Global Business Expansion: Major Barriers to Consider for New Market Entry
Going worldwide has ended up a common phenomenon within the current commercial enterprise and competitive world. Corporations make the most numerous global markets primarily based on specific motives. The main reason, however, is to diversify the marketplace and additionally increase profitability by way of covering a greater market pool. international markets are quickly evolving, and organizations very often locate it challenging to preserve up with their strategies. Therefore it's realistic to infer that the worldwide systems of many groups will incorporate a university of state enterprise operations that at any given time undertake wonderful desires. This, in turn, shows that for the distinctive economies, maximum businesses could embody separate get entry techniques. most normally, nevertheless, is the advent of a prototype for corporations that is practiced in definitely each industry. It generally starts with entering the marketplace through an indirect delivery platform, normally a self-sufficient local provider or distributor. The worldwide marketplace additionally poses diverse limitations and blessings which require careful analysis earlier than making the very last choice to move global. It is also essential to observe that businesses use multiple techniques to pursue global operations including mergers, acquisitions, partnerships, franchising, among others.
For a USA based organization, however the decision to go into the global market is guided by different factors, all inside the political, economic, social, and technological environments. There are also some internal and external factors as well that can be come into the way of the expansion plan of any business. Most importantly, when a business leader initiate to bring people or resources on the same board from different culture and race that affects both internally and externally.
Major Barriers and Considerations
As a US based enterprise trying to put money into a global marketplace, it's crucial to recognize where it wants to be and what is going to prevent it from being successful there.
To outline limitations to entry: “obstacles are barriers stopping entrant corporations from being hooked up in a selected market” (Pehrsson 64). Some not unusual examples which could easily end up barriers to access are: price lists, access time, authorities policy, access and exit charges, competition, infrastructure, and many others. Depending on the focused United States, those elements come to be greater or less relevant depending on the strategy of the business.
First, the current trend of more companies going global has attracted a lot of political matters that need to consider. The political / legal situation abroad is very different from the United States. Most countries aspire to independence and elevate themselves in the eyes of the world. The spirit of nationalism in many lands has led them to engage in practices that have been extremely damaging to foreign advertising organizations.
- Stability in national politics: Business activities tends to grow and prosper when the nation is politically stable. When a nation is not politically stable, international firms can still run a profitable business. Their tactics will be affected however. Many firms may prefer to engage in the export business rather than invest heavily in foreign investment.
- Monetary Circumstances: The exchange rate of a single national currency represents the value of that currency in relation to that of another country. Governments set independent exchange rates on supply and demand. The power of supply and demand puts others. If the exchange rate is low compared to other countries, the buyers of that country must pay higher prices for imported goods.
- Trade blocs and contracts: US companies generate one-third of their revenue from overseas products, such as Asia and Latin America. The North American Free Trade Agreement (NAFTA) promotes export marketing by enabling companies to sell goods at lower prices due to reduced prices.
- Taxes: Many countries encourage free trade by inviting firms to invest and do business while encouraging local firms to engage in overseas business. These nations do not usually try to control the importation or discrimination of foreign firms. There are, however, some governments that openly oppose free trade. For example, many Communist countries want satisfaction. Therefore, they forbade trade with non-Communist countries. But these limits vary with East-West relations.
Secondly, the technological environment is another vital factor for the global movement of a business. You cannot expect the same level of technical efficiency to other countries. Even, the changing nature of barriers to entry into the field of dynamic technology can provide many lessons in teaching and serving managers. The level of technological development of the nation affects the attractiveness of doing business there, as well as the type of jobs that are possible. Consider some of the following technical problems that firms may encounter in doing business overseas:
- Foreign workers must be trained to use unusual equipment.
- Negative transportation systems increase the cost of production and physical distribution.
- Repair standards vary from nation to nation.
- Lack of data processing equipment makes the planning, implementation, and management of marketing strategies very difficult.
- Transportation and communication is not the same in every country.
Thirdly, economic situation which is represents its current capacity and ability to produce goods and services. The key to understanding market opportunities lies in the assessment of the country's economic growth phase. The way to divide the economic growth of countries is to divide them into three groups:
a. Industrialized
b. Developing
c. less developed countries.
