In business marketing, ambition, value proposition, and content are inseparable. They are aimed at ensuring that the consumer can see how the business functions and is managed (McKeown & Durkin, 2017). In this paper, these strategies are used to advertise the city of Harpers Ferry, West Virginia. Ambition allows any business to remain successful and make important decisions (Ramdani et al., 2019). Thus, buyers will be able to believe in what is being offered to them, ranging from goods and services (To et al., 2020). Harpers Ferry’s ambition is to become one of the region’s major tourist destinations, which will attract more people and expand the budget. In addition, the city aims to increase the population by inviting new residents to permanent residence. The ambitious Harpers Ferry wants to increase the number of excursions and activities available to meet the different needs of visitors.
The value proposition of the city is vast and varied, which is of interest to people. This strategy is about making a conscious choice to be better and more interesting. Harpers Ferry offers all kinds of employment to new residents of the city through more jobs. People can devote themselves to the tourism industry, the cultural development of the city and the development of new excursion routes. Moreover, the city is located near the national historical park, where a sufficient number of jobs are offered. For tourists, Harpers Ferry has prepared active water and hiking activities and cultural and historical attractions.
As for the content, Harpers Ferry presents a lot of entertainment for all categories of tourists. Active people can devote themselves to rafting or kayaking. At the same time, people aimed at a more cultural holiday will be able to visit a large number of museum expositions. Thanks to the national park, the city is distinguished by a picturesque picture available in any area. This will invariably become a charge of good mood for any resident or tourist.
References
McKeown, N., & Durkin, M. (2017). The Seven Principles of Digital Business Strategy. Business Expert Press.
Du (previously Emirates Integrated Telecommunications Company) is one of the largest telecom operators in the United Arab Emirates. In 2006, the company entered the market dominated by Etisalat to prevent the telecom monopoly in the country (“Our story,” n.d.). Du utilized a hybrid strategy that combined a competitive price offering and a broad range of provided services. In other words, the company achieved a substantial competitive advantage by implementing an intelligent business plan. Since 2006, Du has been actively increasing the quality and scope of its products, which has allowed the company to become one of the largest telecom providers in the UAE today.
Corporate Vision
A thorough understanding of the organization’s vision and mission has allowed Du to attract a loyal group of customers by promoting endorsing values, such as transparency, honesty, and innovation. The company’s executives have established clear objectives regarding profitability and sustainability, which is essential for attracting new investors (“Sustainability,” n.d.). Ultimately, meticulous attention to corporate responsibility and ethics is a significant factor in the company’s success.
Strategic Planning
Consequently, strategic planning plays an essential role in the effectiveness of the established business-level strategy. Namely, Du has applied the Blue Ocean strategy, implying the new demand generation and intelligent market segmentation (Kyrylov et al., 2020). Since Etisalat is the only major competitor, Du can utilize the Blue Ocean model to divide the market and take the specific niche in telecom operations. The company achieves this objective primarily by providing flexible options in mobile, internet, and TV plans.
Conclusion
In summary, the business-level strategy adopted by Du has been the most crucial factor in the company’s success since 2006. The previous monopoly by Etisalat was a significant challenge for newcomers in the telecom industry. Nevertheless, the intelligent usage of market segmentation, broad product variety, and the application of the Blue Ocean strategy to divide the market have helped Du to create a competitive advantage. Ultimately, Du’s chosen business-level strategy was paramount to the company’s success, turning Du into one of the largest telecom providers in the UAE today.
References
Kyrylov, Y., Kyrychenko, N., Stukan, T., & Zhosan, H. (2020). Formation of enterprise management strategies and entrepreneurship training. International Journal of Management, 11(06), 793-800. Web.
In their 2008 article, David J. Collins and Michael G. Rukstad presented the concept of explaining the company’s strategy in only thirty-five words. According to the authors, one of the fundamental problems in this discussion is that managers and executives frequently have a vague understanding of their respective companies’ strategic planning (Collins & Rukstad, 2008). The solution to this issue is to analyze the organization’s strategy by breaking it down into manageable elements. To achieve this objective, Collins and Rukstad (2008) identified three critical areas to focus on in strategic statements – objective, scope, and advantage. Ultimately, the intuitive understanding of how to apply strategy is by combining the mentioned factors and implementing a specific and time-bound development plan.
Consequently, it is essential to analyze each of the strategic elements in greater detail to understand how to apply the strategy. Objective generally refers to what the company wants to achieve, but, according to the authors, it should be “specific, measurable, and time-bound” (Collins & Rukstad, 2008, p. 6). In other words, it is essential to differentiate between vague visions, such as “increase wealth,” from strategic objectives, such as “increase the market share by implementing service X in the next three months.” Consequently, scope concerns the company’s domain and emphasis on customers, geographic locations, and vertical integration (Collins & Rukstad, 2008). Managers should transparently analyze these three dimensions to determine the strategic plan for the organization and appropriately distribute available resources. Lastly, advantage is the most significant element in strategic planning that differentiates the company from its competitors. According to Collins and Rukstad (2008), it is critical that managers determine a specific competitive advantage since it is the primary means of achieving goals in business. In summary, all three strategic elements are essential since they enable a more thorough understanding of the organization’s strategic development.
The research presents international business strategy with the case of Aramex International. Aramex grew from a small local firm to a global player in the logistics and transportation business. The company considers international market as a platform for further growth.
It has used acquisition, joint ventures and franchises to grow its brand globally. Aramex experienced few challenges related to time zone, language, cultural and legal differences and capital constraints. It is recommended that Aramex must continue with further growth in international markets through acquisition, joint ventures and franchises, as well as grow the business in the domestic market.
Introduction
Established in 1982 as “an express wholesaler to the US-based express delivery companies” (Aramex International 2014a), Aramex has grown from a local company to a global brand. The company has changed delivery services globally by providing “express, domestic, and freight forwarding services within its operation” (Aramex International 2014a).
Aramex went public in 2005. As a result, the company’s major objective is to deliver increased shareholders’ returns by a growth strategy that focuses on enhancing the company’s competitive ability among the main global transportation and logistics companies.
Aramex main approach strategy is based on a sustainable business model. This is obvious through its corporate culture and value creation. In 2006, the company released its Sustainability Report. Through this report, Aramex aimed at becoming the first carbon-neutral global logistics and transportation company in the world (Aramex International 2014a).
According to Aramex, sustainability management refers to “integrated development and growth of economic, environmental, and social performance in a manner that optimises value for all stakeholders” (Aramex International 2014a).
Aramex has been able to exploit free trade agreements and levelled economic conditions across the global to explore new markets. This has enabled it to compete in the global arena. Aramex depends on several factors to drive its business model of strategic growth. These market strategies entail joint ventures, acquisitions, franchises, and leveraging on resources.
The company has been able to develop reliable logistics and transportation systems that deliver successful results within its complex operations. Consequently, Aramex has been able to rely on its massive resources and global presence to deliver values to all its stakeholders.
Performance Assessment
Aramex’s approach to internationalisation/globalisation
Aramex developed from a local firm to a major global transportation and logistics solution company with many operations internationally. In the Arabian Gulf, Aramex has become the company of choice in the logistics and other related services. Aramex’s approach to internalisation involves geographical focus with certain products that enhance shareholders’ value based on the company’s growth strategy.
The company aims to repeat its model used in the Gulf region in the other parts of the global. Aramex strategy has been “connecting high growth emerging markets, such as those in Africa and Asia, to its global network” (Aramex emerging markets strategy “paying off” after another record year 2014).
According to Aramex, this strategy of promoting trade links between high growth markets has worked well in the global market. Consequently, the company focuses on acquisitions in the major trade routes.
In this regard, Aramex noted that “international express and supply chain services were the major drivers of solid revenues in its major geographies and high performing markets, particularly in the Middle East and sub-Saharan Africa” (Aramex emerging markets strategy “paying off” after another record year 2014). Through geographical positioning, Aramex hopes to capture current and future opportunities in developing economies.
Aramex has concluded that Arab countries near the Persian Gulf are its key markets in addition to its new markets in sub-Saharan Africa. Markets in different geographies are responsible for the bulk of its revenues. The company pointed that its approach to link emerging markets to its global operations and hubs is effective.
Aramex’s globalisation strategies also involve franchising in emerging markets, mainly in “Africa, Southeast Asia and the Commonwealth of Independent States” (Aramex International 2014a).
Aramex’s market entry strategies
The company has depended on various market entry strategies globally. Today, Aramex claims its position among the leading logistics and transportation firms in the world.
Strategic acquisitions and partnerships have remained the major entry strategies for Aramex in certain markets and regions (Porter 1998). For instance, the company used such strategies in Turkey, Malaysia, Bangladesh and Vietnam (Aramex in strategic acquisitions 2011). Through all these market entry strategies, Aramex aims to achieve sustainable growth that creates values to shareholders.
