Explain the role and effect of any two international business strategies.
As the globalization of the world economy and the speed up integration process the international competition is increased, the requirement for international business strategy is rising ever higher. International business strategy plays a vital role in the global economy, it not only to guide a company's development, but also link the global economy. What is strategy? A strategy is the pattern or plan that integrates an organisation's major goals, policies and action sequences into a cohesive whole. (Mintzburg, 1984) Those strategies established long-term objectives and provided the overall guidance for the operational decisions which are focus on the whole companies. They determine the overall direction of an enterprise and its ultimate viability in light of the predictable, the unpredictable and the unknowable changes that may occur in its most important surrounding environments. (Elizabeth, 2001) Internationalization of operations has led organizations to assume different types of strategies. For instance: the localization of KFC. When you eat in KFC you will discover that the test of food in England is different from the test in China. KFC changed the favour of food to Cater to the tastes of local people. McDonald's and KFC use this kind of international business strategy to make their profit. There are four basic strategies to enter and compete in the international environment: international strategy, multi domestic strategy, global strategy and transnational strategy. (Charles, 2007) This essay will discuss the role and impact of international strategy and global strategy.
International strategy is tried to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies. (Business glossary, 2009) In other words, a country or a company has a big advantage at a products or service compare to other countries when using the same input; it wants to make profit by selling its products or service to these countries. That is because there are less competitors or no competitor in those countries. There are four basic components managers need to address when they do international strategy plan. They are distinctive competence, scope of operations, resource deployment and synergy. (Michael and Ricky, 2007) In the following section, this paper will be to analyze four basic components.
First of all, distinctive competence is what we do very well compared to our competitors. (Michael and Ricky, 2007) The distinctive competence of a firm may be good word of mouth, high technology or effective management. It is a main advantage of a firm, without it the company will difficult to compete with local companies. Moreover, distinctive competence is a foundation for a firm to success in other countries. Thus firms will highly developed its distinctive competence before enter other countries. Also the firm often can take a big market share in the new market. Future strategic success requires that firms keep their distinct advantages over their rivals. Thus, firms must continuously assess their surrounding environments. In the second place, scope of operations is the area which the company plans to operate. Scope is the geographical regions, for example: counties. (ibid) In this process, the manager need to find which market is most attractive and bring some profit for the company. The firm needs to concentrate on the regions where the distinctive competence. So that the firm can makes the highest interests from these areas. In the third place, Michael and Ricky (2007) claims that resource deployment can specifies how the firm will allocate the resources. The resources of a company are limited. As a result managers have to consider about how to use limited resources in the most effective way. For example: according to the Human Resources Department plan, employees would be a reasonable arrangement of working in different time, such as morning and evening classes. This method can be recycled for use of limited resources. In addition to that managers need to try to avoid waste company resources. Take Microsoft as an example, it outsourcing the manufacture of Xbox to Flextronics. Microsoft is not good at manufacture the Xbox, then it outsourcing the production to Xbox. Thus Microsoft can focus on the development of their advantages. Finally, Michael and Ricky (2007) states that synergy is the degree to which different part of operation can benefit each other. (Michael and Ricky, 2007) Synergy is help to create an effect of greater than the sum of one plus one. For instance, Disney has theme park, when you enjoy the experience you will get some information about its movies at the same time. After you watched Disney movies you want to go to the Disney Park again. Movies and parks help each other.
The firm, using international strategy, will develop products or services in their home country and subsequently introduce them to the international market. The company establishes manufacturing and marketing functions in local country, but the head office tight control over it. International strategy transfer distinctive competences to foreign market. However, it lack of local responsiveness.
In general, there are three views on ‘global strategy'. First, global strategy is one particular form of multinational enterprise (MNE) strategy that treats countries around the world as a common, global marketplace (Levitt, 1983; Yip 2003). The second view treats global strategy as ‘international strategic management' (Bruton et al. 2004; Inkpen and Ramaswamy 2006; Lu 2003). Obviously, international strategic management is broader than ‘global strategy'as defined by the first view.. The third view defines global strategy in even broader terms: the strategy of firms around the globe, which is firms' theory about how to compete successfully (Peng 2006).The companies coordinate its resources and sales global wide. Specifically, under a global strategy, competitive advantage is obtained by worldwide deployment of an individual asset and maximization of global asset utilization. (Kedia，2000) The company also can learn from the experiences in one country for use in another. The firms try to market a standardized product world wide. This strategy is quite suitable for many industrial industries, whose goods are universal used and need minimal local responsiveness.
Logitech, the word's largest producers of computer mice, did this strategy quite well. Logitech manufacture in Asia, undertake basic R & D work in Switzerland and California, design products in Ireland, and coordinate marketing and operations from California. Through this coordination Logitech minimized its cost. It use cheapest labour，high effective R & D team, good design and good coordinate group. At first, Logitech set up its factories in Taiwan. When it needs more production capacity, Logitech turned to China where lower labour cost has. So it used the resources maximum and reduced the cost as much as possible.
Global strategies are employed by multinational companies, whilst always produces in one country. China is a good place to manufacture with cheap labour. Nike manufactures all its products in south-east Asia. If another country has the specialist skills to offer superior product design and research facilities, then these functions could be located there. (John and Kevin, 2007)These firms tend to use their cost advantage to support market growth and expansion opportunities. Outside the domestic market offers a lot of opportunities for increasing profit. The low cost can recover the R & D and investment fees. This strategy also can accelerate learning and transfer new skills. It has increased the communication between countries and contributed to the globalization of the world economy. However, there are some problems for global strategy. It needs high initial and sustained investment. Next, there is a cost for cooperation. In addition, high interdependence subsidiaries are required. The cost reduction and local responsiveness are the key points the manager should consider when the firm want to implicate global strategy.
To sum up, these two have different content and different functions. International strategy is tried to make money by bringing distinctive competence to your target foreign market. It is also a process of resource coordination. Before introduce to the international market, the firm need to develop their distinctive competence at home country. So that it can over take big market shares in the foreign market. Global standardization strategy is to pursue a low-cost strategy on a global scale. The ways to reduce the cost are economies of scale, learning effects and location economies. The result of this strategy is the globalization of the world economy and maximization of global asset utilization. These strategies are quite useful many multinational companies are benefit from it.
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