Reflection Essay
The aim of the essay is to give a reflection the knowledge gained from the International Business Strategy (IBS) module. The reflections will be built by making a link between the knowledge gained from learning the IBS and the knowledge gained from the module. The three briefings presented in the appendix depict crucial paths towards gaining knowledge as well as the relationship between the learning from class work and the three articles provided. Lastly, the paper will identify the knowledge gaps of interest existing within the international business strategy.
The journey to learning the IBS module began by gaining a basic knowledge of the operations of the international businesses. Crucially, I had gained knowledge on how the international, the local, and the Multinational Enterprises evaluate their environment and the competitive advantage. For instance, I had knowledge on how the PESTEL tool was important in evaluating the situation of the environment for investment. The model of the Porter’s Five Forces is used by many businesses in analyzing their competitive advantage (Porter, 2008, p.56). It helps the companies to evaluate the profitability of an investment by evaluating the attractiveness of the industry. It was vital to understand the strength of a company through a consideration of fives forces that include; new entry threat, powers of the suppliers, substitutions threat, powers of the buyers and competitive rivalry (Hamilton & Webster, 2015, p. 125).
Another area that I learnt was on the vital challenges the firms experience when going international. The firms need to consider the impacts of cultural differences, tax structure, corruption, infrastructure, and the efforts of the foreign governments to protect the local industries. The factors mentioned above have a great impact on the success of business in the international markets despite the ability to have a strong customer base. For instance, government increase taxes to protect important industries such as those producing fire arms and those employing a big percentage of the country’s population.
I had knowledge on the alliances in the international businesses while considering the entry strategies in the international business (Doole & Lowe, 2008, p. 34). The strategies included a joint venture, direct investment, licensing, exporting, and the Foreign Direct Investment. The use of each method was dependent on the conditions in the foreign country, goals, and the resources of the firm (WüHrer, 2014, p. 130).
The six weeks used in learning the IBS has greatly helped in gaining new understanding and knowledge in the strategies applied in the international business. Despite having knowledge in PESTEL AND Porter’s five forces, the concept of the distance in the international business environment was a very new concept. The concept argues that a business intending to invest in a foreign country should consider other factors beyond the attractiveness of the environment (Ghemawat, P., 2001).
The deep analysis of the global strategy in the multinational companies resulted in the deep understanding of the international market and the environment. George (1989) stated that every industry has distinct factors that contribute to the globalization. A company needs to understand the factors that have the capability to build the economies of scale and the competitive synergies. The environment, cost, competition and the market factors influence the rate at which globalization takes place in a given industry. The firms in the industry should significantly align its strategies of the globalization with the current drivers of the globalization of the industry (Hubbard, 2013, p.34).
The conceptual analysis of the three articles the tutor assigned greatly contributed to cognitive development in the IBS. More so, I analyzed the three articles by linking the author’s ideas in the books, peer-reviewed journals, and knowledge gained from the IBS. The first article explained the significance of the firms to give a consideration of the effect of the distance to the success of the global expansion rather than considering the potential sales potential. The failure to consider the distance caused $500 million losses to the Star TV. With such an example, I highly appreciate the knowledge gained from the IBS. Frynas and Mellahi (2015, p.87) described the importance of considering the economies of scale and the capital required in the investments. The economies of scale and the capital requirements are significant factors in the economic distance.
The second article discusses how the Multinational Companies can serve the developing countries while making a sustainable amount of profit. Frynas and Mellahi (2015, p. 92) noted that the internationalization of the business increases the competitive advantage of a firm over the suppliers and the trade unions. The article by Prahalad and Hammond (2002) extended my knowledge on how to increase profit, reduce costs of operations, and increase the innovation by positively investing in the developing countries.
The last article authored by Beamish and Lupton explained the six critical managerial issues that the managers must give consideration in the process of initiating a joint venture. In the process of analyzing the article, I understood the significance of trust in the success of the joint venture. Trust was significance when sharing knowledge, governance and control, measuring performance and in the process of the internalization (Hubbard, 2013, p. 84). The managers should make certain that their objective fits best in a joint venture (Vaidya, 2012, p. 32).
