Strategic Management In International Business - Essay Example

Strategic Management In International Business Introduction Successful international marketing requires recognition and authority at the top decision-making level. International marketing programs developed by Marks & Spencer must be carefully planned and based not merely on knowledge of internal corporate affairs, but also on knowledge of external environments. Business organizations like Mark & Spencer are more likely to make fundamental and continuous corporate adjustments to the demands of shifting market environments. To date, relatively few have truly adopted a market orientation, despite the lip service that has been paid to marketing as an orientation in business. Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. Marks and Spencer (M&S) is a leading UK-based company specialized in clothing, homeware, food, furniture, beauty, financial service and, energy products (M&S Home Page 2009). Proposal for Expansion Rational for Expansion The country selected for penetration is Slovak Republic. The choice was not accidental: with the development of European Union new markets represent unlimited opportunities for M&S to expend their activities. Slovak Republic is one of the potential geographical regions for M&S to expend its activities and gain larger market share. This location was selected because Slogan Republic is an attractive tourist destination for many European tourists, so it would help M&S to attract wider target audiences in summer and in winter (Dobson and Starkey 43). There are many challenges associated with opening business in the Slovak Republic. The analysis of the whole issue shows that retail businesses are more likely to develop new markets. According to the recent research, foreign companies are likely to build business around a new emerging technology. The general situation can be regarded as rather positive. Opportunities in the New Market The main opportunities in the Slovak Republic are favorable economic position, opportunities from the Regional Markets and reduced prices, online sales. An increasing role of unions forces M&S to spend much cost on labor resources increasing wages and social provisions. High labor cost can result in decreasing revenues and profitability of the industry. On the other hand, new technologies and automation allows retailers to decrease prices and improve service quality. The Slovak Republic can be seen as an outpost for further expansion in this region. The country is known for importing a wide range of products. The company strongly recommends many state will have to copy with mandatory standards and private sector voluntary standards. The Slovak Republic is an active participant of the EU-led operation, so it will be easy for M&S to conduct its financial operations and meet trade regulations. Further analysis of the Slovak Republic will defend a decision to enter this new market. For M&S, international marketing is concerned with setting goals, establishing policies and programs, and implementing business action for the entire firm. Its major tasks are to translate consumer wants and needs, actual and potential, into profitable products and services that the company is capable of producing; to cultivate markets to support these products; and to program the distribution activities necessary to reach the markets. Country Analysis Political System The Slovak Republic and Eastern Europe do have any supermarkets like those proposed by M&S. The liberation and democratization of the political system in many East European countries have proved to be a boon to dynamic retail companies from UK. Most East European countries have yet to create adequate infrastructure support for modern retailing to take root in the new environment (Slovak Republic Home Page 2008). There is little doubt that Western retailers will have unlimited opportunities to expand in this region through joint ventures, licensing, and limited-term management contracts. Eastern Europe, in spite of its initial problems, will offer a great growth opportunity to West European retailers for many years to come. Slovak Republic is one of the main FDI destinations in the region attracting potential investors by tourism and recreation industry. Economic System In general, the Eastern Europe is characterized by unstable economic situation and high inflation rates. The process of economic transformation in many East European countries, though holding great promise for the future, is currently proving painful and frustrating to the masses who have not yet found any material change in their economic well-being. The old public sector distribution system is functioning parallel to the newly introduced private distribution system in many East European countries (Slovak Republic Home Page 2008). To create a positive Western-style economic infrastructure and to hasten the process of industrialization, these countries have invited leading firms from the United States, Canada, and Western Europe to form joint ventures with local business firms. Existing company laws were amended and new laws passed in many East European countries to facilitate and promote the inward (Dobson and Starkey 43). Thus a favorable legal environment was founded to attract joint ventures and wholly owned subsidiaries from Western Europe to this region. The Eastern Bloc countries accounted for 17.4% of world GNP in 2007, with a 430 million-person market. Hungary, Czechoslovakia, and Poland alone have a combined GNP greater than that of China. With wage rates much lower than those in Spain, Portugal, and Greece, Eastern Europe represents an important new low-cost manufacturing opportunity (Slovak Republic Home Page 2008; see appendix tables 1,2,3). Social and Technological Landscape The hold of socialist parties has considerably weakened in the politics of European countries over the past few years. In the united Germany, the Christian Democratic Union and the Free Democratic Party have ruled in