QUESTION
Assignment 1: Challenges in international management
Type: Individual
Format: Essay (You are encouraged to use headings and/or sub-headings to separate the sections/cases of your essay.)
Word limit: 2500 words (variation within 10% more or less is allowed)
This activity is a platform to sharpen and demonstrate your knowledge and analytical skills in international business. It is designed to help you achieve the learning outcomes 1, 2 & 3. The assignment focuses on the actors of international business and their actions in the contemporary international business context. It also provides you with opportunities to link the international theories with the practice by analysing real-world examples from the academic point of view.
Key Assignment Question:
How does international business organisation achieve its internationalisation objectives in the contemporary context?
Process:
1. Select a multinational corporation.
2. Write a brief overview of the organisation and its mission/objectives related to international business (maximum 500 words for this section)
3. Select and then analyse the internationalisation process of the organisation and its impacts on the international context (International business theories can be adopted in this section)
• What did the organisation do to internationalise itself? [i.e. environmental analysis, involvement with different actors, entry mode]
• Please explain factors affecting the internationalisation process of your Multinational Corporation(MNC).
• What was the impact of these actions on the organisation and/or broader community (i.e. host country, competitors, industry etc.)?
(1,500 words)
4. Experience/lessons Learned (500 words)
• What experience and/or lessons should the organisation have learnt from the analysis? Why do you think they are important for their future acting?
• What insights did you gain about international business in the contemporary context?
SOLUTION
Introduction
The most reputed and perhaps the biggest company in the World in terms of retail. It has a proven track record for implementing successful business across the globe with its wonderful business practices and world class marketing plans. Wal- Mart is a company which has done business not only in the US but also many countries across the globe. The company was established by Sam Walton at Rogers, Arkansas in the year 1962. The business growth was in the track with a period of 17 years after starting the company. By the end of financial year 2001, company already saw a turn over of one billion US dollars. With its effective marketing strategies Wal-mart managed to make it reputation of being the largest retailer in the world with revenue of 218 billion dollars. The companies continue growth in terms of revenue led the company to operate in the global level. The global operation started in the Mexico City in the year 1991.
Its global presence has seen a new height, when it was found that more than 100 million customers have visited the Wal-mart retails globally. The number of associates stood at 1.3 million which are on rolls of the company and has been diversified across 3200 stores in the US and more than 1000 stores across Canada, China, UK,, Germany, Korea ,Indonesia etc.
Wal-Mart operates its stores in different versions worldwide. It is generally categorised in three main segments. Namely
ü Wal-mart Stores
ü Sam’s Club
ü International Stores
It can be further differentiated into Discount Stores, Super centres and Neighbourhood market. (Lewis, 2011)
Currently the company serves around 200 million members and customers in a week at little higher than 8000 units under various collaboration and banners in 15 countries. The sales have crossed $400 billion mark and employees more than 2.1 million people globally. It is a leader in sustainability, corporate philanthropy and employment opportunity.
In the year 2008, the company found three major areas which are crucial at present for the company. The mission statement is “to help people save money so they can live better.”
The crucial areas are: health, power efficiency and moral foundation. These matters have been transformed into the broad objectives that are stated as under:
- Access to the world class health care at an affordable price.
- Minimize the power cost for the consumer.
- Moral and Environmental issues to be taken care of before expanding the business network. .(wallmart.com,2012)
Internationalization of the process
In the present business environment there are no fixed methods for globalization of the business. As there are various complexities in the entire process of the business which varies from place to place and business to business. The standards of internationalization of the process of any business are set by the owners by themselves. In general view in terms globalization few concepts are relatively popular in terms of globalization of the process.
The commonly followed strategies are as follows.
- Exporting of the product
- Seeking for Licensing the product to other company
- Go out and give franchising opportunity to other company.
- Joint venturing with the native country firms
- Setting up of a wholly owned subsidiary.
Generally the experiment has proved that bring change to the on going firms international engagement, it lays down the rues and regulation for setting up foreign subsidiaries. Hence it becomes important to include these variations and give more business ideas like, joint venturing, licensing and franchising opportunity (Lewis, 2011)
Study of the factors undertaken before going Global
Before launching the Wal-Mart brand as other brand was lively in all the respect and with the increase in the revenue the company has achieved that comfortable level to go out and play in the international arena. Wal-Mart sensed the need of hour and knew that the international trade will give a good numbers in terms of sales and profits enhance the image and offer valuable ways by creating jobs in the process of globalization.
