Introduction
This paper presents a case of expansion of business in the global market. The paper focuses on Auto Parking business. The Auto Parking business has been expanding due to the growth and expansion of physical infrastructure in the world. The Auto Parking business that is discussed in this paper entails providing parking and other related services. This implies that the business does not just offer parking services for cars and other automotive, but it also offers other services that are required by the customers. The company is, therefore, a modern company that deploys modern technologies in business. The business, therefore, pays attention to a wide variety of dynamics that are critical to competitive positioning in the international market. The main argument in this paper is that managing business globally requires the adoption of cross-cultural aspects of management as an adaptive technique to the international market.
Does the international market present opportunities for all kinds of the businesses in the world? This is the question that forms the center of concern for firms as they think of expanding into the global market. Business opportunities often present themselves in the global business environment. However, the ability of a company to succeed in the international market depends on the level at which the company assesses the environment and applies the desired strategies of managing a business in such an environment. This paper expounds on how the Auto Parking business can be expanded from one market to the other in the global trading environment.
Of critical relevance in the paper is the exploration of the international business environment in relation to the expansion of business opportunities in the international business environment. The strategies for expansion of business practices are brought out in the paper. The paper also brings out the factors of dynamism in different markets in the world and how these factors are dealt with through the deployment of international models of business management.
Global Strategy
Expansion of business in the global market is a competitive strategy that is being widely adopted by companies in the market. Market entry strategies are dependent on several factors, most of which revolve around the internal factors and the external factors. The internal factors depend on the functions within the business that denotes its ability to enter and adapt to the competitive forces in the given market (Chung & Enderwick, 2001). The external factors are the aspects of the market in which the firm aspires to enter. The assumption in this paper is that the business has been in operation in the Arab region.
Most companies enter competitive markets like the North American market through mergers (Chung & Enderwick, 2001). Having operated for a long time, the company can seek for small auto parking companies in North America and team with the company to gain a footing in this region. A similar strategy can be applied to Europe since it is equally large and competitive. The South East Asian market is also becoming quite competitive. Therefore, the main means of entering this market are through partnerships with the Auto Parking companies in the region, after which the company can establish its firms in the region.
Africa and some regions of Asia present a region that is comprised of countries that have developing economies. These economies are, therefore, weaker and less competitive. The company can, therefore, enter these regions through the direct establishment of business ventures or through the acquisition of auto parking companies in these regions. The strategy of acquisitions can also be applied to the entry of the business company in the South American region, which is comprised of countries that are transforming into middle-income economies.
International strategy and organization
There are key factors that are considered in the management of business across borders. The key factors that are considered in the organization and execution of business operations for a company in the global market are models of business ownership and outsourcing, business location in the global market and managing across different cultures (Stonehouse, Campbell & Hamill, 2007). The firm, therefore, ought to come up with firm-level strategic choices. The first thing in the design of firm-level strategic choices is the identification of the business location and the design of the Auto Parking business in the new region. This is a critical step in as far as the development and enforcement of other strategies are concerned.
Planning is a vital step in the global expansion of a business. One of the vital aspects of planning in managing business globally is the structuring of operations in diverse regions. One aspect of the organization is the consideration of gradual expansion. Gradual expansion, in this case, implies introducing the business in one region and allowing it to pick and gain footage in that region before expanding to other regions (Stonehouse, Campbell & Hamill, 2007).
This is one way of reducing the risks that are attributed to managing a business in a new environment. As soon as the business is established in a new region, research will be the main guiding factor for the expansion of the company in the market. The company can limit its operations in the early stages of operation in the new market and expand its operations depending on the level of response in the market. The company will combine the models of doing business in the new regions with the models that have been used to enhance business in the GCC region.
Analysis of international opportunities
Business opportunities are often derived from the environment in which the firm is operating. One way of noting the opportunities in the new market is by way of research and engaging fully with the business environment to understand the internal and external factors that affect the operation of a business. The automotive industry is broadening with the increase in the rate of industrialization. The broadening of the global automotive industry is accompanied by the growth in the number of people who own and use vehicles on a daily basis. This is a key competitive factor of competition for the company in the market.
