Challenges in Expanding Business Activities Globally
Companies tend to fail to deliver on their promises after going global. In the post-expansion period of the business, they often fail to become successful as a global brand (Martins et al. 2021). This is due to their lack of competence in conducting business in a foreign market. Furthermore, such failures are not limited to a single industry; retailers, manufacturing firms, transportation, power/ energy-producing corporations, etc. have all discovered that expanding in today's marketplaces is simpler to strategize than to execute. Furthermore, Globalization of the economy, internationalisation of enterprises, and the formation of emerging markets are all current business concerns. International business used to be the domain for firms with significant scale plus scope, but multinational enterprises (MNEs or MNCs) – not anymore enjoy monopoly in the industry. There is growing competition in domestic and foreign market alike. Under certain circumstances, this incentive stems from a realisation that success in foreign markets depends on survival (Park and Lee 2021); if competing organisations thrive in international markets, they strive to gain big scale profits and solvency to accomplish a competitive edge in its industry. Nevertheless, a critical analysis of the actual experiences of global expansion reveals that the seeming potential is far from simple to realise in practice. This begs the topic of if a firm is internationalising, then what’s the 'best practice' in terms of global expansion strategy. Hence, this paper aims at identifying and analysing the key factors which influence a firm’s success after the expansion of business activities into a foreign country.
One primary issue is that many businesses are expanding outside their domestic borders in the era of globalisation and industrialisation (Cherunilam 2020). Numerous businesses exist outside of respective home markets as a result of mergers. In several market areas, including mining, F&B, and pharmaceuticals, there are various successful examples, however, they are still restricted when contrasted to foreign nations. When an organisation reaches the growth stage, there comes a time wherein the leaders and management of the firm decide to go global or say "internationalise". It is usually an exhilarating endeavour, but it also carries with it a whole new holistic approach. As a result, this empirical review would guide the current investigation into what techniques organisations can take to grow their foothold in other nations, as well as what factors may obstruct the expansion from becoming successful.
Different nations have different professional and social cultures, traditions, environments, etc. With which the tastes and behaviours of the consumers differ from one nation to another. There is a learning curve that must be adjusted to the customs of conducting business in whatever nation the firm decides to operate in. Understanding the audience will likewise be vital as the firm operates with its franchisee, partner, licensee, etc. to develop marketing tactics and resources.
For example, citing religious considerations, McDonald's in India doesn't sell pork or beef (Singireddy 2020). However, there are plenty of vegetarian alternatives on the menus. Remarkably, non-vegetarian and vegetarian suppers typically are cooked in distinct segments of the food outlets. McDonald's has been inspired by indigenous flavours in so many meals that it's tempting to overlook it's a worldwide company rather than an Indian fast-food joint. Another example is global food chain outlets offer halal chicken in Islamic nation (Dragomir and Lau 2019).
Cultural Differences in Foreign Markets
Acknowledging the cultural variations across the organisation's market as well as the entry market can assist the company to maintain a positive connection with its market entry mode and avoid cultural blunders. This same can be done to overcome the linguistic barriers in the foreign market. If this is the first time the company is continuing to expand into any foreign market, choosing a nation that chooses to speak the identical dialect as the company or has a large proportion of people who converse using the company's language would then eliminate the necessities to translate handbooks, streamlining training programs for employees and the introductory approach, and reduce the risk of expertise transmission being "lost in the translation."
Consumer nationalism "brings together 2 of the main fundamental historic factors in contemporary culture: nationalism and consumerism" (Chandan and Christiansen 2019). Consumer nationalism refers to the purchase and consumption of specific commodities by customers as a political gesture. Hence, an analysis of two types of consumer nationalism emerges as engaged in the reproducing nationalism, derived from existing research and a variety of instances, taking into consideration both deliberately nationalist discourses and activities and relatively basic, daily forms of nationalism.
Consumer animosity, which is described as "remnants of aversion due to prior or contemporary military, political, or economic events," could be leveraged to gauge clients' dislike for particular nations (Antonetti et al. 2019). This can, nevertheless, be employed to explain broad trends in inclinations and consumption of foreign products, across nations. Consumer animosity is sparked by a variety of factors, including extraordinary historical events, economic strife, and religious, cultural, or behavioural differences. Customer animosity against Japan in the United States, or consumer animosity against Turkey in Greece, are two examples of geographical contexts.
