Discuss the strategies to enter the global market.
In today’s’ business world, the enterprises use a number of strategies to enter the global market. The theory of Aggregation, Adaptation and Arbitrage can be discussed as various approaches of global value creation. As opined by Estrada et al. 2014, depending on the financial statement and the history of the globalization a company uses these strategies to obtain the global market. However, in this world of global village, the companies need to consider all of them in different scenarios. Here, in this essay the author has made an analysis of these three strategies in the business operation of two companies from two different industries. From the education industry of Australia, the author has chosen Scholastic Corporation and Pearson Education. On the other hand, from the aviation industry Virgin Australia and Eastern Australia Airlines have been chosen for the analysis of these strategies.
Aggregation:
The theory of Aggregation in business and entrepreneurial field can be described as a method of overcoming the differences by employing cross border mechanisms. As discussed by Blanco-Mesa et al. 2015, the companies try to exploit the similarities among the economies. The approaches of this strategy of Aggregation can be diverse. These are:
Geographic: the companies distinguish the markets and choose according to their business strategies. As opined by Weske 2012, they chose the countries, which are close and have a trade agreement with that particular country. It can often be seen that the countries from the Pacific Ocean are more likely to be involved in the trade relations with the countries from that same region.
Economic: the companies follow a discriminating strategy of investment according to the economic stature of the countries. As discussed by Lakshmanan and Oberhofer 2013, for most of the companies which are operating in the worldwide platform, it is best to invest in the developing economies rather that the economy of the developed countries. This can be cited as the example of the economic Aggregation.
Cultural: as discussed by Mesa et al. 201, the companies sell the products according to the culture of the countries. Sometimes the companies from a different country chose the market of another economy, which have the same culture.
Administrative: as opined by Weske 2012, the companies have to put proper concentration on the administration of the target company while going for overseas operation. For example, the drug market of the European Union, poses some regulatory requirements on some countries.
The companies like Scholastic Corporation and Pearson Education are using the cultural Aggregation approach. Such as, the Scholastic corporation publishes their bestseller Harry Potter only in the few languages (Scholastic.com 2016). Now, the similarity of the used language i.e. “English” is providing them this facility. Both of the companies have followed the geographic approach of Aggregation too. Even being the companies of the USA and UK, they are operating in Australia with good popularity. On the other hand, the airlines companies like, Virgin Australia and Eastern Australia Airlines are using the geographic approach of the strategy of Aggregation. They are conducting business in a number of countries (Virgin Australia 2016). In case of Virgin Australia, they are utilizing the geographic approach in its full while operating in New Zealand. Theses aviation companies are also following the strategy of administrative Aggregation while flying in New Zealand and other countries.
Adaptation:
As considered by Döhring et al. 2014, Adaptation can be described as one of the supreme business strategies that can amplify the market share of a company by establishing the business model of the company suited to various parts of the global markets. This interesting strategy also has a number of approaches.
Variation: as mentioned by Estrada et al. 2014, the companies make changes in the product or the service or the business policy to adapt to the market of the targeted countries.
Focus: In the market of world cinema, it can be noted that the movies require adaptation to be acknowledged in the foreign market. As opined by Döhring et al. 2014, in this approach of focus, concentration has to be put on different segments to reduce the shock.
Externalization: as discussed by Hu, Wu and Chen 2013, in this approach, the companies meet the local requirements of the target market by lowering the cost or transferring the responsibility of the business model to a local partner. As mentioned by Estrada et al. 2014, In this regard, the policy of franchising and strategic business alliance can be cited as examples.
Design: To reduce the cost of the strategy of variation, companies make changes in the design of their products and services. As mentioned by Döhring et al. 2014, various companies make altered product which are low in price or have some distinctive qualities to grab the market of the foreign economy.
Innovation: it is an instrument of improving the effectiveness of the endeavors related to the other strategies of adaptations.
The companies like Scholastic Corporation or the Pearson Education has understood the growth of the education industry in Australia. Both of the companies are using the strategy of externalization to capture the widening market and reap the profit by following the strategy of adaptation. They have their franchise in the land of Australia. It is important for them as, operating the whole business model from a distant land is next to impossible. So in few cases, they have provided the local business stores to obtain the franchise of their brand. Thus, they are gaining a mutual profit.
On the other hand, the companies like Virgin Australia and the Eastern Australia Airlines are concentrating on increasing their focus to the low cost airlines to obtain the market in the middle class and in the developing countries (Qantas.com 2016). They also concentrate on their faculty of innovation to make alteration in their design to obtain a larger market.
