Discuss the Case Study for International Business Strategy of Long Range Planning.
The meaning of international business strategy is that internationally scatters the act of subsidiaries liberally and operates as if the subsidiaries were the local companies, with less coordination from the sources company. Cinquini & Tenucci (2010) stated that international business strategy leads to worldwide varieties of business strategies and higher level of adjustment to the primary business atmosphere. An international business strategy evolves a significant designed single strategy for the whole channel of subsidiaries and partners, surrounding most of the countries simultaneously and fluctuating synergies across the several countries. De Wit & Meyer (2010) opined that companies go global for a number of reasons but the major objective is the growth and expansion of the companies. When an organisation hires international workers or seeking for new markets in abroad, an international strategy could help to diversify and expand the business.
In the current study, the researcher attempts to analyse the modern theories of economy in the current history of international economy. Here, the chosen company is related to Japanese sports cars. Although the business initially launched in Japan, but the company attempts to expand its business in the market of Australia. Therefore, the car culture in Japan has yielded experts in the tuning industry. Herein, the researcher is going to give an overview of the market entry strategy in order to expand the sports car business. Therefore, the ethical and social consideration of issues would be elaborately described in this study by the researcher. On the other hand, the researcher would analyze the financial risks of common international business strategies. Finally, the recommendation would be detailed in this study to overcome the barriers regarding the issues.
Evaluation of key modern economic theories in recent global economic history
Today people recognize the factors that resist the monitoring, specification or enforcement of the economic transaction attribute boundaries on economic probabilities which are just as perfect as the technological limits. According to Sarala & Vaara (2010), moderns economic theories tend to isolate itself from the theory of classical economic by looking at more than just a source of production and the invisible hand theory. Moderns economic look at the products similarly to the nature of the demand, the supply of money, and its effects on the or monetarism and growth and free trade. On the other hand, the modern economic theory is advent of the macroeconomic research that looking at the huge boundary of the single economy. This does not define that a person identified classical economists do not favor the products; it simply refers that economic alteration through history with the modern economist term which was coming after the period of the theory of classical economy.
Classical economics started by the looking at the resources used in the production of goods and services. Economic growth defines to the increasing rate of the products and the services introduced by an economy over a long period of time. This is counted as increasing percentages in the accurate gross of the domestic product which may be called as GDP measured for inflation. Some economist emphasizes on improving return as the resource of economic condition of growth. They importantly emphasized on the international trade to increase the market and developed productivity on the countries of trade. Trade helps a country to buy and sell the products from foreign comparatively lower pay to which the countries could be made in the home country.
According to Oltra & Luisa Flor (2010), in the theory of modern economic growth, some of the efficient economists emphasized the nature of improving return via the direct foreign investments that stimulate learning by doing the activities via knowledge capital.in the Australian market, the newly industrialized regions have gained very high growth in their economic rates in the past two decades.
The modern economic theories to market comprises of several features. Verbeke (2013) opined that the modern economy releasing today is scattered all over the world. this is the advent of revolution in knowledge of capital and information of explosion. The most significant key matters are the innovation theory which is comprised of inter-industry inter-firm. On the other hand, international expansion of trade with the help of modern networks
According to Kojima (2010), therefore, the modern economic theory emphasis mainly on two networks of inducing growth via expanses on study and improvement on the main instrument of knowledge innovation. The first network is the influence on the available products and services. However, the other one is the influence of stock of the knowledge.
Therefore, the Japanese sports car company must know the modern economic theory in the case of the expansion of the Australian market. According to the modern economic theory in the Australian market there is highly economical growth (Rossi, 2010). Therefore, the company must know the market entry strategy in order to flourish its business in the Australian market. Not only even Australian market, the Japanese sports car company also strives to enter globally by introducing their innovative products.
Market entry strategy for international business
Market entry strategy refers to the systematic and planned process for delivering the products and the services in a new target market and distributing the products over there. It involves establishing and managing contracts in a foreign country. According to Dagnino & Padula (2009), when an organization tries to become the face of international business it has to take into consideration the various factors like the cost, risk, the degree of control which can be exercised over the business. There are various forms of the entry strategy for international business. The entry strategies vary from one organization to another. For the simplest form of entry strategy exporting can be done via direct or indirect method. The more intricate forms use global operations which can include the joint ventures as well as export the processing regions.
