International Strategic Management the of AllSmile - Case Study Example

International Strategic management – the case of AllSmile Q1. Analyse this industry using the 4C’s model. Does your analysis suggest that this industry is moving either to globalization or localization? To what extent does this analysis inform your recommendations to the board? Marketing strategies of firms around the world has to be continuously revised and updated in order to meet the demands of the customers that tend to change continuously. Towards this direction, it is noticed by Samjee (2008, 3) that ‘numerous changes in the global business climate have intensified global competition through new forms of competition as well as the addition of new competitors’. On the other hand, firms of each particular industrial sector have to align their marketing strategies in accordance with the characteristics of the specific sector but also the position of their competitors. Specifically referring to firms operating in the pharmaceutical industry White (2006, 175) noticed that ‘the pharmaceutical sector regularly forms alliances, partnerships, and joint ventures with kindred industries such as biotechnology, diagnostics, health care, and information services’. In other words, firms operating within the pharmaceutical industry should carefully review their marketing strategy as the qualities, the effectiveness and the safety claimed (through the relevant marketing messages) can have a significant effect on consumers (patients) around the world. The development of consumer-directed advertising has helped towards the improvement of the marketing campaigns of pharmaceutical firms around the world (referring not only to the qualities of the products advertised but also to the effectiveness of these products). Moreover, consumers can be better informed on the solutions available for the treatment of a specific disease. Regarding the specific issue it is noticed by Holtz (1998, 199) that ‘the increase in consumer-directed advertising has helped to foster a health care atmosphere in which it is the patient, and not the medical practitioner, who initiates a discussion regarding possible drug therapy’. The importance of consumer-directed advertising in the pharmaceutical industry has been also highlighted by Wang et al. (2004). The above researchers referred to a specific form of advertising, the 4-C model which has been found to refer mainly to the following issues: ‘First, what the customer want should be sold; second, enterprise should take every efforts to decrease the cost of fulfilling the customers demand; third, enterprise should take every efforts to give convenience to customer for purchasing’ finally, communication with customer is more important than promotion’ (Wang et al., 2004, 4). The above model can be used in order to evaluate the effectiveness of marketing strategies applied by Allsmile especially regarding the targeted market (the Latin America). A short overview of the firm’s current marketing strategies (taking into consideration the above presented model) can lead to the assumption that the specific firm is moving continuously towards the globalization. The above assumption is proved by the fact that most of the firm’s strategic plans are based on the satisfaction of the customer and the improvement of the communication between the customer and the firm. In this context, it should be expected that the firm’s plans regarding the expansion of its activities in the targeted market (Latin America) would be successful if current strategic plans would continue to be applied across all organizational sectors. [493 words] Q2. Apply Porter’s National Diamond model (Porter, M.E. (1990) The Competitive Advantage of Nations) to the analysis of ALLSMILES home country (the United States of America). To what extent does this analysis further inform the rationale behind the organizations current and proposed internationalization strategies? Briefly outline the limitations of this analysis. The use of Porter’s National Diamond model (see Figure 1, Appendix section) is necessary in order to evaluate the business environment in the country of origin (USA) and how this environment could affect the success of the attempted entrance of Allsmile in Latin America. In the literature the value of the above Model has been extensively supported at the level that the identification of the strengths and weaknesses of a particular market is considered as necessary in order to estimate the level of success of local firms if deciding to enter the international market. On the other hand, it is supported that ‘a nation’s prosperity depends on its competitiveness; competitiveness is rooted in a nation’s microeconomic fundamentals—the sophistication of company operations and strategies and the quality of the microeconomic business environment in which companies compete’ (Harvard Business School, 2008, online article). In accordance with the above, in order to decide on the potential success of the firm’s specific initiative – entrance in the market of Latin America – of Allsmile, we could identify primarily the competitiveness of USA as it can be evaluated through the examination of all the elements presented through the Porter’s Diamond Model. The examination of the above model in relation with the US market, can lead