coalition since 1990. The social democrats and the Green Party (representing ecologists) are the main opposition groups in Germany. The Single Europe, with the elimination of hundreds of cross-border regulations and restrictions, has turned out to be a highly fertile region for business expansion by European retailers. Notwithstanding cultural diversities, there is a slow yet obvious trend of social and cultural homogenization within certain regions of member states, leading to the rise of what has been termed the Euroconsumer (Dobson and Starkey 88). Many affluent countries in Western Europe, like those in North America, have witnessed common demographic and lifestyle trends: decline in population growth rate, decline of population in younger age groups, aging of the population, rise in the number of working women, rise in household income, concern for health and environment, and increased interest in travel and leisure activities. These countries have also experienced a severe recession, high rates of inflation, and unemployment. The Single Europe Act brought harmonization of legal and regulatory systems throughout the European Community. All these developments contributed to consumer convergence and the rise of the Euroconsumer. They encouraged business firms to expand their cross-border operations and adopt a region-centric approach to international business (Slovak Republic Home Page 2008). The PESTEL analysis shows that main factors of country analysis: Factor Opportunity Political Stability and favor political outlook Positively effects the retail industry Economical Sustainable growth, but currently in a downtrend effected by the global crises Retail industry is growing even though the growth decreases because of the current financial crises Sociological Multi-cultural diversity Target a diversity of nationalities Technological Technological advancement Use technology to enhance target customers Legal Stable rules More positive rules effecting the industry Environmental Increase in environmental awareness and corporate social responsibilities The banks must involve in the community and increase the involvements in social events Industry Analysis European retail industry European retail industry involves diverse companies and organizations sending end products to end consumers. Recent years, critics admit that monopolies in retail industry occupy an important position changing the nature of the market and structure. Monopolies possess strength that is sometimes insignificant, sometimes considerable. A broad definition of Marks & Spencer as any entity that sells products or services to consumers’ means that certain forms of business are included that would not be included under a more narrow definition. An obvious definitional consequence is that the dollar volume ascribed to retailing changes dramatically as a function of the definition. M&S is one of the giant retailers occupied a monopolistic position on the market. Monopoly in retail industry is bad for consumers because it manipulates their interests and prevents fair competition on the market. Many consumers have no choice ‘forcing’ to buy goods and food at ASDA, Wal-Mart and Tesco. There is a transfer of purchasing power from consumers to the producers of the monopolized goods. Thus society as a whole may be better off in the sense that these goods have required fewer resources to bring them into existence; it may at the same time be worse off to the extent that purchasing power has been transferred from one group to another group. The practical problems of monopoly are thus very largely concerned with the issue of the better or worse distribution of wealth. The amount of damage that is done by the monopoly, with any given volume of output, depends first on the amount of the undesirable monopoly revenue which is secured by the monopolists, and second on the amount of that revenue which can be recovered by taxation or other devices (Dobson and Starkey 71). Competitor Analysis ASDA ASDA is the world’s largest retailer company, which has operated on the market since 1965. The existence of such type of stores on the market becomes urgent. ASDA is targeted at the customers, which buy discounted and unpackaged goods from manufactures at extremely low prices. Global expansion strategy, followed by ASDA has helped the retailer to maintained high-speed growth through market expansion. External factors include opportunities and threats which have a great influence on the company’s market position. From the environmental perspective, the end of 1990s was marked by the changes on the European market which altered many of the parameters of competition and thus enforced a period of reassessment and adaptation. The opening up of the market and the resultant increased competition has widened the perspective of the planning framework with profound implications. The threat is that the removal of physical barriers to trade and the new-found freedom of movement around the European market have served to catalyze European expansion and in so doing raise the degree of European trade. According to the market survey ASDA faced decline in its operations during this period (ASDA Home Page; Drejer 32). Tesco The main ASDA’s and M&S competitors are Tesco, Metro, Ahold, Carrefour. The gap itself depends on the inability or the unwillingness of individuals to satisfy some want in a different way. For Tesco, international marketing is not merely a limited specialized activity of the business, but rather a perspective for the total management team. It does not function as a separate entity in the business, nor is it more important than any other primary activity, such as manufacturing or finance, yet through actual and potential sales it does establish constraints within which the other activities must be performed. The managerial approach to marketing stresses the problem-solving and decision-making responsibility of marketing managers. Tesco was not able to sustain market leadership in Europe, and could not “win” the price competition. A period of rationalization, while painful for firms who fail to react successfully to the new competitive challenge, is an essential part of raised profile in the world economic order, promoting competitive firms with the capacity to thrive on a global scale (Tesco Home Page; Tayeb 43). The opportunities of M&S included high potential to growth and profitability of the company; promotion to other divisions; increased revenue from success in the market, a global expansion and penetration into East European markets; safety and high service standards. The main threat was deregulation of the industry and operational costs (agent services). The main weakness was seasonality (Tayeb 61). Customer Analysis Target audience of M&S Target audience of M&S is female and male consumers from 18-45 years old. 