Sample: Implementation of International Business Strategy

2.2 International Business and strategy

Several economic, social, political and technological forces have made international business ventures attractive in nature. Several firms have already established themselves in several international markets and many more are planning to expand their business on a global level. It is to be noted that the fundamental purpose of any business organization is to make profits. A firm makes profit if the price it can charge for its output is greater than its costs of producing that output (Paul, 2008). In most firms, international expansion is being driven by a brief that emerging markets offer the greatest potential for future demand growth. A firm adds value to a product when it improves the product quality or customizes the product to consumer needs in such a way that consumers will pay more for it, that is, when the firm differentiates its products from those offered by its competitors (ibid.).

International strategy is pursued by a firm for creating value through transfer of valuable skills and products to foreign markets where indigenous competitors lack those skills and products (Ritchie, 2003). Most international firms have created value by transferring differentiated product offerings developed at home. There are several ways and strategies through which a firm can enter into international markets. However, in order to sustain and generate profits in international environment requires much more effort and careful strategic planning on the basis of the several characteristics of the host country as well as the core capabilities of the firm.

Some of the key premises form the basis of a strategic perspective towards international business. These are discussed as follows:

It is not possible to separate the world of business from the social side, such as the world of politics or ethics. Since business action is a social activity, it implies that social, ethical and natural environmental issues are essential strategic issues in international business (Reddy, 2008). Thus, there is a need to emphasize on the social aspect of any strategic framework related with international business. Relationships, norms, values and beliefs are essential considerations in strategy work, which is done through a business marketing strategy and a matching strategy. The main strategic purpose of the MNC is to create societal values by addressing the needs of various social groupings (Paul, 2008). The basic objective of the MNC is then to create a sustainable business by promoting three major types of values namely social value, economic value and the natural environmental value (ibid.).

There is a need to bring consistency between strategy and the external sources of competitive advantage prevailing in the local country market. These include factors related to demand, such as industry, customers, and competitors in the economic environment, or factors in the social environment influencing these, such as the national culture (Reddy, 2008). This will help the MNC in taking advantage of the opportunities prevailing in the local market.

The consistency between strategy and the external sources of competitive advantage, on one side, and the consistency between the strategy pursued in the specific emerging country market environment and the resources and capabilities available for that environment, on the other, should be achieved through matching (Jansson, 2007). This involves linking the resources and capabilities of the internal environment with the various stakeholders in the external environment by making them compatible with each other.

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