Benefits Of Internationalizing Operations: Strategies, Structures And Examples

Organization structure in international business

The term internationalizing denotes the way of increasing the involvement of business in international markets in order to be more competitive and expand their business beyond the domestic territory. One must think globally and has the ability to understand cultures that exists in host country if it plans to serve internationally. The organization should be able to understand and appreciate norms, values, laws, regulations and cultures of other country and then develop the business strategies accordingly. There must be a new concept of innovation, quality and commitment to corporate social responsibility to gain the best business strategies while adopting new cultures and new country (Cavusgil, 2014).

Companies decide to internationalize their operations for several reasons and it should be able to produce many strategies, performance goals and market participation. Even though, a company follows market entry in a standard form, it also aims at following development strategy too. Internalization helps a company to build a strong business in the country market with optimal risk involved (Richard, 2013). There are many advantages when a company internationalize their operations. Some of them are listed below.

• Increase sales: when a company plans to internationalize their operations, it will automatically increase its sales and improve its overall revenue. According to a research, it was said that about 96% of the world’s population do not live inside US and 90% of them do not speak English. So, it can be stated that today customers are found globally and there must be some real potential if a company plans to expand globally. A company must have a unique and innovative product to gain an advantage in the other country and earn business success as well. Let us take an example of a software company. Here if you plan to add on French and German language version in it as a unique feature, it will definitely help you to expand your market value in 200 million which is a huge amount (Ch?apek, 2015).

• Improve profits: The price pressure in the other markets as compared to US market is low because they are not as competitive as US markets. So, if it will help to generate more profits in other markets due to less number of competitors. For example: The price of Jaguar car in California is less than the price of same in England (Queensland, 2017).

• Short term security: The fluctuations in the economy of the US and its market place will least affect the business because when you expand your business globally, the economic condition of the US will not affect your business.

• Long term security: There are huge number of competitors in foreign and domestic market and when it comes to the market like US, it is a mature market with plenty of competitors globally. So, by increasing global marketplace, it will increase the cost savings (Anghel, 2012).

• Increase innovation: If a company plans to extend its customer base internationally, then it must focus on developing a new and innovative products. Uniqueness in product will help the customers to get attracted towards it and motivate them to purchase the products (Chiva, 2014).

• Exclusivity: Advantages of gaining information about the foreign customers, market places and situations which are unknown to others may be beneficial to the company.

• Economies of scale: One of the best way to expand business is exporting its products around the world. It will help companies to gain high scales of economy. A company can earn a differentiating advantage by providing innovativeness in their product and exporting it (Dente, 2013).

• Government incentives: The government of US provides a wealth of help when a company manages to start exporting its business. In more than 100 cities in the US, export help centers are found who provide a resource to the company who plans to export their business. A Small Business Administration i.e. SBA aims at providing Export Working Capital Programs which include the loans guaranteed up to $50,000 to $100,000 which enables exporters to expand their business and grow successfully (Hirst, 2015).

Organization structure is nothing but the arrangement of roles and responsibilities in an organization in a very formal and structured way. Organization structure is a very powerful tool to implement strategy.  There are different types of organization structure i.e. Expo-documents against acceptancert Department, International division structure,  Global Organizational Structures and Expo- documents against acceptancert Department.

Figure: Exports Department

Exports are usually looked by a department of sales and marketing in a company at very early stage when the export sales are very low. When the volume of the exports turnover increases, an individual departments is set and it is set aside from domestic marketing. All the activities are controlled by the home based export departments. The main role of HR department is to plan and recruit staffs for different departments like exports, training and development and compensation. Here, exports department also perform activities like recruiting foreign sales.

 

Figure: International division structure

When a company start operating in foreign, the overseas growth opportunity are created more. A separate international division is implemented which manages to handle all the operations of the company internationally. The head of this division will report directly to the CEO and will coordinate all foreign activities. Functional heads also reports to corporate headquarters. The subsidiary country reports to the international division (Musso, 2014).

Expo-documents against acceptancert Department

Likewise, the HR department aims at coordinating and implementing staffs, providing them training for international assignments.it also aims at interacting with HR divisions of individual subsidiaries.  The international structure aims at managing the attention of the top level management towards international operations by reducing resource duplication. International division also aims at making decisions.

There are several types of organization structure based on many segments. They are global functional divisional structure, global product structure, global geographic structure, global matrix structure and transnational network structure (Johnson, 2016).

 

Figure: Global functional divisional structure

This structure aims at focusing the functional department where they are responsible for the all the activities that take place around the world. For example, operations department controls all the activities related to operations globally. It serves the company throughout the world. This type of structure helps in emphasizing more on the functional expertise and maintaining high level of centralized control.

 

Figure: Global product structure

In this structure, the corporate product division controls all the responsibilities regarding the product growth. Human resource department also manages the product department and ensure that the each product is widely spread in all the locations or not. The head of the product department receives the internal support from all other departments as well like finance, marketing and operations. This structure aims at managing the diversified product line in an effective way. It also focuses on carrying out product modifications because of the changes in the needs of the customers. The products are made unique with updated technologies and innovativeness and are supplied in the market (Lasserre, 2012).