Regions that are already industrialized, like North America and Europe, already present a dozen opportunities for the Auto Parking business. However, the nature of opportunities that present in these countries is quite different from the opportunities that are present in the industrializing regions. It is important to note that the industrialized countries value the advancement in technology and use this as a force for measuring the competitiveness of a given company in the market. Therefore, the firm has to embrace the development and deployment of efficient technology when expanding in the industrialized regions.
The industrializing countries also present opportunities for the Auto Parking business. The business can easily grow in industrializing countries due to the prevalence of less competitive firms. However, the opportunities might also be limited by the fact that fewer people own cars and have less income, meaning that they cannot easily afford to pay for the services as offered by the business. Choosing the nature of services to offer in a given region is, therefore, an important consideration for the business.
Selection and management of entry modes
Several factors are put into consideration when selecting the most effective entry mode for a firm in a given new business environment. Among the factors is the level of competitiveness in the new business environment, the availability of complementary or supplementary business operations in the region and the internal capacity of the firm. Each of these factors dictates the easiness of entering and managing operations in the new environment, thus they are given attention in the selection of entry modes for the company in different regions, which depict different business environments (Jean-Luc, Louis & Paul, 2006).
Three main modes of entry in the international business environment have been chosen by the company. These are entry through mergers and acquisitions, entry through the direct establishment of new business ventures in the new market and the utilization of a hybrid method in regions that present different business settings. Each strategy has its own strengths and weakness. Mergers are best applied in situations where a firm finds it difficult to enter the new business environment because of either higher competitiveness in the market or a total variation in business culture between regions.
The competitiveness of the North American region is a key guiding factor for the choice of the merger as the main entry strategy. Direct entry can pose problems of competitiveness in the market. On the other hand, the entry by acquisitions is used in the regions whose scale of competitiveness is far much lower than that of the company. Direct entry can also be applied in the developing regions of the world since such regions present less relative competitiveness. The newly industrializing regions present a lot of dynamism. A combination of models can, therefore, be used in the region.
The development and marketing of products
The company deals with the marketing of services. The services sector requires a higher level of creativity since the nature of business offering is fully determined by each individual customer, especially in the case where the company is fairly new in a certain market. Customers are often used to certain kinds of services as offered by firms in the market. Therefore, the introduction of a new company that deals in the offering of services in a new market has a lot of marketing implications for the business. First, there is the issue of differentiation of services from other services and an enticing or a pull factor for the customers.
This is a vital step and the main way through which the business can trigger customers and attract them to the company. Customers have to find a reason to skip other services and seek for the services that are being offered by the company (Chung & Enderwick, 2001).
The issue of creativity and the application of diverse marketing strategies come out here and are the determinants of the pace at which the company will gain marketing and a strong operational basis in the international business environment. The difficulty of operating in a competitive business environment is that the customers are used to a wide ray of services and cannot go for services that appear to be less attractive than the ones they are used to. The main attributes of the service offering in the international market entail the increased diversification of services and the utilization of high technology as an attractive tool for the business. The company needs to weigh between the demand for services in the market and its ability to develop products that meet the demand in the market.
Managing international operations
According to Nilsen, Kowske, and Anthony (2005), global management is affected by several factors of variation. The factors of variation are brought about by the prevailing differences between the operations of the company in its mother location and the nature of business operations in the new region. The differences in the nature of discharge of management in the mother country and the newer regions of operation in the global business environment present a vacuum, which must be filled at all if the company wants to succeed in the international market.
The attributes of management in the GCC regions still differ in the nature of management in the Western countries and other regions in the world like Africa and the East Asian region. It is quite complex to establish and manage business operations in new markets, especially when there is the existence of a greater variation in business practices. One aspect of international business operations that will be given much attention by the company is the mastering of the features of business and managerial practices in each region.
Business operational issues, as well as the issue of managing performance, are given attention in an effort to master the factors that affect the establishment of the Auto Parking business in the new market. The choice of an entry mode has to be followed by the PEST analysis, which leads to a clear understanding of the new environment. This is critical to the development of strategies that fit the existing operational environment in the international market. The most important factors in as far as the Auto Parking business is concerned are the political factors, as well as the economic factors. The political situation determines the state of the economy and the stability of the business.
