Global Competitive Strategy - Genting Group - Essay Example

The business world over the last 60 years has being transforming itself into a global marketplace where companies from all over the world compete to increase its market share of a 6.6 billion client market. Large organizations can no longer rely on its domestic market to comply with the expectations of its shareholders. Companies of all sizes have an opportunity to tap into the global arena by utilizing the World Wide Web or internet to reach a global clientele base. A company that everyday deals with the challenges associated with globalization is Genting Group, a Malaysia based investment holding and management multinational firm. This paper discusses different strategies firms can utilize to achieve global penetration. A global firm is a company that operates in more than one country and is able to capture research & development, production, logistical, marketing, and financial advantages in its cost and reputation that are not possible by purely domestic firms (Kotler, 2002, 390). Prior to make a decision on global expansion a firm must perform an internal and external analysis of its operations and environments to determine if global expansion is viable. There are risks associated with going global. Some of the risks are: poor cultural comprehension, lack of managerial experience in the global environment, monetary foreign exchange fluctuations, intellectual property protection, and political corruption among others. There are many different market entry strategies companies can utilize to achieve entry into a global market. Four international market entry strategies are: exporting, licensing, joint ventures, and wholly owned subsidiaries. The most basic and easiest strategy to implement is the exporting strategy. There are two types of exporting strategies: direct and indirect exporting. The more common of the two is indirect exporting. An indirect exporting strategy involves a company selling its products to an independent intermediate who controls the distribution network that will allow the product to ultimately be offered to the foreign clientele. Once a company learns about the foreign market and determine their product has good growth potential, many firms upgrade their strategy to direct exporting. “Direct exporting allows firms more control over activities such as market selection, marketing mix variables, adaption to local markets and monitoring competitor activity” (Kai-mahnert). A way for a company to penetrate the global marketplace with a low capital and human resource commitment is through a licensing strategy. In a licensing agreement the licensor allows a foreign company to utilize a manufacturing process, trademark, patent, trade secret or some other form of intellectual property in exchange for a fee or royalty (Kotler, 2002, 391). The most important consideration prior to entering into a licensing agreement in a foreign market is ensuring the foreign nation’s government and legal system provides adequate protection of intellectual property. Another important factor is choosing the right partner; one that will proactively market your product. A downside to licensing agreement is that the licensor obtain lower profits in comparison with other alternatives and that the company loses control over the supply chain of its products. A third international expansion strategy is joint ventures. A joint venture is joint collaboration between a foreign company and a local firm. Prior to China opening its market after its entrance to the World Trade Organization (WTO) in December 11, 2001 the only way for a foreign investor to gain entry into the Chinese marketplace was through the joint venture mechanism. Another international expansion alternative is through direct investment into wholly owned subsidiaries. This type of expansion requires a high capital commitment; it is the alternative that can produce the higher potential profits. Executives can take advantage of the global movement in other ways to improve its operations. Outsourcing is an operating strategy which involves sub-contracting a foreign firm to perform a part of the production cycle in order to reduce costs. In the automobile industry subassembly of a portion of the auto manufacturing process is a common practice among competitors in the industry. Company can also improve its distribution channel to attain international sales by taken advantage of E-commerce. A business can use a website to generate sales, provide service to customers, and to provide information to the general public. Genting Group was founded 45 years ago in Malaysia as Genting Berhard. The Genting Group name which is used as the trading name for the company in Bursa Malaysia is composed of five companies. This firm has effectively utilized a diversification strategy to reach the global marketplace. Genting International PLC, Genting’s most successful division, is an investment holding company. Any business that operates in the financial and investment industry must have a very good understanding of the global market since players in the equity and money markets deal with investments opportunities across national boundaries. Some of the other business divisions of the company include Resorts World Bernard which operates in the hospitality and entertainment industry and Asiatic Development Bernard, a division that deals business affairs in the real estate and plantation industries. As we moved closer to the second decade of the 21st century businesses have become more adept to dealing with the implications of the globalization movement. The new economic era, the convergence age, that began ten years ago allowed the entire world to reap the benefits of multi-channel communication that brought the entire world together as the internet became the primary tool that connects our global society. The proliferation of broadband helped multinational companies achieve more efficient business process such as having workers being able to connect to corporate global network and databases wirelessly from any location in the world. A worker in Australia can upload information to a common system which can be used by an employee of the same firm working in Canada. It is important to remember in order to succeed and achieve market penetration in a new foreign location companies must utilize proven market entry strategies such as licensing, exporting, direct investment and joint ventures. Global expansion is a highly rewarding strategy that should be pursued by companies of all sizes. References Kai-mahnert.de. Introduction. Retrieved February 10, 2009 from http://74.125.113.132/search?q=cache:GiHeDqlE224J:www.kai-mahnert.de/studybuddy/Papers/Global/Foreign%2520Market%2520Entry%2520Strategies.doc+direct+exporting&hl=en&ct=clnk&cd=10&gl=us Kotler, P. (2002). Marketing Management (12th ed.). New Jersey: Prentice Hall. Wto.org (2009). China and the WTO. Retrieved February 9, 2009 from http://www.wto.org/english/theWTO_e/countries_e/china_e.htm Read More