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The other reason is that a company wants to exploit core competencies for the industry. When a company enlarges their business in other foreign country, their business will become much stronger in the market than before. Thus, it is easier for the company to exploit the core competencies for the industry in their target market. When entering a foreign country, some of the chosen country offers a much better technology and resources. So, the company can have more access to the resources and capabilities in the foreign country. And the last reason on this situation is to spread their business risk across a wider market base.
Although there are many reasons that lead a company to enter foreign country, the competition that might emerge in the future will make the process on making a strategy is more complicated and complex. This is because the industry competitiveness factors differ from one country to another. Besides, the location-based advantages are applied for a certain country. Another important factor that leads to the complexion on making strategy is the differences in the cultural, demographic and market conditions factor. Another factors for this complexion is the government of the country which involves the difference in the policies and also the economic conditions and not forget the currency exchange rates risks which will occur whether when the currency is high or low.
The impact of government policies and the condition of the economic may gives positive and negative impacts to the business. The positive impact from the government policies is that the company may earn some tax incentives beside low tax rates and also low cost loans. Environmental regulations might be a negative impact from the government policies to the business in the foreign country. The government policies also result in competing against the domestic competitors for the subsidies and loans and also there might be restrictions on the import activity.
Exporting, licensing, franchising, wholly-owned subsidiary and also strategic alliances or joint venture are the strategic options for entering and competing in the international markets which really applicable when a company make a decision to enter a foreign country. All of these strategies have their own advantages and also disadvantages. Exporting requires low capital and also offers economies of scale in utilizing production capacity. Besides, exporting has no distribution risk and direct investment risk. But unfortunately, exporting offers high transportation and shipping costs, also the exchange rates risk is quite high. Exporting also lead to the loss of the channel control.
Licensing and franchising strategies offers low resource requirements, gain income from royalties and franchising fees and lastly, offers rapid expansion into many markets. Same as exporting, licensing and franchising strategy also has few disadvantages such as high costs of maintaining the control of proprietary know-how, loss of operational and quality control and also difficult to adapt to local market tastes and expectations. Acquisition allows the company to have high level of control, quick large-scale market entry. Acquisition also avoids entry barriers and access to acquired firm's skills. But acquisition offers high costs for the acquisition, the complexity in the process of acquisition and also the integration of the firm's structures, cultures, operations and also personnel.
While Greenfield strategies offers high level of control over the venture, "Learning by doing" in the local market and direct transfer of the firm's technology, skills, business practices and also culture. But the capital costs of the initial development is quite high, also the risk of loss. The loss might be because of political instability or lack of legal protection of the ownership. Greenfield has the slowest form of entry due to the extended time required to construct facility. The last is the alliance and joint venture strategies that avoid entry barriers. It also allows for the resource and risk sharing, offers partner knowledge of local market conditions. Joint learning and sharing and also offers preservation of partner independence. But there are barriers in cultural and language. Also the costs of establishing the working arrangement are high, there are also issues of the joint control and the protection of proprietary technology of competitive advantage is lacking.
When entering a foreign market in a foreign country, a company should start thinking strategically on all of the possible solutions and outcomes to compete with their future rivals and competitors. This is because their future rivals and competitors could be approaching from domestically or internationally. Domestically means that the rivals and competitors are from the local market while internationally means that the rivals and competitors might be a new entrant to the market from outside of the country. As a company decided to enter a foreign market in a foreign country, the company should pay more attention to the cross-border transfer advantage in term of capabilities and also competencies. This is because these two factors will lead the company to a more successful competitive advantage in the future.
Competitive advantage is defined as the factors which will fulfill the customer's needs more affectively, by offering a product or services that customers will value more highly and more efficiently with or at a more lower cost. A company's competitive advantage is the factor(s) that can differentiate the company from other company. Beside competitive advantage, there is also sustainable competitive advantage which is defined as giving the buyer/seller of customers a lasting reason(s) to value or choose or prefer the company's products or services rather than what is offered from the other company or competitors.
