International Business of Heinz Company - Assignment Example

INTERNATIONAL BUSINESS H. J. HEINZ Introduction H.J. Heinz is a US based global food company. Along with its subsidiaries, it is involved in manufacturing and marketing of food products all over the world. The core products include ketchup, condiments and sauces, frozen food, soups, beans and many other food products. The company manufactures these food products then packages them for the customers. Heinz operates in North America, Europe, Asia, and Africa amongst many nations (Heinz, n.d.). Heinz is an international company that has prospered. In the United States, Heinz products that have been distributed include Classico pasta sauce among others. Ketchup is common in most Heinz co-companies such as those in Poland, but it adopts a different name to suit the host country. The Poland Ketchup product is called Pudliszki. Most companies would like to expand across many countries and thus have to apply different marketing strategies. All these varied strategies offer different results. Most successful companies don’t assume that any entry method they choose would be automatically accepted by the country they enter. According to Terpstra, Foley and Farathy “to be competitive, a firm may need to know what is going on in its foreign markets” (2012, p. 4). Decisions for the criteria to be used in choosing a market entry strategy include consideration on number of available markets, penetration within the markets, profit potential, risks involved, as well as the personal and administrative requirements. Heinz direct exporting strategy is evident through Feigenbaum, White and Matticks research; they state that Heinz has its own sales organization whereby there are independent brokers, agents and distributors (2011). Marketing Strategy Joint Venture H.J. Heinz Company has in most of its foreign businesses employed the strategy of joint ventures with foreign companies, so as to expand its market and foreign influence. Such examples include the Olive Company in Zimbabwe and Kagome Company Limited of Japan. As for the Kagome Company, the joint venture enables Kagome assume the overall management of Heinz business in Japan. According to the report by Business Wire (2001), the main aim of strategic joint ventures is to enable Heinz become a leading global food company. Kagome on the other side has become a leading distributor of Ketchup and other food products in Japan. Through Kagome’s alliance with Heinz, they are able to align global operations and products, so as to accelerate growth. Successful venture is characterized by good planning by the executives who according to Cyr (1995) would commonly consider market opportunities, business strategy, and resource as well as capital investment. Corporate cultures amongst other challenges are normally demanding and need to be considered if the two companies are to fuse well together. H. J. Heinz’s joint venture with other foreign based companies did not result in formation of a completely different organization. This conforms to the rules of joint ventures whereby the merger should not lead to the creation of a different organization. The resulting fusion of these companies is a completely collaborative strategy. Yan and Luo say that the child organization is largely influenced by the institutional environment (2001). During the initial venture negotiations, it is the responsibility of the parent to ensure that there is an agreement over which to lie liable, regarding the venture management responsibility, as well as how the key positions are to be held and conducted. H. J. Heinz is aiming at developing further globally by reaching many countries. Further evidence shows that Heinz has a partnership with an international Disaster agency belonging to the United States; the agency is situated in the upper side of Nile in Egypt. In a food industry, if a company wants to posses equal chances of competition with rival companies in the market, it will be forced to adapt to the market culture. Given that culture varies from one region to another, it would be very difficult for a company to compete using only one product. This has compelled Heinz to have many products in the market; the products that must get molded to different rules and regulations in order to remain competitive in the market. In such a case, Heinz continually acquires companies that are already established and already have stable product demand in the market. This strategy enables Heinz to bypass the heavy political traps that foreign companies must adapt when they enter into foreign markets. The acquisition of these companies helps Heinz maintain the business practices of the company it obtains. Challenges faced by Heinz International businesses face various challenges that include: Foreign currencies. Communication barriers. Environmental standards. Business and local culture. Political and legal environments. Business and local culture An international business can be very delicate. Business marketing campaign matters most for the success of a business entity, because there has to be management of different behaviors, values and attitudes. There is a case whereby an Arabic business failed due to its display label; the company was marketing its soft drink products, unfortunately the six pointed star label is a synonym in Israel. Another business in Japan had a white painting on its face which according to Japan means death. Differences are likely to occur if for instance, there is a difference in the way with which the mother company varies from the co-partner in factors such as goals, perceptions and different values. Failure of this would lead to disharmony and constant failures. To avoid misunderstandings, varied issues have to be discussed through negotiations. Human resource