Lesson-7

Discussion Questions(DQs) 

1. You are the CEO of a new technology group that wants to expand to the Asian market. Select an Asian nation.

a.       What aspects of the legal-political environment do strategic decision-makers need to examine?

b. What economic issues might affect your company's international strategy

c. Discuss why it is important to understand the national culture of this country.

d. Describe your planned entrance strategy into this new market.

Be sure to support your work with specific citations from this week's Learning Resources and any additional sources.

 Answer:

If I were the CEO of a new technology group then I would have expanded to the Asian market-India. In this paper, I will answer the questions based on this market-India as follows:

a.      Political-legal aspects to be examined by strategic decision makers

Political-legal environment refers to political-legal factors that will have a potential impact on the operation and success of the company. As a strategic decision maker, the following political-legal aspects should be examined:

·         Political stability should be determined because more the political instability more the uncertainty can happen which ultimately hampers the company to run smoothly.

·         Legal-political procedures should be examined because it would be easy to set up the company when there are clearly well-established political-legal procedures (Coulter, 2013).

·         Laws and regulations about individual rights and business activities should be examined because these will clearly show that whether there are opportunities or threats to operate the businesses.

·         The frequent changes of political parties should be examined as new parties may come up with new rules and regulations that are likely affect the operations of businesses.

·         Availability of the political unions and labor organizations also should be examined as they might create a pressure in increasing the wages or salaries of the employees in the company.

                                     

b.      Economic issues affecting the company’s international strategy

It is true that strategic decision makers must be aware of economic issues while doing business internationally. Some of the major economic issues affecting the company’s international strategy are as follows.

·         Economic recessions/Depression in the business cycle is likely to affect the company so that it must be carefully understood.

·         It is important to understand the types of economic system such as free market economy (most of economic activities are privately owned and controlled), planned economy (Most of economic activities are governed by the government) or mixed economy (some are privately held and some are controlled by government) (Coulter, 2013).

·         Other economic issues include currency exchange rates, diverse tax policies and inflation rates that can affect the company’s international strategies. For instance, inflation (increasing general price level) rate should be anticipated by strategic decision makers to make possible changes in a country’s monetary policies and make business decisions about product, price, place and promotion. On the other hand, tax policies vary from country to country so that these policies must be understood to operate businesses strategically by managing company’s overall tax obligations (Coulter, 2013).

c.       The importance of understanding the national culture of the country-India

It cannot be denied that culture play an important role in the business so it must be understood before entering into another country as it varies from one country to another. The culture includes values, beliefs, attitudes; lifestyles, languages, religion and so forth, and the reasons why they should be understood are as follows.

·         Understanding Indian’s national culture is important because people in this country have different values, attitudes that shape their behaviors and beliefs regarding our product types. It is most important to know what they like and what they do not so that only it can be decided to operate businesses in this typical country.

·         Indian’s religion is Hindu so that people in this country believe that Cow is goddess so they do not like Cows to be killed and they do not eat the beefs. It means that even the beefs are widely eaten all major parts of the world, people from Indian and other Hindu countries do not eat and killing them are strictly prohibited. In this case, if any business in hoping to sell the beefs in these countries would not be allowed so that understanding the culture plays a pivotal role.

·         It is quite easy to expand our business where widely spoken language is English. Many Indians and business managers speak it fluently, though of course meaning can vary across cultures and countries. However, Indians may have a particular difficulty saying “no”, as it can convey an offensive message. Instead, they will prefer making statements such as “we’ll see”, “yes, but it may be difficult”, or “I will try” when they likely mean “no”. That’s why it is important to understand their languages and meaning as per their habits and doing this would help to make them productive and familiar.

Hence, I opted to expand first my business into India because Nepal and India are only two countries which have Hindu religion, similar lifestyle of people, almost understandable languages, and many similar cultural identities. It is very important to have something in common to expand our business in the country to get successful.

d.      The planned entrance strategy into this new market: India

While it is true that there are basically five ways to enter into international markets such as global sourcing, exporting, licensing, franchising, and direct investment (Coulter, 2013), I would prefer to enter into India by using direct investment. As India is rapidly evolving as technology-centric country, I will be using a joint venture as a planned strategy to open my business in India because of the following reasons:

·         Using a joint venture strategy, I would access to new markets i.e Indian markets and distribution networks that have been used by Indian local partners.

·         I strongly believe that it will help to create a win-win benefit for both partners by increasing the capacity by sharing different knowledge, skills and abilities.

·         It will also help to reduce the risks and costs among the partners.

·         It would access to greater resources, including specialized staff, technology and finance that could be beneficial to grow faster in one of the rapidly growing economic country.

References

Coulter, M. (2013). Strategic Management in Action (6 ed.). New Jersey, USA: Pearson Education, Inc.

David, F. R. (2011 (13th ed.). Strategic Management: CONCEPTS AND CASES. New Jersey: Pearson Education,Inc.