Organizations like the Japanese sports car which is planning to go global will have to consider the following basic steps like:
Marketing: the countries the company is aiming at, the segments will be highlighted and how to manage and execute the marketing effort. In this case, the chosen countries for the marketing of the Japanese sports car will be Australian and US ( Harmon, 2010). Next, the company should keep in mind about its sourcing, that is, whether to obtain the goods or manufacture the goods by itself. In this case, the Japanese car company will customize the sports car on their own. Simultaneously the company should also focus on the investment and control, that is, whether it should be a joint venture, global partner or acquisition (Ghauri & Cateora, 2010). The company has exported cars in Australia and the US and has earned huge reputation. The customized parts are manufactured in Japan and are supplied from the same country and they are of high quality. The car culture in Japan has produced experts in the tuning industry. The company has decided to trade in the US Dollar only (Lu et al.2010).
The Japanese car company should focus on the latest trends in the international business. They must analyze the expanding and emerging markets of the developed nations in terms of its language, financial stability, and economic procedures as well as the local cultural factors which serve as the key factors behind the market expansion. The company should also keep in mind that with expansion in the market the demography will also change. Innovation is the new word for business expansion (Rugman, Verbeke & Nguyen, 2011) In this era of competition if the company fails to be innovative in customizing and tuning the cars then they will fail in capturing the market. With the huge technological advancements, the company should focus more on the communication. The stronger the communication network the stronger will be the customer base. Since the companies based in Australia and the US have low labor costs the challenge faced by the Japanese car company will be to keep ahead of the others with more effective and faster innovation in the field of car customization. Emphasis should also be given on higher degree of automation usage. In the current scenario, the western economy has become stagnant and the emerging market growth has slowed and hence economic growth in the coming years will be slower. Keeping this in mind the company should plan the profitability of the international business plan in the face of this slow demand (Kojima, 2010).
Analyze the strategic issues
Once an international business has been realized a performance gap, the initial challenge in order to closing the gap is to rectify the reasons behind the performance gap. there are so many causes within the marketing atmosphere including low sales strategy, extreme competition and struggling with the national economy. The reasons can be obvious or the organisation might require carrying out the study to find out the problems (Matthyssens & Vandenbempt, 2010). When an accurate reason has been found out the organization can take a measurable action plan to deal with the cause. There are number strategies which are available in the organization; the appropriate remedy will depend on the reasons of the performance gap and the organization’s resources. In this study, the Japanese sports car company mainly deals with the car modifies globally and it tries to expand its business globally. In order to expand its business, the company might face some issues regarding the market entry strategies (Ghauri & Cateora, 2010). In this present study, the Company has some ethical issues. The management system is not always able to find out the problems. In the workplace, the employees are not always able to share their ideas in order to be more productive. The managers sometimes do not provide the scope for the employees to share their ideas so that the organization sometimes faces internal clashes between the employees and managers. Sometimes, they are demotivated when they do not get the opportunities to share their problems. However, it is important to an organization to involve their employees in the decision-making process for the sake of the company. Therefore, the Japanese sports car companies not always give the opportunities to its employees to share their ideas. On the other hand, the company sometimes does not produce the products according to the need of the customers and then it is unable to meet their needs ( Hill & Jain, 2000).
Ethical and social consideration of ethical issues
The meaning of the ethical consideration is considering the objectives of the doctrines of goodness, the right and wrong of the actions, prior or actions. Measuring the right or the wrong approaches standards especially based on the profession standard. On the other hand, social considerations holds the factors which is concerned with the interests of the individual, communities, society and groups as a whole, which are mainly evolves interventions into the economic mechanisms (Levy & Newell, 2009). Social issues are about trends, situations, conflicts in society. With the incorporation of ethical consideration which means utilising the society's standards which is constituting the right or wrong behavior based on the business plans and policies. Therefore, the Japanese sports cars modifiers company faces some ethical and social issues. When the company is going to introduce the new products then it faces the competitive edges. Each and every company must keep in its mind about the market price in the competitive advantages when introducing its products (Gebauer et al. 2010). The owner's behavior towards the customers, employees, vendors and the community highly impact the behavior of the workers who look for to set the standard. Herein, the owner's behavior of the organization towards the employee is one of the considering factors that is highly impacted by the market prices. According to Lu et al. (2010), it may be called ethical issues. Therefore, the company could maintain these factors in order to expand its business. Thus, the company would able to reduce its employee turnover and absenteeism. The key ethical consideration in the strategy includes the stakeholder participations, organizational values, individual values and managing change. When undertaking the international developing strategies this often outcomes in the methods in which the organization is being provided the ultimate of improving a plan and submitting it to the organization (De Wit & Meyer, 2010).