Often, the most important marketing opportunities exist among developed countries, as they have high levels of income, which is one of the essential ingredients of market building. However, most developed countries have stable human settlements, and the full market for many products is already in place. Developing nations, on the other hand, have a growing human population, and although they are currently importing limited goods and services, the potential for long-term growth in these nations exists. Dependent communities are looking for products that meet basic needs - food, clothing, housing, medical care and education. Advertisers in such countries should be educators, emphasizing knowledge in their marketing programs. As the rate of economic development grows, so does the seriousness of the marketing effort focused on countries.
After that we need to consider the social/cultural environment of the market we target for as a leader of the business. The cultural environment contains the influence of religious, family, educational and social programs on the marketing system. Retailers who intend to market their products overseas can be more sensitive to overseas cultures. While the differences between our cultural background in the United States and those of foreign nations may seem small, marketers who ignore these differences risk failing to make use of marketing programs. Failure to address cultural differences is one of the main reasons for the failure of overseas marketing. These include:
- Language: The importance of linguistic diversity cannot be overemphasized, as there are about 3,000 languages in the world. Language differences cause many problems for advertisers to create advertising campaigns and product labels. Language problems only get worse when people around the world speak several languages. For example, in Canada, labels must be in English and French. India has over 200 different languages, and a similar situation exists in China.
- Colors: Colors also have different meanings in different cultures. In Egypt, for example, the green color of the land is considered unacceptable, because religious leaders once wore it. In Japan, black and white are the colors of mourning and should not be used on the product package. Similarly, purple is not acceptable in Spain because it is associated with death.
- Customs and tabs: Every culture has its own unique sets and customs. It is important for advertisers to learn about these customs and tabs so that they know what is acceptable and what is not appropriate for their marketing plans.
- Prices: A person’s values come from his or her moral or religious beliefs and are learned through experience. For example, in America we place the highest value on material welfare, and we have more opportunities to buy status symbols than the people of India. Similarly, in India, the Hindu religion prohibits the consumption of beef, and fast-food restaurants such as McDonald's and Burger King will experience considerable difficulty without product modification. Americans spend a lot of money using soap, beverage, and mouthwash because of the value placed on personal hygiene.
- Time: Americans seem to be more enthusiastic about time compared to other cultures. Timing and timing are the norm for business in the US. However, retailers who set up direct appointments for telecommunications in the Middle East and Latin America will have more time on their hands, as businessmen from both cultures are much less frequent. For many of these traditions, setting a deadline such as “I need to know next week” is considered oppressive and disrespectful.
Moreover, Business practices vary from country to country. Here are a few examples of foreign business behavior that differs from US business behavior:
- In France, major retailers are reluctant to advertise their products. They have a strong desire to provide retailers with the products they need.
- In Russia, plans of any kind should be approved by a string of seemingly endless committees. As a result, business negotiations can take years.
- South Americans like to talk about business “nose”. This desire for physical intimacy is pushing American businessmen away from the ever-moving South American people.
- In Japan, business people are already familiar with the peace process.
Summary - Discussion and Justification
Entering into the international market is not similar to doing so in the domestic market, because the firm seeks to capitalize on the investment by investing in that market. Often local firms will adopt simulation techniques, sometimes successful. When they succeed, their country's economy is gaining momentum. If they do not succeed, the international company often buys them.
Depending on the various economic, political, social and environmental forces that influence an organization’s ability to compete in the global platform, the following points need to keep in the task list for a successful global business move.
- Company should plan for the expansion to get more sales and increasing market shares.
- Companies should target to be the business leader in that particular sector.
- The company may choose enter into International market in order diversify a company's product line and to minimize the risk factors.
- Markets and investments would be protected by other investors once they enter into international market and get engaged in an international business.
- Controlling the expenses should be in active task list which is again one of the most important reasons to move global for a US based company. Company would buy the resources gain cost advantage.
- A business definitely should proactively consider about the movement of competitors; to get protected from their competitors or gain added advantage over them.
Many American firms have found that there are many opportunities for international trade, as evidenced by the large number of goods shipped to US firms. Once a company has decided to enter a foreign market, it must decide which is the best way to enter that market. The firm has different options for entering foreign markets, the choice of which depends largely on the level of control that firms wish to maintain over its marketing strategy. When a company decides to market its products globally, it must decide whether to modify its local marketing program. Some firms prefer to customize their market plans, adjusting their marketing mix to meet the needs of each target market. Others use standard marketing combinations. In deciding whether to customize, there are a wide variety of opportunities to change product, pricing, promotion and distribution strategies. A leader just have to pick the way out !
By Md Rafiuddin Haque, University of North Alabama
References/Sources:
Picture Taken/www.tradeready.ca
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