Global Repositioning: Maximizing International Business During a Global Recession - Assignment Example

Global Repositioning: maximizing international business during a global recession Executive summary This paper discusses a number of issues such as global business, global economic recession and global positioning or strategy. It examines the current changes in the global business environment and the appropriate survival strategies. It critically addresses specific dilemmas or issues that face the international manager. It then illustrates the analysis with reference to appropriate models and theories as well as country or company examples drawn from course materials or other forms. The paper further defines global repositioning. It identifies and researches on relevant subject areas such as the impact f globalization. Introduction Global repositioning refers to choice of companies or countries according to the importance of their strategies. This takes into consideration the scope of their markets and the choice of their customer segments. Global repositioning involves giving value to the customers in whatever field they are competing in. Many international businesses trade most of their commodities in their home region, with just a few being explicitly international. It is argued that these examples of international commercial victory should be viewed as greatest practices and benchmark to be cautiously studied and emulated by the rest of the international businesses, the majority of which are characterized by a narrower and shallower infiltration into host region markets (Tallman and Yip, 2001). Conversely, the observed frail market situation in the host territory, as compared with the home market might as well be interpreted as the result of a nationwide preference for regionally based activities, resultant from a cautious cost-benefit analysis. At this point, calculated interactions amongst big players might sway the global sales pattern and the choice of target markets (Rugman and Verbeke, 2004). In general, it can be argued that the regional strategy of international businesses is entrenched in the broader organizational, institutional and competitive contexts at the regional level. In these circumstances, its local strategy choices develop interdependently with change in existing government regulations, genuine organizational forms, and existing industry practices. It must be acknowledged that regions themselves might vary with time, and consequently offer greater opportunity for the growth of international businesses (Tallman and Yip, 2001). As globalization takes place, it is limited to the upstream edge of the value chain. A number of the world's major international businesses master the art of linking internationally dispersed input in the form of financial capital, human capital, research and development knowledge, and components, and can be incorporated to better serve home region clientele. It is therefore possible to be global at the value chain's upstream ending, and a lot can without doubt, be learned from observation and initiation of the routine of global leaders in this proportion of the value chain (Tallman and Yip, 2001). Now the international market is faced with a severe economic recession that these businesses must tackle. The global financial markets have come crumbling down as a result of this recession. As a result international businesses have had to change their strategy. Current issues in the global business environment Traditional trade theory concentrates on a given nation's endowment of capital, labor and land resources. However, this does not drive existing trade models among countries (Porter et al, 2000). However, this has ceased to be the case since companies do not require their own domestic supply of capital for success. Capital is accessible on the global capital markets once a viable prospect has been recognized (Snowdon and Stonehouse, 2006). Regarding labor, studies have shown that the quantity of labor does not affect competitiveness, but rather its quality and specialization, both of which are very vital (Snowdon and Stonehouse, 2006). It is critical to know that benefits result to a less extent from input in the usual logic, and to a great extent from effective utilization of inputs as well as technology. The effective use of input is primarily influenced the proximity and location of these resources. With the current trend towards globalization, there is additional division and specialization of clusters (Porter et al, 2000). There is rise in division and specialization of clusters among the players. For instance, rather than have just four to five major clusters worldwide, there are around ten if not more. There exists an unstoppable progression where economic effectiveness and productiveness rule. In increase in trading barriers will only result in other factors such as political connections, military issues, and the size of the home market rule instead of productivity. Since productivity currently rules, there is added specialization and clusters (Snowdon and Stonehouse, 2006). Global strategy reflects extreme version of the market segmentation, size-related efficiency, market imperfection and great competition that are concerns in all strategies (Lasserre, 2007). Nevertheless, differences in technological, competitive, macroeconomic, currency, legal and political regimes are in greater global markets instead of domestic markets that they really symbolize in a new environment (Rugman and Verbeke, 2004). The escalation of regional mutual economic unions has formed a world of multi-tiered regulatory regimes that differ dramatically from region to region, exacerbating any difference and increasing the complication of the global trading