Consumer ethnocentrism may foretell preferences for domestic products, although it lags and tends to fall short of explaining international product purchasing behaviour. Once consumers develop negative views about imports, the impacts of consumer ethnocentrism might be amplified. Automobiles manufactured in the United States, with assembly factories in China, are a prime illustration (Guo and Bunchapattanasakda 2020). Ethnocentric consumers would not buy similar commodities as they only buy stuff made in their nation.
When an organisation has decided to expand globally for the very first time, it could be tempting to expand to one such country where they show interest. On the one hand, some modes of entry, such as franchises or joint ventures, may be a faster approach to close the deal. Many of the world's largest multinational corporations (MNCs) have their head office in developed nations such as the United States, Japan, and European countries.
On either end, numerous businesses end up with their first franchisee/business on either half of the planet, losing out over the advantages of growing into a more local market. Woolworths is a corporation that has focused on the local markets and has become a successful retailer/supermarket within its domestic and international borders. This MNC employs over 5,600 people and has operations in South Africa, Singapore, Hong Kong, New Zealand, and, of course, Australia. It is headquartered in Burnley, Victoria (Kasanagottu and Bhattacharya 2018).
Consumer Nationalism and Animosity
Because international tourism and immigration have become highly popular, the populace of adjacent (Asakawa et al. 2018), or surrounding nations is expected to have a bigger percentage of prospective customers who have encountered (and enjoy) the organisation's brand. Having started the worldwide growth of the company in one of such marketplaces enables the business to capitalise on its brand awareness. Expansion of these organisations into a market further away from home can also present additional hurdles in terms of travel time, logistical barriers (Cichosz et al. 2020), and handling time zone changes once it pertains to managing, recruiting, and controlling the firm’s business subsidiaries.
Hence, in summary, if an organisation has ventured outside of its home nation, for the first time, the endeavour will demand a lot of commitment, and it'll be critical to have simple access to the foreign marketplace to help the organisation's business performances.
Several elements, as aforementioned, might influence a firm's efforts to grow its business outside its nation's territory. A crucial factor is the overall reputation of the company’ home country. These variables influence a nation and brand’s image from the perspective of inhabitants from other nations based on their personal preferences (Chaulagain et al. 2019). A venture capitalist or a manufacturer, for example, may consider a nation's macroeconomic stability, whereas a student might be primarily concerned with the nation's level of education or educational quality. For example, even though there are more Indian businesses represented, overseas companies are still preferred. In reality, 59 percent of the Indian workforce believe US-based Multinational enterprises are better employers, whereas 79 percent of MNC staff believe their companies are better workplaces. Likewise, these companies provide quality and warranted products and services than the majority of Indian businesses. Hence is even preferred by consumers in the market.
Thus, the image of a company is directly correlated to its nation of origin (Rossanty and PUTRA NASUTION 2018). It is, nevertheless, distinct in that it focuses on customer behaviour or ways the nation in which the product was manufactured, as specified on the product's label, may impact customer purchasing decisions. In the end, it adds to an organisation's international success.
The Foreign Market Entry Strategy, or how the organisation has chosen to internationalise itself, is a critical aspect. Exporting one's goods to another country isn't the only strategy to expand one's business overseas. Other typical foreign entry tactics include M&A, JVs, Franchising, Born Global(s), FDI, and so on (Schellenberg et al. 2018).
For example, Business Acquisition is one approach. Acquiring a firm or business that are up - and - running and developed is a tried-and-true method of expanding a business. The advantages of acquisition are numerous: well-refined products and brand names, well-honed distribution networks, pre-existing consumer segments, and so forth. Business Acquisition is among the quickest ways to expand a firm's reach, yet it comes with a hefty price tag and also seven potential challenges with integration, communication, and culture between the acquiring company and its affiliate.
Another approach is a joint venture, which is defined as a business, company, or partnership founded by two or more organisations, persons, or entities. JVs have some fundamental benefits: offering exposure to resources & marketplaces, transferring technological advances, lowering political risk (Chidlow et al. 2019), and increasing the company’s competitive position (Almor 2018). Because the national and international companies share control and ownership. The 4 key elements determining the success of the process of internationalisation of born global businesses are the entrepreneur, the network, the industry, and its products/services. Other elements that influence traditional internationalisation were investigated as well, but they turned out to be irrelevant to the born global idea.
A competitive industry is beneficial since it indicates desire. When examining the competitive climate, ensure that the degree of competitiveness isn't too high or close to saturation aka market saturation (Mahamadou 2021), as this will leave minimal opportunity for new entrants to enter.
