Company Background
Perhaps the most complicated, transformed group of forms of international business operations in the production and investment group. Its appearance is caused both by the problems of organizing effective exports to the selected foreign market and its physical remoteness. Such production involves the transfer of not only marketing but also production activities abroad (Schwartz, 2020). The creation of the final product abroad removes the problems of both tariff and non-tariff barriers, as well as the lack of preparedness of a foreign counterparty who wants to act as a licensor or franchisee.
The range of organization of production abroad is quite wide. It includes both organizations abroad for the assembly of the final product or production under a contract, as well as significant foreign direct investment in order to create a strategic business unit abroad, which is fully owned by an international company. This very diverse group of forms of international business operations is often used to select operational management solutions for the development or expansion of the market (Schwartz, 2020). It is also used to create a market platform with minimal risk for the investment of the owner of the transferred intellectual property.
Trade Operations
The most profitable trade operations strategy for manufacturing assembly facility another country is a free trade strategy. Such a strategy will reduce restrictions on foreign trade to a minimum. To implement this strategy, it is possible to buy and sell goods without delivery to the territory of the state where the owners of the manufacturing assembly facility are located (Hill, 2021). Such a transaction, in which goods are bought from a foreign counterparty, are not imported into the territory of business owners, and are sold to another foreign counterparty, is possible.
There is a distinction between direct re-export – the goods are imported into the territory of the resident country and indirect re-export – the goods are not imported into the territory of the resident country but are sent directly to a third party without crossing the borders of the resident country (Schwartz, 2020). The goods under such a transaction are not subject to taxation because the goods will not be located, imported, or exported from the country of the business owner.
Logistics
Logistics work within the framework of international marketing is more complex. This is caused by country differences in distribution networks and marketing environments. It is almost impossible to use the same type of strategies, so the optimal solution would be a minimal appeal to intermediary companies and a combination of different modes of transport. In the strategy of international cargo transportation, the advantage should be given to the delivery of cargo by sea.
Sea transportation is the most practical, safe, and cost-effective type of cargo delivery. Sea cargo transportation is most often used when the land route of delivery of goods is long or expensive. The use of standard containers transported by sea can serve as an example for the introduction of standardized packages for transportation on land modes of transport (Schwartz, 2020). International air cargo transportation has a strong impact on international distribution, so air transport allows to reduce the time of cargo delivery to anywhere in the world.
Within the framework of international land transport logistics, vehicles of different foreign countries differ greatly in their quality. Trucks are a universal vehicle that can be a potential competitor to rail transportation. The equipment for railway transportation should be interfaced with suppliers, intermediaries, and consumers (Schwartz, 2020). Competitive advantages, maximum savings on reducing significant production scales, standardization of sales in the global range — all this requires coordination of the principles of a global logistics strategy. It should take into account not only the peculiarities of individual countries but also general approaches to the construction of schemes for the movement of material flow.
HR Strategies
In the system of international management, there are a couple of variants of strategies of an international company for the formation of culture and personnel policy. This is the dominant style of the headquarters and the transfer of its elements to branches or adaptation to the conditions of the host country when the so-called home approaches dominate. It is also possible to such a form of management as fusion when there is a kind of synthesis of various managerial and cultural aspects of the activities of the headquarters and branches. For management, universalism can be chosen when a certain neutral style is established and accepted by different cultures (Hill, 2021). A fifth strategy is a combinable approach, which is a combination of all the approaches listed above in relation to the regional or global conditions of an international firm.
Marketing Strategies
The implementation of another country’s marketing space for manufacturing assembly facilities abroad should be based on the production of goods or services on the territory of the domestic market or in another country. When choosing a business of this type, before entering the target foreign market, it is necessary to determine which functions in the distribution of the product will be performed by the company itself and which will be transferred to intermediary organizations. The distribution of roles in marketing activities defines most of the future risks.
The three marketing strategies to choose from include direct, indirect, or joint export (Hill, 2021). With direct marketing, the company assumes full responsibility for promotion since it will cooperate directly with local distributors and other intermediaries in the target market. In the case of an indirect marketing strategy, a contract will be concluded for the sale of the product abroad with an intermediary company from the domestic market. When exporting together, it will be necessary to find partners in the domestic market. Joint cooperation with other firms will allow solving the issue of insufficient funds for export.
Localization Strategies
In the case of manufacturing assembly facilities abroad, localization by means of contract production will be the most advantageous. Contract manufacturing can exist within one country or scale within the borders of the world. Transferring the production of a product imported to a foreign market or organizing the localization of their activities by domestic companies in this way is convenient (Hill, 2021). This is due to the fact that manufacturers are ready to produce any volume of products for the customer, whereas China, for example, works for an incomparably larger volume of one batch of goods.
Although there are many different kinds of highly qualified and unique specialists in the resident country, however, there are either not enough innovative developments or high-tech equipment for independent development. In this sense, the form of contract production, as a rule, is beneficial to both parties to the contract (Schwartz, 2020). During localization, there is an additional saving of time and money due to the absence of the need to pass customs procedures. This allows, on the one hand, the customer company to save on the maintenance of production facilities, the maintenance of the staff of workers, etc., which inevitably makes its own production heavier. This, in turn, makes it possible to directly reduce the share of direct costs in the formation of the product cost for the end user.
References
Hill, C. (2021). Global business today. New York, NY: McGraw Hill.
Schwartz, H. M. (2020). Intellectual property, technorents and the labour share of production. Competition & Change, 0(0), 1-21.