a bigger share in market. If in case there is a gap in the technical expertise, strategic alliance will help in filling the gap and the strategy would aid in sharing the distribution networks in order to reduce the cost of logistics. Financial and technical resources would be used to a maximum extent that will provide a competitive advantage to the strategic alliance of T&T and E-mart. Consequently, it can be ascertained that if the strategies are developed and initiated effectively in the strategic alliance than the outcome from the alliance would help in serving the long-term objectives of T&T. Alternative “the Chosen One" (Strategy Selection) From the aforesaid proposed entry mode strategy, it can be asserted that the best mode of entry for T&T in South Korea would be joint venture as both T&T and E-mart have a good experience in selling food products across Asia. The main reason for choosing joint venture as an entry strategy for T&T is that it would provide an opportunity to both the companies to assimilate their resources and collaborate with each other so as to achieve positive outcomes in the Korean market which would be quite difficult for T&T to achieve the desired results as a sole company. Joint venture has been proposed as a best entry mode strategy as it would help T&T to strengthen its business activity in South Korea and introduce its existing food products into the South Korean market. Moreover, joint venture would provide a huge opportunity to T&T develop new products with the aim of selling it in South Korea along with its home country that is Canada and other Asian regions. Diversification of T&T’s business would also occur in the process of joint venture as it would provide the platform for the company to broaden its business reach internationally. In addition, E-mart is a more suitable company for T&T to engage in joint venture it is one of the largest retailers in South Korea for selling consumer goods and groceries (Brouthers & Brouthers, 2000). Thus, allying with E-mart for T&T would be the best choice which would reduce the extent of competition and risk in the South Korean market. Furthermore, it can be ascertained that joint venturing is a rational choice for T&T to enter into the South Korean market as it has enough experience and technical expertise for marketing and selling its products in the Asian regions. Consequently, if T&T integrates its business activity with E-mart then both the companies can assimilate their technical expertise along with experience to gain a competitive advantage in the South Korean market and other Asian regions. Eventually, joint venture is a balanced approach which would help both the companies in providing better services and products as a part of business level strategy in the market that would ultimately satisfy the customers and provide recognition to the joint venture. As per the article of Chan and Justis, it can be explicitly stated that joint venture is the best mode for T&T to penetrate into the competitive market of South Korea as franchising and strategic alliance is not much encouraged by the government regulations as compared to joint venture in South Korea (Chan & Justis, 1990). It has been viewed that T&T is already specialised and experienced in marketing its products in Asian and Canadian regions which provide a greater advantage to T&T to use its Asian and Canadian marketing strategies in South Korea after it gets allied with E-mart. Moreover, joint venture would benefit T&T in exporting raw materials to South Korea wherein the cost of production and labour cost is quite cheaper and reasonable. Distribution and supply chain networks of both the companies can be used in an effective manner with the aim of reducing the cost of transporting products and meeting the required demands of customers in the market (Elangoa & Sambharya, 2004). On the whole, it can be clearly stated that joint venture is the best strategy for T&T to enter into the South Korean market as per the prevailing market situation. References Beamish, P. W. & Lupton, N. C., 2009. Managing Joint Ventures. Academy of Management