International Marketing Assessment - Essay Example

Running Head: International Marketing International Marketing [Institute’s International Marketing Answer to Question Oneof the most important reasons why it is highly advisable for Skoda to use consultancy services is because of the fact that the same would help the company to design and build a strategic vision. The biggest problem with most of the players in the global and even in the regional automotive sector has been the inability to distinguish between operational efficiency and strategic vision. By definition, operational efficiency refers the practice of performing the same set of required activities better than performance of their rivals (OCED, pp. 234, 2010) (Porter, pp. 63-65, 1996). Yet, the fundamental question remains and revolves around the reason of why shall the company use the services of consultants for the same and why the internal talent be utilized for the same. There are many reasons in this regard. Firstly, strategy building is a difficult and painful exercise since it requires making hard and avoidable choices. In fact, strategy builders have to get out of their comfort zones and take decisions to undertake discussions, which they would have not even imagined under normal circumstances. It has been an observation (Porter, pp. 69-74, 1996) that at times, it becomes extremely difficult for the company to make those choices considering the human and emotional constraints. This also explains why many Chinese and Japanese companies avoid having clear and well-defined strategies since the process of the same would require them to go against their culture of collectivism, uncertainty avoidance and achieving consensus for every decision (OMahoney, pp. 64-69, 2010). Quite understandably, when managers are making the strategies, there is a high probability that the emotional element would get into the process to make it more biased. Many companies successfully develop good strategies but fail to execute them; however, it would be a complete disaster if the company designs a biased and mediocre strategy and then executes it with all possible energies (Curnow & Reuvid, pp. 79-84, 2003). Furthermore, over the years, the field of strategic management has developed to great limits. New complexities, inventions, and use of latest tools, ever-changing industry scenario, new elements and dynamics and others have made it even more complex for any nonprofessional or even an average middle manager to involve himself in the process of strategic management and promise great results. Management consultants bring with themselves vast experience in their fields of helping companies making turnarounds and taking otherwise tough decisions. In addition, experts (Curnow & Reuvid, pp. 78-86, 2003) have indicated that their experience and expertise is something, which the internal members of the company cannot offer to Skoda. Moreover, this outside and unbiased strategy making process may help the company not to identify their strengths and opportunities better then before but also it would help the company to unearth its weaknesses and threats better than before (OMahoney, pp. 61-68, 2010). It is human psychology that when something is brought too close to the eyes, vision for the same becomes smaller and smaller. However, for managing change, taking tough decisions and creating long-term strategies, it is imperative to set aside emotions and intuitions, step back to see the picture as a complete whole so that its internal and external environment can make sense together. Quite understandably, this is troublesome for the internal people considering their narrowed vision, obsession with the company and emotions, however, the same is not true for an outsider with expertise and experience in the same field (Curnow & Reuvid, pp. 69-74, 2003). Furthermore, one of the most important reasons why consultancy is advisable for Skoda company because of the fact that both the economy of Czech republic and Skoda company itself are in infancy. Czech Republic came into being in the year 1993 and Volkswagen Group acquired Skoda Company as early as in the year 2000 (Jakubiak, Kolesar, Izvorski & Kurekova, 2008). Furthermore, the country, the industry, and the company are in crisis and it is understandable that while looking at things, they would have a narrowed perspective full of regional insights. Skoda needs the perspective of international management experts (OMahoney, pp. 61-68, 2010) who would bring along themselves the experience of turning around many companies and many industries in various countries. In this regard, it is highly unlikely that its local or internal staff would have the experience, knowledge, and capability to view things with a different lens and see the picture as a whole (Janosec, 2010). Until now, the paper has analyzed extensively about the need of a consultancy for Skoda and the way it would benefit the firm. However, there is another side of the picture as well. Even the consultancy firm would also find itself in advantage from helping out a company like Skoda operating in turbulent industry. Despite the fact that Skoda has been there for quite a long time but as mentioned earlier, Volkswagen group of companies has recently acquired it (Jakubiak, Kolesar, Izvorski & Kurekova, 2008). The top management of the company needs direction in strategic marketing and by doing the same, the consultancy firm would be able to add many points to their points’ sheet and gain a lot of valuable experience. Helping Skoda successfully would help them understand the complex dynamics of the automobile industry of Eastern Europe, which would be done with keeping various