Matching Strategy to Foreign Operating Environments - Term Paper Example

Matching Strategy to Foreign Operating Environments Introduction To most firms, international business can be the most challenging engagement especially when real success-oriented strategies are formulated and implemented. However, it can be the best venture a business can venture a company can invest in when the strategic approaches made is effective. The level of competition in international industries is extremely high, evidently due to the large number of players. According to Tallman (2007), human cultural dynamics compels companies operating in the international arena to understand, flexibly adapt and align themselves with the foreign cultures. Third, the legal policies as well as political influences are among the many problems that companies operating on global platforms can additionally face. These can be a major hindrance for most businesses that may fail to cut through the cultural diversities in the foreign countries in which they operate. Setting strategies that can help a company maneuver through these demanding situations, therefore, becomes a prerequisite if success is to be anticipated. This paper seeks to discuss the Integration-Responsiveness Framework as a principal basis for international business success and critically evaluate the four business strategies in order to understand comprehensively issues surrounding global strategic management. Description of Integration- Responsiveness (IR) Framework Integration-responsive framework is a concept that is familiar to international business strategy management. It is an explorative structural framework deployed by organizations that operate in the wider global contexts to understand and solve the likely management problems that may arise during their operations. In order for multinational enterprises to fully understand the influence of market forces as well as the social factors that are likely to challenge their international performances, an insight into the integration responsiveness concept becomes utterly important. Its applicability to conceptualizing the issues surrounding strategic management of companies and firms that are dedicated to the manufacture of commodities that are sold in the international markets is very cannot be undermined. In nutshell, integration-responsiveness framework is an evaluation strategy that is used to assess contextually factor predominant to organization success or failure in the global investment. These environmental factors pose a great challenge and companies should find ways of solving them (Cavusgil, Knight and Riesenberger, 2012). This concept provides for two imperatives that confronts a business in its international trade explorations. According to Lin and Hsieh (2010,p. 912), a business operating in the global context seeks to gain competitive market advantage through reconnoitering the likely market imperfections that come as a result of the changes experienced in the international diversities. Consequently, given that these multinational enterprises (MNEs) are working in different nations that have diverse economic forces and varied socio-cultural factors, they must seek to adapt and align with these changes in an integrated and responsive fashion. Being able to match the structural system of an organization with the reality in the international market is a big advantage that places such companies at better positions of success and prosperity. In reference to integration responsiveness, businesses work to meet two pressing demands that are critical for the performance of the company. One is the dire need to meet the local demands and the necessity to gain an upper hand in the highly competitive international market that is comprised of several reputable suppliers. The matching strategy, therefore, is the way out of such dilemmas (Meyer and Estrin, 2014). The assumption that there are better organizations that are predisposed to international market success is misconceived and misleading. According to contingent theory, every there is no one way of doing things. It is the situation or circumstance that dictates what way is suitable to produce a better outcome. The same way, international business is an art of strategy. No single way is fit to achieve good results and the more contextual the strategies are, the better the results. Every single decision made must be consciously harmonized with the extrinsic factors as this will undoubtedly breed success. External factors that influence an organization must be compatible with the internal structure. Primarily, organizations need to assess the contingent coordination between the internal and external factors with regard to the distinct group of the company in order to achieve an efficient workflow and performance (Jeffs, 2008). The management of international businesses is stressed by the daunting task of finding ways of globally integrating their businesses while at the same time being locally responsive to the home-grown forces (Lasserre, 2007). These two considerations are critical to any international strategic management since they work to synchronize the operation of the business in the global contexts with the local demands. Global forces are those stressors generated from the industry that the company is encapsulated in the international trade. They are the pressures that compel strategic rethinking and allocation of resources to help achieve business goals. These forces may necessitate well-thought decisions that can assist in the coordination of activities for multinational enterprises in their pursuit of international success. The two conflicting pressures (local responsiveness and global integration) are the prime reasons why a multinational enterprise may need to make different strategic decisions that will both affect its local structural organization and global actions. Global Integration The need to learn, adapt and integrate into the global contexts compels businesses to make numerous variations. There is a range of pressures at the global level that influence an organization into acting differently and include the following: Necessity to reduce costs One difficult task that comes along with internationalizing a firm is seeking for ways through which costs can be reduced. Economies of scale are identifiably a suitable way to do this, but the question that arises is how this can be carried out. Companies have to strategically evaluate how they can to minimize their cost. Localization in certain regions will bring the benefits of economies of scale. Assessing the location for production is, therefore, an important task (Heinecke, 2011). Cost Effectiveness Production of Universal Products Companies seek to achieve cost effectiveness through manufacturing those products that can be sold and consumed in almost every part of the world. The producer will most likely increase the margin of their market. At the same time, it will be easy to introduce the product to new markets as it is ‘universally trusted’. This is a pressure that keeps the management on its toes, and it requires a lot of planning as well. Uniform Product to All Branches Consequently, companies that have several branches across the world are under pressure to deliver services and products that are similar. This is not only important for the brand reputation but also beneficial for purposes of quality assurance and standardization. Global Sourcing of high quality materials for production One worry