How External Growth Strategies Based on International Expansion Can Be Implemented in Ensuring Corporate Success - Literature review Example

How external growth strategies based on international expansion can be implemented in ensuring corporate success Lecturer In the recent decades, organizations and corporations are searching out for ways of reaching out the external markets to enhance success due to increased competition for customers at the local level. Thus, as a result, it is crucial for them to understand and participate in the international financial markets (Cunha, 2013). Wood (1997) defines growth strategy as a plan that is implanted and formulated with an aim of expanding the organizational business. There are different strategies that can be employed as growth strategies, and they vary and depend on a number of variables. It is crucial for each corporation to develop its own strategy of growth in regards to its own environment and characteristics. Most organizations will fail to achieve their desired targets for growth in profitability and revenue because of an inadequate consideration of opportunities for the business, poor identification of an international growth strategy or because of lack of an organizational infrastructure that cannot support the full execution of the stipulated plan. It is, therefore, important for managers to identify appropriate growth strategies for international expansion in ensuring corporation success. One of the major basic concepts of international business is enhancing the use of the global strategies to enhance the organizational, financial revenue returns (Clark & Tunaru, 2001). In contrast to the multi domestic organizational strategies, that will permit national subsidiaries in an effort of adapting to the local conditions, the global strategy is aimed at maximizing the global efficiency through integration of the national markets and provision of the similar products all around the world. Thus, external growth global strategies entails a worldwide integration of strategy development and their implementation where organizations integrate in a worldwide network of differentiated subsidiaries in exploiting the best location for their products (Poghosyan & Poghosyan, 2010) . A successful implementation of an external growth global strategy results in a superior value for international finance. In enhancing better organizational positioning in the dynamic and global setting, it is essential for the firms to adopt strategies that will allow them to evolve in the environments in which they are embedded to. The model of international expansion assumes that the corporations will systematically engage in cost-benefit calculations of all the possible modes of external growth strategies and consider the best option. There are a number of ways of enhancing external growth without accessing growth funds. According to Song and Lee, (2012) financing of organizations in enhancing the external market is difficult to obtain due to the tight financial markets. Among these strategies, include engaging in strategic alliances and network, through diversity and the creation of mergers and alliances. The diversification benefits of investment in the emerging markets have become a key feature in enhancing financial globalization (Clark & Tunaru, 2001). Strategies for diversification are essential for expanding the organizational operations through the addition of services, markets, products or the stages of production to the existing business. According to Graham, Lemmon, & Wolf, (2002) the main goal of diversification is allowing the corporation to enter new lines of business different from the current ones to enhance its value. Organizations need to seek ways of enhancing external growth and international finance for the attainment of success. The organizational management has a responsibility of ensuring that the right strategies are put in place, and the optimal outcome is attained. Effective strategies commence with an organizational strategic vision. Deciding in times of significant future states in the world the long terms paths to commit to as well as when to change paths is a central strategic problem are what managers are often faced with. This is because accelerated global completion and change creates uncertain, hazardous environments in which the reversibility and strategic flexibility are essential success factors. In the changing and dynamic environment, organizations leadership have a responsibility of responding to the challenges and problems of the interdependent environment where new markets appear overnight, and the old ones shift with little warning. In doing so, there must be corporation between cultures, legal systems, and borders. The leadership should offer flexible options of adapting to the ever-changing environmental conditions in achieving external growth. According to Edison and Reinhart (2000), capital flows and controls have been the advocated method for managers in dealing with currency and financial crises. They have an ability to take a number of forms such as the outright prohibition of funds, restrictions on capital account transactions, the prohibition of cross-border funds movement and dual exchange rates. Major aspects of external growth include enhancing the organizational diversity, engaging in strategic alliances and network by the formation of strategic alliances such as mergers and acquisitions. These alliances are efficient ways of facilitating the organizations external growth without funding as aligning with each other is important in growing the customer base. Through the engagement of mergers and acquisitions, organizations have the ability to enjoy the many benefits that are associated with infusion of cash into the business in a very short length of time. Through foreign collaboration, organizations are able to grow externally by coming together and working jointly