Developing Global Business Strategies and dealing with the standardisation / individualisation debate - Essay Example

? Developing Global Business Strategies and dealing with the standardisation individualisation debate. How Ford address this issue (LO 5) name Institution of affiliation Table of Contents Outline 3 1.0.Introduction 5 2.0.Factors related to international business development 6 2.1.Consumer pressure 7 2.2.Increased global competition 7 2.3.Rapid increase in and expansion of technology 8 2.4.Liberal government policies on trade and resources 8 2.5.Development of institutions supporting international trade 9 3.0.How countries/companies develop within a developmental framework 9 4.0.Economical and political implication of international business 10 4.1.Economic implications of international business 10 4.2.Political implications of international business 10 5.0.The impact of the global movement of factors of production on international business 11 6.0.Role of knowledge, communications and creativity on success of international business 12 7.0.Discussion and analysis 13 8.0.Conclusion 15 9.0.References 16 Outline 1.0 Introduction Provides an overview of international business and the standardization/individualism debate and introduces the case of Ford in global business strategy development and standardization. 2.0 Factors Related to the Development of International Business 2.1 Consumer Pressures Consumer pressures on product are explained in terms of increasing tastes and preferences on different products causing organizations to adjust to meet them. 2.2 Increased Global Competition Global competition from GM and other automobile companies is explained and how ford overcomes it. 2.3 Rapid Increase in and Expansion of Technology The use of technology at Ford is explained in terms of relevance to employees, consumers and products developed. 2.4 Liberal Government Policies on Trade and Resources The operation of multinationals in foreign nations is defined by present government policies on trade and resources 2.5 Development of Institutions that Support International Trade International business operates under regulation of independent bodies that protect exploitation and ensures adherence to the right international business standards. 2.0 How Countries and Companies Develop within a Developmental Framework The factors like legal and environmental factors to be considered in the development of countries or companies in international business. 4.0 Economic and Political Implications of International Business 4.1 Economic Implications the effect of international business on economies especially due to economic globalization is explained. 4.2 Political Implications International business is explained in terms of its impact on domestic policies and rules and regulations development or eliminations to protect citizens and local firms. 5.0 The Impact of the Global Movement of Factors of Production on International Business Global movement of production factors is associated to impacts like brain drain, maquildoras, foreign direct exchange, backward integration among others. 6.0 Role of Knowledge, Communications and Creativity on Success in International Business The changing consumer needs and preferences call for sufficient knowledge of consumers, market conditions, government rules and others to translate to satisfactory innovations. The right knowledge from different markets of multinational companies must be communicated such that standardization retains consistency of products. Creativity defines innovations style and results to brand loyalty. 7.0 Discussion and Analysis The Evaluation of Ford Company’s standardization approach to global business is provided in details. 8.0 Conclusion The development of global standards is dependent on the intentions of a firm in the international market and for Ford standardization has sustained the company’s competitive advantage and profitability. 9.0 References 1.0. Introduction International business has been in existence as long as nations have existed and communities have exchanged commodities with each other resulting to business. Today, international business is not only evident through multinationals like Ford, McDonald, Coca Cola and Samsung and others, but also in retailers and distributors globally. Additionally, international business involves competition of products in world markets while the competitive advantage is solely dependent on the gained economies of scope and economies of scale across the markets. In order to operate successfully in the global markets, industries operate as global or multi-domestic. Global industries encourage competition of same firms with each other while multi-domestic industries compete only at a national market and independent of other national markets. The development of Global business strategy is dependent on what a business is to engage in while operating in a universal business environment and its service to worldwide consumers. Global business strategy is based on long term or short term objectives. As a result, global industries adopt a global strategy while multi domestic strategy involves tailoring products to individual countries with innovation dependent on local research and development expertise. The need for global business strategies was prompted by internationalization and globalization of existing local firms with the intention of increasing the firm’s value. Global business strategies are dependent on the pillars of standardization or individualism and adaptation. Standardization and adaptation of global business strategies have severely conflicted with each other resulting to a great debate as each side tries to prove being more profitable for global businesses. Production standardization for global organizations involves generating similar products for both national and international markets with only minute modifications being involved. Conversely, global market orientation involving adaptation pays keen interest to differences in factors like culture and environment which influences consumers’ purchasing patterns differently. The choice of either standardization or adaptation strategy by organizations is dependent on the circumstances surrounding each business. The discussion in this paper focuses on how Ford Motor Company has developed its global business strategies and dealt with the debate over standardization or individualization (Kotenikov, 2013). Ford Motor Company