Strategic Initiatives of Global Growth
The criteria used for making a global expansion decision and rationale for your selection
Global market代写 Multinational Companies (MNCs) continue to expand their global presence by constantly identifying new markets into which…
1.1. Introduction Global market代写
Multinational Companies (MNCs) continue to expand their global presence by constantly identifying new markets into which they can expand their operations (Ozturk et al., 2015). The purpose of this essay is to identify the potential drivers which can cause such a decision making. The focus of this analysis is predominantly to provide information for an UK based fashion MNC (ABC Ltd) to expand into newer markets. Prior research has shown that entering new markets involves major resource commitment.
And the right choice of the organisation to enter could impact future profitability of ABC Ltd. According to Wild et al. (2014), the identification of promising foreign target markets is a critical issue in international marketing. And international business research and development.
The evaluation of such foreign target markets needs to be approached from two complementary levels. The first is the market or country perspective which is often driven by international market selection. And the second is the consumer perspective which is considered as international consumer segmentation (Sakarya et al., 2007). This research will discuss both these elements as both the market. And the customer can drive strategic decisions regarding international market selection.
This essay discusses both theoretical and empirical perspectives on factors which may drive such selection. The chosen organisation, ABC Ltd is in the fast fashion business. And is already operating in four international locations in Europe. The marketing manager of ABC Ltd wants to expand to another market to improve global brand presence. The purpose of this essay is to highlight theory. And empirical factors which may drive this selection process. Global market代写
International Market Selection- Theory for Global Growth
Performing International Market Selection (IMS) is a comprehensive process which requires detailed assessment of various functions. Many studies support the choice of a formalised decision process where specific factors are given specific weights. By using a weighted average analysis, it is possible to arrive at a formalised decision (Wild et al., 2014). On the other hand, many experts prefer a non-systemic approach where the specific goals of the organisation and potential familiarity with the market are the key decision making factors (Wild et al., 2014). Finally, there are some MNC firms which decide to expand based on customer centric decision making processes (Cavusgil et al., 2014).
A key theory which many studies in market internationalisation literature has examined is the OLI or the eclectic paradigm.
According to Wild et al. (2014) this paradigm is one of the seminal pieces in literature which focuses on specific drivers which can influence MNE internationalisation decisions. The authors conclude that this theory helps identify specific strategic factors which can help understand firm motivation to expand. OLI stands for ‘Ownership, Location and Internalisation’ and this framework concludes that there are three potential sources of advantage which underlie the firm’s decision regarding an international market selection (Sakarya et al., 2007).
The first is ownership advantages where firm specific advantages may allow the firm to improve their flexibility or reduce inherent costs (Cavusgil et al. 2014). Secondly, location specific advantages are linked to some specific resource or capability that is best available in a different location. Finally, internalization advantages are found to determine how a firm operates in a different location based on demands in the market as well as other factors (Meyer and Peng, 2016). Cavusgil et al. (2014) concludes that using the OLI approach can be ideal in determining next level of opportunities or areas of growth and development. Global market代写
In the context of ABC Ltd, given that the organisation operates in the fast fashion business, targeting global operations will depend on any of these factors. Locational advantages for example may create alternative locational opportunities for manufacturing. On the other hand, internalization related advantages could be based on ideal retail front options and managing customer expectations.
The use of external factors are also considered as potential theoretical factors which may drive international market selection.
As Sakarya et al. (2007) conclude, most IMS and segmentation studies are found to make use of diverse data including economic, geographical, political and cultural factors while taking decisions on the right markets to expand to. In the context of ABC Ltd, findings show that understanding the right international market requires assessment of potential market drivers and determinants including economic and social factors.
An analysis of the H&M international market selection strategy can be used as an ideal comparator. The case study assessment showed that expansion to developing markets including China and India was considered as the economic growth was high and social shifts in preferences towards western clothing was evident.
Determinants of International Market Selection – Drivers of Globalisation
To identify the right international market selection drivers, this research uses the approach given by Andersen and Buvik (2002). they conclude that both systematic and non-systematic factors may drive overall choice of international market. Based on their findings three levels of determinants have been identified.
