Is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology.
In the world of international business there are lots of strategic options which usually used to measure performance of the business, but here will be using Ansoff matrix on the four (4) strategic options preferable, although each strategic option has its risks involved.
1.1 Globalization and the rise of multinational corporations and branding
According to Smith and Doyle (2002):
“A further, crucial aspect of globalization is the nature and power of multinational corporations. Such companies now account for over 33 per cent of world output, and 66 per cent of world trade (Gray 1999: 62). Significantly, something like a quarter of world trade occurs within multinational corporations (op. cit). This last point is well illustrated by the operations of car manufacturers who typically source their components from plants situated in different countries. However, it is important not to run away with the idea that the sort of globalization we have been discussing involves multinationals turning, on any large scale, to transnational: International businesses are still largely confined to their home territory in terms of their overall business activity; they remain heavily ‘nationally embedded’ and continue to be multinational, rather than transnational, corporations.” (Hirst and Thompson 1996: 98).
1.2 Advantage of globalization
Globalization has made the competition rises due to technology, most business people has knowledge on how to capture customers by introducing innovation which increase more advantage to consumers, competition is always good to consumers because of the decreases in the price.
1.3 Disadvantage of globalization
This is one of the disadvantages of globalization, in view of the fact that when different people gathered in one place can create violence, especially murder and bombing, which is not good for business and for country and the citizens.
2.0 FACTORS CONTRIBUTING TO THE GROWTH IN GLOBALIZATION
2.1 The liberalization of international trade
The removal of trade barriers has been the source of increasing international trade and changes in customers taste and preference, there has been more freedom of importing and exporting the goods / services exchanged from one country to the other, not only that but also trade protection methods have been minimal such as tariffs and quotas.
2.2 Technological progress
Technological advancement has also help to reduce international barriers, most likely the use of internet facilities has more power when it comes to doing business online, it’s very easy and it can also help to reduce cost of transportation and other fair of travelling.
Nonetheless, not only the internet provide such access to consumers but there are such facilities which create product awareness for consumers to see and be able to demand those facilities which encouraged globalization including, application of mobile telephones, satellite communication such as DSTV, global media networks such as BBC, CNN, AL-JAZEERA and VIDEO-CONFERENCING, which helps to lessen barriers to the business such decreasing operating / production cost.
2.3 Cultural awareness and recognition
This has increased more awareness and tastes to some consumers; for instance, in the movie industry there are now more recognition on Hollywood, Bollywood and even Nollywood (Nigerian movies)
3.0 THE EFFECTS OF GLOBALIZATION ON BUSINESS ACTIVITY
Globalization can not only provide opportunity to business but also there are some risks/threats in it.
3.1 Increasing competition
One of the effects regarding globalization is increasing competition in business, such as mobile phones, in China due to high demand of mobile phones they are now trying to imitate products of other mobile companies like Nokia just trying to compete with them, and yes here in Tanzania, there are very high demand regarding Chinese phones due to its affordable price.
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3.2 Economies of location
This is one of the positive effects when trying to produce more products on location which is much more cost effective due to power of producing in economies of scale within economies of location, like China is the best place to invest since the productions are likely to be more cheaper, that is, the amount to be paid to one America employee could pay almost ten employees in China, that is the reason as to why the whole world prefers China to be a production place.
3.3 Mergers, acquisitions and Joint Ventures, franchises
These factors allows business to spread around nations due to the forces joined between one company / country or business just to make sure they grow-up and fasten, for instance Mc Donald has decided to join forces by franchising the business in the world, which is true, has definitely became well known in the business.
4.0 DESCRIPTION OF THE FOUR ANSOFF MATRIX MODELS ANALYSIS
“Globalization makes alliances an essential part of a firm’s strategy in order to stay competitive and to achieve superior performance. To better capture global opportunities, firms tend to cooperate with other firms to capitalize on and leverage their limited” resources since it is impossible for one firm to “do it all and do it alone”. Similarly, in order to cope with increasing global competitive threats, firms are likely to form alliances .Based on the classical industrial organization perspective-the market power, firms form alliances to reduce competition and uncertainty. Through such cooperation, companies gain market power that helps alleviate competition and improve its competitive position.”
The decision to enter into a foreign market can be influenced by globalization which could be willingness of the business people, who are willing to go far just to make sure that they expand their market. There are several ways to enter into a foreign market by using the Ansoff matrix as follow:-
4.1 Market penetration (existing market, existing product)
Market penetration is one of the strategies used in the existing customers just to make sure sales are increasing without pooling the product out of the market, nevertheless by using market penetration they could use more activities just to make sure that their existing product is well known around the world, for instance to start advertising in multinational countries just like Dutch advertises their products such as, yoghurts, shampoo, milk and even other products, by advertising even in our country they do create such opportunities for penetrating and creating more demand for those who did not have an idea about their products.
This strategy not only penetrating the product but also struggling to retain the existing customer for such product because it’s not very hard to get customers but retaining those customers is very hard job thus, there are lots of strategies in the world of business one of them is marketing, just to make sure the business is well known.
For instance Coca cola company “has been doing some of the broadening on its own and some in partnership with other companies” (Daniels et al, 2008, p.570) just to make sure the coca-cola brand is well known in the world. The coca cola company has gone so far as to test the market in Singapore, Toronto, and even have the coffee shops. Also Coca cola company has joint venture with Nestle for tea products outside the unites state and a joint venture with Cargill to develop a new sweetener to put into drinks” (Daniels et al, 2008, p 571)
4.2 Market penetration seeks to achieve four main objectives:
“Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling
Secure dominance of growth markets
Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors
Increase usage by existing customers. For example by introducing loyalty schemes” (Mike Morrison, 2011)
4.3 Market development (new market, existing product)
This is one of the market strategies which involve moving the existing product further in international market so as to gain more customers from international market, not only going across or beyond the borders but also attracting new customers in the same product so as to gain more advantage and even to maximize sales.
