Required Readings From The UMUC Library Note: You Must Searc

Required Readingsfrom The Umuc Library Note You Must Search For Th

Required Readings: From the UMUC library: (Note: You must search for these articles in the UMUC library. In the case of video links in the UMUC library, exact directions are given on how to find the video.) · Connaughton, S. A. (2015). Strategic management in a sustainable society. Research Starters: Business (Online Edition).

From other webpages: · McNamara, C. (n.d.). Business ethics and social responsibility. Free Management Library. Retrieved from · Social responsibility. (n.d.). Investopedia. Retrieved from · Stakeholder theory. (n.d.). Business dictionary. Retrieved from · Triple bottom line. (n.d.). Investopedia. Retrieved from Supplementary Materials: · Ethical issues at an organizational level. (2016, May 26). Retrieved from · Social responsibility audits. (2012). In Ethics in business. Retrieved from responsibility/ · Waddock, S. (2008). Ethical role of the manager. In R. W. Kolb (Ed.), Encyclopedia of business ethics and society (Vol. 5, pp. ). Thousand Oaks, CA: SAGE Publications Ltd. doi: 10.4135/.n303. Retrieved from MGMT 670: Week 8 Lecture Week 8: International Business: This week, the students will study international business. Why does a company decide to compete internationally? How does the business’ global strategy affect the company? They will learn how businesses enter foreign markets and use international operations to improve overall competitiveness. Learning Objectives: Understand why companies choose to compete internationally. Understand the five general modes of entry into foreign markets. Analyze why and how differing market conditions across countries influence a company’s strategy choices. Understand how multinational companies are able to use international operations to improve overall competitiveness. Introduction Every company has to decide whether to compete internationally as part of its strategic plan. If a company does decide to expand internationally, it then has to decide how to compete. Why do companies decide to expand internationally? “Some of the reasons include 1) faster growth, access to cheaper inputs (raw materials and labor), 3) new market opportunities from a vastly bigger customer base, and 4) diversification—less vulnerability to changes or events in specific regions when the company is dealing with a number of regions of the world†(Conner, 2012). Many companies decide to expand for economies of scale, “reduction in unit costs associated with producing large volumes of a product†(Moskowitz, 2009). There are some potential risks to global expansion: “1) increased costs, 2) the need to meet Foreign regulations and standards, 3) cash flow woes due to delayed methods of payment and 4) operational complexity, and 5) failure to understand local business norms and customs†(Conner, 2012).