1.2. Organisation Specific Factors Global market代写
The first organisation specific factor that is considered is asset transferability. According to Ozturk et al. (2015), when an international organisations choose new markets they will need to determine if it is possible to ease inter-organisational transfer of tangible and intangible assets. In the context of a manufacturing organisation this can refer to specific techniques or patented processes (intangible) or human capital (tangible) to the location to begin the internationalisation process.
The second organisation specific factor is the understanding of customer expectations and the ability to meet these expectations. Vaughan (2016) contends that the visibility of an organisation targeting its clients and the degree of interpersonal interaction that is expected between the organisation and potential clients can also influence international market decisions. One can argue that a good example from which ABC can learn from is Marks and Spencers. The UK based organisation expanded and operated in China.
However, they were unable to manage the Chinese consumer expectations and needs and the organisational approach to interaction with the clients was not ideal. This led to the pull out of the organisation from China in 2017.
Strategic importance linked to expansion is also identified as a major element which drives overall expansion (Ozturk et al., 2015).
Findings in research show that when an organisation is looking to expand to a new location then the strategic importance of this decision linked to core competencies need to be assessed (Cavusgil et al., 2014). Vaughan (2016) argue that global expansion decisions in the fashion industry can be driven by the underlying reason for expansion. If one were to consider the luxury brand, Mulberry, their expansion to East Asia is largely linked to their need to improve brand knowledge, brand reputation and brand equity in newer markets. Therefore, based on such strategic importance and organisational mission, specific internationalisation decisions may be made.
Finally, organisational culture should also be considered as a potential factor which may drive the corporate strategy and decision making of organisations. Organisations are classified into four different cultures including hierarchical, clain, market culture and adhocracy culture (Budeva and Mullen, 2016). This cultural matrix helps understand the underlying elements which drive organisational operations. Budeva and Mullen (2016) concludes that from a cultural perspective the adhocracy culture is largely responsible for global expansion as any organisation which operates within this cultural framework is found to be creative and flexible.
Furthermore Cavusgil et al. (2014), also argue that internationalisation decisions and success could be linked to the willingness to take risks and look for newer options. This could be linked to an adhocracy cultural framework. On the other hand, Cavusgil and Knight (2015) contends that MNC organisations which have a market culture may focus on competitive actions and achievement. Therefore, to improve their inherent competitive capability, firms may choose specific markets where they can get potential location specific advantages. for example, Zara was the first fast fashion product to enter India which provided them with first mover advantages.
1.3. Market Specific Factors Global market代写
The second group of factors that are discussed in the context of this research are market specific factors. Ozturk et al. (2015) concludes that the target location for expansion and operation in the fashion industry is largely driven by these factors.
The first factor discussed is the market size and market potential. Buerki et al. (2014) concludes that by understanding the size of the market, the amount of sales and profits that can be obtained from entry. Furthermore, the countries’ GDP and number of inhabitants are also some determinants which may influence international market selection opportunities. In the context of ABC Ltd, the opportunity to expand to a new market needs to consider if there is a growing market potential in the specific region. Globally, as Singh (2016) reported the overall growth is expected to be between 5.6% to 6.6% by 2020.
This growth is expected to double in emerging economies like India, Brazil and some African countries.
Therefore, given the opportunity for better sales in these countries it is important for ABC to consider these locations as potential targets for future growth. Global market代写
Secondly, the investment climate and ease of doing business is also identified as a key strategic factor which may decide international operations and market selection. Wild et al. (2014) conclude when a specific location is considered to have a positive investment climate this is driven by market potential as well as ease of doing business. Operational ease and reduced bureaucracy are key elements which drive decisions to expand to newer countries.
Thirdly, from an external environment perspective, it is important to address the nature of cross cultural research and its implications. This research discusses culture as an independent factor which may drive strategic decision making linked to internationalisation. The cultural distance between two countries may also drive the overall decision to expand to a specific location. This research considers the Hofstede dimensions which may drive decision making. Hofstede argues that there are six dimensions influencing the national culture of a country including uncertainty orientation. Power distance, masculinity versus femininity, individualism versus collectivism and indulgence versus restraint (Hofstede, 1984).