Analyze the financial risks of common international business strategies
As stated by De Wit & Meyer, (2010) the international business strategies involves a systematic and planned process for delivering the products and the services in a new target market and distributing the products over there. In order to expand its business in the global platform, the Japanese car company should also analyze the risk factors involved in the common international business strategies. The common financial risks involved in the global business strategies include the foreign exchange risk and the liquidity risk (Gambardella & McGahan, 2010). In the case of the foreign exchange, there is a risk of the financial transaction which is denominated in a currency other than the base currency of the particular country. The foreign exchange risks also occur when the foreign subsidiaries of the company have got the financial statements in a currency other than the reporting currency of the entire entity. The risk in foreign exchange is that there might be a sudden movement in the exchange rate in the denomination currency which is related to the base currency before the date when the transaction is to be completed. The Japanese Car Company should keep in mind about this risk which can imply severe financial consequences (Casadesus-Masanell & Ricart, 2010).
The liquidity risk is also a financial risk which involves a certain time period which includes a given financial asset, security or commodity that can never be traded quickly enough in the market without having any impact on the market price. This can be further classified as market and funding liquidities (Teece, 2010). In the case of the market liquidities, an asset cannot be sold due to lack of liquidity in the market. It is a sub set of market risk. It happens due to the wide spread of offer and making explicit liquidity reserves and even extending the holding period of VaR calculations. In the case of the funding liquidity, there is a risk in the liabilities. It occurs when the fall is due and cannot be met at an uneconomical price ( Kolk & Van Tulder, 2010).
Hence the liquidity risk occurs due to uncertain liquidity. When the credit ratings of a company fall it loses its liquidity. When the company witnesses sudden outflow of cash or some other events takes place avoid trading. A company is also vulnerable to liquidity risks when it is dependent on markets which experience the loss of liquidity (Verbeke, 2013). In international business, risks lurk at every corner and can threaten the viability of the products and the services. Every now and then there can be new traders in the marketplace, sudden trends in the commodity prices, economic and interest rates and also the currencies. The financial executives should incorporate the holistic risk management program or the one which allows them to manage risks in the broad front (Nenonen, & Storbacka, 2010).
In order to solve the problems that the company faces the researcher is providing some way to overcome the barriers. The company will always be truthful in interacting within the organisation and with the suppliers, with the consumers while simultaneously the company's secret information and the secrets of trade. The company may face the performance gap through internal business strategy. If the major reasons regarding this matter in which the organization carries out its business operations in the international business strategy in Ansoff's matrix. This strategy provides the organization with the four options and involves an organization's goods and the market it maintains. Under the Ansoff's matrix, the organization could evolves a product development strategy, market penetration strategy and the market development strategy or a diversification strategy to close the gap. However, the strategies are about how the organization would able to close the gap, practise are concerning the actions they would undertake, the methods are specific actions with an appropriate aim, the aims are often incorporated over a short term. However, the Company tremendously faces the internal rivalries within the work environment. The Company should engage its employee in the decision-making process. So those, the employee are motivated by the organization in order to get best outcomes. Moreover, in order to reduce clashes between the employee and managers, the organization should create fruitful atmosphere. In order to reduce the risks, the company should hire foreign employees so that to create a better work culture and understand the communications between the Japanese and Australian work atmosphere and to mingle the both work culture.
It could be inferred that when a company strives to expand its business in the Australian market, it should first attempt to implement market entry strategy. Although the company based on the Japan, so that it could first analyze the economic growth of the Australia because the economic condition of Japan and Australia is different from the culture. However, it is important for the organization to implement the appropriate international business strategy in order to expand its business. By using multi domestic strategy, it enables efficiency in the attributing responsiveness to the requirements within the markets of it. However, by implementing the strategies of marketing, sourcing, investment and controls help the company to understand the foreign business markets and environments as well. The company would able to rectify its internal gap through the gap analysis process. This process helps the company to understand its issues regarding the market entry. In order to expand its business the company should maintain the legal obligation according to the nature of the market. As it is based on the Japanese company so that it is quite difficult to understand the foreign economic growth. Therefore, the modern economic theories and events are provided for the company to better understand about the foreign economy. The liquidity and foreign exchange risks are the major risks when an organization is going to enter in the foreign markets with their products.
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