Reasons for Choosing Internationalization Strategy
Firms choose in pursuing internationalization strategy due to various reasons. Some of the reasons for internationalization strategy includes a bigger access to the market, economies of scale with additional opportunities of learning and strategic and the lower cost advantages of location such as energy and labor (Onkelinx, Manolova and Edelman 2016).
- Presence of Market Opportunities: This can be classified as a reactive motivation since a certain foreign market represents part of the emerging economies and thus represents a stronger potential. For example, Sony selling consumer electronic goods across international markets.
- Diversification of Risks: This factor of motivation can again be classified as strategic motivation as it refers to the willingness towards diversification of the firm’s risk. This makes the firms more immune to the changing trends of consumption across each market. For example, IDE Technologies refers to the firm operating in countries like Switzerland and South Africa for maintaining consistent level of revenue.
- Competitive Strike: It represents a strategic motivation for attacking the foreign competitors. Firms can either directly enter the home market of the competitor for increasing the competition while reducing the market share of the competitor. For example, to combat the dangers of competitive forces Caterpillar decided to capture the Japanese market through formation of joint venture with the Mitsubishi.
- Economies of Scale: This can be classified as reactive motivation. This allows the firm to economize not only the distribution but the transportation network. For example, Apple started manufacturing iPhone across China for taking advantage of lower cost for production and flexibility.
- Seeking of Profits: This can be classified as a proactive motivation as entering market with lower level of prices in comparison to the competitors grants competitive edge. For instance, Google going international. In case it did not go abroad then it would have a potential loss of profit against its competitors.
Contract laws can represent the country risk arising from the legal environment of the host country since it impacts the sale of the goods and services, intermediary agreements, franchising and licensing, foreign direct investment and the joint ventures.
The three approaches that firms can employ for setting the international contractual disputes are as follows:
- Mediation: The focus of mediation is to bring in a professional mediator for aiding the disputants in coming to a consensus. Mediation can be quite effective in enabling the parties to vent the feelings and totally explore the grievances (Faulkes 2018). Mediators also aids in hammering out the solution that is voluntary, sustainable and non-binding.
- Arbitration: Here neutral third party serves as the judge who seems to be responsible for resolving the dispute. The disputants also have the option to virtually negotiate any aspect of the process of arbitration where lawyers seem to represent the time and the standards when standard evidence are used (Abwunza, Peter and Muigua 2019). Arbitrator hand down the decisions which are usually confidential and does not seem to be appealed.
- Litigation: This is considered one of the most familiar types of the dispute resolution. Civil litigation seems to involve a defendant facing off against plaintiff in front of a judge or a judge or jury (Ross 2017). The judge or the jury holds the responsibility for weighing the evidence and making the rule. The information that is being conveyed in the trials and the hearings generally enter and stays on public record. Lawyers seem to dominate the litigation that often end in settlement agreement during pretrial period of preparation and discovery.
It is critical for a firm to select most appropriate market for the product or the service during the primary stage of the internationalization since it aids in the evaluation of the market potential with regard to the revenues generated, understand the access to the market with regard to the host country being warm to the investments by the multinational firms, potential for the competition and the dynamics of industry across the prospective market. This also allows in judging the profit and the revenue potential of the market based on level of initial investment necessary for the establishment of operations, gestation period, industry structure and degree of the obstacles which the concerned firm might face in terms of competition (Eriksson et al. 2015)
The negative consequences of making poor selection for the firms planning to globalize through the FDI can be loss of profit, demerited goods and services made available to customers and the increase in price due to the fall in the demand. It leads to an unfavorable climate of investment which takes away the confidence from the business in raising the productivity as well as improving the efficiency for increasing the revenues earned and the capital that is available for the investment (Verbeke, Coeurderoy and Matt 2018). It also prevents the investors with the market confidence thereby persuading them in investing more capital. Depending on state of economy, firms seem to evaluate the opportunities for investment while relating them to the governmental policies for ascertaining the economic conditions impacting financial market. A poorer climate for the investment shall reflect higher rate of crime, a non-skilled labor force and higher corporate taxes. A lack of confidence will persist which will make the firms reluctant to invest. This leads to uncertainty within the economy.
Nicaraguan market happens to be amongst one of the second poorest market across the Western Hemisphere with a GDP of close to $1900 (trade.gov 2021). The market economy of Nicaragua suffers from the ongoing economic and the political crisis. The authoritarian and the undemocratic action of the regime has undermined the credibility of the nation in terms of purchasing power of the consumer and the lowering of the investor confidence.
