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Overview of the Company

Discuss about the International Business across Borders.

The surging integration of markets has intensified challenges for business enterprises across the world while consistently unfurling new dimensions to them. Globalization, in the context of business opportunities has made it inevitable for the managers to develop a conceptual understanding of international business since each large and medium sized company, at present, needs to expand their business on an international level. The contemporary customers too prefer selecting a brand while purchasing that has an international reputation in the market. However, to compete in a global context while originating from a developing country only enhances the problems for business organizations as they lack exposure and credibility in a global market. Therefore, each business house, now a days strives hard to become transnational, establishing its business on an international level across the borders.

This report reviews a brief analysis of the company, Godrej Group’s background along with locating its current operating position. Then, the report discusses the organization’s design and structure as well as control issues to verify whether the company is capable of competing in the international market while discussing its strategy for the global context. Besides, it probes into the organization’s schemes to project itself in the international market (Godrej.com  2017). It is also worthy to review the company’s operational control, production and distribution and human resource management that has caused its eminence in the Indian market. Eventually, this report attempts to identify the key issues in the management and provides some recommendations considering the opportunities that lay before them. 

The Godrej Group, headquartered in Mumbai, Maharashtra and originated back in 1897 presently operates in diverse sectors. This Indian conglomerate has been operating in varied sectors ranging from consumer products, electronic appliances, furniture and security, agricultural products to industrial engineering and even in real estates. The Godrej Industries and its subsidiaries functioning under the patron enterprise, which are as follows, operate these multifarious categories:

  • Godrej Properties
  • Godrej Consumer Products
  • Godrej Household Products
  • Godrej Hershey
  • Godrej Agrovet and
  • Nature’s Basket Ltd.

Besides these, Godrej & Boyce is a private holding enterprise that has its presence in 14 different countries investing majorly in home appliances and security sector.

The chemical division of Godrej Group, Godrej Industries has a vast functioning area based in 40 countries and to more than 60 countries; it exports the products of its subsidiaries (Zander, McDougall-Covin and Rose 2015.). On the other hand, the highly diversified Godrej & Boyce has a prominent existence in the major continent markets of Europe, U.S.A., Middle East, South East Asia and even in Africa.

Current Operating Position

The design of the organizational structure determines the modes of performance a company is likely to deliver (Jensen, Larsen and Pedersen  2013). Since Godrej Group has been, an industrial giant in India an holds equal reputation in large number of countries, it operates in a multilayered hierarchy that ensures its smooth functioning. On the supreme position of the organization the Board of Directors, retain all the decision-making power. The Managing Director operates just under them and is responsible for all the internal processing and performance of the company. The complete structure of the conglomeration is rather complex and elaborate.

In order to expand their business in some of the salient markets worldwide the Godrej Group has had several joint ventures. Unfortunately, these ventures have given rise to some issues, rather serious ones that has made the company part ways with them. One of such issues has been the recently talked about split between Godrej and the leading American confectionary Hershey’s , where Godrej itself called off the joint venture. It has been reported that Godrej was bothered by the slow progress of the JV of worth 4.5 billion whereas other chocolate marketers seemed to record good profit in the international market (Epaper.timesofindia.com 2017). Apart from this, Godrej had aborted several other joint ventures in the past, worth mentioning among them was in the early 90s call off between Godrej soap and Procter & Gamble as brands like Cinthol were getting self-flagellation. According to a spokesperson of the company, the issues of ownership and funds have become a matter of concern for the organization since they have consistently been giving rise to control issues hindering the growth of the company.

In pursuance of international growth, Godrej Consumer Product has adopted a two- pronged scheme that will aid their steady growth. The acquisition of Keyline in UK it has developed a strong ground to flourish. Godrej is going forward with twin strategies to become stronger footed in the global market:

  • Diversifying risk and
  • Grabbing new market.

Godrej has much expectation from its alliance with Keyline and a multiplying growth in this particular sector. Besides Keyline, brands like Rapidol also garner huge profit for Godrej. However, Godrej plans to hunt for new opportunities by grabbing new market despite the fact that it increases the risk factor for the patron company (Hoenen and Kostova  2015).

The SWOT analysis gives an overview of the conglomerate’s strength points and weaknesses. Besides, it discusses the future opportunities the company can avail and that what the threats are, which have been a matter of concern for the Indian conglomerate ("Godrej Company Profile - SWOT Analysis" 2017):

SWOT ANALYSIS

Strengths

·         The vast range of products that the company offers covers almost every area of day-to-day needs.

