International Business And Comparative Strategies Essay.

Literature on Best International Business and Competitive Strategy

Discuss about the International Business and Comparative Strategies Theories.

This section of the study deals with the existing theories and models of international business. The section is divided into three parts. In the first part, the discussion has been carried on the competitive strategies taken by the companies for international business. In the second part, the evaluation is made on different international business models and in the third part, the discussion made on the key factors and theories of international business and management.

Competitive advantage, in the context of the business framework, helps a business to sustain in the competitive market (Dunning, 2015). The competitive advantage in the international context not only creates a sustainable position for the business organization, rather the business organization gains a relatively attractive position in the market. According to Beamish and Lupton (2016), in the international business context there are two generic approaches to competitive advantage. The approaches are generic approaches, but fundamentally, these two approaches are very different from each other. The two approaches are the cost strategy and the differentiation competitive strategy. According to this particular thesis, if one wants to combine both the thesis then they could not do that. Combining both these strategies is impossible.

If the business organization or the firm adopts the cost strategy then, the firm has to make sure that they retain certain standard for the product that is being produced by the organization (Grant, 2016). The organizations adopting the differentiation strategy at times find it difficult to maintain a low and at the same time, find it difficult to compete with other firms, who are producing standardize goods.

The changes that have been there in the international business market are rapid changes and the changes are taking place, much after Porter has come up with his theory (Meyer & Peng, 2016). The recent studies on the competitive strategy, reveals the fact that there should be a combination of both the strategy. According to the recent studies, combing both the approaches is not at all impossible, but rather it is feasible. If both these approaches can be combined together then the business organization could easily survive and sustain in the complex and the competitive market. The combination of both the strategy is referred as the hybrid strategy and it is opposed to the pure strategy that was propounded by Porter (Cantwell, 2015).

According to the recent studies that have been conducted the hybrid strategy, address the needs of the customer in a better way. According to researchers, the hybrid strategy not only addresses the needs of the customer in a better rather to be more precise it addresses the needs of the customers in appropriate way. According to the present studies if organizations are adopting the hybrid strategies, then one should have this fact in their mind that this particular strategy is difficult to imitate.

Review Industry Best Practice Models Where Available

In case of the organizations operating in the foreign markets, the organizations have to be very careful about choosing the competitive strategy (Fleisher & Bensoussan, 2015). The competitive strategy that they will choose could be treated as a vehicle that will help the organization gain a position in the international business market. The strategy that the company will choose will help the organization to gain financial return from the competitive market at the same time. Therefore, in the international market, choosing the competitive strategy is very important and the organizations have to be very careful while choosing it.

In the present business world, the best way of business expansion is involving in international business (Zander, McDougall-Covin & Rose, 2015). Most of the large business organizations in different countries are applying different models of international business in order to expand the business at the international level. The most popular models of international business and management are as under:

• Franchising
• Joint venture
• Merger and acquisition
• Turnkey

All of the models of international business are very effective in current business scenario. All of the models are discussed below:

Franchising: This model of international business is very common and old model. This particular model originated in North America and became very popular for rapid expansion of market or business. This particular business model is very much effective for the businesses, which deal with the products or services that can be transfer easily. According to Morschett, Schramm-Klein and Zentes (2015), franchising is such a business technique in which the franchisor (who is the actual owner of the business and has trademark on the products or service) allows the franchisee (who operates the business in the other country or place on behalf of the franchisor) to distribute and sale the products of the franchisor by using the trademark.

Gärber and Petersen (2016) noted that the success of the franchising business model depends on the efficiency and success of the franchisee because franchisee is the person, who directly deals with the business in the foreign countries. Buckley (2016) mentioned that many giant business organizations especially from the fast food industry opted for this particular business model for expanding the business in the international market. For example, McDonald’s has expanded its business in different foreign countries by adopting the franchising model. In the same way, Starbucks has also expanded its business in different countries.

Joint Venture: Joint venture is another common international business model adopted by different business entities. In the words of Jackson and Sørensen (2016), joint venture is a business model, in which two or more investors enjoy the business ownership as well as control over the business operations. Tallman and Pedersen (2016) stated that the major advantage of this particular business model is sharing of the business risk. As there are two or more business ownerships, the risks are also shared by both of the owners. At the same time, the model also helps to achieve the financial strengths of the organization.

Franchising

However, Chaney (2016) commented that the owners of the business do not have direct control over the management of the business and sometimes it becomes very difficult to recover the capital from the business. On the other side, Buckley (2016) stated that there are many companies, which have achieved tremendous success by adopting the joint venture business model. For example, virgin mobile expanded its business in India by involving in joint venture with Tata Teleservices. Another most popular joint venture happened between Sony and Ericsson, through which both the companies expanded the mobile communication business in different countries.

