Internationalization issues that organizations need to consider before adopting international business strategy

Author: Iloka Benneth Chiemelie 

Published: 9/ 12/ 2013

1.0 Analyse the issues of where, when, and how to be considered by an organisation planning an international entry strategy

In order to transform global challenges into new opportunities, there is a need for firms to adopt continuous development and introduction of new products (Talukdar et al., 2001; Sheth, 1968). However, even when the products is right, firms still face the problem of markets to make such products available for. When choosing considering internationalization, firms need to consider a number of factors in the form of:

1.1 Where to internationalize - this is probably the most significant question that must be address and it deals with the understanding of the right market to make products available for. The significance of this question has gained wide spread attraction in literatures (see e.g. Anderson and Gatignon, 1986; Agarwal and Ramaswami, 1992; Pan and Tse, 2000). If a firm makes the wrong choice of “where” to enter, the business is doomed to fail. For instance, a pork processing / distribution firm making the wrong choice of internationalizing into Islamic countries will experience low demand and possible backlash with culture as compared with making the right decision of internationalizing into Pork consuming nations such as China.

1.2 When to internationalize – even when the right market has been chosen, there is still the need to understand the right time to enter the market. A number of factors influence these decisions: a) seasonality, b) price value, and c) market stability. The company need to ensure that the market is very stable in order to avoid losses that might come from operating in unstable market – which means that internationalization is most common “when” the market is stable and needed raw materials available. Some products seasonal in nature (such as fireworks for festivities, winter wears and tickets for concerts), and firms need to ensure that they right season is the time they internationalized because will create the right environment for higher returns as compared with internationalizing when the season for the goods is not yet around.

1.3 How to internationalize – the case of how reflects on the degree of standardization that the firm will adopt in relation to products offered and the new market, entailing other elements like market features and marketing mix (Sheth, 1968; Jain, 1989; Cavusgil, Zou and Naidu, 1993; Harris, 1994). The “how” factor basically describes the “packing” of the company’s products and it is very important because it is a direct description of who the company is, what it does and where it can be seen. The products should be well packaged in order to ensure that competitiveness is created and profitability ensure. Brands such as KFC enter new markets with a package of “So Good” - which is a clear description of who they are and what they offer - and it can be linked to their continued business success.

2.0 How can the potential benefits be made to exceed the risks?

Lauren Maillian Bias, the CEO of Luxury Market Branding, based on her experience to present an analysis of how chances for success can be increased and chances of failure reduced in new market in a Forbes (2011) report and they are:

2.1 Understand customer and business etiquette of the international market – the new business should familiarize itself with ways business are undertaken in the country in order to ensure that they are not found wanting with respect to acceptable business etiquette.

2.2 Gather historical data on the currency value fluctuations of the country – there is a need to understand the historical fluctuation of the country’s currency and this will help to determine exactly “when” to enter the new market (during period of lower currency value) and “How” to enter (probably adopt price skimming strategy to acquire more returns).

2.3 Know the business slaw in the new country – basically failure to know this will put the company on the blink of instant collapse as breaking the business law can normally come with high risk of damages to be paid and eventual failure of the business (through bankruptcy or even cancelling of licence by the government).

2.4 Conduct focus group to test chances of success – the next will be to conduct a focus group and understand the chances of success for the new business. This is more like a trial role in the sense that the focus group gets to try the new business and present their idea of chances for either success or failure.

3.0 Conclusion

From the above analysis, it is clear that there is a need for firms to understand where, when and how to internationalize as such will increase their chances of success.

4.0 References

Agarwal, S. and S.N. Ramaswami. 1992. “Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internalization Factors.” Journal of International Business Studies 23(1): 1-18.

Anderson, E. and H. Gatignon. 1986. “Modes of Foreign Entry: A Transaction Cost Analysis and Propositions.” Journal of International Business Studies 17(3): 1-26.

Cavusgil, S.T., S. Zou and G.M. Naidu. 1993. “Product and Promotion Adaptation in Export Ventures: An Empirical Investigation.” Journal of International Business Studies 24 (3): 479-506.

Harris, G. 1994. “International Advertising Standardization: What do the Multinationals Actually Standardize?” Journal of International Marketing 2 (4): 13- 30.

Jain, S.C. 1989. “Standardization of International Marketing Strategy: Some Research Hypotheses.” Journal of Marketing 53 (January): 70-79.

Lauren Maillian Bias (2011), “A 5 Step Primer for Entering an International Market.” Available at: http://www.forbes.com/sites/yec/2011/09/22/a-5-step-primer-for-entering-an-international-market/ [Accessed on: 1/08/2013].

Pan. Y, and D.K. Tse. 2000. “The hierarchical model of market entry modes.” Journal of International Business Studies 31(4): 535-554.