This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
The current generation business environment became more complex, dynamic and continually changing. In order to gain and maintain a sustainable competitive advantage, many small firms have considered a range of efficiency and improvement initiatives. This makes them to involve in experiencing different business scenarios by implementing strategic planning processes in their firms. The Loughborough based Lifting Solutions Company with its 650 employees comes under the same category. To be successful in the stabilizing with its products as standardized products in global market, the company needs to persuade few objectives it has to face in its global business exploration.
1. Requirement of Changes & Appropriate Management
A company entering into global business market requires some changes it has to meet will be depending on the type of product and the category which it comes under. The company's lifting solution product comes under the engineering and heavy equipment product category which requires only little modification to the regional sensitivity.
1.1. Cost Efficiency
The lifting solutions loughborough based company needs to meet some changes in its cost factors while entering the global business market.
Figure 1: Competitive Pressure on Cost
The company has high pressures on its cost factors with the global standardization strategy. These costs involve export, shipping, marketing costs and local taxes while entering different markets in the global countries. This can be managed only when the localized market demands and profits are more than the subsidiary needs. If not the case, it is suggestible to open up manufacturing units in the subsidiary boundaries to wave off the trade costs. But the wholly owned subsidiary brings up high risks to the business firm. Maintaining efficiency in initial costs is the main disadvantage for the company associated with global standardization process (1).
In order to get access towards rapid growth in the global market, the company needs to give its highest priority to the local responsiveness and rapid adjustments to the order changes. Multi-Domestic Strategy has good flexibility options for its products customization required while entering other markets. It requires the company to allocate its staff working team with good market manageable skilled employees individually as per respective locations in the global market. Maintaining order flexibility grows up some additional costs involves operational and infrastructure costs along with time factor. This keeps the company out from the list of lowest cast manufacturer.
1.3. Product & Process Innovation
The strength of the company depends on affection its products has in the market. Product life time is becoming less and less these days. In order to maintain its market stability the company should recruit its employees with good innovation skills and has to support them in spending part of their work time in product innovation with complete freedom. Development in the product and process innovations requires great support from the management in providing the employees with completed freedom in latest technology accessibility and associated research with changes in the relative engineering industry. For this it requires for the Loughborough Company to expand its current number of employees with a specialized innovation division.
2. Manufacturing Outsourcing
Outsourcing attained major role in the current business markets. Outsourcing is the route to boost company's market share and land a lucrative contract with a large retailer in the subsidiary countries. It must be approached with business process knowledge and effective outsourcing processes experiences the company to reap its full benefits. The most profitable, well-known and highly touted companies have gotten where they are today by outsourcing their manufacturing. Consumers want their products cheaper and quicker, and this demand shaped the current day business system. This accelerated the outsourcing as an accepted management tool, fueled by the need for intense focus in the profitability and not just cost cutting, and by growth in size in capabilities of contract providers (2).
2.1. Cost Efficiency & Rapid Adjustment Flexibility
With implementing of manufacturing outsourcing, the company gains high level of cost efficient products on its own standards. This is due to the difference in the technologies available off shore and the variable currency exchange rates. Being US and Far East countries as its main developing markets, the Loughborugh based lifting solutions company attains a great advantage in outsourcing its manufacturing to off-shore specialist producer than establishing its own business facility there. U.S. and Far East countries are well developed in advanced technologies of their own. It is gentle to go with the former option of outsourcing. Later may cause the company to fall in high risk with the competition provided by the cluster companies. This may delay the time period required for the product to get its standardization. With strategic outsourcing, it has low financial impacts. It waves of the establishment costs, which is weigh down factor for small developing firm.
By outsourcing manufacturing to U.S. and Far East countries, it requires very less time for the Loughborough Company to settle its markets in those countries. Choosing the option of offshore factory results in choosing key suppliers rarely and price negotiation occurs. With manufacturing outsourcing, the flexibility of the product increases. This is because of the strong local culture establishment of the off-shore producer with the local people. There are also huge cost savings with manufacturing outsourcing in terms of exporting, licensing, and countries where FDI is restricted. This finance can be turned up either in to profits or to support versatile order change demands made by the customers. But still there is a backdrop with contract outsourcing, that it lacks its long term market presence (3).
2.2. Product & Process Innovation
The Loughborough based company should go for outsourcing the manufacturing to off-shore producer for keeping up its product standards in the list of innovation products. Strategic approaches like Ethnocentric & Geocentric are appropriate to follow whre it requires it domain constantly developing and selling new innovative solutions and products. Outsourcing helps the company build strong culture and informal management networks. This overcomes lack of qualified managers and working men in the host nation (3). This needs pure Global Strategy for manufacturing where the factor cost/skill mixture is most favorable. There is great skill transfer between the off-shore company and the source one which is most required in product innovation process.
The view of establishing own business facility in an off-shore location, gives an advantage of protecting the companies own technology. And also gives ability to engage in global strategic coordination. But with high costs and market risks (3). The company needs to face many changes and risks in its structure to become leader in its domain.
3. Global Supply Chain
The supply chain is a process that transforms materials into products and delivers them to customers through specific activities. Activities are the building blocks of the supply chain. Management of the global supply chain is, the process of supply, production, and distribution that makes other strategic objectives possible. There is a significant shift taking place from mass production with standardized products and services, towards customized production of both products and services (4).
3.1. Cost Efficiency
With the global supply chain system, it enables the Loughborough Company to reach beyond the geographical boundaries to coordinate operations and management, without the investments and problems of direct owner ship. This involves the company to bear higher logistic costs for exporting products overseas and paying taxes in the former country if any. This is suitable only when the international needs of the companies lifting solutions are less than the local. Here I suggest the company to follow localized strategic approach than global.
With the global supply chain system characteristic like, A common information system accessible to all members makes coordination possible between the organization (4) and gives high flexibility in manufacturing the products. With this the company technology is securely positioned within it. The characteristic of supply chain operation, procurement, production and distribution gives highest flexibility to the company as all the processes of supply chain are within the body. This makes company respond quickly to rapid adjustments to order changes.
The Loughborough Company if distributes its products from its very own two bases in Loughborough and South Africa, there will be less innovation scope for the product development. This is because the company isn't able to see the rapid changes in the industry growth and the changing market demands day by day. This also stops the technology and skill exchange flow required for developing and selling new innovation products. Maintaining stable position in the market becomes very difficult in very short period of time.
Considering all the discussions on the proposed business objectives with each specific situation of the Loughborough Lifting Solutions Company, its shows that the business strategy required to follow depends on the particular mode of operation the company is intended to follow. Basing on either outsourcing manufacturing or owing business facility in a offshore location, or supplying the products from its very own current locations via exports, a suitable and appropriate business strategies from globalized, localized, multi-domestic or translational should be chosen. This can be either in single or with combination of favorable options.