Hiring and managing employees
This is an issue of international human resource management. Managing employees in the global business environment is an aspect of cross-cultural management. This has been at the center of discussion in the debates of international business management practices in multinational corporations. It is critical to note that this is a service company and employees are often in close proximity to the customers when discharging the services.
There are two factors that should be considered when hiring and managing employees in the new operational regions. First is the issue of familiarity with the environment in which the operations are set. Secondly is the manner in which human resource practices are discharged in the global business environment. The company needs to understand the human resource practices in the region in which it is staging its operations (Nilsen, Kowske & Anthony, 2005). For instance, human resource policies and rules that govern the management of employees in the region should be put into consideration. Failure to meet the standards may cost the operation of the business in the international market (Guthridge & Komm, 2008).
The company must get employees with the relevant skills to discharge functions in the new operational ground. Sourcing, therefore, becomes necessary for the company. The unfamiliarity of the company with the new operational regions is bound to affect the recruitment of employees, especially in getting the required skills. However, outsourcing is one of the solutions to setbacks in the recruitment of employees in the international business environment. The company can opt to outsource for a human resource firm in the new business region to help in the recruitment of employees. This has a higher payoff than opting to rely on a recruitment structure that is used in the GCC.
Cross-cultural issues affecting the business
According to Primecz, Romani and Sackmann (2011), managing business internationally requires the commitment of a firm in learning the variations that exist between the mother country of operation and the international environment in which new business is staged. Cultural variations, which refer to the ways in which business operations are discharged, have a huge impact on the operations of the firm. Cross-cultural issues in international business management come out in two ways. The features are found in the real business operations and in the discharge of human resource management.
Beginning with the real business practices, the establishment of business in a new region is affected by the operational culture in the new region. Customers in the new business region might have been used to certain practices which the new firm is not aware or is unable to offer. Each of the regions that the business seeks to enter has its own modes of discharging business functions, which define the business environment. Adaptability is, therefore, one of the key factors in establishing a business in the international environment. One factor of adaptability is the choice of entry mode in the given region. Entering through a merger can help the company to learn the new business environment and discharge business functions according to the demand in that market.
The other area that poses a challenge in international management is culture and the management of employees. Cultural variation is brought about by the difference in language and other norms, which affects human resource practices. Managing international business through expatriates has proven to be difficult due to cross-cultural issues (Zhang, 2009). This is the reason why there is a need to combine expatriates and the local employees in order to bridge the cultural gap.
The impact of politics, law, and business ethics
Politics in any region have a resounding impact on the business environment in a given environment. Politics impacts on the formulation of business legislation in a given country. In fact, the legislative process is a political process, meaning that economic legislation is shaped by political processes. Globalization has had a positive impact on the development of international business. The legislation that embraces protectionism in most countries is being drawn away and replaced by the legislation that allows free trade in the globalized business environment. This favors the company because it is seeking to stage business in different regions of the world. However, research in international business still reveals a tendency of protectionism of local companies by governments. The best thing with the Auto Parking business in most regions is that it is usually run by medium-sized companies, thus the legislation on protectionism does not affect the business in a big way (Josie & Ingrid, 2007).
According to Josie and Ingrid (2007), business ethics is an area of concern, especially in the contemporary international business where firms engage in diverse corporate issues. Ethical breaches often come from the lack of mastering the laws and regulations that guide responsible business management in the global market. Ethical issues are embedded in the culture of management that is set and embraced by the company. The company needs to ensure that it pays attention to the emerging as issues of ethical management, like observing the protection and conservation of the environment, as well as observing the rights of the employees, the customers, and the community where the business is located.
Economics and emerging market issues
The modern business environment is quite dynamic. The dynamism is necessitated by the changing trends in the markets. The trends in the market are affected by changes in technology, the size of the market, fluctuation in prices due to changes in economic conditions, and the growth in the international competition among other factors. All these combine to put a lot of pressure on the firms that are affecting the firms that operate business beyond borders.
The company needs to brace up with the changes in the market to be in a position to maintain a favorable level of competitiveness in the international market. An example of the economic factors that can affect the business operations of the company in the international market is the fluctuations in the prices of crude oil in the international market. Such economic development implies a reduction in expenditure by people who own cars (Kerr & Gaisford, 2008).
