Organisations operating the global markets

Organisations operating the global markets

Introduction

The business environment is shaped by various forces which play a vital role in defining how different parties which are engaging in trade, relate with each other. The operations of every single organization are dictated by the target market. Changes in tastes and preferences within the target market forces the firms to change their operational strategies to remain in business (Chesbrough, Vanhaverbeke. and West, 2006). The report identifies the approach which different Multinational corporations are undertaking to become successful in the global markets (Doh p.695). The reports address two major organisations in its analysis of the worldwide business practices which are Argos and Amazon. These two brands are successful global brands which are competing effectively in the global market. The analysis seeks to explain factors that are seen to impact on the success of the organisations operating the global markets.

Globalisation.

Globalisation has become a major trend shaping how an organisation operates. Under this approach, business organisations develop international influences through their market offerings. Many firms have started producing goods and services aimed at not only the available local market but also, they are considering market extension into global markets (Dunning, 2013). Due to this, therefore, marketing strategies of many organisations are strategically designed to fit into these global markets. Organisations operating at global scale enjoy some operational advantages over its competitors which include a larger market. Organisations, however, have to invest heavily in all the aspects of the marketing mix to ensure that their globalisation initiative bears the anticipated fruits. The firms must ensure that their market offering reaches the market promptly, for this reason, therefore, the organisation must invest in the placement strategies. Reaching a global market requires the development of approaches which gives the organisation the adequate capacity of serving the world market. Different micro and macro environment factors shape the global market as opposed to organisations which serve just the local market.

International trading is defined as engaging in trade activities outside the borders of the country within which an organisation is founded. Multinational corporations (MNCs) engage in international trade due to the many benefits which accrue the practice. When organisations engage in international trading, their target market is extended. The organisations then enjoy increased profit margins due to increased sales volume. Organisations operating in foreign markets, however, face some challenges as they struggle to meet their operational objectives and operate within their operational objectives (Rauch, Wiklund, Lumpkin. and Frese p 767). The organisations have to come up with operational strategies to help them compete effectively within the global market. Among the main challenges the organisations are struggling to operate, these challenges include ever-changing tariffs and also the international trade laws.

Multinational corporations in international markets.

Many corporations operate either daughter companies or have affiliates of the mother company in different parts of the world. These affiliates companies enable the MCNs to be able to distribute their products to different markets within the globe. The affiliate companies also a time serves as a source of raw materials for their mother companies. The operations of the multinational corporations are shaped by both microenvironment factors and also the macro environment level factors.

Micro factors

The main micro factors affecting the MNCs include; the suppliers, customers, redistribute and the competitors. Under suppliers, for instance, the MNCs choose for the best suppliers who will provide the best quality supplies in the most economical way. The organisations, therefore, will develop a partnership with the suppliers who supply the raw materials. Argos, for instance, uses V Tech and Leapfrogs as their suppliers (Zhu, Sarkis and Geng, p 449). Having a good relationship with the suppliers ensures that the company maximise on the quality of goods and services to the organisation to enable them to create their final products.

Another factor which the firms consider is the target customers. Understanding the global market is essential to match the organisations offering with the actual market need. MNCs have a major challenge when it comes to meeting the customer needs, this is because of the large market and therefore very challenging to come up with a universally acceptable product. The customers have diverse views on the products provided and thus react differently towards the product. Some customers become early adopters to the developed product while others end up becoming rate adopter. The organisations, therefore, are required to undertake marketing initiatives which are aimed at ensuring all customers need are handled (Hill, 2008). Undertaking marketing research also becomes a challenge due to the increased diversity among the customers as well as their large numbers. Understanding the trends shaping the global market enables the organisations to plan on ways through which it is going to meet its customer’s needs.

Exposure to new markets through globalisation also exposes the organisation to more competition from the other companies operating globally. The, therefore, needs to come up with strategies to enable it to survive the stiff global competition (Donaldson p 198). Engaging in mergers empowers an organisation to acquire financial base as well as the operational base required to operate within the global market effectively and competitively. Since its founding in the early 70s Argos has engaged in various mergers aimed at boosting the firm’s competitiveness in the market. Engaging in competitive pricing enables the firms to have a competitive edge especially when dealing with an international market which is price sensitive. Another approach which can enable Argos and Amazon is engaging in joint ventures, under this two independent firms come together and agree to join forces in solving a given problem in the market (Mathews, and Zander p 387). Through this approach, an organisation can start enjoying low-cost leadership within the market place which gives it a competitive advantage. International trade law pertaining fair competition also dictate the activities which the multinational corporation ought to follow. Some laws are favourable while some especially the law developed by the host government with the motives of protecting their local companies. The unfavourable trade tariffs make the organisations suffer unfair competition, and therefore they require to have approaches to counter the challenge of unfair tariffs.

Macro environment

The macro environment also shapes how the MNCs undertake their operations. Among the major aspects of the macro environment affecting these two organizations operations are, technological changes, economic status, the political status of the organisations, demographics among other issues (Ambos, Ambos. and Schlegelmilch, 2006). The concept of globalisation and international trade have become a reality due to the existence of technology (Selsky, and Parker p 849). Technology, therefore, can be said to play major roles in any future growth and development of the globalisation concept. Changes in technology thus posses either an opportunity to an organisation engaging in international trade or a threat (Coviello p 713). Any changes in the technology which affects an organisations operation, therefore, ought to be taken with a lot of gravity by these two organisation. Technological change which may impact the operations of these firms include; changes in online purchasing platform or even increased insecurity within the online platform (Richard, Devinney, Yip. and Johnson p 718). When these changes are not considered effective, they may lead to business failure or major loss.

