Prospects of Internationalisation of Frontex - Research Paper Example

Integrative Term Project - You represent top management in a manufacturing company employing over 5000 employees that has been operating in the domestic arena for sometime. This company now decided to go international and establish a manufacturing plant in France. Executive Summary The development of business activities worldwide has increased competitiveness among firms in all industrial sectors. In this context, the entrance in the international market becomes the most appropriate solution for improving organizational performance; however, the specific strategic solution is not always available. Quite often firms are proved to lack the necessary support in order to expand their operations, a fact that can lead to the limitation of their profitability and may put under risk their existence in the market. On the other hand, even if a firm’s entrance in the international market is effectively supported, other issues can appear; the failure in identifying the risks that the specific initiative may include could lead the organization involved to severe damages. In fact, the above phenomenon is quite common; the responsibility of a firm’s management team for the specific problem cannot be doubted. in the study of Diamantopoulos it is noted that ‘the methodological pitfalls of international research often lead to questionable research results’ (Diamantopoulos, 2003, 80). Despite the above problems, the internationalisation of firms remains the most effective strategy for the increase of their performance and for this reason it should be attempted if it is considered as achievable – except from the case of severe operational or financial problems. Current paper examines the prospects of internationalisation of Frontex, a manufacturing firm that has a significant presence in Jordan. Since its establishment the firm has achieved to increase its performance within its industry; however, gradually the internationalisation of the firm has been proved to be unavoidable. The firm’s power to compete its rivals is going to be tested through its entrance in the French market. 1. Company Overview L. Kawan and J. Fayum, engineers, established Frontex in Jordan in 1986. For a long time the firm’s operations were limited to a specific manufacturing activity: the production of drilling machines. Today, the firm’s production has been expanded in a wide range of products – machinery - of similar use. The firm began its activities with about 25 employees. Today the firm’s employees are estimated to be more than 5,000 – most of them work in the firm’s central unit – about a mile out of Jordan city. The firm’s branches across Jordan have been estimated to 40. The profitability of the firm is an important indication of its prospects in the future; in the financial year 2008 the firm’s profits have been increased up to a level of 18% compared to the profits of the previous year (2007); the above increase is significant if taking into consideration the international financial crisis, which has caused severe damages to many firms worldwide; in 2009 the firm’s profits were further increased – being up to 15% higher compared to 2008 – in accordance with the financial data released through the firm’s financial statements for the period up to September 2009. Up to now the firm’s owners have avoided to use external financing; in the first 2 years since the firm’s establishment the firm’s owners offered the necessary funds for paying all operational expenses; gradually, through the increase of the firm’s profits the need for financial support was eliminated. The global financial crisis led the firm’s owners to seek for support – at least for a 2-yrs period; however, the only solution available seems to be the internationalization of the firm – the entrance in the French market has been considered as an appropriate strategic solution in order for the firm to effectively face its competitors and stabilize its position in the specific industrial sector. A series of facts seems to justify the specific strategic plan. 2. Reasons to enter the international market The entrance of the firm in the international market has been decided because of the following reasons: a) the customer base of the firm would be expected to be increased – a fact that would lead to the increase of the firm’s profitability, b) the participation of the firm in the international market would offer to the firm’s managers the chance to seek for additional financial support – the trust towards multinational firms is expected to be higher compared to firms the activities of which are limited in a specific market, c) the firm’s operations would be supported by the advanced technology used in manufacturing activities in the host country, d) the firm would not be affected by the potential turbulences in the economy of Jordan; instead, it could choose among the Jordan and the French market when the pressures of the market would start to be strong – and financial support would then be required, e) the firm’s managers could proceed to the development of strategic cooperation with firms operating in the international market. France has been chosen among other countries in the international community for the following reasons: a) the specific country has been proved to be capable of exiting strong financial turbulences, b) France is among the leading countries in the European Union – the level of growth of its economy can be a factor of security – and possibly a guarantee for growth – for foreign firms that enter the French market, c) France has an active presence in the Middle East area – the involvement of the specific country in activities that require the use of the firm’s products is a positive indicator for the firm’s potential to develop strategic alliances with French firms and d) in the case of the need for financial support, financial institutions in France would be able to offer the funds necessary – the funding of businesses has not been particularly limited in France since the country’s financial institutions managed to keep their position in the market and avoid any major damage. 