International Business Strategy - Case Study Example

International Business Strategy (Monash University): Case Study Report on Acer Globalization Name: College: Course: Lecturer: Date: Table of Contents i) Executive Summary……………………………………………………………………3 1.0 Introduction…………………………………………………………………………...5 1.1Purpose and Background………………………………………………………5 1.2 Assumptions/Limitations……………………………………………………...5 2.0 Issues Identification and Analysis…………………………………………………….6 2.1 Issue of Configuration and Coordination……………………………………...6 2.2 Entry Strategy…………………………………………………………………8 3.0 Alternative Solutions………………………………………………………………….9 3.1 Issue of Configuration and Coordination ……………………………………10 3.2 Entry Strategy ……………………………………………………………….11 4.0 Recommendations …………………………………………………………………...14 5.0 Implementation………………………………………………………………………15 I. References …………………………………………………………………………….17 Executive Summary Business organizations entering or operating in international markets are often faced with various issues which can lower their competitiveness if not well addressed. Acer is faced by two major issues notably entry strategies and configuration and coordination. Poor strategic positioning and employment of foreign manager who conducted business autonomously and sometimes took inadequate initiative led to poor configuration and coordination within the organization. Besides, the organizational structure of the company did not support teamwork thus posing substantial problem to configuration and coordination. In addition, Acer encountered various difficulties while entering the international market thus lowering its competitiveness. The entry of Acer to the international market was challenged by the fact that Taiwanese products were perceived to be of poor quality in international markets. Lack of proper understanding of the international market before entry was another major problem of Acer. Besides, the company experienced difficult in adopting the culture and understanding local languages in foreign markets. Alternatives to address the issues of configuration and coordination include use of online customer relationship management solutions, establishment of an effective organizational structure and enhancing team spirit. Besides, the alternatives to address the issues regarding entry strategy include establishment of a strong brand through extensive promotion, extensive market research to understand cultural practices and legal requirements, merging with local firms, acquisition of local firms and entering into a franchise agreement with a local firm. However, only five alternatives are recommended to address the issues of entry strategy, configuration and coordination. The high recommended alternatives include adoption of web based CRM software, establishment of definite vision, mission, goals and objectives to promote teamwork, acquisition of local firms, conducting extensive research to understand the international market appropriately and enhancing its image in international market through promotions, production of high quality products, provision of high quality service and substantial participation in social responsibility activities. Adoption of web based CRM software and enhancement of company image, extensive market research and establishment of precise mission, vision, goals and objective should be done within a period of one year. However, acquisition of local firms should be executed within a period of five years. All employees and managers should be given an opportunity to contribute to the implementation of the new strategies. 1.0 Introduction 1.1 Purpose and Background Acer is a multinational organization which manufactures desk tops, laptops, personal digital assistants and other computer accessories. Though Acer is a Taiwanese business organization, it has expanded its operations to foreign markets (Acer Group, 2009). However, its entry to the international market was faced by various issues which lowered its competitiveness. The company experienced problems in its entry strategies as well as configuration and coordination strategies. However, there are various alternative strategies which can be utilized by the management team to improve the entry, coordination and configuration in the international market. Effective implementation of new strategies regarding entry, configuration and coordination is likely to boost the competitiveness of the organization in international market. 1.2 Assumptions/Limitations Various assumptions were made during the study since definite information could not be retrieved. To start with, it was assumed that the information in the case study reflected the current situation in Acer. Moreover, it was assumed that the reference material used were reliable. However, the study had various limitations. To start with, the time allowed for the study was not adequate enough for some research methodologies to be utilized to gather more information. Moreover, the research focused on two issues notably entry strategy and configuration and coordination issues thus ignoring other critical issues. 2.0 Issue Identification and Analysis Acer is being faced by various issues which affect its competitiveness in international market. Identification of issues facing a business organization in international market is very crucial since it enables managers to develop effective strategies to mitigate the effects of the issue or exploit fully the opportunities in the market. Moreover, critical analysis of the issues facing a business organization is paramount since it leads to proper understanding of the nature of the issue and how it can properly be addressed. Acer is being faced by various issues regarding its international strategy designing and entry strategy. 