UAE Multinational Corporations' Strategies - Term Paper Example

UAE Multinational Corporations’ Strategies The business world has become so competitive. Management development techniques help an organization to compete fairly in business. Good management techniques include understanding the internal and external factors that affect the organization. An organization needs to analyze and come up with measures to help it prosper. Being profitable is the desire and objective of every organization. The global economy also influences the performance of multinational companies. This paper reviews the management development techniques employed by United Arab Emirates (UAE) multinational (Curwen and Whalley, 2008). An international business is an enterprise or entity that is involved in commercial transactions in two or more than two countries. An international business cuts across boundaries in doing business. The business environments are the surrounding factors that influence the business performance. The business environment can have a number of impacts on business. Before establishing a business in a foreign country; it is imperative to study the business environment to establish the feasibility of a particular business. The economic factors in a given country will influence the habits of the consumer. A good economy is one that has empowered consumers to purchase products they demand thus satisfy their needs. Recession and Inflation influence the purchasing power of consumers. In a market that is undergoing recession, there is a tendency of consumers not to purchase commodities. Recession is usually caused as a result of scarcity of money in the economy. Investors always don’t risk setting up a new venture in a market that is undergoing recession. This is because produce will not sell as the consumers limit their spending. Inflation is an economic situation where the prices of goods and services shoot up hence limiting the consumers’ purchasing power. When there is an increment in price of goods or services, the consumers anticipate lower prices in the future and thus they do not spend on such commodities. The consumers can also seek alternative products that are relatively cheap and can serve their needs. It is proper to investigate the market before setting up a business venture or marketing a product. Factors that will influence a business venture to be established in an inflated economy are vast. If the good or service being offered does not exist in the new business environment, then it is worth investing there. If the good or service is a primary commodity and will be offered at a relatively cheaper price then the venture can be set up despite the inflation. Government taxes also influence the course a new venture can take. If the government taxes products or service that the new price is ready to offer, then the venture might seek an alternative location. Taxes will increase the price of the commodity hence consumers might avoid buying the same commodity. Taxes also decrease profitability of a business. It is not wise to venture in a market where profits will be relatively low, or production will be hindered. Interest rates can also impact the economy negatively or positively. When the interest rates are high, this affects the value of the currency thus limiting sales, exports and imports. This is a negative economic environment for a new business venture. The per capita income also affects consumer spending habits. In countries where the per capita income is high, consumers spend more, and that is encouraging for new business enterprises. Conversely, in countries with low domestic income customers tend to spend a little money because their budgets are limited. Such economies are not suitable for new business ventures. Growth and size of the economy also influences market opportunities. Gross domestic product (GDP) is the amount of commodities and services produced by a country within a specific period of time. Variance in the GDP of a country is the pointer of economic growth and activity. Strategies followed by managers to maximize the firm’s profit are pursued in three different areas, value creation, strategic positioning and operations (value chain). In value creation, the firm creates more value to its product and/or services. In general, firms can increase the value of their products and/or services by increasing their customer’s view of the value of these products and services. This means that a product’s or service is that viewed by the consumer. Because firms compete with other firms in providing a product or service, they normally charge less than the value placed by the consumer. In strategic positioning as suggested by Porter, firms’ managers will have to decide where the company should position their products and services with regards to the volume and cost of these products and services. The main objective of positioning is to maximize its profitability. Three guidelines have to be followed. They include choosing the position in which there is enough demand to support this choice. The second is configuring the firms’ internal operations to support that position. Another one is ensuring that the firm has the right structure to support this position. (Hill, 2011) In this context, the value creation and firm positioning must be consistent with each other to create the successful operations and achieve the set goals of the firm. Internationally operated firms can expand their domestic market to include international market. Good use of location economies by identifying individual value creation activities, serve expanded global market from a central location that helps in cost reduction, and have a better return on value by leveraging different skills in foreign