For a European Multinational Enterprise to achieve success across the Nicaraguan market, a learning organization may be vital since they constantly learn from every possible thing they seem to do (Örtenblad 2018). They seem to use own experience along with those of the others for improving performance. They have been found to learn from the success and the failure. Constant learning seems to be built systematically into the infrastructure and DNA of the organization. The value created by constant learning seems to be driven, modelled and espoused by CEO as well as the senior management. Learning organization allows open as well as widespread communication and include people at every level in most of the communications (Kanten, Kanten and Gurlek 2015). Further, the senior leaders also seem to demonstrate constant learning through communication, people seem to be rewarded with growth of job, promotions, recognition and financial compensation
Setting International Contractual Disputes
The three strategic objectives for creation of competitive advantage in the international business as proposed by Bartlett and Ghoshal are as follows (Bartlett and Ghoshal 2017):
Efficiency: The firm should build effective international supply chain. Efficiency indicates to the lowering of cost for the activities and the operations of the firm on global scale. MNE’s having multiple value chain across the world should pay attention on how they should organize the manufacturing, supply chain, research and development, marketing, product and the activities of the customer service (Holm, Holmström and Sharma 2015). For example, automotive firms like Toyota strives for achieving scale economies through concentrating on the sourcing and the manufacturing activities within limited locations across the world.
Learning: The firm should create the ability of learning from the international exposure and exploit the learning on the worldwide basis. The diversity of the ambience puts present internationalizing firm with unique opportunities of learning (Kotabe and Kothari 2016). Although the firm goes abroad in exploiting the unique advantages like brand name, technology or the capabilities of the management, managers seem to add to the capabilities through internationalizing the new knowledge gained from the international exposure. Therefore, the organization is able to gain new managerial and the technical know-how, ideas for new product, research and development capabilities, skills of partnering and the survival capabilities within the unfamiliar environment. For example, the research center of the Procter & Gamble in Brussels has developed specialized capability in technology of water softening, particularly since water across Europe contains more minerals in comparison to United States.
Flexibility: The firm should develop flexibility on a worldwide scale for managing the country specific diverse opportunities and risk. The volatility and the diversity of international environment acts as special challenge for the managers (Grøgaard, Colman and Stensaker 2019). Thus, the ability of the firm in tapping the local resources and exploiting the local opportunities becomes critical. For instance, managers seem to opt for the contractual relationships with the independent distributors and the suppliers in a single country while involving in direct investment with the other.
The comparison and contrast between the six styles of management styles are as follows:
It aids in clarifying the identity of the group for creating a safer workplace (Mazzetti et al. 2019)
It helps in creating third space where two or more group seem to engage on the neutral ground (van Meerkerk and Edelenbos 2018)
It helps in promoting interdependence as well as creative thinking within the shared space (Ott and Eisenhardt, 2020)
It aids in observing across the boundaries and creating of space for the others (Peterson, DeCato and Kolb 2015).
It aids in moving separate groups within the new shared space of boundary (Fischer et al.2016)
It aids in reimaging present realities and the future possibilities within the shared space (Hafey 2017).
When it comes to context, this style is applicable in alleviating conflict within through elevating the boundaries between the groups whether there is detraction of competing agendas.
Evaluation of Market Potential
It also helps in defining boundaries for a group after merger or rationalization or whether the security or the identity seems to feel threatened 2. a. When it comes to context, this stye breaks down the disciplinary or functional silos and builds closer relationship with the stakeholders
It seeks to flatten the internal hierarchies or recombine into the matrix structure for a specific activity of task and finish. 2. a. As far as context is concerned, this management style seeks towards developing and pursuing ‘way finding’ strategic change project involving the internalized reconfiguration or the significant level of external partnership.
It also helps in the development of the activities of joint venture for delivering specific goals 2. a. When it comes to context, this management style is applicable where groups on the either side of the boundary requires mutual respect
The style is also applicable in seeking towards understanding the needs of the different groups of stakeholders along with development of an encompassing mind-set 2.a. When it comes to the context, this management style helps in reframing newer community sense following integration or merger through creation of inclusive organization for the diverse groups.
It also reflects the need in finding ways towards engaging the disparate group and building the community for collectively problem solving or achieving of goal. 2. a. As far as context is concerned, this management style aids in reframing the collective identity or the open perspectives towards significant medium to the longer-term opportunity, change and discovery
- When it comes to tactics, it helps in discussing and defining shared value
- Helps in clarifying the roles and the responsibilities
- Establish the engagement rules with the other groups
- It also helps in establishing sense of community practice based on the knowledge and expertise 3.a. As far as tactics are concerned, it helps in establishing and identifying the third spaces.