2.1 Issues of configuration and Coordination Business organizations operating in international markets usually face challenges of configuration and coordination of their operations. Configuration within an international business organization entails effective positioning of value activities while coordination concerns integration of value activities within a business organization. Acer is not an exception of business organizations faced with configuration and coordination issues since it operates in various markets across the world. Configuring and coordinating all activities carried out in all subsidiaries has been a major challenge to Acer management team (Allen & Kendal, 2003, p.798). To start with, Acer was unable to compete effectively with its competitors such as Compaq, HP and Dell due to poor configuration. The strategic positioning of the value activities of Acer was poor since it decided to hire distributors of its products in major international markets. As a result, customers were unable to acquire products and services of the company in the right place and at the right time. This led to decline substantial decline of sales volume of the company as compared to its competitors. Though the company tried to mitigate the issue of distribution of products by forming alliances and acquiring local companies, configuration of its operation remained a major challenge (Allen & Kendal, 2003, p.799). Besides, hired managers in foreign subsidiaries conducted business autonomously and sometimes took inadequate initiative. In this regard, the performance of the business organization in foreign markets such as United States of America declined substantially. Consequently, massive employees’ layoff and shutting down of non-performing subsidiaries was experienced. Such a move exacerbated the poor performance of the company since its overall revenue declined substantially. Besides, poor communication within the business organization was witnessed due to poor organizational structure. Establishment of three business units led to more confusion since low level, middle level managers as well as employees could not ascertain where to derive orders and where to take complaints and suggestions (Allen & Kendal, 2003, p.803). Moreover, the organizational structure of the company posed coordination and communication problems. Organizations global operations in three types of business units notably product, strategic and regional business units marked the beginning of poor coordination within the business organization. Since these units were evaluated independently, unethical competition among the three business units emanated. Teamwork in the entire business organization seized thus driving the quality of service delivery and products very low. In other words, the business units did not aim at achieving common goal. Poor coordination led to establishment of controversial strategies in each business unit (Allen & Kendal, 2003, p.804). 2.2 Entry Strategies Business organizations are required to establish effective entry strategies in order to succeed in international markets. Acer was faced by various difficulties while entering the international market thus lowering its competitiveness. It is clear that Acer had not established effective entry strategies before entering the international market. The entry of Acer to the international market was challenged by the fact that Taiwanese products were perceived to be of poor quality in international markets. Taiwanese products were perceived to be dubious in many international markets thus preventing the organization from accessing the market effectively. This was a major challenge to the organization since many customers shunned away from purchasing the products of the company. Consequently, the sales volume as well as profitability of the company declined substantially (Neil, 2009, p.59). Lack of proper understanding of the international market before entry was another major problem of Acer. Acer had poor understanding of the international market, legal conditions and competitiveness in foreign markets thus affecting its entry negatively. Understanding the mode of business operations in foreign markets is very crucial before entry. Besides, the company had no effective distribution channels during the time of entry. In this regard, sales volume of the company was lower than expected. Establishing an effective distribution channel is very crucial for business organizations when entering international markets. Customers usually value products and services which are availed at the right time of need and at the right place. Failure of a business organization to establish an effective distribution channel leads to inability to meet the interests of customers precisely. In this regard, many customers shift to another brand (Nicole, 1996, p.101). Besides, the company experienced difficult in adopting the culture and understanding local languages in foreign markets. The employees of the company lacked international experience thus not being in a position to adopt new culture precisely. Cross-cultural communication and understanding between western individuals in foreign markets and Chinese in headquarters was difficult thus posing a major challenge to successful entry of the company in the international market. Effective communication within a business organization is very essential since it leads to proper coordination among managers, supervisors and employees. In this regard, Acer faced major problem in coordinating its personnel and other stakeholders due to language and cultural barrier (Nicole, 1996, p.97). 3.0 Alternative Solutions In order for Acer to succeed in international market, effective strategies need to be developed and implemented. The effective strategies are those which will help in addressing issues and disadvantages facing Acer in international markets. As aforementioned, Acer is being faced with various issues on its entry and operation in international markets. There are various entry and operational strategies which can be utilized by managers of the company to address the issues. Though Acer has already implemented some of effective strategies, there are other alternatives to curb the challenges. 