points in mind (KPMG, 2008). Despite the fact that it is highly recommended for Skoda to engage itself in using the service of management consultants but there are some basic things that the company needs to understand and clarify between it and the consultants. Firstly, the company should clarify its expectations and clearly discuss the outcomes desired and uncertainties (Sturdy, Clark, Handley & Fincham, pp. 448-449, 2009). Many such consultancy ventures fail because clients fail to understand or talk about their expectations and work processes. Secondly, the partners need to decide about the degree of control that the company would be able to exercise over its client. Thirdly, the company has to make sure that all the information about the internet and external audit of the company is available for consultants. However, it is also important for the company to keep a balance or decide on terms regarding dissemination of private and confidential information to the consultants (Sturdy, Clark, Handley & Fincham, pp. 448-449, 2009). Answer to Question # 2 The previous section of this paper included analysis on the importance of strategy, strategic positioning, and strategic vision for any company. Now, the paper will use this analysis to build upon our understanding of importance of market entry modes. In fact, deciding on the entry mode in any market is the foundation of the point from where the strategy making process begins. In other words, one can say that deciding on the market entry mode is nothing less than a part of overall strategy of the company. As it says, “what starts well would end well” and “a successful start is half the job done.” In addition, smart companies focus all their possible energies in deciding the market entry mode, which can be the “best fit for them.” For instance, if any firm believes that it is ready to accept the high risk associated with the business, it would go for the full ownership or acquisitions of its activities (OCED, pp. 5-7, 2010). However, a risk-averse firm would go for taking on the role of agents for exporting, franchising, or licensing. Despite the fact that this approach would not result in high returns; however, important here to note is the fact that the firm is risk averse and is ready to tradeoff for risk in return for low returns (Sturdy, Clark, Handley & Fincham, pp. 448-449, 2009). Additionally, as mentioned earlier, a firm that is willing to accept risk since it thinks that it is prepared to face or absorb the shocks would probably go for joint ventures, mergers and full ownership of their businesses since it would provide them the chance of earning the highest returns with high risk. For further information, appendix A can be referred (Czech Invest – Investment and Business Development Agency, pp. 5-19, 2010). Before analysis on the entry mode, it is necessary to have a quick glance at the macro environmental factors that act on Czech Republic. Political factors are largely stable and favorable because the coalition government is stable, pro EU enlargement and even is planning to adopt the Euro before the mid 2010s. Strong banking system, taxes incentives for investments, training incentives, and possible adoption of Euro are making economic environment also favorable. The same is true because all these factors make it easy for investors to invest in the industry. However, the socio-cultural factors are not in that same line because the population is declining and is growing older (KPMG, 2008). This means that no significant growth could be achieved due to the purchases of new buyers. With Czech Republic being a technological nation and in the presence of favorable infrastructure and skilled people for technological innovations, there would be immense opportunities for any investor to improve continuously his offering by innovation (KPMG, 2008). Environmental factors are not favorable for the industry since the country and its automotive industry has to abide by specific targets for making environmental sustainability and fuel efficiency. The legal environment poses no significant threat for businesses since it does not put any trade barriers or hold companies from mergers and acquisitions. Therefore, companies can function smoothly with lesser havoc on the legal front (Janosec, 2010). After a careful analysis, it has been an understanding that the “best fit” for the company to enter in the Czech Republic would be “Joint Venture”. One of the most important reasons for using this approach is understandable by the five factors, which influences the choice of entry in any market. Firstly, it is the nature of competition. In order to understand this point, it is important to refer back to Porter Five Forces Model (David, pp. 233-237, 2010). According to the analysis, the overall industry is moderately favorable because the threat of rivalry and bargaining power of customer is high but the bargaining power of suppliers is low, threat of new entrants is low and the threat of substitutes is moderate. However, important here is that despite the fact that threat of rivalry and bargaining power of customers appear as two factors out of five and since they can be outplayed by the ratio of “two to three” yet these factors hold crucial importance and in practice are putting biggest dent on the industry profits (Hitt, Ireland & Hoskisson, pp. 342-348, 2009). Therefore, any player that wants to improve the overall industry condition would prefer to turn these factors into the industry favor. Joint Venture offers the way for the same. If two players of the industry would merge to work in a merger that would decrease the rivalry to some extent since it would change the