Long Term Strategies and Globalization

Long Term Strategies and Globalization

MGT/498

Introduction:

It is essential for leaders to know the Globalization involves in many areas of the home company’s strategic plan, alliances, innovations, and organizational structures. The following are breakdowns of each definition for a company to consider:

Globalization can affect a company’s strategy plan to adjust to the local responsiveness by accounting for local culture and needs, and cost reduction, which comes through standardization either by products or processes known as global integration.

Strategic alliances can facilitate global strategic plan by combining both firms’ resources and capabilities to create new value for the partnerships.

Innovations contribute to long-term strategic growth through incremental innovation by having a minor improvement on the existing products, and the radical innovations of a unique method for value.

Organizational structures for optimal global operations in the home and the oversea offices.

Evaluate the Effects of Globalization

How Strategic Alliances Facilitate Global Strategic Growth

• Opportunities of Globalization – Globalization offers several opportunities for a company. A SWOT analysis can aid in ensuring the opportunity is thoroughly vetted prior to moving forward. Companies of all sizes can benefit from the opportunities of globalization. Although the opportunities may be appealing, identifying potential threats as well as internal weaknesses are needed to ensure the best decision is made.
• Growth – Typically, the reason for international expansion is to grow. Often, the desire for international growth is due to a saturated market in their home country.
  • Efficiencies – It is sometimes advantageous for a firm to expand internationally for efficiency purposes. Some countries offer cheaper resources, such as labor or raw materials. A product’s lifespan is another efficiency to consider when deciding whether globalization is the right choice for an organization. Economies or scale and scope are also efficiencies that can offer an advantage to firms expanding internationally:
  • Managing risks – There are risks involved when a firm does not expand. In the unfortunate event that there is devastation in one country, having a firm in another country can help prevent complete extinction. It may be a natural disaster, societal change, or economic downturn, but whatever the situation, a backup plan will help manage the risk.
  • Knowledge – In general, the knowledge obtained from expanding is another opportunity of globalization. It aids in innovation, cultural adaption, and product knowledge, all of which have a potential for increased sales.
  • Response – The opportunity may be as simple as responding to the needs of customers or competitors. In some situations, a customer may find value in having local resources, especially if there is local competition. Another possibility is that the competition goes global and a firm finds it necessary to expand to remain competitive (Dyer, Godfrey, Bryce, 2016.)
  • Where to Expand – Once a firm evaluates whether global expansion is the right choice, they must then decide where to expand.
  • Possible Risks – Risks of globalization are extensive. A strong understanding of the country in question is crucial to the success of the company. Answering questions such as if the people in the country will buy the product or service? Can they afford it? How are the product distributed? Will the local people work for the firm? These are all essential understandings and possible risks of expansion.
  • Cultural Distance – Cultural distance refers to the how much the cultures of two nations differ. Culture, in general may be religious, ethnic, lingual, trust, gender related, rules, laws, and/or political. Differences between cultures can impact consumer behavior.
  • Administrative Distance – Administrative distance is the amount and the way that the law, politics, and regulatory impact how the two nations do business. It is possible they are similar which makes it easier to do business in both countries. If they are drastically different, it may be challenging to adapt and do well.
  • Geographic Distance – Geographical distance is simply the distance between the two nations. Transportation and communication costs can add up if not researched.
  • Economic Distance – The average income in the nations accounts for the economic distance. Expanding to countries with similar economies is a common strategy (Dyer, Godfrey, Bryce, 2016.)
  • How to compete – A concern for companies trying to expand is how to effectively manage brand. Earning the trust of locals in both the brand and the products is important in a competitive environment. Perception and stereotypes can negatively impact the success of an expanding company. According to Hult (2012), “International competitiveness is a measure of an organization’s advantage (or disadvantage) in marketing its products and/or services in global market” (pg. 195).
  • Local Responsiveness – The strategy for an organization expanding includes making decisions regarding the products, marketing, and how to distribute the products in the environment and culture in which it expands.
  • Standardization – Standardization efforts are also a part of competing internationally. To the extent possible, companies standardize in order to provide transparency and have consistent expectations when purchasing the company’s products or services.
  • Global Integration – Global integration consists of Multi-domestic strategy, Global Strategy, and Arbitrage Strategy. Multi-domestic and global strategies deal significantly with the power struggle between responsiveness of the local market and standardization efforts that reduce costs. Whereas, arbitrage strategy can pertain to either responsiveness or standardization (Dyer, Godfrey, Bryce, 2016.)

