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International Business Strategy

International market entry modes are very much important for fixing the strategies of the business organizations. The business organizations all around the world seem to expand in the contemporary times so they can increase their profits and gain better reputation because of provide customer experience. This is the reason that the business organizations always look for the best opportunities when they will expand and make the most utilization from the simplest of the chances (Weismann, Buscaglia and Peterson 2014). In this scenario, business organizations will have to be very much cautious when they will enter the markets in the different countries. This essay will look to explore and critically examine the different ways how the business organizations look to enter their target countries and manage to make business there. However, the organizations that look to expand into the different countries face many issues.

These issues will have to be discussed in this essay so the risks of the countries could be found. The major risks that are involved within this entry mode of the markets are associated with the countries. Mainly the political conditions of the countries and their overall business probabilities pose a challenge in front of the companies. The social, political and economic factors have always been regarded as challenges for the overall growth of the organization (Weismann, Buscaglia and Peterson 2014). In this essay, these issues and challenges will be dealt with for the properly highlighting the best opportunities for the expanding business organizations. The cultural and political issues are taken as most crucial challenges for the entry modes of the organization.

            International market entry strategy is surely one of the most crucial factors for the overall success of the organizations. If the organizations can successfully venture out into the other countries, they will surely have a range of benefits in terms of the overall productivity and cost management for the company (Thompson, Strickland and Gamble 2015). In this discourse, it will be highly important to note that foreign direct investment (FDI) is surely one of the systems that will be important for the international organizations to enter into the market of the different countries. The political risks are very important to determine how the organization can cope up with the challenges within the countries they expand into (Thompson, Strickland and Gamble 2015). The implementation of the foreign direct investment in some specific regions and countries is very crucial. The size of the country and the rate of population growth are the most intriguing factors that can be discussed within the organization’s chances to venture into different countries (De Beule, Elia and Piscitello 2014). Some companies always prefer to enter their markets in China so they can do their business in a great manner. Apart from that, the size of China is very huge and it is definitely the largest populated country in the world. There will be no shortage of manpower and this factor is definitely something to be considered as positive. Apart from that, there will be no such problems among the organizational managers because there are enough chances for the organization to make the profits. The political risks are lesser in China than the other countries as well. The socio-cultural climate in the country is also good and favorable for the safe venturing. This is why critics have questioned in favor of foreign direct investment in China. 

            Yet some international companies have always opted for the foreign direct investment practice because of the political risks that exist in some countries and states. Some companies have always preferred better political conditions in the countries and states so they can work better. The issues that are there as part of the political risk are stability in the property rights, quality of the bureaucracy, judicial systems and other factors (De Beule, Elia and Piscitello 2014). These issues should be managed properly so the organizations can provide better employment opportunities to their people. Through this method, the organizations will get better opportunities to use the resources of the country in a better manner and they will surely be able to adjust with the political changes. As the critics have suggested, it is better for the companies to consider the national culture of the countries to make adjustments with the common people of the country (Ang, Benischke and Doh 2015).

On the other hand, few critics have also raised their voice considering the fact that national cultures of the countries might clash in conflicts. This should be taken care so the business services of the organization and the customer services are not affected. According to scholars, the culture of the host country will have great impacts on the effective business decisions of the countries. Some elements should be considered within this cultural hierarchy. It is because of the needs of the organization. Personality clashes between the people belonging from different cultures will be an important factor to deal with (Ang, Benischke and Doh 2015). Amidst these circumstances, organizations should be able to cope up with the behavioral and cultural issues so they can be safe. Sometimes, the clash of cultures regarding the collectivism and individualism will definitely create some problems for the organizations to carry out the business properly.

As per the critics, the most important of the market entry strategies are foreign direct investment (FDI), joint venture, and product licensing, exporting partnership and internet sales. The use of the contingency theory is surely a very important strategy by which they will be able to align their strategies properly (Hohenthal, Johanson and Johanson 2015). The success factors of the big, small and medium sized companies will be very much important because they will have to highlight the cultural issues that might arise when working in a different atmosphere. The use of the market diversification strategy is a very crucial mode by which the organization will be able to construct a proper market plan as per the domestic environment of the country. Now, the domestic environment of the country implies to the political and cultural issues within the country. Through this market entry strategy, the organizations will be able to address the strategies taken up by the host governments. These strategies are quite important for the understanding of the organizations for them to select the strategies properly.