Ways to Expand There are five ways companies enter international markets: Source: Carpenter & Dunung, 2012b. Exporting Exporting is the “sale of products and services in foreign countries that are sourced from the home country†(Carpenter & Dunung, 2012b). Using domestic plants as a production base for exporting goods to foreign markets is an excellent initial strategy to test the international waters. The amount of capital is usually minimal, and existing production may be sufficient to make goods for export. A manufacturer’s can limit its involvement in foreign markets by contracting with foreign wholesalers experienced in importing. An export strategy is not the best choice when (1) manufacturing costs in the home country are substantially higher, (2) the costs of shipping goods overseas is high, or (3) adverse shifts in currency rates occur. Licensing Licensing is “granting of permission by the licenser to the licensee to use intellectual property rights, such as trademarks, patents, brand names, or technology, under defined conditions†(Carpenter & Dunung, 2012a). Licensing is an effective strategy when the firm has valuable technical know-how or a patent but does not have the organizational capability or resources to enter a foreign market. Licensing can also be a good choice in markets that are unfamiliar, politically volatile, economically unstable, or otherwise risky. The big disadvantage of licensing is providing technological know-how to foreign companies and losing some control over its use. In addition, monitoring licensees and safeguarding the company’s intellectual property can prove time-consuming and difficult. Franchising Franchising is when a “multinational firm grants rights on its intangible property, like technology or a brand name, to a foreign company for a specified period of time and receives a royalty in return.†(Carpenter & Dunung, 2012a). Franchising is often best for service and retail businesses. Franchising has many of the same benefits as licensing. The franchisee bears the costs of establishing a foreign location; the franchisor is responsible for recruiting, training, supporting, and monitoring the franchise. A big challenge with franchising is maintaining quality control, especially when the local culture does not stress quality or when local sources do not meet quality standards. An opportunity or challenge can be whether to allow franchisees to modify the product to better serve the local population. Partnering, Joint Ventures, and Strategic Alliance Partnering, joint ventures, and strategic alliances are cooperative agreements with foreign companies to gain mutual benefit (Carpenter & Dunung, 2012b). Companies in industrialized nations have long partnered to have their products imported and sold by companies in emerging nations. In addition to gaining access to new markets, such cooperative arrangements have been made to take advantage of economies of scale in production and marketing. By partnering with another firm, companies can realize cost savings that they can’t achieve with their own small volumes. Other motivations include to gain access to expertise or knowledge of local markets to share distribution facilities or dealer networks to work together to outsell rivals, instead of spending energy competing against one another to establish working relationships with key officials in the host country’s government to gain agreement on technical standards. Partnering, joint ventures, and strategic alliances allow each company to maintain its independence and save capital (that would be spent in an acquisition or merger). These sorts also are easier to disengage from once their purpose has been served. Potential pitfalls of these sorts of arrangements include overcoming language and cultural barriers, trust-building, conflicting objectives and strategies, differences in ethics and values, and becoming overly dependent on the expertise of the foreign partner. Acquisition Acquisitions are when one firm acquires control over another firm Carpenter & Dunung, 2012b). These transactions can be made using cash, stocks, or a combination (“Types of transactions,†2016). Acquisitions are used to give a company quick access to a new market and are often used when the industry is consolidating. Downsides of this strategy to expand globally include high costs and limits on ownership by foreign firms in some countries. Acquisitions also don’t always increase the company’s value (“Mergers and acquisitions,†2016). An important question to ask when considering a merger or acquisition is “Can [the] firm achieve lower average costs or higher average prices by including multiple business units in same firm?†(“Mergers and acquisitions,†2016). Greenfield Venture A wholly owned subsidiary is called a “greenfield venture†(Carpenter & Dunung, 2012a). Such ventures are complex and can be costly, but they provide the firm with the maximum amount of control and have the most potential to provide above-average returns. To be successful, the firm may have to acquire knowledge of the existing market by hiring either host-country nationals—possibly from competitive firms—or costly consultants. An advantage is that the firm retains control of all its operations. Potential disadvantages include corruption or red tape in the host country and cultural and language barriers. Strategies for Global Expansion There are two strategies a company can use to expand globally: multi-domestic (think globally, act locally) or global (think globally, act globally) (“Global strategic management,†2010). Multi-domestic In this strategy, there is local decision making and the product is customized for the local market. This strategy allows for local market conditions while reaping the benefits of corporate standardization. In this approach, the company uses the same competitive strategy (low-cost, focused, or differentiation) but allows local managers to make country-specific variations in product, production methods, or distribution to satisfy the local market and take advantage of local market conditions. This strategy can result in high costs because of the many variations across countries. Time to market can be slow because national approval is required for introduction of new products. Global In this strategy, the product is the same in all countries and control is centralized; there is little decision-making authority on the local level. Advantages of this strategy are lower costs, quicker introduction of new products, and coordinated activities. This strategy works best when there are few cultural and market differences in the countries in which the company is operating. Improving Overall Competitiveness There are two important ways in which a company can improve its overall competitiveness by expanding globally: Use location to lower costs or improve product differentiation Use cross-border coordination in ways a domestic competitor can’t. Using Location When a company decides to expand globally, it must analyze its value chain to decide whether to make any changes. Should certain elements of the value chain be concentrated in one or a few countries? Which countries are the best for each element of the value chain? In making those decisions, companies should consider: Whether the costs of any activity (e.g., manufacturing) are lower in some countries. Whether there are economies of scale that occur because of the expansion. What the learning curve is in performing an activity. Whether certain locations offer access to superior resources or other advantages. Cross-Border Coordination Resources accessed because of the expansion should be carefully examined for how they can add to the firm’s competitive advantage. More efficient manufacturing and transportation, underutilized capacity, and knowledge gained in a new market can all be used to enhance competitive advantage and increase market share in competition with domestic-only firms. Conclusion There are many ways in which a company can choose to expand global. Each has potential rewards—and potential risks. A company considering global expansion must consider all the factors before deciding whether and how to expand.

Paper For Above instruction

International business expansion is an essential strategy for modern organizations seeking growth, diversification, and competitive advantage in an increasingly globalized economy. Companies decide to compete internationally for various reasons, including access to larger markets, cost efficiencies, resource acquisition, and risk diversification. Understanding the motivations behind international expansion and the different modes of market entry is crucial for developing effective global strategies that sustain organizational success.

