Companies International Strategy Case Essay
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Companies International Strategy Case Essay
Companies operating in global markets choose from among three basic international strategies: (1) multidomestic, (2) global, and (3) transnational. Each of these strategies responds to the local markets and business efficiency in different ways.
A multidomestic strategy emphasizes local needs rather than pushing products and services from the company’s home country. For example, the television show Master Chef customizes the programming that is shown in different countries.
A global strategy emphasizes operational efficiency to benefit from economies of scale. It offers the same products in different locations. Examples include Microsoft and Intel, where local preferences do not dominate. Consumer goods makers such as Levi’s and L’oreal develop global brands to gain efficiency.
A transnational strategy emphasizes balance between local country preferences and the efficiency of standard products. For example, McDonald’s relies on its brand name but adjusts its offerings in different countries. It does not serve beef in India and it sells wine with food in France.
The three types of international strategies are compared in the figure below.
Types of International Strategies
Approaches to International Strategy
Whichever international strategy is chosen, the entry strategy for international markets needs to present a comprehensive plan that sets goals, allocates resources, and establishes policies to guide international operations over a period long enough to achieve sustainable growth in world markets, often three to five years.
Without a well-integrated entry strategy, there is only a sales approach to international markets. The sales and entry strategy approaches are contrasted in the table below.
Sales Approach versus Entry Strategy Approach Aspect Sales approach Entry strategy approach Entry mode No systematic choice. Take opportunities as they come Systematic choice of most appropriate mode Target markets No systematic selection Selection based on analysis of market/sales potential Dominant objective Immediate sales Build market position Resource commitment Only enough to get immediate sales Whatever is necessary to gain market position Time horizons Short run Long run (say, 3 to 5 years) New-product development Exclusively for home market For both home and foreign markets Product adaptation Only mandatory adaptations (to meet legal/technical requirements) of domestic products Adaptation of domestic tests and services to foreign preferences Channels No effort to control Implement control to support market objectives Price Determined by domestic costs with some adjustments to specific sales situations Determined by demand, competition, objectives, and other marketing policies, as well as costs Promotion Mainly confirmed to personal selling Advertising and sales promotion While the sales approach may be justified as a first attempt, a prolonged adherence to this approach would not be sustainable in the long run.
Choosing a Market and Entry Modes
The assessment and choice of target markets would include the following tasks:
- define the market—Consider the demographics, location, and common interests or needs of your target customers.
- perform market analysis—Gain an understanding of market growth rates, forecasted demand, competitors, and potential barriers to entry.
- assess internal capabilities—Which of the company’s core competencies can be leveraged? Are the sales channels, infrastructure, and relationships in place? What are the time-to-market considerations?
- prioritize and select markets—What are the gaps in the marketplace that the company can fill better than its competitors?
- develop market entry options
The selected entry mode could be one or more of the options in the table below.
Entry Modes Offshore Contractual Investment · Indirect · Direct agent/distributor
· Direct branch/subsidiary
· Licensing · Franchising
· Technical agreements
· Service contracts
· Management contracts
· Turnkey contracts
· Sole venture, new establishment · Sole venture, acquisition
· Joint venture, new establishment or acquisition
As the company develops its international strategy, it is useful to visualize the long-term evolution of the company in world markets. As seen in the table below, in Stage 1 the company is constrained to one or two entry modes. At Stage 4, the company is able to evaluate all possible entry modes to select the most appropriate one. Stage 4 denotes that the company has become multinational, meaning its foreign market entry strategies is designed from a global perspective rather than a single-country perspective.
Entry Mode Stages
- Stage 1: Ad hoc exports
- Stage 2: Active exporting and licensing
- Stage 3: Active exporting, licensing, and equity investment in foreign countries
- Stage 4: Full-scale multinational marketing and servicing
Servicing of occasional, unsolicited export orders. Also includes response to unsolicited licensing arrangements. Marginal commitment to foreign markets.
The choice of entry mode also depends on the degree of control, financial outlay, and risk in each mode over a period of time, as shown in the figure below.
Decision on Entry Modes
The actions in the international marketing plan include the following:
- service—a combination of tangible and intangible attributes that confer benefits on users
- price—pricing discretion to achieve differentiation in the market. Together with sales volume, price determines sales revenue
- channel—wwn none, some, or all channel agencies
- logistics—physical movement of samples, including transportation, handling, and storage, as well as the choice of location of collection centers and labs
- promotion—includes personal selling, advertising, sales promotion, and publicity
The following evaluation matrix can be used for each of the countries to decide on an entry strategy.
Entry Strategy Evaluation Matrix Modes\ Criteria Investment Sales Costs Profit contribution Market share Reversibility Control Risk Other Local sales office Licensing Franchising Agent/distributor Investment: New venture Investment: Acquisition Joint venture Mixed Resources
RUBRIC
Excellent Quality
95-100%
Introduction 45-41 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Literature Support
91-84 points
The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.
Methodology
58-53 points
Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score
50-85%
40-38 points
More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.
83-76 points
Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.
52-49 points
Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality
0-45%
37-1 points
The background and/or significance are missing. No search history information is provided.
75-1 points
Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.
48-1 points
There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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