The Features of Market Change - Essay Example

? Company based report Company Based Report In businesses there is a probable chance that environments change, more specifically the external environments including market and the business itself (Aswathappa, 2010, pp.37). In that case organizations adapt certain strategies to overcome the influence of the change and its unexpected outcomes. This report is going to analyze the features of market change and its impact on the organizations system. The subjects of globalization and market competition will be part of the discussion to identify that how organizations adjust or fail to adjust in the external environment change. The main objective of this study is to understand how organizations adjust in change, more specifically a change coming from the external business environment (Kazmi, 2008). Introduction It has been seen that entrepreneurs operate with respect to the environment in which they are established. There is a significant relationship which businesses have with their respective external environment (Chidi et al., 2011). Though environment brings opportunities for the business like growth opportunity or expansion opportunity, but there are certain threats too like competition or rivalry. Environment has three major components including globalization, market and competitors which can change rapidly or be rigid for a longer aspect of time (Adekola & Sergi, 2007). It all depends on how the market evolves and how businesses compel in the present environment situation. Hence the progress of entrepreneurs depends on two things, first how much they accept the change from environment components, and second how quickly they adjust to that change (Chidi et al., 2011). Interaction is very important in this respect as it sets the ground for developing a positive relationship between the entrepreneur and its environment (Chidi et al., 2011). An interaction mechanism is one which sets the interaction relationship, as if it is sufficient adjusts a positive relationship, but if it is inadequate adheres to the decline of the business (Ansoff, 2006). This report is going to analyze how companies interact with their environments, and how they adjust to the environmental changes after evolving with the change (Chidi et al., 2011). Theoretical background When entrepreneurs adjust to the change they have to analyze each components of the external environment. According to modern literature, components include the market, the competitor and company’s individual business domain. All areas are parts of company’s external environment and come out separately in devising company’s growth or expansion strategy (Weiss et al., 2008). Globalization is one of the major components of external business environment, holding a direct influence for companies at the time of change (Adekola & Sergi, 2007). When companies are highly internationalized, they have to review all the features (culture, politics, society, and economics) associated with globalization in order to appropriately adjust to the change (Adekola & Sergi, 2007). Multinationals often find it a challenge, as they have to analyze all the features which are important from their global business point of view. This is one core requirement which hyper-globalists have to fulfil; otherwise they are out from competition or even out from the state of heading forward (Singla, 1993). According to several classical business theories like The Uppsala Model, when entrepreneurs are in a position to internationalize, they should target the developing regions, where new markets are waiting and new trends can be set (Jain & Griffith, 2012, pp.136). Companies can become pioneers in those regions if they understand the diversity and cultures of the new place. With respect to the Uppsala model, business expansion is itself a change where adjustment can be brought if organizations make the right decision. A right decision for an expanding entrepreneur would be to target the developing nation, where there is less competition and more chances to grow and progress (Pauwels et al., 2004). According to modern applicable theories like The Eclectic Paradigm model, when businesses expand especially at the global level, they have to cover three major aspects, the ownership, the benefits and diversity of the market (the market trend/localization) (Dunning, 2003). Ownership means to expand business in terms of market possession, which is achieved by having competitive advantage among other competitors in the region. Benefits include the market share and the business progress, which is achieved by exercising individual knowledge and expertise in the newer region (Gudlaugsson & Schalk, 2009). Similarly market trend is analyzed and captured by understanding new customer needs and wants and new common market perception (Cant et al., 2009). Hence in adapting eclectic paradigm model, an internationalized business organization can adjust to the global change by covering three areas of the business, the ownership, market benefits and the localization respectively. The model implies to both SME (small or medium size) and to multinational (international business models) (Buckley & Hashai, 2009). Apart from globalization, competition and competitors are also influential segments in any business environment change (Singh, 2004). There could be direct competitors competing on homogeneous products and could be indirect competitors competing on different groups of products and services (Blenkhorn & Fleisher, 2005). To adjust to the change, entrepreneurs bring all competitors (direct and indirect) into account, as without this they are out to perceive the true market situation (Hill & Jones, 2009). As modern text indicates, business competitors compete on different things like they compete on investment they have, market capital, consumer perception, brand reputation, or brand image in order to gain competitive advantage over each other. This is how business rivalry (monopoly) expands and influences the method of entrepreneurs’ adjustment in a new market place (Sharp, 2009). Empirical evidence