3. Entry Strategy When having to decide the methods that are most appropriate for the entrance of a firm in the international market, managers need to take into consideration the following issues: a) the financial potentials of the firm – referring to its potential to cover the expenses required – at least of the initial period – for the establishment of the firm in the foreign market, b) the skills of employees to respond to the needs of the particular initiative, c) the social, economic and political environment of the host country and d) the prospects for the firm by entering the foreign market. The customer trends and preferences in the foreign market would be another issue for consideration. The role of the culture of the country of origin cannot be ignored; in this case managers in Frontex would examine the level at which the products of a firm based in Jordan would be welcomed by French consumers. The specific issue is highlighted in the study of Agrawal et al. (1999) who noted that ‘the country of origin has been identified in the literature as an important cue that might be used by global marketers to influence consumers' valuation of the brand’ (Agrawal et al., 1999, 255). Towards the same direction, it is stated that ‘consumer evaluation of products is influenced by the stage of development of a country from which the product originates’ (Wang and Lamb, 1983, in Knight et al., 2007, 108). A similar view is adopted by Karunatra et al. (2007); the above researchers studied the role of customer attitudes on the development of a specific buying behaviour and found that ‘nationalism plays a strong role in consumer attitudes to product components’ (Karunatra et al., 2007, 349). The design and the development of the firm’s entry strategy would be based on the issues discussed above. The entrance of the firm in the French market would be completed in four phases: a) at a first level a research would be conducted regarding the market conditions in France in relation to the specific business activity – including the performance of firms that operate in the same sector, the potential customer base, the chances for funding, the availability of skills – referring to the knowledge and the experience required for working in the specific firm, the position of the state towards the specific industry and the potential prospects of a foreign firm in the French market, b) at a next level, the firm’s performance should be carefully examined – relevant data should be retrieved in order to check the availability of funds required for the completion of the specific project – the potential funding by the state – Jordan or France – or by private investors would be also examined at this phase, c) the resources available for the specific plan – referring to the non-monetary resources, i.e. employees, technology, suppliers – would be identified and evaluated; the potential cost for the acquisition of additional resources – if required – could be examined at this phase d) a detailed plan of action would be then developed; the specific plan would include the activities – in hierarchical order – required for the establishment of the firm in the French market; e) the firm’s employees would be informed on the specific initiative – those who would like to work in the branch of the firm in France should follow appropriate training sessions, f) at this phase, the activities included in the plan of action should be developed. Particular provision needs to exist regarding the promotion of the firm’s products in the French market; the entrance of the firm in this market should be made known to consumers and firms in French – appropriate marketing policies should be developed for the promotion of the firm’s products in the host market. The specific need is also derived by the views in the literature presented above and which emphasize on the relationship between the country of origin and the consumer perceptions on the quality of products – except from the products that are produced locally – however, in the case of Frontex it is not clear yet whether the center of production will be in France or whether the products will be imported from Jordan – it seems that at least for an initial period the second practice will be chosen. It should be noted that the appropriateness of the phases included in the entry strategy should be continuously checked by the firm’s managers; the use of relevant strategic tools when dealing with the above task is possible; an indicative practice is the benchmarking which is described as ‘the measurement and implementation of the most successful operational standard or strategy available in an industry’ (Nattermann, 2000, 22); other strategic tools of similar role could be used instead in order to minimize the risks of the specific initiative. The Wiseman’s Grid – a tool used as a generator of strategic business plans – would be another strategic tool available to the firm’s manager in order to decide on the activities that should be included in the firm’s entry strategy (Appendix, Figure 1). 4. Environment The establishment of a firm in a foreign market needs to be carefully examined in advance; the environment of the host country is among the priorities of the firm’s managers; the latter have to identify and evaluate the challenges that their firm could face in case of its entrance in a particular foreign market. In the specific case, environment is related with the political, economic, social, technological, environmental and legal conditions of the French market – the PESTEL analysis can be used in order to identify the challenges that the firm could face in the case of its entrance in the specific market. The analysis of the firm’s environment in relation to the specific strategic plan – referring to the PESTEL analysis - can be developed as follows: a) Political: Political conditions in France are rather stable; in fact, no major political turbulences have occurred in the specific country, b) Economic: France is among the leading countries in the European Union; the firm’s economy is extremely powerful; investments in foreign markets are at a high level; there would be no risk of severe financial turbulences in the French market, c) Social: French culture is known for its tend to be aligned with other cultures - even when this alignment is not possible still the foreign cultures are well accepted and respected; the fact that the firm is established in another market – this of Jordan – is not expected to influence negatively the consumers in