Due to progress in communication, transformation and technologies which have performed in development of world’s economy, people from different nations, cultures, languages and backgrounds are now communicating, meeting and doing business with each other more than ever. As there is increase in business activities between people from different nations, cultures, languages and backgrounds, companies who are operating internationally or which are going to be a global they have to concentrate on many factors to be a successful in international market. One of the significant factors among them is a culture. For the success of any business in variety of countries or regions it requires to have understanding of how cultural differences across and within nations can affect the way business is practiced. The main determinants of culture are religion, political philosophy, economical philosophy, education, language, social structure etc. Businesses have to understand and match with all this cultural determinants, as Continue reading
International Business Basics
Motives for Firms Engagement in Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI) is a popular investment option adopted by firms in the contemporary business environment. This form of investment stream occurs when a firm decides to assume partial ownership of either a company stock or physical assets in a foreign country. Besides, this business manoeuvre enables a firm undertaking FDI to gain a significant measure of controlling its management systems and structures. Although portfolio management and FDI are close and interrelated terms, they are quite distinct in the sense that the former does not permit any tangible degree of securing company control. On an international scale, the inflow in FDI is often considered to start from ten percent of ownership of stocks or assets of a foreign company. In order to accomplish FDI projects, special arrangements such as mergers and acquisitions have to be effected. Alternatively, international franchising can also be used as a channel of attaining the Continue reading
International Marketing Communication – Key Issues and Challenges
When first starting-up an organization, launching a new product or service or simply reminding customers that the organization exists, firms need to educate consumers. This education comes in the form of marketing communication, which is otherwise known as promotion. Promotion is an organization’s articulation of messages it wants to send to target audiences to achieve business objectives. The promotion mix or integrated marketing communications (IMC) consists of advertising, sales promotion, trade shows, personal selling, direct selling and public relations. Without doubt, investment in one or more of these methods of communication will increase the firm’s costs, and for this investment to be a profitable one, the marketer must know the purpose of promotion. The Chartered Institute of Marketing claims that “the purpose of any form of marketing communication is to provide a set of information to your target audience in a way that encourages a positive, or buying, response. The Continue reading
Foreign Market Entry Modes – Five Modes of Foreign Market Entry
Changes in the internal and external business environment have meant that more and more firms are expanding their operations across country borders. External factors such as: the removal of trade barriers, free trade agreements between countries, and an emerging middle class has made the idea of going global more attractive to organisations across the world. Internal factors such as: increasing profits, increasing market share and becoming a global brand are more drivers for organisations to globalize. Whilst there are a lot of drivers of internationalization, and hence potential advantages to internationalize. Types of Foreign Market Entry Modes An organisation has a number of different entry modes to choose from when it internationalizes its operations. All organisations will have different reasons for going global, which will have an influence on which entry mode is best suited to them. An organisation will need to determine their desired level of commitment, flexibility, control, Continue reading
Sources of Attaining Competitive Advantage by a Business Firm
When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. Competitive advantages are capabilities that are difficult to replicate or imitate and are non-tradable. Pitts and Snow define a competitive advantage as “any feature of a business firm that enables it to earn a high return on investment despite counter pressure from competitors.” A competitive advantage exists when the firm is able to deliver the same benefits as the competitors are but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). Thus, a competitive advantage enables a firm to create superior value for its customers and superior Continue reading
Target Markets in a Global Environment
The starting point in selecting the most effective channel arrangement is a clear determination of the target market for the company’s marketing effort and a determination of the needs and preferences of the target market. Where are the potential customers located? What are their information requirements? What are their preferences for service? How sensitive are they to price? These are some of the questions that the channel manager should answer. Customer preference must be carefully determined because there is as much danger to the success of a marketing program in creating too much utility as there is in creating too little. Moreover, each market must be analysed to determine the cost of providing channel services. What is appropriate in one country may not be effective in another. Channel strategy in a global marketing program must fit the company’s competitive position and overall marketing objectives in each national market. If a Continue reading