The three readings assigned by the tutors contributed to the understanding of the IBS module lecture notes. The first article by the Ghemawat is linked to the lecture 2, ‘Understanding Business Environment’ regarding the consideration of the of distance when firms are making decisions to invest abroad. The reading highly contributed to my understanding of the lecture 2.
The second article that the related to the operation of Multinational companies in the third world countries relates to the lecture 3, ‘Understanding the International Business Environment
(2): Industries.‘ The lecture and the article facilitate the understanding of making investments in the international business. The lecture 3, had identified the factors such as cost of operation, trade liberalization and economies of scale that firms consider when making investments. The third article by Beamish and Lupton and the lecture 5, ‘International Expansions and Strategic Alliances,’ mutually contributes to the understanding of major decisions made when making international alliances. It is also significant to note that Frynas and Kamel (2015, p.172) explained that it is vital for the firms in the international business to consider capital available for investment and level of control desired.
The attendance at the lectures, tutorials and the conceptual analysis of the three articles assigned highly added value to the knowledge I have. Moreover, the interactions with the students from the diverse cultural grounds as well as being involved in the tutors have made it easier to gain knowledge and the understanding of the IBS module.
There are crucial gaps in the knowledge that I aspire to attain in future. First, the vital gap identified is the lack of the work experience. I plan to seek employment or internship from a company that would help me to apply the knowledge gained from the IBS. Second, I would like to gain knowledge on how to strategically be involved in the innovation. I am always amazed at how the Google makes innovations. In future, I desire to invest in businesses and apply the innovations, competition, and the creation of the values for the customers.
Bibliography
Beamish, P. W., & Lupton, N. C. 2009. Managing joint ventures. The Academy of Management Perspectives, 23(2), 75-94.
Doole, I., & Lowe, R. 2008. International marketing strategy: analysis, development and implementation. London, Cengage Learning.
Frynas, Jedrzej George And Mellahi, Kamel 2015.Global Strategic Management. Second edition. Oxford: Oxford University Press
George S. 2002. ‘Global Strategy…In a World of Nations?’ MIT Sloan Management Review, Fall, vol. 31 issue 1, pp. 29-41
Ghemawat, P. 2001. Distance still matters. Harvard business review, 79(8), 137-147.
Hamilton, L., & Webster, P. 2015. The international business environment. New York. Oxford University Press.
Hubbard, N. 2013. Conquering global markets: secrets from the world’s most successful multinationals. http://www.palgraveconnect.com/doifinder/10.1057/9781137307729.
Porter, M. E. 2008. Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.
Prahalad, C. K., & Hammond, A. 2002. Serving the world’s poor, profitably. Harvard business review, 80(9), 48-59.
Vaidya, S 2012, ‘Trust and Commitment: Indicators of Successful Learning in International Joint Ventures (IJVs)’, Journal Of Comparative International Management, 15, 1, pp. 29-49, Business Source Complete, EBSCOhost, viewed 15 November 2015.
WüHrer, G. 2014. International Marketing Compact. Wien, Linde Verlag Ges.m.b.H.
Appendix
Article: Ghemawat, P. 2001. Distance still matters. Harvard business review, 79(8), 137-147.
The article by the Ghemawat gives an emphasis that firms in the international business should consider the effect of the distance to the operation of the business in the foreign market. Most of the times, the firms overestimates the potential profitability of the foreign markets. Greatly, the problems arise with the tools that the managers use in the predicting the potential investments. One of such tools is the Country portfolio analysis (CPA). It is vital to consider the elements of the distance such as culture, administrative, geographic, and economic distance.
I greatly gained a lot of knowledge from reading the article. First, I appreciated that the consideration of the distance is vital to the success of the business in the international market. The business that succeeds has great understanding of the elements in the distance. Most of the authors describe the distance as the external environmental factors that determine the success of the business (Paliwoda, 2012, p.49). Greatly, I enjoyed understanding the application of the adjusted CPA in the case of the Tricon Restaurants International (TRI). The Mexico was among the countries that were least attractive for the investment. The application of the adjusted CPA made Mexico become more attractive for the investment.
