Global Business Expansion Strategies - Essay Example

GLOBAL BUSINESS EXPANSION STRATEGIES Date: Introduction People start different businesses with different aims and objectives, strategies employed towards realization of business objectives are important in its growth and development. Successful businesses are those that are preceded by excellent market research, which identifies the types of products that are non-existent in the market, showing plans and strategies by which the business will use in reaching its goals. Business expansion is an important activity that ensures that a business establishes braches and subsidiaries in other places to increase its market share. Expanding a business makes it enjoy the economies of scale that comes alongside such expansion. Strategic business expansion should always be accompanied by strategies that can make the business consolidate its status in the market without going under. This is because, in as much as the strategy has many advantages, there are many involvements which the business has to be keenly aware of, failure to which brings diseconomies that can cause the business to fail. When a business expands its presence in the market, it enjoys increased profits that make it able to hire more personnel that are competent. These personnel alongside other important resources are expensive to acquire especially when a business is operating on small scale. Business expansion enables the business to create many different strategic partnerships and alliances thereby increasing its competitiveness. It is always the dream of business managers to establish networks and relationships that are crucial towards a business’ attainment of its goals and objectives. Trading in new markets is sometimes adventurous especially where the business enjoys awesome reception from its clients (Byrne & Popoff, 2008). For this reason, business growth and expansion is an issue that is taken with a lot of seriousness by its owners, knowing that it has myriad benefits Global business expansion Global business expansion refers to strategies by which a business uses in order to increase its presence beyond its country’s borders. This is normally influenced by the growth patterns of the business and the need to take advantage of the dormant markets that are unexploited in some countries. A business may have products that are not existent in another country. Proper market research may reveal the potential for success in that country, something that forces the business to start making initiatives into exploiting that particular market (Terpstra & Sarathy, 2001). Global business expansion is usually maintained by different motives, there are companies that undertake the exercise merely for prestige and enhancement of is statues as a global business. Other companies will do it simply to enhance diplomatic ties between the countries; all this motives are fine if only they are beneficial to the business at the end of the day, helping it achieve its goals and objectives. a firm must provide solutions to different critical questions regarding best approaches to do these, as shown in the appendix table, chart one. Currently, advancements in the field of information and technology have been the main factors enhancing business expansion mechanisms. Technology has led to an increase in communication models and mechanism, something that has increased the flow of information between different people. Information is the single resource that plays a major role in the success and failure of business organsations. Where a business has enough information about its growth mechanisms, management, market and the entire business environment, it is able to use this information to tailor strategies that give it a competitive advantage over its rivals. Trading between people across a country’s borders has become easy that it used to be some decades ago. People can transact without having to meet physically, this is accelerated by the internet technology that enhances payment and money transfer systems as well as product distribution mechanisms without major hassles. This is the reason why most business have been on the run, making sure that they devise those mechanisms by which they can increase its client base and market share. Effective business expansion mechanisms must adopt global and international strategies in order to expand and manage to integrate successfully in the local market. A global business expansion strategy normally leads to a variety of strategies that aim at adapting to the local business environment. However, the main challenge is coming up with a single strategy that is able to enable the business use it throughout all countries of the world where the business wants to establish its presence. Besides adapting to local markets throughout the world, the strategy should also address the prevailing challenges in the business environment. This is one challenge that accompanies global business’ expansions. When businesses are able to craft up successful global expansion strategies, it means that they are able to use the strategy in all its subsidiaries and partners simultaneously in the different countries (Yip, 2002). This requires the business to source for marketing and sales personnel that have the relevant expertise and knowledge relating to the business climate in most countries. In general, it is significant to recognize that the business atmosphere is different in different countries. Different countries have legislation about business operation and activities that are varying in great extents from one country to another. Similarly, cultural aspects are also very divergent even within different communities in the same country. This means that designing a global business strategy should take care of all this issues and more that have an effect on smooth business practice. An international business expansion strategy on the other hand, refers adoption of a