'Consumer' behavior occurs where people act as purchasing agents guided by corporate procedures to acquire low cost products. The target audience consists of A, B, and C1 social-economic groups. M&S is oriented on teenage audience and young people who are brand loyal and value good music. Positioning of M&S can be characterized by establishing trustworthiness, confidence, and competence for customers. The customer behavior model is based on the following elements: insights, design and action. The consumption process is a learning experience that affects and is affected by perception. Perception influences the selection and interpretation of marketing information, symbols, and products. Because it affects the expectations of potential results from various customer choices, it is a significant factor in individual and group reaction. In essence, perception determines how marketing reality is interpreted and thereby influences the consumer. Buying runs the gamut from habitual, routine purchases, which involve little planning, to such purchases as houses and automobiles, which require deliberation and evaluation over a considerable period of time; from purchases initiated by the buyer to those initiated by the seller; from purchases where powerful, logical, and rational motives exist as in some industrial situations, to purchases where more emotional motives are the dominant force, as in such consumer goods as perfumes. The reasons for making purchases vary among buyers. Such features as status symbols, prestige, utility, economy, price, service, and warranties may appeal to different segments of the market (Drejer 87). Formerly, a very simplistic approach to the study of motives was adopted in marketing, with motives dichotomized as rational or emotional. Motives that lead purchasers to buy without "adequate" evaluation of the advantages and disadvantages were termed emotional. They resulted in action not because of any logical evaluation, but because of such factors as image, color, brand, and style, and they appealed to pride, belonging, love, ambition, and fear. Rational motives, on the other hand, were related to logical and reasoned courses of action, and were stimulated by appeals of economy, service, durability, and functionality of products (Tayeb 65). M&S operates on the dynamic market where the main objective was to maintain the high level of service quality and developed strategies to improve their services. Market was usually affected by the factors in this environment often and it was able to have an influence upon it. Before the economic crisis of 2008, the main strength of M&S was that its products obtained a very competitive position on the global market.. A SWOT analysis of Marks & Spencer PLC Strengths Financial resources 4 7 1.5 Market share 4 2.5 5 Brand Image 5.5 7 4 R&D 4 8 1.5 Management Team 5 5 5 Manufacturing Technology 2 6 3 Good at Acquisitions 7 4 2.5 Patents 4 6 6 Strong Customer base 7.5 5 2 Innovation 6.5 5.5 8 Wea Opportunities Rapid market growth in existing market 5 4 8 Economic outlook 4 5.5 4 Access to low cost funding 5 7 6 Technology/product transition 4 8 4 Availability of low cost outsourcing 5 5 9 Market for high performance product 2 6 5 supply of custom products for major outlets 7 4 1.5 Internet-based sales 4 6 3 Partnerships with service organisations 8 5 6 Emerging markets in Eastern Europe 6.5 5.5 2 Threats Inflation 5.5 7.5 1.5 Economic slowdown in existing markets 4 2.5 4 Cheaper imported products from China 9 7 6 Increased regulatory environment 4 8 4 Green (environmental) lobby 5 5 9 Adverse exchange rates 2 6 5 Rapid movement of market to on-line channel 7 4 2 major competitor as a result of consolidation 4 6 8 New breakthrough technology 7 5 3 Lack of supply of skilled R&D labour locally 6.5 5.5 7 Chart Conclusion The report shows that M&S is well-positioned on the market and have opportunities to operate in Slovak Republic. Buying behavior is rational if the purchases have been approved by the buyer, who acts to satisfy his physical or psychological needs, even though reasons for purchase may conflict with what observers feel should be done or are not readily apparent to researchers. Purchase reaction that is geared to satisfy such needs as the need for affiliation, the need for achievement, or the need for power should not be termed irrational. Although customers often purchase on the basis of emotional appeal, this does not mean that promotional strategy should be mainly emotional. Often the best strategy is to offer a rational motive such as economy, service, or family protection to support emotional drives. Works Cited ASDA Home Page 2009. Web. Dobson, P., Starkey, K. The Strategic Management: Issues and Cases. Blackwell Publishing, 2004. Drejer, A. Strategic Management and Core Competencies: Theory and Application. Quorum Books, 2002. M&S Home Page 2009. Web. Slovak Republic Home Page. 2009. Web. Tayeb M. International Business: Theories, Policies and Practices, Harlow, Pearson Education, 2000. Tesco Home Page 2009.Web. Appendix Table 1. Population growth rates in Slovak Republic Table 2. County Score Over Time. Table 3. Economic Freedom Read More