International Business Transactions and Strategies

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Introduction

International business involves business transactions taking place across national boundaries. The business involves large and small firms, as well as those with strategic alliances within the global market. However, there are several distinctions made depending on the nature of strategies applied by firms based on organizational and functional decisions comprising of financial, administrative, marketing, human resource management and operational decisions (World Trade Organization, 2009).

Liberalization of both trade and investment has contributed towards growth and development of international business within the last few decades. International business differs from domestic enterprises based on across borders strategies and systems of operations. These include unique government systems, taxes and duties, foreign currencies as well as different cultures amongst other systems (Allen and Raynor, 2004).

International business can be valued based on comparative advantage of various countries. Such aspects consider the fact that each nation specializes in production of some unique goods and services based on presence and abundance of factors of production (Allen and Raynor, 2004).

At the same time, firms are differentiated in terms of kind of resources available for utilization which guarantees them competitive advantage based on quality of products and services offered. Changes within resource needs, product life cycles and domestic markets create some need within firms to invest in international markets.

Outline explanation of the chosen international organization

Levendary Café comprises of a chain of 3500 cafes including Denver soup, salad and sandwich restaurants. The Café operations were managed by Mia Foster serving at the capacity of being the new CEO. The company’s fundamentals are recognized as having stronger basis and, at the same time, performance based on objective management forecasts. Additionally, the company boasts of strong international brand despite being tapped out of domestic market. The restaurant entered the Chinese market with unique changes in their marketing strategies such as using different design of stores and menus for the purposes of appealing to local consumers.

Levendary Café is famous for its wholesome soups, salads, and sandwiches made of high-quality ingredients. The café has numerous operational centers within the United States with headquarters in Denver. These locations are characterized by comfortable and friendly environment. The company recruits highly skilled and professional staff and at the same time operates under attractive tagline and brand image which identifies the restaurant’s food the one that makes people feel rich.

Description of the global business environment the company operates considering the industry, main competitors, and the biggest challenges

Competitive environments usually vary from country to country based on economic, political and cultural dimensions. Level of competition existing between firms in international markets varies depending on the country of operation (Bartlett and Ghoshal, 1987).

Good example can be derived from the scenario between two countries i.e. the US and China, whereby owners of a majority businesses in the US are private companies hence competition only arises within the private sector. This is contrary to business operations within People’s Republic of China where businesses were owned by the state hence making it difficult for multinational companies from the United States to compete favorably within Chinese market.

Chinese market provides potential base for business operations based on the population density. The country seems ripe for investment firms with the rising urban middle-class population. Chinese food services industry experiences growth due to increase in the number of women professional workforce and increasing trend of eating out.

However, the interest of the majority of population inclines towards their cultural beliefs making consumers more attracted to restaurants serving Asian food at affordable prices (Kogut and Singh, 1988). At the same time, Chinese consumers consume less diary products demanding that any foreign based restaurant such as Levendary should reduce supply of diary related products. This is contrary to the United States market where majority prefer diary products such as cheese soup.

Company’s major challenge revolves around low returns, competition from a wide variety of regional food suppliers, such as local restaurants. Major competitors within Chinese market include KFC which is considered as most successful foreign fast food restaurant in the Chinese market, because KFC entered the market through joint venture partnership which enabled them to adopt local management styles as well as become appealing to local consumers.

The other foreign competitor is McDonalds who penetrated the Chinese market through its unique menus, as well as affordable prices affordable for younger generation.

There is also Pizza Hut, operating in Chinese market through utilization of its uniqueness in satisfying the needs within high-end casual dining restaurants. Competition within the US food service industry comprises of various privately owned restaurants offering various food categories with services based on time, nature of dinning offered either casual or table dinning services.

However, restaurant and contract food service industry is known to be very lucrative within international market depending on locations. The sector operates in over 9000 locations within the United States. At the same time, the industry is characterized by high level fragmentations amongst multi-unit restaurant concepts and also involves presence of independent operators and major operators such as McDonald’s and Starbucks.

According to analysis from the case study, Chinese taste is satisfied through Quick Casual categories of restaurants comprising of concepts such as Panda Express. Despite all these, Levendary café planned to operate more wholesome choices compared to other Quick service concepts. The industry’s cost structure appears to be relatively simple and sub-divided into occupancy, labor, food and supply costs that appear conducive within international market.

Describe the organizational structure of the company

Lavendary Café operates based on complex organizational structure with headquarters in the United States. Various activities are represented within the organizational structure, with the structure comprising of Chief Concept Officer (CCO) assisting in the process of ensuring that the restaurant maintains top United States market concept.