One of the primary motivations for international expansion is the pursuit of faster growth opportunities. Both emerging and established firms recognize that entering foreign markets can open new customer bases and increase revenues more rapidly than remaining solely within domestic borders (Conner, 2012). Cost considerations also play a pivotal role; companies often seek cheaper input costs such as labor, raw materials, and production costs in other countries, which can significantly improve profit margins through economies of scale (Moskowitz, 2009). Additionally, diversification benefits—spreading operations across multiple regions—reduce vulnerability to regional economic downturns, political instability, or adverse regulatory changes.

However, expanding globally involves notable risks, including increased operational costs, compliance with foreign regulations and standards, currency fluctuations, and the complexities inherent in operating within diverse cultural environments. These risks necessitate careful strategic planning, with a thorough understanding of local markets and regulatory landscapes before committing resources abroad (Conner, 2012).

The modes of entering foreign markets vary and include exporting, licensing, franchising, joint ventures, acquisitions, and greenfield ventures. Exporting is often the initial approach, involving selling domestically produced goods in foreign markets, allowing firms to test international waters with minimal investment (Carpenter & Dunung, 2012b). Licensing and franchising enable firms to leverage intellectual property rights or brand recognition without extensive resource commitments, ideal for entering unfamiliar or high-risk markets. Conversely, partnering through joint ventures and strategic alliances provides shared resources, local expertise, and risk mitigation, though challenges such as cultural differences and trust-building may arise.

Acquisitions offer rapid market access but are associated with high costs and potential integration difficulties (Carpenter & Dunung, 2012b). Greenfield ventures involve establishing wholly owned subsidiaries from scratch, which, while costly, grant maximum control. The decision among these modes depends on factors such as resource availability, control preferences, risk appetite, and strategic objectives.

Furthermore, companies can adopt either multi-domestic or global strategies to expand internationally. The multi-domestic approach emphasizes local responsiveness, allowing adaptation of products and services to meet specific regional preferences. This strategy often increases costs and complexity but enhances customer satisfaction and market relevance (Global strategic management, 2010). Alternatively, a global strategy adopts a standardized approach, promoting efficiency, cost reduction, and faster product rollout, suited for markets with similar consumer needs and regulatory environments.

Beyond entry mode selection, global expansion enhances competitiveness by optimizing the location of value chain activities and fostering cross-border coordination. Analyzing the value chain enables organizations to identify where to locate manufacturing, research, and distribution activities to maximize cost savings and resource access. Many firms locate manufacturing in countries with lower labor costs, while research and innovation may be centralized in technology hubs (Porter, 2015). Effective cross-border coordination enables companies to achieve economies of scale, improve product differentiation, and respond swiftly to market changes, outperforming domestic-only competitors.

In conclusion, international expansion presents a complex interplay of strategic decisions, market dynamics, and operational considerations. When effectively managed, global strategies can significantly enhance a firm's competitiveness, profitability, and sustainability. Companies must weigh the potential rewards against the intrinsic risks, selecting appropriate entry modes and strategic approaches tailored to their resources, objectives, and market conditions. With thoughtful planning and execution, organizations can thrive in the dynamic landscape of international business.

References

• Carpenter, M. A., & Dunung, S. P. (2012a). Exporting, importing, and global sourcing. In Challenges and opportunities in international business. Retrieved from related URL
• Carpenter, M. A., & Dunung, S. P. (2012b). International-expansion entry modes. In Challenges and opportunities in international business. Retrieved from related URL
• Conner, C. (2012, Aug 14). Ready to go global? Six tips to help you decide. Forbes. Retrieved from URL
• Moskowitz, S. (2009). Economies of scale. In C. Wankel (Ed.), Encyclopedia of business in today's world (pp. ). Thousand Oaks, CA: SAGE Publications Ltd. doi: 10.4135/.n326
• Porter, M. (2015). Michael Porter on competitive strategy [Video]. Retrieved from URL
• Global strategic management. (2010). In QuickMBA. Retrieved from URL
• Research Starters: Business (Online Edition). Connaughton, S. (2015)
• Additional scholarly articles and reports on international strategy, market entry, and competitiveness—accessed through credible academic databases and journals.