Foreign Countries Entry Method of a Company - Research Paper Example

Harnessing and Integrating the Role of Social Media in the Foreign Country Entry Method of a Company Introduction The last few decades saw the different factors coming into play that propelled many domestic firms into conquering the global market in what is known as internationalization. Some of these factors are the “rapid growth and integration of Asia Pacific countries; the formation of regional trading blocs; the creation of market economies, particularly in Eastern Europe; and advances in production and communications technologies (Malhotra, Agarwal and Ugaldo, 2003, p. 1)”. Johanson and Vahlne (1990) as cited by Moen and Servais (2002, p.49), defined this phenomenon as "a process in which the enterprise gradually increases its international involvement. This process evolves in the interplay between the development of knowledge about foreign markets and operations on one hand and increasing commitment of resources to foreign markets on the other.” One of the main factors that promote internationalization is the rapid expansion of the internet. Moving their business from its physical existence into the realm of the internet had been part of the redesigning process particularly for those who intend to go global (Barrutia and Echebarria, 2007, p. 924). The internet became an integral tool especially for those with limited resources because it offers lower resource requirements and risk without sacrificing visibility. In recent times, the internet became the haven of almost all products, ideas, news, people, personalities, commercial advertisements and even political campaign. Recently, another area in the internet has emerged which proved to provide more tools that can be harnessed by business in their marketing strategies – the social media. John Jantsch (2008) defined social media as “the use of technology combined with social interaction to create or co-create value”. He went on to describe how social media could be a set of varied and important tools to business as it is a combination of exchanges of information, promoting social circles or groups (Parr, 2009), blogs, search capabilities, networking and bookmarking (Jantsch, 2008) among others. Literature Review Many literature and researches have tackled the issues on internationalization in different ways. Some have focused on the standardization or adaptation techniques in marketing in their penetration of the global market which was claimed as a long running debate between the proponents of the two ideas (Vrontis and Kitchen, 2007, p.87). Some literature have centered on the differences of the internationalization process of those who conquer the global market gradually and those who leap right into it during its inception or what is termed as born global companies (Moen and Servais, 2002; Freeman, Edwards and Schroder, 2006; Crick and Jones, 2000). While others have extensive researches about the different entry methods, processes and strategies (Malhotra, Agarwal and Ugaldo, 2003: Ellis, 2000; Yip et al, 2000) as well as the discussion of the advantages and disadvantages of multinational companies over small and medium enterprises (Tyagi, 2000; Ojala and Tyrvainen, 2007; Vida, Reardon, Fairhurst, 2000). With regard to the born global companies’ phenomenon, researches are looking at it with interest because they defy the established models (Moen and Servais, 2002, p. 52). They try to determine if born global is a new concept or an existing occurrence which was just understood and harnessed properly to their advantage to conquer the rapid changes that shaped the global landscape. (Chetty and Hunt, 2004, p. 57). Moen and Servais (2002, p. 52) cited the works of McDougall, Shane, and Oviatt (1994) who studied 24 born global companies to seek and understand their key success factors. The researches acknowledged that “the entrepreneur must rely more on hybrid structures for controlling sales and marketing activities (e.g., close personal relationships, joint ventures). However, the researches and literature did not go into detail about the activities of these born global companies that propelled them to their success. This is the proposed concept of this paper. It will try to establish the concept of utilizing social media and all its components as one of the sources integrated in the entry method of a company into the international market domain. Analysis and Results There are different kinds of social media: social news, social sharing, social networks and social bookmarking. Digg is the most famous social news site where the primary activity is to share news with others. Social bookmarking is almost the same as social news except it includes bookmarking sites that can be shared with others. Social sharing is involved with sharing pictures and videos by uploading them to the site. Social network, which includes Facebook, Twitter, LinkedIn, MySpace, etc, makes their subscribers share many things including comments, ideas even pictures with friends, family and even business associates. “Its bringing the world together like nothing else has” (Jones, 2009). With the wide expanse of social media, there are many benefits that businesses can reap from the proper harnessing of this media and more business have been taking advantages of these gains. A related research done by Rosetta, an interactive marketing agency discovered that some multinational companies have discovered Facebook and have existing fan pages with already thousands who subscribed as fans. They reported that 59 of the 100 leading global retailers were among them and it includes Nike shoes, Nestle, Abercrombie and Fitch, Dell and Wal-Mart. It only goes to show that multinational companies have become aware of the power and the benefits of social media (Legatt, 2009). Three major hindrances put forth by Freeman, Edwards and Schroder (2006, p.33) in conquering the international market were “lack of economies of scale (cited from Welch and Luostarinen 1988), lack of financial and knowledge resources (cited from Karlsen et al. 2003), and risk aversion (cited Dimitratos and Plakoyiannaki, 2003)”. These are the same issues that would be faced by business seeking to find its niche in the international market through entry in foreign countries. However, the paper also emphasized that the born global companies who succeeded utilized to their advantage their strategic business relationships and networks (Freeman, Edwards and Schroder, 2006, p.35 cited from Crick and Spence, 2005) and capitalized on the local business knowledge that these networks were able to provide. Businesses, especially those start ups and those planning entry into foreign markets will greatly benefit from the