Geographical expansion based on acquisitions in emerging markets, such as Asian countries and sub-Saharan Africa has been identified as the main pillars in the global trade (Parasie 2014). The geographical expansion strategy has ensured that Aramex gains significant presence in the US and China.
Aramex also relies on franchises to globalise its brand in emerging economies. Such a strategy has been effective in Africa, the Commonwealth of Independent States and Southeast Asia (Aramex International 2014a).
At the same time, Aramex leverages on its existing infrastructures with additional products when expanding into international markets. The company integrates supply chain management alongside document storage business into its existing portfolio in certain regions.
Aramex uses organic growth strategy to gain access to international markets. In this regard, the company capitalises on its good reputation as the best logistics and transportation company with all solutions in one location.
In addition, technology has driven Aramex business strategy by enhancing efficiency in operations, service quality, sales, business growth and profitability (Aramex International 2014b). Still, Aramex supports small businesses and uses e-commerce to facilitate growth in trading activities.
The trade limitations/barriers that apply to Aramex and how it deals with them
As Aramex evolves from its local operations into an international business with many products and services, it has faced several drawbacks. The company has used several unique strategies to counteract such barriers.
First, Aramex experienced capital constraints. Usually, getting adequate capital for local, regional and international growth strategies could be challenging for any organisation. In some cases, firms may opt for financial markets to fund such expansion ambitions.
The company used the funds to expand its regional operations. Aramex also received private funds for further expansion and exited the NASDAQ. The company launched its IPO in 2005 and raised the capital for global expansion. Today, it forms alliances and engages in acquisitions because of adequate capital.
Another challenge to effective operations that affected Aramex was time zone differences. Global business operations are difficult because of differences in time zones. Different time zones require an organisation to establish a 24-hour operation and therefore, effective management team must run the company at all times.
Schedules for real time collaboration and coordination of business activities in diverse geographical locations were difficult for the company. The farthest east and west with a large time differences were the most difficult to coordinate.
Time zone differences have presented many challenges to many multinational firms even with the development in technologies. Aramex has attempted to overcome time zone differences by dividing operations into regions. Decision-makers, however, must be available at all times to execute important decisions required.
Aramex also faced language and culture challenges. When Aramex decided to venture into global markets with several diverse languages and cultures, there were challenges associated with business laws, labour market practices, cultures and business languages. Understanding basic elements of these factors are critical for any company that seeks global expansion.
Cultures and business practices also differ significantly. Aramex aimed to avoid language and cultural difficulties by seeking joint ventures and franchises with local companies. As a result, the company was able to establish reliable partnerships and a team of professional advisers in different target markets. The company has been able to exploit many untapped markets in emerging economies despite the barriers faced.
There were also legal issues that Aramex faced in different markets (KPMG LLP 2011). Generally, states have different types of laws that control specific business operations. For instance, many countries have strict rules about individual privacy, and therefore, courier companies must observe parcels confidentiality at all times.
On the other hand, some countries have less strict laws on privacy, intellectual property rights, labour laws, civil rights groups, and environmental issues. All of these differences presented increased costs to the company as it strived to comply with legal requirements and other issues, but Aramex aimed to operate within legal provisions in different countries.
Performance Analysis
Internationalisation/Globalisation
Aramex considers internationalisation as an opportunity for the new growth phase and aggressive expansion (Aramex in strategic acquisitions 2011). The company’s senior executives claim that it has started to invest in key emerging economies.
The globalisation strategy has served the company well and therefore, Aramex considers it as a strategy for gaining significant market shares in emerging markets (Grant 2005). It aims to explore further investment opportunities in Africa and Asia.
Acquisitions, joint ventures and franchises have fulfilled Aramex’s efforts of creating a comprehensive network in Asia, Africa, the Middle East and other parts of the world. Through international ventures, the company focuses on providing comprehensive logistics and transportation services, enhancing the expansion of customer base and increasing market shares globally.
As the company increases its presence in several regions, Aramex also strengthens and complements its existing networks and operations in such regions.
Market entry
The company’s “strong cash position is ideally placed to support its development and expansion plans globally” (Aramex International 2014a). As a result, Aramex’s performance in the global market has been impressive as it continues to increase sales and profits (Aramex emerging markets strategy “paying off” after another record year 2014).
The company has focused on new markets through acquisition, joint ventures and franchises that have generated positive results and profits. Aramex’s robust business model of agile is closely aligned with its “growth strategy, making it a stable investment choice for local and foreign investors” (Aramex International 2014a).
Consequently, it can respond rapidly to unexpected events in the market. Moreover, its decentralised business model has empowered management teams to make critical decisions and respond to customers’ needs effectively.
Trade
In the year 2013, Aramex recorded an increase in sales by eight percent and net profits by 14 percent. The company’s trade and business activities in international express services supported by robust e-commerce services were responsible for the growing sales and profitability.
Aramex has benefitted immensely from its “online platform and e-commerce strategy, particularly in the retail sector globally” (Aramex emerging markets strategy “paying off” after another record year 2014). In fact, the company’s revenues increased by 23 percent in the year 2013 because of its global e-commerce trading activities (Aramex emerging markets strategy “paying off” after another record year 2014).
Specifically, this strategy has facilitated business in Africa and Asia by linking high growth emerging economies with its established businesses in other regions. Consequently, increased acquisition has become the main approach that Aramex uses in these regions to increase trade links.
Aramex has noted strong performances notwithstanding increased difficulties in international markets. The company has attributed such increased revenues to the growing international business in its major geographical regions and high potential areas, particularly in the Gulf region and emerging markets in Africa.
Aramex, therefore, aims to promote its strategy with the purpose of seizing current and future trade opportunities across several emerging economies.
The company has noted that its core markets are found in the Persian Gulf. These markets contributed the most revenues relative to other regions. Sub-Saharan Africa also recorded strong growth. Aramex asserts that emerging markets and its entry strategies of connecting emerging economies have facilitated global operations and created reliable business hubs.
Increased investment activities and acquisitions in emerging markets have contributed to strong performances noted in the company. The company executives note that they will continue to approach global markets bullishly with the aim of driving expansion plans aggressively and leveraging on existing assets, agile business model and global alliances to differentiate business activities.
Suggestions
Internationalisation/Globalisation
Aramex noted that international express and supply chain services have contributed significantly to its sales and profitability globally. In the international front, therefore, the company has been successful. Nevertheless, Aramex also aims to embrace e-commerce in its international expansion efforts.
The company must observe that e-commerce and technologies are growing fast in new economies, particularly in Africa, the Gulf region, Asia and Africa. It, therefore, must seek for talents that can implement effective e-commerce strategy and capitalise on high demands across such regions.
Aramex must also focus on the emerging business-to-consumer market in order to grow and strengthen its e-commerce business. This would result in a highly efficient platform that will establish Aramex as e-retailer in the international field (see appendix).
At the same time, the company must also continue to grow its domestic market because it experienced low growth in the year 2012 due to slow economic activities in Asia and Europe (Aramex emerging markets strategy “paying off” after another record year 2014).
Market Entry
Aramex’s market entry strategies of acquisitions, franchises and joint ventures have worked exceptionally well. The company, therefore, should continue to focus on these modes of entry to grow its brand in the international market as competitions with local firms increase. At the same time, it must focus on experiential marketing to engage new customers.
Customers will have opportunities to experience Aramex’s international express and logistics services firsthand. Hence, they will understand how Aramex’s products and services will improve their lives and businesses. The company can provide cost-free and risk-free services for new customers and other existing customers to grow its market share globally.
Trade
Aramex has performed well in the international market. However, the company must seek for further acquisitions, joint ventures and franchises to grow its trade activities. Emerging markets in sub-Saharan Africa and Asia have presented better business opportunities for Aramex.
In addition, the company must develop its e-commerce business model to facilitate growth and establish strong links with new markets (Charnovich 2009). This should include a same day e-commerce delivery business (Aramex buys same day e-commerce delivery firm in Australia 2014). Aramex, however, should not ignore its domestic markets since it recorded slow growths at home (Banalieva and Dhanaraj 2013).
Conclusion
This researched focused on international business strategy. It used Aramex as a local company that expanded rapidly into the international market. The research has covered performances in globalisation, market entry and trade activities of Aramex, as well as challenges associated with internationalisation.
It shows that the company has utilised international business opportunities to grow its brand by focusing on emerging markets, particularly in sub-Saharan Africa and Asia, which it has considered as new emerging markets with strong potentials for growths.
Recommendations
It is recommended that Aramex should promote its e-commerce in emerging markets globally to grow its international brand and create strong links in emerging markets.