- It also helps in establishing buddying mentoring or arrangements for the cross group partnering
- Creation of diary space for the relationship building of cross-group
- Usage of social media space for the sharing of the profiling information
- Establishment of a repertoire of the knowledge sharing of the cross group or the social activity. 3. a. As far as tactics are concerned, this management style, enables in joining with the group from different sector for tackling shared problem
- Promotion of open-table activity enabling volunteering for the multi-lateral activity or conversation under shared goal
- Establishment of flexible, innovative and secondment arrangements supporting particular task
- Promoting and supporting the lower risk collaboration
- Establishment of joint evaluation and review mechanisms 3. a. As far as tactics are concerned, it helps in establishing shared for reflecting on the other perspectives of the group.
- It also involves extending invitations to the others either horizontally or vertically for attending meetings or socializing
- It also allows periods of shadowing as well as role swapping along with subsequent level of opportunities for reflection and review.
- It also enables decoding and the translation of the group process and jargon for the others
- It also aids in sharing the experiences of the outside group with the other members of the group for further understanding of the group culture of the others. 3.a. When it comes to tactics, it helps in the identification of the core values
- It also enables the establishment of a unifying cross-group branding as well as identity
- It also involved establishment of a narrative or a storyline for clarifying cross group identity or objectives
- It also involves the identification of the achievable objective or the strategic outcome for creation of a common success
- It also involves launching cross group sub-team or the venture team for achieving a specific deliverable 3. a. As far as the tactics are concerned, the style seems to focus on the creation of the cross-functional teams for navigating the strategic change or establishing the alternative future.
- Question and the target removal of the legacy boundaries
- It also enables exploration of the new collaboration with the former competitors.
- Allows in attending and supporting the events outside the sectors
- Involves sending mixed teams of the leaders in exploring the opportunities within newer fields of the activity.
- As far as the outcomes are concerned, this management style helps in developing psychological security when the intergroup boundaries seem to be maintained and defined. 4. As far as the outcomes are concerned, it helps in building intergroup trust. Suspending of boundaries enables newer relationship to be built on mutual integrity and confidence 4. When it comes to outcome, it allows intergroup interdependence where intergroup boundaries seem to be woven into bigger whole reflecting mutual interdependence. 4. When it comes to the outcome, this style allows in maintaining intergroup respect through understanding the similarities and the difference along with development of awareness and positive regard for the others. 4. When it comes to the context, the style allows development of intergroup community. Groups seem to set aside the differences of working towards the achievement of a higher shared purpose. 4. As far as outcomes are concerned, it allows in the formation of the intergroup community where the groups seem to set aside the differences in working towards the achievement of a higher shared purpose.
The Dutch corporation that has been relocated to South Korea and which has been seeking the benefit from the pool of the young engineers of the food production for expansion and enhancing the innovation of the company depending on the new initiative through the exploration of new products belonging to next generation, can have a combination of management styles of weaving and transforming. This combination of the management would be most effective since the Dutch company looks forward to discovering new frontiers. The weaving style of management shall promote interdependence as well as creative thinking while the transforming management style shall aid in reimagining the future and the present possibilities within shared space.
- More trade for the European Firms: The various trade agreements negotiated by EU makes it a good region for doing business.
- Creation of Job Opportunities: Globalization will also help in creating job opportunities
- Advantages for the Consumers: The bigger benefits of the globalization as well as trade to consumers comes from the imports.
- Worldwide flow of investment: Globalization triggers the inflow of investment.
- Exchange of Knowledge: This is the process that brings together the academic staffs, the users of the research, wider group as well as communities for increasing the impact of the research.
- Faster Economic Growth: This involves increase in the capital goods, technology, labor force and the human capital.
Purpose marketing refers to the strategy used by the organization in centering the external efforts of communication around the social cause which seem to align with the core values (Reichertz 2019). The new guideline of purpose marketing can be used for redistribution of wealth and value over dozen countries around the world where Multinational Enterprise remains active in sales, production and logistics through cultivating deeper relationships and staying relevant through knowing that the customers can act as the powerful brand champions. Through valuing transparency and authenticity, it also portrays to the customer that there is a purpose and it is considered bigger than simply turning into profit.
The explanation of how the FMCG Multinational Enterprise can organize itself in creating more distribution of wealth and value over countries where it is active can be done through the value chain model. This will involve the analysis of primary and secondary activities of the value chain. The primarily activities will include consideration of:
- Inbound logistics: This will involve focusing on each aspect of transformation from raw materials to the finished product. This might include retrieval of raw material, storage of the inputs, internal distribution of raw materials and the components of beginning production.
