Written by M.Azim Ulfati
Introduction
In
this paper the main topic will be about Foreign Market Entry and Diversification
of a A Company and other companies. The first part is
to create an argument for diversification of an A
Company business that will be presented to the board of directors or business
investors then I will develop a strategy for diversification indicating the
products and industries for the diversification and how synergies may be gained
from the diversified activity of A Company after that
I will identify and discuss the foreign market that the company should enter
and will discuss the strategy it should use to enter the market. I will also discuss the challenges that
company may face in the foreign market, and how it might respond strategically
to minimize the impact of these challenges.
Further
more I create a scenario when it would not make sense for the company to
diversify or expand into a foreign market and will provide support for my
rationale and lastly I will assess how the company that will create a business
environment conducive to ethical behavior.
1-Create an argument for
diversification of your business that will be presented to the board of
directors or business investors.
A diversified company is a collection of
various and individual businesses. This collection of businesses, whether
related or unrelated, will cause the strategy- making and decision-making tasks
for these collection and/ or groups of businesses to be even more complicated,
important, and crucial than ever before ("Foreign market entry,”)
Diversification
is a very essential and vital move for any business or company. A business must
only know the need to diversify. It must also know of when to diversify.
So long as a company has its hands full attempting to capitalize on profitable
growth
opportunities in its present company, there is no urgency to pursue
diversification. The big risk of a single-business company, of course, is
having all of the firm's eggs in one industry basket. If the demands for the
industry’s product is eroded by the appearance of alternative technologies,
substitute products, or fast-shifting buyer preferences, or if
the industry becomes competitively unattractive and unprofitable, then
company's prospects can quickly dim. ("Foreign market entry,”)
Diversification is going to be the key to the longevity of our
service and products in A. Its smallest
competitors, Simply B offers World wide linguistic, intelligence and
technical support while another largest competitor C, offer
linguistic, intelligence, technical support; and have begun to offer minimal
linguistic services. “Diversifying entrants pose a bigger threat in increasing
rivalry and challenging incumbents’ market share. Right now, C is the leader
in diversified product lines, although our competitors offer a variety of
services and products. A Company will improve on
quality in order to become a threat to the competitors. If A does not diversify, it will quickly become irrelevant in the
market, like its smaller competitors. If it plans to succeed and increase
longevity it must diversify and improve upon what its competitors offer.
Currently, A is the government’s leading provider of
translators, interpreters and cultural advisors, with more than 8,000 personnel
in 13 countries across the Middle East, Africa, Asia and Europe. In addition to
language translation service, A provides intelligence support and training
and technical solutions. ("Company,”)
Its Service is inserted in a rapid change environment principally because of
lightning fast technological development and advancement. In this environment
the threat of product obsolescence drives company to improve present products
and to develop new products to assure sales and profit stability. Therefore, as
the language application life cycles are completed, new life curves with other
applications must be started. Additionally the company is experiencing growth
and effective use of new managerial techniques which facilitate the development
of, and planning and control in, multiproduct and services.
Due to the fact that A Services already has very
high technological resources the company can use this expertise to leverage a
cross-business value chain relationship strategy. With that strategy the
company will diversify into related business with essential value chain,
gaining more competitive advantage potential than companies that diversify into
business whose value chains are totally unrelated. Then A Services could transfer skills and technology from the
applications with languages to applications for another languages in general.
In this way the company can reduce costs via sharing use of common facilities
and resources, and utilizing the company’s well-known brand name and services
and to grow services sales.
2-Develop A Strategy For
Diversification Indicating The Products And Industries For The Diversification
And How Synergies May Be Gained From The Diversified Activity.
As a way to increase popularity and customer base loyalty, marketing,
research and development will work with designers and distributors on a
linguist, contractor employee line for plus capacity of the services. Currently
capacity of service and finding the right and qualified human power in a
specific field is difficult to find for working and deploying overseas and
being a way from their family.
C
is the leading company in providing human power services but that company
provides human power at a high cost and they are extremely expensive for the
clients to offer. Our A offers the best
service in a reasonable price to the customers where they can afford and that
have made it the global leading company and with that it vigorously executes
specialized operational solutions to support the unique program management
requirements of customers worldwide and the result create remarkable
experiences and they have been very successful for development of their
diversified strategy and activities that they offer.
3-Identify and discuss the
foreign market that the company should enter and discuss the strategy it should
use to enter the market.
