Internalization Strategies - Copreci - Case Study Example

Internalization Strategies: A Case of Copreci Name Institution Course Date Internalization Strategies: A Case of Copreci Introduction Copreci is a Spanish multinational manufacturer of household appliances. The company opened its doors in 1963 and has since grown to become a global brand with operations in more than seven countries and employs more than 1,400 people (Kamp 2016, p. 1). The company’s main areas of business include manufacture of cooking gas products, such as gas valves, safety gas valves, main switches, pipes, gas rails, thermostats, switch harnesses, and induction solutions, such as regulation and control systems and induction generators. The company’s growth is attributed to the strategies that the company has adopted over the years that include developing quality products that meets the needs of consumers in the market (Kamp 2016, p. 1). The company’s strategy to internationalize its operations has also contributed significantly to its success. Nevertheless, the company needs to improve as far as how it internationalizes its operations to ensure success in the international markets. This paper outlines the internationalization strategy that Copreci has adopted over the years and concludes by recommending the internationalization strategies that it needs to adopt going forward to ensure growth and success. Copreci’s Internationalization Strategies The case indicates that, although Copreci started operating in 1963, its journey to becoming a global player began in the 1990s (Kamp 2016, p. 1). Since then, the company has focused on expanding its operations to different markets that presents growth opportunities. Presently, Copreci operates in more than 7 countries and still intends to expand to more foreign markets as it seeks to increase its market share. According to this case, Copreci has adopted different internationalization strategies as it seeks to enter different foreign markets. First, the case indicates that Copreci started expanding into the international markets through exporting (Kamp 2016, p. 2). Exporting is a market entry strategy, where a company manufacturers products domestically and then use agents and distributors in foreign markets to perform the marketing and sales on behalf of the company. It is indicates that Copreci adopted exporting strategy for about two decades. However, Kamp (2016, p. 2) indicates that as time progressed, Copreci decided to change its foreign market entry strategy by adopting foreign direct investment (FDI) instead of exporting. For instance, the case shows that Copreci began using FDI strategy in 1989 when it opened its first foreign subsidiary in Mexico. According to the case, the move by Copreci to open a subsidiary in Mexico was based on Copreci’s opportunity-based orientation and responsiveness to the clients in foreign countries that the firm wanted to serve. Copreci has used FDI strategy in other foreign markets, such as Czech Republic, Brazil, China and Turkey, where it has established its production plants. Copreci’s Internalization Strategies Recommendations The case indicates that the success of Copreci will depend a lot on how well it approaches the international market. Since 1990s, the Spanish company has focused a lot on the foreign markets for its growth. However, to succeed in the foreign market, the management of Copreci should consider adopting the following internationalization strategies. First, Copreci needs to adopt localization strategy in order to succeed in different foreign markets, where it expands its operations. The company needs to understand that foreign markets presents different market environment from domestic market due to the varying socio-cultural issues. This implies that, the best way to approach the international markets is to pursue localization as its internationalization strategy. Hines (2013, p. 2) defines localization as a strategy involving a company developing products that suits the specific needs of a local market. This implies that, when expanding to markets, such as Australia, Brazil, Indonesia and China, for example, Copreci should ensure that its products are customized to the tastes and preferences of the local people. This would ensure that the products that Copreci offers to the people in the foreign markets are those that suit their tastes and preferences (Hines 2013, p. 5), thus ensuring good performance of the household appliance components manufactured by the company in foreign markets. Secondly, considering that different markets have different external environmental factors, such as political and cultural factors, Copreci should ensure that its market entry strategy is chosen wisely before entering a foreign market. The case indicates that Copreci has depended largely on FDI as its market entry strategy into foreign markets. However, the management of the company needs to understand that FDI cannot be suitable to all foreign markets. For instance, markets that are highly regulated and highly cultural such as China many not require FDI (Shenkar et al. 2014, p. 14). This implies that, in the event that Copreci use this strategy in China, this might result in the failure of the company in the Chinese market. Therefore, Copreci management should ensure that the right market entry strategy that suits different foreign markets is used as entry strategies. For instance, when entering a country like China, it would be highly recommended that the company adopts strategic alliance with Chinese firms and all the other countries whose markets are highly regulated and are culturally sensitive. In order for Copreci to succeed in the international markets, it will have to reconsider its recruitment strategy in the global market. Jackson (2002, p. 32) notes that the success of a company in a foreign market is determined largely by the kinds of employees that a company recruits in a foreign market. In this regard, evidences across the globe have shown that hiring employees that understand the local business environment is critical in ensuring the success of a foreign company in a foreign country. As such, Copreci should ensure that it changes its recruiting strategy in foreign markets by ensuring that local people with good knowledge about foreign markets are hired (Jackson 2002, p. 41). This would be necessary as it would give Copreci the advantage of being conversant with the local culture, such as language, and the general business trends in the industry where Copreci operates. Additionally, Copreci should consider investing adequately in promotion of its products in the international markets to ensure its growth and success. This indicates that Copreci has not focused enough on promoting its products in the foreign markets. It is important for the management of the company to understand that merely being an early mover into foreign markets is not enough for the company to win customers (Neelankavil 2015, p. 72). Instead, because competition in the household appliance components keep growing in different markets, the management of the company should ensure that its brand is promoted in each of the foreign markets where it expands its operations (Neelankavil 2015, p. 72). This would require the Spanish company to invest adequately in the advertising tools, such as social media, television, website, and sales promotion among other advertising strategies to create its brand awareness in the international market. Conclusion Copreci has grown since 1993 to become a globe brand. The Spanish company currently operates in more than seven countries across the globe. The case indicates that Copreci relies mainly on foreign direct investment as its foreign market entry strategy. However, as demonstrated in the report, Copreci needs to ensure that it adopts effective market strategies that are congruent to the different market conditions in foreign markets. In particular, the company needs to consider adopting localization strategy for different foreign markets, choosing market entries wisely, as well as recruiting most of its staff from local people because of local employees are more conversant with the local culture and general business trends. Above all, Copreci should invest adequately in promotion to help create its brand awareness in the international market. References Hines, C 2013, Localization: A global manifesto. Routledge, London. Jackson, T 2002, International HRM: A cross-cultural approach. SAGE, Mason. Kamp, B 2016, Copreci: from an acorn to a wide oak tree. Deusto Business School, pp. 1-17. Neelankavil 2015, Basics of international business. M.E. Sharpe, New York. Shenkar, O., Luo, Y., & Chi, T 2014, International business. Routledge, London. Read More