3.1 Issues of Configuration and Coordination There are various strategies that Acer can use to improve its configuration and coordination in the international market. To start with, the organization must use computerized tools to improve subsidiary, division and departmental coordination and better collaboration on duties. Various online customer relationship management solutions (CRM) provide business organizations with coordination and configuration tools such as web self service portals, shared calendar, instant messaging services as well as report and task sharing functionality. Such tools help allow managers and employees in different locations to carry out their duties more effectively. This is because a single platform is established where all company information, historic events and documentation can be retrieved. Acquiring and adopting the CRM tools will play a major role in enhancing the coordination and also configuration within the business organization. Communication will be enhanced thus minimizing or eliminating delay of crucial information for decision making. Moreover, all managers will be able to coordinate effectively since they will be able to get adequate information at the right time (Chang, 2004, p.560). Moreover, establishing an effective organizational structure and strategy will play a major role in enhancing configuration and coordination within the business organization. Confusion and blame game was experienced in the organization due to poor organizational structure and strategy. For an organization to be successful, all subsidiaries, departments must aim at attaining similar major goal. As a result, precise definition of the goals, mission and vision of the organization will play a major role in ensuring effective configuration and coordination within the organization. Besides, establishing a hierarchical structure will play a significant rule in boosting the coordination within the business organization. Employees need to understand precisely where they should take orders from while managers must understand precisely who to issue orders to. In other words, authority and responsibilities must be well defined to enhance coordination and configuration (Chang, 2004, p.569). Besides, creating team spirit within the organization is very essential in ensuring that proper coordination and configuration is attained. Subsidiaries should not compete with one another but instead they should support each other. Managers and employees should be informed about the interrelationship of the business subsidiaries. Failure of one business subsidiary has a substantial negative impact on other subsidiaries since their operations are interrelated. To boost coordination substantially, the company should aim at forming cross-subsidiary and cross functional teams. Such teams have proved to be very effective since they enable all internal stakeholders of the business organization to focus in attaining similar goal (Chang, 2004, p.571). 3.2 Entry Strategy Entry strategies are very crucial in ensuring the success of a business organization in international market. There are various alternatives which can be utilized by Acer to address the entry issues facing the organization. One of the alternatives is establishment of a strong brand to address the issue of dubious Taiwanese product image. In order for a brand to be strong in the global markets, various principles need to be applied. These principles include recognition, consistency, emotion, uniqueness and adaptability. In order for a brand to be well recognized, it must enjoy strapping awareness among opinion of leaders and consumers. The recognition represents the nexus of discernment and reality enabling brands to establish credibility in new markets rapidly. In order for a brand to be recognized, intensive promotion must be undertaken. Moreover, consumer needs must be met effectively (Jim, 2009). Strong brands attain a high degree of consistency in verbal, visual, auditory and tactile identity in various regions. The brand needs to develop a consistent customer experience in the global market. In order to achieve this, Acer needs to carry out an integrated global marketing. The company can shed distracting acquisitions, simplify the core offer and adhere to a shared message in the global market. Approaches for various regions must be modified appropriately depending on the external factors prevailing (Jim, 2009). Another alternative to promote the image of Acers products in the international market is supporting government public relation campaigns and joining Taiwanese industrialists during trade fairs to enhance the image of Taiwanese products in general. Though the company had already adopted this option, more efforts should be applied to build a high value brand (Neil, 2009, p.59). Another alternative to mitigate the entry issue is to carry out research to understand culture and national languages used in various markets. Understanding the culture and languages of targeted markets is a major step in addressing the barrier of culture and language (Velo and Mittaz, 2006, p. 400). In addition, the managers and other employees must adopt the culture and learn the languages of the targeted market in order to avoid conflicts and misunderstandings (Pine, 1995, p.51). Products need to be tailored to fit the culture of different regions. In this regard, the company should not discriminate any society based on their cultural values but instead it should manufacture products favoring each culture in the market segment. However, the modification needs to be done appropriately to avoid destroying the brand image (Aaker, 2004, p.187). Merging is another strategy which can be used by Acer to break the entry barriers to international markets. Merging involves coming together of two operating business organizations to for one business organization. In this case, merging with local companies which produce similar products is a major strategy to mitigate the issue of culture, image and also legal requirements. Local business organizations are usually more acquainted with the culture, legal requirements and formal languages in local markets. In this regard, merging with local companies which produce or distribute personal computers, notebooks or accessories will be an effective entry strategy (Anne, 2000, p.1). Besides, Acer can also mitigate some the issues of entry to international markets by acquiring local firms in various parts of the world. Acquisition of firms will enable the company to expand its market share thus be competitive in the international market. Moreover, acquisition of local firms enables a business organization to adapt easily to the culture and regulations of international markets. However, by acquiring established firms in international market, the company will be able to take full control and management of the new subsidiary (Anne, 2000, p.1). Franchising is another alternative for successful entry into international market. Franchising is market entry method where a firm practices and uses another firm’s business philosophy as per agreement. In this case, a local firm is granted the right to distribute products, trademarks and techniques of the other firm for a commission and royalty fee. Unlike acquisition and merging, each firm in franchising is independent. However, some aspects such as national and international training, advertising and other support services are usually obligations of the franchisor. Through franchising, Acer will be in a position to adapt the international environment quickly thus stabilizing within a short period of time (Anne, 2000, p.1). 