Globalization has made the world flat where ideas, information, skills, and
technology are being easily transferred across boarders. Such movement promotes
companies from all over the world to enter new markets. Foreign market entry
has become very popular over the years, and companies seek to enter such
markets in order to achieve financial growth. Companies who are entering a
foreign market undergo a complex process in order to penetrate the new market
accurately. The company must have the opportunity, appropriate resources and
skills, an adequate entry mode, and most importantly the right timing. Each of
these factors mentioned above have to be chosen accurately in order for the
company to successfully enter the new market.
(Jung, 2012)
And
each of the above mentioned factors have been chosen accurately and it has been
able to enter foreign market successfully.
When a company decides to become international, it must be careful in selecting
when to enter the new foreign market. Timing is key. The organization has to
take into account several factors regarding the market and the company itself.
The foreign market must be ready for such investments; hence, the targeted
industry must ensure opportunity and should contain the right settings to
facilitate market entry (Jung, 2012). As previously mentioned, an organization
needs certain resources to come into new marketplaces. These resources
can be described as technological, marketing, and financial resources. Also,
organizations as a whole should be capable to undertake such action. With all
of these factors taken into consideration, a company should be able to enter a
foreign market efficiently and effectively. (Jung, 2012)
Once a company decides in entering a foreign; the organization must choose on
an entry mode. Past research on entry...
Over
the last decades, the world has increasingly become a smaller place offering
more opportunities to potential and existing companies in terms of markets to
explore. Barriers to trade have fallen, technologies have been improved, and
these are only two of many more important factors that serve as incentives to
internationalize, creating a favorable environment to get on board and start
the process. Nevertheless, the decision to expand business activities to
foreign markets is extremely complex. The initiative, to be fully rewarding,
must be thoroughly planned and undertaken.
The
strategy, which a company should use and enter the foreign market, is
diversification strategy. Diversification is a set of strategies. These
strategies involve all the dimensions of strategic involvement. It can include
internal, external, related or unrelated, horizontal or vertical, and active or
passive dimensions either singly or collectively.
Diversification
involves a substantial change in the business definition singly or jointly in
terms of customer functions, customer groups, or alternative technologies of
one or more of a firm’s businesses.
There
are different types of diversification strategies.
Concentric
Diversification
When
an organization takes up an activity in such a manner that it is related to the
existing business definition of one or more of a firm’s businesses, either in
terms of customer groups, customer’s functions or alternative technologies, it
is called concentric diversification.
Concentric
diversification is of three types:
Marketing
related diversification
Technology
related diversification
Marketing
and technology related diversification
Marketing
related concentric diversification:
A has considered all the above-mentioned strategy for
entering foreign market so far successfully. Since its services are already in
many different countries like the United States of America, Germany, Kuwait,
Qatar, Kyrgyzstan, Afghanistan, Turkey and the company should enter in one of
the other poor countries where the donor countries help a lot. There is the
need for the international donor organization where many donor countries need
linguists and contractors for the communication purposes. They need to use
their multi national business strategy, where the company would vary a little
in the company’s strategic approach in response to differing local market, competitive
conditions and local preference. With the whole business based on online
applications, by entering a foreign market, A has
been able to coordinate activities across many different countries and should
continue to coordinate their activities and build competitive advantage.
4-Discuss the challenges
that company may face in the foreign market, and how it might respond
strategically to minimize the impact of these challenges.
A operates in dynamic markets where the window of
opportunity opens. Its survival and success is determined by how quickly,
efficiently and holistically they predict and act upon foreign opportunities.
How ever this company may face with some challenges like any other countries
and I would like to talk more in details that not only A but also many other companies may face the following changes
when doing business in foreign market.
1-Political
Environment challenges
High
levels of uncertainty in terms of continuity of government policies, changing
political philosophies that may be evident in targeted market.
These
uncertainties in political changes may include general instability,
expropriation, operations’ and finance, Uncertainty about target’s value,
Difficulty in “absorbing” acquired assets, Slower startup, High risk and high
commitment.
2-Entry
challenges,
In
order to enter the foreign market it is very difficult to break in to a market
and compete with other companies. There will be tariff and non- tariff
challenges, Potential costs of trade barriers, Transportation cost, Foregoes
potential location economies, Difficult to respond to customer needs well,
Licensing agreement, Lack of control over operations, Difficulty in
transferring tacit knowledge, Negotiation of a transfer price, Monitoring
transfer outcome, Potential for creating a competitor
3-Legal
environment challenges
The
company may face legal environment challenges because the court law decisions
may have upon a company’s globalization attempts. These cultural, political,
geographical differences pose threats and challenges to global firms and as
well as legal system and affect the business transaction. The environmental
challenges can be the common law system, which is derived from English law and
found in England, USA, British common wealth countries, which include for
instance, Australia, Canada, New Zealand and the former British Colonies in
Africa and India. The civil or code law system derived Roman law and found in
most European nations, Japan and non- Islamic and non- Marxist countries.
