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What is international business strategy?

International business strategy refers to the plans that helps in guiding organization action that sells their services and products outside the country in which they operate. (Mellahi et al. 2021). These strategies help guide the organization on how to line or approach the market and segment that are essential to focus on (Humphrey et al. 2020). With the appropriate strategy, a company can easily expand its market condition, make the most of ROI, gain a competitive advantage, and enhance its brand image (Mellahi et al., 2021). International strategy is the top method for numerous businesses planning to expand globally, importing and exporting services and goods while maintaining their offices in the home country (Mellahi et al., 2021). Companies are choosing numerous models like multi-domestic strategy, which uses different marketing, sales, and strategies of product where they are operating; for example, Johnson and Johnson use this model. Global strategy, in this case, is when a business defines a single global brand and makes fewer or zero changes in the other areas of the market (Jansson 2020). For example, Technology giant Apple (Humphrey et al. 2020). Transactional global strategy business mainly operates in the head and central office in one single country that is coordinative local subsidiaries in the global markets. For example, Nike, Coca-Cola, and McDonald's are using this model of international strategy (Jansson 2020). This essay will shed light on the strategies of international business with theory and concepts, the motivation behind taking business internationally, and this essay also shed light on important drivers of globalization.

Modes of entry in the international business is direct exporting, which is involved when a company exports its products and services to another market overseas; for a few businesses, it is one of the fastest entry mode levels in international business (Luu et al. 2018). It is also known as direct selling, when a seller of one country imports their product to another market. The advantages of direct exporting are that the company can select foreign representatives in the overseas markets; this strategy helps businesses protect their goodwill, patents, intangible assets, and trademarks (Luu et al. 2018). The disadvantages of this strategy are that for offline products, companies can't sell due to higher costs. Franchising and licensing are the other effective method to enter the foreign markets; for companies who want to create a presence of retail in the international market with less risk, licensing and franchising is the effective method to create a global image of the brand in international markets (Luu et al. 2018). Its advantages include lower entry costs in the global market, it offers a passive income source, and it enables expansion in numerous regions with less investment. Joint ventures are one of the most favored entry modes in the global business for sharing their knowledge, brand, and expertise (Kotler et al. 2019). The organization that wants to expand in the international markets can create joint ventures with local businesses in the international location, where both the partners equally share their risks and rewards with the business (Tocar 2018). Joint venture benefits include partners influencing or leveraging their expertise to expand and grow in the chosen international country (Kotler et al. 2019). It allows the transfer of intellectual assets, properties, technology, and oversmarketkets knowledge. Foreign direct investment is another best technique to enter the global market. It involves organizations entering the international market by investing substantially in a particular country (Kotler et al. 2019). Few modes of entry with the help of FDI are acquisitions and mergers, greenfield investments, and joint ventures (Kotler et al. 2019). Foreign direct investment allows companies to invest directly in foreign markets.

Modes of entry in international business

The top barriers to entering international markets are monopolies, considered a very serious entry barrier in the international market (Oliva and Kotabe 2019). It blocks the competitor's entry by using licences and patents to prevent the possible substitutes development by having complete control over suppliers or resources, distribution routes, or mainly by using pricing strategies (Oliva and Kotabe 2019). For example, In North America, internet services. Legal protection also acts as the major barrier in the international markets; when organizations cannot assume their protection of intellectual property (patents, copyrights, trademarks), and effective and fair settlement in dispute mechanism, it is most likely to suffer in the market condition. And corruption and bribery also act as major issues in international markets when companies want to expand their operations in other countries (Oliva and Kotabe 2019). Generally, entry barriers in the global markets differ from the domestic markets that include barriers to culture( social system), Accessing to distribution channels, language barriers, switching costs of the customer, policies of the government (licensing requirements, taxes, controls, export restrictions, import quotas), currency exchange rate stability, adoption of the product, promotional activities changes required, economic environment, political environment, nationalism, advantages of the cost that the local organization holds, and corruption (Oliva and Kotabe 2019).   