The organisation ought to consider the economic status of the target market. The economic status dictates the purchasing power of the target customers (Evans, 2010). When the purchasing power of a given society is low the lower their expenditure of the consumers, consumers within a low economic status will also tend to be more sensitive to the prices set and thus poor pricing strategy may affect the overall business performance (Perlmutter p 117).

Political stability also defines the trade environment of a given country. Unstable politics expose the business to loss through damage. International brands such as Argos and Amazon must also consider the political stability of the host governments to be able to understand when to invest and when they should disinvest (Leung, Bhagat, Buchan, Erez and Gibson p 357). The political class generate trade policies which shape the international trade. These policies include revision of tariffs or redesigning of the existing policies to guide all the stakeholders in the international market docket.

Strategies

Various strategies have been adopted by these two firms to enable them to survive the forces in the marketplace. Among the major strategies which have been adopted by firms with time include; low-cost leadership (Beamish, 2013). Amazon, for instance, operates under low leadership approach, due to this the organisation can operate in the highly competitive market (Peng, Wang. and Jiang p 920). The low-cost leadership initiative allows the organization to set their prices low therefore serving more customers. Through this approach, an organisation can create a quality product at a reduced cost of production and therefore serve the market with a high-quality market offering.

Argos on its part has engaged in various mergers since its foundation. The initiatives are always aimed at giving the organisation the financial or technical base required to serve a given market effectively (Nonaka, 2008). Merging with a distributor, for instance, enables an organisation to facilitate placement of the products produced. Merging happens between an organisation with the capacity to do what its merging partner is not able to do (Cantwell, Dunning and Lundan p 567). The merging concept gives an organisation the capacity to undertake its marketing initiative appropriately. Merging gives an organization a competitive edge over its competitors since the firm can be able to undertake its activities using other party’s capacity (Briscoe, Tarique and Schuler, 2012).

Another approach undertaken by Argos is engaging in corporate social responsibility. The firm operates a charity partnership with Macmillan Cancer Support. Through this approach, the organization can assist the needy within society (Hodgetts, Luthans. and Doh, 2006). Due to this approach, the organisations brand have received recognition among many stakeholders (Killing, 2013). Adapting the use of corporate social responsibility as a marketing initiative enables an organisation to create a better image of the brand to the target customers. The approach can also lead the customer loyalty as customers seek to repay the organisation which engages in the noble task.

Management of change in international business.

Change is inevitable, and it brings growth or failure of business if not well managed. Different changes happening within the operational environment affect the premise under which the business was founded. Any change should be met with a counter change to ensure that the premise on which a certain strategic goal was bound to be realised is maintained (Welch, Piekkari, Plakoyiannaki and Paavilainen .p 740). Various changes which require effective management within the international business include; technological change, policy change, changes in the customer tastes and preferences and also economic status change (Rugman, Collinson, and Hodgetts, 2006).

Changes in tastes and preference of the customers lead to a change in the customer’s needs. If the organisation doesn’t notice the shift in the need, they will continue to produce products which do not meet customers expectations. Regular check-ups ought to be undertaken to ensure that the products developed still meets the needs and want of the target customers (Stock, and Watson, p968).

Economic changes affect the purchasing power of the target customers which translates to either increase or decrease of the target profit. Organisations ought to monitor the world economic trends to be able to plan adequately. An economic crisis can lead to business being inoperable when the cost of doing business becomes exaggerated. Noticing the change in time enables an organisation plan promptly and make the right decisions (Johnson, Lenartowicz. and Apud p. 525). Through the use of such information, an organisation can seek to divest from some regions which are economically unviable.

Changes in international or national trade laws also require to be effectively managed. Failure to observe the changes may make the organisation engage in illegal practices which may lead to monetary losses as a result of fines. Tariffs may also change offering an opportunity to the MNCs, but if the management of these organisations is not keen to notice the change, they will end up losing on the opportunity.

Management of information within the international trade

Information is an asset to an organisation and thus requires effective management to ensure that it doesn’t fall into the wrong hands. Information can be sold by the organisation to earn revenue, but under the wrong hands, secrets about the business may be exposed. Employees ought to be monitored as they handle the information to ensure that information is only accessible by an authorised person. The information should be password protected to ensure that authorisation is practised when accessing the information due to this easy monitoring about the people who have handled the information is possible (Chang, Witteloostuijn and Ede, 2010). Use of strong antiviruses also should be practised to protect the information from hacking threats — the social media platform despite offering a better marketing platform posse a significant threat due to the ease of hacking (Dinnie, 2015). An organisation can create a dashboard platform which may be used to lock all the social media accounts in case of a hacking threat. The approach will reduce the effects of hacking and will help have an immediate response before more danger is done.

Human resource

Human resource management is key to the achievement of MNCs operational goal; this is so because the organisation will use the human resource to actualise their goals. The organisations, however, must be guided by international labour laws on how they ought to treat and manage their employees. The employees’ rights ought to be respected and observed (Noe, Hollenbeck, Gerhart and Wright, 2006). These laws, however, are bound to change based on the area of jurisdiction, and therefore the organisations must ensure that they are familiar with the laws of the land on which they operate. The organisation must avoid any form of discrimination towards their employees despite their race or origin (Carroll. and Shabana p 85). The organisations must also engage in competitive remuneration practices when compared to their competitors to ensure the welfare of their employees is observed.

References

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