The Strategy of International Business - Research Paper Example

The Strategy of International Business 1. Centralization and Decentralization Introduction Any organization requires strategic and operational decisions. Scholarly research depict that decentralization and centralization entail two opposite ways of transferring decisions with aim of changing the organizational structure of the organization. Centralization is the process in which one personnel becomes the only person in authority. The highest person in authority makes all the decisions and channels them down to those in lower levels. In essence, information, knowledge, and ideas are always concentrated at the top. Centralization in an organization involves many tiers with the span of top managerial control being broad. Decentralization in an organization entails distribution of decision-making process within the organization, where managers at different divisions in the organization making decisions relating to their sphere of responsibility. This ensures distribution of responsibility and work within the organization thus making work easier. This paper discusses at length the benefits and shortcomings of both centralization and decentralization and their influence on today’s international company. Some of the advantages that come along with centralization of authority include reduced costs. This is possible since the standardized procedure and methods do not really require more specialists or even more departmental machines and equipments. Most importantly, reduction of costs in any company helps in boosting the company’s economy thus leading to its subsequent success. Another advantage is uniformity in action due to central administrative control. Uniformity takes place when the same executive ensures supervision of work within a particular office having the same type of office equipments thus ensuring a uniform performance of activities. Centralization in a company encourages and consents personal leadership. This ensures that one person becomes the centre of authority. Introduction of personal leadership facilitates aggressive marketing, quick action, and attainment of pinpointed objective or purpose. Moreover, due to the uniformity in action, centralization also leads to improved quality of work. This becomes possible by the aid of better supervision, improved machinery, and standardized procedure. In addition, centralization in a company permits adaptability and flexibility of the organization due to changes in circumstances. On the other hand, despite the advantages that exist in centralization, it also has its associated disadvantages. Some of these pessimistic aspects include delay in work and performance due to loss of person-hours because of record transmissions to and from the central office. Decision making at most times becomes slow ultimately resulting to delays in office work. Centralization has completely no privacy since orders and decisions arise from one source and conveyed to all. Moreover, slackness in work builds up in the absence of better supervision and work control this results to remote control of work as executives are under heavy pressure of work. The associated advantages of decentralization in an organization comprise distribution of work- load of top executive. Since the authority is delegated, the executive is able to share his burden with others at lower levels thus basing his concentration on the future of the organization. Another advantage is increased motivation and morale within the organization because of the delegated authority. In addition, decentralization results to greater efficiency and output due to emphasis on caution, care, and enthusiastic approach to work. Decentralization leads to diversification of activities leading to creation of new job opportunities. This becomes possible as new managers are entrusted with new responsibilities and assignments. Decentralization emphasizes on better co-ordination of operations facilitating to effective control and quick decision-making. However, decentralization also has disadvantages that include more costs associated with duplication of equipments and functions. Since decentralization is quite costly, many small organizations find it hard to adopt the system. Moreover, specialization suffers a lot since everyone becomes jack-of-all-trades with no master. Decentralization offers no uniformity in action because methods and routines differ within the various divisions in the organization and departments. Due to the diversity in work, decentralization requires more specialists and this reduces the economy thus contributing to great losses within the company. The international company of today is quite affected by both decentralization and centralization. In relation to centralization, management of an international company becomes quite challenging. Though having only one personnel in leadership is advantageous, it becomes hard for the executive to manage all the decision-making processes and meet the challenges of the company. This results to slowness in work and thus leading to low out put. On the other hand, decentralization in an international company in the marketing world today offers largely a lot of advantage since there is often distribution of work and challenges within the company. Decisions made and work becomes easier due to increased work force. This provides the company with an opportunity to enhance economic growth and increase in its profits. In conclusion, it is important to note that both centralization and decentralization play a great role in the modern world of business. What matters is the size and extent of Business Company in that centralization becomes of much importance to small companies due to simple management operations and less work force. Decentralization on the other hand favors diverse business companies that require assistance in the management operations and division of labor. 2. Value chain Introduction Over centuries, effective management of companies, precisely international, has failed ultimately leading to the entire organizational failure. Managements have worked tirelessly to realize positive results by employing several strategies. For instance, value chain, a concept discussed by scholar Michael Poster has been employed extensively by companies in efforts to meet both their long and short-term goals. According to porter, this concept comprises of several activities that are used by the organization to create value for the organization’s clients. This question will analyze in depth three activities within value chain that international organizations use to realize effective management. As stated in the introduction, these activities play crucial role in the process of realizing primary function of the organization. The first activity is procurement, which entails all the activities undertaken by the management to acquire all the resources that are beneficial in the process of it operation. For instance, in a sells organization, say coca cola, all the raw material that is required to make the final product must be purchased. This is because without these final products, clients will not have any product to purchase. The process of procurements might not be as simple as it seems. Arguably, it requires specialists who can negotiate for prices after finding vendors. Therefore, if any international company undertakes this process effectively, the entire activities will have chances of flowing effectively and