·         The enterprise has a wide range of subsidiaries to concentrate on manufacturing several different products.

·         Flourishing manufacturing units.

·         Sophisticated and strong IT connectivity with wide range of distributors.

·         Advanced R&D capabilities

·         Competent and well-trained management section.

Weaknesses

·         The company lacks promotional and advertising activities, which is a major disadvantage for it.

·         It emphasizes more on prima division and office automation.

·         At the same time, the company is focusing on several security products.

·         Impressive selling schemes are absent.

·         Dealers prefer keeping the stock of other companies since Godrej does not offer them attractive gifts.

Opportunities

·         The huge market share acquired by Godrej and its subsidiaries.

·         The company may raise consumer offers.

Threats

·         Rapidly growing competition in the international market.

·         Products offered by Godrej are not unique.

·         Other competitors are also giving stress on branding.


Organizational Design Structure

Some subsidiaries that have been topping the Indian market are now aiming for a global expansion. The subsidiary of Godrej Consumer Products Ltd. (GCPL) is concentrating on chalking out a 3x3 strategy, which can aid their globalization. With this new strategy, they intend to penetrate deep into the three continents of Asia, Africa and South America basing on three different manufacturing segments as hair care, personal wash and insecticides. Instead of eyeing for the already populated markets of developed countries, where it would have been really challenging to introduce and establish a completely new brand they have rightly focused on the developing countries. According to a spokesperson of GCPL, they are studying the market of these continents to understand the trends of developing countries better. Again, the developing countries have more population than anywhere else in the world where the chances of consumption of the products are rather high (Epaper.timesofindia.com. 2017)

In favor of expansion, GCPL has also undergone the process of a series of acquisition in the developing countries like Nigeria, Indonesia etc. In 2010, GCPL acquired a prominent consumer product enterprise in Indonesia, Megasari, which has been proved highly beneficial for the company notching huge revenues. Besides, a Nigerian beauty product company, Tura has also been acquired by GCPL and this acquisition looks promising (Epaper.timesofindia.com. 2017). Talking about the insecticides market, the company holds a large number of shares in the market of Indonesia (35%) as well as in the hair care and wipes market GCPL seems to be quite strong-footed. in addition to this, if not in directly jumping into the market with their products it is cleverly buying stakes of already existing local companies.

Supply chain management is often described as obtaining the right things to the right places and at the right time. Godrej believes in a thorough study of market place on a daily basis by the sale of the products considered as trigger. The enterprise has set up an effective channel of distribution to maximize the selling of their product while making sure they are available in abundance to the consumers (Kim and Mauborgne  2014). The supply chain that has been set up by the company follows the order of wholesalers, retailers, showrooms and consumers. Godrej also maintains a website making their goods available online and has tie ups with several shopping sites that result in a faster sale of the products.

Management and Control Issues

The umbrella company Godrej offers a varied number of products conforming to all the basic and household requirements of people (Bhasin, 2017) (Altaf and Shah 2015). These product ranges are as follows:

  • Refrigerators
  • Washing machines
  • Air conditioners
  • Microwave ovens
  • DVD players
  • Office Furniture – Desking and Seating
  • Open Plan Office Systems like Computer furniture andStorages
  • Home Furniture -Living Bedroom furniture and Dining and Kitchen cabinets.
  • Locks –Electromechanical and mechanical door locks, Furniture locks, Padlocks, Glass and Architectural Hardware etc.
  • Multifunction devices
  • Typewriters, Fax, Printers
  • Plasma displays, projectors etc.
  • Burglar and fire alarm
  • Coffers and Cash boxes
  • Security/ Fire doors etc.
  • Workshop equipments
  • Tool Storage cabinets
  • Mobile components etc.
  • Compressors
  • Energy Conservation Services Systems
  • Bushbar Power Distribution

Apart from all these sections, the Godrej Group deals in several other manufacturing segments, which also play key part behind the reputation of the company.

Operational controlling in business refers to monitoring internal processes of how the business should be running (Verbeke  2013). It alludes to the decision-making part related to the business processes. The main components of operational control are:

1. Controlling the consequences

2. Liquidity planning

  • Supervising the profitability
  • Enhancing the efficacy even more using the existing resources

While discussing the operational control in Godrej, we must primarily analyze the management function of the said organization (Stacey 2016). The management of Godrej has rather a complicated number of processes, which include:

  • Planning, decision making, formulating of objectives and goals as well as selection of quality resources.
  • Next comes the turn for employment, improving of the human resources, communication and deployment.
  • The third step includes motivating the personnel by encouraging and inspiring them, issuing commands and drafting personnel policies.
  • Eventually it is the turn for them to monitor all the operations going round and report to the higher authority.