in the attainment of a common goal. With the advent of a globalized world, increased foreign investments and foreign trade, there is an importance of increasing the volume of trade among organizations. Through collaboration, corporations are able to acquire the necessary expertise in the manufacturing process, gain technical knowledge in the market to promote products to the foreign countries. These cross-border transactions represent a basic unit of organizational multinational strategies. However, when engaging in the transactions trade barriers and tariffs, economic development extremes, market and production location tied characteristics, currency exchange risks, cultural differences as well as the political and legal differences have to be taken into consideration. Moreover, the subsidiaries roles in the global strategy are of significant importance. According to Kim, (2003) acquisitions and mergers fosters a highly flexible customer responsiveness and openness as well as wages equality among the nations involved. Thus, foreign collaborations are essential for removing managerial, technological and financial gaps in the developing nations and have been recognized as an important supplement for the development of countries as well as for securing scientific knowledge. There is always been tension between the pressure of globalizing to enhance external growth as well as the requirements of staying local to serve the individual customers in strategic decisions of the multinational organizations. The advantages associated with external growth include maximization of the economies of scale, cost-based and reduction of duplication. This way, the organizations are able to achieve efficiency. Graham, Lemmon, and Wolf, (2002) states that the advantages of localization are revenue based as it is essential in allowing differentiation to reach the customers, as well as the attainment of responsiveness. Therefore, it is crucial for companies to be able to balance the advantages of standardization against the revenue advantages of adaptation to globalization. However, the model of an organization entry in the global world is crucial in interpreting and determining its impact on different entry modes are driven by different motives (Poghosyan & Poghosyan, 2010). The manager’s rewards are usually greater when a corporation attains globalization as an external growth strategy. As a result, managers are often paid a commission based on the extent of the organizational external growth achieved. The higher the scale level, the larger the compensation is attained. As well, power and recognition also accrue among the managers of these globalizing and growing companies. As a result, these companies become better known and are able to attract high-quality managers. Moreover, a large market share leads to economies of scale in a corporation enhancing the production runs of the corporation. In ensuring that the organizations have knowledge on the organizational performance, managers should encourage a desirable level of financial disclosure (Bertomeu & Cheynel, 2013). This way, it will be an essay to determine whether the organization is ending in the right direction in enhancing external growth. It is important for organizations to drive positive social change by enhancing its diversification strategies in an effort of expanding the organizations services and products to the existing business and this way, the organization will be able to enter new lines different from the current operations. In an effort of increasing the number of customers as well as enhancing their market share, organizations and corporations need to acquire other companies and engage in joint ventures through mergers and acquisitions overseas to grow in other regions. As well, they can also choose to expand product offering through innovation and enhance customer service. In determining the firm’s performance in the external market, the management has a responsibility of conducting a performance appraisal. This comprehensive financial statement is important in providing an insight into the organizations performance (Kasilingam& Jayabal, 2012). References Bertomeu, J., & Cheynel, E. (2013). Toward a positive theory of disclosure regulation: In search of institutional foundations. Accounting Review, 88(3), 789-824. doi:10.2308/accr50388. Cunha, A. (2013). On the relevance of floating exchange rate policies. Economic Theory, 53(2), 357-382. doi:10.1007/s00199-012-0694-2 Clark, E., & Tunaru, R. (2001). Emerging markets: Investing with political risk. Multinational Finance Journal, 5(3), 155-175. Graham, J., Lemmon, M., & Wolf, J. (2002). Does corporate diversification destroy value? Journal of Finance, 57(2), 695-720. Edison J. H. & Reinhart C. M. (2000). Capital controls during financial crises: the case of Malaysia and Thailand. Board of Governors of the Federal Reserve System International Finance Discussion Papers 662. 1-38 Kasilingam, R., & Jayabal, G. (2012). Profitability and solvency analysis of a manufacturing company using Dupont and Altman model. BVIMR Management Edge, 5(2), 53-64. Kim J. (2003). The stock return-inflation puzzle and the asymmetric causality in stock returns, inflation and real activity. Economics Letters 80: 155–160 Poghosyan, T., & Poghosyan, A. (2010). Foreign bank entry, bank efficiency, and market power in Central and Eastern European Countries. Economics of Transition, 18(3), 571-598. doi:10.1111/j.1468-0351.2009.00378.x. Song, K., & Lee, Y. (2012). Long-term effects of a financial crisis: Evidence from cash holdings of East Asian firms. Journal of Financial & Quantitative Analysis, 47(3), 617-641. doi:10.1017/S0022109012000142 Wood A. (1997). Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom. The World Bank Economic Review, Vol. 11, No. 1, A Symposium Issue on How International Exchange, Technology, and Institutions Affect Workers. 33-57   Read More