It must focus on further acquisitions, joint ventures and franchises alongside experiential marketing strategies to grow its market share, revenues and profitability. Finally, Aramex must increase its trade activities in emerging markets through e-commerce platforms and facilitate trade in the domestic market too.
Aramex International 2014b, Strategic Direction. Web.
Banalieva, E. and Dhanaraj, C. 2013, ‘Home-region orientation in international expansion strategies’, Journal of International Business Studies, vol. 44, pp. 89–116. Web.
Charnovich, J. 2009, ‘How to Maximize Technology ROI and Create and Lead Superior IT Performance’, TecExecs, pp. 1-2.
Grant, R. M. 2005, Contemporary Strategy Analysis. Hoboken, Blackwell Publishers, New Jersey.
KPMG LLP 2011, Succeeding in a Changing World: International Strategy. Web.
Parasie, N. 2014, Dubai’s Aramex Earmarks Africa for Future Growth. Web.
Porter, M. E. 1998, Competitive Advantage: Creating and Sustaining Superior Performance: New Introduction, Simon and Schuster, New York.
Appendix
Figure 1: Growth of e-commerce in the region, source (Aramex International 2014).
Diversification is the main strategy used by many corporations in a very competitive market. Many companies including Hewlett Packard (HP) participate in diversification of products and service. The main reasons for diversification are:
Growth: the computer market is currently flooded and there is an intense competition. This has resulted in most company’s escaping the stagnating market in hope of capturing other better markets.
Risk management strategy: companies diversify to reduce risks.
Increased sales and profits: HP Company seeks to increase its market share and maximize on its profits.
Economies of scale: diversification enables companies to enjoy economies of scale and this drives production costs down.
HP diversification strategy
To indentify HP diversification strategy, it is imperative to analyze the major products and services offered by the company. They include computer sale, mobile technology, recycling, energy efficiency and providing software solutions. Key HP segments and services also indicate the level of diversification. These are the following:
HP
HP software and solutions
HP Pro-curve
HP services
Enterprise storage and service
Personal system groups
Printing and imaging
Financial services section
Diversification strategies
At the corporate level, HP has global expansion strategy. The company expands regionally and internationally. This is referred to as the cross border strategy and it lowers production cost and increases sales worldwide. At a business level, the company has several diversifications.
Some of the diversifications are related to the product that HP specializes in and they are just seen as a growth in the same field. These products include manufacturer computer parts, storage devices and other HP services that are related to the computer industry.
HP has also diversified to other products that are not related to their core business. The company is currently diversifying to produce software products, offer financial services and solutions as well as investing in the production of mobile phones.
It must be noted that venturing new markets outside the company’s field of specialization is quite challenging as the company has to compete with experts in this field and the already established companies. For example, HP competes with IBM in terms of software development and with Nokia in the mobile phone technology. One strategy that HP uses is the acquisitions of companies already dealing with these products.
HP has in the recent past acquired companies dealing with hardware, software, services and those dealing with mobile devices. Some of the companies acquired are 3COM Computer Networking, EDS Information Technology Consulting, OPSWARE Inc, Compaq Personal Computers among others.
Impacts of diversification
HP diversification process has been beneficial to the company. The diversification process has increased the sales and profits margins of the company. The company develops one strong brand instead of having individual brands and hence diversification strengthens the HP brand.
HP BCG matrix
The Boston Consulting Group (BCG) matrix classifies products and services of a given business and enables the managers to determine which products should be given priority over the others. The BCG matrix has four sections representing; cash cow, dog, star and question mark.
The cash cow represents products with low growth but high market share, the star represents products with high growth and high market share, the dog shows products and services with low market share and low growth while the question mark represent products with high growth rate but low market share. The BCG matrix for HP is shown in figure 1 below.
Ramada Plaza Hotel is a hospitality facility located in Newark, New Jersey. The hotel was established in the early 1980s, and is historically acknowledged for its role in housing plane crashes victims between the 1990s and 2000s (“Ramada Worldwide: Ramada Plaza Newark Liberty International Airport” par. 2). Ramada Plaza Hotel is strategically situated due to its proximity to the Newark International Airport. The business is currently rated as a 2-star hotel with an accommodation capacity of 178 rooms. It is believed that the lodge registers a stand out financial performance throughout any given year.
Business Strategy
Porter’s four competitive strategies
According to Porter, there are four competitive strategies that an organization can adopt. These include cost leadership, low-cost differentiation, differentiation, and low-cost focus (Grant 54). The Ramada Plaza Hotel combines two strategies; differentiation and low-cost focus strategies. Using the differentiation strategy, the hotel provides unique products and services. For instance, the hotel provides airport shuttle services to its guests at no cost (“Ramada Worldwide: Ramada Plaza Newark Liberty International Airport” par. 2).
In line with a low-cost focus strategy, the company targets a niche audience. Rather than marketing its products and services to the entire New Jersey population, Ramada Plaza Hotel mostly focuses on airport service users. As a result of this strategy, Ramada has been branded as the cheapest provider when compared to other facilities within the same category.
Porter’s five forces analysis
Coined by Porter, the Five Forces Analysis is centered on the idea that five critical forces, which often determine an organization’s competitive power, exist (Porter 27). Foremost is supplier power. The vast range of products and services provided by the hotel implies that Ramada is served by a set of suppliers. A good example of such suppliers is the internet provider for wireless connections. The hotel does not have the ability or the capacity to provide for its internet needs. Therefore, it must rely on internet providers, who have the power to determine the level of price to charge for their services.
The second force is buyer power. As it has been determined previously, the company targets a niche market implying that it only serves a small number of customers. As Porter stated, each customer presents a paramount value to a company. Therefore, the loss of any one of them may lead to significant losses (102). Inferring from this, the hotel’s customers have the ability to drive prices down meaning that they have high buyer power.
The third point of analysis is the competitive rivalry. As Porter revealed, what is essential in this case is the number, along with the capability of the competitors (33). There are several competing hospitality facilities in Newark. Among these includes the Renaissance Newark Airport Hotel and the Holiday Inn Newark Airport Hotel. These facilities are known to offer high value to their customers with a range of integrative and unique products. Therefore, the Ramada Plaza Hotel is faced with a very intensive competition.
The threat of substitution is also a significant factor. Considering that the hotel provides unique services and products to a specified niche market audience, the threat of substitute is low. Indeed, there are very few substitutes for airport service users. For instance, there are hardly any secure accommodation alternatives in Newark.
The ultimate effectual factor is the threat of new entry. To operate in the market that Ramada focus upon, it necessitates extensive resources and capital. Aside from this, it requires a host of legal formalities, and widespread advertising. Therefore, establishing and sustaining a business in this market is very expensive, often beyond the capacity of most prospective investors.
Works Cited
Grant, Robert. Contemporary strategy analysis and cases: text and cases, London: John Wiley & Sons, 2010. Print.
Porter, Michael. “The five competitive forces that shape strategy.” Harvard business review 86.1 (2008): 25-40. Print.
Porter, Michael. Competitive advantage: Creating and sustaining superior performance, New York: Simon and Schuster, 2008. Print.
Ramada Worldwide: Ramada Plaza Newark Liberty International Airport. Web.
Devising effective business strategies that improve the overall performance of an organization and its successful participation in the global market has become one of the most burning ambitions that managers in companies that intend to increase customer preference, profitability and sustain competitive advantage have assumed.
Studies point out that as a business in the local and international market is becoming more diverse and competition increasingly intense, formulating an effective business strategy has turned out to be one of the effective ways a business can exist and compete favorably.
In an oorganizational setting, the term organizational behavior is used to describe the dynamics that exist between individuals and groups in a typical workplace in addition to the operational nature of the organizations in question. There is a myriad of factors that come into play whenever people interrelate, intermingle, or work together in organizations.
These factors account for the organizational behavior issues which are significant in the day to day running of business organizations.
It is also imperative to note that the study of organizational behavior is growing in importance bearing in mind that contemporary multinational organizations are comprised of employees who have to work as cohesive teams in spite of their distinct cultural values and socio-economic and political backgrounds.
Bernardez (2009) points out that some of the practical approaches that businesses have embarked on include developing useful core competencies, value chains, supply chains, strategic directions, and competitive advantages.
As this paper examines, businesses are developing core strategies and improving on them to enhance their performance locally and globally. It is on this front that this paper analyses Haier Group, it is business strategies and how they impact on its performance.
A background of Haier Group
Haier Group is a global white electric appliance company with its Headquarter in Quingdao China (Chan 2011, p. 148). Studies indicate that the company, formerly known as Quindao Refrigerator Plant, has today established itself as a renowned brand in the whole world ranking among the top four most significant manufacturers of white goods.
