A Strategic Approach to Internationalization - Essay Example

Born global 03056 Introduction Born global firms are those organisations which peruse the vision of becoming a global business entity from the time of their inception. This kind of organisation focuses on rapid globalization of their business processes without any long term domestic operational or internationalization period (Cavusgil and Knight, 2015). The born global firms are contradicting the process of traditional internationalization by adopting the instant internationalization process. Most of the international organisations generally focus on their operations on the home country and after a certain period of time they tend to gradually expand their business in other international markets. These organisations mainly target each country and regions as a unique marketplace. On the contrary, born global organisations tend to consider the entire world as a single marketplace from the very beginning of their business process (Chetty and Campbell-Hunt, 2004). Generally, these born global organisations employ the differentiation marketing strategy to create a niche market for their unique products and services (Harveston, Kedia and Davis, 2000). Though the market approach of considering the entire world as a single and borderless marketplace has assisted the born global organisations to secure an international competitive position, it will not be a suitable marketing option for the organisations that are seeking to expand internationally (Moen and Servais, 2002). The further discussion of this essay will evaluate various researcher views and theories to analyse the importance and limitation of single marketplace in the internationalization of organisations. Evaluation/Discussion The increasing economic integration across the world, globalization and innovation of advanced communication technologies are triggering the rapid internationalization process of domestic organisations (Chandra, Styles and Wilkinson, 2012). According to researchers, nowadays consumers are getting wide access to the information of different parts of the globe. They are getting wide exposure to the tastes, preferences, lifestyles, sports and fashion of different communities worldwide. Rapid changes and progress in information technology, communication channels, globalization commitment and trade agreements are resulting in remarkable financial and economical interconnection between different markets of a wide range of nations (Chandra, Styles and Wilkinson, 2012). This changes and progresses are gradually creating “borderless world” for the international business organisation. Different researches have shown that within the last few years, a huge number of small and medium enterprises have adopted the rapid internationalization procedure in the early stage of their business venture (Chandra, Styles and Wilkinson, 2012). A study of Hackett Group, based on the responses of more than 200 senior executives of organisations across the US, Asia-Pacific and Europe, has demonstrated that most of the organisations across the world are focusing on expanding their businesses beyond the limitation of national borders (Lu and Beamish, 2006). According to an analysis of Construction News, more than 100 large UK contractors are rapidly diversifying their business processes according to the requirements of the international market. Most of them are looking forward for overseas work orders to improve their revenue generation. For example, the management of Dawnus Construction are generating more than 50% of their revenue from the overseas business contracts. The analysis has also illustrated that the top market players of the UK construction industry, such as Balfour Beatty and Carillion, are focusing on international projects. This step has assisted these organisations to enhance their global market reputation (Lu and Beamish, 2006). The research of Engineering New-Record has conveyed that in 2011 the UK construction industry has generated approximately $450 billion of revenue through their international business ventures (Lu and Beamish, 2006). Over a period of time, a number of researchers have offered different theories to analyze the effectiveness and limitation of rapid internationalization of organisations. The international entrepreneurship theory of Oviatt and McDougall has described various essential factors for the instant internationalization of organisations. According to this theory, any organisation must possess sufficient amount of assets to initiate their international business venture. They also need to have strong network connections and communications with the governance body of other international organisation. This theory has also emphasised on proper knowledge gathering about the advantages and disadvantages of different business locations. It has stated that organisations must have a strong hold on their unique resources, patents and copyrights to avoid the duplicity of their product or services (McDougall and Oviatt, 2000). The concept of borderless, single marketplace has a number of advantages on the prompt internationalization strategy of small and medium organisations across the globe. This kind of internationalization procedure assists organisations to increase their annual cash flow or net profit (Nummela, Saarenketo and Puumalainen, 2004). Transferring their competitive advantages to the foreign market allow them to increase their financial gain. This internationalization strategy also allows the organisations to improve their overall performance level to meet the business standard of overseas organisations. This strategy assist the organisations to access the resources of foreign market to increase the quality of their production (Zucchella, Palamara and Denicolai, 2007). The single marketplace strategy provides extensive growth opportunity to the small and medium organisations. This strategy assists the organisations to serve a wide range of consumers with a limited production and operational cost (Hsu and Boggs, 2003). The borderless internationalization procedure of organisations can also face a number of potential barriers. The main barrier of internationalization is the limitation of finances to properly execute the export procedure. Scarcity of working capital and other physical resources can hamper the success of international business venture of different organisations (Cuervo-Cazurra, Maloney and Manrakhan, 2007). Limited