Global Business Strategy and Standardization - Assignment Example

GLOBALIZATION OF LOGISTICS Introduction In the recent past, globalization has risen to possess an increasingly important effect on business activities and strategies including marketing. Many markets are becoming open and available to various international organizations since the complexity and cost of doing business is reducing with globalization (Wild & Wild 2008, p. 56). One important attribute of globalization is an increase in marketing activities for businesses that operate globally. With globalization, business organizations have the potential to access cheap labor and other important resources raw materials, most of which are freely available in the developing countries. By accessing such resources, businesses operating across nations find it easier to price their products and services at favorable prices enabling them to attract and sustain their market share. Additionally, this enables them open up their businesses to broad markers where people have disposable income to spend on various kinds of goods and services. In the wake of globalization, another important feature evident in business activities is increased communications technology, which has spread across different parts on the face of the earth. This has in fact allowed campaigns in international marketing to be effectively coordinated from domestic databases. The mobile phone technology and internet revolution has played an important role in opening new international industries to an endless potential for opportunity (Venkateswaran 2012, p. 78). It is important to realize that globalization has greatly influenced the manner in which people shop. Customers now have a wide potential of goods and services to choose from, having the ability to shop from any place on the globe, something that has produced huge dynamism in tastes and preferences. Following this development, multinational companies have been looking doe better global strategies they can use in creating and sustaining their market share. This paper examines the concept of creation of effective global strategies that these companies can use in the process of creating competitive advantages in the highly globalised business environment. Global Business Strategy In the wake of globalization, multinational enterprises are faced with the need to formulate and implement an effective global strategy they can rely on in doing business effectively across many countries on the globe (Frear, Metcalf & Alguire 1992, p. 9). These businesses have realized the advantage that comes with a strategy, which effectively correspond to the changing business environment. For this reason, the need for creating an effective global business strategy has become paramount. A global business strategy, as sought out by these businesses can be described as strategy engaged by businesses, firms and other multinational enterprises that operate in the expansive global environment, which has the potential to serve many customers across the world (Wibbeke 2008, p. 67). Often, the global business strategies are closely linked to the businesses that develop them such that they can use them to achieve both the short and long term objectives. In most cases, some of the short term objectives devised by these businesses include improving its daily operations, company efficiency and others essential aspects of organizational management. On the other hand, the long term goals include increasing its profits, earnings and sales as well as ensuring sustainable growth and development and stability for the particular businesses (Burt, Dobler & Starling 2003, p. 46). It can be seen that in this case, the global business strategy is very different from the local strategy. First, the global strategy incorporates such factors as standardization of products, whereby adaptation come has to come in. here, the multinational enterprises has to ensure that its products and services are standard across the world. This strengthens its brand image, thus sustaining its market share. The reason for doing this is that globally, in as much as many opportunities exist, success comes to businesses that can effectively adopt and use strategies that correspond to the global business needs (Burt, Dobler & Starling 2003, p. 48). It is important to acknowledge the fact that product diversification and differentiation are also important in the creation of local business strategies. This is because; businesses try to create competitive advantages by adopting strategies that make them unique in their product development and other business strategies. In the modern business environment, global strategies have risen because of internationalization and globalization of domestic companies, which has increased the rate of globalization in these businesses (Frear, Metcalf & Alguire 1992, p. 11). This has prompted business managers and owners to think and formulate global strategies that they can rely on in increasing their competitive advantages. In the process of creating global strategies, it is important to realize that global strategies in multinational enterprises depend on two main pillars. First is standardization, where these business organizations try to establish products and services that are uniform across the world. This prevents other business from creating similar products, something that enhances their competitive advantages. Additionally, the strategy includes adaptation, whereby companies try to adapt to new environments they launch their businesses (Burt, Dobler & Starling, p. 2003, 49). Adaptation often means that these businesses have to learn some of the essential aspects of international business management which includes language and branding elements that enable the locals to identify with particular company products and services. Standardization In Multinational enterprises, the process of standardization of goods and services requires the companies to produce goods and services that are similar at the national and the global level (Frear, Metcalf & Alguire 1992, p. 14). In most cases, these products may have some minor changes in the design, but does not make them different from those in their local environment. The process of standardization of these products and services stems from the fact the customer needs in almost all countries of the world are similar. The concept of standardization is believed to have surfaced in 1960s but vanished after failing to appeal to business organizations. Later, the strategy resurfaced again in the 1980’s when it was used by businesses in Europe and some places in Japan, which reported increased returns and great levels of process and product innovations. In this case, the innovation acted as an important source of effective and comparative global business strategies as follows. First, standardization enhanced development and management of economies of scale. In this case, companies that used this strategy managed to produce extremely large quantities of products by use of more or less of the techniques in production. Secondly, standardization plays the essential role of preserving the home country’s image which plays host to the particular global corporation by assisting in minimizing the respective costs of modification or design, alteration as well