France, d) Technological: France is a well developed country; the technology used in various industrial sectors is continuously developed; the firm is expected to be benefited by the advances of technology in the manufacturing industry in France, e) Environmental: the firm will have to respect the environment through all its activities exactly in the same context as currently – referring to its current operational activities in Jordan and f) Legal: the French legal system does not prohibit foreigners from developing business activities; in fact these activities are supported when are considered as important for the development of the country’s economy. The marketing risks for foreigners that attempt to enter the French market are analysed in the study of Kotler et al. (2008, 949); in this study it is made clear that the foreign firm that seeks to sell its product in the specific market should avoid to rely on the cooperation of wholesalers – a practice used by the local firms which prefer to cooperate with the wholesalers than to promote their products through appropriate marketing strategies. The examination of the firm’s environment should be combined by the identification and the evaluation of the performance of specific organizational sectors – before applying any phase of the plan related with the firm’s establishment in the French market. The organizational sectors that are likely to be examined and evaluated before the involvement of a firm in key strategic initiatives are summarized in the study of Gomez et al. (2002, Ch.15) as follows: ‘inputs (materials, energy, information, management, technology, facilities and labor), transformation (or conversion process) and disposition (marketing and sales)’. After examining the above organizational sectors, the firm’s managers would be able to evaluate the prospects of the firm in the new market – the assumptions made in the context of the PESTEL analysis described above should be also used by the firm’s managers in order to decide the feasibility and the expected performance of the specific project (Thomsen, 2005). It is possible that additional measures are required in order for the chances for the success of the particular plan to be increased. 5. Cultural profile of France Culture is an important element of organizational activities worldwide. In accordance with Soutar et al. (1999, 203) ‘culture is an important idea as it deals with the way people live and approach problem solving in a social and organizational context’. Culture in terms of organizational performance can refer to two different areas: the organization itself – organizational culture – and the culture of the region where a firm is established – the culture of this type refers to the ethics, social values and traditions held in a specific society. France has similar cultural characteristics with the other western countries; at this point there is a difference; French tend to behave differently under conditions of pressure or when having to develop a difficult activity. Certain issues need to be taken into consideration by the firm’s managers when having to develop the firm’s plan for entering the French market: a) the issue of time is explained differently by French when developing various activities – including business; deadlines related with the completion of the various phases of the project would be clearly explained to all locals (lawyers, financial advisors, accountants etc.) that would participate in the realization of the specific project, b) particular emphasis should be paid on the development of the relationships with locals (entrepreneurs, suppliers, public authorities and so on), c) it is quite necessary that the firm’s representative in France shows that he is willing to adopt the French culture (Hall, 1990, 132); the French culture would be a valuable tool for increasing the chances for success of the particular initiative – entrance in the French market; however, it should be proved that the firm’s owners respect the particular cultural – the adoption of elements of this culture by the firm’s managers would be an effective method for gaining the acceptance of French consumers. 6. Rationale for the staffing policy that will be used for top-level, medium level-managers, and other positions The staffing policy that will be used for the firm’s various positions – referring to the firm’s branch in France has to be based on specific criteria. The ability of the employees chosen to communicate would be a criterion of high importance for the HR managers that deal with the specific task. In accordance with Cornelissen et al. (2001, 413) ‘the importance of the organizational relationships and processes between departments within communication organization cannot be doubted’. On the other hand, it is noted that firms that are interested in entering the international market should set the following priorities: ‘a) international staffing, b) international recruitment and c) a variety of issues surrounding the problem of shortages in international managers’ (Scullion, 1994, 86). From a different point of view, Schuler et al. (1998) made clear that there are specific criteria that need to be used by the firms that are interested to enter a foreign market: ‘a) the business structure, b) the legislative and employment relationship context, c) the patterns of HRM competence and decision-making and d) the national culture’ (Schuler et al., 1998, 159). In the above context, the HR policies adopted by Frontext could be differentiated by the relevant policies of the French firms – differentiation in this case would not be a disadvantage but an element of success. The selection of staff would be the first phase of the staffing policy developed in the context of the particular project – entrance of the firm in the French market. At the next level, a fair rewarding system would be developed ensuring that employee satisfaction is adequately supported. The rewarding scheme suggested by Watanabe (2000) could be possibly applied in this case. In accordance with this system, the criteria for the development of successful rewarding schemes in modern organizations are the following ones: ‘a stable income base is provided with more equal and annually increasing monthly wages, while competitive incentives for better performance are offered in the form of more drastically varied biannual bonuses’ (Watanabe, 2000, 321). No differentiations should exist regarding the hiring of staff in various organizational positions – referring to positions in different levels of the hierarchy – otherwise the issue of inequality would occur in the firm, a fact that could further affect negatively the performance of employees leading to the decrease of their productivity. 