I gained knowledge on how firms intending to go international utilize the country portfolio analysis (CPA) wrongly. (Ghemawat, 2001, p. 02). In CPA, the firm is required to analyze the Gross Domestic Level (GDP) of a country, a wealth of the consumers and the capability of the consumers to spend on certain types of goods. Moreover, I learned the application of the gravity theory in analyzing the relationship between the level of trade and the distance (Ghemawat, 2001, p. 04). The theory stated that the trade and the size of the economy were positively related while a negative relationship was depicted between the trade and the distance. The CAGE distance framework was a vital tool that could be applied in the analysis of the foreign environment (Ghemawat, 2001, p. 05).
Moreover, I gained the knowledge of how it is difficult to adopt the impact of the political distance especially when the strategies are made to protect the local industries. The government usually protects the industries when there is a concern for the security; where the company has employed a great number of people or it is involved in the exploitations of the natural resources. Doole and Lowe (2008, p.29) explained that the government always make efforts to protect the important industries. The international businesses firms operating in the international markets should vitally evaluate the political distance.
It was difficult to agree with the author that despite the technological developments and improved communications, the distance of the business operations remains unchanged (Eid, Elbeltagi & Zairi, 2006, p.99). Normally, the increased technological development is attributed to the reduction of the distance (Doole & Lowe, 2008, p.429). For instance, the use of the internet has increased the trade over the boundaries. At the same time, it has been attributed to the westernization. Moreover, it was difficult to understand the fact presented by Ghemawat (2001, p.03) that the level trade between a physical distance of the five thousand miles is 10% of the trade between countries separated by the distance of the one thousand miles. It was difficult to believe or understand since there were no facts presented. Besides, the developments in technology have also encouraged the international trade between many countries.
Article: Prahalad, C. K., & Hammond, A. 2002. Serving the world’s poor, profitably. Harvard business review, 80(9), 48-59.
The article explains the probability of the multinational enterprises ability to make substantial profits in the developing countries. The authors discussed the most relevant misconceptions that exist in the understanding the developing countries towards the investment. The business environments in the developing countries have been largely misunderstood. Prahalad and Hammond (2002, p.48) explained that the multinational companies do not have to give the social favors to the peoples in those countries. They need to serve their interests. The developing countries have poor people but when their buying power is aggregated it has a huge impact on sales. More so, Prahalad and Hammond (2002, p.50) proved that the buyers in the poor countries spend on goods of ostentation despite the belief that they lay emphasis on the basic needs.
Interestingly, i learned about the World Pyramid. The world pyramid classifies the consumers according to the levels of the buying power (Prahalad & Hammond, 2002, p. 53). Most of the companies concentrate on the top of the pyramid where the consumers have a higher power to make purchases. The companies have ignored the population at the bottom of the pyramid with the lower purchasing power. Nevertheless, Prahalad and Hammond (2002, p. 53) argued that the most relevant factor of consideration is the efficiency in the application of the returns on the capital employed (ROCE).
The article part of that was most interesting is the description that the companies can still invest in the developing countries and largely benefit from the operations carried out there. Crucially, the company has the capability to benefit from the untapped market. There is a misconception that there are great barriers such as the corruption and lack of the infrastructure. Nevertheless, many multinational companies are successfully operating in the developing countries. More so, the company benefits from the reductions in the costs of the production and the capability of the faster growth. The use of the cheap labor from the developing countries helps in the reduction of the cost of operation. China and the India are the key examples of the countries that developed as a result of using the cheap labor. Moreover, understanding how investments in the developing countries contribute to the innovations was interesting. The challenges faced in the developing countries have led to the developments in wireless technologies and the e-commerce.
Having read and understood the article, it was difficult to agree on the fact that the investment in the developing countries contributed to the reduction of the costs of the operations. In the developed countries, there is less development in the infrastructure (Ryan, Gasparski & Enderle, 2000, p.130). There is no adequate and cheap source of the power nor the workers with the adequate skills. Firms have to get professionals from the outside those countries (Austin, 2002, p.290). Moreover, the firms have to use the generators due to frequent blackouts. The developing countries are also associated with the increased taxes and the cost of capital (Pakenham et al., 2013, p. 53). I felt that the author partially the factors that greatly influence the cost of the operation in the developing countries.