In China, Haier Group is the largest white goods maker, and its various products include computers, cell phones, vacuums, televisions, microwaves, dishwashers, air conditioners, freezers, and refrigerators. Chan (2011, p. 150) indicates that its massive growth and business successes are due to the ability of its management team to make effective strategic decisions and efficient implementation of core competencies.
The company’s annual sale from over 13,000 different products it produces is approximately $8.6 billion (Chan 2011, p. 152). The company has an employee base of about 30,000 people and carries out its operations in nearly 160 countries.
In his publication, Yip (1989, p. 49) indicates that Haier Group has over the years since its inception at the beginning of 1980 developed its business in three major stages that include global expansion, diversification and developing a national reputation of quality.
On the latter, the company has implemented rigorous standards and employed total quality management systems to develop a reputation for its products such as refrigerators, and a strong brand for the company. Besides, it has diversified its offerings, expanded its products, and expanded globally.
Haier Group, internal and external factors
SWOT Analysis
Strengths
One of the critical advantages of Haier Group is its numerous sales outlets are located in different countries around the world. It is imperative to note that Haier Group over 5500 sales points and about 30 franchise stores where it distributes and sells its products to.
Due to its several joint ventures with giant companies, as discussed in the paper, the company’s ability to acquire resources and successfully expand its business to other regions has been enhanced.
The other strength the company has its product offerings that are unique and of excellent quality. Its products, such as refrigerators are built on core technology and distributed to its outlets via qualified and trained employees. The company has a unique corporate culture and offers its customers efficient after-sale services. This gives it a high reputation abroad and at home.
Weakness
One of the distressful gap that the company has is adapting to the ever-changing global market. Due to the profound changes in the worldwide market due to fluctuations in economies and the nature of its products, which are majorly traditional electronic products, the company finds it cumbersome to adapt.
Unlike its competitors like Electrolux and Whirlpool, Haier’s breakthrough in the international market is not efficient. This, in turn, makes its efficiency, output, and input relatively low.
Opportunities
Haier Company has numerous occasions in the international business arena to go out to enhance its participation in economic globalization. Being a giant company that has made tremendous advances in terms of products and services, it has more time to prepare, analyze the external environment, and set strategies for future changes.
Also, the company has competencies that include core technology, which it can use to develop more sophisticated products for the market. These products can then reach the market faster as it has both foreign and domestic business partners who are interested in acquiring and distributing its products
Threats
Like other giant companies in today’s economy, Haier faces numerous threats that affect its performance in the global market. One such threat concerns funds to acquire resources to use to improve its products and business operations.
Deficiency of funds is a threat to Haier Group as it may make it less competitive and lose its power in the market. Consequently, its equally stronger competitors will take its position in the market.
Besides, another threat is the campaign today for green and environmentally friendly products. The market for its products is threatened by calls for consumers to buy products that save energy and those that are environmentally friendly. This calls for the company to change its tactics and set new production strategies which are environmentally friendly.
Team orientation
The performance of small groups within an organization is a crucial ingredient to the overall output of the entire organization. Hence, the success of any organization heavily relies on the individual production of small teams that constitute departments or divisions within an organization.
Increased productivity has been directly linked to group efficacy in an organization. Besides, there are other group dynamics elated to group efficacy that may also contribute positively to the growth of an organization.
Most studies have also revealed that group dynamics derive a lot of benefit from efficacy and the overall effectiveness of a group. Although leadership style in an organization is paramount in driving groups, leadership satisfaction may not necessarily be affected by group efficacy.
Team building is an essential organizational practice and behavior that is highly recommended for any organization seeking to boost its performance. The essence behind any team-building strategy is that when employees work or pull together towards achieving a common goal, it is more likely that the organization will realize a much faster growth compared to when they pull in different directions.
Hence, the concept of team building can be described as organizational behavior and practice that attempts to bring employees together as one cohesive team that works to achieve a common objective or goal.
In their publication, Wang, Lin, and Chu (2011, 100) point out that teamwork is a critical component in a business as it enhances performance and work success. Haier group has been able to carry out its operations effectively due to its management team that encourages team dynamics.
External factors
Competitive factors
Haier Group has over the years been capable and efficient of offering its customers due to the high competition it faces from other giant competitors like Whirlpool and Electrolux. Omar, Williams, and Lingelbach (2009, p. 180) point out that without competition, a company may lack incentives to provide best and quality products to consumers.
Indeed, competition enhances efficiency and offering quality products and services, which is what most customers require. However, too much competition in the global business arena hinders Haier Group from making maximum profits, research, and development as well as technological development.
Besides, competition may force a company to lower its prices to stay in business. This, in turn, affects a business’ ability to maximize profits.
Economic factors
One of the economic factors affecting the Haier Group is the trade cycle that Lin (2006, p. 50) describes as the fluctuation of the cost of commodities or goods in an economy. Accessing raw materials and their value are some of the challenges that Haier Group faces due to the rise, fall, stability, and continuity of cost of products.
It is imperative to note that trade cycles are a changing factor that impacts any business in an economy due to changes in the general price level.
Haier Company and its global business strategy
Developing a comprehensive plan has become an essential requirement for multinational businesses that are set to achieve benefits in terms of growth and profits. Setting up a global strategy requires a company to focus on key dimensions such as competitive moves, marketing approach, value-added activities, product offering, and market participation.
Omar, Williams, and Lingelbach (2009, p. 183) argue that integration and sharing are vital components of a global strategy that maximizes the performance of a business in international markets.
Haier Group has been able to diversify its product offerings and establish a good business brand in China. It is a quality brand, and good reputation has given it an opportunity and an advantage and made it transfer its products to developing and developed nations.
It is imperative to point out that as exemplified by Haier Group that to enhance a global business strategy, an organization must incorporate a multi-domestic approach since this maximizes a business’ local profits, revenues and competitive advantage. This, in turn, will aid it in enhancing its worldwide performance.
Globalization dimensions
Competition and marketing approach strategies
Due to intense competition in the global market today, many businesses have resorted to developing certain competitive moves to aid them to gain competitive advantage and still sell at low costs. Mohanty (2011, p. 30) points out that over the years, global strategies for most multinational companies have revolved around competitive moves across countries.
However, it is worth mentioning that those moves have mostly been successfully used by companies in China and Japan, such as Bridgestone Corporation and Haier. For instance, through competitive steps, Haier Group has been able to expand its market segments and penetrate in different countries, including the US, and establish itself in the fourth largest white goods manufacturers.
Research indicates that its effective global strategy via competitive moves has been properly strategized by its management team. Mohanty concludes his argument by exemplifying that effective strategy are vital as by moving across countries, a business enhances its bargaining power and save cost since costs vary in a different location.
Buckley and Ghauri (2004, p.87) point out in their groundbreaking publication, “Globalization, economic geography and the strategy of multinational enterprises” that a global strategy, unlike a multi-domestic strategy developed and tailored to work locally, focuses on applying a uniform market approach worldwide. Agreeably, companies can achieve huge successes by adopting a particular marketing approach.
However, it is imperative to point out that within a marketing mix, not all elements must be uniform. For instance, Haier Company’s success has not only been brought about by adopting an ordinary red square and surrounding blue dots logo, advertising theme and market positioning for its appliances but by also using different brand names for the product depending on a country.
Lin (2006, p. 50) concurs with Buckley and Ghauri’s (2004, p.87) arguments, but points out that an active market approach should take into account that inasmuch as a uniform marketing approach is a critical global business strategy, geographical location and marketing environments are also essential components that should be considered.
Value addition, an offering of products and participation in global markets
Adam Brandenburger and Barry Nalebuff in their value-added theory in business suggest that one of the most common international strategies of adding value to business activities is breaking down the value chain so that those activities are carried out in different countries (Bernardez 2009, p. 40).
In concurrence, Fang and Zou (2009, 749) posit that this is a strategic placement that many electronic companies including Haier Group in China have adopted to reduce the cost of production, labor, and sale of their products.
Besides adding value to its products, Haier Company’s strategy to participate in the global market has involved entering into markets that are of strategic significance such the US, Middle East Market and some nations in Africa like Egypt and South Africa. Participation in strategic global markets has provided it with significant competition, flexibility, and marketing advantages.
Additionally, companies with global business strategies achieve numerous benefits that include increased competitive leverage, improved customer selection, improved programs, enhanced quality of products. Mohanty (2011, p. 30) points out that the cost reductions are achieved through pooling production activities, exploiting the flexibility and lowering factor cost, as well as enhancing bargaining power.
For instance, Haier Group enjoys economies of scale by concentrating on the production of refrigerators and other white goods in different countries in almost all continents of the world. On improving its customer selection, its global strategy creates recognition of products, serviceability, and global availability, which are essential ingredients for enhancing customer preference.