management is normally closely related to cultural facet. In some countries, the locals want to do business with their people; in such an instance, the company has to hire local personnel, the managers too have to be highly experienced and be capable of handling cultural adaptability, so as to balance the interdependencies. Since Heinz deals with food products, the issue of culture and country’s practices is a constant challenge to them. For example, there are differing health standards and regulations pertaining food products amongst many nations. Heinz is forced to take possible measures to deal with such complications with the countries respective economic Unions or Organizations that deal with food standards (Feigenbaum, White and Matticks, 2011). In relation to global development, Heinz has managed to find ways of making innovations in products so as to remain relevant to given demographics. Heinz acquires an existing company with an already proven record and success in the market. As an example, the recent acquisition is the Foodstar Company, one of the leading Chinese food manufacturing companies specializing in branded soy sauces and fermented bean curd (Flexnews, 2010). Heinz does particularly well in United States of America since its sale of Ketchup is associated with heritages and common condiments used by Americans. Examples of such are the Vinegar and Cocktail sauce. In Canada, Heinz has ventured into its culture specializing in what the Canadians like, such as the infant foods in United Kingdom; Heinz is associated with its traditional foods to the extent that it looks like a UK based company. Pudliszki in Poland and the Italian Plasmon are just but examples of how Heinz has managed to fend off the challenges related to corporate and local cultures. Political and legal environments The successes of a company largely rely on the kind of treatment it receives from the country within which it operates. The legal environment includes the changes in applicable laws and regulations. Such laws may exist in the form of food laws and policies, accounting specifications, as well as environmental and taxation issues. Other factors that are politically and legally related to businesses are import and export limitations, nationalization and security matters such as the act of terrorism. As much and fast Heinz is growing, it has had political hiccups to deal with; for instance, according to Feigenbaum, White and Matticks (2011), Venezuela is Heinz’s potential market place suitable for economical growth, but it is leading in terms of terrorism and political unrest; this creates difficulty for market penetration and business activities. Further effects of political unrest and legal issues affecting Heinz include the way in which its supply chain gets disrupted. Poor transportation systems are the cause of affected goods distribution system. Other factors that change in relation to political systems are the increase in cost of labor, expenditures, food safety problems, increase in taxes, environmental degradations amongst many factors. Foreign currencies Currency exchanges have an influence on the current and the future Heinz business. Although this has not been a major challenge to Heinz in most parts of its locations, it has had challenges on some companies especially outside America and Europe. This is not always the case because in Europe in the year 2010, the transaction currency cross rates in the United Kingdom had some impact on the overall profit of the company. According to Feigenbaum, White and Matticks (2011), there was a reported case of decreased gross profit, the main reason being an increase in commodity cost and adverse exchange rates. Pricing issues In regions where Heinz is dominant, it has been enjoying the benefit of controlling market monopoly. The sales from 2010 financial year had a pricing gain of 2.1%; this was accelerated by the emerging markets and other top brands in the company. However, in the regions where there is high competition, the situation has affected the favorable customer’s financial stability, as well as the companies’ financial gains. Some of these situations happen to be beyond the control of Heinz. Market competitors that have significant finance take advantage of such situations ensuring that they remain competitive to the disadvantage of Heinz. Communication barriers Heinz is a large company spread in many parts of the world; therefore, it is more than obvious that there would be language barriers. Some nations are Chinese speaking, others English, French, Japanese and many others. Any information from the central offices would not reach all the branches as it is; it could be distorted in the process of interpretation. It is very difficult to communicate the same message in all the advertisements. Since communication is a key factor in product advertisement, it creates an underlying concern for Heinz to adopt. It is very crucial that different styles are considered so as to satisfy every market and customers. For example, there is a difference in the manner in which Japanese and Americans perceive advertisements. The Americans are fond of adverts based on celebrities whereas the Japanese prefer adverts that are object oriented. Effective communication presents a challenge, but for the sake of the company, this issue has to be critically considered. Heinz has taken a step further by involving its consumers to take part in the challenge of designing advertisements. Global Political Risks International business encounters a lot of risks, wherever it operates and conducts supply chains. A company is therefore required to be aware of the global risks involved. These include global issues that cut across all the regions, for example the act of terrorism, social and political risks. A company manager