Taking business at the international level increases profitability and sales; going international helps provide new revenue sources, secure long-term business success, and get a larger return on investment (Tien 2019). The internet makes it easier for the organization to reach international levels easily. Ability to help out more people, the organization's solution is helping businesses reach out to customers and improve their lives effectively (Tien 2019). When business is going at the international level, it gives the advantage of helping a larger number of people who are finding their questions and answers. When a business expands globally, greater talent access helps attract new talents pool with unique mindsets and skills (Tien 2019). When an organization gets information about new individuals, learning about a new culture helps them secure more advanced operations (Oliva and Kotabe 2019).    Understanding people from other countries helps organizations build new perspectives on their relations with potential customers (Tien 2019). It exposes numerous opportunities for foreign investment; foreign investment is essential for the business, and the company can easily attract investment opportunities (Oliva and Kotabe 2019).   It helps improve the organization's reputation, and it acts as the major motivation for many organizations (Tien 2019). When organizations successfully go internationally and market their offerings to a new age population audience, it helps in enjoying prestige at the global levels. It also helps to diversify the company's markets; going global level provides numerous advantages to the company; it acts as the motivating factor behind going internationally (Marshalok et al. 2021).

Opportunities in foreign markets are the major motivation behind expanding business internationally. Opportunities of market are found abroad (Katsikas et al. 2019). These opportunities may include product demand of the organization in the international market, changing trends that favor the products in the global markets, and the absence of competition, giving an advantage to the first mover in the foreign markets. For example, Sony sells its products on the global markets (Katsikas et al. 2019). The organization has major markets on the international level in almost every continent, and they have explored its consumer electronics product. Apple is also one of the most prestigious organizations operating internationally; they have created strong goodwill and brand image in the minds of their customers (Bosso et al. 2019). Nivea brand has expanded internationally to appeal to their domestic markets. Its ads give testimonials from customers of various ethnicities of an international brand.

Barriers to entering international markets

Economies of scale play a major factor in going internationally; organizations want to globalize their company to accomplish economies of scale (Bosso et al. 2019). It is advantageous because it enables organizations to economize distribution and transport networks (Bosso et al. 2019). Additionally, it enables organizations to manufacture cheaper products in few countries because of factors like costs of components, supplier availability, flexibility, different legislations, and wages. For example, Apple has begun manufacturing iPhones in China to benefit from low production costs (Bosso et al. 2019). Apple's volume of production and changes in unpredictable engineering needed it to manufacture in that location, and it offers flexibility that is not possible in the US (Fredonia et al. 2022). China factories can employ thousands of engineers who can respond to the changes and variations overnight when necessary. For example, Apple redesigned the screen of the iPhone at the last minute, and within less than an hour, a new fresh screen arrived at the manufacturing plant's location.

Diversifying their risk is the main reason for going at the international level that companies want to diversify their risk (Sharma et al. 2018). By implementing and doing this, organizations have become more resistant to the changing trends of the consumer in every market. They are also less affected by consumer behavior and buying of their products, like climate (Sharma et al. 2018). For example, H&M opened its first retail store in India and has expanded its reach all over India in less than a year. Gaining large profits is a positive signal for H&M to become the most popular and successful brand in the international markets. It has aimed to take the position of Zara and become the world's most apparel retailer.

Drivers of globalization are technological drivers; Trade liberalization plays the major factor behind globalization as a way to regulate the global trade policies and economic position and has been used by numerous governments to control what is exported and imported into the country (Nasir et al. 2021). Numerous policies are coming from imports with non-tariff and traffic barriers; One of the vital drivers and features of globalization has been the barriers to the trade liberalization of services and goods (Nasir et al. 2021). An essential motivation for such action has mostly related the market access because most governments reciprocate each other decision on liberalization, and every country is benefited from the market that is getting from the export industries. For example, major reforms have been taking place in the global markets since 1978 and trade (Nasir et al. 2021). One of the highest GDP growths was experienced by China, which is around almost (10%) worldwide. In the last few years, there has been an enormous shift towards liberalization of trade all around the world, and countries have numerous policies in the liberalization that largely depend on the various phases of development, in political and cultural factors (Gharleghi and Jahanshahi 2020).   One prominent international organization promoting linearization of trade and bringing principal reductions in the barriers to trade worldwide is (WTO) world trade organization (Gharleghi and Jahanshahi 2020). Privileged or preferential agreements in trade can also take place among countries, like (NAFTA) the North American free trade agreement, and (EU) European Union, where all members have mutual international trade policies and substantially decrease barriers to trade between themselves (Gharleghi and Jahanshahi 2020).  

