Motor Vehicle Manufacturing Company in Britain - Essay Example

Motor Vehicle Manufacturing Company in Britain Motor Vehicle Manufacturing Company in Britain With fluctuations in the global economy and the increasing pressures of globalization, it has become all the more important for companies to expand beyond national borders. Moreover, the economic meltdown of 2007 still has its repercussions on the economy in developed countries and it would take time for them to emerge out of the crisis entirely. Amidst such economic conditions, new markets provide attractive growth opportunities for businesses dealing in consumer-products and international retail. Expanding into new markets has greater potential for higher revenues because of the increasing proportion of middle-income customers in many countries particularly Britain and Brazil. Keeping these driving forces in mind, a motor vehicle industry in the US is seeking to break into the market in Britain. This paper will focus on the expansion of the US-based MNC into the motor vehicle industry of Britain, highlighting the entry strategy to be used and designing an implementation strategy for the mode of entry. Organizational Culture The organizational structure of a firm inculcates the beliefs the employees hold about the organization and is depicted by the behavior of the employees in group settings and by its leaders. In order to implement effective strategies and to establish itself as a leading brand in Britain, the MNC needs to have a good hold on its organizational culture. An organizational structure that represents the mission, aims and objectives and desired relationship with stakeholders would cover the major elements which will have an influence on the organization when penetrating the market in Britain. Ideally, the fictional MNC should have a clearly defined mission statement and should repeatedly instill its mission, values and objectives into the attitude of the employees. The relationship it should have with its stakeholders would be flexible and supportive; the accounts and business operations of the firm should be kept transparent. Employees should feel valued for being a part of the organization and a healthy communication channel should be maintained between the higher authorities and the employees. Following these guiding principles, an easy entry into the market in Britain can be achieved. Environmental Scanning Environmental scanning allows an analysis of the external environment and its interconnections with the organization’s internal environment. It allows the firm to gain a competitive advantage by aligning the dynamics of the business with its environment. A technique for carrying out an environmental scanning analysis is the PEST analysis. It includes six elements which give information regarding the forecast, assessment and monitoring of the environment. Using the analysis for scanning the political environment, it can be found out that there is a great deal of emphasis on the legislation regarding the impact of business products on the environment. The European Automobile Manufacturer’s Association aims to bring down carbon dioxide emissions, which highlights the need to operate on sustainable business practices. The legislation in Britain allows for reasonable leasing schemes. A legislation passed in 2002 requires that taxing will be according to the emissions produced and miles run. Taxes are also being adjusted to the level of exhaust gases produced by cars (Branxton, 2012). The economic situation shows that in industries where the supply exceeds the demand, as is the case for the car industry too, business endeavors are focused on boasting marketing and improving the product outlook. The social environment represents a consumer trend towards cars which are low on their emissions. Thereby, firms are focusing on producing cars which are eco friendly, and opting for innovative modes of fuel such hydrogen. The use of aluminum cars have also increased because they are lighter than steel cars and allow an efficient use of fuel. People also prefer convertibles and MPVs. The technological domain shows trends such as an increased demand for air bags and differentiation techniques like play stations installed in cars, for boasting sales. Plants in Britain, on the whole, are less effective than those in US, because of a failure to observe best practices and cut down processes which are inefficient (Branxton, 2012). Organizational Structure, Ownership Structure & Entry Mode According to Porter, to develop a global strategy, an organization needs to configure its activities according to the region it is operating in; this inculcates its organizational structure. In the modern world, the economy of a country, due to its unpredictable and rapidly changing quality, does not warrant the implementation of a centralized mode of management. Business growth largely depends on the innovation and knowledge being accrued, which in turn is influenced by the ability of the organization to know about the preferences of the customers and to adapt in response to it. Thereby, the flatter the system of management, the easier it is for the organization to cater to changing customer needs. A model depicting the dynamics of the global business environment suggests that for a multinational firm, value-chain activities depend on the differentiation of the goods or services offered, and their modification according to local needs and demands. For the motor vehicle manufacturing company, a decentralized organizational structure is preferable. This means that the firm would have to give greater independence to lower hierarchies. The responsibility of making strategic decision would lie with lower levels of hierarchy; higher management would primarily be concerned with regulation of the results (Galliers & Leidner, 2003). A decentralized organization structure would allow greater participation of its employees in the decision making process, adding to their job satisfaction and productivity. Its ability to respond to customer needs quickly also makes it more suitable for establishing the MNC in Britain. When it comes to ownership structure, widely held companies are very common in Britain (Frederikslust & Ang, 2008). The reason for this is attributed to better protection of investor rights by the legislation of the country, a strong capital market and the prevalence of block-holdings which are less than 30% (Grant & Kirchmaier, 2004). The MNC under discussion is a large organization with operations spread in several countries. Its presence in the UK would not be manifested as a small and poorly performing firm. This means that it can command a significant quantity of control over its operations. Thereby, it is suggested that a widely held ownership structure should be adopted for the MNC. Entry mode for the company depends on the resources it has along with the degree of control that it needs. As established above, the firm would opt for a widely held structure; this pertains that it needs a certain degree of control over its operations in the target country. Amongst all the entry modes available, Greenfield investment is the only mode which offers the maximum degree of control over the operations of the organization. Although exporting is a famous mode of entry in the UK, if the firm is able to carry out comprehensive and thorough research regarding the target market and also has the resources to sustain the operations, it should opt for the establishment of a new business in the UK. It would take time for the company to establish its presence but the mode offers long term increases in its average return. Political Risk Assessment Devising a political risk assessment for UK includes as analysis of the macro- and micro-level risks. According to the AMB risk report, political risk in the UK is very low (A.M. Best Company, 2011). UK is not bound to make the Euro its currency, signifying that it cannot be influenced by the members of the Maastricht Treaty. Moreover, the government has invested resources in implementing strong fiscal austerity measures (A.M. Best Company, 2011). The political system in Britain is not wrought with corruption and there is no impending threat to the stability of the country. Thereby, UK can be ranked as a safe country for investment. Nevertheless, risk factors include regional, social, government stability along with monetary policy and labor flexibility. Implementation Strategy The first step the company should take is to start research on Britain and its market. It needs to chalk out a plan of action which includes the purchase of land, grant of rights for setting up a plant in the country, recruitment of personnel and local work force and provision of machinery and other resources required to get the facility functioning. It needs to tailor its products according to local demand, emphasize upon marketing its products and adopt sustainable business practices. Reference List A.M. Best Company. (2011). United Kingdom. Retrieved from http://www3.ambest.com/ratings/cr/reports/UnitedKingdom.pdf Branxton. (2012). Analysis Of The Car Industry. Retrieved from http://www.slideserve.com/branxton/analysis-of-the-car-industry Frederikslust. R. A. I. V., & Ang, J. S. (2008). Corporate Governance and Corporate Finance: A European Perspective. Taylor & Francis. Galliers, R. D., & Leidner, D. E. (2003). Strategic Information Management. Oxford: Routledge. Grant, J., & Kirchmaier, T. (2004). Corporate Ownership and Performance in the UK. Retrieved from http://eprints.lse.ac.uk/19960/1/Corporate_Ownership_Structure_and_Performance_in_Europe.pdf Read More