Multinational Business: Short Answers Essay Example

Building International Consensus

Due to the process of globalization and international integration, companies strive to enter international market. Besides, businesses try to remain competitive there, attracting a greater number of clients. In order to stay profitable, efficient and successful, companies attempt to initiate and adopt new strategies.

1) Benefits of global expansion

The four benefits of global expansion for firms entering the global market include:

greater diversity in the present company and an increased rate of multicultural awareness and communication,
increased revenue through international expansion and stronger brand awareness,
more job opportunities and greater creativity
business growth through new ideas and innovative methods presented by foreign employees.

While limiting their activity to the domestic market, companies may not experience these benefits, losing points in the market field and decreasing the number of customers contributing to the company’s growth, success and development. Greater profitability, diversity and business creativity can benefit the company’s business substantially.

2) Basic Strategies

While competing effectively in international markets, firms use the four basic strategies: including the global standardization strategy, localization, transnational and international strategies. However, each strategy can only be applied under specific conditions. The global standardization strategy might be used when firms feel pressure to reduce costs. The localization strategy is recommended to deal with different customer preferences and tastes. Transnational strategy is aimed at “cost efficiency and local responsiveness, global learning and diffusion of innovations” (Peng, 2013, p. 299). International strategy is the most appropriate for the market with low pressure for local responsiveness and minimal local customization.

3) The first mover company

Being a first mover is nearly often a challenging process for companies being the first to enter the given market or industry. As for the advantages, while being the first company on the market, the company can make a lasting impression on clients. Brand recognition and loyalty can be also established for this specific company, as customers have no other companies to focus on or choose from. Thus, the first mover company can attract a greater number of customers, contributing to the business growth and development in the market. Since the company does not have to focus on competition, struggling for more attention from customers, it can focus on its products and services promoting better quality and perfection for people using their products regularly. As for the disadvantages, the company faces many challenges while exploring the new market, as well as financial burdens which can be avoided not being the first mover. Risks are high because the company cannot learn from previous mistakes and experiences of other firms.

4) The effective entry strategy

While entering a foreign market, every company should decide on the effective entry strategy. This strategy predetermines its future growth and success in the chosen market. The number of Foreign Direct Investments through mergers and acquisitions has increased significantly in the modern society. Therefore, companies should consider positive and negative sides of the FDI applied by the company. On the one hand, the FDI can stimulate economic development and increase employment opportunities, promote the development of human resources and increase productivity. On the other hand, the business may experience higher costs and negative effects on exchange rates, as well as expropriation when the government controls assets and businesses.

5) Price-quality relationships

Price-quality relationships play an important role in the modern-day business, as customers not only want to get high-quality products but also higher quality products and services at affordable prices. In fact, customers often equate a price with quality, measuring how good or bad a product is depending on its price. Thus, the higher price is often associated with higher quality, and there is an assumption that cheap products or services are of poor quality. Sometimes people are uncertain concerning the brand and quality of this or that product. In this situation they usually focus on its price to make the final decision, comparing this product with the similar ones in the line. Thus, the relationship between quality and costs is a strategic objective of global production and logistics.

6) Innovations and technologies

The modern-day companies are now highly dependent on new and advanced technologies benefiting their business and success on the market. However, the type of technology used by a company impacts its decision about the location of its production. Setting a business in numerous locations allows a company to be focused not only on one specific destination, thus escaping many problems and risks, getting more opportunities to grow, succeed and develop. For example, the low rate of fixed costs can help companies to manage activities in different locations. Modern businesses should properly choose technologies influencing their present and future development and success.

7) Foreign factories

Initially, foreign factories were mostly used for reducing production costs and getting cheap labor, as well as cutting down logistics costs. However, the world is changing on a regular basis, as well as the role and significance of foreign factories in the community. Nowadays, many companies use such factories to get talented and highly skilled employees for promoting greater creativity and innovation in business. Besides, they are used to get closer to customers and suppliers who understand local culture and values properly. Foreign factories are now centers of expertise and innovation. Employers should value diverse employees benefiting the business.

8) A country’s economic development

A country’s economic development impacts a company’s product decisions and other business areas significantly. In fact, developed countries attract more businesses compared to the developing nations. It happens because people feel more confident and secure in wealthier nations that provide higher salaries and better working conditions. In fact, developing countries experience fewer opportunities to compete in the international market. Such companies focus mostly on export of some materials and goods rather than on the production of primary products and services. Foreign factories are often located in the developing countries, providing cheap labor for multinational giants that were initially located in the developed countries.

