AD655 International Business, Economics, and Cultures
The last two decades, probably after World War II the economic growth have speeded up by multinational enterprise. In the 1990s foreign direct investment made by these firms grew as faster arte than both international trade and GDP (Cieslik & Ryan, 2011). The foreign direct investment already created lots of fortune for world economy; however, it is not luck to each international firm. Some of them also faced huge risk, even failure. Throughout history, it seems like it is not easy for companies to entry foreign markets. Some of firms were very successful in the their home countries; however, they were failed in foreign markets. Those corporations adopted the same marketing strategies that they used in their home countries because they thought using the same methods would bring much profit in the foreign countries. However, the results were not they expected before. Why? The main reason is that the foreign market environment is not the same with their home countries. There are many different conditions in foreign, and those differences would make international companies rearrange strategies for new markets. Such as, culture, geography, religion, politics, etc. Among those differences, the most important is culture difference. Culture is a system of values and norms that are shared among a group of people and that when taken together constitute a design for living--where values are abstract ideas about what a group believes is good, right, and desirable, and norms are the social rules and guidelines that prescribe appropriate behavior in particular situations. Therefore, international firms cannot use the same marketing strategies that they used before to apply different foreign markets. In addition to strategy difference, in the past, standard products were popular by international enterprises since they can operate multinational supply chains by standard operations. However, recently, more firms design their product more localization, it is because international firms want to fit in deeply foreign markets. Sometime, the companies even need to adjust their products for foreign customers, like Starbucks and Coca-Cola adjusted their recipes for local markets. Facing the different markets, the corporations should use different strategies to fit in the different markets, and customized product for local customers. International enterprises need to restart to think many details about their customers, product, service, supply chains, etc. In addition, there are different modes for foreign firms to entry the different countries, such as exporting, contractual agreements, strategic alliances, and direct foreign investment. Each mode has its risk, and international companies should find out the best mode to for itself. Choice of entering foreign mode is always a good argument for literature. The primary option is foreign direct investment. It can bring lucrative benefit, but it has biggest risk. The direct selling and setting the branches are costly, and business organizations would face bigger risks by this directly foreign selling mode. Well know examples of such organization are using this mode to set up their value chain in foreign countries, such as Banyan Tree, UTC, and Volkswagen (Jonsson & Foss, 2011).
Other is separating ownership and control, likes contractual agreement. Although this mode could not bring the benefit directly, it is long-term investment and has low investment risk (Brown, Dev, & Zhou, 2003). Other is strategic international alliance, it is based on some specific conditions that are controlling cost and arranging schedule, to generate this mode, such as, the air industry (Brown, Dev, & Zhou, 2003).
Whichever mode do the companies decide, and they still need to review their strategies for foreign markets. It is because the company would face changing quickly environment, the shopping...