Demand and Supply Led Drivers - Essay Example

Essay for International Business Table of Contents Table of Contents Introduction 3 Demand and Supply Led Drivers 3 Eclectic Theory 4 Uppsala Model5 Product-life Cycle 6 Introduction Stage 7 Growth Stage 7 Maturity Stage 8 Decline Stage 8 Conclusion 8 References 10 Introduction Every company in this modern era is trying to capitalize on the advantages of globalization. After achieving huge success level in domestic market leading companies wish to do business practices across the domestic border in order to maximize profit, its market share, core competency and goodwill. These are all tangible and intangible assets of a company. The company chooses internationalization process in order to take the advantages of advanced technology, potential marketplace and favorable economical factors of international market. The internationalization process and the reason of adopting the process can be identified by several business models. Demand and supply led drivers will help to identify the advantages of customer and supplier relationship management for the international market orientation and the difference of these two drivers will help to identify the impacts on business practices for a company. Followed by this the Eclectic theory of internationalization will help to analyze the different categorized advantages that will help international business practices. Next the Uppsala model will help to find the business activities of a company in a foreign market. Last but not the least the product life cycle tool will help the company to develop their product internationally considering different aspects of product life cycle. The objective of the study is to find the reason for internationalization of a company and evaluation of several international business tools. Demand and Supply Led Drivers In order to adopting international business process companies need to understand about the demand led drivers and supply led drivers. The basic purpose to reinforce this demand and supply drivers is the gaining knowledge of companies about the demand chain management and supply chain management in international market. The difference of demand led driver and the supply led driver in specific international market is based on importance. The supply led drivers is the degree that focus on consumers and this driver gives importance on efficiency of service. Here the company management consider about cost-led and supreme level of customer service. The risk of this supply-led driver is that the target customers may be aggregated. Therefore the link between customer and supplier relationship management may be hampered. Demand led drivers hold the broader vision of relationship management. This driver integrates both of the customer and supplier relationship management. The need of demand led driver is to allocate required resources for thy international operation (Porter, 2011, p.115). It is kind of a push strategy which influences both the customer and suppliers. Supply led driver is more of a pull business aspect. It may affect the target customers different brand loyalty and orientation. Eclectic Theory Eclectic theory of internationalization is the economics theory based on the theory of transaction costs. The idea behind the application of eclectic theory in internationalization process is to understand the economic approaches in international competitive business market. The fundamental forms of international market such as Licensing, FDI, and Export can be distinguished by this theory (Cantwell and Narula, 2012, p.71). Before entering in international market the three categories of advantages in internationalization process of this theory such as ownership advantages, internationalization advantages and location advantages need to be identified by the company. If the company has ownership advantages such as knowledge about the international target market, employees’ international language skill, appropriate products, information about import permission and huge contacts can help the company to do the Licensing in international competitive market. Licensing cut down the intensive cost than other international process. If the company owns the internationalization advantages then it should invest more capital in foreign market. The export subsidiary will help to achieve the export process due to the company’s internationalization advantages. Company chooses FDI as it is the key capital intensive activity. If the company owns the location advantages then it will be easy for them to enjoy FDI which is necessary for international business. These three business advantages combined represent the eclectic theory of internationalization which helps the company to find the business advantages in global market. Uppsala Model Uppsala model describes about the organizations’ activities in international market. This model helps the company to gather experiential knowledge about international market. This experience drives the healthy business opportunities in international market. Moreover, learning through a company’s own operation can be effective as the globalization process is bit slower. This model helps to demonstrate the impression on company’s investment behavior by the learning process. Lack of experience knowledge can hamper the establishment chain of a company in new international market (Buskley and Ghauri, 1999, p.173). If the companies fail to gather large resources for internationalization, the development of activities should be stepwise character and evolutionary. The better market knowledge risk will always minimize the market risk factor and these learning will help the company to brunching out in international market. Uppsala model is effective as this model efficiently identifies the important factors regarding choosing the target market. In order to reduce the uncertainty and, minimization the market risk, companies willing to adopt internationalization process. Before venturing and investing in international market companies need to gain extreme knowledge level about the specific international market place. Therefore the Uppsala model of internationalization can be implemented. Companies have to analyze the psychic distance