7. Kinds of leadership and motivational systems that are most effective in the host country. The choice of the leadership system and motivational system that will be applied on the firm’s branch in France has to be based on certain principles: a) the local culture – referring to the social culture as well as the commercial culture of French businesses – needs to be taken into consideration and b) the willingness of employees to follow the system proposed should be examined in advance – if there is strong opposition in the workplace regarding these systems, then the implementation of the latter will not be successful. In accordance with Blazey (2009, 351), ‘an effective leadership system respects the capabilities and requirements of the workforce and other stakeholders and it sets high expectations for performance and performance improvement’. Apart from the above criteria of success, an effective leadership system would be achievable in terms of the skills/ abilities of the leader involved in relation with the internal and external organizational conditions that are expected to affect the development of important leadership decisions in the short or the long term. Leadership is quite important for the success of business initiatives. For this reason, it is noted that ‘leaders must make fundamental changes in the way they do business to achieve performance excellence’ (Stamatis, 1997, 487). The leadership system used by the firm would be chosen among existing leadership styles – see the Goleman Leadership Styles Theory, Figure 2, Appendix) and the Leadership Continuum Theory, Tannebaum & Schmidt in 1973, Figure 3, Appendix - or it could be developed by scratch taking into consideration the above issues as well as the firm’s potentials to respond to the needs of each relevant decision. The motivational systems that could be used in the host country would be designed by the firm’s HR managers – taking into consideration the employees’ existing skills and abilities – or they would be based on theoretical models that have been developed in the literature. Again, appropriate plan of action would be developed by the firms managers; the latter could choose among existing motivation theories, like the one of Maslow – Hierarchy of Needs Model, Figure 4, Appendix – or the one of Herzberg Theory – Two Factors Theory – Figure 5, Appendix. 8. Kinds of communication problems managers might face in the host country’s working environment. As already noted above, culture is an important part of all activities in France. For this reason, it has been suggested that the persons that are going to communicate with locals in order to promote the firm’s products would prove in practice that they respect the French culture – potentially by adopting some elements of this culture when communicating with local entrepreneurs, advisors and other professionals that are able to support the operation of the firm’s branch – both in the short and the long term. In the above context, managers in Frontex are expected to face the following communication problems in the French working environment: a) the level of managers’ language skills on the French language may be low – appropriate training and relevant support would be required – as the use of French language in the French working environment is considered to be of critical importance, otherwise severe cooperation problem could appear, b) the perceptions of managers on time – referring to the time involved in the completion of various business activities – can be different compared to the perceptions of locals in time; as explained above in France it is expected that each issue is resolved slowly – no rush can be accepted – except perhaps from the case that an emergency is proved to exist, c) the perceptions of managers on commitment on specific tasks can be different from the relevant perceptions of locals; commitment cannot be enforced in the French workplace; furthermore, it cannot be assumed to exist – delegation of tasks must be clearly proved, otherwise it cannot be used when responsibilities need to be accounted for a project’s failure. Other communication problems that managers could face in the French workplace would involve the issues of cooperation – when it is considered as obligatory and when not – and motivation – different policies might be used for French employees to be motivated in relation with a specific business project – compared to their counterparts from Jordan. 9. Description of the methods of control over the foreign operations The operations of the firm’s branch in French could be monitored using the following methods: a) the appointment of a person that will be responsible to control all operational activities in French and submit a relevant report – at least every month - to the firm’s central unit in Jordan; this person would work in the specific position for a period of a year – after that period, he is expected to be replaced, b) the visits of the firm’s top management team in the firm’s branch in France – provision should be existed for the ability of the firm’s managers to check any document of the firm’s branch when visiting the branch – no previous notification on the specific visit will be made to the firm’s branch in France, c) the firm’s financial statements will be sent periodically – every month – in the firm’s central unit in Jordan for review; these statements should be followed by analytical report of profits and expenses. Additional methods could be adopted at the level that it is considered as necessary for the limitation of risk involving in the specific initiative. 