Pearce II, J.A.,& Robinson, R.B. (2014(14th Edition)). Strategic Management: Competing for Domestic and International planning. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from https://www.nibusinessinfo.co.uk/content/joint-venture-benefits-and-risks

DQ 7.2 . Read: Strategic Management in Action Cases: Case #3 "Tata's Time.”

a. What are the advantages of Tata going international? Disadvantages?

b. What challenges might Cyrus Mistry face as he guides his company?

c. What are the economic and political-legal environments in India? Identify opportunities and threats, and if Ratan Tata's strategy of pushing outside India makes sense?

d. How would you define the Tata Group's purpose? How does its core values influence strategic choices?

e.       Describe some strategic alternatives for Tata.

The Tata Group, Indian based company, is one of the leading companies in the world, and it is the world’s 6^th most admired company in the steel industry (Coulter, 2013). The company generated $20 billion revenue during the year 2009/2010, and continues to grow other several markets such as Europe, Africa, Middle East, south Asia and South America.

a.      Advantages and Disadvantages of Tata going international

Tata going international can have both advantages and disadvantages which are as follows:

Advantages:

·         It helps Tata to achieve an economies of scale and economies of scope.

·         Global presence is possible, wide coverage of markets and customers.

·         It helps to locate the tax benefits and regulations strategically.

·         It makes Tata to learn about particular markets or world religion.

·         With the help of global markets, it helps to become a stronger competitor, both nationally and internationally.

Disadvantages:

·         It is quite difficult for Tata to manage the supply chains/times.

·         There can be higher chance of quality issues among different operations.

·         It is challenging to operate the businesses where there are large differences in language, culture, beliefs, values, ethnicity, religions and so forth.

·         There can be fierce competition in terms of jobs, markets, and talents.

·         Financial and economic risks may occur due to disruptive changes such as national disasters, disease outbreaks and terrorist attacks.

b.      The challenges Cyrus might face as he guides his company

The challenge Cyrus might face as he guides his company is to survive on the world stage only by being both too big to beat and too good to fail (Coulter, 2013).  In addition to his, He faces the daunting challenges of steering a giant company as multinational conglomerate increasingly becomes more than 100 companies through economic headwinds at abroad and home.  Other challenges include economic and financial risks, complexity of greater distribution and networks all over the world, and acquisitions.

c.       The economic and political-legal environments in India, and Opportunities and Threats

The economic growth of India has been growing rapidly above 8% annual rate since 2008 (Coulter, 2013). Indian’s political-legal environment is not perfect but it is not as bad as it was in 50 years ago. Political stability has been created along with clear-cut political procedures for setting various activities. Laws and regulations now are better than ever before and they are favorable to working business environment.

Due to changes in economic and political-legal environment, the company now is struggling to exploit the opportunities and facing the threats. The opportunities can be low cost by outsourcing its various activities in other part of the world, easily market entry into other countries, mass productions and economics of scale, growing markets and customers demands, increasing per capita income or purchasing power. On the other hand, it can be threats that can affect the operation of the company such as growing intense competitions, pressure from the suppliers, increasing power of buyers, and threats of substitute products.

d.      Tata Group’s purpose and its core values influencing strategic choices

Tata Group’s purposes are valuable for the success of company such as creating trust, respect among employees, shareholders, consumers, and the community, and improving quality (Coulter, 2013). Tata’s core values include integrity in conduct business fairly with honesty and transparency, understanding the company culture along with respect, compassion and humanity for colleagues and customers around the world, excellence in work and production systems, building a good relationship with valuable partners all around the world. In addition, building strong relationships based on tolerance, understanding and mutual cooperation, and working for the community and the environment in which they operate. These purposes and core values are likely to affect the company’s strategic choices in the strategic framework for all its activities.

e.       Some strategic Alternatives for Tata

Some of the strategic alternatives available for Tata are global outsourcing; Exporting/importing, franchising or licensing, and foreign direct invest by setting up a foreign subsidiary. Tata is large investment company so that it would be better off to use strategic alliance-joint venture and foreign direct investment. However, as a strategic manager, there are many factors that should be taken into account before choosing and going for the alternatives.

References

Coulter, M. (2013). Strategic Management in Action (6 ed.). New Jersey, USA: Pearson Education, Inc.

David, F. R. (2011 (13th ed.). Strategic Management: CONCEPTS AND CASES. New Jersey: Pearson Education,Inc.

Pearce II, J.A.,& Robinson, R.B. (2014(14th Edition)). Strategic Management: Competing for Domestic and International planning. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from https://hbr.org/2010/03/leadership-lessons-from-india

 “The Challenges of developing and managing emerging markets in foreign locations”

Overview of the Question

It has been said that developing emerging markets in foreign locations are challenging, but managing in foreign locations can be even challenging. While it may be true that many companies are developing and managing emerging markets in the foreign locations successfully, there are many factors that must be taken into account before entering into foreign locations. However, understanding the foreign locations and making appropriate strategies would be helpful to cope with these challenges and develop its markets accordingly. This essay will discuss about the challenges of developing emerging markets and managing them in the foreign locations, and finally strive to come up with a reasonable conclusion.