When international firms enter the new markets or countries, they select varied strategies to enter (Hohenthal, Johanson and Johanson 2015). These strategies should be noted so that the organizations do not have to face some troubles in the future. Sometimes they choose the licensing and franchising method and sometimes they choose the exporting method. This exporting strategy can be done through directly or an independent manner through the use of different channels. Critics have highlighted over the fact time and again that the organizations’ entering strategy will depend on the range of control that a company has on different tangible and intangible resources that they use in the new host countries (Iamsiraroj 2016). The costs of the transactions will be regarding the commitment to the different resources. This is why the resources should be used by the companies very closely. It has been argued that the two most important factors for the success of the organizations are mode of control over the resources and location of the organization (Blonigen and Piger 2014). Proper exporting of the goods will require the organizations to behave in a responsible manner and they can be controlled in an administrative manner as well. The managers of the organization should be committed to the resources.

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The role of the host government is an immense force since the returns on the sales and assets will surely rise in the country. This will surely be highly beneficial for the organization from several aspects. Another effective form of the international market entry strategy is the international contracting (Hohenthal, Johanson and Johanson 2015). The investment based entry is also a very crucial method for entering new markets. It is, therefore, a big question whether the organizations will be supported by the host countries for their contribution. However, the host governments must take into account the fact that the national GDP of the country will increase if the local people are given jobs in those organizations. These organizations will create employment opportunities for the local people and thus they can use the local resources at a lower cost level. Critics are of the opinion that the taxes will have to be imposed when these companies send their goods outside the country (Blonigen and Piger 2014). This will increase the national income. If the business environment within the host country changes, this will pose as a huge challenge for the success.

Therefore, the organization will have to take some serious steps in order to adjust with the changing business environment of the host country. Critics have argued over the issue that the tax charges and customs duty of the products should be controlled by the Governments effectively, thus securing the rights of the organizations. The political aspects should be taken under consideration as well. If the organizational managers find that there is turbulence within the political atmosphere of the host country, they should sit down with the Government officials to describe about the problems they face in terms of carrying out their business properly. If the country is not able to pay back the debts, the international organizations will face a lot of uncertainties as well.

The host country should provide stable investments that will cater to the betterment of the situation for the organization. The economy of the host country will improve surely with the help of the import and export of the country. Apart from the economic risks, the political risks are very important in this discourse as well (Iamsiraroj 2016). The political decisions made within the country are similar to the external business environments. The expanding business organizations must look into this matter with utmost importance. Then the business organizations must look into this issue so they can come up with the best feasible solutions. If the political scenario within the country goes on to deteriorate, it will cause great loss to the group of investors. The scenario might arrive at a point when the economic background or standpoint of a country is very strong but the political standpoint is fragile. This will surely be a huge problematic thing for the success o profits of the organization. If this political unrest goes on within the country, it might not be an effective one for the big investments (Cui, Meyer and Hu 2014). Thus, critics are quite sure that the investment from outside countries is very much important for the economic growth of the country.

Some countries are emerging very fast because of the investment of several multinational companies. Therefore, they will need to retain this growth and increase their GDP as well. This will surely cause the rapid industrialization in the countries. Therefore, it is rightly argued that the proper market entry strategy will be very much beneficial for the host countries (Cui, Meyer and Hu 2014). Their economic growth will take them to a newer height and it will deal with the country risk in a very swift manner. These political considerations might cause distress in the industrial feature of the company. However, the newly built up companies might also face some problems if they make risky entries. This will surely be fatal for their success in those emerging markets. In the emerging markets, there are many political unrest in the emerging markets and this might cause huge issues if not dealt with properly (Nayak and Choudhury 2014). Therefore, the companies should validate all the necessary elements before they go on to understand the financial fundamentals of that particular market. The political issues and challenges will cater to the growth of the country risk. So, companies can also decide to opt out from these markets as well.

Another crucial aspect of entering new markets is in terms of their growth in the circle of technology. Countries like United States, Japan, China, Germany, Australia and other countries are very much superior in the use of the technology. Therefore, they will need to understand how they can provide the best business environment for the companies. Both the established and newly emerging companies need the support of the technology to enter the new countries with the help of supreme technology (Nayak and Choudhury 2014). This is how the organizations should keep in track of all the issues that take place within the countries. The countries with the frontier markets will always provide best destinations for all the companies. The companies will readily move to these new places just because it will give them added benefits along with economic and political stability.

According to the critics, this will be a huge step towards success for the organization (Farla, De Crombrugghe and Verspagen 2016). The frontier market countries will also emerge as the top rank destinations for the organizations. These frontier markets are generally some smaller countries and they need the market growth for their own development. These smaller markets are seen to suffer from the liquidity so they will need to be consolidated with the help of these top international organizations. Many people argued that the companies should be very careful when they tend to enter these markets. They might face some serious competition from the local companies but they will have to deal with them effectively.