as stocking and handling of products, something that speeds up the process of delivery systems (Devinney 2010, p. 19). Additionally, the strategy plays an essential role in saving the company’s managerial efforts and times when it comes to decision making on matters affecting manufacturing of various products. The third and most important benefit for standardization as used in businesses is the fact that it led to faster accumulation of learning experiences especially when it comes to a learning-by-doing strategy (Merino 2010, p. 49). This means that the process of standardization made businesses to perform activities deemed essential in their competitive growth, while experimenting on them. This approach reduced the costs of having to test new strategies before launching them in the respective businesses. In this case, most business managed to increase their success and performance at a very faster rate, something that enhanced the use of global business strategies. On the other side of the continuum, people that advocate for market orientation as an important attribute global business strategies in multinational enterprises explain that while human basic needs may happen to be homogeneous across the world, standardization does not appear as the basic word to fit this description (Franklin 2011, p. 33), this is because environmental and cultural factors among others appear to significantly affect people’s purchasing product decisions from one part of the world to another. For this reason, the global business strategy designed by the multinational enterprise has to be cognizant of this important attribute. From the foregone discussion, it is important to understand that currently, the trends in globalization are making it mandatory for multinational enterprises to consider using effective strategies that ensure they reach into new markets and establish their competitive advantages. Global strategies in this case can be considered as a special field of study that effectively address many of the interdisciplinary issues in organizational theory, marketing, business strategies and other important aspects of management. The success of multinational enterprises in a globalised business environment depends on the ability of the business to choose global business strategies that are appropriate for the kind of circumstances that it faces in its particular performance (Powell & Ghauri 2008, p. 98). However, choosing the strategy appropriate for the business, whether it concerns adaptation or standardization depends on the potential of the firms to suit their respective marketing strategies as well as the dynamics of the external environment. A conceptual contingency structure, in most cases is theorized between critical variables of the particular businesses like better sales revenues, specific relationships as well as capacity utilization among these particular variables and their implementation leading to high performance levels. Of the things that heavily affect the global strategies for multinational business enterprises is the influence of World Trade Organization’s rules on the trade for goods and services being produced (Kleinert 2004, 88; Condon 2002, p. 49). Other factors affecting the strategies include foreign direct investments as well as intellectual property rights as featured among businesses at the local and international level. The effect of these factors influences the negotiations, interests and the agreements between the developed countries. Additionally, they influence some of the important issues in modern businesses like climate change, environmental protection global security and international migrations (Daniels & Radebaugh 2000, p. 63), all of which affect the growth and development as well as success of multinational enterprises and other business operating on the local front. PESTEL Analysis in the Global Business Strategy All multinational enterprises, in the process of creating and consolidation on their competitive advantages are expected to effectively identify some of the external factors that can influence the effectiveness of their strategies (Cartwright 2002, p. 42). Most of these factors are those that the organisation has no control over; for this reason, businesses are forced to adapt to them. Without an effective understanding of this adaptation, most multinational businesses have ended up suffering greatly. One of the most successful tools that multinational enterprises can use in creating their global strategies is the PESTLE tool for analysis. This tool enables businesses to examine some of the changing trends in the political environment, economic, social and technological as well as the legal and other environmental issues. After making an analysis of these issues, multinational enterprises uses the data gathered to devise strategies that can help them in their expansion process. Fig 1. PESTLE analysis, (Warner, 2010, p. 65) PESTLE analysis has been used by many businesses in examining the bigger picture for the businesses’ external environment especially as far as foreign markets are involved. By using the PESTLE analysis, managers can have an effective understanding of the threats and opportunities that they face (Kimmel 2005, p. 76). Additionally, the analysis plays an important role especially when it comes to building a clear vision for their businesses’ future and how they are to compete profitably with other emerging businesses. The PESTLE tool gives an analysis of the market growth and decline, thus offering a better position, direction as well as the direction for the business (Shapiro 2002, p. 43). Whenever a local business is considers becoming a multinational enterprise, all these factors become critical to its growth and development as well as success. Additionally, the PESTLE tool offers an important insight about the particular status for critical market flatteners in both present and their future states. The multinational enterprises are expected to ensure that they comprehend their microenvironment in ensuring their strategy is effectively aligned with powerful forces that affect the particular business landscape. When these businesses want to exploit changes in their environment, instead of surviving or opposing these changes, they have higher chances of succeeding in their activities. By understanding how to conduct successful PESTLE analysis managers of the multinational enterprises can do away with strategies that can affect their performance and success considering the dynamics of the external business environment (Davies 2011, p. 105). Lastly, by understanding the PESTLE factors prior to joining new markets in other countries, multinational enterprises can decide on markets that can give them returns on their investments. Managers should understand that the success of certain PESTLE factor in one country may not mean that the same will apply in another country, prompting the need for this analysis in all the markets they are planning to join. In understanding the PESTLE analysis, three important steps are supposed to be observed; first, managers of the PESTLE factors are supposed to effectively examine the significance of each factor in the PESTLE tool, relating them to their particular context. Secondly, they are to discover and categorize the data that can effectively