to the following assumptions: a) currently, the entrance in the market of Latin America is considered to be a rather risky decision taken into consideration the oil shocks and the continuous changes in exchange rates (chance element in Porter’s Model); b) the cost related with the relevant effort of Allsmile will be rather low (cost of land, energy and transport in Latin America) – factor condition in Porter’s Model; c) the demand of the market for pharmaceutical products is high (Demand conditions in Porter’s Model); d) the firm’s strategies regarding the specific initiative will be carefully reviewed and tested in order to avoid any failure (or to achieve a limitation of potential failures as possible) – Firm strategy element of Porter’s Model and e) There are several industries in USA that could support the firm’s operation in Latin America (Related factor in Porter’s Model). Finally, it should be noticed that the USA government strongly supports any relevant initiative of its firms within the international market. In the case of Allsmile, its effort to enter Latin America is expected to be supported by the USA government as the company has proved through the years that it can respond to the demands of such an initiative covering the major part of the relevant cost and appropriately protect the interests of both employees and consumers worldwide. [430 words] Q3. In terms of the internationalization process develop, in outline form, suitable international market entry strategies. You should justify any future Foreign Direct Investment you anticipate (over the next 5 years). In order to decide on the appropriateness of a specific foreign direct investment strategy we have to proceed primarily to the identification of the conditions of the market involved and their evaluation taking into consideration the firm’s characteristics and its potentials for growth both in the short and the long term. Regarding this issue, Azemar et al. (2008, 85) noticed that ‘the elasticities between FDI and its determinants vary considerably with the level of host country development’. The above researchers have used data related with the location plans of Japanese firms for a particular decade (1990 up to 2000) and came to the conclusion that corporate tax is a criterion that can influence a firm’s choice in order to enter a specific market. In any case, there are many elements that need to be taken into consideration by firms that seek to expand their activities within the international market. The so-called institutionalization is taken place within the countries that are interested in attracting the foreign capitals. The above procedure is found to refer to a series of steps which have been examined in the literature and the following findings have been revealed: ‘institutional processes that legitimize more effectively through the cognitive and normative pillars (e.g. educational attainment, bilateral investment treaties, privatization, and political uncertainty) are better indicators of inward FDI than those that legitimize primarily through the regulative pillar (e.g. tax reform, trade reform, and financial account liberalization)’(Trevino et al., 2008, 118). In accordance with the above, the countries (most commonly the developing ones) that need to attract foreign investors proceed to specific plans taken into consideration the needs of their economy. It should be noticed that in most cases schemes that have been already used in the past and have been proved to be effectively are preferred when planning the restructuring of a country’s market in order to respond to the needs and standards of foreign investors. Regarding the particular market of Latin America – targeted market for Allsmile – it has been revealed that ‘cross-border investment has been a large part of merger and acquisition activity in the Latin American banking sector; Spain and the United States have been the largest investors, participating in almost 70% of the total transaction value’ (Ortiz et al., 2006, 419). The above study refers especially to the banking sector in the particular region; however in the case of pharmaceutical industry the above mentioned method of FDI, i.e. mergers and acquisitions, should be also considered as appropriate. In other words, merger and acquisition could be employed by Allsmile in order to enter the Latin America market; however, appropriate measures should be taken by the firm in order to minimize the effects of macroeconomic differences (as a result of the cross-border commercial activity). In accordance with the above, foreign direct investment in Latin America would be profitable only under specific terms and conditions; all parameters related with the region’s particular macroeconomic conditions should be taken into consideration by Allsmile before attempting any investment on any of the region’s countries. [503 words] Q4. Briefly advise the board on how the companies Human Resource Management (HRM) strategies should be developed to ensure that home country staff can be effectively deployed in the selected region. In order for the operation of the firm’s branches in Latin America to be successful (both in the short and the long term) it is necessary that home staff is appropriately prepared to work in the firm’s establishments in the above region. At a first level, a series