Identify and discuss in detail five key issues that managers need to carefully assess when contemplating an overseas expansion. Throughout your discussion, provide details relating to two examples of Australian companies who have successfully expanded their operations overseas.
An organization can be called successful once it has successfully ventured into an international location (Hitt, Ireland and Hoskisson 2012). However, not just venturing will help the organization to succeed, it should be able to sustain itself in the international location amidst of the all the problems and issues in the international location. When on one hand, the organization might get certain opportunities; on the other hand, threats and problems will come complementary (Rupert 2012). In such a situation, the organization should be prepared to deal with the problems. However, problems can be both external and internal. The presence of the competitors, the taste and preference of the customers, the economic condition of the country and several other factors will pose threats for the organization (Docquier and Rapoport 2012). On the contrary, the organization needs to manage the employees so that there is no differences in the organization based on culture and background of the employees (Guthrie 2012). The financial condition of the organization is also an important factor as it is up to the available resources and finances, the company will be successful in the venture (Baylis, Smith and Owens 2013).
This write-up will look into the five main issues that a company might face wile venturing into overseas location. However, there are a number of issues that a company might face but the most common issues and important issues will be highlighted in the write-up. The issues can be related to the external problems as well as the internal coordination among the employees. In addition to this, the write-up will look into two different Australian companies and will evaluate their success stories when they have ventured in an international location. The examples of those companies will act as the examples for other companies who are planning to venture in an international location.
While a company aims at venturing into international location, there are a number of things that the managers should keep in mind to face the challenges in the new location. Out of all the issues, the main five issues that should be given special attention are:
The new location will require new workplace, new facility management, new staffs and new ways of marketing (Meyer and Bromley 2013). Hence, a good amount of finances needs to be kept for the management in the location. In addition to this, the difference in currency will be another issue for the managers. The manager has to pay the people who will be recruited from the new location based on the pay that the employees get in the new location (Anderson 2013). In addition to this, the setting up of the office will require extra expenditure. Thus, it is important for the managers to manage the finances when an organization is venturing in an international location. The management of the finances should be done beforehand so that the organization does not face any problem after the set up (Kamens 2013). The company has to decide that whether they are capable enough to manage an office in a new location. Based on the financial capability, the company should take the further regarding the venture (Drori, Höllerer and Walgenbach 2013).
The employees are the main people who will make the organization work in the international location (Stromquist and Monkman 2014). The manager needs to hire the employees who hail from the location where the company has ventured. In such a situation, the management of the employees will be a tough job. The most common problem that will occur in the organization is the cultural differences (Gwynne and Cristobal 2014). There will be a clash if culture in the workplace and the way of the work will be done (Sandbrook and Güven 2014). Thus, the managers should carry out training session where the employees will be trained to work as a team. In addition to this, they have to use on a common language of communication in which all the employees will communicate with each other and the senior authorities will communicate with all the employees (Hite and Chorev 2014). Once there will be common language, chances of difference will be les in the organization. However, the management of the employees is an internal affair, yet the internal environment at times affects the external environment. The entire process of the organization will be dependent on how the employees present the organization to the customers (Martin 2014). Hence, a well-coordinated work force is required by the organization when they are venturing in a new location.
The customers are the ones who should be impressed with the products and services of the company (Farrell and Newman 2014). It might happen that the advertisements and the promotional activities that were used to impress the audience of the native country might not be able to impress the customers of the new location (Hirst, Thompson and Bromley 2015). Hence, it is important to keno about the taste and preference of the customers present in the location. A thorough market research is required in such a situation. The company needs to know about the competitors present in the location (Benería, Berik and Floro 2015). The company should follow the market strategies and the techniques used by the competitors to impress the customers so that they are able to gain a strong customer base (Child 2015). The market research of the new location should start well in advance. The researchers need to do a localized search so that they are able to decide the location of the office (Hitt, Ireland and Hoskisson 2012). The market researcher should be able to tell about the proper timing when the company could venture in the new market (Docquier and Rapoport 2012). In this way, it will be able to obtain an early gain from the market.
To get an early success in the new location, partnership can be an option available to the organization, which is planning to venture in the new location (Baylis, Smith and Owens 2013). It is better to do the partnership with an organization, which has its origin in the overseas locations or has strong knowledge about the organization. However, various issues might crop up when two organizations form entirely different background is working together (Meyer and Bromley 2013). The companies will have different policies in the partnership program. The way of managing the employees will be different in the companies. It might happen that one company might follow transformational leadership and other company might follow the transactional leadership. The managers have to decide the type of leadership style that should be followed in the organization (Drori, Höllerer and Walgenbach 2013). There can be issues regarding the different organizational structure and the organizational culture (Stromquist and Monkman 2014). The different in the structures and the cultures of the organizations will create issues between the organizations. In addition to this, the location of the organization will be an issue (Sandbrook and Güven 2014). The employees will hail from different cultural backgrounds and the problems of communication between then employees will create problem for the people in the organization (Gwynne and Cristobal 2014). Hence, it is important the before the partnership, the managers settle all the difference between the organization before they enter into any partnership.