4.0. Recommendations 1. 1 Acer should adopt web based CRM software in order to boost its coordination and configuration in the international market. Having a computerized shared calendar will enhance the ability to share documents, reports and even tasks within the organization. A shared computerized calendar will ensure that projects and tasks of the organization are accomplished in time thus enabling the organization to exploit opportunities and meet the needs of its customers effectively. Moreover, the organization should install instant messaging and web based self service portals to improve coordination among its stakeholders. 2. The company should establish definite vision, mission, goals and objectives in order to promote teamwork. Internal stakeholders should aim at attaining a similar major goal through the guidance of a well defined mission statement. Moreover, the company should form cross-functional and cross-divisional teams to boost teamwork spirit. 3. The company should aim at enhancing its image in international market through promotions, production of high quality products, provision of high quality service and substantial participation in social responsibility activities. Though the image of Taiwanese products in international is poor, Acer should overcome this entry issue by meeting the needs of customers and the society effectively. 4. Extensive research to understand the international market appropriately must be carried out. The company failed to prosper in certain markets due to inadequate knowledge on cultural practices and languages of the community. As a result, the company should carry out extensive market research in all potential markets. The market research will also play a major role in understanding the needs of the customers. Bearing in mind that, customers in different markets may demand for differentiated products and services, Acer should carry out extensive market research to identify customer preferences in good time. 5. Acer should enter foreign markets through acquisition of local firms. Acquisition of local firms will enable Acer to adapt to cultural practices and languages more easily. Moreover, the company will avoid unnecessary legal fees thus minimizing its cost of operation. Though acquisition of firms is more costly that merging and franchising, Acers managers will take full control of its operation thus enhancing coordination and configuration. 5.0 Implementation The recommendations aforementioned entail both short term and long-term strategies which need to be taken by the business organization. In this regard, some of the recommendations should be implemented within a period of one year while others should be implemented within a period of three years. Adoption of web based CRM software and enhancement of company image through promotion, provision of high quality services and participation in social responsibility activities should be done within a period of one year. Moreover, extensive market research and establishment of precise mission, vision, goals and objective should also be done within a period of one year. However, acquisition of local firms should be executed within a period of five years since this strategy is very costly (Velo and Mittaz, 2006, p.505). For the implementation of the recommended strategies to succeed, internal stakeholders and major external stakeholders need to be involved. All employees and managers should be given an opportunity to contribute to the implementation of the new strategies. However, the chief executive officer should chair the meeting for implementation and issue overall orders to divisional managers. Nevertheless, each project should be headed by a manager selected by top management level based on merits. Forming cross-functional or cross-regional team to carry out the new projects should be encouraged. Moreover, the company will have to borrow funds from international financial markets or issue new shares to finance its acquisition projects. Finances of other projects should be retrieved from the organizational earnings (Velo and Mittaz, 2006, p.506). References Aaker, D.A. (2004). Brand portfolio strategy: Creation relevance, differentiation, energy, leverage and clarity. ISBN 0743249380: Free Press. Acer Group. (2009). About us, Retrieved October 4, 2009, from http://www.acer- group.com/public/ Allen, M. & Kendal, R. (2003). Relating Porter’s configuration/coordination framework to competitive strategy and structural mechanisms: Analysis and implications. Journal of Management, 19(4), p.797-808. Anne, B. (2000). Foreign direct investment in emerging economies. Foreign Direct Investment, 20(4), p.1. Chang, M.H. (2004). A revised framework of global strategy: extending the coordination- configuration framework. International executive, 36(5), p.557-573. Jim, S. (2009). How to start winning the credentials and awards your company needs to build brand reputation. Public relations, 16(1), 16-16. Neil, M. (2009). Brand portfolio strategy and firm performance. Journal of marketing, 73(1), 59-74. Nicole, C. (1996). Foreign market entry and internationalization. Entrepreneurship: Theory & Practice Journal, 20(4), p.95-109. Velo, V. and Mittaz, C. (2006) Breaking into emerging markets - skills needs to face this challenges and ways to develop them in hospitality management studies, International Journal of Contemporary Hospitality Management, 18 (6), 496-508. Read More