between the investment and host international market. After getting success company can increase the business border area at later stage. Cultural distance between two countries may affect the business practices. If the cultural distance seems to be more, the companies initially think about joint venture business, as the global competitive business market is uncertain and unstable. Moreover, the business environment factors like competitive environment and legal fact5ors need to be analyzed while the companies willing to do global operation and it will help to define the psychic distance of Uppsala model. This psychic distance cannot be stagnant at a point due to development of communication system and international trade. As a whole the potential value and size of target market and several primary elements of international process can be measured by Uppsala model by gathering knowledge about international market and the learning effects on the companies’ activities. Product-life Cycle The product life cycle can be considered analytical tool that measures how an organization develops their products in global and domestic market (Proctor, 2000, p.82). It also describes about the company’s marketing program development when the company is operating on both national and international markets. . The four fundamental aspects of global product life cycle theory can be demonstrated; demand for a specific product, international competition, manufacturing and effective marketing strategy. The company can introduce a product in international market by a quality marketing strategy. International product life cycle analysis of a company includes economic values of a country, economies of scale and market development. It can be analyzed by standard business model like product life cycle. The product life cycle of a specific product describes four life stages of products that are introduction stage, growth stage, maturity stage, and decline stage of a product. Introduction Stage The company introduces their new products in the introduction stage of product life cycle. These newly launched products cannot be completely identified by most of the consumers. People’s perception about these products can be negative like according to them these products are of bad quality or these products can be expensive. Manufacturing of products is dependent upon the talent of skilled employees (Gaspar, 2005, p.325). Manufacturing in short run industry has drastically changed the production methods. In many developed countries, the leading players often internationally step out in terms of product sell to target audience to maximize profit. International rivalry is typically fictional throughout the introduction phase of product life cycle. Growth Stage The competitors throughout the growth phase of product life cycle in developed foreign markets starts to facsimile the product. The competitors of that company also can get influenced to step out and start to begin exporting, frequently starting doing business practice in international market that primarily innovated the goods or services. The growth phase of a product in product life cycle is also highlighted by the promising product standard basis on massive production (Ellwood, 2001, p.58). As innovator enters in a growing number of international markets by introducing the product in fresh untapped markets, it results price war. Maturity Stage In near future, the product steps in the maturity phase of the product life cycle. In this phase company start to feel that the international marketplace for the particular product becomes saturated, denoting that almost every people who tend to consume the products has purchase it. At this stage the product had to face huge competition from its competitor. Decline Stage The companies, who promote their products for international market, should protect both international and national markets from global competition, while as a final point flouting into critical upward markets to find out new target customers. After a while, when the specific product steps in the decline phase of product life cycle, the innovators might shift their manufacturing into developing foreign countries in order to enhance sales. It also minimizes the operational cost. During decline stage, the product can turn out to be outdated in maximum developed international markets, or else the price of that product is obsessed so near to the ground that the competitive market for that product becomes almost 100% saturated. Conclusion In order to get maximum competitive advantages and maximization of profit and market share companies adopt international business strategy. To evaluate it several business tools can be applicable (Porter, 2008, p.77). According to the Eclectic theory of internationalization companies can gain many international business advantages like Licensing, FDI, Export which will enrich company’s location, ownership and international advantages. Moreover usage of Uppsala model will help the company to gather experienced knowledge about international competitive market and the target market. This highlights about the international business activities of a company. Lastly product life cycle tool help to develop the products in international competitive market. This tool includes different life stage of a product. Companies adopt this strategy to measure the performance of product and change it according to the taste of consumers. The companies should be knowledgeable about the social, economical and several environment factors of specific country. References Porter, M., 2008. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Simon and Schuster. Gaspar, J., 2005, Introduction to Business. Stamford: Cengage Learning. Proctor, T., 2000. Strategic Marketing: An Introduction. Hove: Psychology Press. Buckley, P., ghauri, P., 1999. The Internationalization of the Firm. Stamford: Cengage Learning. Cantwell, J., Narula, R., 2012. International Business and the Eclectic Paradigm: Developing the OLI Framework. New York: Routledge. Porter, M., 2011. Competitive Advantages of Nations: Creating and Sustaining Superior Performance. New York: Free Press. Ellwood, W., 2001, The No Nonsense Guide to Globalization. Brooklyn: Verso. Read More