environment considerably (Drache et al, 1991). Similarly, capability at managing extremely diverse clients in numerous places, coordinating production across an extensive and very diverse set of subsidiaries, funding operations in various currencies, and management of extensive and greatly independent subsidiaries go further than a plain scaling up of normal business practices (Snowdon and Stonehouse, 2006). The pressure of the new economy for the information age trade can only make this analysis extra difficult and more vital. Internet companies are born universal and are obliged to handle the strategic circumstances, choices and issues presented here for the big and veteran firm, despite the fact that they are new and lack experience. Similarly, their information base suggests a well-built language and cultural component to their content, and the resultant need to adapt from a market to another (Snowdon and Stonehouse, 2006). Furthermore, their vital attachment to technology that rapid universal organizational learning, from competitors in various markets and from flourishing lower units, is the key constituent and source of competitive advantage for such corporations. Segregation in a single market is a sure way to fail but this message is not easily adaptable to a sophisticated audience in numerous markets (Snowdon and Stonehouse, 2006). There is an emergent importance of company-specific and knowledge-intensive assets in the wealth generation process, and the type of tailored assets like skilled labor and public infrastructure, which required to be used together with these assets for effective harnessing and deployment. Furthermore, the decrease of many artificial and natural barriers, the increase of other spatially related transaction costs; and the increasing need and ease for companies to manage their cross-border activities and form alliances with alien firms (Jansson, 2007). A number of these factors have influenced companies to have and concentrate specific kinds of value-added activities within a restricted number of locations; others have caused them to scatter such activities across a number of locations. Whereas several have chosen a realignment of international business activity in the direction of developed economies, others have preferred a location in emerging market economies (Drache et al, 1991). All are indicative of a shifting global division of labor, which, due to their growing role in the global economy and the need to capture economies of mutually dependent activities. It has been acknowledged that location preference of international businesses will depend on the motive for the venture and whether it is new or sequential (Drache et al, 1991). Apart from market accessibility and growth, economic and institutional amenities were not only valued than the customary criteria for access to raw materials, cost of labor, and fear of protectionism, but in all cases, they were also considered to increase in importance from 1996 to 2001. The existence of other investors in a given country is becoming more important, both as an investment stalk or indicating influence to other alien firms less known within that particular country, and as an agglomerative magnet by which companies gain from being part of a geographical cluster of related activities and dedicated support services (Drache et al, 1991). There exist three agglomeration gains namely infrastructure quality, degree of industrialization, and existing level of FDI (Rugman and Verbeke, 2004). Issues facing the international business manager The majority international business actions are characterized by semi-globalization, which falls between companies expanding worldwide as though it is an integrated market place and companies focusing chiefly on their domestic market and functioning quasi-independently in each particular host nation, where state sensitivity is the only strategy needed (Yip, 2002). The experimental proof for regionalization proposes two key points for its success. First, a good deal of the worldwide activity of international businesses seems to be carried out at the intra-regional as opposed to the inter-regional level (Porter et al, 2000). Discussion The majority global business actions are characterized by semi-globalization, which falls between companies expanding worldwide as though it is an integrated market place and companies focusing chiefly on their country and functioning quasi-autonomously in each particular host country, whereby state sensitivity is the only strategy required (Yip, 2002). The experimental proof for regionalization suggests two points for its success. First, a good deal of the worldwide activity of MNEs appears to be conducted at the intra-regional as opposed to the inter-regional level. The triads of regions considered most appropriate are Asia, Europe and North America because these regions are the dwelling of an enormous majority of big MNEs worldwide and the geographic locus of many business innovations. Additionally, the regions greatly differ geographically and are very far apart from each other, and characterized by interior attempts to attain better regional unity, which is at the moment most advanced in Europe and least in Asia. Second, numerous MNE global operations are organized at the local level as opposed to global level (Drache et al, 1991). The scale and pervasiveness of the globalization trend has been overstated and most are unable of exploiting and deploying their company-specific advantages globally in an unsystematic style. Even though the majority of big companies would like their goods and services to be used globally and to get high market shares internationally, the regrettable reality of global trade is that just a few firms have achieved a balanced