manufactures and trades automotive vehicles in the Ford, Lincoln, Jaguar, Mercury and Volvo brand names. As the company expands globally, its customer base is gradually becoming more diverse and so are the established markets. Ford products’ market and customer diversity have called for modifications on product development and marketing approaches (Kotenikov, 2013). In Europe, Ford product design currently focuses on the needs of people with limited mobility while in North America Ford products are being designed to contain desires and needs of maturing baby boomers that are characterized by active lifestyles (Kotelnikov, 2013). The discussion focuses on issues like factors related to international business development; the development of Company within a developmental framework; economic and political implication of international business development; the impact of production factors movement; and the role of creativity, communications and knowledge in international business success (Kotenikov, 2013). 2.0. Factors related to international business development The creation of a global strategy requires the analysis of factors like consumer pressure; elevating competition globally; rapid elevation and expansion of technology; liberal government policies and development of international business supporting institutions. 2.1. Consumer pressure Kotelnikov (2013) highlights the main consumers of Ford products are in the United States and Europe. Ford has therefore concentrated on consumer feedbacks in these two markets and then incorporating the consumer needs from other markets to establish a strong global brand image. In the US, automakers are called upon to boost vehicle’s efficiency through adherence to United States stricter requirements for mileage while winning the fuel economy. In the case of consumer dissatisfaction with a product, like the recent Turbo engine overstatement (Ohnsman, 2013), consumers lose confidence in the product and this affects profitability. 2.2. Increased global competition The business environment facing numerous organizations today is characterized by elevating global competition levels. In addition, business environments have experienced new global competitors who are entering the market owing to falling trade barriers and costs of transactions. For a long time, Ford and other have dominated most of the market in the United States (Corporate.ford.com, 2013). However, competitive pressure has faced Ford in terms of product quality, portfolios and pricing as well as the global success of automotive players founded in Germany, Japan and Korea. The Japanese competitors included Nissan, Honda and Toyota which were more fuel efficient inexpensive cars and were preferred especially during oil crises periods (Corporate.ford.com, 2013). In terms of design and luxury, Germany’s Daimler and BMW were preferred. Despite increased competition, Ford did not exit the automotive market but embraced commitment to innovation throughout its vehicle line up, through customer focussed technology, outstanding fuel economy, and astonishing style (Corporate.ford.com, 2013). 2.3. Rapid increase in and expansion of technology In many other multinationals, information technology includes maintenance of hardware, technical support, software support and networking solution. In the presence of IT professionals, organizations manage daily business needs and use innovative technological tools to create globalized consumer products (Corporate.ford.com, 2013). Besides having adequate IT professionals, Ford Company has self-service websites from which visitors and dealers find the information they require with ease (Ford, 2008). The customeraskford.com and dealeraskford.com websites were launched to elevate the satisfaction of the car owner and the experience of customers after their purchase. In addition, Ford has Cisco Unified Communications that consolidate call centres, facilitate supple business model and minimize staff (Cisco IBSG, 2007). Ford Company also has new chat rooms and blogs dedicated to car analysis from which feedback from customers is received. Ford’s sustainability and electrification Strategy involves computer technology adoption in reducing carbon dioxide through advanced internal combustion engine and transmission technologies like EcoBoost engines (Ford, 2008). 2.4. Liberal government policies on trade and resources In the international business environment, liberalization of trade results to elevated welfare obtained from improved domestic resources allocation. When countries restrict imports, they establish an anti-export bias which causes the price of importable commodities to rise as compared to the exportable commodities. Outside the North American market, Ford is established in Europe and other places and this has contributed to increased output and income rate for the organization. The difference in prices in the various markets is attributed to the trade policies existing in those countries (Economy watch, 2010). Trade policy acts as a connection of convey price signals to the nation’s economy from the global market. For instance, Ford Motor Company spread to India was contributed by imposed reduction on export car tariffs, removal of minimum capital investment for starters, a proposal on investment tax relaxation. Apart from being a potential market, India is an ultimate outsourcing destination for Ford (Economy watch, 2010). 2.5. Development of institutions supporting international trade There are numerous institutions developed to support international trade. These institutions include World Trade Organization or WTO, Regional and bilateral trade agreements, the organization for Economic Co-operation and Development OECD, International Monetary Fund and World Bank, and Aid agencies (Duncan, Jancar-Webster & Switky, 2008). WTO is the institution responsible for ensuring that there exists smooth, free and predictable trade flow between nations through a set of Global rules that multinationals like Ford have to adhere. Ford also has to identify areas where they can engage in international trade agreements between United States and other countries to trade and invest under reduced tariffs, import quota and reduction of other trade barriers (Duncan, Jancar-Webster & Switky, 2008). 