Economic condition of the country where the company is venturing is one of the major factors in globalization (Hite and Chorev 2014). The country might be going through a recession or economic downturn, which should affect the business of the company. On the other way round, it might happen that the economic conditions can be stable but the particular industry is not able to perform well in the market (Farrell and Newman 2014). Then also, the business will suffer a loss. It is important for the company to do a thorough marker research before venturing and know about the economic conditions of the place (Hirst, Thompson and Bromley 2015). The functions of the industry should be studied so that there is no issue later. If the company is eyeing for a partnership, then also it is important the condition of the other company should be studied (Benería, Berik and Floro 2015). The history of the company, it performance in the past five years and the corporate social activities will tell a lot about whether the partnership will work in a long run (Rupert 2012). The financial stability is a big factor as far as the venturing is concerned. The Financial stability will decide the future of an organizations in an international location (Guthrie 2012). Thus, a thorough study is required as far as the economic stability is concerned.
It can be seen that while venturing into overseas locations, many companies face various issues in the process (Anderson 2013). However, there are certain examples where the venture proves successful not only for the company, which is venturing in the new location for the company, which is located in the new location. One of the famous examples is the partnership between Holden and the Shanghai General Motors. In the year 2012, the famous Australian company from Australia, Holden entered into a partnership with Shanghai General Motors of China and the Pan Asia technical automotive center (PATAC) (media.gm.com 2012). Pan Asia technical automotive center is a 50-50 venture between the Shanghai Automotive Industry Corp and General Motors (media.gm.com 2012). Pan Asia technical automotive center is famous for the engineering services that it provides to the automobile companies. The service includes testing, development, validation of the components and design (media.gm.com 2012). Due to the partnership of Holden the Shanghai General Motors, the world of car market was able to experience new vehicles being launched under the partnership (media.gm.com 2012). While some of the machineries will be developed in the factories of Australia, some of the parts will be tailor-made in the Chinese market. Holden was benefitted by the partnership because it gave a sense of pride in the global vehicle programs (media.gm.com 2012). In addition to this, the organization was benefited because the engineering, and the manufacturing of the cars would be portrayed in front of the world. The most common problem that could have happened in this context is the Chinese superstition regarding the number four (Lan 2012). The Chinese culture believes that the number four has connections with death and loss and hence they void doing any work on fourth (Lan 2012). In addition to this, many places avoid the number four. On the other hand, no such culture exists in Australia. The planning for the business might not give place to such superstitions. However, it is a good sign that the two companies have not let such superstition come in their way of work and was successful in the international venture.
Wesfarmers took a daring step when it went out of its comfort zone and started its business in the United Kingdom (Kamens 2013). When on one hand, venturing should be done with proper planning, on the other hand, venturing also means that a company should try to go out of the comfort level and try something new (Martin 2014). When Wesfarmers acquired the home base hardware group of the United Kingdom, Bunnings it made a $700 million acquisition in the process (Bartholomeusz 2016). Until now, Wesfaremrs has been following the conglomerate model of business. The model consists of various kinds of business clubbed together. However, with the expansion with Bunnings it has decided to concentrate on the retail business and gain the most from the industry. Once Wesfarmers will be able be able to successfully acquire the business of Bunnings, the partnership will be the most profitable in the world of retail industry (Bartholomeusz 2016). It is expected that the sales will be of almost $10 billion per year, the earning will be around $1 billion before the interest and tax (EBIT) (Bartholomeusz 2016). The EBIT margin will amount to and the return will be of 33.5%. The success of John Gillamask is a proof of the fact that the organization has been successfully able to surpass the threats portrayed by Woolworths. As far as managing the human resource is concerned, chances of problems among the companies will be less. Both United Kingdom and Australia more or less share similar culture and language. The way of work might be different but the workers will not have many problems in settling with another company from a different country. Even if the managers face any issue, it will be the duty of the managers to settle those issues within the organization. As far as the economic conditions are concerned, chances of threats will be less as both the companies hail from developed countries.
Conclusion
The write-up explored a number of issues that an organization can face that is venturing overseas. However, five main issues have been identified, which could pose as threats for the organization. The five issues that could be identified are, the issues regarding the management of the finances of the company, then issues in managing the human resource, the taste and preference of the customers, partnership issues and the economic conditions of the new location. These issues not only tell about the problems that the company will face from the external market, but also tell about the internal factors. As far as the partnership is concerned, it involves both the external and internal factors. The issues with the finances and the human resource management are internal. On the contrary, the taste and preference of the customers and the economic conditions of the place are the external factors. Thus, the organization should be prepared to face both the external and the internal factors. The examples if Holden and Wesfarmers are proper lessons for all. Holden partnered with Shanghai General Motors and launched two new vehicles in the market. Wesfarmers went out of their comfort zone and teamed up with the Bunnings of the United Kingdom. Both the companies have performed well even after the venture as they have shared their area of task. The works have been divided according the availability of the raw materials and the better labor. It is not always necessary that after the partnership, the entire operations should be shifted to the new location. The division of manufacturing task will be helpful for both the companies. In addition to this, the organizations should take up challenges and make their presence felt in the market. The margin of profit can be less, yet the example the organization will set for other organization will help the companies to gain a good position in the market. The example of Holden and Wesfarmers should be able to throw light on how to venture in an overseas location intelligently.
References
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