1. Explain why some companies operate in the global marketplace using the Diamond model
2. What are the benefits of operating in the global marketplace?
3. What risks do companies face with operating in the global marketplace?
4. What are the various types of risks associated with operating in the global marketplace?
5. What is outsourcing? What are the benefits of outsourcing?
6. Explain different international strategies.
7. Differentiate between the various options for entering the global marketplace
Week 5: Selecting Corporate-Level Strategies
- What are the three concentration strategies? What are examples of each strategy?
- When is a concentration strategy used?
- What is a horizontal integration strategy? What are the advantages and disadvantages of horizontal integration?
- What is a vertical integration strategy?
- What is a backward vertical integration strategy?
Week 5 Discussion
Part 1
The diamond model is a kind of model that emphasizes the competitive advantage of the business or industry Hence, this model makes one company or business better than another within a specific region or country. It is being used by business houses worldwide to analyze the competitive environment in foreign markets before entering there. Through this model, the business can be able to discuss its traits with the public or market place which offers them success in the new market (Vaidya, 2022). The diamond model enables the business to know the resources in the new marketplace and enhance its performance and beat its competitors to the entities of the same product or service line.
A global marketplace is a place that is utilized in describing the exchange of goods, services, and ideas which is inhibited by geographic borders. In such marketplaces, many organizations can be able to target and access the customer base regardless of their proximity (Globalization Partners, 2020). Moreover, the organizations that are participating globally can also be able to participate in international supply chain management, service partnerships, and logistics. Furthermore, globally operating organizations may enjoy various benefits such as stability when economic turbulence, enriched workforce, improved technology, leverage turnkey globalization, and more.
It is not important that businesses operating globally may only enjoy benefits and maximize their profits, instead, they also need to bear several risks that might impact their business and business targets. The risks in the global expansion of the business comprise HR management, tax compliance, legal complications, etc (Globalization Partners, 2020). However, a business is said to be successful in global terms only if it overcomes all the prevailing risks. Therefore, it is advisable for businesses planning for global expansion to look at their business operations and then decide whether the business is capable of global expansion or not.
Companies that are operating on a global basis or involved in international trade, are not only required to deal with the risks locally, but instead various other business development risks such as transportation, intellectual property, ethics, currency exchange, and credit, amongst others. If these risks are kept unsolved in the business, then it might obstruct the smooth and effective running of the business (Vineyard, 2019). That’s why it is the top priority of the business houses to limit the effects of prevailing risks and should solve them in the short term so that it does not affect the long-term operations of the organization.
The term outsourcing is the practice of contracting or getting done business functions and processes with third-party providers. On the other hand, in terms of IT, the initiative of outsourcing with the technology provider comprises various business operations from discrediting, defined components to disaster recovery, software development, etc (Overby, 2017). This system offers a lot of benefits to the organizations such as lower cost, variable capacity, accelerated market time, more focus on the strategy, and more.
The organizations working in the international market are multinational corporations and the largest multinational organizations are the focus of the international arena. However becoming the best player in the international market and gaining huge profits is not easy, instead, organizations are required to choose the best international strategy to operate and beat their competitors (Pressbooks, 2022). Moreover, the international strategies that should be adopted bat various organizations include multi-domestic strategy, global strategy, and transactional strategy.
Organizations need to approach international markets very carefully and before entering into the foreign marketplace, they must need to analyze the market opportunities and the internal capabilities to determine which international market strategy will fit perfectly. Many businesses first start with lower-risk strategies and then progress to other strategies. The strategy for entering the global marketplace includes exporting, joint ventures, licensing, direct investment, and trade intermediaries. The differences between each are given below
Part 2
Many companies take the concentration strategies very sensibly and in these strategies, the company tries to involve competing successfully in a single industry. Big corporations such as McDonald’s, Starbucks, and Subway have relied highly upon the concentration strategy to become the dominant players in their respective industries. Moreover, the three major types of concentration strategies include market penetration, market development, and product development. The firm doesn’t need to chooseusedsuggestsTutorachieve one, or two concentration strategies. On the other hand, if the organization wants, then it can implement all the 3 types of concentration strategies on its premises (Open text, 2022). The strategy of market penetration is used by Nike to feature various famous athletes in print and television ads. On the other hand, the market development strategy used by Kicking Horse Coffee. Meanwhile, the product development strategy is sued by Starbucks to introduce the VIA, an instant coffee variety.