Perspectives, pp. 75-94. Beamish, P. W., No Date. The Design and Management of International Joint Ventures. Engaging In Cross-Border Collaboration: Managing Across Corporate Boundaries, pp. 567-580. Brouthers, K. D. & Brouthers, L. E., 2000. Acquisition or Greenfield Start-Up? Institutional, Cultural and Transaction Cost Influences. Strategic Management Journal, pp. 89-97. Chan, P. S. & Justis, F. R. T., 1990. Franchise Management in East Asia. Academy of Management Executive, Vol. 4, No. 2, pp. 75-85. Christensen, C. M. & et. al., 2011. The New M&A Playbook. Harvard Business Review, 49-87. Doherty, A. M., 2006. The Internationalization of Retailing. International Journal of Service Industry Management, Vol. 18, No. 2, pp. 184-205. Duerr, E. C. & Duerr, M. S., No Date. Evaluating A Joint Venture: Nummi At Age 20. San Francisco State University, pp. 1-14. Elangoa, B., & Sambharya, R. B., 2004. The Influence of Industry Structure on the Entry Mode Choice of Overseas Entrants in Manufacturing Industries. Journal of International Management, Vol. 10, pp. 107-124. Fane & et. al., 2003. Competitive Advantage the Toyota Way. Business Strategy Review, Vol. 14, No. 4, pp. 51-60. Gomes-Casseres, B., 2003. Constellation Strategy: Managing Alliance Groups. Ivey Business Journal, 1-6. Govindarajan, V., 2012. A Reverse Innovation Playbook. Harvard Business review, pp. 120-124. Hitt, M. A. & et. al., 2006. Strategic Management: Competitiveness and Globalization. Thomson Canada Limited, pp. 9 (1) – 9 (24). IESE Business School, 2008. The KLM Approach to Alliances. University of Navarra, pp. 1-23. Nguyen, H. T. & Meyer, K. E., 2004. Managing Partnership With State Owned Joint Venture Companies: Experiences From Vietnam. Business Strategy Review. Vol. 15, No. 1, pp. 39-50. Pekar Jr., P., & Margulis, M. S., 2003. Equity Alliances Take Center Stage: The Emergence Of A New Corporate Growth Model. Ivey Business Journal, pp. 1-9. Preble, J. F., 2001. Global Diffusion of Franchising: A Country Level Examination. Multinational Business Review, pp. 66-76. Shinsegae, 2010. Store Details. Shinsegae Corporation. [Online] Available at: http://english.shinsegae.com/english/emart/emart_store.asp?STORE_CD=26 [Accessed March 27, 2014]. Takeuchi, H. & et. al., 2008. The Contradictions That Drive Toyota’s Success. Harvard Business Review, pp. 96-104. T & T Supermarket Inc, 2014. Corporate Profile. About Us. [Online] Available at: http://www.tnt-supermarket.com/en/cprofile.php [Accessed March 27, 2014]. Williamson, P. J. & Raman, A. P., 2011. How China Reset Its Global Acquisition Agenda. Harvard Business Review, pp. 109-114. Bibliography Beamish, P. W. & Lupton, N. C., 2010. International Business: An Asia Pacific Perspective. International Acquisitions, pp. 200-220. Bartlett, C. A., 2001. Jollibee Foods Corporation (A): International Expansion. Harvard Business School, pp. 1-23. Chandrasekhar, R., 2007. Mahindra & Mahindra LTD- Farm Equipment Sector. Ivey Management Services, pp. 1-18. Chintu, N. & Williamson, P. J., 2013. Chinese State-Owned Enterprises in Africa: Myths and Realities. Ivey Business Journal, pp. 1-10. Costco Wholesale Korea Ltd. & Costco Wholesale Corporation, 2012. About Costco. Costco.CO.KR. [Online] Available at: http://www.costco.co.kr/eng/about/index.html [Accessed March 27, 2014]. Gomez, B. & et. al., 2012. Exploring the Influence of Three Types of Grocery Retailer Loyalty Programs on Customer Affective Loyalty. The International Review of Retail, Distribution and Consumer Research, Vol. 22, No. 5, pp. 547-561. Ho, R. & et. al., 2009. An Approach to Develop Effective Customer Loyalty Programs: The VIP Program at T&T Supermarkets Inc. Managing Quality Service, Vol.19, No. 6, pp. 702-720. Kim, W. C. & Mauborgne R., 2005. Blue Ocean Strategy. Harvard Business School Publishing Corporation, pp. 1-185. McColl, M. D., 2013. Mapping the Value Chain: Integrating Firm, Competitor and Competitive Analyses for a Customised Strategy. Vancouver Island University. Sull, D. N., 2005. In China: The Importance of Managing Relationships Dynamically. Ivey Business Journal, 1-12. Read More