Formation of joint ventures
Establishment of joint ventures by companies has been observed to be an effective business strategy that enhances its ability to access resources, capabilities, knowledge, and new markets. Beamish and Lupton (2009, p 80) point out that a business may go into joint venture agreements with another purposely to share resources and use them to enter foreign markets or potential new markets, create new services and fresh products.
In its growth strategy, Haier Group has entered into numerous joint ventures in its plan to expand internationally and compete with its giant competitors such as Whirlpool, Maytag, Frigidaire, and GE. For instance, Haier is in a joint venture agreement with the Venezuelan Government, a strategy to aid it to obtain imported products that are incredibly cheap from Abastos Bicentenario in Venezuela.
Other joint ventures it has entered are with a Germany’s premium refrigeration company called Liebherr Group in 1984, a UK’s leading retailer in general merchandise called Argos in 2011 and LIXIL Corporation also in 2011 and with Merloni Electtrodomestici Company in Italy (Chan 2011, p. 148).
In international business, international joint ventures (IJV) aid businesses to gain each others capabilities and resources that they use to develop products cheaply, reliably and faster.
In agreement with Beamish and Lupton (2009, p 80), Fang and Zou (2009, 750) point out that entering into a joint venture is an international strategy that businesses in uncertain foreign markets use to enhance their capabilities and win against their competitors.
However, it is imperative to note that joint ventures attract numerous and diverse management problems due to a difference in business practices, policies, and management styles, among others.
Joint ventures and management problems
In his publication, Chin (2011, p. 20) points out that even though as two or more companies can come together in a joint venture, the fact that they are owned by different individuals may present management challenges and problems. Indeed, various companies have incongruent and competing goals that if not well aligned, may affect the performance of a joint venture.
In international business, the success in the performance of companies in joint venture agreements typically relies on management and strategies. In accord with Chin, Bernardez (2009, p. 21) points out that effective joint venture performance in international business can be affected when one partner after an objective has been set, may fail to be satisfied with it or to attain it effectively.
This may affect the stability of a partnership and might lead to renegotiation of contracts, reorganization, or even termination of the organization.
Need for knowledge management, governance, and control
Most organizations do not often stick entirely to the rules and regulations. As a result, a vacuum is left where power play and conflicts can thrive. Hence, managing organizations in a systematic and well-defined way can only be achieved if the dynamics of conflict, authority, and power are well understood.
Lack of knowledge in joint venture management, governance and, control remain as some of the biting issues because they reduce cooperation between management and workers, lowers employees’ motivation and creativity, and ultimately brings down productivity and profitability. Gholami (2011, p. 152) argues that the problem is the cause of underperformance and the possible collapse of many joint ventures.
In agreement with Gholami, and other management scholars holding the same position, it is true that poor management of joint venture due to lack of skills, trust or capabilities significantly hamper its success in the international market. It is therefore imperative to point out that effective knowledge management, governance, and control are essential ingredients in joint ventures that anchor continued improvement and should be embraced both in leadership and business culture.
The above view concurs with Mary Jo Hatch model for management and control dynamics which require that managers and leaders in joint ventures create an understanding that carefully integrates all stakeholders and employees and develops a general consideration perception at all levels (Bernardez 2009, p. 21).
While this new model of operation may indeed not be easy to implement, it is essential that managers in international joint ventures slowly seek to enrich their existing business system towards acceptance of their ideologies at all levels. As a result, the creation of capabilities, good governance, and control must be seen as a essential process that will enhance a joint venture performance in the global market.
Building core competencies
According to Hamel and Prahald (1990, p. 79), one of the most potent ways corporations can succeed and make tremendous gains in global competition is through developing core competencies. Competitive advantage, capability, and competence in organizations vary and cover a broad range of areas.
Building internal and external competencies are factors in a business that is vital in moving an organization towards gaining competitive advantage. Studies indicate that achieving competitive advantage requires organizing internal factors and connecting core competencies and capabilities with available resources.
Due to the intensive competition and increasing uncertainty in the global market, it is a company with proficiencies such as Haier, a multinational white goods company, that can and has over the years steadfastly and continuously made sustainable advantages in conducting business.
Lin (2009, p. 47) indicates that it has achieved tremendous gains and ranks high among white goods companies because of its competencies and resources that are non-substitutable and exclusive and that most of its competitors do not have.
It is imperative to mention that some of the capabilities or core competencies that they have include innovative capacity, strategic flexibility, organizational learning, and effective technology, among others.
Core competencies as vital elements of Haier’s strategic capabilities
In his publication, Hamel and Prahald (1990, p. 79) point out that skill is related to functional or cultural issues in a firm, as well as managerial roles and leadership within a business.
Consistent provision of superior value and high quality and.hi-tech products and services by Haier to customers locally and internationally has been successfully determined by the company’s abilities to establish strategic business decisions as well as their strategic capabilities.
Indeed, and in concurrence with Hamel and Prahald, through competencies, Haier Group has been successful and has maintained customer satisfaction, achieved overall strategic goals and increased their production processes through advanced technologies. Additionally, its capabilities have been witnessed in the manner in which it has combined organizational knowledge, integrated technology, and coordinated production skills.
Today, the white goods marketplace is going through passionate competition, as more businesses are entering the market with new products. Due to that, many white goods producers are striving to fit into the environmental conditions that are changing at a fast pace by improving their business strategies.
Lin (2006, p. 50) points out that competence requires strategic capabilities controlled by an organization whereby resources are put into action to improve, sustain, and support organizational performance.
Haier Group has over the years, integrated its streams of technology, enhanced its commitment to the creation of best products and marketing practices. This has improved its performance locally in Japan and the international market.
Why not think only of core competencies
It is essential to underscore the fact that not all core competencies give competitive advantages even though most scholars, including Baker (2011, p. 299) regard them as important sources of competitive advantage.
Strategic capabilities through core competencies are essential only where a corporation can use its strength in competence to surpass other competing companies over a single line of product and not a wide range of products.
Gholami (2011, p. 152) indicates that most successful companies have stopped determining their advantage over others simply because of products since they vary and turned their focus to leadership skills.
For instance, Haier, a giant global company in the production of white goods products cannot compete with Honda Company that deals with power trains and engines in gaining a competitive edge since their products are different. This indicates that core competence is not an attribute but a variable factor.
Conclusion
To sum up, the discussion in this paper was based on the thesis statement “Devising effective business strategies that improve the overall performance of an organization and its successful participation in the global market has become one of the most burning ambitions that managers in companies that intend to increase customer preference, profitability and sustain competitive advantage have assumed”.
The analysis has indicated that in devising a business strategy, it is vital to understand the internal and external factors of a business. Also, the paper has focused on Haier Group and has exemplified that as a large business, it is business strategies, both locally in China and globally have been based on global expansion, diversification and developing a national reputation of quality.
References
Baker, J 2011, “Conceptualizing the dynamic strategic alignment competency”, Journal of the Association for Information Systems, 12(4), 299-322.
Beamish, PW & Lupton NC 2009, “Managing Joint Ventures”, Academy of Management Perspectives 75-96.
Bernardez, M 2009, “Minding the business of business: tools and models to design and measure wealth creation”, Performance Improvement Quarterly, 22(2), 17-52.
Buckley, P J, & Ghauri, PN 2004, “Globalization, economic geography and the strategy of multinational enterprises”, Journal of International Business Studies, 35(2) 81- 98.
Chan, X 2011, “A SWOT study of the development strategy of Haier group as one of the most successful Chinese enterprises”, International Journal of Business and Social Science: Special Issue, 2(11), 147-155.
Chin, A 2011, “Cultural competency key to Asian market share” InFinance, 125(1), 19- 21.
Fang, E, & Zou, S 2009, “Antecedents and consequences of marketing dynamic capabilities in international joint ventures”, Journal of International Business Studies, 40(5) 742-761
Gholami, S 2011. Value creation model through corporate social responsibility (CSR)”, International Journal of Business and Management, 6.9: 148-154.
Hamel, G & Prahald, CK 1990, “The core competence of the corporation” Harvard Business review, 79-82.
Lin, T 2009, “Haier Is Higher”, Strategic Finance 91(6), 41-49
Lin, TW 2006, “Lessons from china”, Strategic Finance 88(4): 48-55
Mohanty, S 2011, “Having analytics may not be enough: Organizations need to improve business intelligence and decision-making through guided, predictive analytics” Information Management, 21(1), 30.
Omar M, Williams R & Lingelbach D 2009 “Global brand market-entry strategy to manage corporate reputation”, The Journal of Product and Brand Management, 18(3): 177-187.
Wang, W, Lin, C, & Chu, Y 2011, “Types of competitive advantage and analysis”, International Journal of Business and Management, 6(5), 100-104.