(Jusuf & JusuBiljanaf, 2011)
The
Islamic legal system derived from the interpretation of the Holy Koran and
followed by Afghanistan, Pakistan, Iran, Saudi Arabia, and other Islamic
countries. (Jusuf & JusuBiljanaf, 2011)
The
Marxist legal system, found in Marxist socialist countries such as Russia, the
republics of the former Soviet Union, Eastern Europe and China, as well as
other Marxist socialist states who rely on economic, political and social
policies as the center of their legal systems (Jusuf & JusuBiljanaf, 2011)
4-Market
Potential and Market Size challenges
5-Cultural
challenges
Culture
is considered among the most challenging aspects while selecting a market.
Although language, different culture and preferences still have an impact
because of company’s history and accelerated pace of internationalization and
technology development the company faces more difficulties and more
competition. I think that a successful marketer must be a student of culture
because it deals with a group’s design for living and it is pertinent to the
study of international marketing. Therefore, culture is integral to the
marketing concept, which is based on satisfaction of wants and needs of
potential buyers. Culture has also impacts on the way messages concerning the
ability of the product or service to satisfy the needs and wants, are received
and interpreted. This is even more so in international markets, where cultures
differ markedly from one international market to another. When designing a
product, style, and other related marketing activities, and if they are to be
operative and meaningful, they have to be acceptable to the related cultural
market. We can say that culture is very evident in all marketing activities,
for example: in pricing, promotion, packaging, and styling. (Brakeman,
H.G./Bell J.H.J./Penning’s)
6-Technological
challenges,
Technology
is vital for gaining a competitive advantage while competing in international
markets, and is a major driver of globalization, because it allows companies to
produce products or services more cheaply and with a better quality. (Jusuf
& JusuBiljanaf, 2011)
Technologies
may offer consumers and businesses more innovative products and services such
as Internet banking, new generation mobile telephones, etc. furthermore,
technology help companies to better distribute and serve customers, for
example: books via the Internet, flight tickets, online but some countries do
not have good technology to do business online and run almost all of the
business with the help and assistance of technology.
In
order to respond the challenges in the foreign market and to minimize the
impact of challenges in a company, then the company needs to do the following
performances.
1-It
is very important for companies whether in domestic or international, large or
small, that want to conduct business without taking in consideration the
political environment of the country where they intend to operate. An
examination of target country’s political orientation and environment is part
of the preliminary screening stage of market select. Any company considering
doing business outside of their own country should carefully study the
government structure of the target market as well as the political systems of
the targeted country. (Jusuf & JusuBiljanaf, 2011)
Interest
in politics is the first dimension listed in many frameworks examining export
environments. This is largely due to the fact, foreign firms must try to make
their activities politically acceptable or they may be subjected to politically
condoned harassment (Jusuf & JusuBiljanaf, 2011)
Government
involvements in business are related with making policies how best to promote
the national interest. Any firm engaging in international marketing should also
be aware of the importance of sovereignty to national governments and its
consequences for global business (Jusuf & JusuBiljanaf, 2011).
Always
asses the risk when selecting target markets because of high level of
uncertainty in terms of government policies, changing political philosophies
that are evident in targeted market It is extremely important for company while
considering strategies to be used during internationalization stages to
consider all aspects of political risks.
2-
And in order to reduce the impact of entry challenges in a company, the company
needs to obey the rules and well train and manage their staff to handle the
entry challenges based on the tariff and non tariffs rules and regulations
because usually entry rules and regulations are imposed by governments in order
to protect domestic industry or to ensure that companies entering from foreign
markets conform to trade relation’s arrangements with other countries.
3-
when it comes to legal environment challenges, the company hast to study the
legal environment rules and regulations of each country and environment, manage
and follow them to the best of its knowledge and always consider international
business due to the impacts that court of law decisions may have upon a company’s
globalization attempts.
4-The
company needs to asses foreign markets and do an estimation of international
market potential constitute significant challenges that many
internationalization companies have failed to meet.
5-
The company needs to asses and be a ware of the cultural sensitivity and issues
that are very sensitive to one’s culture and to accept the differences between
cultures by assessing in an objective, not creating stereotyping. There are
many numbers of cultural concepts that assist in clarifying cultures in broad
terms like, religion, tradition time, language, space, and familiarity and
consumption patterns.