The CCO ensures that food is developed to cater for various needs within different target markets and also focuses on satisfying upcoming trends through application of right market strategies such as upgrading food taste (Ghoshal and Bartlett, 1995). Marketing department reports to CCO, and are majorly involved in publicity of company’s outlets and franchise stores, this enables adequate creation of awareness amongst consumers.

Management team ensures proper running and planning within company’s premises which includes placement of menu boards, table tents as well as banners. Marketing team also indulges determination of pricing mechanisms (Kostova, 1999). The various pricing mechanisms which can be used by the company include; international, geographical and psychological pricing.

International pricing is where different prices are charged on same goods depending on region and nature of environment of operation. Such decisions are made based on various factors such as country’s economic conditions, marketing objectives and also consumer perceptions. Geographical pricing involves pricing goods and services based on geographical zones and Psychology pricing where consumers’ rate quality based on prices attached on goods and services provided.

Then there is also department comprising of fully scaled test kitchen and food science laboratory working under CCO. The food team is responsible for conducting various quality checks within all Levendary cafes ensuring food tastes change in accordance with cultural beliefs of the target market segment. Then there are store managers reporting to district managers manning operations within various regions, these managers report to area directors which ultimately operated under market vice presidents (Ghoshal and Bartlett, 1995).

The company’s organization structure ensures that strict operational standards, policies and practices are maintained. The same organization structure comprises of Chief Franchise Officer undertaking the responsibility of supervising franchised Levendary’s stores. Business development team ensures that right strategies are applied within international expansion processes and also endowed with responsibility of undertaking research licensing within new markets (Pothukuchi et al., 2002).

Explanation on various impacts of culture on business’s activities around the world

From international business perspective, cultural environment comprises critical aspects with significant impact on market environments. This is since culture comprises of commonly held general beliefs and values amongst different groups of people within one nation.

Various models tend to explain impact of cultural values on businesses, these include individual dimension, degree of response towards risks, issues based on gender, as well as power dimensions. Nations enforce different individual values on citizens influencing their choice of goods. Response towards risks describes the degree of acceptance on uncertainties associated with introduction of new products within the country.

Power distance refers to the level to which a nation uses its power to manipulate and control business operations. Issues on gender revolve around respect for both male and female traditional values. Such models have proved necessary in the process of exploring management approaches appropriate for different cultures (London and Hart, 2004).

The company’s culture focuses on delighting consumers with their products and services. This was translated and incorporated within their local menus found in urban, suburban, as well as rural set-ups across all company branches. However, this is contrary to other multi-nationals such as McDonalds where one menu is created for entire company branches.

Various social and cultural practices within Eastern Europe and China seem to be quite different from that of Americans, original Levendary Café. Such differences usually affect level of sales within some regions. Major differences exist in religion and social lifestyles which affect demand levels of restaurant products and services since they dictate consumer buying patterns (Pothukuchi et al., 2002).

Some of the common cultural beliefs may, at some point, determine the branding nature of most companies based on the need to identify with consumers within target market. For example, market existing in Eastern Europe is usually known for diversified attitude towards food and beverage products from other regions, especially coffee products.

At the same time, marketing team from any multinational company needs to deal with issues surrounding language barrier. This is since effective communication is the key to successful marketing and sale of products (Pothukuchi et al., 2002).

There is need for Multinationals to consider granting natives of any market segment employment opportunities for the purposes of identifying and easily complying with native’s cultures. Such circumstances require complete change and approach within communication channels whereby products are ultimately linked to prevailing culture within various markets.

Operations management and marketing teams require strategies capable of dealing with cultural gaps within countries such as China since this ensures adequate penetration of foreign firms (Furrer et al., 2008). Varied cultural perceptions on western products within Asian and Far-East countries determine demand and level of sales. In some instances, they shy away from western products due to fear of alienation by western tastes, religion and ethnicity.

Highly populated regions like those of Eastern Asia present good market base for international products and services. Overall, sales are often affected by frequent political instability within such regions. However, US regions anticipate high urban population due to industrialization which has led to increase in consumer demands for products and services.

At the same time, various regions within Eastern Europe experience constant changes within their legal systems hence may adopt the kind of marketing strategies applicable in the United States. In some regions, media content are screened before releasing to consumers (Rowley, 2010).

Countries such as China operate under some forms of media restrictions since they have to conform to religious beliefs and cultural creativity. Kind of legal structures enforced determines consumers’ responses within domestic market segments (Kogut and Singh, 1988).

Another company that tries to employ strategic entrepreneurship is McDonald’s, a renowned firm in its industry that tries to employ global management, but acts significantly under the local context (McDonald’s, 2010). McDonald’s is an international food chain that has thousands of outlets across the globe.