The importance of the diversification strategy is also a very crucial factor when the companies should be engaged in the investment of their money. These things will eventually result in the overall financial developments (Farla, De Crombrugghe and Verspagen 2016). Therefore, critics are right to discuss about the country risk because these risks are posed as serious challenges. Also, the companies will have to adjust with the local cultures of the countries where they will be working at. It is because they can gain the maximum support from the local people if they learn to respect the local cultures and other perspectives (Chan 2016). This is how the organizations can flourish outside their home base.

On a concluding note, it can be said that the market entry strategies are very much essential for te successful venturing of the organizations. The expansion of the organizations is really something that should be given the utmost importance in terms of making higher profits and giving benefits for the organization. The country risks should be considered properly by these organizations because this will surely create the problems and barriers in the path of growth for the organizations. This is why it is quite important that the organizations should analyze all the country risks within the external environment of the organization. Therefore, the economic and political issues could be resolved properly if the organization needs to succeed. The purpose of the organizations will be to find out the ways to deal with the issues properly. This is how they can go on to be the successful ones despite the country risks they face in terms of the business environment.

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References and Bibliography

Ang, S.H., Benischke, M.H. and Doh, J.P., 2015. The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), pp.1536-1553.

Blonigen, B.A. and Piger, J., 2014. Determinants of foreign direct investment. Canadian Journal of Economics/Revue canadienne d'économique, 47(3), pp.775-812.

Cavusgil, S.T., Knight, G., Riesenberger, J.R., Rammal, H.G. and Rose, E.L., 2014. International business. Pearson Australia.

Chan, S. ed., 2016. Foreign direct investment in a changing global political economy. Springer.

Corcoran, A. and Gillanders, R., 2015. Foreign direct investment and the ease of doing business. Review of World Economics, 151(1), pp.103-126.

Cui, L., Meyer, K.E. and Hu, H.W., 2014. What drives firms’ intent to seek strategic assets by foreign direct investment? A study of emerging economy firms. Journal of World Business, 49(4), pp.488-501.

De Beule, F., Elia, S. and Piscitello, L., 2014. Entry and access to competencies abroad: Emerging market firms versus advanced market firms. Journal of International Management, 20(2), pp.137-152.

Farla, K., De Crombrugghe, D. and Verspagen, B., 2016. Institutions, foreign direct investment, and domestic investment: crowding out or crowding in?. World Development, 88, pp.1-9.

Hohenthal, J., Johanson, J. and Johanson, M., 2015. Network knowledge and business-relationship value in the foreign market. In Knowledge, Networks and Power (pp. 187-224). Palgrave Macmillan, London.

Iamsiraroj, S. and Ulubaşoğlu, M.A., 2015. Foreign direct investment and economic growth: A real relationship or wishful thinking?. Economic Modelling, 51, pp.200-213.

Iamsiraroj, S., 2016. The foreign direct investment–economic growth nexus. International Review of Economics & Finance, 42, pp.116-133.

Jones, J. and Wren, C., 2016. Foreign direct investment and the regional economy. Routledge.

Kraus, S., Ambos, T.C., Eggers, F. and Cesinger, B., 2015. Distance and perceptions of risk in internationalization decisions. Journal of Business Research, 68(7), pp.1501-1505.

Nayak, D. and Choudhury, R.N., 2014. A selective review of foreign direct investment theories (No. 143). ARTNeT Working Paper Series.

Shahbaz, M., Nasreen, S., Abbas, F. and Anis, O., 2015. Does foreign direct investment impede environmental quality in high-, middle-, and low-income countries?. Energy Economics, 51, pp.275-287.

Sleuwaegen, L. and Onkelinx, J., 2014. International commitment, post-entry growth and survival of international new ventures. Journal of Business Venturing, 29(1), pp.106-120.

Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts and readings. McGraw-Hill Education.

Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts and readings. McGraw-Hill Education.

Weismann, M.F., Buscaglia, C.A. and Peterson, J., 2014. The Foreign Corrupt Practices Act: Why it fails to deter bribery as a global market entry strategy. Journal of Business Ethics, 123(4), pp.591-619.

Xia, J., Ma, X., Lu, J.W. and Yiu, D.W., 2014. Outward foreign direct investment by emerging market firms: A resource dependence logic. Strategic management journal, 35(9), pp.1343-1363.

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