6-Technology
is vital for gaining a competitive advantage while competing in international
markets, and is a major driver of globalization, because it allows companies to
produce products or services more cheaply and with a better quality. As I
mentioned above that some countries do not have good access with good
technology or if they do they may have some limitation so the company has to
assess the technological environment and consider alternative ways of approach
where they can solve and minimize technological challenges. (Jusuf &
JusuBiljanaf, 2011).
5-Create a scenario when it
would not make sense for the company to diversify or expand into a foreign
market. Provide support for your rationale.
There
are seemingly three simple questions to be answered to find out whether it will
make sense for the company to diversify or expand in to a foreign market or
not. Expanding to other markets or diversification can be very
challenging, unpredictable and a very high-stakes game, in fact there is little
conventional wisdom to guide managers as they consider a move that could
greatly increase shareholder value or seriously damage it. Although by
expanding A Services to foreign markets the
company might be able to enhance potential to build a global brand name with
significant power in the marketplace, this scenario seems to be much more risky
than diversification. In fact changes in foreign politics, taxations and
increase competition can have dramatic consequences in the business,
especially if the company is not prepared to spread the risk among other
business.
Therefore
diversification seems to be the better strategy to achieve a sustainable
advantage, which can result in the creation of enormous shareholder value. This
is because A company strengths allow the company to
create something unique. By identifying company’s unique and unassailable
competitive strengths the company can move beyond
a business-definition approach and instead launch
a diversification effort based on its strategic assets. Every move
makes sense for a rival or for the companies in the industries, it does not
make sense for your own company or industry; the race to globalize sometimes
leads people to overestimate the size of the prize. It is important to find out
that are there potential benefits for our company? Do we have the necessary
management skills? Will the cost outweigh the benefits? Considering A Company main strategy concerns “Language and technical
services” the company can build on their excellent skills in technology and
flexible payments to start new applications in language and launch similar
applications for many other languages. In this way the company will not be so
dependent of the one region language service and can consolidate their position
in market before expanding into foreign markets.
The
last things that the company needs to consider are to look carefully at its
existing business. If the company does not have the right manager to cope with
a divaricating strategy can not integrate the diversified business into one
company or ring fence the new operations as a business in its own right, the
organization is not strong enough to be an umbrella where its core values
resonate across the group then it does not make any sense for the company to
expand in to a foreign market.
6-Assess how the company will
create a business environment conducive to ethical behavior.
I
think ethical behavior in a business environment is extremely important and
that is acting in ways consistent with what society and individuals typically
think are good values. Ethical behavior tends to be good for business and
involves demonstrating respect for key moral principles that include honesty,
fairness, equality, dignity, diversity and individual rights and increasing
consumer trust. However, the given nature of the activity in which the business
is engaged would temper and define the outer limits of ethical behavior and the
mode in which it manifests itself, on the part of business institutions and
their managers. Even knowing that the company is inserted in a highly
competitive industry, which it is also feasible to create greater opportunities
for unethical behavior, the company must behave ethically.
But
the question is how? Given the existence of opportunities in order to create a
business environment conducive to ethical behavior the company must be engaged
in ethical behavior in the marketplace and these attitudes must flow from the
top level managers to the low level. In fact, managers’ ethical values
serve as example to influence each employee’s choice of ethical/unethical
behavior, while corporate culture supports each decision as the right thing to
do.
Additionally
the company must develop a minimum level of ethical business conduct such as
norms and minimal conduct behaviors. It must consider a business conduct for
the organization to conform to the prevailing societal norms, traditions, and
culture of the relevant environment especially if the company decides to expand
into foreign markets. Finally to create a business environment conducive to
ethical behavior it is necessary to extend higher ethical standards of fairness
through the way the corporation and its managers interact with its stakeholders
in Brazil or around the world.
Reference
1-
(n.d.). Foreign market entry and diversification. Business and Management,
Retrieved from
http://www.termpaperwarehouse.com/essay-on/Foreign-Market-Entry-And-Diversificaion/135828
4-
Barkema, H.G./Bell J.H.J./Penning’s, M.J., Foreign Entry, Cultural Barriers and
Learning, Strategic Management Journal, 17,2, 1996, pp. 151-166.
5-
Jusuf, B., & JusuBiljanaf, A. (2011). Factors that influence entry mode
choice in foreign markets. 5.4. Legal Environment, 22,
6-Jusuf,
B., & JusuBiljanaf, A. (2011). Factors that influence entry mode choice in
foreign markets. 5.7. Culture
7-
Jusuf, B., & JusuBiljanaf, A. (2011). Factors that influence entry mode
choice in foreign markets. 5.8. Technological Factor
