The Analysis Of Strategic Option For Globalisation Commerce Essay

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Globalisation is the integration of national economies into the international economy through trade, foreign direct investment through capital flow, migration and the spread of technology. Globalisation is driven by a combination of economic, technological, social, culture, political and biological factors.

Standardisation gives the potential benefits of economies of scale and the effects of the experience curve, but the disadvantage of supplying products that may not have local appeal. The question then facing firms is whether it is better to standardise and attempt to 'educate' consumers to accepting the new product or whether it is better to supply an equivalent to the traditional local product.

The issue of standardisation has absorbed many writers over the last decade, but the truly globally standardised brand or product - a highly desirable objective for some firms - is still late. An indication is given of the elements of global marketing that are relatively easy to standardise in Doole and Lowe (2008).

There are many reasons why it might be necessary to adapt elements of the marketing mix including legal, cultural differences and usage conditions. Consequently a product might need to be modified for different markets because of different safety standards, its packaging and advertising because of legal requirements, and language differences and culture may dictate that certain colours, symbols and brand names would have the wrong meaning. Distribution tends to be difficult to standardise because companies must make use of the traditional distribution channels that are often very slow to change. Prices are almost impossible to standardise because of the fluctuating currency exchange rates and the differing stages of economic development of countries, leaving customers with differing abilities to pay the same price.

Achieving uniform positioning of a product or service, too, is extremely difficult. Countries are at different stages of economic development, and few firms practise truly effective global segmentation, so a product may be an everyday purchase in one country and a luxury in another.

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INTERNATIONAL MARKETING CHALLENGES

Throughout the international marketing process there are pitfalls and challenges, some of which are detailed below. These give rise to creating the lessons of good and bad practice. Good and bad practice are discussed in greater detail in Doole and Lowe (2008)

Opportunity analysis and marketing research - are essential to decide which countries are most commercially attractive, offer the most potential and can most effectively be served by the company. However, emerging markets carry risks, first those associated with unstable environments and second from the unreliability and difficulty in obtaining information.

Sensitivity to different cultures - is essential throughout the process, including customer research, product and service development and communications. There are many examples of organisations offending customers and underperforming because of their cultural insensitivity.

Transnational segmentation - Over focus on country characteristics segmentation rather than transnational benefit segmentation can seriously curtail global development because of the failure to benefit from scale economies. Good practice requires a hierarchy approach starting with transnational segmentation followed then by country-based segmentation, but, typically, few managers have the vision to carry out transnational segmentation.

Market Entry Strategies - Arguably the most critical decision for organisations is deciding which market entry to adopt. Choosing between the options, such as using agents or distributors, licensing or acquiring a local company, requires an appropriate balance to be struck between the organisation's desire for host market involvement and control and the level of investment and risk it is prepared to take.

Marketing Mix - As we have already indicated, there are a series of decisions needed: about the marketing mix: the level of standardisation that is possible: and adaptation to local market needs. Decisions are required on the product portfolio, new product development, distribution, communications and pricing strategy, and each of these is critical. Each decision could well be influenced by different factors, including the stage of economic development, cultural demands, legal controls, usage conditions and ethical considerations.

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SKILL AND CAPABILITY DEVELOPMENT

In thinking about learning it is useful to revisit the decisions in international marketing strategy and the three broad issues that managers need to address:

The identification, analysis and evaluation of opportunities.

The establishment of a strategic perspective and development of a global marketing strategy.

The approach to be used in the implementation and operation of the global strategy.

It is these issues that form the base of the management process that underpins the development of a global marketing strategy, and so these are the key areas for knowledge, skill and capability development. To be successful in international markets, firms must have managers that have the ability to think, analyse and plan on an international scale. To operate effectively, a global marketing manager needs:

Proactive marketing skills;

A global outlook and positive attitude to the international arena

A broad knowledge of the global marketplace.

It is necessary develop the management skills to manipulate the interface between the marketing mix and the complex environmental factors. However, it is difficult for individual managers to take the local country approach at the same time as a regional / global view.

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LEVERAGING CORPORATE LEARNING ACROSS GEOGRAPHICALLY DIVERSE MARKETS

Markets around the world are subject to many influences. While it is possible to identify those that are common to many country markets, the real difficulty lies in understanding the specific nature and importance of influences within markets. Understanding the apparently conflicting nature of these influences is essential to develop appropriate strategies.

This is particularly problematic in the largest and most complex companies, which are referred to as 'transnational companies'. They aim to standardise some elements of the marketing actively and adapt others and so end up with composite strategies. These transnational companies aim to achieve superior performance by pursuing three strategic aims:

Global efficiency and competitiveness

National level responsibilities and flexibility

Cross-market capacity to leverage learning on a worldwide basis.

The strategies that transnational firms develop to achieve global competitive advantage need to accommodate some or all the following:

Simple and complex individual product and market policies, which they may be independent or interdependent in different parts of the organisation.

Customer segments that may be specific and unique to specific market or transnational and valid across boarders.

Cooperative relationships with firms that might also customers, suppliers and competitors at the same time, while simultaneously ensuring that the distinctive values and positioning of the company are maintained by building meaningful value - added relationships in the supply chain.

It is these issues that form the base of the management Process that underpins the development of a global marketing strategy, and so these are the key areas for knowledge, skill and capability development. To be successful in international markets, firms must have managers that have the ability to think, analyse and plan on an international scale. To operate effectively, a global marketing manager needs:

Proactive marketing skills;

A global outlook and positive attitude to the international arena;

Brand knowledge of the global marketplace.

