One major component to entering a new market as an international business, is to be sure the product and/or service matches the needs of the market. Things that can affect the failure or success of a newly introduced product can range from cultural traits, values, habits, and norms. There is a lot of research needed to put into these concepts to ensure that the product/service is appropriate for that foreign market. The book uses an example of how Americans prefer moist creamy dessert cakes, which differs from England which prefer dry cakes that can be eaten with tea.
There are four basic questions that international strategists should seek to answer:
Who in the foreign market uses the product?
What are the values of the people in the foreign market?
What are the signals that indicate change in the market?
How can the firm increase market share.
One can see the importance of these questions. There are several ways to tackle these questions. When using product strategy there are five types using different alternations of standardized/customized messages and products. By combining these strategies with the 3 fundamental alternatives successful implementation of a product is possible. This is similar to how MTV entered China, adhering to the cultural differences and traditions to become one of the most successful transnational media corporations.
On the subject of service, there are three broad service categories: people-processing services, possession-processing services, and information-based services. These three strategies facilitate balancing standardization with local customization. Similar to product strategies, these are crucial to the success of international businesses.
All in all, international managers have several strategies that will differ from nation to nation. Carefully analyzing and implementing the right strategy is key for success. The four "P's" of marketing also come into play when approaching entering a foreign market. For manufacturing, different approaches consist of licensing, franchising, management contracts, joint ventures, contractual alliances, and wholly owned subsidiaries. Each approach has a different level of risk pertaining to investment, which must be considered upon penetrating foreign markets. International expansion can prove to be highly profitable or detrimental to the business.
Friday, March 12, 2010
Friday, February 12, 2010
The Global Environment
The beginning of chapter 3 discusses the impacts of tariffs, place quotas, and embargos in domestic environments. Companies that need products from countries that have imposed embargo acts will find a way to obtain them. The real issue becomes not actually getting these products, but the increased costs to over come. The book discusses an example that if a U.S. company needed a product from Cuba, the company would have Cuba trade the products to another country such as Canada, which has no embargo imposed and get the product through that channel. This "middleman" results in higher costs. This example stresses the fact that international managers need to be well aware of nations' tariff and quota practices, as well as embargos.
There are different aspects to consider when exporting, importing, outsourcing, etc... Managers need to knowledgeable of the domestic competitive climate as well as the domestic economic climate. These two are crucial for international managers to make big decisions. A manager wouldn't want to be beat by a competitor with a similar strategy on penetrating the same international market. Also being aware of the domestic economic climate could be vital for a struggling company to survive in a weak domestic economy.
An important part of the chapter talks about the formation of the European Union. The EU is made up of 27 European nations and is taking a similar idea that of the U.S. The book states how citizens will describe themselves as "European" rather than German when traveling internationally . Similar to the U.S., one would describe themselves as "American" instead of a "Californian." The EU poses a threat to external companies in regards to protectionism and preferential treatment. It also poses a threat to external companies as potentially not being in contact with the standard-setting body of the EU. This may cause violations of the EU product and safety standards.
NAFTA (North American Free Trade Agreement) - This agreement began in January of 1994 including the countries of Canada, Mexico, and the U.S. This was originally formed to combat the EU, but its mission is quite different from the EU. The NAFTA is still in the early stages of a union and not as cooperative as the EU, but has been successful to reduce tariffs, remove the restrictions of certain products imported/exported, and increase investment opportunities.
One of the more important topics reviewed in chapter 3 is the awareness of cultural differences. Businesses need to adapt to the cultures of new markets they are attempting to enter. An example used in the book was KFC's attempt to enter Brazil. Since the company lacked to recognize the cultural differences between the U.S. and Brazil, their approach failed miserably. This topic is such an important part for a business to succeed in any other country. Culture also affects the way business is conducted.
Competition is viewed very differently from country to country. Some countries consider competition to be a wasteful practice. Japan, for instance, views competition as a wasteful practice, as its main goal is to gain the largest market share while keeping all of their citizens employed. This is very different from the U.S. when competition is wired into our psyches at a very young age. The book touches on topics such as cartels and government owned enterprises in regards to competition. Tariffs and quotas also play a big role in global competition.
There are different aspects to consider when exporting, importing, outsourcing, etc... Managers need to knowledgeable of the domestic competitive climate as well as the domestic economic climate. These two are crucial for international managers to make big decisions. A manager wouldn't want to be beat by a competitor with a similar strategy on penetrating the same international market. Also being aware of the domestic economic climate could be vital for a struggling company to survive in a weak domestic economy.
An important part of the chapter talks about the formation of the European Union. The EU is made up of 27 European nations and is taking a similar idea that of the U.S. The book states how citizens will describe themselves as "European" rather than German when traveling internationally . Similar to the U.S., one would describe themselves as "American" instead of a "Californian." The EU poses a threat to external companies in regards to protectionism and preferential treatment. It also poses a threat to external companies as potentially not being in contact with the standard-setting body of the EU. This may cause violations of the EU product and safety standards.