delivery of their sales in Asia, Europe and North America (Jansson, 2007). For the majority of other firms, selectivity in countrywide and global expansion has remained important. A good deal of that selectivity has been guided by local considerations like the preference of Asian companies to grow their operations mainly in Asia; of European firms giving precedence to their territory; and of American firms exploring business opportunities first in America before considering other regions of the globe (Snowdon and Stonehouse, 2006). The major reason is that the risks involved in intra-regional expansion appear to a great extent lower than those of inter-regional expansion. The added costs of doing business in a foreign country are a lot higher when venturing into other global regions than when expanding in the home region. It is hard to run an international network across more than one region because of the distance separating these regions. This distance brings with it a mixture of economic, geographic, administrative and cultural roots which have their diverse consequences on the management of the firm (Jansson, 2007). Corporate level management is faced with huge bounded rationality constraints when running operations in the host regions (Snowdon and Stonehouse, 2006). Hence, a lot of the world's principal MNEs display a regional element in their operations, such as a regional headquarters. Several of these MNEs emerge to be home region bound as opposed to having an international operation and exploitation potential. This is particularly the case for FSAs at the downstream side of the value chain, where goods and services require intensive marketing to buyers (Yip, 2002). In case of markets in search of FDI, an MNE's resource allotment to the host market can be viewed as a single-sided commitment from likely buyers, and consequently carrying considerable risk, particularly in cases with a high liability of interregional foreignness. Conversely, other kinds of FDI, fixed on the upstream part of the value chain particularly sourcing and manufacturing, are frequently accompanied by resource commitments from other economic actors, thus reducing the challenge posed by the risk of inter-regional foreignness because these other actors are entrenched in the appropriate host region (Jansson, 2007). Particularly, if inter-regional FDI in sourcing or manufacturing is aimed at primarily facilitating home region sales, and is hence efficiency seeking, the risk of an inter-regional foreignness mainly does not represent a major risk, but such investment might not improve the MNE's situation in terms of sales in the host region (Snowdon and Stonehouse, 2006). Conclusion Many challenges are presented in the management of such businesses. For instance, the coordination function is made difficult by the remoteness of the subsidiaries. Moreover, a country's regulation regarding certain types of business may be different from the next, which could lead to a mix-up in policies.Moreover, their taxation and customs regimes may be very different from one another, with some being more stringent and demanding while others being friendly. Going international has proved to be a big challenge for many business entities. However, this is the move businesses should take since the advantages presented by it far outweigh the disadvantages. With the current advancements in technology, any business that does not follow this trend stands very low chances of survival. Moreover, the trends in globalization will force many businesses to take this option to expand their market. International expansion strategies To remain competitive in the current global recession, international companies will have to adopt a number of strategies. First, they need to establish some kind of intimacy with their customers in order to create best total solution for them. This will include such practices as service customization and after sales support. The companies will also need to offer product leadership in their area of specialization. This means that they have to sell the best products in their particular market. The companies must also ensure they adopt the principle of operational excellence. They must have their processes under control in order to ensure best total cost to their customers. This will involve product availability at the best price. Recommendations In addition, the companies will need to choose an appropriate global structure that will ensure efficiency of operations. Their choice of processes must also put into consideration the efficiency of operations. They must also put in place proper coordination mechanisms among their areas of operation. The companies must also hire the right employees who will not only add value to the companies but also carry the image of their companies to their potential customers. References Drache, D et al (1991) The New Era of Global Competition, McGill-Queen's Press Jansson, H (2007) International Business Strategy in Emerging Country Markets, Edward Elgar Lasserre, P (2007) Global Strategic Management, Palgrave Macmillan Rugman, A and Verbeke, A (2004) A perspective on regional and global strategies of multinational enterprises, Palgrave Macmillan Ltd Snowdon, B and Stonehouse, G (2006) Competitiveness in a globalized world, Academy of International Business Tallman, S (2007) A New Generation in International Strategic Management, Edward Elgar Publishing Tallman, S and Yip, G (2001) Strategy and the multinational enterprise, Oxford Handbook of International Business Yip, G (2002) Location and the Multinational Enterprise, Palgrave Macmillan Journals Yip, G (2002) Total Global Strategy II, Prentice Hall Porter, M et al (2000) Global Competitiveness Report 2000, McGraw-Hill Porter Read More