needs to assess relevant points so as to safeguard the business. According to McKellar, “risks at the operational level means the issues that arise from the interaction of a specific intuitive and presence on the ground with the surrounding political environment” (2012, n.p.). Global economic developments rank political risks among the top constraints; government intervention is one of this risks. Political risks have been defined by the World Bank as “the probability of disruption of the operations of multinational enterprises by political forces or events” (2011, p. 19). Political forces may originate from the host or the home nation. Political risks in host nations refer to uncertainties in the government and political institutions, “actions that affect foreign direct investors, but also to dynamics that could result in civil disturbance, terrorism, civil wars, and cross border conflict” (World Bank, 2011, p. 18). Political risks are mostly a major source of constrain to Foreign Direct Investment. In developing nations, a more strict screening and approval processes has been on the rise, the restrictions are more common on some prevalent select sectors. Political risks also occur when the government breaches contracts, restricts currency transfers and conversions, as well as political instability. In response to the latest global economic crisis, both the developed and developing countries have put in place several measures to boost their businesses. For instance, the economic stimulus package, government aids, loans and grants. Although these are the state measures meant to revive economy, the risky thing is that they tend to trigger government interventions and are more likely to escalate political risks subjected to businesses. Economic Risks Global businesses encounter quite a number of economic risks as they gain control of international business. There is a risk in exchange controls whereby the flow of capital into and out of the country is restricted. This risk subjects a business into the hardship of removing profits or increasing investments in the host nations. According to Cochran (2012), exchange controls are sometimes done intentionally on certain commodities whose supply is to be regulated. Although the risk of exchange control may not have major impact on the importation of goods, it can lead to the collapse of the business plant. Tax policies are another form of risks that has an economical impact on the business. They are being applied by countries which want to attract foreign investment and be able to gain control over the international corporations. Although this policy enables the host nation gain more tax, it subjects the investment with the risk of collapse. For the nations that are affected by inflations, devaluations and rising costs, investors may be forced to enter into a premature closure. Conclusion H. J. Heinz has grown tremendously over the past few years into being a dominant production company and a marketer. This has been as a result of implementing various business strategies including the strengthening of its international markets and accelerating adoption of emerging market techniques. Heinz must now put in place measures to counter all the challenges. It has to comply with the foreign policies since they adversely affect the company’s food supply chain, and can lead to market failures with the increase in taxation threatening customer treatment. Heinz is an innovation based business company whereby its key business idea comprises the general business strategy such as basing the company on a global scale and making the most out of the company talent. A large percentage of the Heinz future depends on the company’s dependence and investments on emerging markets. The company should keep its undisputed focus on continuous improvement and innovation within the available markets and if it continues with constant improvement, then it will be able to cement its competitive nature in the market. It is more likely that Heinz will encounter more political and economic challenges in future due to the current global trends, for example the rise in terrorism and the recent world economic recession. Heinz should therefore develop more strategies to counter these potential challenges. Further success will be determined by its continuous improvement and innovations within the already existing market. The company has to venture more into international markets by focusing on emerging markets, especially in countries that have much potential by merging and acquiring existing companies, while considering the rules and regulations of the host nations. Reference List Business Wire, 2001. Heinz and Kagome Propose Japanese Joint Venture: Kagome would own 51% of Heinz Japan Limited [Online] Available at: [Accessed 29 March 2014]. Cochran, S., 2012. Political and Economic Risks in Conducting International Business [online] Available at: [Accessed 29 March 2014]. Cyr, D. J., 1995. The Human Resource Challenge of International Joint Ventures. Portsmouth: Greenwood Publishing Group. Feigenbaum, K., White, J. and Matticks, E., 2011. H.J. Heinz Inc: Industry Analysis [pdf] Available at: [Accessed 29 March 2014]. Flexnews, 2010. Heinz Completes Acquisition of Foodstar [online] Available at: http://www.flex-news-food.com/console/PageViewer.aspx?page=33180 [Accessed 29 March 2014]. Heinz, n.d. About Heinz [online] Available at: [Accessed 29 March 2014]. McKellar, R., 2012. A Short Guide to Political Risk. Farnham: Gower Publishing Ltd. Terpstra, V., Foley, J. and Sarathy, R., 2012. International Marketing. Chicago: Naper Press. World Bank, 2011. 2010 World Investments and Political Risks. Washington: World Bank Publications. Yan, A. and Luo, Y., 2001. International Joint Ventures: Theory and Practice. New York: M. E. Sharpe. Read More