  Three Type of Innovation

  • Strategic Alliance-Having the correct strategic alliance can help facilitate global strategic growth by adding more value to the current products and services. It is crucial for companies to earn the trust of their consumers by adding value to their products. By having the correct partnership with expert companies joining together to better current products and services.
  • Tap in to business growth-When two of the best companies join together to better their products they are combining their resources and capabilities to create a better value. They can potentially tap in to the business growth of the company increasing their sales. This can be beneficial for the business because they can partner with successful companies.
    • New geographic markets- Having the correct strategic alliances can help the business partner up with the correct business to venture in new geographic markets. Since most of the business can partner with expert same language business it can be more beneficial for the business. This reduces the amount of time invested in day to day operations. They can hire employees from the new geographic market.
    • Build Strong Alliances- If companies partner up with a strong company that has learned how to master their product they can gain profit by reducing cost. The company may also benefit by creating new sources. It is important for companies to build strong alliances with strong companies.
    • Acquire more business- It is beneficial for the company to acquire more business to increase their sales and grow their business. Having two of the best companies partnering together can help them acquire more business and expand their growth.
    • Increase substantial growth- it is beneficial for companies to work together to better their products to increase substantial growth for their business.
    • Compliment strengths and expertise through strategic alliances- It is important for companies to complement their strengths and expertise through their partnership together. Understanding the strengths of the company to make it better and using the company’s expertise they can better their current products and create new ones.
    • Assess how strategic Alliances can facilitate global strategic growth- One of the best ways to facilitate growth is by building long lasting relationships with their current partners and potential partners. This can help the business be able to grow and expand their business to other markets.
    • Increase substantial sales growth- Partnering with an expert partner can help increase their sales goal and help grow their business. This can lead to an increase in sales growth.
    • Capitalize on consumer demand- For business it is crucial that they focus and capitalize on consumer demand. If they hear to what their consumers want or desire from their product they can increase their sales.
    • Accept new challenges and opportunities- It can be challenging for business to partner with companies to better their products however it can lead to more success for the business. Therefore, it is important that they accept new challenges and new opportunities because it can expand their success.
    • Develop new products- One of the best ways for business to increase growth is by continuing to develop new products and better their current ones. Partnering with an expertise partner can facilitate their strategic growth.

  These are three types of innovations for a company to apply in its strategies to create the business models:

  Long-Term Strategic Growth:

  • Incremental innovation draws on the knowledge base and slowly improves the product or service it offers.
  • A radical innovation draws on a different knowledge base, technologies, or methods to deliver value in a truly unique way. It is a fundamentally different business model than the rivals, the meaning they create, deliver, and capture value through very different resources and capabilities. Many innovation strategies depend on the radical innovations that are reconfiguring the value chain to eliminate activities, low-end disruptive and high-end disruptive innovations to allow mass customization. Also, the Blue Ocean Strategy is to create new markets by targeting non-consumers, and free business models.

  Incremental innovation builds on the existing knowledge base and improves on the product and service it offers. It also called “sustaining” innovations because they sustain the current product offering and revenues for the business.

  Radical innovation can benefit a company strategically, and it’s critical to the important success of increasing the strategic growth. Today’s executives have a better understanding of the relationship between business growth, and innovation that created a widely understood of the lean and mean competitive along with the incremental innovation to keep the competition on the current product markets. However, the radical innovation can change the game to the next level to achieve the firm’s goals and success. Also, radical innovation can break down the low-end and high-end disruptive. It transforms relationships between suppliers and customers, displaces current products and long-term growth, and restructure marketplace economics.

  Disruptive innovation is an innovative strategy which completely changes the market for that product or service. An invention completely changes how the product is made or delivered or changes the product all together. Introduction of a new product is also a possibility with disruptive innovation. These forces competitors to either come up with another radical innovation or to adopt the innovation from its originator. This could also force competitors out of the market completely.

  Organizational Structure

  Selecting an organizational structure that is best suited for an optimal global operation is like picking a new car that meets all your needs. The most basic need is finding something road ready that can successfully take you to point A to point B without any issues. In the world of organizational structures, you want the best chain of command, span of control, and decision-making functionality.

  The most common and functional structures is the functional organizational structure, departmentalizing an organization based on common job functions. For example, marketers, salespeople, customer service reps are grouped together by the areas in which they operate in. This allows for a high degree of specialization for employees and you can easily climb this structure as the organization grows. However, this structure can have some barriers if the organization has a variety of products or target markets.

  Divisional Product based structures are a little different although the structure is similar. Divisional organizational structure is made up of multiple smaller functional structures. For example, each division within the divisional structure can have its own marketing team, sales teams, etc. Everyone division is responsible and dedicated to a particular product line. This organizational structure is ideal for organizations with multiple products and can shorten product development cycle, keeping the competitive advantage at an all time high.

  A matrix organizational structure does not mimic your traditional hierarchical model but is modeled like grid. Employees, who are represented by the green boxes have dual reporting relationships, either reporting up the structure or across the structure. Reporting up the structure represents the strong and direct-reporting relationships, while going across the structure represents secondary relationships. Functional reporting take precedence over product based reporting. Employees are in contact with many segments and a great deal of self management happens between competing bosses. The matrix provides flexibility and a balanced decision-making.

  Conclusion

  In summary, it is essential for a company to assess the opportunity for globalization that can affect the business’ strategic plan. It must identify why, where, how for expanding internationally. Having an analysis by using SWOT to measure the growth, efficiencies, managing risks, knowledge of customers’ response to the products. Also, the firm must know the type of alliances to suite the business and select the right innovations for long-term growth. Lastly, the company develops an organizational structure for optimal global operations.

  Reference

  Al-Ali, K. (2014). Disruptive Innovation – An opportunity for growth Disruptive Innovation–An opportunity for growth. Retrieved from http://blog.hypeinnovation.com/disruptive-innovation-an-opportunity-for-growth

  Dyer, J. H., Godfrey, P., & Bryce, D. (2016). Strategic Management: Concepts and Cases. Retrieved from The University of Phoenix eBook Collection database.

  Hult, G.T. ( 2012 ), ” A focus on international competitiveness “,Journal of the Academy of Marketing Science , Vol. 40 No. 2, pp. 195 – 201 .

  Radical Innovation: How Mature Companies Can Outsmart Upstarts. (2000). Retrieved from http://hbswk.hbs.edu/archive/1764.html