Article: Beamish, P. W., & Lupton, N. C. 2009. Managing joint ventures. The Academy of Management Perspectives, 23(2), 75-94.
The article gave a consideration on the main reason the firms enter in the joint ventures. The joint ventures enable the firms to attain their objectives more easily and faster than when operating alone. The joint ventures involve the members by contributing some capital that assures their commitment to the investment. Despite the advantages associated with the joint ventures, they are always challenged with particular managerial issues. The managerial issues identified include the performance, knowledge sharing, governance and control, internationalization, cultural differences and the valuing of the joint ventures. For instance, the joint venture would be faced with a challenge on whether the control would be shared in accordance with equity contribution or any other means agreed.
The reading of the article facilitated the gain of vital information; nevertheless, the understanding of the concept of knowledge management was very of great interest. It was important for the firms to agree on the ways that they would share the knowledge possessed by each other. Nevertheless, it demanded a high level of the trust. Girmscheid and Brockmann (2005, p.78) noted that trust is very important in the joint ventures in team building, conflict resolution, and the performance of the business organization. The sharing of knowledge may cause one firm to lose control and the influence over another (Girmscheid & Brockmann, 2005, p.78). Instead of sharing knowledge, it was found that the firms in a joint venture should make efforts to build the capabilities of the other firm. It was vital that firms willing to share knowledge should not seek to form a joint venture. Where the partners involved want to gain a competitive advantage over one another, it is very risky to share the knowledge. Moreover, some of the knowledge is patented and sharing with a partner would be a disadvantage to the partner giving the knowledge.
It was difficult to agree with the author the issue of the governance of a joint venture would go to an extent where the government would be involved. Hubbard (2013, p.23) stated that the success of a joint venture is greatly dependent on the desire of the partners to collaborate and share information. The joints venture is based on a mutual trust and based on the agreements that were made when the partner made the decision to form the joint venture. The major joints ventures are formed dependent on the agreement made between the participating partners. Therefore, the issue of the control is not based on the government or the equity share. The agreements made by the partners are the vital in making decisions in the control and governance of a joint venture.
Partners have a role in making the decision towards the management and the control of the joint venture. Initially, the partners make agreements on the responsibilities and the how the firm would be managed. The decisions and management responsibilities are distributed based on the trust. Sometimes, the partners share responsibilities based on the expertise, the crucial goal of a joint venture is the success of the business operations. The cooperation instead of the fight for power is significant in the management.
Bibliography
Austin, J. E. 2002. Managing in developing countries: strategic analysis and operating techniques. Simon and Schuster.
Doole, I., & Lowe, R. 2008. International marketing strategy: analysis, development and implementation. London, Cengage Learning.
Eid, R, Elbeltagi, I, & Zairi, M 2006, ‘Making Business-to-Business International Internet Marketing Effective: A Study of Critical Factors Using a Case-Study Approach’, Journal Of International Marketing, 14, 4, pp. 87-109, Business Source Complete, EBSCOhost, viewed 15 November 2015.
Hubbard, N. 2013. Conquering global markets secrets from the world’s most successful multinationals. Houndmills, Basingstoke, Hampshire, Palgrave Macmillan.
Girmscheid, G., & Brockmann, C. 2005. Trust as a success factor in international joint ventures. K. Kähkönen und J. Porkka (Hrsg.): Global Perspectives on Management and
Pakenham, K. J., Mcentire, J., Williams, J., & Cooper, A. 2013. Making connections: skills and strategies for academic reading.
Paliwoda, S. 2012. Perspectives on International Marketing-Re-Issued (RLE International Business) (Vol. 29). Routledge.
Ryan, L. V., Gasparski, W. W., & Enderle, G. (Eds.). 2000. Business students focus on ethics (Vol. 8). Transaction Publishers.
