Internationalization of Org

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Internationalization of Indian Organizations – Organizational culture challenges

Global Arena : Motivation for expansion

The chief reasons why companies set foot on foreign soil are:- * Economies of scale
* Economies of scope
* Availability of production factors at a lower cost : cheap labor, cheap raw materials

Economies of scale imply, through expansion of operations the company can derive economies of scale, by getting access to a larger resource base like increased capacity of raw materials, labor force, etc. more number of suppliers, facilitating higher supply chain efficiency. Economies of scope means that using the variety in the goods and services being offered, the companies are able to use their facilities more efficiently with marketing and certain operations facilitated by its other international facilities.

Stages of International development:
| Domestic| International| Multinational| Global|
Strategic Orientation | Domestic orientation| Export=oriented, multi domestic| multinational| global| Stage of development| Initial foreign investment| Competitive positioning| explosion| global| Structure| Domestic structure with export department| Domestic structure with international division| Worldwide geographic and product structure| Matrix and transnational structure| Market potential| Domestic and moderate| Large and multi domestic| Very large and multinational| Whole world| Source : Understanding the Theory & Design of Organizations by Richard L. Daft

In the international stage, the organization has independent operations in different countries, and a multi domestic strategy is used, meaning that the competition in each country is handled independently of competition in other countries. The product design, assembling and marketing is customized and tailor made for the specific needs of the customers of different countries. High

High

Low
Low
High
High
Low
Low
Forces for global integration
Forces for global integration

Source : Understanding the Theory & Design of Organizations by Richard L. Daft

Source : Understanding the Theory & Design of Organizations by Richard L. Daft

Forces for local responsiveness
Forces for local responsiveness

INDIAN COMPANIES PREFERRING AFRICA FOR GOING INTERNATIONAL

Reasons :-

* Vast untapped natural resources especially oil and mineral resources like coal, copper, etc * High GDP growth, over the next 5 years 7 places out of top 10 high GDP nations, are projected to be African nations. * young workforce

* India’s Asian competitor China already demonstrating its presence in Africa with success of various Chinese MNCs like Sinopec in oil and petroleum , Huawei in telecom, etc * National oil and natural gas production has reached its stagnation and Indian companies are scouring outside to meet the growing energy demands of Indians * To increase scale of operations

* To maintain a Competitive advantage
A few stints in Africa :
1. One of the biggest acquisition in African history, India’s Bharti Airtel’s $10 billion bid for mobile telephony company Zain Africa’s assets. The reason for the success of Bharti-Zain deal was that bot got in touch with the regulatory authorities to understand the issues that might crop up after the acquisition leading to cultural misunderstandings rooting from feelings of nationalism and deterrence. An advantage that played for Bharti was that they were dealing with a middle east company (Zain) that already had telecom licenses existing in Africa, hence lesser opposition as compared to the case if they were to acquire a local brand. 2. Marico’s 100 % shares purchase in Enaleni Pharmaceuticals Consumer Division Pvt Ltd, an Enaleni subsidiary. It led to Marico’s entry into Africa’s ethnic hair care and health care market. At a formal interaction between the executive VP and HR head...
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