operations. In general, firms that operate internationally are normally able to increase both their profitability and profit growth. The main key here is to be able to leverage the availability of global resources to reach these goals. In expanding the market, companies leverage their products and competencies to increase their growth rates. The company focuses on its core competence; “skills within the firm that competitors cannot easily match or imitate” (Hill, 2011) to penetrate the international market and gain an advanced step in front of its competitors. Companies could also expand their profitability using location economies, in which a firm locates a value creation activity in an optimal location for that activity. Another profit growth activity a firm can gain is by using cost reduction activities, such as production cost reduction, through the use of learning effects, economies of scale, and strategic significance. Finally, as discussed by Hill, Leveraging Subsidiary Skills is one of the effective profitability growth activity, this can occur by using the successful activities in a firms foreign location, in other locations as long as they would maintain the ultimate goal of profitability and profit growth. The main two types of competitive pressures a globally competing firm can face are Pressures for Cost Reductions and Pressures for Local Responsiveness. In the pressures for cost reductions, firms are required to try and lower their costs of value creation (Hill, 2011). To do so, the firm is required to find the optimal place that will comply with this requirement. For this reason, some companies outsource some of its operations to manage low cost to value creation procedures. The second type of pressures a global firm faces is the Pressures for Local Responsiveness. This type of pressure occurs when an international firm faces differences in customer tastes and preferences at where they are expanding. In such a case, the firm is expected to customize its products to appeal to a new customer at the new location. In responding to this kind of pressure, a global firm is required to reduce this pressure while maintaining their domestic requirements to still maintain their cost reduction strategy. Firms can adjust their infrastructure or distribution channels but along these adjustments they will have to comply with the host government demands. Global Standardization Strategy focuses on cost reduction through the economies of scale, learning effects and location economies to increase profitability and profit growth. The primary activities of the firm are mainly focused in few locations that ensure both global standardization and cost reduction. As presented by Hill, this strategy is most effective when the pressures for cost reduction are at their highest while the pressures for local responsiveness is minimal. Localization Strategy focuses on increasing the firm’s profit grow and profitability by customizing their products and services to match their targeted customers throughout their operations places. Firms using this strategy are those who are faced with high pressures for local responsiveness, but at the same moment, these companies will have to operate efficiently while maintaining their costs at a low level. In the transnational strategy, firms try to lower their costs through location economies, economies of scale and learning effects while accounting for local differences. In this situation, companies are faced by high pressure for cost reduction and local responsiveness. This is one complex situation a firm may face in an international expansion effort. A good measure to resolve the situation is using a separate strategy for each local needs and goals. The fourth strategy is the International Strategy which is found in situations where firms have low pressures of cost reductions and local responsiveness. Firms that use this strategy usually tend to centralize their product development functions in each major country they function, in this case the firm might increase their costs, but this is not a concern because they have low pressure for cost reduction. (Hill, 2011) Firms looking into international expansion are required to identify their level of pressures to effectively select the best strategy for their international expansion. Once their pressures are identified, the firm can either work directly with one of these strategies, or tailor one that best serve their needs and helps in achieving their ultimate goal of profit growth and the firms’ profitability. Emaar has a very strong leadership. As is rightfully said by Emaar, “Our strength lies in our capacity to grow our investments by being open and receptive to new, innovative ideas and technologies. This will enable us stay ahead of the curve and fulfill our responsibility for cultivating the next generation of industry leaders.” However, how is this possible? If individuals were not having IT, then Emaar had to actually spend hours to find the required data to assess their position in the market and to find ways to be a leader and ahead of the curve. With the introduction of IT, things have become a lot easier. The data is readily available and all the Leaders have to do data mining and process the data according to their need and thereby saving much time and effort, which can be directed elsewhere. Hence people think that IT does play a very vital role for the above. The role of IT is very crucial when it comes to Organization Culture. One other important aspect of Organizational behavior is Decision making process and IT helps a lot in this aspect, because with the data being accessible so easily due to IT. However, if raw data is there and it is not processed, then decision cannot be made. So IT