Yip, GS 1989, “Global Strategy in a World of Nations?” Sloan Management Review, 31(1) 29-42.
Total compensation systems are a necessary aspect of company human resource management. The base wage and contribution policies are critical in attracting, retaining, and incentivizing human capital. Each firm should adopt an approach to developing compensation packages that align with the organizational structure and the company’s solvency. Business strategy has a direct impact on total compensation systems as the salary and benefit rates are optimized by company requirements and design.
Introduction
Total compensation systems are a critical function of company management and human resources. It directly affects employees and their salaries. The compensation packages are developed to incentivize and maximize employee performance. Each firm should focus on optimizing the compensation system according to the company’s needs. The total compensation system of each firm depends on the chosen business strategy as it determines the organization’s finances, human capital needs, and staff performance.
Total Compensation System
A total compensation system is a comprehensive financial package that is offered to employees in any company. It consists of base compensation, pay incentives, and indirect benefits. Base pay is the largest portion of the payment, which consists of an agreed-upon salary. The payment is fixed and continues as long as the person is employed. Pay incentives are variable payments that are offered by the company. They can be considered a method of profit-sharing with employees since these payouts are usually made as commission or performance bonuses. Most firms choose to pay a larger ratio of fixed wages over incentives. Finally, the indirect benefits part of the package includes common employee benefits that supplement salaries. It includes insurance, paid time off, retirement programs, and additional perks that the position offers (Bessette, 2014). The corporate business practice has developed an emphasis in all parts of the total compensation system as the incentives and benefits can often match and exceed the base salary in monetary value.
Any compensation systems must align with the organizational objectives and company business strategy. The concepts are interrelated as it is essential to determine the best compensation structure which helps to manage profits and equity. Also, the compensation policies have an effect on workplace culture as additional pay-outs can impact employee retention, motivation, and productivity. The total compensation system is usually a firm’s largest expenditure. When developing compensation packages, a business philosophy should be considered. The rates, benefits, and incentives should be consistent with the complexity and solvency of the firm (Bessette, 2014). Therefore, the company should maintain a cost-effective package that balances employee and business interests.
Business Strategy Effect
An innovative business strategy is common among high-technology firms. There are multiple dimensions of compensation within innovation-seeking companies. Technological innovation implies the firm will take a product differentiation position within a market. Product differentiation consists of developing and producing unique products that provide value to the consumer thus establishing a competitive advantage over competitors. An innovative strategy seeks to increase pay levels of positions that are critical in new product development. This includes research, development, and design. The CEO can choose to connect the innovation strategy to non-executive compensations as it garners support and motivation for the employees. The firm compensation structure is based on investment in necessary departments that ensure the success of the business strategy. Besides, the firm can add time-dependent compensation incentives to retain talent which has gained experience and helped to implement the business strategy. A concept of pay mixes gives a disproportionate advantage to long-term pay. Also, employees may be offered extended access to stock options vesting (Yanadori & Marler, 2006). The internal pay structure of highly technological firms is decisively affected by innovative business strategies.
Executive compensation packages are dependent on a variety of factors. Managers are responsible for executing the firm strategy and directly influence corporate performance. The company can establish a strategy of cost leadership that focuses on high volume sales at lower prices. The alternative is the differentiation strategy which focuses on brand recognition and product innovation with a lower return on asset. In either approach, empirical findings support that firms customize compensation systems to reward management styles that pursue chosen business strategies. This is critical since the compensation system becomes a tool that the board of directors and shareholders can use to encourage management to adhere to a certain company direction and be more efficient in its implementation. Also, regulators may use this information in audits or legislation on executive payouts, taking into account the correlation between firm strategy and compensation packages (Balsam, Fernando, & Tripathy, 2011).
The system is directly interrelated to business strategy through performance-linked compensation and long-term incentive plans. Companies with a product differentiation strategy use performance incentives more commonly than with a cost-leadership approach. However, the strategy did not lead to significant differentiation in long-term incentives. That may occur when such incentives are based on qualifications and experience which are independent of the current business strategy the company chooses to adopt. It is critical to include strategy in developing the compensation structure because a poor design results in an adverse effect on performance. Evidence suggests that the contingency theory applies to compensation systems sincere there is no universal approach to performance incentives. A compensation system correctly aligned with a business program positively influences the performance and fulfillment of goals based on the strategy (Chen & Jermias, 2012).
Analysis
Developing a comprehensive and competent total compensation system requires knowledge of the company operations. The business strategy determines the company’s needs, available finances, and investment into the staff. In turn, the compensation package will influence human capital. Budget allocation is an aspect that must be considered as the company has to determine salary ranges for each position. Salaries have to remain highly competitive to attract experienced and qualified individuals that are necessary for innovative strategies. If a company is restructuring its debt or attempting to raise total assets, the compensation package may be smaller with a focus on long-term benefits that do not require immediate payouts.
If a firm is choosing a business strategy to increase sales or customer support, introducing performance-based incentives will motivate employees to increase productivity in those areas. Furthermore, the total compensation system has a function besides pure financial incentives. The time invested in developing the system by business strategy and engaging the employees in the process provides an excellent opportunity for feedback. The company can re-examine its values and priorities. Management can enhance its operations and organizational structure. Meanwhile, the workplace culture shifts accordingly, and there is more interest amongst employees to seek out professional opportunities. The alignment of policies and payments of the total compensation system with strategic business aspects optimizes company efficiency.
References
Balsam, S., Fernando, G., & Tripathy, A. (2011). The impact of firm strategy on performance measures used in executive compensation. Journal of Business Research, 64(2), 187-193. Web.
Bessette, D. 2014. Total compensation and how it is used in an organization’s human resources strategy. In 11th International Conference on Information Technology: New Generations (pp. 573-574), Las Vegas, NV. Web.
Chen, Y., & Jermias, J. (2014). Business strategy, executive compensation and firm performance. Accounting and Finance, 54(1), 113-134. Web.
Yanadori, Y., & Marler, J. (2006). Strategic Compensation: Does Business Strategy Influence Compensation in High-Technology Firms? Strategic Management Journal, 27(6), 559-570. Web.
The following essay will be a reflection of my learning about international business strategy based on my understanding from the course work, other resources, and the three briefing papers I presented in the seminar. It will widely dwell on regional strategies for global leadership, Global and Transnational strategy, and the way local companies keep multinationals at bay as per the briefing papers.
International business refers to the business transactions that involve two or more nations. It is not limited to the major business transactions with only the multinational corporations but also includes export and imports by sole proprietors. International business strategies are the policies that are laid down to govern and harmonize international businesses, which have become the order of the day in the world we are living in.
For instance, the General Agreement of Tariffs and Trade was laid down in 1949 during the UN conference on trade and employment and resulted from failure of the negotiating countries to create the International Trade Organization.
These strategies are meant to govern their short and long-term objectives such as the day-to-day running of the company, Increase in sales, marketing and profits as well as growth and stabilization of the company in the market (Pearce, 2010)
Regional strategies for global leadership
Global leadership has been brought about by globalization where by the world has been reduced to a cyber space and communication has been very efficient around the world. For a business to be successful globally, it has to carry out regional strategies in order to find out where its business can perform best.
The regional strategy focuses on building bridges between societies, which facilitates healthy business across the border business. For any business to be successful globally, it has to invest much of its resources on studying regions instead of generalizing ideas in order to invest in a region depending on its needs.
Most of the successful companies globally have employed five types of regional strategies, which include home base, portfolio, hub, platform, and mandate. A company may not necessarily employ all the regional strategies at once but it would be important to take a reconnaissance in the region interested in for it to settle down on the best strategy (Harvard Business School Press, 2009, pg 198).
In the home based strategies, companies manufacture from products from their home country and then export to their neighboring countries. This approach ensures that all the benefit goes to the home country thus promoting their Gross Domestic product. It creates employment to the citizens of the home country and the profits develop its country of origin.
Home based strategy tends to exploit the country of export since it competes with the developing domestic industries. It may incur a lot of cost when the country of export has laid down many business barriers to multinational Corporations. I would recommend that all companies interested in international business to apply foreign direct investment so that both countries may benefit from the rewards therein.
I would recommend portfolio strategy for businesses looking for long term investment. This strategy operates by investing in foreign direct investment. It may face challenges when establishing but gain root in the foreign country with time and is able to compete well with the local companies. For the hub strategy, it would be important to create a good relationship between companies in different countries.
This would enable it benefit its home country better with the benefits it is getting from its businesses in the region. The operations of the mandate strategy add up to specialization and enjoyment of economies of scale.
This is because specialization ends up in manufacturing of quality products at affordable prices and though the company may not make high revenue at once, the overall benefits are good both to the home and to the foreign country.