This company provides products and services depending on consumer needs hence providing products that have considerable diversification in order to establish brand name, and at the same time, cater for prevailing cultural needs when it comes to supplying foodstuff across regions.

For instance, McDonald’s in India does not serve beef even if in its other outlets outside the country, since it has become its primary fast-moving product. This means that the firm eventually tries to seek the opportunity to cater for international market through trying to act within local domains (McDonald’s, 2010).

The company avoids undergoing certain moves capable of centralizing its production processes since there are many factors to be considered beforehand. These include culture and other relevant heritage associated with the existence of a prevailing culture within the society.

Operations within various market environments based on geographical set-up, population and other potential measures require much consideration. East European nations usually uphold principles of bureaucracy making it difficult for foreign multinationals to make significant penetration. This is since these nations are cautious of any form of colonization from any western nation through their business operations.

Additionally, manufacturers require elaborate considerations on marketing principles capable of capturing customers. Despite threats posed to multinationals, there is need to invest in substantial marketing processes through application of modern and available technology within such interior regions. At the same time, uniqueness of products and services offered by the Company acts as the best source of convincing power that can be utilized to attract consumers to company’s brand (London and Hart, 2004).

There is a necessity to use different strategy approaches within various regional markets. Similar strategies can only work in cases where destination markets share closely some cultural relations with countries of origin. In such cases, same management values and corporate cultures are applicable.

Products and services offered in Eastern Asia countries should have different tastes from those supplied in European countries. This prevents cases of incurring huge losses where management utilizes the use of similar strategies. Multinationals should encourage marketing strategies appropriate in these countries where majority of those within management team are employed from target destinations (Alden et al., 1999).

Identify the key management issues the chosen organization faces

The company faces the challenge of balancing between strategic management and competitive advantage. It is evident from the case study that strategic management would always lead to competitive advantage (Rumelt et al., 1991). However, whether or not the concerned competitive advantage is sustainable, there are relevant proofs that are necessary in order to justify the claim that there is no such existence of sustainable competitive advantage because of the frequent presence of innovation (Bartlett and Ghoshal, 1987).

The competitive advantage of Levendary Café in the first place compares to other key players within the same industry based on brand name. However, their brand is unique, and one of its kind. The company’s strategic moves may not be that unique at all considering the fact that there are many key players trying to imitate what it has already built.

Aside from the fact that this firm establishes its name in the international context, it has the ability to promote the idea of trying to serve its target customers with the product they deserve under the local context. For this reason, this firm has the chance to serve its customers with appropriate product service offerings that they need and deserve.

Conclusion

Global marketing at some point involves inclusion of International joint ventures which act as potential guides for foreign firms within local markets. This enables foreign companies to find easy access to local customers.

In addition, the firm’s image receives some uplift as many consumers require assurance of their local firms before associating with any foreign products. At times, it is referred to as third-party endorsement.

There are other ways in which foreign firms can access resources from destined markets. These include: getting a license, signing contracts, forming alliances amongst application of other market strategies. Joint ventures are mainly preferred because they perform better than privately owned multinational firms.

References

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Allen, D & Raynor, M. (2004). Preparing for a New Global Business Environment: Divided and Disorderly or Integrated and Harmonious? Journal of Business Strategy, 5 (25): 16–25.

Bartlett, C. & Ghoshal, S.(1987). Managing across borders: New organizational responses. MIT Sloan Management Review, 1 (29): 43-54.

Furrer, O., Tomas, H. & Goussevskaia, A. (2008). The structure and evolution of the strategic management field: A content analysis of 26 years of strategic management research. International Journal of Management Reviews, 1 (10):1-23.

Ghoshal, S. & Bartlett, C. (1995). Changing the role of Top management: Beyond structure to processes. Harvard Business Review, 1 (73): 86-96.

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London, T, & Hart S.L. (2004). Reinventing Strategies for Emerging Markets: Beyond the Transnational Model. Journal of International Business Studies, 5 (35): 350–370.

McDonald’s. (2010). Company Information. Web.

Pothukuchi, V, Damanpour, F, Choi, J, Chen, C & Park, H. (2002). National and organizational culture differences and international joint venture performance. Journal of International Business Studies, 2 (33): 243–265.

Rowley, M. (2010). How nonprofits are using social media for real results. Web.

Rumelt, R, Schendel, D, & Teece, D. (1991). Strategic management and economics. Strategic Management Journal, 1(12): 5-29.

World Trade Organization. (2009). “Trade and Investment Statistics“. Web.

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