Maintaining A Universal Business Strategy
The prevalent perception about globalization is that it enables business uniformity. Regardless of which industry a firm is catering to, whether it is the language service providers or the electronic industry, the rule of business remains the same. Hence, organizations do not need to adjust their business to every market environment.
The Other Side Of Economic Interdependence
With globalization, there is an obvious resurgence for the need to sustain national identity. As people believe that foreign insurgence into their culture threatens their uniqueness, they often tend to refrain from purchasing.
Do Businesses Need To Distinguish themselves When Going Global?
With the ease of doing business on a global scale, organizations often make one mistake. They assume that since the entire world community is one big global village, they do not need to diversify or differentiate their strategies for different markets. And their product or services would be universally accepted everywhere without having to distinguish them from the local/domestic product of that market.
In this article, we are going to argue that this perception is wrong. Instead, management should conduct thorough research into the target market. Learn the intricacies and nuances of the languages and culture. And then introduce a product or service that does not only gets introduced among the consumers but is also adapted by them.
Opting For Globalization
Effective foreign market penetration is a combination of globalization and localization. Many marketers coin the name “globalization”. This is the most effective method of doing international business.
International Business Versus Domestic Business
When a local business reaches its maturity stage, it often outgrows its operations to an international scale. This is prevalent from the example of Honda and Toyota. They started their operations domestically. And with time they penetrated global markets.
With time, we are observing that certain organizations are taking an alternative route. And immediately start to target the international market. They usually name themselves global startups. One clear example is Language service providers
With global startups, the existing issues and challenges are also multifarious and multifaceted. For instance, organizations have to overcome the following obstacles;
- Tackling the issue of diversity of cultures and traditions
- Variation in social norms
- The way business is practiced
- Legal formalities
- Regulations imposed by local governments
- Economic and political instability
All of these challenges make international business more complex and arduous. Not to mention, the level of risk, which is much higher during international expansion.
On the contrary, expansion into international markets helps you in a lot of other areas.
- If the inflation increase in the target market, your profitability also increases accordingly.
- Currency and exchange rates also help a lot. If you start your operations in the USA but switch your manufacturing industries to a third-world county, your operational cost would decrease significantly.
Why Do Organizations Expand Globally?
Different factors motivate businesses to expand globally. They include:
- Strategic
- Economic
- Market
However, the motives are multifaceted. And are different for every business depending upon their goals and aims. Let us discuss all of the above-mentioned motives with examples;
-
Market
Market movies are divided into two further categories;
- Offensive
- Defensive
Offensive:
When organizations take the initiative to capture an opportunity that allows them to initiate commercial activities in a foreign market, it is known as Offensive motive.
Example:
In the 1990s Mary Kay penetrated the Chinese market. The aim was to capture the huge untapped potential of the world’s fastest-growing population and economy.
Defensive:
Defensive motive is described as a methodology in which organizations stand as a bulwark against the changes that may take place in the market environment. That either originate from their domestic competitors via new products. Or through their local governments via new laws and regulations.
Example:
When Lenovo entered the international markets, it has to face Dell as its local competitor. So it opted for a defensive motive strategy by acquiring the personal computer division of IBM. This enabled Lenovo to curb the growing dominance of Dell.
-
Economic
Economic motive occurs when the sole purpose behind the global expansion is to increase profits. This is achieved when firms can diminish their expenses. But at the same time increase their return as well.
Example:
Apple products are manufactured in China but assembled in the USA. This is because manufacturing costs in China are significantly lower than in America.
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Strategic
Strategic motivations are based upon an organization’s ability to capitalize on their points of differences or their unique strengths when they expand into international markets.
This allows them to stand out from the rest of the crowd and create a positive customer perception. And every time the consumer sees their product or service they will associate that particular distinctive trait with the brand.
Example:
Cirque du Soleil is a great example of Strategic motivation. They are the pioneer of a modern-day circus. When the circus industry was dying, they combined live theater and circus and toured over 300 cities.
Conclusion
Globalization has increased economic interdependence between nations. Consequently, businesses around the world have the opportunity to access international markets. However, international expansion has its pros and cons.
In this article, we discussed some of them. And also tried to explain the big picture of expanding globally in the time of globalization Read More.