Global and transnational strategy
After learning the concept behind global strategy and transnational strategy, it has become so clear that these two strategies are very dependent on each other. The transnational strategy is diversified in a manner that it works on both local and global interests through headquarter thus taking the advantage on global integration.
It targets experience-based economies and is keen on local responsiveness such as consumer tastes and preferences, indigenous business practices, the policies of the local government among others. The global strategy ensures that all international business transactions meet the global standards.
It is governed by a global headquarter, and good communication is necessary for the subjects to meet the set standards. It has great influence on cost reduction and standardization thus the firms enjoy the advantage of economies of scale (Anon. 2010).
I have learnt that the global strategy invest a lot of its resource on configuration, co-ordination and local responsiveness. In configuration, the company tries to analyze how the business it wishes to carry out is carried out in other nations. It also tries to study how international businesses are coordinated (Stone House, 1991).
The transnational strategy facilitates configuration and coordination of a company globally while still maintaining local responsiveness. Therefore, a company can serve the local market efficiently and effectively while still serving the world market. The good thing with this strategy is that it is able to balance local and international trade.
How local companies keep multinationals at bay
Multinational strategy deals with the responsiveness of the local public such that they can monitor and respond to the local needs and opportunities. It enables the international market to be able to serve the interest of the public up to the grassroots. This is mostly facilitated by the local governments, which make the necessary communications to the local market (Barlett, 1989).
Most multinational corporations pose a big threat to the local companies especially in developing countries by subjecting them to stiff competition. This mostly happens because the multinational corporations are well established and are financially stable such that they can advertise their products to the public very easily. The local companies have therefore come up with strategies to keep these multinational corporations at bay.
Such strategies include imposition of high tariffs to foreign companies, policies of foreign direct investment among others.
According to Harvard Business review, the local companies have come up with a six-part strategy to keep MNE’s at bay which comprise of offering customized goods and services, development of business model solely to curb obstacles, being up to date in terms of technology, utilizing low the abundant low cost labor and doing local trainings, capitalizing on new ventures and maximizing on their talents (Bhattacharya and Michael, 2008).
I have realized that the local companies have come a long way through these strategies and can now compete well with the MNE’s. However, there cannot lack challenges in the implementation and they can only be safe when they are fully established.
Conclusion
International business strategies are important in the smooth running of either regional or international businesses. International market gives every business an opportunity to maximize profit and to enjoy economies of scale due to the availability of a wider market. It also gives people a wider variety if goods and services to choose from thus making life easier.
International business strategies make it easier to carry out businesses across the borders since some countries may set policies, which may not be favorable for their counterparts.
Reference list
Anon. 2010. Strategy of International Business. Web.
Barlett, G., 1989. International Business Strategies. Web.
Bhattacharya, A. K., and Michael, D., 2008. How Local Companies Keep Multinationals at Bay. Harvard Business Review. (Attached material).
Harvard Business School Press. 2009. Harvard Business Review McKinsey Award Winners. MA, Harvard Business Press. Web.
Pearce, R., 2006. Globalization and development: an international business strategy approach. Web.
Stone house. 1991. Global and Transnational Strategy. (Attached document).
Esprit is chasing Zara and heading Gap. Competitive analysis should be between Gap and Zara.
According to the figures shown in the Competitive Profile Matrix (CPM), the total score of Gap is 1.9 while that of Zara is 2.15. Areas for improvement in strategic planning should include.
Esprits should expand globally. Its markets at the moment include Germany, Europe, Asia Pacific, North America. Germany should not only be the major market. The awareness of its brands should be improved because there is so much competition in the market. Research and development are very necessary for North America to determine why it is the smallest segment of Esprit and why it contributes only 4% of total international sales. Pricing strategies should be sought to determine why its products are facing stiff price competition. The different cultures’ fashion trends need to be determined. The focus should not only be on New York or Los Angeles but should also target other cities and states. Esprit’s products should be able to meet the lifestyle demands of young people because they prefer European/German products. Esprit should take advantage of economies of scale in the Asia Pacific due to the strong economic growth. Expansion of Esprit market should be in Italy and Spain. The brand image by Esprit needs to be made better.
Esprit’s products should be able to match with customers/clients’ attitudes. The research will be necessary to determine the tastes and preferences of customers all over the world. Products should have a brand image that is attractive so that more sales can be achieved, more market values acquired and earnings per share will also be improved. Esprits casual should be of designer quality for the young. Clothing should match with personality and people should be in Esprit brands that are attractive and showing styles. The need for making the brand name image to be positive is necessary. The quality of brands should match with price and right fitting. The brand image should also be impressive to the middle age and the learned. Hong Kong people are not ready to spend on brands that can not be valued and are ready to spend more on high-quality brands. This could be the season as to why Esprits is losing its market share to Zara. Edc should also target other body shapes apart from the petite size.
The Quality of Esprits products should be advanced: With changing socio-cultural trends and the increase in the number of people in Asia, quality should be matching with customers’ needs. Esprit’s poor quality of products may be contributing to excess competition from Gap and Zara.
Declining childbearing rate (change in the ratio of young generation)
0.05
1
0.05
Bargaining power of customer (high alertness on pricing, product quality, fashion trend, and choices)
0.20
2
0.40
Total: 0.62 0.65
David F.R. (2006)
Overall speaking, Esprit’s performance in reacting to the external environment is a little bit above average 1.89. According to the subtotal score calculation; opportunities have a weighted score of 1.24 and threats 0.65. Apparently, the company is utilizing more efforts to capitalize on its opportunities rather than to deal with the threats that they are facing.David F.R. (2006)
Areas that the management needs to focus on are:
Rivalry: Esprits should also consider doing business on the Internet in order to deal with current competitors and lack of entry barriers threats that have lead to over flooding of the markets and Esprits products are not being considered.
Change in ratio of the young generation: People are not bearing kids as before and product lines for children’s commodities may shut down due to lack of market. Products should be made in such a way that they can fit all age groups.
Bong aiming power of customers: Esprits selling neat, affordable luxury goods and coming up with new products that are stylish. Prices should be fixed to avoid reductions. Their products for women, children, and men should not have bargain-able options.
Internal Factor Analysis
Internal factor evaluation (IFE) Matrix
Strengths
Strengths
Weight (∑ = 1)
Rating (1-4)
Weighted score
Brand image
0.15
3
0.45
Customer loyalty
0.10
3
0.30
Total: 0.25 0.75
Weakness
Weakness
Weight (∑ = 1)
Rating (1-4)
Weighted score
Low advertising budget
0.10
2
0.20
Sales distribution
0.20
2
0.40
Other negative microeconomic factors
0.45
0
0
Total: 0.75 0.6
The overall score of Esprit internal factor evaluation is 1.35 and weaknesses is a little bit better (above average).
In terms of breakdown, score Esprit performs much in building strengths. (0.70,55% of the total score) rather than dealing with its weaknesses (0.6, 455 of the total score).
The management should focus on:
Marketing Esprit products more and this will call for a high budget for advertising expenses and research to determine customers/clients preferences. Esprit should have other marketing branches outside Hong Kong because it is a global company. The supply network should also be modified and advanced to ensure high market value and hence the Esprit value.
Esprit collection for the upper class that is those who need professional new wear; if marketing is good enough sales will generate funds enough to fund other capital investment programs.
Sales should be advanced and improved in order to increase the company’s market value. High turnover brings about high-profit margins and this increases the earnings per share resulting in a market leader position in the industry.
In strategic planning, the idea is to deal with microeconomic factors, which are within Esprit control. These factors affect the Esprits Company regardless of other players in the industry.
Returns should be maximized at a low cost to improve profitability. Strategic planning will also relate to taking advantage of all possible economies of scale in order to have a comparative advantage and to avoid opportunity costs. The brand image and customers loyalty should also be improved to ensure that clients/customers for Esprit are maintained to the disadvantage of competitors.
SWOT Analysis
STRENGTH (S)
WEAKNESS (W)
Brand image
Customer loyalty
Low Advertising budget
Sales distribution
Other negative microeconomic factors
OPPORTUNITIES (O)
Ethnic and quality awareness
Brand extension on edc
Move to the upper brand fashion grade market
Develop quality fashion
So strategy (Aggressive)
Revitalize the Esprits collection and Esprits casual
Put more marketing efforts in Germany, Europe, North America, South Pacific
By using a strong brand image Esprits can crease sales volume.
Provide different kinds of Esprits products
No strategy (conservative)
Employ/hire more overseas labor in Germany, Europe, North America, and South Pacific to achieve the cost leadership strategy
Provide special discounts for Esprits products (edc) in North America and Europe.
Design differentiates Esprit products lower bargaining power of customers.