strategy that allows business practice where the widespread business subsidiaries act independently from each other (Geringer & Hebert 1989). These subsidiaries carry on their businesses as if they were local companies; in addition, they have minimal coordination and supervision from the parent companies. Using an international strategy in this case shows that subsidiaries must have prior knowledge about the local business climate; they are able to integrate and operate efficiently. These two strategies seem to have some special comparison in the way they apply to business practice. Differences between international and global business expansion strategies There are clear differences between these two business strategies, a clear analysis and comprehension of how they operate is important in making decisions about the particular strategy to adopt. One of the differences relates to how normal businesses practice is coordinated from the centre. Coordination of business activities is an important process where strategic activities and carefully planned and implemented interdependently across all the subsidiaries of the parent company in all the different countries it has expanded to. The implementation of such strategies is done in order to fully exploit the synergies and business opportunities identified in the countries that the business has expanded to. As far as international business expansion strategy is concerned, there is no minimal or no coordination that comes from the parent company, the subsidiaries act independently as is they were local companies. On the other hand, a global business expansion must be effected by strong coordination from the parent company. The parent company must have to ensure that it oversee most of the practices that are run on daily routine. In most cases, their organizational culture is sometimes the same, except in cases where the culture of the people make it impossible for the organisation to integrate its own. However, where there are more than one subsidiary companies in one country, they will appear similar in most of their business practices and organizational culture. The second significant difference between these two strategies relates to the product and services are standardized in response to the local business environment. Product standardization is an important business practice that ensures products and services are standardized in all the countries that the business has established its branches and subsidiary companies. In international expansion strategy, subsidiary companies are assumed to have the ability to take care of all the product standardization procedures according to the demands of the local market. They have the freedom to decide on the way products are packaged, branded and designed to suit the local market. Nonetheless, in case there is a good reason why subsidiary companies cannot standardize products according to the needs of the local market, then the parent company stands in to undertake the process On the other hand, the global business strategy requires that the process of product standardization be taken care of by the parent company. Companies that have adopted a global business expansion strategy are characterized by goods that are similar in branding across the different countries where they have established (Zou & Cavusgil, 2002). The third difference between global and international business expansion strategies relates to strategy integration mechanisms and competitive moves. These two aspects refer to the degree to which an organization’s competitive moves in most of the major markets are interdependent. These two strategies apply differently in different companies in a bid to ensure they are stable and compete effectively with other established business rivals. For instance, a business that operates on the international platform may subsidize its business operations in those countries where the market is showing growth prospects using resources which are gained from other subsidiary companies in the event the market look to be declining. Alternatively, the move is adopted counter attack similar moves by rival companies. For international expansion approaches, the mandate to plan and execute this strategy is in the hands of the subsidiary companies. In order to do this, the subsidiary companies have to conduct a research that is based on the characteristics and behaviors of the local market. Conversely, similar approaches in the global expansion strategy conduct the planning and execution of approaches on a global scale. This is because; the firms that are actively involved in global business expansion carries out their competition as a group of globally incorporated single firms. Competition in an international strategy is treated in each country as a “stand-alone basis” while on the global strategy, it is taken as an integrated approach in all the countries that the business has engaged (Yip, 2002) Before going global, it is important that a firm makes a full assessment of both approaches and decide which of the two will serve the company effectively. It should also explore all the advantages and disadvantages that they are bound to have, so that proper decisions can be made towards the success of the project. Advantages of Global Expansion Global business expansion is associated with different advantages to the firm and the countries involved. First, globalization of business activities enhances diplomatic relationships between the two countries. Only those countries that enjoy cordial relationships enjoy business partnerships and collaboration. Secondly, global business expansion strategies enhance diversity in the workplace. Different people from different practice are brought together to work in the same environment, this contributes to exchange of ideas and ways of doing things. Exchange of ideologies is important in enhancing creativity, inventions and innovations in business practice, something