From the context of international expansion understanding national differences in culture
May be prudent as it can provide insights on operations.For instance, since ABC Ltd is from UK the expected power distance is low. And the organisation has always preferred a flat structure within the organisation (Budeva and Mullen, 2016). However, if they are to expand to Asian countries it is possible that the power distance would be high. So, when operating in these regions the organisation will have to assess if they would be able to manage their overall needs in this climate.
Another potential dimension which may influence fashion operations especially is the preferred marketing mix of the product. For instance, individualist cultures may prefer products which appeal to the individual along with person centric marketing. On the other hand, in collectivist cultures of Asia this may not be ideal as there may need to be a shift in approach. Therefore understanding cross-cultural differences at a national culture level is another key factor. That should be considered while taking strategic decisions regarding the nature of study.
1.4. Consumer Specific Factors Global market代写
As argued in the introduction of this research, organisations cannot serve entire heterogenous populations using standardised approach. Therefore, most organisations which operate on an international level take efforts to balance standardised and adapted processes. At a customer centric level, it is important to understand the consumer needs at different national levels to ensure that the right market strategy is developed. In this context, Cavusgil et al. (2014) concludes that internationalising to a specific market can be dependent on knowledge on consumer needs. If the organisation has prior knowledge of a similar customer segment which operates in the region it may be possible to enhance ease of expansion.
For example, if ABC Ltd operated in India and then after five years decided to expand to the Indian subcontinent countries. It may be easier as these customers may fit into the same customer segmentation. Buerki et al. (2014) concluded that organisational strategy to expand into new markets should consider heterogeneity characteristics including the relevant similarities and differences. The findings concluded that segmentation is particularly important. ABC Ltd should therefore wish to develop and implement the right market analysis. And market development team which can understand differences in consumer needs.
1.5. Challenges and Pitfalls Global market代写
While the previous sections presented comprehensive assessment of the key factors which drive successful growth. And expansion it is also important to identify challenge areas. Cavusgil et al. (2014) concluded that before the decision to enter a market is taken it is important to first project the time it would take to reach target market position. The authors conclude that most international market selection choices require a slow build approach. And if organisations look for short term wins they may not be able to achieve the required growth. Therefore, ABC Ltd should be able to project the time it would take to establish in a market.
Secondly, Wild et al. Global market代写
(2014) also argued that companies should not expand to a specific location simply based on the ‘under-served’ nature of the market. The lack of market growth or the ‘potential’ for future growth needs to be well assessed. It is essential therefore for ABC to conduct adequate and objective market research. Thirdly, while this essay has conducted extensive discussions on the type of market selection the entry mode should also be considered. In some cases, instead of starting a new venture a strategic acquisition may help gain a foothold in the market. Therefore, just the right selection of market is not enough in the UK. It is also important to identify the right strategy for acquisition.
Finally, from an operational perspective especially financial strategy management there can be differences in accounting as well as currency management. And repatriation of funds (Beugelsdijk et al., 2017). Therefore, before ABC Ltd decides to expand to a new country it is important that the organisation is able to understand potential operational differences in operations. Or financial management methods before they decide to expand. For example, many manufacturing companies in the UK prefer the activity-based costing approach. But most Asian countries continue to follow traditional costing methods.
Therefore, by addressing the inherent differences in operations it is possible to avoid pitfalls of expansion into locations where the organisation may find it difficult to succeed.
1.6. Conclusion Global market代写
The purpose of this research was to present an analysis of the key strategic decisions which drive entry into a new market. The study focused on ABC Ltd a UK based fast fashion organisation as an example. The findings show that the OLI paradigm is the essential theory which can help understand internationalisation decisions. However, this decision can be driven by both systemic and non-systemic factors. The analysis of international market selection and underlying factors shows that market driven and organisation driven factors are extensive and impact the decision. Market potential, cultural differences, ease of business, organisational culture and managing customer expectations are the identified factors influencing growth.
The study also identifies that expansion into new markets requires a long term approach where customer needs are understood and operational challenges are acknowledged. ABC Ltd should consider these factors and learn from the examples of other competitors in the industry to ensure that they follow and identify the right market growth strategy.