It is necessary to develop the management skills to manipulate the interface between the marketing mix and the complex environmental factors. However, it is difficult for individual managers to take the local country approach at the same time as a regional/global view.

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DEVELOPING A GLOBAL BUSINESS STRATEGY

Businesses that wish to pursue some form of global strategy have several options:

Domestic Exporter. Most activities are based in the organisation's home country. Offices in other countries are controlled from the central office in the home country

Franchiser or Licensing. The product or service is designed to strict specifications at a centralised location, but countries have their own production and distribution facilities. Breweries often allow production under licence in 'foreign' countries. The major international burger chains are franchisers.

Multinational. Some activities are centralised, but others are managed within individual countries. Most multinationals set administrative and control procedures centrally, and allow offices to decide production and marketing strategies. Many motor vehicle manufacturers operate as multinationals.

Transnational entity. Activities are viewed and managed on a global basis. They may be an office that is recognised as 'Head office' but the location is not significant factor. Some degree localised differentiation and control may be established but the organisation is viewed and managed as a global concern. Global Internet portals such as Yahoo! Are probably closest to this definition.

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DEVELOPING A GLOBAL INFORMATION STRATEGY

An organisation's global information management strategy defines how the organisation develops and organises its Global Information System (GIS). A global information system is any system that processes information, or assists decision-making, in global context.

The global information management strategy addresses issues such as centralised versus decentralised communications architectures, standards and data management. It must also ensure its alignment with the global strategy of the organisation.

A global IS strategy should match the corporate structure and strategy. It needs to support global business drivers, provide for national differences, and include an IS architecture suitable for globalisation.

Establishing the necessary alignment requires the involvement and co-operation of both the senior business planner and senior IS technology manager. Both should learn from each other's field of expertise and plan a global strategy pro-actively together.

There are four strategies for global information systems.

Centralised. All systems development and operation is performed in one place.

Decentralised. Each country develops and operates its own systems.

Duplicated. All systems development is performed in one place, but each country implements and maintains its own systems.

Networked. Systems development and operation is performed is performed in many locations. Some, or all, systems may then be implemented worldwide.

The following four global business strategies can be matched to the strategies for global information systems.

A domestic exporter will usually be suited to a centralised system as activities are based in the home country. Some local systems may be required to comply with local regulations.

Franchiser or licensing organisations operating schemes are suited to a duplicated IS approach. This approach best matches the business strategy.

A multinational strategy is suited to a decentralised IS approach. This approach best matches the business strategy.

A transnational entity is suited to a networked IS approach.

The relationships described above appear straightforward. In real business situations things are unlikely to be so clear-cut. Use the information above as a framework for considering the best fit between global business strategy and global information system.

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ORGANISATION STRUCTURE

The transnational organisation structure is well-suited to achieve global integration, local differentiation, and worldwide innovation. This form of organisation encourages the formation of partnerships and alliances to meet the general goals.

Organisations may form an alliance to combine their strengths and eliminate their weaknesses. Competition and collaboration are both important. A business needs strategies for competition while promoting strategic alliances with leading international companies.

Many modern multinational companies are formed by buying foreign subsidiaries. The subsidiaries often develop their own information infrastructure, which slowly become nearly impossible to integrate.

When organisations adopt a global business strategy the IS may need to be changed to reflect this global without fully understanding the global strategy. A global team is necessary.

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GLOBAL PROJECTS AND GLOBAL WORKGROUPS

Global projects are risky because of their size, scope and commitment. Project risks partially caused by rapid change in business conditions and unforeseen differences among local requirements.

Workgroups that have members based in many countries need a common communication and work collaboration system. Groupware and international communication systems should allow access to documents and scheduling tools.

Technology is not the limiting factor in many globalisation projects. Backgrounds, cultures and beliefs are more limiting than technology.

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GLOBAL MARKETS

The Internet is a global information system that empowers the consumer with more choice and new markets. A customer anywhere in the world can participate in any market. Only companies who can anticipate customer expectations and act quickly will survive. Companies seek internationalisation proactively as a result of various internal forces such as pursuit of growth or to minimise dependence on domestic market through geographic diversification.

There needs to be a legal framework in place to support the transactions on the global marketplace.

Global competition has made quality required attribute of products sold in the world markets. In many industries, advances in information technology permit a defective product to be traced back to a particular worker, machine or supplier.

Companies must deal with customers in other countries whose tastes vary from that of local customers. To adapt to such changes, companies need to establish and maintain a database of customer information.

Operating in global market necessitates a global delivery system. A global delivery system is able to track the status, and in the case of a physical product the location, of a resource or order any where in the world.

A transnational system enables the identification of resource surpluses and shortages in different areas, so resources can be moved to where they are most needed.

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ADVANTAGES OF GLOBALISATION

The possibility of war between the developed countries decreases

Free trade between countries increases

Global mass media connects all the people in the world

The interdependence of the nation-states increases

As the liquidity of capital increases, developed countries can invest in developing ones

Environmental protection in developed countries increases

As the culture barriers reduce, the global village dream becomes more realistic

The flexibility of corporations to operate across borders increases

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CONCLUSION

During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing global strategies to gain a competitive advantage. However, some industries benefit more from globalisation than do others, and some nations have a comparative advantages over other nations in certain industries. To create a successful global strategy, managers must understand the nature of global industries and the dynamics of global competition.

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