- Operations: These will involve activities such as packing, machining, testing and assembling
- Outbound Logistics: This will include activities for delivering products to customer by passing through the varied intermediaries.
- Sales and Marketing: This will include advertising, promotional activities, channel selection, pricing, quoting, relation building and channel the members.
- Services: This will involve the pre and the post-sale that will be undertaken by the FMCG company.
- Infrastructure of the Firm: Effective management of infrastructure can allow the FMCG company in optimizing the value of the entire supply chain
- Development of Human Resource: Effective management of HR will allow the FMCG firm in reducing the competitive pressure depending on the skills, motivation and commitment of the workers
- Development of Technology: This involves the integration of technology in the distribution, production, marketing and the activities of the human resource.
- Procurement: This indicates the process that is being involved in the purchase of the inputs from raw material, equipment, machinery and supplies.
Negative Consequences of Poor Selection
The creation of a more equal distribution of the wealth and value over countries by the FMCG multinational enterprise can be explained with the help of Osterwalder’s business model. This will include consideration of:
- Key Partners: This refers to the relationship which the FMCG will share will the other businesses.
- Key Activities: This indicates the key things which the business needs to do in order to run.
- Value Proposition: It refers to the value that a firm promise to deliver to the customers for buying the products
- Customer Relationship: This refers to the process used by the FMCG business in engaging the customers
- Customer Segment: This represents the community of the customers or the business which the FMCG enterprise targets at selling its products.
- Key Resources: This represents the money, raw materials and the employees
- Channels: This indicates direct stores, online stores or the catalogue promotion
- Cost Structure: This indicates the different types of cost like the fixed and the variable cost.
- Revenue Streams: This refers to the various sources from which the business is able to earn money.
The chosen African country is Nigeria. The MNE should secure the legal ownership in Nigeria through legal compliance which represents a means by which a specific business seems to comply with the geographical location. Laws seem to regulate business environment as the means for the state for ensuring level playing ground for all individuals who seeks towards doing business within the state. Laws also helps in ensuring certain guarantees within the state that makes the possible since there exists a predictable element. The legal requirements also aid in keeping the business activity in check for ensuring that stakeholders shall have required assurances for investing in state. For example, some of the relevant laws regulating the corporate business across Nigeria are The Companies and the Allied Matters Act CAP C20, Laws of Federation of Nigeria (LFN) 2004, The National Office of the Technology Acquisition and Promotion Act CAP N62 (thomsonreuters.com 2021).
To establish itself as independent and local firm in Nigeria, the MNE should register itself. The documents required for registering a company would be the Memorandum and Articles of Association (MAA), payment receipt of the stamp duties, consent from the key directors of the firm, statement of compliance by the legal practitioner. The key requirements for company registration would comprise of minimum 2 to close to 50 members where members have an age above 18 years old. For example, the company cannot be registered if it has members of unsound mind or it is disqualified by The Company and Allied Matters Act (CAMA) or it is bankrupt. Besides, the MNE should have a minimum limit of share capital of around NGN 10,000 to get registered in Nigeria.
The MNE can legally secure integrity and transparency regarding the investments and payments through consultation with the Convention on Business Integrity (CBi) which aids business actors across Nigeria in actively engaging against any kind of corruption that consequently helps in generating greater inflow of investment. For examples, CBi had been established for promoting ethical practices, transparency, integrity and a fair competition across business (cbinigeria.com 2021)
The MNE can abide by local tax laws through following the clauses mentioned in the Financing Act which is amended in the year 31 December 2020. For example, the Act amends various tax and fiscal legislation including the Capital Gains Act, CAMA 2020 and the Companies’ Act related to income tax. There are certain provisions put across by the Finance Act. Some of the key amendments include:
- Donations put across by the corporate entities to the funds established by government in event of pandemic or the health crisis shall be regarded as the allowable deductions for the tax purpose.
- Minimum rate of tax for the companies with respect to the returns for period between the January 1, 2020 and December 2021 shall be reduced from around 0.5 percent to about 0.25 percent of the gross turnover which is lesser than the franked investment income.
- The obligation of the non-resident firms liable for paying tax to filing of the tax returns with Federal Inland Revenue Service (FIRS) do not apply to the non-resident firms whose ultimate tax liability across Nigeria lay in withholding the tax.
- Dividends of the public listed firms on Nigerian Stock Exchange which remains unclaimed for a minimum of six years should get transferred to newer funds known as Unclaimed Funds Trust.
- Amounts that remain dormant in the bank account which remained unutilized for a minimum six years must get transferred to the trust related to Unclaimed Funds.
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