Global business refers to international trade which states that the company doing the business at the international level by exchanging goods and services (Lindgren, Sirobi, and Bandsholm, 2016). The companies can expand the business at the international level by exchange the goods and services across the world. For expanding the business the company requires the large amount of capital to invest in the business (Jones, and Kierzkowski, 2018). The investors and the stakeholders help the company in expanding the business at the international level. In this report, the discussion is made on the global business. The discussion is based in the report format to analyse the factors which affect the company in expanding the small and medium size firms at the international level (Cheng, Ioannou, and Serafeim, 2014).
In the beginning of the report, the stakeholder’s view of the firm will be discussed. After that, VRIO framework is used to analyse the internal environment of the organisation in the context of its resources. The factors will be discussed that affect the strategic decision of the medium and small size firms. In the last section of the report, the key drivers will be discussed which helps to sustain an advantage over time. The use of the company will also be discussed to maintain the organisation structure (Aguilera, Judge, and Terjesen, 2015).
SMEs have attracted attention while recognising their crucial role in country`s economy and its contribution to growth. A properly constructed organisational structure has become necessary to manage the foreign activities. Organisations select several modes to enter foreign market such as exporting, joint venturing, establishing a greenfield investment to acquire a stake in existing company. Apart from thinking of financial resources available to the organisation to expand in the international market. There are other several factors that an organisation need to consider. Arguments for entrepreneurial framework that can considered while thinking of internationaling the small or medium organisation-
It is one of the most factor that gives an approval of setting up a venture at international one`s the domestic stakeholders such as customers, suppliers, and shareholders are satisfied. Although the concept of CSR has become very popular among the organisation as well as stakeholders. The increasing awareness of social, political and scandal matters have developed environmental obligation at a corporate level (Lim, and Greenwood, 2017). This can be wrong statement to say that SME have less or no awareness of negative impact of the operations and lack of interest in executing environmental obligations. Especially when the core competency is CSR, it takes efforts on the part of both customInk and Hagerty. The stakeholders of CustomInk undoubtedly remain very satisfied because it provides two time’s free food and meal with addition to snacks. Hagerty remains an insurer which not only insures client’s cars but also allow employees to collect outstanding points for gifts (Lim, and Greenwood, 2017). Moreover, it is important to consider CSR concerns especially when firm wants to expand. It wants the support of the stakeholders that can affect the business. In order to win the stakeholder concern, an organisation should take and opt to take right as they differ from MNCs in several factors such as availability of resources available, drivers, how engaged and involved are stakeholders, and strategies. Although the organisation have particular barriers which prevent them to engage in environmental practises such as improper organisational structure. Nevertheless, a small organisation based on consumer-facing operation that can find an instrument, which is suitable to satisfy the needs. A strong- customer based organisation has the ability to raise funds by an effective platform. It is integral part of proving to the investors the reasonability and value creation of proposition. private small companies mostly include agricultural sector that constitute a source of employment and entering into the international market either through export or setting a venture can provide a good source of employment in transition countries. Improved and standardised SME`s competitiveness can contribute to awaking it to achieve social development of stakeholders by providing them high quality goods. If the organisation is a product manufacturing firm, It can provide a feedback services and after purchase services to the customers. This leaves a positive image on the minds of customers; directly it drive, customers as it retain them and enforce them to induce investment. Strong entrepreneurial framework such as good and well-trained HR can attract to get assistance from innovative enterprises that often spin-off and allow the commercialisation of innovative output in the international market. High potential and good capital from IPOs is able to identify other global international firm and harness both market knowledge and technology to launch a business in other country. One’s the organisation has established its stake in market, by social media and other sources, public get to know whether the organisation has performed in its country or served the material well (Moatti et al., 2015).