thus effective management might eventually be realized. The second activity within the value chain that would play a critical role in assisting for the effective management of organization is Human resource. According to business analysts, human resource is the backbone of every organization where success is an option. As the process that entail the entire process of man power produce results, effective management will be realized only if this activity is properly implemented. These process include the process recruiting new staff, developing them, ensuring that they are motivated, and rewarding their efforts. As such, it is therefore important for international organizations to ensure that the process of recruiting new staff is free and fair. This includes undergoing a through interview that will ensure that those recruited as well qualified for the job. Take for instance an international organization like Coca Cola the processes of realizing the final product to ensure that customers are satisfied is complex. It therefore calls for an individual who is competent enough to ensure that nothing is a mess. Many organizations have failed to realize effective management ultimately failing to meet client’s needs due to failure in the human resource management. The fact that every individual is a momentous source of value calls for proper operation in the HRM department. Worth noting, organizations should develop a clear merit, which is marked by excellent human resource practices. Technological development is another factor that cannot be left out in the process of developing an integrated business strategy through effective management. As ….puts it, this activity includes all the processes that are key in trying to manage and process information and working towards protecting the knowledge base of the company. As many have put it, technology is ever evolving. As such, not any organization will succeed if left out by such advancement. A good example is the computer era. International organizations have incorporated this technology to market with the aim of selling their products online without disclosing private information of the company. Through this online marketing, costs have been minimized as much as possible. If an organization uses any current technology, chances of increasing sales are high since it is easier to meet new and potential clients. All the activities in the top management should be maintained and protected from people. It is for this reason that technology development is crucial. The fact that no any technology is perfect means that any existing technology will end and easily manipulated by a new technology. If organizations are not keen to change with any development in technology, private information might be disclosed which might lead to unmanageable losses. In efforts to develop a new strategy, technology development is inevitable to prevent such from piracy by competitors. In conclusion, it is evident that whatever activity undertaken by any organization, there is a direct link to realizing competitive activity. This is so unless an organization is operating as a monopoly, which is not a common case for international organizations. Since the common strategy is seeking to realize cost leadership, it is unavoidable to reduce the costs that are linked to the above-discussed activities of value chain. To realize this, it is important to ensure that an eye is kept on these activities if an organization develops an integrated business strategy. 3. The Strategy of International Business Introduction There are varieties of alternatives available to an organization once it makes a decision to join overseas markets. The alternatives differ in terms of risk, cost, and the amount of control that can be practiced over them. The decision on the manner in which to enter a foreign market can have a remarkably noteworthy impact on the final results. Some of the most common methods through which an organization can enter a foreign market include direct export, indirect export, and production in another country. After deciding on the export strategy, judgment is reached on the channels to incorporate. For instance, most agricultural products use such channels as distributors, agents, or involve the government. Processed material, on the other hand, use more complicated forms. It is also important to note that an organization that has decided to join overseas market comes across three essential issues; sourcing, marketing, investment and control. On the issue of marketing, the organization needs to make a decision on which segments or countries, and how to implement and manage the marketing efforts. On the issue of sourcing, the organization needs to make a decision on whether the products shall be bought or internally manufactured. As far as the investment and control issue is concerned, the organization should decide on whether to form a global partner, a joint venture, or an acquisition. The exporting strategy is the carefully established and the most oldest of the entry strategies. Exporting is a term that can be used to refer to the marketing of goods and services produced in a certain country into another. Exporting is advantageous in that it is less hazardous since manufacturing is done locally and reduces the risk of overseas operations. Moreover, it offers the exporters with a chance to learn markets overseas before investing. However, it is disadvantageous in that the exporter is at the mercies of the agents overseas, resulting to lack of adequate control. There are two types of exporters: aggressive and passive. An aggressive exporter creates marketing strategies that offer a wide and apparently clear picture of the firm’s intention within the foreign market. a passive exporter, on the other hand, waits for orders or gets some by chance. Firms can, therefore, be divided into aggressive activity, minor activity, and no activity. Aggressive firms have well defined strategies and plans such as price, product, distribution, research elements, and promotion. Aggressiveness and passiveness majorly depends on the speed of export. Exporting methods are either indirect or direct export. As far as the direct export is concerned, a firm can use a distributor, an agent, government agencies, or an overseas subsidiary. The major problem concerned with direct exporting is market information. The exporter has the task of choosing a market, looking for an agent or a representative, setting up documentation and physical distribution, as well as promoting and pricing the products. The major problem results to decisions such as certification, pricing, and promotion of the products being left at the hands of other parties. It has been argued that exporting requires a close partnership between the importer, the exporter, transport, and the government. If these factors do not coordinate, the probability of a failure is increased. Contracts between the seller and the buyer are vital. Agents and forwarders play a critical role in such activities as arranging documentation and booking air space. Indirect methods on the other hand, offer a variety of advantages such as commissions, which increase motivation, the manufacturer or exporter requires modest expertise, availability of contracts worldwide or in the operating market, as well as the availability of credit acceptance that reduces the burden of the manufacturer. The biggest indirect exporting method is countertrade. This is because competition results to