 

Figure: Global geographic structure

Here, the company’s operations are controlled and organized geographically. The company having narrow product lines usually follow such structure. It enables independent heads of the geographical subsidiary to monitor and control on market requirements and evaluate the environmental changes and give a prompt respond (Vitez, 2017). Headquarter is responsible for transferring the excess resources from one country to another if necessary. The HR department helps to achieve company’s mission and goals in all countries by coordinating with its subsidiaries. This structure is useful when there is undiversified product line because subsidiary here don= not cooperate with each other due to nationalistic biasness.

 

Figure: Global matrix structure

Under global matrix structure, CEO controls two main corporate head departments besides other departments like HR, marketing, finance and operations. The two main head are basically categorized under global operations and global products. Global operations departments manages to controls all the activities across the globe and with the support of HR department. Global product department ensure that the product from all the department have reached to the potential market. It helps in improving foreign sales performance by providing new products. It may also create conflict issues because of complex structure i.e. most managers needs to report to more than two bosses (Jaiswal, 2013).

International division structure

 

Figure: Transnational network structure

Such structure enables to link with the subsidiary worldwide which helps to remove the concept of two or three matrix dimensions. Every process here are linked to each other by inert related sub systems. It is designed around nodes which build fully networked multidimensional organizations.

Let us take an example of a very famous company named “Walmart” and know how it became successful across the globe.

Walmart is an American multinational retail corporation that helps to manage the chain of several hypermarkets and grocery stores. It was found in 1962 by Sam Walton and further incorporated in the year 1969 on 31^st October. It started with the simple idea of selling more and charging less by providing discount stores and became successful in the last 50years and very soon it became world’s largest retailer in across the world. They have established 11703 stores operating in 28 countries with 9 different names. Moreover it has 260 million customers in the world. The company operates with different names in different countries like Walmart in the United States and Canada, Walmart de in Mexico, Asda in the United Kingdom, Seiyu Group in japan and best price in India. It has moreover owned operations in Brazil. Argentina and Chile. It has earned the revenue of $485.9 billion in the fiscal year 2017 and ranked itself as a leader around the world (Essay, 2017).   

Walmart is divided into 4major segments i.e. Walmart’s Stores, Sam’s Club, international markets and others. Walmart stores include discount stores, Supercenters, supermarkets, Walmart.com and small format stores and contribute to the sales amounting to 64.3%. Likewise, Sam’s club is a member that perform cash and carry operations with 620 stores and sales amounting to 13.0%. It also serves internationally with the 6148 stores that also include distribution centers and sales amounting to 16.7%. It also serves in other many sectors with the sales amounting to 6.1% (Loganathan, 2013).

 Major reasons to globalize its business (Smith, 2013).

• In order to survive in the market, Walmart needed high level of growth so it decided to enter the international market and globalize its business across the whole world.
• The domestic business was on the saturation stage which created difficulty in the domestic market to survive and grow.
• The growth rate in other developing countries was in double digit as compared to the home country. So, it have an opportunity to market its operations in other markets.
• US only represent 4% of the total world population. So, remaining 96% of the population were still missing to be served.

Route to Globalization

• Mexico

1991: It opened Sam’s club in Mexico with the joint venture with a Mexican retail company named Cifra.

1997: It became successful in acquiring major interest in Cifra by launching Walmart De Mexico.

• Canada

1994: It entered the market of Canada with the purchase of 122 woolco stores.

2013: Later it owned 329 retail units as Walmart Canada.

• China

1996: It opened its first store in Shenzhen.

2007: It purchased an interest of 35% in Trust-Mart.

Global organization structure

United Kingdom

1999: It acquired ASDA and entered the market of UK.

2013: Now, it has 565 total retail units.

• Japan

2002: It acquired 6.1% stake in Seiyu.

2005: It made Seiyu a Walmart Subsidiary.

2008: Later, it became a wholly owned subsidiary.

• Chile

2009: It acquired y servicio D & S SA.

2010: D & S was named as Walmart Chile and it managed to operate 329 stores.

• India

2007: It made an agreement with Bharti enterprises and established a joint venture named Bharti Walmart Private Limited.

• South Africa

2011: It acquired a major stake in Massmart Holdings Limited.

Every company or business plans an entry strategy to enter into a new market and globalize their operations throughout the globe. Similarly, Walmart has also developed some entry strategy by establishing its businesses n other many host countries and became successful. It analyzed its major competitors and focused on the economic development to enter the new country. Later, it made several strategy based on political factors, legal factors and economic factors that will help the business to run and grow smoothly. After that it implemented it strategy by acquiring the other retail outlets and involving in joint ventures and also getting involved in Greenfield operations (King, 2012).

Conclusion

Thus, from the above analysis, it can be concluded that Walmart has adopted a successful marketing strategy to globalize its operations and worked out to be leader in the retail market. It has established its stores across the globe and gained happy customers. It has served the world by providing number of retail stores. It has globalize its business and captured the host country operations. Likewise, globalizing business is nothing but a way to increase the sales revenue of a business by serving in the host country and expanding its major operations to gain higher profits. 

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