As an entrepreneurial framework, VRIO is a tool that is designed to assist the organisation to discover and protect the available resources and other potential, which can give a long and sustainable competitive advantage. This framework has four basic questions such as value, rarity, imitability and finally the organisation. It is a form of analysis before thinking and trying of entering into the international market (Chatzoglouet al., 2018). Value is one of the element that evaluates how much resources the company have used to add value to the product or service used by the customer. It is necessary to examine the element that can exploit the opportunity and neutralise the competition with its internal ability (Managementmania, 2018). If customInk and Hagerty feel that they have achieved a competitive advantage through its resources, covered, and captured the market, then move to other element. Rarity is related to how company manages its resources because ultimately these resources and capability are derived from the society. If customInk and Hagerty lacks value and lacks rarity (Chen, Lin, and Shiu, 2018). It is the combination of analytical advantages and techniques to assist the organisational management to evaluate the business resources. Financial resources have detailed indicators, which can evaluate the financial conditions of the business from different perceptions (Responsis, 2018). If the enterprise, lacks rarity then it is in the position of competitor parity. The resources are valuable and but common that keep competing in the market. If it is successfully achieved and value and rarity identified, the enterprise shall move to next step. Imitability is the expensive that can duplicate the enterprise resources and its capability (Fabbri, and Klapper, 2016). The SMEs has to fight with its rivalries and find an equivalent substitute to compare with certain offerings. Moreover, if the company keep using its resources in copying and pasting, it would have a give and temporary competitive advantage. It requires extreme effort to stay apart and ahead of other competitors. After considering and examining all these three elements, the last encounters that how company organised its management system, process, structures, and culture to capitalise on capabilities (Frederick, 2016). It is understood that the company cannot achieve an international market unless it does not get support from internal staff. This can be difficult to realise the potential ability of value, costly to imitate, and rare resources. By analysing these things, a company has to identify and reassess the work to attain a required organisation. While considering the CSR activities and its operations together in customInk and Hagerty, SMEs can suffer from social complexities one`s it imitates the resources and capabilities are based on other company`s culture and other interpersonal relationship (Jurevicius, 2013). Nevertheless, both the companies are performing well for their CSR whether it comes to employee satisfaction and service providing to customers. The value element also includes the entrepreneurial structure, its system, processes, organisational structure, and the culture that create a value to the organisation and achieve an appropriate CSR strategy. The companies can achieve competitive advantage in the domestic market among the competitors and slowly can approach the international market (Kim, Lee, and Shin, 2015). This is how social and environmental factors affect the CFP-
(Source; Smits, 2014)
Entry barriers- It is not easy to enter in the international market with just huge resources or with a idea. It requires to accomplish many legal compliance to get permission from other country`s government (Knott, 2015). The compliance in every country differs from each other and it keep relying on other collaborated or joint ventured company to understand the policies, laws and regulations of the country (OECD, 2018). More entry barriers can be unavailability of appropriate resources such as proper labour and raw material. Moreover, while establishing the customInk and Hagerty in other country, it also look for appropriate technology that can be easily available. The company may need to change its product attributes due to different culture of consuming products (Lim, and Greenwood, 2017).
Product substitution- product substitution is a reason of not leading the company to think of introducing the original material in the market. The substitution can be such a way that the substitution should be unknown to the customers or without the purchaser knowledge. Substitution damages the contracts, less expensive, and replaces the expensive, good quality, high graded material, and similar looking material. One`s customInk and Hagerty has gained a strong image in the global market, it will be easier for the company to avoid the substitutes because customers will start assuring the product of this companies provides a high-graded product.
Bargaining power of suppliers- many companies cut down their core competencies just to reduce the internal investment in this process they might take poor decision that have been mistaken where cost centres remain in the favour of suppliers. Many companies have established core competencies and has emerged as a leader in the international market. In the given case study, it is said that JVCs has lost its stake among companies such as sam sung kia, gold star and many more that has the ability to build core building product emerging as a leader where products are already so diverse in terms of display, automotive engines by OEM supply contracts and finally composed strategies to supply to the western companies. The market “Asian” has grabbed a lot resources and image in the international market (Yami, Meyer, and Hassan, 2017).
Institutional based constraints- customInk and Hagerty have to consider the behaviour of current competitors and also the potential to enter the market. For example- sector in which brand positioning is important. Moreover, new entrants necessitates the operation with high capital investment. Core competency do not finish or become extinct after use. Competencies have to be nurtured on regular basis and protected the knowledge that has been faded. Competencies is a important ingredient that has to be nurtured and taken care of. Patterns of diversification in the firm and entry in the market should be guided by the mangers not just because it seems attractive (Min et al., 2016).
Rivalry among firms- It is an important factor when thinking of entering into the international market. A firm should have strong position in its domestic market that can lead it to think of entering into international market. Nevertheless, in short run, company`s competitiveness is derived from price, performance, and the quality that it offers that are ultimately attributes to the current product. In the long run, key competitors in the international market have to be treated and observed carefully that can reveal which strategies this organisation can use to build a competitive advantage. Asian market competitors have built advantages in the competitive market with its components. Moreover, it has leveraged off their superiority products to move to build brand share. They cannot remain lo-costing suppliers for always because of their consolidated leadership and gain price leadership. After the company has covered its fixed cost in the new growing market. Moreover, their reputation for its brand leadership has to remain in operation to price leadership.