According to ‘Aon Hewitt Best Employers 2015’ Godrej emerged to be the best place to work and has achieved the command in talent management. However, in managing recruitment process overseas Godrej faces several challenges:

  • Greater exposure brings greater risks in international undertakings
  • Has to consider numerous external factors such as the regulations of the foreign country.

While staffing their subsidiaries overseas Godrej conforms to the following approaches that smoothens the process of recruitment (Lee and Kang 2016.):

  • Ethnocentric: As a family based company, Godrej’s subsidiaries in overseas enjoy little autonomy. All the strategic decisions are taken only by the topmost level of hierarchy at headquarter in Mumbai.
  • Polycentric: Recruitment of staff members of foreign subsidiaries is based on the policy of HCN while headquarter bases on PCN.
  • Geocentric: Godrej does not strictly follow nationality as the key to recruitment but offers equal opportunity to the personnel as suitable for the growth of their career (Stahl and Tung 2015).

As Godrej keeps rotating its employees in foreign locations, they provide proper pre-departure training to them in order to make them able to sustain in the foreign location. This training consists of three parts:

  • Language Training
  • Cultural Training
  • Training to manage personal life

Undoubtedly, this methodological management of human resource has become a strong point behind the dazzling success of the conglomerate (Rees and Smith 2014).

The chairperson of the Indian consortium Adi Godrej has clearly stated the future ideas of his organization, which includes an increase in overseas acquisition (Foss, Lyngsie and Zahra 2013.). The directors have identified the abundant opportunities of foreign acquisitions and this is why they have been exploring the possibilities of acquisitions specifically in the populated developing countries (Webcache.googleusercontent.com, 2017). As discussed above, they are aiming to propel growth in the international market of Latin America, Asia and Africa with their 3x3 strategy and targets CAGR of near about 26% from both organic and inorganic sectors within 2020 (Goerzen,  Asmussen and Nielsen 2014). In order to achieve complete operational efficiency they intend to purchase 100 per cent in the enterprise in phases. The growth prospect of Godrej indicates it to surpass some of the biggest companies in U.S and China by 2040-2050 (Sriram and Panda 2013).

As devised, Godrej had opted for several acquisitions in the recent years acquiring five out of the eight international affairs. This gave them the initial surge in the international revenues but now, it has become the biggest challenge for them to maintain the steady growth in a competitive market. Apart from this, the neglected promotional strategy section has become another matter of concern for them, as their individual branding in the international sector has been unconvincing.

International Competitive Strategy

In addition to this, Godrej has to survive the stiff competition with some the renowned international brands with high brand value and of greater popularity among consumers (Mathiyazhagan et al. 2013.). Some of the competitors of two most prominent subsidiaries of Godrej, GIL and Godrej and Boyce being:

  • Palmolive
  • Black Rose
  • L’Oreal
  • Old Spice
  • Gillette
  • Featherlite Office Systems Pvt. Ltd
  • Monarch Furniture Store

The growth in the insecticide segment of GCPL had slowed down in past few years. Among the other personal care goods, the soap category has also declined a bit which has inevitably reduced the consolidated net profit margin of the said subsidiary. In order to maintain the growth, the company must concentrate on the new and fresh variants of product range while sticking to their strong existing points that are running well both in domestic and international markets (Livemint.com, 2017).

Talking about Godrej & Boyce the company observed a growth of 31% in its consumer durables but at the same time, the furniture sector grew at a modest rate of only 10%. Though producing a low profit margin, Godrej also need to strategize the rapidly growing appliances business since it has immense possibility to compete in the international market (Kumar 2015.).  

In addition to this, G&B needs to allocate greater capital for the industrial product division, GIL as it has been observed to underperform because of modest capital spending.

Conclusion:

Hence, reviewing all the major points covered in the report we can definitely affirm that the Indian conglomerate Godrej Group is sure to achieve their aimed international expansion. This multi-dimensional company has immense prospect overseas as it deals in almost everything and therefore, can certainly grab the larger share of market in the developing country. Leaving India, Godrej, as a brand already has a strong market position in the countries like Indonesia, Latin America, Africa and Europe, which delivers a strong consistent sales growth to the company. Since the Godrej Group owns a vibrant as well as a diverse business, it has the advantage of consumer trust; the consumers are likely to use one or the other products of the enterprise in their day-to-day life and thereby the factor of credence is formed among them. Lastly, as the company is still largely owned by the family it ensures the administrative smoothness without any sense of confusion in their routine operations. All these factors concerned, Godrej is one of those few companies that have successfully managed to retain its superior reputation not only as a domestic enterprise but also as a conglomerate one.