Arbitrage:
Now, last but not the list, the strategy of arbitrage can be designated a pragmatic strategy of global business. In this approach, the companies go for producing the product or the service where the production cost is the cheapest and sells where it is the most gainful. This strategy talks about the core essence of the ideology of “globalization” (Ling et al. 2013). It can be defined as the original cross border strategy. This policy has a number of strategic bases. These can be discussed in the following ways:
Economic: in this approach, the companies follow the strategy of outsourcing and off shoring.
Cultural: here, the companies use the association of the cultural eminence of certain countries to their products to obtain the acceptance in the market. For example, the companies related to the fashion industry tries to associate their product to the aesthetically rich culture of France. On the other hand, the companies operating in the coffee business associate their product to Colombia.
Administrative: here, the companies make acquisition of the local brands so that they can obtain the tax benefits provided to the local companies in that very sector by the concerning state govt (Loveridge 2015).
Here, in Australia, thee companies Scholastic Corporation and the Pearson Education are utilizing the strategy of economic approach of the strategy of arbitrage. While operating in Australia, they are publishing their books in the Australian publishing houses or they are utilizing the resources of the Australian land while publishing their books in their Australian publishing houses. On their part, it would be less profitable to operate the publishing of the books in the United States of America or in England. Therefore, they are utilizing the raw materials and the human resources of the land of Australia and selling those products to the Australian land. In addition to this, the Pearson education also has their “online chat support” is which is based in Philippines (Hannah Rinehart, Dr. G. Donald Allen and Kelly 2016).
On the other hand, the virgin Australia is focusing on the strategy of acquisition of the regional flights and expresses, thus they are utilizing the strategy of arbitrage within the approach of administration. In addition to this, the Eastern Australia Airlines Pty Ltd. has also made a number of amalgamations to expand the operation of their business (Qantas.com 2016).
Conclusion:
The combined utilization of these three strategies based on their required approaches, can provide a firm a huge extended managerial faculty. These will also make them compelled to operate in multiple corporate cultural. In gaining solid competitive advantage, these strategies can also be helpful. While considering these strategies, the companies should focus on one or two of them and ensure that they are fit for the organization values. The companies should consider external integration and they also should be alert of the circumstances of avoiding them. Now in the world of globalization and the legal integration of the global economy has provided the multinational companies the advantage of utilizing these previously discussed business strategies. These strategies are the age-old policies of operating global business. However, in this temporal world of global business they are emerging as one of the pioneering and helpful strategies to implement to obtain the best financial result.
References:
Blanco-Mesa, F.R., Gil-Lafuente, A.M. and Merigó, J.M., 2015. New Aggregation Methods for Decision-Making in the Selection of Business Opportunities. In Scientific Methods for the Treatment of Uncertainty in Social Sciences (pp. 3-18). Springer International Publishing.
Döhring, M., Reijers, H.A. and Smirnov, S., 2014. Configuration vs. adaptation for business process variant maintenance: an empirical study.Information Systems, 39, pp.108-133.
Estrada, H., Martinez, A., Barrera, F., Vazquez, B. and Najera, K., 2014. Adaptation of Business Models to the Structure-in-5 Organizational Style. IniStar.
Hannah Rinehart, i., Dr. G. Donald Allen, T. and Kelly May, P. (2016). Pearson Education | United States. [online] USA. Available at: https://www.pearsoned.com [Accessed 22 May 2016].
Hu, G., Wu, B. and Chen, J., 2013, December. Dynamic adaptation of business process based on context changes: a rule-oriented approach. InService-Oriented Computing–ICSOC 2013 Workshops (pp. 492-504). Springer International Publishing.
Lakshmanan, G.T. and Oberhofer, M., International Business Machines Corporation, 2013. Aggregation, organization and provision of professional and social information. U.S. Patent 8,346,746.
Ling, D.C., Naranjo, A. and Scheick, B., 2013. Investor Sentiment, Limits to Arbitrage, and Private Market Returns. Real Estate Economics, Forthcoming.
Loveridge, R., 2015, July. Incorporating Business Professions; Communication, Governmentality, and Epistemic Arbitrage. In 27th Annual Meeting. Sase.
Qantas.com. (2016). Qantas | Book airfares on Australia Pacific’s Best Airline. [online] Available at: https://www.qantas.com [Accessed 22 May 2016].
Scholastic.com. (2016). Scholastic Publishes Literacy Resources and Children’s Books for Kids of All Ages. [online] Available at: https://www.scholastic.com [Accessed 22 May 2016].
Virgin Australia. (2016). Virgin Australia | Book flights & holidays with Virgin Australia. [online] Available at: https://www.virginaustralia.com [Accessed 22 May 2016].
Weske, M., 2012. Business process management: concepts, languages, architectures. Springer Science & Business Media.
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