International Business Strategy

International business strategy

Any ambitious enterprise that is going to achieve and sustain profitability and profit growth, no question, would have to expand business abroad. Facing the firms with foreign market orientation are two apparently contradictory goals, to reduce cost by product standardization and, subsequently, central production at optimal location in the world to cater to local demands for customization by product differentiation, localized marketing mix and so on which unquestionably tend to raise cost. In order to deal with these two opposing ends, four international business strategies have been worked out, namely global standardization strategy, localization strategy, transnational strategy, international strategy. Now, this essay will critically analyze these four global strategies respectively by using real business examples.

It is proposed by Levitt that the forces of globalisation driven by technology and wider travel are leading to more homogenized customer needs and wants worldwide. In this sense, the strategy of global standardization with a universal product and message can be an integrating force across national borders. To send out different communication messages across countries could lead to customer diffusion and even dilution of the brand. The design of Coca-cola soft drinks has changed little in its history, from logo to the distinctive glass bottle. These unique and consistent characteristics evoke a strong brand image which has cross-cultural appeal.

Moreover, in many industries, companies can reap cost advantages by operating on a global scale and ultimately improve their all-round competitiveness. Using a centralized structure, a firm can draw economies from bulk purchase discounts or by sharing functions such as product development, marketing, production and managerial resources among different markets. In Coca-Cola's example, economies are gained through the competent running of a large-scale franchising system for its bottling operations. Besides, in sectors where technological and production processes are homogeneous, extra weight is placed on standardization of products as a prerequisite for success. As part of its vision that Coke should taste the same around the world, Coca-Cola has chosen to standardize its product and manufacturing process. The knock on effects of this are more streamlined procedures and greater cost efficiencies.

However, it is sensible to imply that, where there are differences in product preferences, product uses, attitudes, shopping patterns, income levels and education, a one-size-fits-all approach will not work, especially in consumer goods markets, where demands for local responsiveness remain high. An unsuccessful example from the textbook about Vodafone Group of the UK illustrates what can happen when a global standardization strategy does not math market realities. In the early 2000s, Vodafone's vision was to offer consumers in different countries the same technology so they could take their phones with them when they traveled across international borders while ignoring the fact that Japan's most active cell phone users, many of them young people who do not regular travel abroad, care far less about this capability than about game playing. As a result, the company left the Japanese market with a loss of USD 5.4billion.

Moreover, a global strategy includes an operational risk. If employment laws or corporation laws change in the country where a company manufactures its global product, then that could ruin everything.

Thus, some companies choose localization, increasing profitability by customizing the firm's goods and services so they provide a good match to tastes and preferences in different national markets. Although the branding and position of Coca-cola remains consistent worldwide, its execution is based on what is judged to be best for each local market. This is evident in its 'Live on the Coke Side of Life' advertisement campaign launched in 2006 where elements of local culture are included. On the product side, Coke bottles and cans include the target countries native language and are sized to match up to other beverage bottles or cans in that country. By customizing the product offering to local demands, the firm increases