that increases a business’ competitiveness. Diversity enhances ideologies in projects, which is an essential function that gives a company the much-needed competitiveness in company operations. Global expansions also create employment opportunities in different countries. A business is able to create successful teams that can spur performance and success from any part of the world. This increases economic growth in the countries in which they are established, leading to an improvement in the country’s economic growth. Having people from different perspectives adds the much-needed ideas in order to create products that are unmatched in the industry. It is true that where different people are working on a certain project, their ideological differences are important towards creating excellent products that increases marketing advantages in the market. Expanding business approaches means that the business is having an expanded global reach. When the business is able to make many products and sell to markets worldwide, it increases its global presence. A large market means that the business is able generate huge profits which are critical towards its development and further expansions. A business is able to use its increased profits to set up technological infrastructure that enhances its effectiveness. Global expansion can only be made possible using reliable technological infrastructure, this makes it possible to effect means of payment that has to be uniform in different parts of the world. In addition, the business should have reliable distribution channels so that products can be sent to customers at the places of convenience. Advancement in technology makes it possible for business to meet clients and sell products on the internet platform. Good and reliable technology reduces overhead costs in business operations; this means that businesses that are going global must inculcate state of the art technological infrastructure in their operations. Disadvantages of Global Business Expansions Global expansion comes alongside some disadvantages to the company as well as to the local population. One of the disadvantages of this practice to local people is the influence that it has to them. Some products that are sold across different countries carries with them some values that may not be in tandem with the cultural practices and belief of the local people, adoption of these cultural practices tends to erode the local culture, something that fuels conflicts between companies and people. For instance, products like coca cola, Nike and Microsoft have been known to propagate American value to people who embrace and use them. Other products that have raised cultural conflicts include clothes and other kinds of outfits that may not be in line with clothing preferences for local people. Social welfare concerns are business concerns that have to be observed by businesses despite of whether they are global or not. For large multinational business, the expenses associated with social welfare costs so much money that can prove too costly for the business. The greater the number of subsidiary companies in different countries, the higher the financial obligations to the company. This in itself is part of the many diseconomies that the company is exposed to whenever it starts to expand its operations globally. There are some products which when companies happen to trade in, they are potential causes of conflicts. Trading in products like gold and oil has resulted in wars and perennial conflicts in different countries. Whenever companies want to trade in these products across nations, they have to be ready to counter these challenges. In addition, companies dealing in such products have been targets for terrorism across the world. Many people have lost their lives in such incidents, making potential employees fear to seek employment in such companies. Whenever terrorism activities affect firms and companies that have been set up in certain countries, it results in losses that go into millions of money. Recovery strategies are also costly and may make some companies to wind up operations in some countries. Multinational companies have been encouraged to observe environmental conservation mechanisms in different countries. These countries sometimes develop strict policies that businesses are supposed to adhere to; some of the requirements have financial implications that can be costly for the company. Going global should therefore prompt a particular business to make careful cost analysis into investments in different countries in order to apply strategies that will reduce overhead costs as much as possible and maximize on profits. In conclusion, companies should always think of expanding and enhancing their market share across different markets in the world. They should not fear the cost implications that come along with such plans since the huge profits associated are lucrative and can compensate for the potential losses and risks that may arise. They should use technological advancement to create online platforms where they can create and increase their presence in different markets worldwide. One of the ways to do this is simply to create a website and links on social networks to build traffic into their sites, this way they will attract more clients who are always increasing by day on social media. References Byrne S & Popoff L (2008). International Joint Ventures Handbook, Baker & McKenzie, London. Geringer J. M & Hebert, L. (1989). Control and Performance of International Joint Ventures, Journal of International Business Studies, 20(2), 235-254. Terpstra V. & Sarathy, R. (2001). International Marketing, Dryden Press; Chicago Il. Yip, G (2002). Total Global Strategy, Prentice-Hall: London. Zou G. & Cavusgil S.T. (2002). The GMS: a broad conceptualization of global marketing Strategy and its effect on firm performance, Journal of Marketing, 66(1), 40-57. Appendices Chart One Read More