services that social media offer. One of the key components of social networking is its interactivity or its two-way communication system as compared with the traditional media which rely on broadcast or one-way communication only. It allows companies to talk to their customer on a more personal note therefore easily collecting the knowledge and information that they seek about the new market that they are wanting to tap. The exchange of ideas with the market for information would easily be done within the social media context (Jones, 2009). Because of the nature of social media which is about networking, it is parallel to the requirement and the need of companies seeking entry to the international market in building and alliances and linkages. It was emphasized that these strategic alliances were the key success factors of the born global companies. But more importantly, these media are more affordable than traditional ways that could be too much for the company’s budget. Managerial Implications Making a business or product visible to its target country or niche through social media would require adjustment in management perception and strategy. On one hand, the internet may reduce the companies’ sales force as they are replaced by virtual salesman in the form of either the companies’ websites or selling and advertising pitches sent through the social media sites. It could also remove the need for physical assets and elaborate channels that were required in the traditional process just to source out the products (Barrutia and Echebarria, 2007, 929). Management of business expanding to foreign markets must also be ready with their strategic and business plans because the internet has the ability to propel the companies into rapid geographic expansion. The internet provides the ability to sell to new geographical markets through simultaneous tapping of target groups in social media sites and consequently to their respective members (Barrutia and Echebarria, 2007, 929). Marketing conceptualization and strategy must also be tailored by the management to fit the requirements and the parameters of the social media that they would be utilizing. The commitment of the senior management towards building alliances and dedicated networking must also be prioritized as this becomes the pillar of the business. “The transfer of knowledge among network members is facilitated by the cognitive abilities of the management, enabling not only the identification of knowledge but also its communication to the firms (Nahapiet and Ghoshal, 1998 cited by Freeman, Edwards and Schroder, 2006, p.36)”. Caveats and Limitations As utilizing the social media would prove beneficial to companies which are expanding into foreign markets, there are also some restrictions and limitations to these gains. One of them is the same advantage of the internet which could also be a disadvantage to any business. As the internet could make a firm easily penetrate and gain access to the different channels and media towards reaching out to their target customers, the same low barrier to entry could also pose as a disadvantage as it easily welcomes other competitors which could threaten existing business and have the tendency to swamp many industries (Barrutia and Echebarria, 2007, 929). Another possible caution in utilizing social media for business is the threat of some groups’ ability to gain an upper hand and control over the perception of the group. This has been the controversy surrounding Digg previously which was criticized that because of their concept of voting for the top news, the top subscribers has power over the votes and thus the declaration of which news becomes popular on the site (Chapman, 2009). Although it could work to the advantage of the companies who will be catapulted to popularity, it necessarily creates disparity among the competitors. Further care must also be exercised in using social media because of its interactivity or two-way communication scheme. As fast as advertisements and press releases could be distributed to their target audience, negative publicity which could taint the image of the company and even lead to its downfall could also be circulated as fast and as easy as well as to the same number of people. Future Directions One blogger, Charlene Li (2008) boldly pronounced that “social networks will be like air” in the future, anticipating the ubiquitousness as well as the dependency of people on such connections. This has a major impact on businesses that will harness the benefits of social media especially social networking. It could prove that direct access to the target audience and niche market of specific business will be relied on especially in the future. Owyang (2009) on the other hand listed five eras in the evolution of the social web. He stressed that the era of social relationships, social functionality, social colonization, social context and social commerce even if appearing sequentially will also overlap with one another. He believes that because social media started with relationships, the future decision making of individuals will be based on influence of others dictated by these relationships. In the end, “socially connected consumers will strengthen communities and shift power away from brands and CRM systems; eventually this will result in empowered communities defining the next generation of products (Owyang, 2009)”. A blogger Jim Tobin (2008), on the other hand put forth his five predictions about the social media and two of them are worth looking into by businesses using social media. One is that social media will be portable which was explained as having a streamlined social network connecting all the social networking sites. It could mean that business in the future will have to streamline their communication towards this new development to gain the advantage. Another important prediction to note is the addition of the new tools that will replace the existing ones in the context of evolution and innovation. Because of this, businesses must also be adaptable to the changes to use to its advantages. Concluding Notes As the recent technological breakthroughs opened the different linkages of the world that connects the entire world, businesses were able to penetrate also into the foreign market particularly because of the internet. In this age, conquering international markets even for start up companies could be easier than it used to be. However, the ease in entry is not without proper strategic planning of the management. For the factors that could prove a hindrance to the entry into foreign market of companies, there could be ways to oppose or circumvent them within the internet itself. 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