apply to the particular factors. Thirdly, the data gotten has to be analyzed with effective and reliable conclusions drawn for the success of the company (Fernie 2009, p. 34). Some of the common mistakes done in this analysis include stopping at certain steps or simply drawing assumptions that the analysis made earlier are successful for this new market without effectively testing the particular assumptions and coming up with alternative scenarios. Political factors The political environment, as outlined in the PESTLE analysis considers the effect of political activities in a country on the business environment. Political activities often have great influences on customer’s confidence and business spending (Hill 2008, p. 65). The analysis of the political environment is particularly significant for new businesses in the global scene. Political considerations happen to include treaties, which favor the growth and development of business activities among the member countries. Economic factors Managers in multinational enterprises are expected to analyze the macroeconomic factors in order to identify those that can have short and long-term impacts on the success of its strategies (McManus & White 2008, p. 52). Some of the important factors to consider in this analysis include interest and inflation rates, tariffs as well as the growth and development of local and external economies. Other factors of critical importance in this analysis include availability of labor, unemployment among others. All these factors influence the success of the businesses’ strategies especially for those associated with location and establishment of reliable business facilities and functions. Socio-cultural factors These factors are often different as one moves across different countries. Some of the cultural and social factors that can influence business activities include language, religion, cultural views and perspectives (Ramamurti 2011, p. 98). Additionally, these factors comprise of the attitudes beliefs on environmentalism, consumerism and the roles played by men and women in particular societies (Gold 2004, p. 54). Businesses operating on the global stage have to ensure that the devise their strategies in line with these factors in order to be successful. Technological factors Technology is critical especially when it comes to opportunities and threats for that businesses often encounter. For instance, new technology makes it easy for development of products and services as well as value addition. This later influences the pricing strategies so the businesses get maximum returns from its production activities. Technology facilitates innovations that enhance efficiency and effectiveness in the business like online trading, product promotion among other others (Jacoby 2010, p. 32). These among other related changes bring a difference to the particular business landscape. Environmental Factors Environment is always viewed in the dimension of raw materials critical for products of goods and services. This factor can be viewed as having both direct and indirect costs to the firm (Groznik 2011, p. 72). Additionally, the analysis of this factor considers the effects of production activities to the business like waste management. The business has to ensure that it established effective means by which it can take care of its wastes that they do not pollute the environment in which it exists. Part of this process includes treating wastes before releasing them in rivers or in the environment or using means of production that reduce on excessive and harmful smoke among other wastes. Other perspectives of environmental factors examine the extent to which product packaging is recyclable or biodegradable. Legal Factors Here, emphasis is placed on the regulations and rules relevant to particular regions and the business. Legal factors comprises of rules established to influence business activities, ensuring that they effectively comply with the laid down procedures (McKnight 2001, p. 51). Companies are supposed to ensure that they effectively comply with these factors in order to have smooth business operations. It is important to understand that most PESTLE factors are often interrelated. In most cases, the legal environment has close relations with political factors in any country (Frazelle 2002, p. 21). Here, laws and regulations in the country often change as long as there is enough political will. However, irrespective of all these changes, it is important that multinational businesses consider how to align themselves effectively to the external environment if they want to succeed. PESTLE analysis and Globalization In the past decades, many multinational businesses have been established, creating foreign competitions. At the same time some industries have been deregulated while state-owned enterprises have been given to individuals to manage them in the process of privatization (Lanza & Quint 2001, p. 29). Globalization is more than companies manufacturing and selling their products internationally, rather, it examines the business strategies that these companies develop in the process of creating and sustaining their market share. In the globalised business world, one of the key attribute has been standardized products as well as diverse competitive strategies that are integrated in the different global markets (Berghe 2003, p. 23). In such industries, competitive advantages are a preserve of the firms in the global environment. In the globalization process, markets have special significance. For instance, when markets appear similar in various ways, the pressure for globalization in the particular industry becomes great. Conclusion In conclusion, it is important to accept the fact the building a successful global business strategy is a very important step for multinational enterprises and not a myth. The success of these enterprises depends on the preparations they make towards understanding the new markets that are reaching before rolling out their operations. The PESTLE analysis among other tools plays an important role understanding some of the factors in the new market before building its global strategy. Many of the successful multinational enterprises have created and adopted organizational approaches, which give them clear strategic directions with flexibilities that give them opportunities for success. Both big and small multinational businesses have the ability to perform ultimately best depending on the way they understand and develop successful global strategies. For this reason; it can be deduced that having global business strategies is not a myth for multinational enterprise but an important step that assures maximum and reliable competitive advantages for the particular businesses. Bibliography Berghe, D. 2003. Working across borders: Multinational enterprises and the internationalization of employment. Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam, Rotterdam. Burt, D.N., Dobler, D.W. & Starling, S.L. 2003. World Class Supply Management:: The key to Supply Chain Management, International (7TH Ed), McGraw Publishers, McGraw – Hill. 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Wild, J., & Wild, K. 2008. International business: The challenges of globalization (4th ed.). Pearson Prentice Hall, Upper Saddle River, N.J. Read More