How to Develop Firm Internationally: Electronica - Case Study Example

Table of Contents Number of used words: 1618 (excluding table of contents, references, web sources and acronyms) Organization is a structure with a ‘collage’ of humans doing their allocated work under the supervision of a leader, for the benefit of the organization as well as them. This unison of workforce is needed to take organizations into the ‘territory’ of success. And one of the ways to take the organization into the territory of success is to literally move the organization into another territory or market or country. With every organization expanding their horizons and making an imprint in various markets, the organization had to put in an extra effort to formulate strategies to reach the customer’s minds. Likewise, ESC Electronica also has plans to expand internationally. ESC is a well established company with healthy customer base in the field of manufacturing of cars, electronic parts, parts for aerospace and electronic clogs industry, delivering process monitoring and control systems. In order to expand the healthy customer base, ESC recognized in its 5 year plan that there will be good business in England, Belgium and Germany. But while trying to achieve this objective, ESC could face obstacles. So, this paper as a form of report to Jan will advise him, on how to develop his firm internationally. International market entry & development After deciding to enter international market, a variety of options are open to ESC. (Joint Ventures, Direct Exporting, Contractual Agreements, Licensing / Franchising). “FDI statistics may be becoming increasingly irrelevant as new forms of international investment are devised” (Oman).The feasibility of these options are dependent on variety factors like investments, costs, risk, knowledge and the degree of control, which can be exercised over them in terms of security. Since, ESC is a small company and resources are limited, I would advise ESC to first export directly the materials needed in the PMC process (Process Monitoring and Control systems), through qualified agents and distributors in these countries - England, Belgium and Germany. This strategy only requires surveyable degree of commitment and is of low risk. Then, this strategy would also support the limitation of investments and resources, while at the same time helping to maintain the optimum quality in the installed PMC systems. But the challenge to this strategy would come in finding qualified agents/distributors or middlemen, who could represent ESC in their home and local market. The operation in the foreign markets requires only limited resources and could be done by a family member of ESC. The main part of the foreign operations is handling e.g. market research, contact relationship, pricing policy etc., all these would remain as Jan’s responsibilities. Sales would be allocated to the agents and distributors. The marketing strategies to conduct these Global operations would also be decentralized, with ESC only playing an overseeing role. And as soon as Jan gets experience in this export oriented decentralized marketing strategy, higher commitment and putting more investments can be discussed. So, the success of this initial strategy would set the stage for the implementation of the next stage of expansion in the form of join ventures or Contractual Agreements. So, for ESC to make a presence in those foreign countries without pumping in major resources, and at the same time concentrate on the local market, they can adopt this export oriented strategy with decentralized marketing. International strategy export-based with decentralized marketing Any initiative taken by an organization should be backed by a compact foolproof plan. In this case, after a lot of thinking, ESC understood that for it to succeed further, international operations are an option. “…we are moving toward a world in which barriers to cross border trade and investments are tumbling” (Hill). While conducting the international operations, the feasible thing for it to do, is adopt a particular strategy and if it has an eminent thinker’s ‘address’ attached to it, it will be better. That is, ESC adopted the export based strategy, which has Porter’s tag attached to it. Michael Eugene Porter, an American academic who is famous for his views on management and economics, brought out certain theories that are related to an organization’s international strategies or operations. Porter says that if an organization wants to expand its operations internationally, it can follow two concepts called configuration and co-ordination. Configuration deals with the aspect of where and at what scale will the operations can be done (Tsorakis). ESC has the options to locate its operations in England, Germany and Belgium. Then the important aspect of co-ordination can be achieved by utilizing the staff and by appointing new staff. Both this aspect of configuration and co-ordination is identified by Porter as four broad combinations, leading to the four variations in international strategy, including the export strategy. As any