information availability to analyse the overseas market can also play an important role to hamper the internationalization of different organisations. The restriction in information access of various locations can minimize the success ratio of organisations in terms of initiating their business venture in borderless marketplace (Arndt, Buch and Mattes, 2012). Inability to properly communicate with potential overseas business partners and consumers can have a huge effect on the failure of the internationalization strategy. This will further affect the relationship of organisation with the global market (Korsakienė and Tvaronavičienė, 2012). A research report on Swedish exporters has shown that following the traditional distribution channel across the different parts of world can restrict the competitive advantages of an organisation in the overseas market. Various Swedish export businesses have confronted barriers to explore the global market due to the lack of customization of their distribution channel (Cunningham, 2015). Intercultural differences of various communities impose a strong barrier to the organisations to introduce a unique product for all the segments of the global market. This situation adversely affects the competitive advantages of the organisations with borderless internationalization strategy. The strategy to treat the entire world as a single market place provides a less competitive structure to the internationalization of the organisations (Kahiya, 2013). Considering the world as a single and borderless marketplace generally influences the globalization of businesses. Globalisation generally promotes the communication across the international borders. Globalization of businesses and productions influences the organisation to treat the entire globe as a single market. Therefore, they tend to offer a unique product to all the market segments across the world (Dunning, 2002). It also helps organisation to efficiently satisfy the demands of consumers and market. Globalization increases the tendency of organisations to offer standardized products to the consumers of all the countries (Kaynak and Hassan, 2014). Various supporters of globalization have argued that the needs and demands of the consumers from different parts of the globe are getting very similar over the period of time. The increasing developments of communication and technologies are assisting the global consumers to access and adopt the lifestyle, food and clothing preferences of different communities across the globe (Kaynak and Hassan, 2014). According to researchers, standardisation of the different attributes of marketing mix as well as formation of a unique market strategy motivate businesses to attain economies of scale for their product marketing. These arguments of the researchers have also promoted the importance of the product and service standardisation. These researchers also have mentioned that the standardization procedure of these globalized organisations can only reach success if there is uniformity in the customer responses and resemblance in the economical freedom (Alli, Winter and May, 2011). The globalization procedures of organisations assist them to improve their financial performances. Globalization of production and marketing procedure allow the multinational organisations to create a global culture within the consumers. It also promotes the demand of low cost and high quality standardized products in comparison to distinctive and less available customized products. Therefore, the standardisation procedure of products and services in the globalized market helps the organisations to address the requirement of a wide range of consumers across different market segments (Alli, Winter and May, 2011). Homogeneous technological development across all the business segments of the world is assisting the organisations to reduce their production and operation cost. This situation is allowing the organisations to enhance the quality of their standardised products. It also enables them to improve their market positioning strategies (Dunning, 2002). These benefits of globalization have faced strong contradiction from the followers of the market adaptation. They have explained that, though the globalization approach of organisations assists them to create a strong brand value, it also decreases their market reputation and financial gain by narrowing down their targeted market segment (Schmid and Kotulla, 2011). The researcher have also illustrated that the globalization theory of businesses with a standardized product or service has been proven to be very impractical in terms of satisfying the requirements of different segments of the international market (Schmid and Kotulla, 2011). Different segments of the global market demonstrate significant differences in terms of socio-economic condition and the changing need of the consumers. This situation eliminates the market value of the standardized products. In this condition, the organisations need to customize the products and services as per the needs of the local consumers. This adaptation procedure assists the businesses to gain a strong position in the new segment of global market (Schmid and Kotulla, 2011). The supporters of market adaptation have argued that the marketers need to tailor the elements of marketing mix to properly fulfil the requirements of the different segments of consumer in the international market. The market penetration rate of the organisations with standardized products is very low among the countries and regions with special and distinguished needs and product preferences. These globalized organisations may display incompetency to satisfy the need of customized products of different parts of global market. In this scenario, market adaptation strategy is very essential for organisations to reach their ultimate goal to capture the global market (Verma, Gupta and Nangia, 2014). Adaptation of the preferences and cultural differences of various markets allow the organisations to offer customized product ranges to different market segments. It also helps them to strengthen the consumer loyalty towards their products and services (Verma, Gupta and Nangia, 2014). Rather than treating the entire world as a single market, the organisations need to create different bordered segments of locations and regions as per the changing culture, lifestyle and preferences of the habitants (Schmid and Kotulla, 2011). Adaptation procedure