Declining childbearing rate (change in the ration of young generation)
Bargaining power of customers (high alertness on pricing, product quality, fashion trend, and choices
Other negative macroeconomic factors
ST strategy (competitive
Differentiate the Esprits collection and Esprits casuals
Create various special Esprits products (edc) for different age groups.
Enhance Esprits quality in Europe, North America, South Pacific, and Germany.
Sophisticate gifts on Esprit’s products to make purchases more productive
WT strategy (defensive.)
Hire part-time or contract workers in Europe and North America.
Give more training to Esprit’s workers in order to increase their skills and knowledge.
Invite models to advertise their clothes.
Put more Research and development t develop a new strategy to cope with high demand in Gap, Zara, Bossini
These are microeconomic factors facing Esprit and macroeconomic factors facing the industry and market that Esprit operates in. Microeconomic factors in this case will be Esprit’s strengths and weaknesses while macroeconomic factors will be opportunities and threats in Esprit’s industry or business environment.
Esprit’s strengths should take advantage of available opportunities. Esprit should make use of these opportunities to minimize its weaknesses. Esprits strengths should be used to overcome the threat in the industry while weaknesses should be dealt with to avoid future threats. Strengths, weaknesses, opportunities, and threats (SWOT) analysis is the foundation for strategic planning because it helps to come up with programs and investment decisions for the company to be successful in the long run.
Ethics and quality awareness in Hong Kong should facilitate Esprits brand image. The beliefs and culture of the Hong Kong people should enable the marketing of Esprits goods and services.
Brand extension on edc enables customer loyalty because customers need to be faithful to what they believe in.
Hong Kong people are moving to the upper brand fashion grade market, which means that more customer loyalty will be enabled.
Esprits strategic plan should be to take advantage of developed quality functions to build on its brand name and increase sales.
Due to the Ethics, quality awareness in Hong Kong. Esprit’s budget for advertising should be improved. Brand extensions on edc should enable more sales through advanced and network sales channels. The move to the upper brand fashion grade Esprit should deal with the problem of lack of sales distribution. Due to the development in quality fashion, the advertising budget should be increased to attract more customers/clients to Esprits products.
Rivalry, which is a negative macroeconomic factor, can be dealt with by the positive brand image. Competition brought about by other companies in the industry can be reduced because the brand image has so much value due to its packaging which improves its outcome. The industry/ business environment has low barriers of entry increasing the number of firms producing similar products. David F.R. (2006).
Declining childbearing rate should not affect the company sales due to the enormous customer’s loyalty and faithfulness and thus by customers for the Esprits. Change in the ratio of the young generation has had a negative implication on the company’s market value.
Purchases of Esprit causal and Esprit’s collections are highly alerted on pricing, product quality, fashion trend, and choices should not reduce the Esprit’s sales because of the brand image and customers loyalty. Esprits products have been in the market for a long and have a good public image.
Esprits should improve its advertising budget and improve marketability to deal with strong rivalry from existing competition due to low entry barriers and online shopping which has lead to flooding in the market.
World markets in Europe, South Asia, and North America, and Germany should be enhanced through good research and development programs to match with the declining childbearing rate due to the changes in the ratio of the young generation.
The threat of bargaining power of customers due to high alertness or pricing, products quality, fashion trend, and choices can be dealt with with a strong strategic plan. Esprits should be focused enough to determine the long-term implication of low advertising budget and lack of adequate and sufficient sales distribution.
Strategic planning by Esprit should ensure the success of the company by considering and dealing with all the microeconomic factors given that macroeconomic factors exist in the industry and may hinder Esprit’s success. Threats and weaknesses work negatively on Esprit’s performance. Strength and opportunities are the advantages of the company and should be made use of. David F.R. (2006).
Quantitative Strategic Planning matrix
Important factors, alternatives strategies, their aggregate values, the impressiveness of score, total impressiveness, the sum total of impressiveness score are all relevant: These include:
Listing opportunities, threats, strengths, and weaknesses should be on the life of the quantitative strategic planning matrix.
Weights assigned for Esprit’s Strengths, weaknesses, opportunities, and threats are: Opportunities sum up to 1.24, Threats equal 0.65, Strengths equal 0.75, weaknesses equal 0.6.
Determining impressiveness scores: These are the values indicating the relative impressiveness of every strategy. Every major external and internal factor at a given time should be considered to enable a comprehensive evaluation of the strategic plan to be taken by the company to improve Esprit’s market value in the long run. Questions to be asked, whether their factors affect strategy to be made. In case its true strategies are compared to the major economic and financial factors which include, strengths, weaknesses, opportunities, and threats. Impressiveness scores are 1 for not impressive, 2 for somehow impressive, 3 for reasonably impressive, and 4 for highly compressive. If it is not true, then they don’t affect the strategy to be chosen.
Computation of total impassiveness scores. This gives the relative impresses of every alternative strategy. The more the total impressiveness score shows more impressiveness of strategy.
Computation of sum total impressiveness score.
Long Term Objective
A strategic plan involves coming up with programs and putting up systems to ensure that Esprit succeeds in the future and sticks to the going concern principles to perpetuity or the unseen future. Current Esprits strengths, weaknesses, and existing industry/market and business environment opportunities and threats should be dealt with at present. Esprits is experiencing a strong brand image, customer loyalty, a low advertising budget, low sales distribution, and other microeconomic factors. Esprit operates in an industry that has ethics and quality awareness, brand extension on edc, customers are moving to the upper brand fashion grade market and development of quality fashion is in place. Other players in the fashion and design productions are giving revelry due to competition, low entry barriers, and online shopping all causing flooding of both causal and professional wear. The childbearing rate is also going down and the young generation is changing every day. Customers’ bargaining power is high due to alertness pricing awareness on product quality, a fashion trend, and choices. David F.R. (2006).
Broad objectives
Esprit should have a thorough understanding of the areas that it needs to continue operating. Esprit has a market in Europe, Asia Pacific, North America, and Germany where the headquarters are located. Esprit’s mission and vision are carried into real actions and objectives and later to goals that need to be realized. Objectives are wide and should cover using strengths to take advantage of existing opportunities, dealing with weakness by making use of opportunities, the threats in the market can be countered by the Esprit’s strengths and its strategic plan should mainly be centered on neutralizing current weaknesses to avoid future threat in the Hong Kong market. Stockholders, third parties, auditors, and Esprit are all worried about the company’s future given that the image and opinion by stockholders determine the funds available for funding investment and other capital-intensive projects.
The long-term objective will be, not dated, continuous, and nonmeasurable. Objectives initiate action. Esprit’s objectives should drive the mission statement as presented to shareholders, third parties, regulators, and customers for the Esprits collection and Esprit’s casuals.
Esprits should expand sales for Esprits collection and Esprits casuals to the current customers given the strong brand name.
Esprits management should consider introducing current products into a new market in some places all over the world as a strength given that it can claim customer’s loyalty. Given the current competition (rivalry), strong bargaining power, low advertising budget and lack of adequate and sufficient sales distribution the market department in Esprit should develop a strong research and development plan to come up with creativity and innovation to boost Esprits market value.
Financial objectives
Given the unmatched competition in the market, declining childbearing, and change in the ratio of the young generation high bargaining power of customers, Esprit should have financial objectives focused on gaining high profitability in order to be in line with its mission/vision, company’s perpetuity or the going concern for the Esprit. The financial objective, in the long run, shows a commitment to providing admirable cash flows, credit relationships, high earnings per share, good returns on employed capital investment, growth on dividends to shareholders, and improved stock prices to provide funds and finances for capital investments. Markets in Germany, the South Pacific, North America, and Europe should be diversified to increase the revenue of the company. To financially survive, revenue or returns should be increased or maximized at the lowest cost possible for the given financial year.
Strategic market goals
Esprit has been experiencing a lot of competition from other companies in the industry. The marketing objective should enable the company to sustain and increase Esprit’s competition strength and together with long-term market position by creating customers value and improved firms value.
The idea here is to win more market share by dealing with the issue of rivalry.
Long-term internal objectives
Esprit should aim at its strength and weaknesses to ensure its internal success. These are the business process factors which have an effect on improving the firm’s value and customer’s satisfaction in Germany, South pacific Asia, North America, and European nations. Esprit’s management’s goals should focus on operating a critical functional activity.
Esprit’s efforts should target advertising and marketing, customers care, financing, human capital, strategic major activities, and sales distribution manufacturing functions.
Esprits front line organizational units within a business should be organized for long-term survival. Input purchases, stock control, holding and maintenance, shipping to the various markets are all factors of consideration. David F.R. (2006).
Reference
David F.R. (2006) Strategic Management Concepts and Cases 11th Edition pg. 4 – 407. Prentice Hall. New York.
