Most businesses currently concentrate in pursuing global strategies in order to gain competitive advantage but the degree of gain differs as some businesses benefit more than others. It is also important to note that some nations do have comparative lead more than other nations in particular industries.
The nature of international industries should be deeply understood as well as the vibrant of global competition so that the management can come up with a successful international approach. Global operations strategy options include international, multi-domestic, global and transnational strategies. Some of the benefits that lead to gain of competitive advantage include efficiency due to economies of scale and exploitation of the country’s resources such as labor and raw materials.
The company can also extend the product’s life scale as well as having operational flexibility. The company also enjoys transfer pricing and diversifies macroeconomic and operational risks. Some of the factors that determine an industry’s globalization prospective include market coverage, competition, costs and government.
Drivers affecting Globalization Prospects
Cost drivers are influenced by location, differences in country costs and the potential for economies of scale. Customer drivers include common customer needs, global customers, and global channels which require globally coordinated marketing programs. The ability to satisfy customers’ needs and widening market coverage for a company is crucial in success of any global company that intends to expand its business globally.
Competition is a vital driver that must be closely analyzed. Increased global competitions shows that the industry is ready for globalization and the global competitors will always have global advantage over local competitors. The government policies may either boost or discourage globalization due to the factors that are related to it such as the trade policies, technical standards and trade regulations.
Liberal economies and favorable government policies greatly boost globalization. Global strategy is characterized with similarity of products in all countries as well as centralized control with little decision making at the local level. Global strategy is always effective when the difference between countries is negligible.
Market Screening
Market Screening is a process of scrutiny and evaluation that enables the administration of any business to discover a section of feasible markets by avoiding unappealing markets. Screening assists in identifying the best locations in vast geographic regions and each screening is modified to match key achievement variables of the retailers. The region should have characteristics that are consistent with the company’s target consumer and with the best chances of growth.
The two types of market screening include country screening and segment screening. Country screening uses countries as center of scrutiny for market choice while segment screening concentrates on market segments as the centre of analysis for the market selection. Screening is carried out in a way that the less expensive and less difficult are given first priority.
Initial screening includes basic needs potential where the need potential is concentrated and foreign trade and investment. Foreign trade and investment involves identifying some projections on where the similar goods go or where producers put up plants of producing the goods. This will identify the countries that import and export a company’s products as well as the amount of money involved in the business.
Second screening which comes after the first screening helps in identifying the financial and economic forces such as inflation rates, exchange rates and the interest rates. The credit worthiness of customers is also considered. Other important measures of market demand based on monetary data that include the market indicators and the market factors are equally regarded.
Other Types of Market Screening
Third screening involves both political and legal forces such as entry barriers, profit remittance barriers and policy stability. Entry barriers would include investigation of issues such as import restrictions, local participation and government owned competition while profit remittance barriers include undue restrictions on repatriations of earnings, limits to FDI and inability to provide foreign exchange. Policy stability comprises political atmosphere, political stability and public conflict.
Fourth screening involves socio-cultural forces which are fairly subjective and data are very difficult to assemble especially from a distance. Some of the sources to socio-cultural factors include US department of commerce, business international and the Economist. Fifth screening involves consideration of competitive forces. Some of the factors analyzed include number, size, financial strength of competitors, their market shares and their apparent market strategies. It is also important to verify effectiveness of promotional programs, quality levels of their product lines, sources of the competitors’ products and their pricing policies.
Final selection of new markets is done by visiting the selected countries by the companies’ executives. There should be unhurried field trips by joining government trade missions, trade fairs or face to face interviews. The final selection of new markets also involve hiring local research groups and appointing experienced project managers with great knowledge of the industry and your country and is from the same geographic area.
