An expression often used in the international context is ‘going global. This refers to the potential scope for all of the organization's operations to be uniform around the world and its ability to compete on a worldwide basis.
There are two ways that a multinational corporation can direct its offering of products and services. The first of these is by standardization, where a company sees its market as a homogenized, uniform place for trade. It assumes that customer preferences are universal. On the other hand, companies may see a need for customization of goods and services and the adaptation of these according to national or regional preferences. The differences between the two are that the latter is customer driven rather than being product and production efficiency driven.
Companies will expand according to their resource availability and their core competencies. Management commitment and decision-making companies can position themselves as they wish along the value-adding chain. Hence, companies are also capable of organizational learning. That is, as managers gain experience in different types of international operations they can expand their activities according to the extent of that knowledge and experience. Managers don't have a script. Some may rely on facts and evidence. Others rely on intuition and ‘gut feeling’. All managers must make the effort to convert tacit knowledge that is in the heads and experience of their supply-chain participants into explicit recorded data that then can be analysed, debated and then plans decided upon. Chapters by Jones and also by Dawes in this volume debate tacit and explicit knowledge management issues and processes.
One useful device is known as a life cycle. We are familiar with this process from study of such things as marketing. Products are all fully developed in the domestic market and available for sale in that market. As a firm seeks expansion it will exploit that product to enter likely foreign markets. As the product succeeds in the host country markets, competitors will also start production of similar products. As the product matures in global markets, companies tend to seek to reduce costs and start a search procedure to reduce production costs. For example, if labour is a major cost of production a company may seek out lower labour wage countries and transfer production. They also benefit from tax holidays and other incentives when doing so. The key potential drawback is the increased downstream distribution time and the consequent increase in pipeline stock value, which is a risk to profit.
As mentioned above, the choices available for a company to expand its operations internationally will depend on the resources available to it and also its current operating position. These aspects are internal to the company and therefore controllable by the managers. Management should consider the resources and assets that managers currently have available and their effectiveness in acquiring extra resources and assets. These may be generated internally by sales revenue or else be acquired from shareholders and/or lenders, such as banks. Experience in international operations is also a variable asset. Managers acquire experience by actually doing business in foreign markets. However, companies can acquire experience by recruiting appropriately skilled personnel. The former method takes time, while the latter can provide a much quicker access to growth.
External to the company but still manageable are various industry drivers. These industry drivers include issues such as the nature of the market, government regulation, the nature of competition and industry cost structures.
The nature of the market will depend on the host country's level of industrialization. Companies from developed countries are more likely to trade with companies from other industrialized countries. As a result we see the highest levels of international business being conducted between Western Europe, Eastern Asia and North America. These are trading groups of countries that have high per capita income and large levels of disposable income. These markets also are highly sophisticated with very cosmopolitan tastes.
Governments in all countries are the major players in international business, whether they are taking part in business themselves or merely acting as regulators. There is international cooperation between countries under the auspices of organizations such as the WTO. Countries may go into partnership with others such as the European Union (EU) or the North America Free Trade Association (NAFTA). Markets that were once closed or centrally planned are opening up to be more market driven and provide many opportunities for foreign companies.
Putting these two issues together, managers have available to them a number of strategy levers. These include the nature of the product/service offerings. There are many ways in which managers can participate in the market. Managers can also make choices about the location of activities, whether it is production or sales. They also can make a choice about which competitors they choose to compete with and the nature of that competition.
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