10. Conclusion The entrance in foreign market is usually attempted by firms worldwide in order to support the increase of their performance; this target is not always achieved; mistakes related with the assessment of the existing resources or the potentials of the host market are the most common reasons for the failure of the relevant initiatives. Leaders have a major responsibility for the success of any critical business project. In accordance with Hills (1994, 44) ‘entrepreneurial behaviour often results in common marketing mistakes’. Failures observed in other organizational sectors can be also related with the leader’s inability to respond to the challenges of the particular market. The plan of Frontex to enter the French market should be based on specific principles. Existing market conditions – referring to the French market – would be carefully examined and evaluated and the risk involved should be estimated – as possible – ensuring that any major damage will be avoided. The fact that Frontex is well known in its market cannot guarantee its success in France; regarding this issue it is noted that ‘two concepts have been identified as key variables for the long-term success of brands or firms in global markets: brand popularity and country image’ (Chung et al., 1997, 361). In other words, the brand name can offer significant support to a firm’s effort to enter the global market; however, this is the case of the brand names that are well known worldwide – like Nike, Siemens, Mercedes and so on. In the case of firms that are quite successful in their market but the brand name related to their products is not known internationally, then various issues need to be addressed – in the context explained throughout the paper – in order to ensure that the products of the firms will be well accepted by consumers in the host market. Internationalisation is an important strategic decision for modern firms – helping them to increase their customer base and their profits – at least in the case that their entrance in a foreign market will be successful. On the other hand, the continuous increase of the global competition does not leave many choices to the firms that need to stabilize their position in the market. The ability of a firm’s managers to set the criteria required for the internationalisation of the firm is often doubted. In any case, the policies developed by firms in order to face their rivals can be differentiated in accordance with a series of criteria. The leaders of Frontex decided to enter the international market in order to ensure the continuation of their firm in the manufacturing industry – by keeping on operating in the Jordan market exclusively the firm might had to face problems of funding – under the pressure of the global financial crisis – without adequate support available; by entering the French market the chances for support in a potential strong organizational crisis are increased. For this reason, the entrance in the French market is considered to be an important strategic decision – despite the challenges that the firm’s leaders might have to face. Works Cited Agrawal, J., Kamakura, W. (1999) Country of origin: A competitive advantage? International Journal of Research in Marketing, 16(4): 255-267 Blazey, M. (2009) Insights to Performance Excellence 2009-2010: An Inside Look at the 2009-2010 Baldrige Award Criteria. American Society for Quality Chung, J., Kim, C., (1997). 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(1998) Understanding compensation practices across firms: the impact of national culture’, Journal of International Business Studies, 29(1): 159-172 Scullion, H., (1994) ‘Staffing policies and strategic control in British multinationals’, International Studies of Management and Organization, 24(3): 86-97 Stamatis, D. (1997) TQM engineering handbook. CRC Press Thomsen, S. (2005). Corporate governance as a determinant of corporate values. Corporate Governance, 5 (4), 11-27 Wang, C.K. and Lamb, C.W. (1983) The impact of selected environmental forces upon consumers' willingness to buy foreign products. Journal of the Academy of Marketing Science 11(Winter): 71–85 Wiseman, C. (1985) Strategy and Computers. Dow Jones – Irwin Watanabe, S. (2000) ‘The Japan Model and the future of employment and wage systems’, International Labour Review, 139(3): 307-325 Appendix What is the strategic target? Supplier Customer Competitor What is the strategic thrust? Differentiation Cost Innovation Growth Alliance What is the mode? Offensive Defensive What is the direction? Use Provide Figure 1 – Wiseman’s Grid – (source: Wiseman, C., 1985)   Visionary Coaching Affiliative Democratic Pacesetting Commanding Leader characteristics Inspires, believes in own vision, empathetic, explains how and why people's efforts contribute to the 'dream' Listens, helps people identifying their own strengths and weaknesses, counselor, encourages, delegates Promotes harmony, nice,  empathetic, boosts moral, solves conflicts Superb listener, team worker, collaborator, influencer Strong drive to achieve, high own standards, initiative, low on empathy and collaboration, impatient, micromanaging, numbers-driven Commanding, "do it because I say so", threatening, tight control, monitoring studiously, creating dissonance, contaminates everyone's mood, drives away talent How style builds resonance Move people towards shared dreams Connects what a person wants with the organization's goals Creates harmony by connecting people to each other Values people's input and gets commitment through participation Meets challenging and exciting goals Soothes fear by giving clear direction in an emergency Impact style on (business) climate + + + + + + + Often ― ― when used too exclusively or poorly Often ― ― When style is appropriate When changes require a new vision, or when a clear direction is needed, radical change To help competent, motivated employees improve performance by building long-term capabilities To heal rifts in a team, motivate during stressful times, or strengthen connections To build buy-in or consensus, or to get valuable input from employees To get high-quality results from a motivated and competent team. Sales. In a crisis, to kick-start an urgent  turnaround, or with problem employees. Traditional military. Figure 2 – Goleman Leadership Styles Theory (source: Value Based Management Net, 2009) Figure 3 – Leadership Continuum, Tannebaum & Schmidt in 1973 (source: Value Based Management Net, 2009) Figure 4 – Maslow Motivation Theory – Hierarchy of Needs, 1908 (source: Value Based Management Net, 2009)   Figure 5 – Herzberg Motivation Theory – Two Factor Theory (source: Value Based Management Net, 2009) Read More