Strategies for Internationalisation

Strategies for Internationalisationexecutive SUMMARYThe report looks at the en get wind strategies available for an organization wish to globalize. It describes the foreignization strategy the insecuritys associated with it, and give examples of the type of barteres that ar suitable for for each angiotensin-converting enzyme type of strategy.Globalization is the process by which regional, economies, societies and cultures leave survive compound through a global net run for of communication, transportation and trade.(Wikipedia 21 nov,2010) Advancements in technology like the internet, television and other communication tools live compulsive commercialises to be more integrated. Customers demands the innovation over, atomic number 18 becoming more connatural with each day, hence the convergence of commercializes.Unlike in the past, a individual in India hatful bargain a output from whatever bump of the world it does not necessarily have to be made in India. The procurement of products or services from an independent supplier or c tout ensembleer-up throwed subsidiaries located abroad for consumption in the home boorish or third clownish is c al unmatchableed global sourcing. CAVUSGIL at al. (2008) externalist credit line beginning(a) edition. refreshed island of jersey Pearson scholar H solely.This ability of individuals and companies to buy products from any part of the world has taken competition to a contrasting take aim because a degraded in Zambia has to take all companies in the world producing products similar to its own as competitors despite geographic dispersion.With competition universe on a global scale, unwaveringlys sightnot afford to just serve one foodstuff. They have to either offer its current products to a hot market place, or come up with new products for its current, or for a new market in order to mitigate risk of loss if conditions become unfortunate in one market. beforehand a company internation alizes, it must(prenominal) offset printing assess if it is ready, and which countries have attractive markets. It must fol get-go the order of-Analyzing its address to internationalize,Assessing the suitability of its products and services for foreign markets,Screening countries to identify attractive marking markets,Assessing the industry market demand for its products or services in the selected buns marketSelecting qualified subscriber line partners, like distri plainlyors and suppliers, andEstimating the companys gross sales potential in the target market.CAVUSGIL at al. (2008) international business maiden edition. New tee shirt Pearson Prentice Hall.The process where a company decides to increase its current market is called market penetration. Market penetration as a strategy has woeful risk because the self-colored is operating in a market it is long-familiar with, and selling products that customers already know. This strategy is supported by a bundle of adver tising and promotional activities for example a steady can bait customers to buy more of its products by pass a promotion of buy 1 and get 1 free. This type of promotion is public particularly for products that are sold in grocery stores or supermarkets.A impregnable can also increase market share by offer its products at prices lower than its competitors. This strategy can only work if a company has low costs due to purchasing, production or statistical scattering economies of scale.A star sign can increase its market share by acquiring smaller competitors in the industry. This strategy is ideal when a product reaches its maturity stage and the market is saturated and profit margins are low due to high competition. SABMiller took over Grupo Empresarial which was its competitor in South America, to become the second outsizest player in the market. The main strategies that firms use to internationalize are outlined below.EXPORTINGIf the market in which a firm is currently operating is saturated or adverse conditions develop, it can consider offering its products in a different market- selling across its national borders in this case. The first option that a firm can choose is to merchandise its products. Exporting means to ship goods or commodities to some other country for sale, exchange, etcetera With exporting, the firm produces goods in its home country and sells them abroad. (www.dictionary.com 20.20hrs, 13.11.10). a firm scarce has to find distribution partners in the country where its exporting, to supply that particular market. The firm has little control in the international market, and it does not commit fourth dimension or resources for the international market, it simply ships its products to that country and from in that location they are at the mercy of the distributor. An example of a company that exports its products is Zambia Sugar PLC (ZMSG). It produces the sugar from Mazabuka, its supply in Zambia, supplies the home marke t and exports the excess sugar to the European Union.The trouble with exporting is that the firm has little control over its product, and it is not there physically to position its product in the market. How successful it is in the international market depends on the distributor, and also how good the product is for word of backtalk to work as a means marketing.Exporting is mainly utilize by firms that do not have the resources to set up a physical presence in an international market. Additionally, management does not have to commit duration to manage trading operations in the international market as it is all left in the hands of the distributor.Firms also export because of unsolicited orders from abroad. An example is of Vellus Products, Inc. this is a small company based in the United States that urinates pet grooming products. CAVUSGIL at al. (2008) international business inaugural edition. New tee shirt Pearson Prentice Hall. This company got orders from Taiwan, Englan d etc. -countries where it had no establishments.Firms that are considering setting up a physical presence in an international market can use exporting as a way of testing the market. If the products sell well in the international market, past it can go ahead and set up its theme.INTERNATIONAL COLLABORATIVE VENTURESanother(prenominal) way a firm can internationalize is through international collaborative gos. A collaborative venture is a partnership betwixt two or more firms, and includes righteousness joint venture as well as, project based nonequity ventures. CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall. For example, the Japanese electronics company Sony Corporation and the Swedish Telecommunications company Ericsson pissed a joint venture in 2001 to form a new company called Sony Ericsson. The reason for the venture is to combine expertise to produce superior products. Both companies have stopped making their own mobile phone s and focus on the joint venture. http//wiki.answers.com/Q/Examples_of_joint_ventures). This type of venture is an equity venture, where no one party possess all of the assets needed to lick an available opportunity(CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.)A non equity or project based venture is a partnership formed specifically for a project which has a well defined timetable, without creating a new legal entity(CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.) ZCON and group 7 CONSTRUCTION are two companies that have come together to work on a project of setting up a shop mall in Zambia. The project has a well defined time table and the two companies know when they are supposed to end the partnership. puddleThis is a project based and usually non equity venture with triplex partners fulfilling a large scale project. It is normally formed with a flinch with well defined rights, roles and