In building a competitive advantage, a company first needs to go through the low-cost provider. Later, the company needs to put more effort in striving in the industry in order to become the industry's low-cost provider, looking at the scope of efficiency. This is because, as mention before, competitive advantage can be achieved through a more low cost products or services offered by a company. The second step or way to build a competitive advantage for a company is by outcompete the rivals or competitors by differentiation of the products or services. Differentiation of the products or services is showed by the uniqueness of the feature for the products or the services. The uniqueness feature of the products or services in to ensure that the feature cannot be easily copied.
Give more focus on the niche market is the third way or step for a company to build competitive advantage. To focus on niche market in term of serving the market in a better way is very important in building competitive advantage. Last but not least is the last way or step for a company to build up their competitive advantage is by offering the lowest prices and also by offering the best prices for their products or services. As mention before, competitive advantage can be easily achieved through low cost and by product and service differentiation. Thus it is important for a company to offer the best and lowest price for the differentiated products and services as the best-cost provider.
In creating a strategy-supportive reward structure, it is important to define jobs and assignments in terms of the results to be accomplished not just in terms of the duties to be performed. I am agreed with this statement because by defining jobs and assignments in terms of the result, it will ensure that the strategy that is developed before can be achieved successfully. It is very important to define assignments and jobs in the process of creating a strategy-supportive reward structure. This statement is closely related with the strategy execution process which will lead to a successful company strategy in the future.
Good strategy execution is done by a good company with a good corporate culture. A corporate culture is the meshing of shared values, beliefs, business principles and also traditions that imbues a company's operating style, behavioral norms, ingrained attitudes and also work atmosphere. These factors are very important because it will influence the company's actions and the approaches in conducting their businesses. A corporate culture is believed to be a guide in a company to all of the personnel to follows as their guideline on accomplishing their responsibilities.
A company cultures can be embedded by two ways, either strongly or weakly embedded. A company with a strong culture has deeply rooted widely shared values, behavioral norms and operating approaches. This type of company relies fully on their culture to operate their businesses and operations. Usually, a company who has a strong cultural value tends to have more disciplined personnel and tend to achieve a more successful level each time. A strong culture company also insists that its values and principles will be reflecting some of the decisions and actions done by all of the company's personnel.
Obviously, a weak culture company is different from a strong culture company. A weak culture company lacks in several factors especially in their principles and also values which are consistently preached or widely shared. Differs from a strong culture company, a weak culture company will have few flaws such as no traditions applied, no particular beliefs, no values implemented, no common bonds and also no behavioral norms. When a company is has a weak culture, there should be an initiative in changing the cultures which will aid good strategy execution. In order to execute a successful strategy, a strong and out of sync or unhealthy culture must be changed. The most important factor in changing the company's culture is the role of the leadership. To succeed, a competent top leadership is necessary for culture-change efforts to succeed.
The top leadership is required to stay on the top of the operation and monitors the progress of the operations closely in leading the strategy executions. The leader also should be constructively putting pressure on the organization in order to execute the strategy well and achieve an excellence in the operations. The leader also needs to initiates more corrective actions in order to improve the strategy execution and to achieve the desired or targeted performance results.
Strategy execution is defined as an operations-driven which involves the management from both of the people and business processes. It is a job for the all of the management team and not for just a few senior managers. Strategy execution can take a long time to develop in term of real proficiency than implementing strategy. It requires a determined commitment to change, action and performance. Committing a executing a strategy entails figuring out the specific techniques, actions and behaviors which are necessary for a smooth strategy-supportive operation. It needs to follow through in a well manner to get things done and deliver great results. Leadership must make things happen while the management needs to make them happen right.
There are three steps for a good strategy execution in building an organization capability. First step is assembling a strong management team and number capable employees in the organization. This step is to ensure that the team that has been developed meets the standards of a good strategy execution process. The second step is to renew, upgrade and revise resources and capabilities. This step is done in order to match chosen strategy which have been chose by the company. The last step is creating an organizational structure that is strategy-supportive. This step is to encourage more motivation to the team for the good execution strategy process.