3.0. How countries/companies develop within a developmental framework In order to establish international business, countries or organizations have to understand their potential investment areas in terms of the existing political systems, the different legal systems, and the political and legal aspects and government-business trade relations that affect international business (Czinkota, Ronkainen & Moffett, 2009). Basically, countries are entitled to protecting the welfare of their people and companies especially from exploitation by foreign companies. However, multinational companies in any country can propose changes to trade policies for the interest of the nation and their interest. While governments establish rules and regulation founded on political and legal philosophies, they have to ensure that they do not develop rules and regulations that prohibit foreign companies but that regulate their operations to protect consumers and local firms. 4.0. Economical and political implication of international business 4.1. Economic implications of international business International business is affected by globalization which unifies the universal economic order through minimization or eradication of operation barriers like export fees, tariffs and quotas on imports (Geiersbach, 2010). Such reductions result to elevation in material wealth, goods and services. For small companies, international business contributes to their growth and competitiveness. In addition, international trade result to the integration of regional economies through business, haulage and communication through the process of economic globalization (Geiersbach, 2010). Economic globalization results to the incorporation of national economies to the universal economy through foreign direct investment, trade, capital flow, and distribution of technology. The development of multinationals like Ford Motor Company, have contributed to the increase in agents of coordinating international economic through their ability to innovate and produce new services and goods to the market; provision of the capacity to utilize technological advances globally; and depiction of worldwide harmonization of management especially since Ford uses standardisation approach (Geiersbach, 2010). 4.2. Political implications of international business Apart from globalization, multinational firms are required to abide by the domestic regulations and rules of the nations where they operate. Multinationals are expected to understand the extensiveness and complexity of political systems of the countries they intend to operate by understanding the role of the government and the rights of individuals and the group (Geiersbach, 2010). When in a foreign nations, multinationals result to the maintenance of stability as a way of retaining foreign investors and attracting others. In some cases, the foreign investors led the government to protect its industries for national security purposes to avoid negatively impacting imports and exports. Some of these industries are telecommunication, infrastructure, and defence. In addition, Geiersbach (2010) asserts that international business causes governments to tend to protect its young industries from exploitation by multinationals through development of rules and regulations in favour of young domestic firms at the expense of multinationals. 5.0. The impact of the global movement of factors of production on international business International business comes with the movement of money, labour and capital among others from one country. The most common forms of factors movement are foreign direct investment, capital transfers, and immigration. According to Geiersbach (2010), multinationals offer incentives of higher real wage for labour across borders which increase the desire of employees to migrate to other countries (Czinkota, Ronkainen & Moffett, 2009). As a result, brain drain is experienced as some nations have scarce labour while others have abundant labour. Countries with low labour continually raise incentives until a time when incentives do not require employees to move. Multinational companies are also responsible for backward integration especially in the case of oil industry. The multinationals move to oil rich countries and extraction and production is carried out by subsidiaries in the host nation while processing operations are carried out in the Western industrialized nations. In addition, Czinkota, Ronkainen and Moffett (2009) reveal that maquiladoras firms make use of raw materials in a foreign land to produce goods and parts which are then exported back to the United States or parent nations while the workers are paid lowly. Foreign direct investment results to the partial control of a local company by foreign company resulting to lose of control by local companies, and manipulation by foreign investors through conglomerate integration (Czinkota, Ronkainen & Moffett, 2009). Technology transfer, like in the case of Ford product standardization, is responsible for foreign investors improving and innovating superior products than local companies which feel threatened while causing loses of jobs for workers. For instance, in the mid-1990s, China experienced technology transfer from America and instead of opening up to allow other nations to trade with it, China required multinationals to localize technology and eventually become competitive (Czinkota, Ronkainen & Moffett, 2009). For instance, Microsoft was require to develop windows 95 with local partner or have it banned while General Motors brought parts joint ventures to China to beat Ford. 6.0. Role of knowledge, communications and creativity on success of international business Knowledge is an essential aspect of any firm since it influences the rate of internationalization of that firm especially market and technological knowledge. Through their international operations, organizations acquire knowledge and experience on a specific market in terms of competitors, business market conditions, clients, and government knowledge through rules and norms. With such knowledge, Ford Company Product development team manages to improve and advance their operations for the global market by incorporating consumer needs satisfactorily (Kasaab, 2008). Apart from market specific knowledge, multinationals accumulate knowledge that is nonspecific and therefore transferrable to other markets. With the right knowledge, creativity and design are essential for organizational innovativeness. Design is responsible for commodity factors like durability and style which serve better in attainment of product demand as compared to price. In addition, creativity