more investment within the market. Countertrade can be of a variety of forms. In most cases, however, two contracts are concerned, one for delivery of supplied goods and the other for payment of imported goods. Foreign production as the third form of overseas market entry include such activities as joint ventures, licensing, contract manufacture, participation and ownership in export activities. Licensing can be described as a foreign operation method in which a firm allows another firm in a different country to utilize the processing, manufacturing, trademark and other skills offered by the licensor. Licensing is advantageous in that capital is not tied up to foreign operations, little risks and expenses are involved, and options to take royalties or buy partners are available. It is, however, disadvantageous in that there is limited participation, returns from manufacturing and marketing could be lost, and calls for considerable planning, interpretation, fact-finding, and investigation. Joint ventures are an enterprise where two or more shareholders share control and ownership over property operations and rights. This has the advantage in that there is a joint strength financially and that there is sharing of ability with a more knowledgeable partner in terms of process or technology. It has such disadvantages as lack of full control by partners, disagreements could result to poor performance, and the inability to recover capital if needed. Conclusively, having carried out all the necessary preparatory work, the potential global marketer should pick on a market strategy as well as a marketing mix. Each of the entries has its advantages and disadvantages as discussed above. The performance of an international business strategy can, therefore be either negatively or positively affected depending on the strategy employed. 4. Stages of Globalization Introduction Becoming global is one among the many goals organizations hold. Though many organizations do not realize this goal, the blame is left on the management due to poor implementation of strategies. In normal circumstances, firms pass through several and diverse stages of development before they can be classified as truly global organizations. From a typical understanding, every organization was once domestic and before being classified as international, it must have being involved in business of exports. To become fully international, joint ventures and/or subsidiaries are established. The process through which these organizations undergo are somehow complex if not properly managed and might hinder organization which are international from becoming multinational before becoming global. In this question, detailed analysis will be given on the four main philosophies that international organizations follow before being classified as global. The first stage is exports. In this stage, there is a partial involvement in the typical process of the globalization. It is during this stage that the firm starts looking for market overseas. This is made possible through links with local dealers as well as distributors. The fact that countries have diverse ideologies explains why this process is partial. In times of war for instance, countries involved have limited chances of involving themselves in trade with those at peace. A good example is during the cold war when the communist countries were hindered from involving themselves in business with the countries of western capitalist. This was as a result of the sworn enmity that existed between the countries. During this stage, the management is faced with many drawback. For instance, the fact that a has started exporting it products means that the management has to do everything in its capacity to ensure that the little exports possible are done as it maintains its domestic activities as possible. In efforts to complete this stage, high levels of losses are incurred and inclusion of unexpected expenses to ensure that its products are purchased. Know-how sales, which is second has both internal and external forces to undergo a re-valuation of the partial exports. Although during this stage there is possible increase in exports, the percentage is not as required. As such, these domestic based organizations get involved in its own activities. At this stage, there is a lot of recruitment to ensure that the manpower available can control the organizations growth. The fact that it is at this stage that exports are increasing, the management give much of its resources to ensure that enough products are availed so as to cater for the developing demand. Therefore, the domestic based organization involves itself in manufacturing of the products as well as marketing and selling the products as they seek to establish key foreign markets. However, managers are keen since the activities of this stage might bring down the organization in case the products do not move as expected. As a result, there are high chances of failure at this stage. The third stage is FDI/Joint ventures. It is during this stage when the organization starts moving to a full insider in the established key markets. If the marketing strategies developed in second stage are well implemented, the organization has to win a notable market share. As a result, the implementation needs some support from a complete business system, which includes research and development as well as engineering. To sustain this development, it is crucial for the management to replicate in the foreign market those systems and other operations that seemed to work positively in the domestic market. However, as much as this growth comes with advantages, the management is faced by challenges since there is need for more personnel and finances to ensure that the initiated oversea activities are kept in place. In the last stage of multinational towards global, there is move by the organization towards a genuine mode of operation, which is global. At this stage, the organization strike an organizational balance thus ensuring that the local customers are served as usual as well as global characters. Therefore, the organization must itself be global localized, a new orientation with a simultaneous consideration in both directions. At this stage, the management is faced by challenges of increased competition thus there is need to invest more in technology and research to ensure that the won market share is maintained. In conclusion, realizing the last stage should be perceived as a way of venturing on to new environments. Worth noting, for this organizational transition to be realized, there is need for organizations to denationalize their activities. Further, there is need for creation of a system of value shared by all the managers in every branch globally. This will help in the process of maintaining the established market structure. Though not realized by many organizations, it is the ambition of each of them to become global and meet every long-term goal. However, management must understand that this realization comes with a cost, which they must be ready to bear. Bibliography Bischoff, A. L. 2011. Porter's Value Chain and the REA Analysis as an Accounting Information System. Munich: GRIN Verlag. Mukherjee, S. 2005. Organisation & Management And Business Communication. London: New Age International. Tielmann, V., 2010, Market Entry Strategies: International Marketing Management. New York: GRIN Verlag. http://www.krannert.purdue.edu/centers/seas/Research/Globalization/sld006.htm Read More