An analysis has been done in this regard by the company. Before going multinational following are the analysis done by any companies for the matter of fact before developing the business plan.
Commitment from the Employees team – An effective plan for the employees in the group ranging from top level to executive junior level, all should be united, does not matter even if he is supplier, every one should be under one roof as an asset for companies effective execution of the process.
Proper definition of the business plan for internal employees must be designed to enter the international business environment. It becomes very much necessary to put a plan of action defining company’s present status, objectives and commitment. It will help to measure the results as whole.
Very prominent factor is the investment how much the company is investing in the process of globalization whether it is 10-15% of the profit form the domestic market or options like pay as you can afford formula.
The company analyzed the proper time frame required for the launch of the company in the global market. It took time and patience to built and lasting world enterprise. Thus it has paid a lot to the wall mart in the long run. The best thing they did is the hosting of website keeping the international market in their mind. Though English is the most popular language in the world, but less than 30 % people can read it in the European continent. The numbers are further lower in Asia and South America. Multi lingual website has become the first choice of the MNC’s so that they can effectively transmit the information without any barrier.
Decision over the Product and services for the nations- It is very important to decide which product to promote in the global market. Many goods supported in the countries like America may be supported in Indonesia.
The company has also launched an extensive market research. It is one of the proven tool for identifying the growth, developments and scope in the market. This enabled the company to find what kind of product is demanded in the market and major markets were targeted.
Research related to the geographical location- In this volume based economy the company has selected the areas where the growth is relatively higher compared to the areas where the sales are at all time low. Thus the company has considered this factor before selecting the countries in particular. A good research was conducted in this regard for identifying the customers so that it can choose the location effectively. It has also taken care of the factors like the control over the business ventures. A perfect plan was prepared before hand in this regard.
Wal–Mart always followed a strategy related to the export of the goods the companies effective style of displaying the product and other things has led the company to touch new heights in the retail sector in many countries.
Legal factors- Any companies before going global always needs to meet the legal requirements and other issues related to the compliances. Thus the strategy of the company was designed in such a way, that they inducted layers, bankers and people from various legal and financial supports. This was one of the priorities of the company as they knew that without meeting this factor you cannot afford to run the company. The documentation and the approval from the government and other trade bodies were taken before entering in any country premises. Appropriate channels were used to get more and more out of the process.
Pricing Factor- It is very important to test the price in the market. How the people receive the price in the current situation? Then negotiate and determine the final pricing structure for the product. Terms and conditions were researched and designed suitably for the customers as well as the company.
Service and replacement strategies- Wal-Mart knew that the customers satisfaction is the key to the success of the business. The relationship with the customer should not end after the sales process, an effective feedback and after sales services were some of the key issues that were determined by the company.
Cultural Aspects- it was one of the key agendas of the Wal-mart to take care of the cultural specific information and general courtesy related to the job and sustainability. The goal of the company was designed in such a way that it will be easier for the company to adapt and make it into their own culture.
.
Factors related to global alliance and partnership- retail giants like Wal-mart had an extensive discussion and formulated policy regarding the alliances and partnership of the company in the different nations. It is an important matter of concern for the companies like Wal- mart to enter into the retail market. Many aspects are related in this matter like joining hands with company of similar capacity who are already in the market or search for any other alliance on profit sharing basis.
The key policy Wal-mart implemented is that they treated employees as a most important valuable asset and business cannot survive without them, in this age of rapid development it is the emotional touch which helps the companies to grow. Taking the best possible care of company and employees, your suppliers and your customers, and your future will be bright, prosperous and happy.
Going global doesn’t have to be a scary proposition. By considering and developing these twenty essential factors before going global, your organization can realize the full potential of globalization and capture dramatic revenue growth. (Dalaney, 2004)
Major problems and hindrances faced
With the ongoing process of globalisation, it is obvious that there will be competition in every aspect. Moreover, with perfect strategies and clever decision can enable the company to witness some robust growth. In the retail business Wal-Mart has also faced a lot of issues running the business. The key problem to mention is the competitor in the field of retail. It is the Kmart, who gave competition to the Wal-Mart. Kmart in US is considered to be the second largest retail chain after Wal-mart. Both the retailers are highly successful in their business. Though, the strategies differ for both the players. Wal-Mart strategy is to set up stores in small towns and within small group of people, while Kmart is focused on to set up stores in populated places. The kmart’s strategy is to gain a larger market share , rather than the volumes.