Merger and acquisition: In this particular business model, two business organization merge together to gain some market and operational advantages in the business. Mellahi and Frynas (2015) believed that merger and acquisitions is the strongest model of business expansion or globalization. This business model was very popular from 1980 to 2000. Radebaugh, Sullivan and Daniels (2015) mentioned that the companies can minimize their risks by adopting the merger acquisition business model. At the same time, Coviello (2015) opined that companies can enhance the market power by applying merger and acquisition business model. For example, Facebook has increased its market coverage and power by acquiring Whatsapp. Similarly, Microsoft and Nokia merged together to gain competitive advantage in the international market.

Turnkey: Turnkey is also very common model of international business. Chaney (2016) mentioned that turnkey is such a business model in which the business is in such a condition that allows immediate action or operation of the business. Grant (2016) stated that turnkey business model is generally adopted by the real estate business organizations. For example, MB Haynes has adopted the turnkey business model in order to reach its business expansion to the higher extent.

Therefore, from the above discussion it can be said that there are different effective international business models that helped the business organizations to strengthen their market grip. Most of the big business organizations have adopted these four international business models. There are some negative points in the business models. However, the advantages are more, which have made the models more profitable for the companies.

The above discussion has cleared out that the concept and models of international business have several advantages that help the companies to improve and enhance their market positions. However, Cantwell (2015) argued that the effectiveness of the international business models is largely dependent on the two types of factors – internal factors and external factors. The key factors of international business are discussed below:

Joint Venture

Internal factors: There are different internal factors that affect the performance of an international business organization. The factors are business location, product or service quality, price of the products or services, types and quality of labour and land (Fleisher & Bensoussan, 2015). If the company expand its business in such a location where demand for its product is less, no business model will be effective. In the same way, if the quality of the product and services is low and price is high, then the customers will never agree to purchase the product or service. The implementation of the business model depends on the effectiveness or quality of the labourer (Morschett, Schramm-Klein & Zentes, 2015). If the labourers are unskilled or less knowledgeable, then the business models cannot be implemented successfully.

External factors: The external factors that affect the international business or the companies are – political situation, social condition, technological advancement, economic situation and legal boundaries. In order to expand a business in the foreign country, it is very important that the foreign is politically stable. At the same time, is the legal boundaries are less then it becomes easier to expand the business in the international market. For example, after passing the FDI policies and regulations, many companies in USA and UK have expanded their business in India (Dunning, 2015).

On the other side, technological advancement influences the international business. If a country is technologically advanced then more business organizations become interested to expand their business in that country (Mellahi & Frynas, 2015). For example, Tata Motors merged with Jaguar Landover in order to expand its business in technologically advanced country that is UK. Apart from these factors, the international business of the companies also depends on the economic and social conditions of the countries. If the economic condition is stable and there is growth in the economy of a country, then it is profitable to expand the business in that country (Coviello, 2015).

On the other side, while expanding the business in some foreign country, it is essential to identify whether the products and services of the company matches with the social culture of the country or not. For example, Standard Chartered changed some of its policies related to the interests on the deposit or investment, when it expanded its business in Pakistan because as per Islamic banking, interest is prohibited (Cantwell, 2015).

However, in order to operate the international business properly, the business organizations have followed some theories of international business and management. Some of these theories are – absolute advantage theory and comparative advantage theory.

Absolute advantage theory was developed by Adam Smith in the year 1976 and this theory suggests that a company or country gets involved in the international business only when it gains absolute advantage in production (Gärber & Petersen, 2016). However, as per the comparative advantage theory, a company takes part in international business if it gains comparatively higher advantage in production (Meyer & Peng, 2016). Therefore, the theories provide the idea of how and when the international business should be done by the companies.

In this study, it has been identified that international business is one of the lucrative way to expand the business. The study has determined that in order to sustain in the competitive market, the business firms adopt the competitive strategies. On the other side, it has also been found out that there are several business models for international business and management. The business models are – franchising, joint venture, merger and acquisition and turnkey. At the same time, the international business of a company also depends on various internal and external factors. Along with that, there are some theories that help the companies to conduct the international business successfully.

Reference list:

Beamish, P. W., & Lupton, N. C. (2016). Cooperative strategies in international business and management: Reflections on the past 50 years and future directions. Journal of World Business, 51(1), 163-175.

Buckley, P. J. (2016). The contribution of internalisation theory to international business: New realities and unanswered questions. Journal of World Business, 51(1), 74-82.

Cantwell, J. (2015). An introduction to the eclectic paradigm as a meta-framework for the cross-disciplinary analysis of international business. InThe Eclectic Paradigm (pp. 1-22). Palgrave Macmillan UK.

Chaney, T. (2016). Networks in international trade. In The Oxford Handbook of the Economics of Networks.

Coviello, N. (2015). Re-thinking research on born globals. Journal of International Business Studies, 46(1), 17-26.

Dunning, J. H. (2015). Reappraising the eclectic paradigm in an age of alliance capitalism. In The Eclectic Paradigm (pp. 111-142). Palgrave Macmillan UK.

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Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Jackson, R., & Sørensen, G. (2016). Introduction to international relations: theories and approaches. Oxford University Press.

Mellahi, K., & Frynas, G. (2015). Global strategic management. Oxford University Press.

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