According to (Luca et al., 2007) study, when entrepreneurs step up in new markets, they have to adapt principles like “market orientation”, which helps them to adjust their position in new market place (Gudlaugsson & Schalk, 2009). Market orientation is one effective tool that helps biotech firms to penetrate the newer region (Luca et al., 2007). The study indicates a significant relationship between market orientation and organization adjustment to the change. It indicates that market orientation is one tool that improvises organization’s market performance, financial performance and ability to innovate in a new market segment (Luca et al., 2007). In business adjustment process like when a company is penetrating the new market segment, there are some factors that affect the entire adjustment process. Time of entry is one major factor that holds the direct influence on the process (Johnson & Tellis, 2005). China and India are two popular markets these days, where new investors hold a direct interest to invest on (Johnson & Tellis, 2005). With emerging businesses, the markets have brought a lot of competition especially for early entrants facing challenges of new market trend, market culture and tradition (Cant et al., 2009). Despite of the challenges early entrants have opportunities too, like they can set new consumer perception, consumer preference, and acquire resources like vendors or suppliers in the region. According to Pan and Chi (1999) study, early multinationals in China show more progress than late year entrants of the region. The study indicates that early entrants generate high profits with respect to the entrants in the late year period, which is because they arrive in the right early time, having more flexibility to adjust into the changing market (HKIBS, 2002). Among most of the market restrainers “culture” is the most crucial one that retreats multinationals in the new market regions (Feldman & Santangelo, 2008). To meet the diversified mode of market competition, it is necessary that entrepreneurs adjust to new trends/cultures; especially those (entrepreneurs) who are competing in the global market index (Ghemawat & Reiche, 2011). For global organizations, there are retrospectively two worth strategies, standardization and adaptation strategies respectively (Meyer & Bernier, 2010). Standardization strategy is applicable when a company tends to offer standardized product like Coca Cola, which inevitably is acceptable to all cultures and changing market trends (Meyer & Bernier, 2010). Similarly an adaptive strategy is applicable when a company offers flexible product like Nokia phones, which have flexibility to add or exclude features with respect to the culture/market it is evolving. This is how a right mix strategy favours the change and encourages the organization to adjust into the change comprehensively and progressively (Meyer & Bernier, 2010). The period of French political economic reform (1980-1995) projected many companies in France to get adjusted in the respective change. The change expected from companies was in restructuring and capitalization. There were three major companies Electricite de France (EDF), Renault and Moulinex that were brought in the discussions of French political business case studies (Senthilkumar, 2002). EDF was a State owned company covering the sector of energy production. In the first quarter of the business, restructuring was excluded from company’s business strategy as State regulations wanted it to stick with the regional policies and administration. Change in EDF’s ownership structure and corporate governance was delayed to the period of 1990s, after that the company was free to look for the restructuring methods. EDF was mainly on to the public service, so was expected to remain less changed and less flexible which was a challenge as EDF wanted to acquire change policies (Hancke, 2002, pp.83-87). Renault a parallel functioning company was one of the competitors of EDF. The company was much flexible in restructuring and corporate changes as compare to EDF, which was in a paradigm of State owned system. The reason was that Renault did not relied on State leadership for restructuring or design, and hence was able to restructure quickly and more aggressively (Hancke, 2002, pp.83-87). Though Renault accepted the State private firms’ policies, but was flexible enough to adapt restructuring tools and strategies. This supported Renault in change adjustment process, which it required to meet up the competitors “EDF” in the region (Hancke, 2002). Moulinex another competitor (a household appliances manufacturer) entered the French market in the year 1980, the time when French economy was facing intense crises. Moulinex frequently failed in quick adjustments, like adjustment in internal operations, administration structure or data managing structure respectively (Senthilkumar, 2002). Once Moulinex got compelled with the conditions of the region, it quickly adjusted to the change being expected (restructuring and reorganizing). Moulinex adapted the same strategies as EDF and Renault, the traditional firms, but it took time for Moulinex to come up with rapid adjustment in the region (Hancke, 2002, pp.83-87). Enron, one of the US energy sector company got failed in the year 2001. Case studies highlight several causes of failure, in which the core problem was company’s weak financial reporting system (Collier, 2005, pp.116-117). Enron was not able to meet US accounting standards, ignoring the true ideas of accounting and auditing principles (Collier, 2005, pp.116-117). All such factors became barriers for Enron adjustment to the change and so as in the region, which brought it to a big-time loss and declining profits (Collier, 2005). Mayflower Corporation, a small truck manufacturing company projected failure in March 2004. The company went through retreatment as it was not prepared to accept large corporate governance structure. It was a small SME going against the Corporate Codes in the region, which was its main cause of failure (failure to adjust in the change and in the market) (Collier, 