Benefits of international business expansion

Various factors like development stage, demography, and location vary among countries in cost. Differences are increasing international investment and trade, thus driving the growth of globalization (Berdiev and Saunoris 2020). For example, In China's southern Guangzhou, 10,000 laborers are working legal hours to sew shoes for the Nike brand $95 a month. In this way, it provides great incentives for an organization like Nike to outsource manufacturing work to China and other lower economic costs, where goods are usually made from the cost of a fraction opposing to the industrialized countries (Berdiev and Saunoris 2020). This is also seen in the clothing industry when manufacturing is moving toward developing nations. It creates fewer barriers to entering the market, is labour-intensive, and needs lower economic development in the hosting country. The cost advantage of importing and outsourcing are abandoned by distribution and shipping costs due to high demand differences (Gunter and Wilcher 2020). An increase in wages leads to the growth of the economy. Thus, production is moved to an economy of low cost. Cost variation is not unique to human capital but is also found in other areas of raw material, directly influenced by the country's geographical location.

Political drivers for globalization, liberalized rules of trading, and freed or deregulated market conditions decrease tariffs and allow foreign direct investment in almost every part of the world (Gunter and Wilcher 2020). Institutions like GATT (General Agreement on trade and tariffs) in 1947 and the World trade organization (WTO) in 1995, the ongoing privatization and opening in eastern Europe are a few examples of the new development. The domestic markets have become more and more saturated, growth opportunities are limited, and expanding globally, numerous organizations have chosen to overcome these market forces (Gunter and Wilcher 2020).

Rapid changes in technology in the past few years, technological advancements have led to the main drivers for enhancing and improving global communication, mobility, and connectivity. Thus it led to the growth of globalization. One of the most prevent changes in technical information technology is mobile phones, where individuals connect with one other from different locations (Deeks 2021). Differences in cost among countries, as the numerous factors in the stage of development, demography, and location vary from country to country. Technology helps in setting and shaping the foundation of contemporary globalization. Innovation in the technology of transportation has revolutionized the industry. The four main drivers of globalization are government, market, competition, and cost (Deeks 2021). These external drivers are affecting major conditions for globalization. The rapid change in technology and technological advancement in recent decades plays a major role in global connectivity, communication, and mobility and helps facilitate and drive globalization (Ramazani et al. 2021). For example, technological changes are seen in almost every factor of globalization in the production, agriculture, and finance sectors (Deeks 2021). One more example of technological globalization is the 400 video-conferencing systems the Bank of America, and banking organization Cleveland has saved $200,000 a month from decreasing travelling expenses by using the video conferencing technology (Ramazani et al. 2021). In transportation, technologies have enhanced or accelerated flexibility geographically, and efficiency and speed of transportation are dramatically decreased. For example, in 1950, the development of aviation technology from propeller aircraft to jet passenger aircraft 1960 reduced traveling by hours, leading to international mobility and greater convenience (Ramazani et al. 2021). At the same time, advances in communication and transportation technologies have made the economic complex in global by overcoming the resistance of time and space.

In conclusion of this essay, international business strategy plays an essential role in expanding their business on foreign soil. The main global strategies that organizations implement are global, multidomestic, and transactional strategies of international. Globalization is the interconnectedness of businesses and people across various parts of the world, eventually leading to political, global cultural, and economic integration. It provides the ability to communicate and move easily with others in most parts of the world for conducting business operations internationally. It enables organizations to find lower-cost ways to produce their services and products. It also helps in increasing competition at the international level by lowering costs in both developed and developing countries for living in less money. Also, every driver has their restraint or limitation influencing the globalization process. Trade liberalization, cost differences among various countries and rapid changes in the technology environment are essential factors in globalization's development.  

References

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