As the name suggested, the concentration strategy is used when the organization tries to focus on a particular group of clients, geographic market, or product. It allows the business to fully concentrate on its efforts and operations instead of diversifying the business operations to another marketplace (Marketing tutor, 2022). Many corporations are nowadays opting for the concentration strategy to get success and accomplish their goals and objectives. On the other hand, the business house can choose any kind of concentration strategy to implement.
Horizontal integration happens when two organizations are competing in the same industry with the same stage of production. It is a kind of business strategy where one company enhances and grows its business operations at the same level as its competitors in the industry. With this kind of strategy, the business can be able to grow in terms of both revenue and size, expand into new markets, reduce the competition, and diversifies its product line (Tarver, 2021). It has both benefits and drawbacks which businesses need to consider before implementing it. Its benefits include a bigger customer base, increased revenue, large market share, etc. On the other hand, its drawbacks include bad economic growth and reduced flexibility.
Vertical integration is the kind of business strategy that allows the business to streamline business operations and take up ownership of various production stages instead of relying on external contractors (Hayes, 2022). Any company can integrate a horizontal strategy by establishing its suppliers, distributors, manufacturers, and retail locations. This strategy does not allow the business to outsource any kind of business function or operation. However, this kind of strategy requires capital investment.
The backward integration strategy is the form of the vertical integration strategy where a company expands its role and fulfills its tasks through the supply chain of the business. In simpler form, it can be said that in this strategy a company buys another company that supplies the products and services for the process of production (Kenton, 2021).
References
Vaidya, D. (2022). What is the Porter Diamond Model? Retrieved on 16th October 2022, from: https://www.wallstreetmojo.com/porter-diamond/#:~:text=Porter%20Diamond%20is%20a%20model,industries%20thrive%20in%20particular%20nations.
Globalization partners (2020). Navigating the Global Marketplace. Retrieved on 16th October 2022, from: https://www.globalization-partners.com/blog/navigating-the-global-marketplace/#gref
Vineyard, J. (2019). 6 Risks in International Trade & How to Manage Them. Retrieved on 16th October 2022, from: https://www.universalcargo.com/6-risks-in-international-trade-how-to-manage-them/
Overby, S. (2017). What is outsourcing? Definitions, best practices, challenges, and advice? Retrieved on 16th October 2022, from: https://www.cio.com/article/272355/outsourcing-outsourcing-definition-and-solutions.html
Pressbooks (2022). 9.4 Types of International Strategies. Retrieved on 16th October 2022, from: https://pressbooks.lib.vt.edu/strategicmanagement/chapter/9-4-types-of-international-strategies/#:~:text=Multinational%20corporations%20choose%20from%20among,the%20local%20culture%20and%20needs.
Course lumen (2022). Reading: Entry Strategies in Global Markets. Retrieved on 16th October 2022, from: https://courses.lumenlearning.com/clinton-marketing/chapter/reading-entry-strategies-in-global-markets/
Open text (2022). Concentration Strategies. Retrieved on 16th October 2022, from: https://opentextbc.ca/strategicmanagement/chapter/concentration-strategies/#:~:text=Within%20concentration%20strategies%2C%20there%20are,industry%20(Ansoff%2C%201957).
Marketing tutor (2022). Concentration Strategy – Definition, Types & Examples. Retrieved on 16th October 2022, from: https://www.marketingtutor.net/concentration-strategy/
Tarver, E. (2021). Horizontal Integration: Benefits and Drawbacks. Retrieved on 16th October 2022, from: https://www.investopedia.com/ask/answers/051415/what-are-advantages-and-disadvantages-horizontal-integration.asp#:~:text=The%20advantages%20include%20increasing%20market,value%20rather%20than%20create%20it.
Hayes, A. (2022). Vertical Integration Explained: How It Works, With Types and Examples. Retrieved on 16th October 2022, from: https://www.investopedia.com/terms/v/verticalintegration.asp#:~:text=Vertical%20integration%20is%20a%20strategy,on%20external%20contractors%20or%20suppliers.
Kenton, W. (2021). Backward Integration. Retrieved on 16th October 2022, from: https://www.investopedia.com/terms/b/backwardintegration.asp#:~:text=Backward%20integration%20is%20a%20form,or%20services%20needed%20for%20production.