There are many possible ways of approaching this strategy, including:
New geographical markets; for example exporting the product to a new country
New product dimensions or packaging: for example
New distribution channels
Different pricing policies to attract different customers or create new market segments
Exporting is example of one of the market entry modes, which use a direct sells, goods can be produced within a country and exported to a foreign countries just to capture new customers with the same products which sold in home country. “Example of Coca-Cola when entered the Turkish market, it tried exporting from Turkey to Kyrgyzstan, the result unfortunately was a soft drink price of more than four times what it cost to buy a soft drink bottled in Kyrgyzstan itself”.(Daniels et al, 2008, p 575)
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Product its likely to expand more to the foreign countries and have more customers than the home country, this is due to the fact that in the home country customers could change their taste and preference due to time factor, that could be one of the reason why selling abroad so as not to lose market share, at the same time that unwanted product can be re innovated so as to have customers in the home country, for instance, by trying to change packaging of the products, or even change the name.
4.4 Product development (existing market, new products)
This is new products in existing market, this is happening when there is product innovation to address the same market towards ensuring that customers are being more satisfied with innovation of the product, this can be done due to so many reasons like:
Product has just gone out of the fashion
Didn’t satisfy customers due to taste and preferences
Globalization issues (Mike Morrison, 2011)
When the product has just go beyond the fashion it was meant like, here in our country( Tanzania) there are some shoes which are in fashion at the moment, it seems that all women use to wear such fashionable shoes that is due to globalization technology, we can see on Television through DSTV and other fashion Television.
Nevertheless this fashion keeps on changing when time passes they will change that fashion in the sense that in the existing market and customers with more fashionable shoes.
Didn’t satisfy customers due to taste and preferences in the sense that customers taste and preference keeps on changing due to globalization and free trade. Businesspersons can import and export more goods and services depending upon the needs and requirements basing on customers changing tastes to better reflect customers demand. For instance, Tanzania has green tea of its own, but at the moment there are many brands of tea from other countries with different tastes like lemon, tea and others. Therefore, customers might be attracted to shift from the old brands to the new ones.
The business could succeed if there is use of one of entry modes like the coordination between two parties, could be two or more people, companies, or even two countries, joint venture can be formed due to numerous rationale like, technology sharing and product development, market entry for a certain county, and even in compliance for the country legal actions, for instance quotas, taxes and tariffs. “For example in case of China, it wholly owns its concentrate plant but has joint ventures with various bottling plants, coca cola ownership in foreign bottling operations has became sufficiently significant that it has set up a bottle investment group within the country.”(Daniels et al, 2008, p 570)
Joint venture can be of useful for the matrix model for implementing those four strategies in order to persuaded market expanding, for instance developing new market to a foreign countries could diversify profit, and even product recognition like Mc Donald’s burger king, is well known all over the world.
Globalization issues, here meant that, since it is very free to do international business, the world has just been like a village, China can come in Tanzania and do business with Tanzanian, likewise, people between these two countries can not only do business but can also exchange so many things like ideas on what to do business, how they live in their own country, taboos, cuisine, dress code, these can definitely make customers want to experience the differences.
4.5 Diversification (new product, new market)
This is where the market is completely new, and products to new customers. There are two types of diversification, namely related and unrelated diversification. Related diversification means that remain in a market or industry with which are familiar. (Mike Morrison, 2011)
“The diversification can be divided again into horizontal, vertical and lateral diversification.
The horizontal diversification is the extension of the production programs.
The vertical diversification is the sales stage stored by products pre order.
The lateral diversification is the sales of completely new products, which are within the range of the technology and marketing in no connection.” (Mike Morrison, 2011)
Diversification is an inherently higher risk strategy because the business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy, it must have a clear idea about what it expects to gain from the strategy and a transparent and honest assessment of the risks
This situation is likely to occur to several situations when moving internationally, diversifying is a good strategy because it help to improve sales by having Strategic Business Units (SBU’s) because if one product doesn’t respond positively in the market other products might perform better, and that can at least reduce failure of the other products because obviously there would be wastage of resources but can be covered to some extent., or even though business can be diversify by using international entry modes to create brand awareness.
For instance, franchising This is one of the market entries which assist market expanding when need to go international, franchisor allow franchisee to use the name of the business so as to expand his/ her market share, this is tremendous fine due to the fact that one can have higher profit for the expansion of sells by using someone else’s name and business formulae,
For instance coca cola company, if franchise with them, they will surely provide formulae, then franchisee will only have to mix with water to have formulae complete. Another example is from Mc Donald’s; franchisee should be provided with each and every aspect which will accomplish the meal with the same taste as if were produced by Mc Donald’s company, though it is costly.
Not only that but also they could even use licensing to which indispensable part when going global, as a means to penetrate into global market, so as to have legal when it comes to use property of your licensor, for instance intangible property such as patents, trademark, and production techniques. The licensee needs to pay fee to the licensor to be able to have the technique assistance if possible, there it will be possible for licensee to market his/her product by using the matrix model, like selling more of the products outside the home country and diversify the profit
Globalization controlling the world, the whole world has became such a small world, this situation made people to know good and bad due to expansion of technology, therefore applying Ansoff matrix tools when doing business is the most preferable way to do so since it well analyze how managers should behave when going international.
1.1 THE ANSOFF MATRIX FIGURE
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