may increase the initial production and operational costs of the international organisations; it will also ensure huge market acquisition and strong financial gain through consumer loyalty (Schmid and Kotulla, 2011). The global market operation procedure of the Coca-Cola Company can be considered as one of the example of globalization of businesses. The organisation has standardized their product for all their operated market. The taste and formulation of Coca-Cola drink is similar for all the global market they serve. The standardized products and globalized market strategy play an important role for the business success of the organisation. The business strategy of Coca-Cola Company does not follow the preferences of different market segments (Verma, Gupta and Nangia, 2014). This rigidness towards the market adaptation prohibits the organisation to attract a huge number of consumers who do not prefer the taste of soda or cola. On the other hand, various juice brands such as Dabur Real and Tropicana are rapidly capturing the different segments of global market by providing variety of flavours as per the taste and preferences of the consumers (Verma, Gupta and Nangia, 2014). The international business strategy of McDonald also has utilized the market adaptation procedure to improve their global market reputation and customer database. The management of McDonald has preferred to customize their product line as per the preferences of consumers of different regions rather than treating the entire global market with standardized product. The organisation has contradicted the strategy of treating the entire world as a single market by dividing the global market into different regions as per their taste preferences and food habits. The stuffing of their burgers differs as per the food preferences of different geographical locations. The organisation provides pork and beef stuffing for the business locations in the US while they entirely restrict these materials in the Indian market (Verma, Gupta and Nangia, 2014). Conclusion The analysis of different researchers view and theories has established that the adaptation of different market segments play an important role in the rapid internationalization of organisations. Considering the entire world as a single market influences the organisations to offer standardized products to the consumers. This procedure generally restricts the organisation to properly explore all the segments of the global market. Therefore, it hampers the estimated financial gain of the organisations. On the other hand, dividing the global market in different bordered segments as per the culture, lifestyle and tradition of the consumers will assist the organisations to improve their global customer database. Adaptation of the preferences of different market segments and customization of products accordingly will enable them to improve their global competitiveness and customer loyalty. Reference List Alli, A. M., Winter, G. S. and May, D. L., 2011. Globalization: Its Effects. International Business & Economics Research Journal (IBER), 6(1), pp. 56-98. Arndt, C., Buch, C. M. and Mattes, A., 2012. Disentangling barriers to internationalization. Canadian Journal of Economics/Revue canadienne déconomique, 45(1), pp. 41-63. Cavusgil, S. T. and Knight, G., 2015. The born global firm: An entrepreneurial and capabilities perspective on early and rapid internationalization. Journal of International Business Studies, 46(1), pp. 3-16. Chandra, Y., Styles, C. and Wilkinson, I. F., 2012. An opportunity-based view of rapid internationalization. Journal of International Marketing, 20(1), pp. 74-102. Chetty, S. and Campbell-Hunt, C., 2004. A strategic approach to internationalization: a traditional versus a “born-global” approach. Journal of International Marketing, 12(1), pp. 57-81. Cuervo-Cazurra, A., Maloney, M. M. and Manrakhan, S., 2007. Causes of the difficulties in internationalization. Journal of International Business Studies, 38(5), pp. 709-725. Cunningham, A., 2015. Barriers to internationalization for Finnish companies: case study: Sweden vs. Nigeria. [pdf] Turku University Of Applied Sciences. Available at: [Accessed 11 March 2015]. Dunning, J. H., 2002. Regions, globalization, and the knowledge-based economy. Oxford: Oxford University Press. Harveston, P. D., Kedia, B. L. and Davis, P. S., 2000. Internationalization of born global and gradual globalizing firms: The impact of the manager. Advances in Competitiveness Research, 8(1), pp. 92-99. Hsu, C. C. and Boggs, D. J., 2003. Internationalization and performance: Traditional measures and their decomposition. Multinational Business Review,11(3), pp. 23-50. Kahiya, E. T., 2013. Export barriers and path to internationalization: A comparison of conventional enterprises and international new ventures. Journal of International Entrepreneurship, 11(1), pp. 3-29. Kaynak, E. and Hassan, S., 2014. Globalization of consumer markets: structures and strategies. London: Routledge. Korsakienė, R. and Tvaronavičienė, M., 2012. The internationalization of SMEs: an integrative approach. Journal of business economics and management, 13(2), pp. 294-307. Lu, J. W. and Beamish, P. W., 2006. SME internationalization and performance: Growth vs. profitability. Journal of International Entrepreneurship, 4(1), pp. 27-48. McDougall, P. P. and Oviatt, B. M., 2000. International entrepreneurship: the intersection of two research paths. Academy of management Journal, 43(5), pp. 902-906. Moen, Ø. and Servais, P., 2002. Born global or gradual global? Examining the export behavior of small and medium-sized enterprises. Journal of international marketing, 10(3), pp. 49-72. Nummela, N., Saarenketo, S. and Puumalainen, K., 2004. A global mindset—a prerequisite for successful internationalization?. Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de lAdministration, 21(1), pp. 51-64. Schmid, S. and Kotulla, T., 2011. 50 years of research on international standardization and adaptation—From a systematic literature analysis to a theoretical framework. International Business Review, 20(5), pp. 491-507. Verma, A., Gupta, A. and Nangia, G., 2014. Study of Various Adaptation Policies by Companies to Compete At a Global Scenario. Global Journal of Finance and Management, 6(7), pp. 615-618. Zucchella, A., Palamara, G. and Denicolai, S., 2007. The drivers of the early internationalization of the firm. Journal of World Business, 42(3), pp. 268-280. Read More