Global-local dilemma

Globalization is on the rise, and it affects the global economy, since reduced tariffs, improved communications, enhanced resources movement have enabled businesses to relate to worldwide financial markets and enlarge their organizations globally. On the other hand, successful growth or expansion into new markets requires that organization adopt international business strategies that best meet their capacities and needs (Tallman & Pedersen, 2015). International business deals with foreign and local stakeholders, workers, customers, and relevant authorities within various nations. Therefore business administrators ought to consider several elements when doing business in international markets, such as pricing strategy, competition as well as supply chain management. To successfully increase or enlarge the customer base and rise in profitability by globalization, businesses need to use up the vital time and resources to learn and understand international market opportunities and settle on the appropriate international business strategies. International business strategies exist in four types and shall be exclusively discussed.

In a speedily globalizing world, business institutions progressively and increasingly work on a global scale. As they do their businesses at international levels, they go through dilemma and they must work to meet the needs of their clients in every region. As these companies operate in foreign markets, they have to be strongly rooted in local cultures, markets as well as adhering to the local rules and regulations (Pelayo-Maciel, Perez-Esparza & Sanchez-Gutierrez, 2017). For most of the Multi-National Organizations, the dilemma emphasizes on a particular sector or field of management knowledge, which in most cases is Human Resource Management. Multi-National Organizations through the dilemma are always under pressure to regulate or normalize Human Resource Management practices whereas on the other hand, they have to execute HRM practices in such a way that they can put up with multicultural employees that work in broad and various markets and juridical status and authority networks (Agarwal, 2015).

Global-local dilemma connects to the level to which organizations may standardize products and services transversely or across national borders or need to be modified to meet and march the requirements of the particular national market. In simple terms, a global-local dilemma is just a choice between a local-responsiveness or global approach to a multinational’s strategies (Paramita, 2014). In the global-local dilemma, the Multi-National Organizations face:

1. Pressure to react to the exclusive and unique requirements or needs in every location or country.
2. Effectiveness pressures that motivate the organizations to de-emphasize local divergences and do business in the same way all over the world; this is under global integration solution.

These are the conflicting demands that constitute or represent global-local dilemma that the Multi-National Organizations need to respond to even as they do their businesses. The choice of solution forms fundamental strategic course.

As discussed in the introduction, several organizations trade internationally, and that calls for clear and well international strategies that are used to prevail in the global-local dilemma. International strategies exist in four different types:

1. International

Applying an international strategy is an indication that the organization is emphasizing on the export of products or services from one nation to the other or the foreign markets, or importing products from other nations for local use. Organizations that apply this kind of strategy always have the main office of operation exclusively in their place or location of origin, enabling them to get around the need to invest in employees and resources abroad. In many occasions, this strategy is implemented by small local companies that export primary resources to big organizations in other countries (Allan, 2006). On the other hand, this form of strategy is not lacking noteworthy business challenges, such as lawfully instituting local sales and managerial offices in main cities and towns globally, managing international logistics that involves import, export, and manufacture of goods, and making sure they comply with overseas manufacturing and trade policies and guidelines.

International business strategies

Even though it has several challenges like the ones mentioned, the international strategy to some extent may still be regarded as the most common, since on average, it needs the least amount of operating cost. Organizations that are determined to expand globally may attempt to apply a mixture of strategies to find out the one which works better as far as logistics and profits are concerned. For instance, an organization starts off using international strategy in exporting and importing goods to or in foreign countries as a means of assessing the international market and determine how fruitfully its products or services sale. Consequently, the organization may want to make changes on its strategy and make a multi-domestic platform by which it can produce and sell its products successfully to the market.  

1. Multi-domestic

The company must invest in setting up its presence in the overseas market and shape its goods or services to penetrate the local market. This will help the company to adopt a multi-domestic business strategy. Contrary to marketing overseas goods to consumers who may at first be familiar with or understand them, organizations often adjust their offerings and reposition their marketing strategies to fit into place or connect with foreign customs, cultural characters, and traditions. Multi-domestic organizations always maintain the company center of operations in the country of origin; however, they often set up foreign headquarters which are also known as subsidiaries and are equipped to provide foreign customer region-specific accounts of the company’s goods and services. In most cases, they use leased buildings to carry out their activities. Some of these companies include Wal-Mart, KFC, Coca-Cola and many more in the manufacturing sector. Nonetheless, these modifications are quite expensive and can make the organization experience a certain extent of financial risk as they launch products that are not proven in the new market. In such cases, organizations normally use the expansion strategy in a restricted number of nations.

1. Global/International

The global strategy is used to increase consumer base through selling goods and services in several overseas markets. To achieve that goal, organizations follow a global strategy power to the maximum to increase their coverage and profit. International companies try to standardize their products to capitalize on the profit increase as they minimize cost and penetrate to wide global consumers. Companies using this strategy tend to keep a central area of operation in the country of origin as it is in the case of other using companies that apply the above-discussed strategies and at the same time setting up offices in the regions of operations across the globe.

