Internationalizes and Explore New Geographies - MyAssignmenthelp

Question: Discuss about the Firms Internationalizes and Explore New Geographies. Answer: Introduction This is the age of competition and customer is the king. With digital marketing and advent of e-commerce, companies are reaching to their customers across globe in no time. When consumers are going global and buying from foreign companies, it also made the firms think that why should they focus on local consumers only and why cant they expand their customer base. All the organizations have ambitious targets continuously and often explores the unchartered territories to fulfill the targets because the growth becomes constant after few years .Also, dependency, be it on anything, is a risk and companies wants to diversify in terms of consumers, suppliers, talent and so on to mitigate their risk which is one of the reason that has given birth to Globalization (Cavusgil, Knight, Riesenberger, Rammal, Rose, 2014). This paper will discuss about the factors that motivated the organization to expand beyond national boundaries. It starts with analyzing the most basic factors and then go on to wards more complex and underlying reasons. Curbing local competitors by taking First mover advantage Introduction of a product in a market where there are no competitors as of now refers to the first mover advantage. Since first mover organizations provides one of its kind products and services to the people, it quickly gains traction from the people and gains the complete market share because there is no competitors. Marketing cost is also less in such countries where no competition exists. Being an early mover will help the organization even when competitors starts entering into the market as consumers will find it difficult to switch between products and also the people will think the first company is the most original and authentic and newer companies are just imitating the model to take advantage of greater market share. Not only this, being a first mover and quickly capture the market will also demotivate the local entrepreneurs to venture into the same field because Global companies are generally cash rich and it is difficult to compete with them unless your offerings are rea lly innovative and provides more value (Sasi, Sperling, Arenius, 2015). Take example of IKEA, IKEA has entered into so many countries and by taking advantage of economies of scale, its super-efficient supply chain, streamlined business processes, it is providing low cost furniture to the people. Local competitors will find it difficult to make furniture at that cost. And thus IKEA remained the leader and curb the local competition. Not only this, There are companies like Airbnb present in US and similar model was copied in Europe by Wimdu before Airbnb enters into European markets. If Airbnb has entered into the European markets in the beginning, it could be possible that Wimdu would have never happened (Cavusgil, Knight, 2015). Risk diversification This is the age of the globalization and collaboration. When companies are seeing that foreign firms are entering into their home markets and threating their existing market share, they are simply questioning status quo an analyzing their prospects of going to foreign countries in search of new markets and customers and reduce their risk by depending on a single market. For instance, there are many economies which are going through the different phases like economic slump, growth, saturated and thus it is a huge risk for an organization to depend on a particular economy (Kim, Mahoney, Tan, 2015). Diversification is the most effective technique for mitigating risk and firms choose to go to international market for diversifying their customer base and mitigating their risk of depending on a limited market. For example, there are numerous US and UK companies that are facing pressures due to slowdown in growth and thus exploring Asian markets which are in developing stage and has tremen dous potential for growth. For example, Hamleys which is a UK based toy retailer chain when sees slowdown in existing markets began to expand to India because incomes are rising in India and with better job opportunities, there is a huge demand prospects for Hamelys product in India (Sunny, Sund, 2014). Operating in multiple markets also helps the organization to better respond to the slowdown in some particular markets because growth markets can offset the slow growth and help the organization to sustain itself in the economies which are facing slowdown or recession. Thus, diversified markets for selling your products is one aspect of risk diversification. Other aspect is having multiple suppliers at different Geographies to mitigate the risk of supply chain disruption. In past, there are several incidences of how the single supplier dependence wreck a havoc for some of the manufacturing companies because their suppliers faced some natural disasters, legal issues and capacity issues and unable to provide the material. Thus, it is always a good practice to have suppliers at multiple locations so that natural disaster at 1 place cannot effect the whole supply chain. Having more suppliers will also increase the bargaining power of the manufacturing company over the suppliers and this is a reason why the firms looking to go global (Hadjikhani, Hadjikhani, thilenius, 2013). Saturation of domestic market/potential of newer markets and competitive pressures In this age of aggressive targets and massive competition, companies always have a target for growth and when the local markets becomes mature, companies have no other option but to explore the unchartered territories to sustain and achieve the targets. In a local market, company can grow for few years but over a period of time, its growth will become constant and company has to look beyond national boundaries. Also, if the newer countries have huge potential for the products, then it is definitely a good opportunity for the company. Companies can also think of going global as first mover or after their local competitors who have already moved to international market. Both the approaches have their own pros and cons (Bianchi, 2014). For instance, first mover advantage will help to penetrate deep into the market and acquire maximum markets but it also carry a risk that if product is not successful, there will be a huge loss. On the other hand, if you move after your competitors, then in such cases, risk will be very less as organization can quickly judge how the consumers are responding to products of their competitors and what is the growth potential. Not only this, first movers often faces huge cost structures initially in order to understand the market, add some localizations before they gain the trust of the customers. Not being a first mover will help the company to enter into the markets without making investments to test the waters as this had already been done by the competitors. Also, sometimes competitors who have already entered into the foreign markets and tasted success in such markets will also bring back the additional earnings and profits back into their country and increase their marketing, campaigning budget and become more aggressive. During such times, reinventing itself , Mergers and Acquisitions or copying competitors by going global are the only few options for the organizations and companies often look for expanding into foreign markets. Consider another similar dimension where some foreign company enters into new country and pose threat to local players. In such cases, local players also explore the home market of the foreign players so that the foreign company can divert its attention in terms of money and effort in its domestic market and not just fully focuses on foreign market. Thus, this is also another important reason why the companies are looking to expand into foreign geographies (Boehe, 2016). Geographic/Strategic advantage Geographical advantage is one of the most important reason of moving to global markets. Some countries especially Developed ones generally have higher cost structures, more strict and regulated labor laws which makes the cost of production quite high in such countries. With increased competition, there is hit on margins and thus organizations pursuit the path of cost cutting to sustain them and moving to foreign and cheap locations is a byproduct of cost cutting. For instance, there are numerous companies like Apple, Dell, Ford, Hitachi that have moved their manufacturing units to China and India so as to take advantage of cheap labor in these countries (Buckley, Munjal, Enderwick, Forsans, 2016). Apart from cheap labor, access to new pool of talent is another reason. For instance, Google, Microsoft and Amazon has moved their development centers partially to India so as to take advantage of huge talent. India is known to have expertise in software development and technology and thus big organizations are moving to newer markets so as to leverage talent in such countries to boost their own capabilities and providing more value to their customers. Some organizations tends to shift their location near their suppliers so as to involve supplier in design discussions as well as to reduce the lead time of the products and reduce inventory. Thus, organizations also explore to newer markets near their supplier base. Also, There have been many cases in the past where the organization is dependent upon a single supplier for their supply and if some calamity happens or supplier unable to supply the material, this can be a disastrous for the company. Thus, organizations tend to globalize themselves to search for the local suppliers also. Also, some organizations force their suppliers to shift to their country. Even some firms have mandate that they will purchase only from those suppliers which are present in their country and which forces supplies to globalize their operations. This way suppliers are forced to develop the competencies globally so as to serve the global manufacturing location of its customers. Also, take another example, a multinational company will look for awarding the contract for its marketing activities to an advertising agency that have global presence so that company approach looks uniform and focused irrespective of the market and focus is not lost. Conclusion This case study discussed about why globalization has become indispensable for the organizations. This age of competition has forced the customer to tap unchartered territories and explore newer markets to sustain their growth. Along with it, there are some few most common reasons which sows the seeds of globalizations in the management of the company and same have been discussed in this paper. 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