So, the supply and value chain must be adjusted, which is a significant factor. Businesses may be obliged to adhere to localised circumstances due to unique price, quality, and other criteria imposed by the international market. Computation and studies, and the appropriate resources, might be required for developing an optimised supply chain management plan. Certain strategic variables are general in the sense that no company can credibly ignore them when expanding internationally. Likewise, controlling the value chain, control of personnel resources, acquiring the relevant economic resources, and a fair view of the risks associated (potential complexities) are among these factors.
Several assessments of global growth, for instance, emphasise the tactics of Western MNCs; but, considering the state of globalisation, there's also no explanation for they must be limited to this domain. Middle Eastern, Chinese, and many other firms' strategies could emerge as much more significant. There are few assessments backed by empirical facts from the experiences of communities coping with such challenges. Globalisation might be the single most important issue in modern business, but practically all of the assumptions drawn around it are based on personal beliefs or generic economic models.
Travelling has now become more convenient than ever before, as well as an increasing number of consumers have become acquainted with aviation companies and notions from beyond their domestic market. Regardless of the very first criterion, if a significant degree of market awareness for the aviation organisation's brand exists, such a company would be ahead of the competition. We as consumers have witnessed many brands freshly emerging in our local market with a line out the doorway right from day 1. For example, Qatar Airlines introduced its services in the UK in 1997. They showed an outstanding demonstration of the advantages of making an entry into the market with established brand recognition (Fetaiset et al. 2020). Probing to determine where the company stands within the prospective foreign market would pay dividends in the long run for both the business and its subsidiary in the foreign market.
Customers build brand attitudes depending on the perceived nation's impressions since they must assess offerings with scant data (Montanari et al. 2019). Because customers must assess new commodities with minimal information, they rely on knowledge regarding other brands created in the same country to develop overall perceptions of the nation and, as a result, attitude towards the brand.
Several instances of this issue can be found in the retail industry itself. Sir Terry Leahy of Tesco PLC in the United Kingdom witnessed Tesco's flagship Fresh n' Easy retail venture in the U.S.A. quickly go into the red, and fail terribly (Rosnizam et al. 2020). The issue is that such major, well-funded companies were at the forefront of market research techniques that employ baseline digital information collecting to monitor customer behaviour — and yet ultimately, they ended in failure. Walmart, the once-dominant American retailer, later abandoned its development into the booming German buyer market, surrendering its shares to domestic competitors like Metro. It is indeed possible that, based on the data gathered, businesses choose to target countries that they believe to be judicially and politically reliable. However, such advances pose a variety of practical concerns. Because apart from a stable political or economy, the most important aspect of becoming successful in a foreign market is the brand’s attitude and consumer's perception towards it.
Choosing the Right Entry Mode
Because the public educational approach may slow the ramp-up stage, it'll be critical to limit financial commitments, especially on Return on investments. Having entered a market where the organisation's product/service is already well-known decreases the requirement for educating consumers as well as the likelihood of non-acceptance from the consumer's end. It'll be critical to evaluate the nature of competition in such a context. Based on the competitive landscape, the firm must proceed with its branding activities.
For example, should customers be informed if a Thailand-based food chain brand decides to offer Thai cuisine in the UK when a food chain business is entering a market that is already acquainted with Thai cuisine? If the latter is accurate, the organisation should bear the responsibility (and cost) of market pioneering to enlighten audiences about the cuisine and Thai culture to develop demand in the market.
Based on a comprehensive assessment and evaluation of pertinent literature, it is obvious that a considerable number of factors can influence brand image and impact the success of the business that has expanded to a foreign nation. Nevertheless, the causes of firms' failure to expand in foreign countries go beyond these considerations. Many MNCs have had great success expanding their business through joint ventures, mergers, etc. and proved to be a typically successful strategy for corporations looking to expand internationally. So, understanding the growth path of a company that decides to go global is critical. This document can help business owners and managers make strategic decisions and develop expansion initiatives. The purpose of this article was to obtain a better knowledge of the challenges that international/transnational/multinational companies face while attempting to expand their operations beyond their native country. User perceptions of brands from different nations, brand quality, price, and notions like nationalism, ethnocentrism, helpful behaviour, and patriotism that could also alter the image of a brand were thought to be variables that could influence the acceptance or non-acceptance of their products overseas. This is the ultimate criteria of a company's success in the international market.
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