Even as the organizations maintain important features of their products and services intact, these businesses characteristically have to make some sensible small-scale changes or modifications to penetrate the international markets. A good example is a software organization that needs to make changes in the language used in the product; while on the other hand, hotels and restaurants may remove or add different things such as names or ingredients to suit the targeted international market.

1. Transnational

Export and Import Strategy

This business strategy has proved to be one of the most complicated strategies that can be applied by businesses when getting into the international market. It appears as a mixture of both global and multi-domestic strategies. Just like other strategies, transnational business strategy maintains organizations central of operations and important technologies in its country of origin as well as granting permission for the organization to set up full-scale operations in the overseas markets. The strategy has a challenge that it inflicts in the companies that apply it in their operations; identifying the best management methods for realizing positive economies of scale and improved effectiveness. Similarly, it also needs a start-up investment that is used in acquiring new workers, getting new offices and other foreign regulatory issues (Ekieli et al., 2018). The transnational strategy is associated with pressures to trim down cost added with launching value-added actions to optimize changes that are important to gain influence and be aggressive in every confined market thus making it more intricate than other strategies.

With all the discussed challenge of the transnational strategy, big companies such as Coca-Cola and Toyota classically apply it since they can endow in research and growth in overseas markets, and set up production, sales, and marketing sectors in various regions.

Examining at the factors that affect the operations of businesses and the strategies; there are external and market factors that are put into consideration since they are the ones that can positively or negatively interfere with the entire business. These factors can either be entirely unrelated or avoidable. Some of these external and market factors include;

1. Social factors: these are factors connected to adjustments in social structures and offer understandings into character, experiences, as well as cultural patterns of a given population.
2. Legal factors: these affect business strategies and are connected to adjustments in government laws or policies of any given nation.
3. Political factors: these are related to changes in the system of governance and government regulations.
4. Cost of a product: in any business, cost plays an important role and should be considered since it is also critical in establishing global prices. Therefore, for all Multi-National Organizations, the initial point for constituting product’s prices is to determine production cost and that of supplying the products to international consumers.
5. Competition: this is measured into how the other organization prices their products and services and the level at which they penetrate the same market. Therefore, when deciding on the strategy, Multi-National Organizations must examine the extent of competition in the international markets(Verhoeven & Johnson, 2017).

In general, the external and market factors are the variables which interfere with the function and the performance of the organization regardless of their inherent incapability to be changed. Taking examples from big transnational companies like Apple and Nestle, there are several ways on how external and market factors operations of the companies.

Global drivers and local needs and advantages

Conditions in the market create the potential for the product thus becoming more global through the potential feasibility of an international approach to the strategy. Global drivers define how consumer behavior supply model change, including the extent to which the consumer needs congregate across the world, consumers purchase on global foundation, international channels of distribution growth and marketing platforms (Keillor, Davila & Hult, 2001). Global drivers can be classified into cost, government, market, and competitive drivers. Through global drivers and local needs, the strategies offer subsidiaries the sovereignty to organize and implement competitive moves autonomously solely based on the assessment of the local competitors and what the local market wants. The advantage part of it is that the strategies plan and implements aggressive struggles on the international scale. Organizations that have opted to adopt international strategy compete as a group of internationally incorporated solitary companies. The reason why companies go international is for the growth, and they apply international strategies to help them achieve the target of the business.

Market entry strategy is a programmed approach of bringing, distributing new products and services to a target market (Keillor, Davila & Hult, 2001). If a company has decided to enter the foreign market, there are various alternatives open, and these may include risk, the level of management which can be implemented over them as well considering the considering. There are several ways in which an organization can enter in the overseas market since one market entry strategy can work for all global markets. These entry strategies include;

1. Direct Exporting

Multi-Domestic Strategy

This strategy involves selling directly into the market that has been chosen by the company. Normally, most companies use agents or distributors after establishing a sales plan.

1. Licensing

This is a stylish plan where a company transfers the rights to the use of a product or services to another organization.

Pros of Direct Exporting

Generally, this entry strategy avoids all the charge and confusion of “brokers.” It enables the company to have full control over sales and to cooperate directly with customers. In this situation, there are higher profits since there is no presence of intermediaries.

Cons

Even though there are advantages, at some point, the company may feel that the agent or intermediary is worth paying. This entry method needs more and extra time, money and energy that the organization may not afford. On the other hand, it requires more manpower to develop a consumer base.

Pros of Licensing

This entry strategy is a fine option in situations where there are obstructions to import and investment, and where the legal security is promising in the target location. Similarly, it works well where there is a low sales potential in the target nation. Also, it is quick and easy and enables the organization to jump border and tariff blockades as well as starting with lesser capital investments (Tayar & Jack, 2013).

Cons

Licensing entry method enable the company to have just a low level of control, and at the same, the licensee may be a competitor (Dodds, 2015). It is easy to lose intellectual property especially when the license period is complete.

In conclusion, internationalization potential in any particular market is determined by market, cost, government and competitor’s strategies. The internationalization creates advantages that are drawn from international sourcing through a global value system. Also, Multi-National Organizations through the international strategies experiences few problems in regards to the global-local dilemma. However, companies are adjusting on their human resources management practices to contain challenges that are being created by global-local dilemma and at the same time penetrate into the foreign markets.

References:

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