However Wal-mart has proved it from its sales figures where the sales are estimated to be greater by four times than that of Kmart’s figures. The difference between both the companies’ sales figures stood at around $37 billion. The discount stores of the Wal-mart faired fairly well where the sales were about $385 per square feet considered as twice the amount of Kmart. Company’s like Wal-Mart has proved it credibility in the field of success in not reliant on the size and quantity.
Initially Wal- mart has also witnessed problem many good professional in the company says company lacked strategic vision. It has been widely argued that the company was unable to meet the expectation, that company popularised the mission statement where it was mentioned that customer’s expectation will be met by delivering quality products at lower price in the market. The company was concentrating to meet the basic necessities. (Global Strategy analysis, ivythesis)
Wal-Mart in the Indonesia
Once the company has gone International .It was one of the major challenge to the Wal-Mart was to find appropriate partner or companies who can popularize or make some sort of business understanding. In Indonesia being a good potential market. Wal-Mart had a discussion with the largest Indonesian retailer Pt Matahari Putra Prima to develop the concept of the hyper market asset. At the same time, Lippo Group an Indonesian Business group which controls Matahari through PT Multipolar, was also looking for global partners like Wal-Mart to expand its business. Howe ever the strategies of Walmart were very clear. Wal-mart wanted to acquire the hyper markets, along with a French retailer Casino Guichard Perrachon SA. In this process Lippo has hoped to generate a substantial amount of $ one billion. The partnership will give the Wal-mart to gain a significantly and control over the assets of Matahari Hypermarkets.
The main reason for Wal-mart in this regard is that, Indonesia is one of the most populated countries in the world and largest nation in terms of Muslim population. This deal could be a golden deal as the Wal-mart wants to keep on moving by opening its stores in the middle –east and South East Asian countries in the world. (Wal-Mart in Indonesia, The writingonthewal)
Conclusion and Recommendation
It has been a great experience studying the entire issue and a good number of lessons are was learned. Expanding the business to other nation can be attractive only when it is planned properly, it will add the value to the business.
There are few vital points which we should remember to sustain the business in the international level which are outlined as follows.
Is the company a business leader at home, these days the transformation of messages are very fast. Thus we can say that if it is popular brand in the country that means greater chance of doing business outside the nation.
Followed by the business model in use- Each and every business model has its own pros and cons. Thus, the company should decide which mode to follow whether it will go for franchising, licensing, joint ventures or wholly owned.
Choose the right partner for the process- It is important to choose the right business houses for the success of the business. In this matter verification of financial status, influence and reputation are some of the key aspect needs some special attention. In relatively smaller nation also check the political scenario which may be helpful.
Study the country where to set up the business- It is important to study the rules and regulation that are imposed by the country. The tariffs and taxes related to the international business is also a matter of concern.
Infrastructure related to the business- It is also an important factor before doing business in the foreign land. All the supporting infrastructure should be in –line to support the business
Key issues are whether you will get home support for the logistic and supply chain form home or any other alternatives needs to be used in this regard. Is the company’s financial efficiency financial department to handle the foreign transaction and exchange in the currency?
Moreover, once you are operating globally, there must be a department who can handle any kind of queries and suggestion round the clock.
Moreover operating model is also very important before going out for business. The cost in terms of supply, real estate and seasonality are also important. (ceoonline.com)
Competitive pricing for the product, price drop is also necessary to study and offer the customers with some outcomes. A very close supervision is required in this regard for the fast and stable results. (BSAG,2011)
References
G.lewis, Researching International strategies of Australia viewed on April 12th ,2012
www.Business.flinders.edu.au/research/papers/01-3.doc
Global Strategy Analysis: Wal-Mart, viewed on April, 13th,2012
http://ivythesis.typepad.com/term_paper_topics/2010/03/global-strategy-analysis-wal-mart.html
Laural Delaney, December 16, 2004, 20 Factors to Consider before Going Global, viewed on April 13th, 2012
http://www.entrepreneur.com/article/75138
Walmart in indonesia: round 2, viewed on April 14th ,2012
http://thewritingonthewal.net/?p=12269
Expanding Internationally: 8 Points To Consider Before Going Global, 2007, viewed on April, 13th ,2012
http://www.ceoonline.com/pages/id22292.aspx
Business strategy BSAG, viewed on April 13,2012
http://bsagweb.com/clients-stories/retail-company
Daniel D. Bradlow, The Changing International Business Context, viewed on April 13,2012
http://www.ialsnet.org/meetings/business/BradlowDaniel-USA.pdf
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