Same as strategy execution, superior strategy execution take a long time to be developed. This is because superior strategy execution has the capabilities that are difficult to imitate and socially complex process. It also is expected to maximize the organizational resources and competitive capabilities in order to support the business model. Superior strategy execution capabilities are expected to lower the costs and permit the firms to deliver more value to the customers. Superior strategy execution also will enable a firm to react more quickly to any market changes, beat the competitors in the market with new products and services, and gain market dominance.
In business, there are many industries that can be listed such as plantation, agricultural, automotive, food and beverages, manufacturing, shipping and so on. These industries operate in a different ways but some of these industries might be related to one and another. Each of these industries also has their own attractiveness that helps in expanding the market for the industry itself. An industry can be attractive to one company and unattractive to another company for example the industry of food and beverages such as McDonalds compare to automotive industry such as Proton.
In an industry, a company will analyzed a few factor that need to be considered for them in order to sustain in the industry especially in the external environment scope. The external environment also known as the macro environment is a broad environmental context in which the company's industry is situated or located. External environment includes a strategically relevant components which the company has no direct control. The components are general economic conditions and immediate industry and competitive environment. In this case, Porter's five forces model will be applied. The factors are rival, new entrant, substitute products, suppliers and buyers.
The first factor in analyzing the external environment of the industry is the competition from the rival sellers or competitors. There are many pressures from the competitors that lead to the increment of the rivalry among the sellers. The buyer's demand is slowly growing or declining leads to the increment of the rivalry. Another pressure is from the similarity of the industry's product. The increasing numbers of competitors, competitors becoming equal in term of size and competitive strength and also the increment of competitors' diversification is other pressures from the rivalry in the industry.
The second factor in Porter's Five Forces model is the competition from potential new entrant. The threat of a new entrant consider the strength of the entry barriers, the expected reaction of incumbent firms, the capabilities and resources and supplies of the potential new entrant and also the consideration of the entry of the existing competitors into the market segments in which they have no current presence.
The third is competition from substitute products which considers the readily and the availability of the substitutes products, the price, the quality, the performance and also any other relevant attributes of the substitutes products. These considerations might be the indicators of the substitute competitive strength in term of the increasing rate growth in sales of substitutes, substitute producers adding output capacity and increasing the profit of the substitute producers or manufacturers.
Fourth, supplier bargaining power depends on the availability of the suppliers' products, the number of suppliers of standard or commodity items, the buyer's costs for switching among suppliers, the availability of the substitutes product from the suppliers, the fraction of the supplier's sales due to the industry demand, the ratio of suppliers relative to industry buyers and also the backward integration into supplier's industry.
Lastly, the customer bargaining power which considers the buyer costs for switching to competing sellers, the degree to which industry products are commoditized, the number of buyers in the industry, the strength of the buyer demand, the buyer's knowledge on the products and services offered and also buyer price sensitivity due to low profits, size of purchase and consequences of purchase.
Proton is a company from the automotive industry. Automotive industry is attractive to Proton but not to McDonalds who are in the food and beverages industry. In term of the rivals, these two companies have a totally different scope of rivalry. Proton has to compete with domestic brand such as Perodua and international brand such as Honda and Toyota. While McDonalds, which is in the food and beverages industry has to compete with Kentucky Fried Chicken (KFC), internationally and Rasamas, domestically. For automotive industry, the barriers for the new entrant are high. That is why in Malaysia, there are only two main automotive manufacturers that are Proton and Perodua. While the food and beverages industry which the barriers on new entrants are very low. In term of substitute products, food and beverages have more substitute products rather than the automotive industry. But for automotive industry, the suppliers bargaining power is high while for the food and beverages industry, the bargaining power of the buyers are high.
As the conclusion, an industry and be attractive to a company and unattractive to another company. In automotive industry, fast food restaurant such as McDonalds are not interest to enter due to the difference in every scope but Proton find automotive industry attractive because of its based operation.