of methods (including training and increased rewarding) is available to the firm’s managers in order to proceed to the successful assignment of expatriates in the firm’s branches in Latin America. However, specific issues should be taken into consideration when planning and applying the relevant project (preparation and assignment of expatriates in Latin America). Regarding this issue, it is noticed by Perez et al. (2005, 1320) that ‘selection, training, and performance evaluation costs’ should be taken into consideration when designing the firm’s HR policies related with its branches in Latin America. It should be mentioned that the differences in culture between the local population and the expatriates are expected to have an influence on the performance of the latter, for this reason, appropriate preparation should be offered to the firm’s expatriates in order to get familiar with local ethics and culture. The specific issue was examined by Leung et al. (2003, 85) who examined ‘the major human resource functions in International Joint Ventures (IJVs): recruitment, compensations, performance appraisal, training and development, and exit’ and came to the conclusion that ‘the Chinese and the foreign partners often diverge on what constitutes a legitimate justice rule and criteria upon which these rules are applied’ (Leung et al., 2003, 85). The above study refers especially to the relationship between expatriates in China and local managers/ administrators; however, it could be equally applied in the case of expatriates in Latin America. In fact, it could be stated that the relationship between the country of origin and the host country is a crucial one – referring to the potentials for success for the foreign investors entering a specific developing market. The above issue should be examined in any case that a firm is interested in entering another market. In other words, the host country can have a strong influence on the HR policies applied on foreign firms that enter its market; however, there is also a different aspect: foreign firms try to apply their own cultural characteristics without pay particular attention on the local ethics and culture (at least at the first years of their establishment in the specific market). In the case of Allsmile both the above views should be taken into consideration when designing the firm’s HR policies regarding the firm’s branches in Latin America. Strong pressures would be expected – in accordance with the above – on the various operational activities of the firm in the specific region; local culture and ethics should be respected in any case and for this reason the firm’s expatriates in Latin America should be appropriately prepared before their assignment in the above area. Even after their assignment they should be offered the necessary support (throughout their work in the relevant region) in order to meet the challenges set by the local social and cultural trends. [513 words] [Total: 1939 words] References Azemar, C., Delios, A. (2008) Tax competition and FDI: The special case of developing countries. Journal of the Japanese and International Economies, 22(1): 85-108 Ferner, A., Quintanilla, J., Varul, M. (2001) Country-of-origin effects, host-country effects, and the management of HR in multinationals: German companies in Britain and Spain. Journal of World Business, 36(2): 107-127 Harvard Business School (2008) National Competitiveness, online, available at http://www.isc.hbs.edu/econ-natlcomp.htm Holtz, W. (1998). Consumer-Directed Prescription Drug Advertising: Effects on Public Health. Journal of Law and Health, 13(2): 199.-221 Katz, M., Rabin, K. (1993). Prescription for New Product Introductions. Public Relations Quarterly, 38(1): 12-18 Leung, K., Kwong, J. (2003) Human resource management practices in international joint ventures in mainland China: a justice analysis. Human Resource Management Review, 13(1): 85-105 MindTools (2008) Porter’s Diamond, online, available at http://www.mindtools.com/pages/article/newSTR_92.htm Ortiz, J., Arbelaez, H., Jeffus, W. (2006) Cross-Border Investment in the Latin American Banking Sector. International Finance Review, 7: 419-438 Perez, J., Barber, J. (2005) When are international managers a cost effective solution? The rationale of transaction cost economics applied to staffing decisions in MNCs. Journal of Business Research, 58(10): 1320-1329 Samjee, S. (2008) Global marketing effectiveness via alliances and electronic commerce in business-to-business market. Industrial Marketing Management, 37(1): 3-8 Trevino, L., Thomas, D., Cullen, J. (2008) The three pillars of institutional theory and FDI in Latin America: An institutionalization process. International Business Review, 17(1): 118-133 Trevino, L., Mixon, F. (2004) Strategic factors affecting foreign direct investment decisions by multi-national enterprises in Latin America. Journal of World Business, 39(3): 233-243 Wang, K., Yao, J. (2004) A Comparative Study on Marketing Mix Models for Digital Products, [online], available at http://www2.cs.uregina.ca/~jtyao/Papers/wine273a.pdf White, A. (2006) Why We Need Global Standards for Corporate Disclosure. Law and Contemporary Problems, 69(3): 167-194 Appendix Figure 1 – Porter’s Diamond Model, 1998 (source: http://www.12manage.com/methods_porter_diamond_model.html) Read More