MT1: International Strategy and Competitive Advantage
In this week’s discussion topics there were some interesting factors that play a critical role in a firm’s decision for expansion into international markets. I was personally drawn to the factor of locations as it offers so many benefits if properly accounted for, and decided upon during the selection process. Carpenter and Sanders (2008) state that a five forces industry analysis can help determine the importance of of a given location, barriers to entry, new entrants, substitutes, and existing competitors, both domestic and abroad. By critically analyzing each of these forces a firm has the ability to weight the pros and cons of each location and decide which one is most in line with the long-term strategy that has been created for the firm. Using this strategy companies can then implement a uniform action plan that will allow them continue producing goods at the expected or increased rate even at the firms new locations. Ometti et al., (2012) state the importance of taking location into account as internationalization is not just one area of possible growth, but it is a natural condition of the business. In some cases firms may be producing products and services that may not be a fit for consumers in a domestic market, so the goal of expansion is driven by the desire to see growth in sales in untouched international markets. (Barringer & Greening, 1998)
MT2: Entry Vehicles into Foreign Countries
The second aspect of international expansion that I thought was very useful and relevant to many of the cohort members who already take part in some of the vehicles that were discussed. Exporting is one of the vehicles that a firm can use to navigate the challenges that come with international expansion. (Carpenter & Sanders, 2008) I found it interesting that this type of vehicles would be utilized by smaller firms that are trying to limit the costs that are associated with entering a new market. I have had to export small amounts of goods from California, and was directed towards the companies exporting firm to have them navigate shipping and necessary tax contribution. Supporting my companies action Bernard and Jensen (2004) demonstrating that many domestic U.S. based firms showed an improved output during expansion as a result of removal or reduction of trade barriers with partnered countries. On the other side, foreign direct investment (FDI) is the action of taken by larger firms to utilize on their capital and infrastructure to help manage growth in a new country. FDI is the international entry strategy where a firm makes a investment in a foreign market to create a new firm or companies that will compete within the new foreign market. (Carpenter & Sanders, 2008) FDI also is suggested to be the greatest investment, because of the additional time and monetary investment required to build an organization in a new and foreign country. (Carpenter & Sanders, 2008) Borensztein et al., (1998) supports this claim in saying that MNCs are considered to be a major contributor to this strategy, because it allows access to developing countries and provides the infrastructure to support growth in these developing areas.
MT3: International Strategy Configuration
The third concept that I thought presented me with unique new ways to analyze a framework for strategy was that of strategic supremacy and utilizing the sphere of influence. The sphere of influence consists of several zones, center of interest, vital interests, products in the core zone, buffer zone, pivotal zone, and forward positions. (Strikwerda, 2002) In the article that was provided by Dr. Pence, D’Aveni (2004) goes on to state that when trying to analyze individual aspects of the sphere it is important to remember that for some firms a forward position may represent a buffer zone on another firm. I take that to mean as we ourselves consider creating spheres of influence in our future positions, we should also take time to consider how each part of the sphere of influence interacts with the other. “A well-defined sphere orchestrates a company’s grand strategy, balancing its market power in relationship to its rivals so it can continue to maneuver freely without fear of retaliation and indeed mold the evolution of its industry structure.” (D’Aveni, 2004, p. 46) With this latest technique for analyzing other competitors and industries it provides me with another way to understand how each layer of the sphere that is mentioned plays a different role for each firm in the industry.
Barringer, B. R., & Greening, D. W. (1998). Small business growth through geographic expansion: A comparative case study. Journal of Business Venturing, 13(6), 467-492.
Borensztein, E., De Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic growth? 1. Journal of international Economics, 45(1), 115-135.
Carpenter, M.A. & Sanders, Wm. G. (2008). Strategic Management: A Dynamic Perspective. Upper Saddle River, NJ: Pearson Education.
D’Aveni, R. A. (2004). Corporate spheres of Influence. MIT Sloan Management Review, 45(4), 38-46.
Strikwerda, H. (2002). Strategic supremacy: Operational excellence is not sufficient; your firm needs a power strategy. Retrieved from http://csumb.elearningctr.com/pluginfile.php/30650…
Hi there! Click one of our representatives below and we will get back to you as soon as possible.