International Business Strategy
This blog is going to provide a high level overview of International Business Strategy.
Especially it gives guidance on how managers can answer 3 questions when thinking about going global!!
1) Why to Expand
2) Where to Expand
3) How to expand
Before that, What is International Business Strategy ?
Precisely, IBS is all about expanding business across national borders!!
Now, Coming back to WHY a company a should go for an expansion ?
Recent research has shown; smart companies expand internationally to achieve important strategic objectives to help them deliver unique value to the customers.
Those important objectives are
- To Increase Sales
- Cost Cutting
- Manage Risks
- Learn new things
WHERE to expand ?
The easiest answer to this question is to enter the country with a largest number of potential customers, especially countries like China & India.
Apparently, Foreign means different & different can be difficult to deal with!! So, Criteria that needs to be considered
Always measure the distance between countries
1) Geographical distance
2) Cultural distance
3) Administrative distance
4) Economic distance
Geographical Distance: Geographical distance is the distance measured along the surface of the earth. The formulae in this article calculate distances between points which are defined by geographical coordinates in terms of latitude and longitude.
Cultural Distance: Cultural distance is a function of differences in values and communication styles that are rooted in culture (demographic OR organizational). Distance is created when individuals or groups perceive that their values and communication styles differ from others.
Administrative Distance: Administrative Distance is a value that routers use in order to select the best path when there are two or more different routes to the same destination from two different routing protocols. Administrative Distance counts the reliability of a routing protocol.
Economic Distance: The distance between two countries is the largest percentage difference in unit costs among all sectors. If all goods are traded, this distance is the smallest uniform ad valorem tariff that shuts down bilateral trade
Now, HOW to expand ?
2 important Fundamental strategies needs to be applied
i) Multi Domestic
Multi Domestic: A multi-domestic strategy is a strategy by which companies try to achieve maximum local responsiveness by customizing both their product offering and marketing strategy to match different national conditions.
Arbitrage: The simultaneous purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.
Getting International Business Strategy perfect can be very difficult, it requires right reason, right place, right strategy for your company.
“Companies that get it right, WIN in a really big way”