International Expansion into an emerging market - Essay Example

Formulation of strategy is sometimes defined as establishing, a proper firm environment fit. The business environment (external) has broadly two components viz, business opportunities and threats to business. The external forces (Macro) are generally; more uncontrollable than the micro forces (internal) when the macro environment is uncontrollable, the success of a company/ organization depends on its adaptability to the environment. A report (quoted in Hill, 2003, pg 491) by Ravenscraft and Scherer concluded that over 75% of acquisitions fail.

Two of the main reasons are a (Hill, 2003, pg 492) "clash between the cultures of the acquiring and acquired firm"and secondly, a failure to (Hill, 2003, pg 492) "realize synergies by integrating the operations" of the two companies. Important macro environment factors include economic environment, political and regulatory environment, social/cultural environment, demographic environment, technological environment natural environment and global environment. The common beliefs and value systems shape the major activities of that society and structure people's perceptions of the world (Sanyal, 2001).

So planning any activity other than native country, companies need to analyze these factors also. Identification of the threats and opportunities in the environment and the strengths and weaknesses of the firm is the cornerstone of business policy formulation; it is these factors which determine the course/courses of action to ensure the survival and /or growth of an organization. The environment might present many opportunities, but a company might not have the strengths to exploit all the opportunities.

Similarly; sometimes an organization will not have the strength to meet the environmental threats. If an organization, thus finds that it will not have the competence to survive in a particular business for which an organization is most competent. Global restructuring of manufacturing industries is the crux of globalization. FDI inflows into developing countries in recent years have been seen into manufacturing. One major channel through which inflows of foreign capital, of foreign direct investment (FDI) in particular, affects labour markets in developing countries (Fischer, 2003).

Indian economic reforms: The economic liberalization is ushered in India in 1991 drastically changed the business environment. The liberalization, by substantially expanding the scope of private enterprise and removing the entry and growth restrictions, has given a substantial leeway to private enterprise to decide the portfolio strategy. Changes in the business environment across the world may change the industrial scenario of nations. The environmental opportunities and threats should be evaluated in the light of the strength and weaknesses of