NAFTA (North American Free Trade Agreement) - This agreement began in January of 1994 including the countries of Canada, Mexico, and the U.S. This was originally formed to combat the EU, but its mission is quite different from the EU. The NAFTA is still in the early stages of a union and not as cooperative as the EU, but has been successful to reduce tariffs, remove the restrictions of certain products imported/exported, and increase investment opportunities.
One of the more important topics reviewed in chapter 3 is the awareness of cultural differences. Businesses need to adapt to the cultures of new markets they are attempting to enter. An example used in the book was KFC's attempt to enter Brazil. Since the company lacked to recognize the cultural differences between the U.S. and Brazil, their approach failed miserably. This topic is such an important part for a business to succeed in any other country. Culture also affects the way business is conducted.
Competition is viewed very differently from country to country. Some countries consider competition to be a wasteful practice. Japan, for instance, views competition as a wasteful practice, as its main goal is to gain the largest market share while keeping all of their citizens employed. This is very different from the U.S. when competition is wired into our psyches at a very young age. The book touches on topics such as cartels and government owned enterprises in regards to competition. Tariffs and quotas also play a big role in global competition.
Monday, February 8, 2010
Cross National Ethics and Social Responsibility
Chapter 2 goes into detail about the meaning of ethics and how they differ from country to country. What maybe acceptable here in the U.S. may not be applicable to the rest of the world. It also gets into the idea that a concept such as bribery could be legal in one country, but socially unaccepted. This can lead to informal punishment such as poor publicity, boycotts, and other detrimental things to a company.
The book further dissects the subject of bribery with the different forms. A Whitemail bribe is a payment made to an official that must do or omit doing something in violation of their lawful duty. A lubrication bribe is a payment to facilitate, expedite, or speed up routine government approvals or other actions or other actions to which the firm would be legally titled. Lastly, extortion is the opposite of a Whitemail bribe as the official is seeking payment from an individual or corporation.
There are several ways to avoid violating a host country's laws. Some tips the book offer are continuously learning about the cultures and/or hiring a local journalist to do a comprehensive local media search. It is very crucial to understand the repercussions of violating the laws and ethics when conducting business in another country.
The FCPA (Foreign Corrupt Practices Act) became law in 1977. The act had 2 main purposes which was to establish a worldwide code of conduct for any kind of payment by U.S. businesses to foreign government officials, political parties, and political candidates. The second purpose was to require appropriate accounting controls for full disclosure of firms transactions.
Though the FCPA constrains some businesses' competitiveness, these businesses have found a way around violating the FCPA such as making donations to build new hospitals or schools. By making donations, and not making payments to "private individuals"; these businesses are no longer violating the FCPA and actually are helping a community. This is a great alternative to bribery and enhances their corporate giving initiatives.
An important part of chapter 2 is the cross-national social responsibilty concept. This is a "notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law or union contract." This concept guides corporations to not only treat themselves fairly, but to cover the community, employees, and customers.
Terms
Cultural Relativism is an idea that no culture's ethics are any better than any other's.
Universalism is an idea of a rigid global yardstick by which to measure all moral issues.
The book further dissects the subject of bribery with the different forms. A Whitemail bribe is a payment made to an official that must do or omit doing something in violation of their lawful duty. A lubrication bribe is a payment to facilitate, expedite, or speed up routine government approvals or other actions or other actions to which the firm would be legally titled. Lastly, extortion is the opposite of a Whitemail bribe as the official is seeking payment from an individual or corporation.
There are several ways to avoid violating a host country's laws. Some tips the book offer are continuously learning about the cultures and/or hiring a local journalist to do a comprehensive local media search. It is very crucial to understand the repercussions of violating the laws and ethics when conducting business in another country.
The FCPA (Foreign Corrupt Practices Act) became law in 1977. The act had 2 main purposes which was to establish a worldwide code of conduct for any kind of payment by U.S. businesses to foreign government officials, political parties, and political candidates. The second purpose was to require appropriate accounting controls for full disclosure of firms transactions.
Though the FCPA constrains some businesses' competitiveness, these businesses have found a way around violating the FCPA such as making donations to build new hospitals or schools. By making donations, and not making payments to "private individuals"; these businesses are no longer violating the FCPA and actually are helping a community. This is a great alternative to bribery and enhances their corporate giving initiatives.
An important part of chapter 2 is the cross-national social responsibilty concept. This is a "notion that corporations have an obligation to constituent groups in society other than stockholders and beyond that prescribed by law or union contract." This concept guides corporations to not only treat themselves fairly, but to cover the community, employees, and customers.
Terms
Cultural Relativism is an idea that no culture's ethics are any better than any other's.
Universalism is an idea of a rigid global yardstick by which to measure all moral issues.
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