also allows the company to process the raw data and reach a decision. Also, the work culture has become much disciplined as the company can monitor the activities and work productivity of the employees but then this also has a negative impact as the employees may feel that the company does not trust them and this may also lead to a reverse impact than a positive impact. IT has become a part of organization culture. Different kind of communication in between the organizations take place through IT means such as company have their own local (internally based) server similar as Gtalk or any other messenger. Alternatively they all use Microsoft Outlook through which communication take place the form of Emails. People and partner are assets to the firm, and to manage them their information in place all time and that too updated. To manually manage this is a huge herculean task. When to comes to people who are the employees, their details are to be managed and kept up-to-date by the firm, if it is fewer people then the company has fewer data to manage, but what is the firm decides to grow, then people increases so does their data, so to manage the data IT plays a vital role. Also to manage the information of partners requires IT support as on time payment, renewal of agreements require automation, to save time. Hence it is observable how important IT is to manage people and partners. The Company partners with Emirates Airline, Samsung, Coca-Cola, Google and other companies. Infrastructure is a vital engine of the company as it deals with management and storage of the data. Data is very important for any firm, but if that data is not structured and protected and is accessible then the firm progress is very difficult. IT ensures that the data is easily accessible to the required department, but is also protected from the unwanted leakage and misuse of the same. Emaar not only take care of its own IT related process, but it also provides IT support to other external entities also. Since its inception, Etisalat has engaged strategies to competitors’ products in consumers’ minds. Etisalat positions itself on the basis of its services and the strong and uniquely humorous communication direction that has now become its signature across all advertising media. It has managed to become the top most cellular company in United Arab Emirates and other nations. Earlier mobile phones were considered as a luxury affordable by the elite only considering the fact that Etisalat’s competitor Mobilink had the most grip over the market at that time, but Etisalat changed its image to a necessity affordable by the common man. Market Differentiation: A company’s marketing offerings should be such that it delivers higher customer value than its competitors. It can do that either by charging lower prices, or offering higher benefits to justify the higher prices. Today, there is an intense competition for the companies and an unsatisfied customer can immediately go for brand switching. Etisalat has differentiated itself in terms of price, quality service and technology. Customers call at the lowest call rates ever, while the quality is maintained to its best. Its other competitive advantages include Value Added Services, Call block services and Corporate Color. Marketing Management Orientation: Companies want to build strategies that maintain profitable partnerships with customers. Marketing orientation tells about the philosophy that should guide these marketing strategies. Etisalat has always followed good marketing strategies. It has introduced packages that meet the customer’s latent needs, as well. For example, the Youth package is meant for the young generation to fulfill their needs of excessive texting and late night calls (Koen and Mason 2004). It also provides services including GPRS, messaging, international roaming and online billing payment. Other mobile products include Uchat Ugames, Missed Call Notification, Uloan, Voice Bucket, Ushare, and others. Etisalat offers least call rates off-network because price is a major aspect of brand selection for the customers. At times of festivity such as Eid, Ramazan and Independence Day, Etisalat always comes up with special offers at lower prices, thus beautifying its image in the customers' mind. Etisalat has taken up many activities to make itself available to people in United Arab Emirates and other countries hence increasing customer base. It has its customer service franchises in almost all the major areas, in the cities. It is also improving its coverage and promotion in rural and northern areas. One example of this is the Kisaan Package. For its sale promotion strategy, Etisalat comes up with different contests and games, premiums are offered whenever a customer does not use his or her Sim for a long time and then re-activates it, free tickets and gifts through lucky draws and other promotional products such as the HBL Credit Card offer. It has also become famous for its humorous advertising which the viewers enjoy a lot. However, Etisalat seems to be less conscious for developing its public relations. It employs direct marketing as a method of promotion by setting up on the road franchises (Steers, 2010). References Curwen, P. J., & Whalley, J. (2008). The internationalisation of mobile telecommunications: Strategic challenges in a global market. Cheltenham: Edward Elgar. Hill, C. W. L. (2011). International business: Competing in the global marketplace. New York: McGraw-Hill/Irwin. Koen, C., & Mason, K. (2004). Comparative international management. Maidenhead: McGraw- Hill Education. Steers, R. M., Sánchez-Runde, S. C. J., & Nardon, L. (2010). Management across cultures: Challenges and strategies. Cambridge [etc.: Cambridge University Press. Read More