that concerns the management is if the can the high-quality raw materials they use in other countries here they intend to open up their branches. It is a major concern because to produce consistently high-quality products, the manufacturer must source from reliable distributors whose products meet the standard threshold. Pressures of global competition One feature that marks international trade is high/stiff competition. Global companies have to structure strategically workable plans that can help them gain competitive advantage. They also need to monitor continuously the performance of their competitors in order to find the best ways of outdoing them in the market. Local Responsive Pressures Locally, businesses have compulsions that drive them into developing strategies and engaging in various actions that assist it to perform well in the home country. In reference to Porter’s theory of competitive advantage, companies that are advantaged in their indigenous local bases are more likely to succeed in the global arena (Cunningham and Harney, 2012). This is the reason focusing on building a strong local base is essential for the general performance of the organizations. Utilize Local Natural Endowments Locally, multinational enterprises seek to leverage the resources available at its dispensation to use in the overseas factories. For instance, local laborers and other factors of production may be transported to the foreign firms. Meet Demand of Local Consumers Multinational organizations are challenged by the fact that the needs of the local customers may be different from those of the international consumers. For this matter, the companies must seek for ways in which the can meet the demands of their home customers while at the same time catering for the global ones (Haugland, 2010). Challenges of Distribution Channels Various places have different distribution channels and companies must have to evaluate which channels when followed will benefit the organization. Local Competition The competition in the local markets cannot be undermined. The competition in the local market could be stiffer than imagined and if no strategies are developed to go about this challenge, success might only be a dream. Cultural Integration Effective cultural alignment or adjustment is one of the advantages that a foreign business organization can have in its operation in a new market. According to Dlabay and Scott (2010), cultural elements such as norms, values among others influence the behavior and attitude of the local consumers. Businesses operating in host nations therefore need to adapt and adjust to the cultural changes. Pressure to Abide by the Government Regulations Another pressure is the need to meet the legal requirements in the host nations. From place to place, government policies and legal frameworks differ and companies are obliged to follow the rules, laws and policies in all the countries in which they operate. Four Strategies Based on I-R Framework Home Replication In this strategy, an organization expands internationally with a perception that the global firms are an extension of what is at home. It views the organizations operating in foreign countries as a replica of the one at home. Internationalization is, therefore, an opportunity that allows the home-made products to be stretched to the wider market. With this view, little or no knowledge is received from the international companies. This method can be best used in cases when the foreign markets are almost similar to domestic ones. Also, when introducing a product into the international market do not need complicated tactics, home replica may best suit. This strategy is more efficient in multi-domestic industries (Cavusgil, Knight and Riesenberger, 2012). Multi-domestic Strategy Similarly, this strategy is much more efficient and workable in multi-domestic industries. It involves developing temporary approaches to each and every market the firm is engaging. In case long-term strategies are needed, the respective organizations have to reorganize and formulate them. It is advantageous since the operations are customized to fit the local systems. Global Strategy This is an approach that is used by international strategic managers in which the headquarters acts as the control base. Power and control lie on the managers based at the main headquarters ad all activities of the firms are regulated in order to achieve the three prime elements of internationalization: learning, efficiency and integration. This strategy is most useful in global industries. It eases coordination and uniformity in the operations of the multinational enterprises. This strategy has numerous benefits. It enhances learning as the firms in those nations can acquire new skills about the host culture which are transferred back to the headquarters. Also, economies of scales are achieved thereby leading to low cost include during the indulgences. It is, however, hard to manage the vast companies that are broadcasted all over (Dlabay and Scott, 2010). Transnational Strategy This is arguably the best approach in which the company attempts to balance the local pressures while still in control of the global operations. It leads to flexibility as well as adaptability. In this strategy, the management is well-adjusted to the global and local demands. This style work best in global industries. Conclusion As seen, the need to match the local demands with global pressures necessitates strategy. International business can be great when properly managed and effective strategies adopted to harness the local and international demands that range from, government policies, competition, need to meet customer demands, necessity to reduce operational costs among others. Evidently, integration-responsive framework is an informative concept that comprehensively addresses issues surrounding the stresses international managers go through while attempting to steward their businesses toward success. Home replication, multi-domestic, global strategy and transnational strategy are the four fundamental approaches that can aid managers in deciding what way to operate best. References Cavusgil, S., Knight, G., & Riesenberger, J. (2012). International business. Upper Saddle River, N.J.: Prentice Hall/Pearson. Cunningham, J., & Harney, B. (2012). Strategy & strategists. Oxford: Oxford University Press. Dlabay, L. R., & Scott, J. C. (2010). International business. Mason, Ohio: South-Western. Haugland, S. (2010). The integration-responsiveness framework and subsidiary management: A commentary. Journal Of Business Research, 63(1), 94-96. doi:10.1016/j.jbusres.2009.03.002 Heinecke, P. (2011). Success factors of regional strategies for multinational corporations: Appropriate degrees of management autonomy and product adaptation. Berlin: Physica-Verlag. Jeffs, C. (2008). Strategic management. Los Angeles: SAGE. Lasserre, P. (2007). Global strategic management. Basingstoke [England]: Palgrave Macmillan. Lin, S., & Hsieh, A. (2010). The integration-responsiveness framework and subsidiary management: A response. Journal of Business Research, 63(8), 911-913. doi:10.1016/j.jbusres.2009.04.031 Meyer, K., & Estrin, S. (2014). Local Context and Global Strategy: Extending the Integration Responsiveness Framework to Subsidiary Strategy. Global Strategy Journal, 4(1), 1-19. doi:10.1111/j.2042-5805.2013.01071.x Tallman, S. (2007). A new generation in international strategic management. 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