and design assist in the establishment of organization image, reputation and creation of loyalty to a brand (Kasaab, 2008). For the consumers, creativity results to the availability of improved product and higher variety of commodities resulting to increased sales. International businesses must embrace communication of information through written, spoken, visual or electronic means. Communication for multinational companies results to the promotion of stronger decision making and strong relationships in business which translates to faster solving of problems and untimely warning of prospective problems. In addition, effective communications enable multinationals to enhance their professional image, engage employees better, and establish stronger connections with stakeholders. However, globalization is a major challenge to communication in organizations given the presence of cultural and language diversity (Gillon & Pearson, 2004). However, the minimization of distractions to effective global communications is achieved through promotion of respect for workforce diversity and adopting on-the-job training to build communication skills. 7.0. Discussion and analysis According to Kasaab (2008), Ford Motor Company operated under individualism after inception where most brands, vehicle platforms and models bore little, if any, resemblance to each other in its North, Central and South America, and Asia Pacific markets. For each market, the company had its individual exclusive systems of merchandise development and manufacturing dealers and processes. After 2008, the company adapted a One Ford mantra that assured to establish new self-motivation. The establishment of one Ford Global Product Development System or GPDS was intended at attaining cost-effective expansion by making the finest exploitation of human resources and every potential economy of scale (Kasaab, 2008). The GPDS implied that Ford Motor Company would operate under a Global Strategic Standardization. Kasaab (2008) reveals that standardization at Ford is achieved through operation of the company as one worldwide team under one goal and product where a single template of design, engineering and development of universal Ford vehicles is used (Kasaab, 2008). Instead of acting from separate entities, Ford has one team of product development which oversees the development of all products globally like the Fiesta, Ranger and Focus. In order to suit all market needs with the same product, Ford is said to have adapted a strategy that requires product excellence through fuel economy, interior console, driving quality, safety, convenience and design technologies and features. Global product strategy came with the global DNA that defines how Ford products smell, sound, feel and drive thereby guaranteeing Ford customers of consistent engineering and development both at supplier partners and within the team at Ford (Kasaab, 2008). The attainment of GPDS is possible with observance of effective communication of processes and deliverables such that all Ford affiliated agencies are on the same page, and the presence of strong leadership team (Kasaab, 2008). In addition, Ford makes use of technical competency and international experience to successfully develop satisfactory global products. As a result, GPDS has made it possible for Ford to utilize global resources to develop global merchandise that meets the tastes and preferences of people. Through standardization, Ford is also able to obtain the latest technology level into all markets, allot costs through economies of scale and facilitate affordability (Kasaab, 2008). 8.0. Conclusion Despite, the ongoing debate on standardization or individualization approach to international business the best solution is dependent on the needs of a company and its international business intentions. The paper has discussed the development of global business strategy and handling standardization with particular interest in Ford Motor Company. The discussion has focused on how Ford Motor Company responds to factors related to international business development. In order to remain effective, Ford has to ensure that its standardization strategy does not overlook the specific consumer pressure from all its markets and produce products that are universally acceptable. In addition, Ford has to observe global competition levels and ensure that its products are developed from product performance policies so that there exists a competitive advantage or a competitive disadvantage is accurately corrected. In order to ensure that the dealers and customers have access to the right information, Ford has websites from which frequently asked questions are answered to create a satisfactory customer experience and inform dealers. Ford also embraces technology through a Product Development team that is obliged to the engineering of all Ford products globally. In addition, Ford Company values knowledge, Communication and creativity for the establishment of its competitive advantage over organizations like general motors. In order for its standardization strategy to remain successful, Ford has made sure that across all its markets, communication is embraced such that all needs are well understood by all. Using the knowledge and experience from numerous markets, creativity has been used to develop competitive and globally satisfactory customer products which have promoted the company’s profitability. 9.0. References Czinkota, M. R., Ronkainen, I. A. and Moffett, M. H. (2009). Fundamentals of international Business. London: Wessex Publishing. Cisco Internet Business Solutions Group or IBSG, (2007). Ford’s innovative Customer Relations Programs Increase Owner Satisfaction and promise 20 percent Reduction in Annual savings. Retrieved from http://www.cisco.com/web/about/ac79/docs/wp/Ford_CS_1119.pdf Corporate.ford.com (2013). News Center. Retrieved from http://corporate.ford.com/news-center/press-releases-detail/pr-farley2658-demographic-shifts-37864 Duncan, W. R., Jancar-Webster, B. and Switky, B. (2008). World Politics in the 21st Century: Student Choice Edition. Boston: Houghton Mifflin Harcourt Publishing Company. Economy Watch (2010). Government policies on Indian Automobile Industry. Retrieved from http://www.economywatch.com/indian-automobile-industry/government-policies.html Ford (2008). Ford Motor Company business plan. Submitted to the senate banking committee. 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