SWOT Analysis

References:

Altaf, N. and Shah, F.A., 2015. Internationalization and firm performance of Indian firms: Does product diversity matter?. Pacific Science Review B: Humanities and Social Sciences, 1(2), pp.76-84.

Bhasin, H. (2017). Marketing mix of Godrej - Godrej Marketing mix. [online] Marketing91.com. Available at: https://www.marketing91.com/marketing-mix-godrej/ [Accessed 31 Jan. 2017].

Epaper.timesofindia.com. (2017). Godrej, Hershey?s End JV over Management Issues. [online] Available at: https://epaper.timesofindia.com/Repository/getFiles.asp?Style=OliveXLib:LowLevelEntityToPrint_ETNEW&Type=text/html&Locale=english-skin-custom&Path=ETBG/2011/07/06&ID=Ar00103 [Accessed 31 Jan. 2017].

Euromonitor.com. (2017). Godrej Company Profile - SWOT Analysis. [online] Available at: https://www.euromonitor.com/godrej-group-in-home-care/report [Accessed 2 Feb. 2017].

Foss, N.J., Lyngsie, J. and Zahra, S.A., 2013. The role of external knowledge sources and organizational design in the process of opportunity exploitation. Strategic Management Journal, 34(12), pp.1453-1471.

Godrej.com. (2017). Godrej | Welcome to the World of Godrej. [online] Available at: https://www.godrej.com/ [Accessed 31 Jan. 2017].

Goerzen, A., Asmussen, C.G. and Nielsen, B.B., 2014. Global cities and multinational enterprise location strategy. In Location of International Business Activities (pp. 137-180). Palgrave Macmillan UK.

Hoenen, A.K. and Kostova, T., 2015. Utilizing the broader agency perspective for studying headquarters–subsidiary relations in multinational companies. Journal of International Business Studies, 46(1), pp.104-113.

Jensen, P.D.Ø., Larsen, M.M. and Pedersen, T., 2013. The organizational design of offshoring: Taking stock and moving forward. Journal of International Management, 19(4), pp.315-323.

Kim, W.C. and e Mauborgne, R., 2014. Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.

Kumar, K.K., 2015. Are Indian FMCG Companies adding Economic Value to its Owners?. The MA Journal, 50(11), pp.90-93.

Lee, J. and Kang, N., 2016. A Study on The Moderating Effects of National Culture on International Human Resource Management Strategy and Knowledge Transfer.

Livemint.com. (2017). After initial jump, Godrej faces challenge of driving steady growth - Livemint. [online] Available at: https://www.livemint.com/Companies/4hidAzRHVFgHFkX9yZHHrM/After-initial-jump-Godrej-faces-challenge-of-driving-steady.html [Accessed 31 Jan. 2017].

Mathiyazhagan, K., Govindan, K., NoorulHaq, A. and Geng, Y., 2013. An ISM approach for the barrier analysis in implementing green supply chain management. Journal of Cleaner Production, 47, pp.283-297.

Rees, G. and Smith, P. eds., 2014. Strategic human resource management: an international perspective. Sage.

Sriram, S. and Panda, T., 2013. Analysis of the Globalization Approaches of Leading Indian Corporate Groups and Linking it to their Financial Performance. In Proceedings of International Conference on Business Management & IS (Vol. 2, No. 1).      

Stacey, R.D., 2016. The chaos frontier: creative strategic control for business. Butterworth-Heinemann.

Stahl, G.K. and Tung, R.L., 2015. Towards a more balanced treatment of culture in international business studies: The need for positive cross-cultural scholarship. Journal of International Business Studies, 46(4), pp.391-414.

Verbeke, A., 2013. International business strategy. Cambridge University Press.

Webcache.googleusercontent.com. (2017). Godrej's strategy for growth. [online] Available at: https://webcache.googleusercontent.com/search?q=cache:https://www.rediff.com/money/2006/jun/12godrej.htm&gws_rd=cr&ei=SnSQWKuBOYHgvgTX5oD4Cg [Accessed 31 Jan. 2017].

Zander, I., McDougall-Covin, P. and Rose, E.L., 2015. Born globals and international business: Evolution of a field of research. Journal of International Business Studies, 46(1), pp.27-35.

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