9) The trends

There are certain factors contributing to the trend toward greater retail concentration in developed countries. These trends are associated with the continuous increase in car ownership and improved households with refrigerators and other appliances. Another factor is linked to the formation of dual-income families and households. In fact, when both partners work and earn good money, a family can afford more goods, which leads to sustainable life. These factors promote retail concentration, changing people’s shopping habits and behaviors. Regardless of the geographical location, people want to live better and experience positive changes and improvements.

10) International communication and marketing

The effectiveness of a firm’s international communication is highly dependent on the nature of the marketing message. Customers rely on the given information while choosing a company. Thus, the language and the ability to specify the most important aspects of a business are the main critical variables affecting the effectiveness of a firm’s international communications. Modern companies are striving for international integration and business expansion. So, the efficacy of international communications matters and affects businesses greatly. Companies’ successful management of international communications attracts customers and investors regularly.

Scenario 1.

a) Since Popper’s Ltd. decided to enter the international market hoping to export its products to other countries outside North America, the company should pay much attention to the marketing mix. Four elements should be taken into consideration, including a product, a price, promotion and a place. Concerning the ‘product’ element, the company should focus on quality and design, packaging and style, trying to attract a customer’s attention and interest in this popcorn. In fact, the product is already considered and marketed as organic, and the company also uses unique tastes and seasonings, like nacho cheese, seaweed, and cinnamon crunch. Customers are always open to something new and original, and companies should make a difference in the market by adding new attributes to the product.

b) I think Popper’s Ltd. should apply a global standardized Communications program while entering the foreign market, as this helps in promoting higher brand recognition worldwide since people can recognize the brand, advertising and products in various countries. Although using a different marketing approach in different countries may be close to local values and traditions, it can affect the overall business scheme and principles. Due to the fact that popcorn is not an expensive commodity, people living in all countries can afford it, thus, there is no need to waste costs on the development of a specific marketing approach.

c) I would recommend push marketing for the present company, as it assists in promoting the product more effectively, increasing people’s awareness of the product’s characteristics. For example, the company can give out samples of its products for free on the streets or in various shops, introducing new tastes and seasonings or simply showing the new product that appears on the foreign market. Pull marketing can be also used through mass-media promotions and advertising, increasing brand awareness.

Scenario 2.

a) The company should consider one of the four basic strategies in international business: the global standardization strategy, the localization strategy, the transnational and international strategies. As for the given situation, the company should pursue the global standardization strategy because the product is accepted in the same manner in every country. Besides, since sulfuric acid produced by the company is a commodity, there is an ongoing and intense competition for the product’s price, and thus, the strategy is always recommended when a company feels pressure to reduce costs either following the trends or trying to remain competitive both in the national and international market fields.

b) Since the company plans to expand its business by opening new plants and entering new locations, it should follow a plan of decentralized manufacturing. In fact, this type of manufacturing is recommended for companies not only caring for business but also for people contributing to its growth, success and development. Kosanke & Nell (2012) stated that with a dynamic and decentralized manufacturing process, “humans are effectively integrated and changes are made dynamically and continuously” (p. 285). This approach is beneficial for many plants and different locations, while investing in production and people is good for the company.

c) While deciding on a location or locations for the company’s plant or plants, I would first of all look at infrastructural facilities and ecological factors. In fact, plants should be built away from cities and residential areas to escape possible environmental harm and health issues. Besides, while choosing the location for the plant, it is important to consider the availability of raw materials in the area, as sulphur is needed for the production of sulfuric acid. These factors will help to avoid future problems and additional costs that negatively affect business.

Infrastructure matters greatly in the choice of the proper location, as transportation, communication means, as well as electricity, power and other facilities may be needed to organize the manufacturing process properly and effectively. Moreover, people working at those plants need food, water, and transport to return home, so these issues should be also taken into consideration as contributing to employees’ productivity and job satisfaction. Availability of required manpower or skilled employees is also important while making decisions concerning the location. If people live too far from the plant’s location, they might not agree to work there. Consequently, employers should consider many factors in caring about employees and the future manufacturing process.