Reactive/accommodative/ proactive strategies- the competitive engagement is not limited to understand the analytical tools but to manage the corporation of 20 years. Reactive business are those businesses that react to unanticipated event after it happens. Proactive strategies are constructed to smell or anticipate every possible challenge because every business can not anticipate every possibility that lies in business environment. It is seen that no organisation can be highly proactive that are effective in dealing with the challenges. Moreover, proactive strategies are at their superiority because they allow the company to use the strategy that can be used to make their own decisions. In addition to this, proactive strategies have a good chance of retaining initiative with other more companies. If company is able to detect every possible situations in the market then it will be easy for the company to use the analytical tools for expanding to the international level. CustomInk and Hagerty will have to operate in proactive strategies to deal with external business environment (Pisano, 2015).
These are the some key drivers which helps the companies in sustaining an advantage over time such as:
Cost reduction is the process of reducing the cost of production and increases their profit. Every decision is taken by CustomInk is affecting the cost of production, as the cost of production for t-shirts can become high if it is treated one by one rather than bulk production. Cost is an important factor for the companies in the term of competition and for surviving long term in the market (Ma, and Kim, 2016).
Corporate governance is the system of rules, and practices by which firm is directed and controlled. It involves balancing the interest of stakeholders, suppliers, financiers, community and government. It also provides the framework to the company to attain the objective (Aguilera, Judge, and Terjesen, 2018).
New technology helps the company in improving the communication, ideas, performance and quality of product. The new ideas helps the CustomInk in competing with other companies by improving the process, bring new and improved products. Innovation and technology are the methods which helps the company in producing the product different from the other companies. It is observed that the innovation and technology are the methods which help to survive long-term in the market (Schaner, 2017).
CustomInk use these methods to survive in the market for long time. In the absence of corporate governance, the board structure of the company will be disturbed. The main objective of the company is defined by the help of corporate governance; the whole management of the company is planned as per the framework. Cost reduction is essential for the company to gain the large profit. In the absence of process of cost reduction, the company can suffer with the heavy loss. New ideas help the company in improving the process of production and quality of services. The companies can work smoothly with these key drivers without them; it is difficult to manage the whole organisation structure (Tricker, and Tricker, 2015).
As the time passes, the company has to adopt the new methods to produce the new goods and services. Production of new goods is essential for the company as per the external environment (Laudon, and Laudon, 2016). But these entire requirement increases the cost of production of the company. The company can use the cost reduction process to maintain the production cost in every step. With the change in the techniques, the rules and practices of CustomInk is also affected. The company can use corporate governance to maintain the rules and practices from which the organisation is directed and controlled. Innovation is some new techniques that are used by the company in developing the new products and services. New technology is used to manufacture the goods and services of the company (Dijkman, Sprenkels, Peeters, and Janssen, 2015). These factors can use the company in gaining the competitive advantage but it is necessary to evaluate the use of these technology and innovation.
Conclusion
From the above analysis, it has been concluded that the SME plays a crucial role in the economy of country and its growth. There are many factors which help the company to enter into the foreign market such as exporting, joint venture and many others. The concept of CSR gets famous among the organisation especially when the company wants to expand the business at the international level. It is seen that even both the companies are SMEs but have been performing well for its employees and customers. It has been seen that the organisation established its stake in the market by the use of social media. Through social media, people get know the performance of the organisation. CSR is the responsibility of the company towards the society and growth of the economy. In this paper, VRIO framework is used to analyse the internal environment of the organisation such as resources. Maintaining the high quality of the resources in the organisation; it has to analyse the internal resources of the company so that it can compete with the competitors (Schleper, Blome, and Wuttke, 2017). Maintaining of financial resources, human resources is essential for the company to grow in the market. From the above analysis, it has been seen that the organisation required those resources which helps in the growth such as value and rarity. All the factors of the VRIO framework are based on the structure of organisation and capabilities. There are various factors which affect the strategic decision of small and medium size firms such as entry barriers, bargaining power of suppliers, rivalry firms and many others. Cost reduction, corporate governance, innovation and technology are the key drivers that help the company for surviving long time. Change in external factors affects the company but these factors help it in overcome volatility. It is essential for the company to use the factors for the smooth survival in the market.
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