Innovation and invention are critical factors for businesses operating in emerging markets. The emerging markets have grown out of the commitment of the industry to invention and innovation. Operating in the emerging markets like the East Asian region require the company to invest a lot in innovation and come up with activities that match the contemporary status of technology adoption in business. The company should also prepare for the changing conditions in the market, which are caused by forces that come from other industries like the financial and banking industry. The contemporary economic environment is highly interconnected, thus shocks in one sector are bound to affect the operation of other sectors in the economy. An example is the recent global financial crisis (Kerr & Gaisford, 2008).
International trade issues
The issues of trade in the international market often come out of the interaction of the company with other players in the international business environment. Most of the issues of managing trade in the international trade center on competition, government regulation and the ability of the company to manage a dynamic market. The international trading environment is confronted with various competitive issues like consumer protectionism, the process of procurement and supplies, and the ethical guides in corporate management (Kerr & Gaisford, 2008). All these issues have a direct effect on the establishment and sustenance of trading activities for an international company.
Up to today, most governments have not harmonized their trade policies. This means that the company is bound to be exposed to a taxation regime in the international business arena, which is quite unfavorable to the company and favorable to the local companies at the same time. This is one case of protectionism, which was mentioned earlier in the paper. This issue is common in the advanced market economies like the United States and the European Union.
One way through which the company can offset such impacts is working on its competitiveness through the mechanisms that have been discussed in the paper to avoid the competitive pressure from the local firms. The complexity of the processes of trade in the international market is another critical issue in the continuity of trade in the globalized markets (Kerr & Gaisford, 2008). The Auto Parking business is often exempted from the procedures. Once established, the business does not so much rely on supplies like other companies that deal in the procuring and selling of products.
Business-Government trade relations
Foreign investment is the focus of business in most countries in the world today. Most governments support investment since it is the key to the expansion of the economic environment and the determinant of the economic welfare of a country. This means that governments have to foster positive relations with the business sector to promote trade and investment. In most cases, trade relations are fostered by policies and laws. The policies that are set by a country in a given market dictate the establishment and the policies that guide foreign investment in other regions of countries (Schaffer, Agusti & Earle, 2009).
The GCC regions have opened up its trade policy in recent times, which has fostered the inflow of foreign investors in the region. This is similar to other regions like Asia, South America and Asia where the policies of government favor both the foreign companies, as well as the local companies. This is an inspiration to the firms from the regions that are planning on investing in other regions. The company can operate in the international market without being subjected to unfair business policies in foreign countries.
The relationship between the GCC region and the other regions is positive and helps in shaping the private business laws in countries like the United States and other European countries to set an atmosphere that favors the relations between international firms and the local government. Foreign trading activities ought to be guided by rules that open up local markets and treat all firms in the market as competitors. The openness of international business is heavily dependent on relations between governments and the industry (Schaffer, Agusti & Earle, 2009).
Issues of Foreign Direct Investment
The investment by multinational companies in foreign business environments is a bold step. It helps a company to take advantage of the opportunities that are prevalent in the international market, thus boosting the revenues of the company (Organization for Economic Co-operation and Development (Paris), 2002). However, it should be noted that foreign direct investments, which entail the entry and establishment of business operations in different markets, can be of an advantage to the competitiveness of the firm. At the same time, it can result in the loss of business and a reduction in the competitiveness of the company.
This resonates from the fact that different business environments in the international market are guided by different policies, some of which can strain the operation of firms in the foreign market. There are also other factors of managing in the foreign business environment. As observed earlier in this paper, managing in foreign markets for the company entails managing across cultures since the mother country of the company is in the GCC region, while the company aims to expand business in other regions outside the GCC.
Variation in trade policies comes out as one of the factors that impede the operation of the company in foreign markets. These factors play out in the foreign market. Complete failure of the liberalization of trade in foreign markets subjects the company to aspects of competition that do not favor it. This was mentioned earlier in this paper. The strategy of entry and the subsequent tactics of management in the foreign market is, therefore, the key to dealing with the challenges of managing subsidiaries that are established in foreign markets.
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