organization wanting to expand its international operations will first want to test the waters, the “export-based” strategy will come in very handy. That is, as export based strategy focuses on the concept of geographically concentrated configuration with low coordination of activities, this will help ESC in the initial stages and help it make the decision about future initiatives or upgradation. When this form of strategy is used, a specific marketing mainly bordering on decentralized regime is found suitable. That is, all the marketing of the new operations can be left to the local staffs, as they are the people who know best about the local market. That is, they can understand the people’ culture, language, customs, tastes etc, using that they can create the marketing strategies to entice the customers. Configuration & Co-ordination The two factors of configuration and co-ordination are the major management issues facing most of the international firms, including ESC. That is, Configuration is the term that is normally used to denote the world-wide operation of the firm’s activities. Without avoiding any geographical area, the organizations will expand, after configuring where to launch and ‘cornering’ on the place to locate. In the case of ESC, this configuring will be done on the basis of the organizational structure and the nature of tasks that will be carried out. That is, as the children of Jan are showing a lot of promise in the management part of the organization, ESC’s future seems to be in good hands. In the case of ESC, each offspring of Jan, who are expected to oversee the operations in England, Germany and Belgium, are equipped with certain skills. For example, Jan’s daughter Marguereet, who had studied business and had helped ESC with financial plans and budgets, is fluent in English. Her fluency in English will aid ESC when it enters England, mainly in the close interaction and selling of their ideas. Likewise, Jan’s son, Geert has good fluency in German, and has a great interest in German literature and culture. This meant, he can play an important role in the configuration of the business in Germany. Co-ordination refers to how different types of organizational activities are carried out in the foreign locations. The Co-ordination is the mechanism that will focus on the work schedule of the employees of ESC in foreign bases, and make organizational decisions based on it. But as both these aspects of management are interlinked and when the configuration part of ESC’s operations are taken care, co-ordination between locations becomes less stressful. Conclusion and recommendation for ESC The leader of any organization should not stagnate and saturate and this includes ESC’s Jan. As Schein pushes forward the idea “that the leader of the future must be a perpetual learner” (Schein, 2004, p.418), Jan should also learn from the current situations faced by ESC and take steps in that direction, guiding the employees under him to success. “A leader leads by example not by Force.” (Sun Tzu, 6 B.C.). And one of the feasible steps which can give Jan, the tag of being the learner as well as the initiator, is the implementation of its expansion plans capitalizing on their human assets for organizational gains such as competitive advantage (Foster & Harris, 2005). With PMC in great need in foreign locales, Jan with its established ESC can move into the market of England, Germany and Belgium. When it decides to make a move, the first recommendation I would give for ESC is to export its products from Holland, without shifting any of its manufacturing facilities. This will give enough time for ESC to study the market from close quarters and then decide the feasibility of more operations. Also, the locations in these countries will be selected according to the demand for PMC. When the initial setup is finalized, then the marketing machinery should be set into motion using the local hands. This form of decentralized marketing will create a separate environment for ESC, so it can device and implement the marketing strategies which are acceptable to the local population. So, unison of humans with an urge to usher an organization into a leading ‘utopia’ will be a successful endeavor, if the leader of the organization show undaunted, unabated and unabashed conduct. And, if the leader takes all the logical steps, the organization would have a ubiquitous presence all over the world. Likewise, Jan should also take steps for ESC to have a international or ubiquitous presence. References Foster, C & Harris, L (2005). Easy to say, difficult to do: Diversity management in retail. A human resource management journal, vol. 3 Hill C. (2005). Global business today, 4th Edition, New York: McGraw/Irwin Oman, C. (1984) New Forms of International Investment Countries. OECD, Paris. Schein, E. H. (2004). Organizational Culture and Leadership, 3rd. ed. 2004, Jossey-Bass Tsorakis, A. Porters model of international strategy. Viewed on November 4, 2007 from http://apotso.wordpress.com/2006/06/01/porters-model-of-international-strategy/ Tzu, Sun. (6th century BC). The Art of War. Read More