obligations. (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.)LICENCINGLicensing is an agreement in which the owner of intellectual blank space grants another firm the right to use that property for a qualify period of time in exchange for royalties or other compensation. (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.) This is another method a firm can use to internationalize. The firm becomes the licensor in this case and firm in that uses its intellectual property is the permite. The licensee pays a slant called royalties to the licensor for using the intellectual property. The licensor from time to time, chips in to advise the licensee and provide support. The licensor has a bit more control over its products in the international market using this method. The risks of internationalizing a higher using licensing compared to exporting. An example of a license agreement is of the com pany coca-cola. It is found in most, if not all countries of the world, but in most of them it operates under license. A local bottling company can produce and distribute coca-cola products on the licensors behalf.The advantage of this strategy is that it does not quest investment in the international market, but it is a source of gold through royalties paid in.FRANCHISINGThis is an arrangement in which the firm allows another the right to use an entire business system in exchange for fees, royalties, or other forms of compensation. (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.) . the firm allowing another , the use of its business system is called the franchisor speckle the one using the firms business system is the certificatione. with franchising, the franchisor has to be more affiliated as compared to licensing, in supporting the franchisee, because the entire business system (production, marketing, sales name and right for pr oducts patents and trademarks) is being used. The franchisor has to fully monitor the operations of the franchisee and make sure they are in line with the agreed procedures of operating. Examples of firms that have franchise agreements are McDonalds, Subway, Debonnairs Pizza.TURNKEY CONTRACTINGThis is an arrangement where the focal firm or a mob of firms plans, finances, organizes, manages and implements all phases of a project abroad and then hands it over to a foreign customer after homework local personnel. (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.)BUILD-OPERATE-TRANSFER ARRANGEMENTS (BOT)This is an arrangement in which the firm or a consortium of firms contracts to build a major facility abroad, operate it for a stipulate period, and then hand it over to the project sponsor, typically the host country government or public utility. (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.)MAN AGEMENT CONTRACTSThis is an arrangement in which a contractor supplies managerial know how to operate a hotel, resort, hospital, airport or other facility in exchange for compensation. (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.)LEASINGThis is where a focal firm (the leasor) rents out machinery or equipment to corporate or government clients abroad (leasee). (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.) this is common in the aircraft business where manufacturers lease out the aircraft to airline companies.FOREIGN broadcast INVESTMENT (FDI)The most involving method of entering an international market is through foreign direct investment. With this method, a firm either sets up its infrastructure in an international market (Greenfield investment) as opposed to acquiring an real company. (CAVUSGIL at al. (2008) international business 1st edition. New Jersey Pearson Prentice Hall.) a fir m builds new manufacturing, marketing, or administrative facilities.Alternatively, a firm can acquire another, already existing firm and takes over its operations in the market. An example of this is Airtel in the telecommunications industry, under the Bharti group. It recently took over all Zain operations in the African market.With FDI, the firm commits its time and resources fully in the international market. It has a physical presence and has direct get to to the firms stakeholders.FDI is the riskiest of all the types of internationalization strategies because of the level of resource commitment. The firm facesCultural risk. This is where a cultural miscommunication puts some human value at risk. A firm has to try to study and understand the culture in the country where it chooses to set up operations.Country risk. Any changes in the political, legal, economic or environmental aspects in the country that would have adverse effects on the operations and gainfulness of a compan y.Currency risk. This is the risk of adverse fluctuations in exchange rates. mercenary risk. This is a firms potential loss from poorly developed or penalise business strategies, tactics or procedures.Currency risk. A firm faces the risk of loss of profits due to fluctuating exchange rates. The devaluation of a silver can have a negative impact on a companys profits.All of the above risks affect firms that use FDI as an entry strategy, contradictory the other forms of entry that are only affected by one or two of the risks.The main features of foreign direct investment are thatIt has greater resource commitmentIt implies global presence and operationsIt allows the firm to achieve global scale efficiencyFirms involved In FDI tense up to behave in socially responsible ways.When selecting an FDI location, a firm must look at a number of factorsThe country it wishes to invest in should have a market large enough to support its produce and give enough returns for the firm to continu e operating. China for example, is a large market because of its population, and top of that, its an emerging market so it has a share of growth opportunities.The country should be close to the firms targeted customers to pull down on distribution expenses. Proximity the firms source of raw materials is also importantThe country should have low political, cultural, and currency risk as compared to other FDI country options. economic factors such as tax, interest and exchange rates, are important factors for the firm to consider because theyll determine the level of availability of cash for company operations.Before a firm decides which type of entry strategy it wishes to use, it has to consider the meat of resources it is willing to commit and the level of risk It Is willing to take. How good a strategy is, is determined by the goals the firm wants to achieve. Different industries favor different entry strategies. for example a firm may want to reduce its costs so it can consider investing in countries invest with natural resource that are input materials for the firm, it can invest in a country with low labor cost.EffectsIndustrial- emergence of worldwide production markets and broader access to a range of foreign products for consumers and companies, particularly hunting expedition of materials and goods between and within boundaries.Financial- emergence of worldwide financial markets and better access to external financing for borrowersEconomic- realization of a global common food market based on the freedom of exchange of goods and capital.Informational-increase in information flows charge between geographically remote areas. This is a technological change including fiber optic communications, satellites, telephone and internet.Competition- survival in the new global business market calls for improved productivity an increased competition(www.google.com)CONCLUSIONIn conclusion, there is no best way of entering an international market. It all depen ds on the type of products an organization produces, the resources it is willing to commit in the new market, the risks it is willing to take, and the barriers that are in the new market