Strategic Issues/Challenges

It is generally accepted that doing businesses internationally could be a great opportunity for expanding their businesses, exploiting opportunities and resources at its best. However, there are of course certain threats or challenges that must be considered while going international into foreign locations. Some of the strategic challenges while developing and managing emerging markets in foreign locations are as follows:

·         It has to deal with differences in culture, languages, and value systems which can create problems for any company if they are not well understood or analyzed (Coulter, 2013).

·         There can be difficult in managing the businesses due to supply chain/time disruptions. The role of quality, market segment, suppliers’ relations are quite challenging to cope with.

·         Due to rapid growth in these emerging markets, more and more competitors may compete for the same purpose so it may increase unfair competition in terms of jobs, markets, and talent people.

·         Getting talent HRs is quite difficult in emerging markets as there lacks the experienced and trained marketers, agencies recruitments and processes. In addition, Understanding people’s beliefs, values, norms is not easy in the foreign locations. It should be aware about workforce diversity, lifestyle, and religion which are tedious task for multinational companies.

·         In emerging markets, marketing in terms of product, price, place and promotion seems quite different than developed markets. For example, there is difference in product development, pricing strategies, advertising and media agencies, and channel/distribution managements.

·         Emerging markets in foreign locations are not systematically organized; include bottlenecks, bureaucracy, red tape, role of corruption and bribery.

·         It is true that developing and managing new products in emerging markets are chaotic because there can be higher number of copyright violations, counterfeit products, nepotism political connections and cronyism etc.

Analysis & Evaluations

                 When we talk about emerging markets then it comes in mind those BRICS (Brazil, Russia, India, China, South Korea) countries which are developing exceptionally with a double digit growth rate. In fact, the emerging markets stand to outgrow the developed markets or countries by more than 4% per annum (Coulter, 2013). It is estimated that over 70% of the world’s growth in the next several years will be coming from emerging markets. However, there are many challenges for managing operations and personnel in a foreign country these have to be addressed and overcome.

  In emerging markets, there are many issues such as high corruption rate, weak institutions, and lack of personal safety which continue to dissuade investors and make operating environments tough and challenging (David, 2011 (13th ed.). It is true that these markets do not have everything that are required to operate business activities as a gradual improvement may take long time in the level of transparency and legal protections.

 The marketing/operational challenges include how to segment the market, what marketing strategies to pursue, and how to relate to the low spending consumers in these emerging markets. Another challenge is that the industrial and business infrastructure could not be effective as it is in developed markets. In addition, tariffs could be very high and government only offers a very few amount of protection to the owners of patent, copyright and intellectual rights. Despite these, other challenges are extensive bureaucracy, laws and regulations that affect the successful operations, monopoly in key distribution/networking, and currency exchange issues. In the same way, high price sensitivity, local needs and limited purchasing power are challenges of emerging markets (Prahalad & Lieberthal, 1998).

Summary, Conclusions & Suggestions

In sum, it is true that developing and managing emerging markets in foreign location both include a greater amount of challenges such as bureaucratic hurdles, low average disposable income, diverse people and culture, weak infrastructure in terms of roads, electricity, technology and so forth (Pearce II, J.A.,& Robinson, R.B., 2014(14th Edition)). Hence, understanding these challenges and differences cannot be possible without having a proper research and other important analyses-PESTEL, Five forces models.

The developing and managing emerging markets in foreign locations can be affected by differences arise from fast changing markets, failing to exploit market and production discrepancies, and cultural differences. Although there can be several ways to overcome these challenges, I would like to discuss three most important strategies to overcome these challenges as follows:

1.      Adaptation: In order to overcome these challenges, the company should strive to boost market share and revenue in these markets by understanding their local culture and act accordingly.

2.      Aggregation: The Company should attempt to reduce the costs by producing in a large volume i.e. economies of scale. For this it has to increase its operational excellence and production to be a leader in these emerging markets.

3.      Arbitrage: The Company should find out the disparities between the supply chains/distributions by locating different parts of supply chains in various locations.

Hence, having applied these strategies, it would be possible to navigate developing and managing the emerging markets in the foreign locations. However, all these strategies should be oriented to understanding the cultural differences and responding appropriately to these challenges.

 References

Coulter, M. (2013). Strategic Management in Action (6 ed.). New Jersey, USA: Pearson Education, Inc.

(n.d.) Retrieved from https://hbr.org/2007/03/managing-differences-the-central-challenge-of-global-strategy

Pearce II, J.A.,& Robinson, R.B. (2014(14th Edition)). Strategic Management: Competing for Domestic and International planning. New York: McGraw-Hill Irwin.

(n.d.) Retrieved from http://www.elementiconsulting.com/insights/emerging-markets-growth-opportunities-and-challenges/

David, F. R. (2011 (13th ed.). Strategic Management: CONCEPTS AND CASES. New Jersey: Pearson Education,Inc.

(n.d.) Retrieved from https://hbr.org/2010/04/the-hidden-risks-in-emerging-markets