size of competitors and lessen their number (Terterov & Reuvid, pp. 85-87, 2005). Secondly, it is the speed of entry, which matters here. Joint Venture as compared to other ways is a middle way between quick entry and slow entry. The industry is not going to turn around very quick; therefore, the firm can wait for a while before it enters in the industry (Cateora & Graham, pp. 245-249, 2007). Thirdly, it is level of involvement, which comes under consideration. Mergers and Joint ventures can offer a mid way between high involvement, which would put the firm in the driving seat to take all the decisions and low involvement that would mean that the firm would almost be a mere spectator. It appears to be the best fit between high risk-high returns and low risk-low returns (Czinkota & Ronkainen, pp. 102-113, 2007). Fourthly, as mentioned earlier, the level of risk and control overall indicates that joint ventures would be the most feasible. The reason for the same is that all other options are inclined towards being extreme to either low risk-low control or high risk-high control. However, joint ventures offer the middle way between these extremes (Heneric, Licht, & Sofka, pp. 451-458, 2005). However, lastly, the factor of investment costs is one factor on which the merging firm would have to comprise since it requires high investment costs as compared to other options of exporting and others (Janosec, 2010). Other than these five factors, Joint Venture would be a great way to work together with a firm competitor and take advantage of their resources and competencies. In fact, the corporate history is full of stories when two competitors have merged and used their individual competencies, resources, and competitive advantages to emerge as one powerful and dominating unit (Onkvisit & Shaw, pp. 15-24, 2008). Secondly, in the light of automobile industry, economies of scale are one defining factor to achieve low costs and high profit margins. In fact, for some firms this is even the competitive advantage (Pavlínek, pp. 163-167, 2008). Joint Venture means that two firms would be able to merge their production together to produce higher than ever and take advantage of economies of scale (Edelhoff, pp. 216-223, 2009). Thirdly, it is evident from PESTEL that the overall outlook of the microenvironment in which the firm would operate is moderately favorable. Important here to note is that the industry has matured and sales are not growing as they were growing in the earlier days (OCED, pp. 46-51, 2004) (OCED, pp. 91-96, 2008). Moreover, the political and legal environment does not try to ensure competition and is open to mergers. Therefore, it is advisable for firms to create the industry as monopolistic one since the same suits maturing industry in the best way (Czech Invest – Investment and Business Development Agency, pp. 5-19, 2010). Internationalization Theory SKODA AUTO UPPSALA MODEL Skoda shall begin its operations in other markets whether in form of exports, licensing or joint ventures in an incremental way. It should start with small investments that should compound with the passage of time only when the company thinks that it has learnt enough and it is not ready for the next big step. Furthermore, once the company has achieved the height of expansion, it shall move in adjacent geographical markets in the same way (CzechInvest, 2008). TCA MODEL The firm would only choose to enter directly in any market only and only if the marginal costs are less than that is achieved through exporting or licensing. Skoda will have to consider all the costs related to the business, with a direct entry method and translate them into per unit costs (Jakubiak, Kolesar, Izvorski & Kurekova, 2008). ECLETIC THEORY/CONTINGENCY APPROACH In light of the eclectic or contingency theory, it is advisable for Skoda to make sure that it has the ownership of all the resources that it has use, whether tangible or intangible. This allows the firm to decrease its ‘per unit’ or ‘marginal costs.’ Quite clearly, this means that the firm shall try to intervene in the industry (CzechInvest, 2008). INDUSTRIAL NETWORK APPROACH Without any doubts, the industrial network approach would be the most comprehensive method that the firm can adopt for considering its internalization. In four stages, it would have to consider the favorability of its partners, characteristics of its partners, atmosphere, and environment surrounding this discussion. As the PESTEL and Porter five forces analysis shows that all these factors are favorable for the firm thus increasing the chances of firm’s direct presence in the industry (Jakubiak, Kolesar, Izvorski & Kurekova, 2008). Appendix A Marketing Oriented Contractual Shared owned and controlled Wholly owned and fully controlled Direct exporting Distributors Agents Interactive TV E-commerce E-business Licensing Franchising Contract Manufacture Alliance Management service contracts Joint venture Partial mergers and acquisitions Full Acquisition Subsidiaries Representatives Assembly Indirect Exporting Via domestic organization Trading companies Export Houses Piggy Backing       LEVEL OF INVOLVEMENT Low High Low LEVEL OF RISK AND CONTROL High References Cateora, Philip R., & Graham, John L. 2007. International marketing. McGraw-Hill/Irwin. Cleaf, Kristin Van. 2007. Czech Republic. ABDO. Curnow, Barry, & Reuvid, Jonathan. 2003. The International Guide to Management Consultancy: The Evolution, Practice, and Structure of Management Consultancy Worldwide. Kogan Page Publishers. Czech Invest – Investment and Business Development Agency. 2009. Automotive Industry in the Czech Industry. 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