2005, pp.116-117). Interpretation and Discussion As per the findings of literature, organizations are closely related to their external environment. The change in environment components like change in market, competitors and business domain expect change in organization internal setup. To adjust to the change organizations have to meet such expectations, in which there is a positive relationship between the environment and organization system and a method to engage with the environment comprehensively (Blenkhorn & Fleisher, 2005). Globalization is one major factor that interferes with the change adjustment process. Those organizations which are highly internationalized have to meet the requirements of globalization, in order to rightly adjust to the change and its reflexes. Competition is also one major factor that interferes with the change adjustment process. It is one major portion that needs to be covered at the time of adjusting to the change. For such reason rivalry and competition are kept on the highest consideration by organizations, especially those who work on international business policies (Buckley & Hashai, 2009). From empirical evidences, it can be said that companies which are highly globalized work on strategies of internationalization (Hill & Jones, 2009). Coca Cola is one of the companies which are diversely present in the international market (Ansoff, 2006). The company understands the technique of cultural engagement and globalization, for which it has been able to adjust in the globalized system of business (Solomon & Schell, 2009). From French empirical studies, it has been interpreted that companies which are State owned cannot quickly adjust to the change, whether it is change in the corporate governance side or change in the infrastructure of the organization system (Hutt & Speh, 2012). Electricite de France (EDF) is one of the companies in France, which due to pressure from Government was not able to adapt change both “Corporate change and restructuring”. Similarly there are companies like Moulinex, which jump in the competition and requires much time to compel with the regional market system. Moulinex was one of the companies that came up at the time of the French economic reform (1980-1995). The company got failed in the adjustment when there was high competition and the company was new to understand the system of the competitive market (Singh, 2004). As soon as Moulinex got evolved with the corporate codes and the corporate system of the region, it started reorganizing and restructuring, which was fundamentally required for Moulinex to adjust to the competition (Dibb & Simkin, 2008). From empirical studies it can be noted that companies mostly fail in adjustment just because they are unable to meet the corporate system of the region. Mayflower Corporation and Enron are two of those companies that failed just because they were maladjusted with the system and trends of the market (Collier, 2005). On the other hand, there are companies that highly adjust like Nokia or Samsung, because they understand the market trends, the cultural diversity and corporate governance systems in which they are franchising. All the segments like (culture, market trend, corporate governance system, modes of globalization) are significant to understand for a company in adjustment (Solomon & Schell, 2009). Such features are essential for both SMEs (small and medium) and MCNs (multinationals) in order to adjust to the change expected from the environment and from the market itself (Cant et al., 2009). There are several companies like Moulinex, Renault, Nokia, Samsung, or Coca Cola which devise their adjustment strategies on the basis of Eclectic Paradigm model. The model includes three basic features, ownership, benefits and localization which after applying the companies are able to adjust to the new market segments (Aswathappa, 2010). The model suggests that if a company wants to adjust into a new region, it has to improve the sections of ownership (market possession), benefits (market share and capital) and localization (understanding the environment trends). The model is significant for large multinationals especially those who are about to enter the emerging markets like China or India. SMEs can also apply the model, specifically those which are present with a rigid structure and wants to expand in terms of an effective adjustment strategy (HKIBS, 2002). Conclusion From the findings a comprehensive view has been established. It is to be understood that a business is significantly related to its external environment and its components, including market, competitors and the business domain (Loudon et al., 2005). When a company is in adjustment stage, it has to assess all the factors which are associated with the change. This is to access the level of change expected and the internal flexibility to adapt such change. In this stage a business requires a suitable strategy like Eclectic Paradigm Model or The Uppsala Model which can rightly adjust the company into the level of change being expected (Pauwels et al., 2004). There are different areas that demand adjustment like market trends, consumer perception, culture, and system, which are to be covered when a company is about to adjust. Hence on a conclusive node it can be said that an organization fails to adjust when it fails to meet the requirement of environment, and it adjusts when it is in a positive relationship with the environment and its components (Ansoff, 2006). List of References Adekola, A. & Sergi, B., 2007. Global Business Management: A Cross-Cultural Perspective. Burlington: Ashgate Publishing. Ansoff, H., 2006. Strategies of Diversification. Research Report. Boston: Harvard Business School. Aswathappa, K., 2010. Management: Concepts, Practice & Cases. New Delhi: Tata McGraw-Hill Education. Blenkhorn, D. & Fleisher, C., 2005. Competitive Intelligence And Global Business. Hartford: Greenwood Publishing Group. Buckley, P. & Hashai, N., 2009. Formalizing internationalization in the eclectic paradigm. 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