.) Explain when and why it is important for a company to globalize
A company is ready to globalize when it has a clear global vision in place, and staffed with internationally experienced managers. There should also be existing strong international business networks, together with utilization of preemptive technology or marketing. Successful globalization would also require existence of a unique intangible asset in the company along with close connection among its product extensions. Finally, a company is ready to globalize if it has closely coordinated organization worldwide (Burney & Sohail, 2006).
6.) Describe the four main strategic orientations of global firms.
Global firms usually adopt one of the four main orientations toward their international activities. The strategic orientation adopted allude to the specific set of beliefs pertaining to the company’s management of its overseas activities
a) An ethnocentric orientation – this is a strategic orientation where a global company follows the values and believes of the parent company to make all its strategic decisions on operations in the foreign market (Aswathappa, 2010).
b) A polycentric orientation – this is a strategic orientation where the multinational company’s decision-making process is significantly dominated by the culture of the foreign country in which the strategy is to executed (Aswathappa, 2010).
c) A regiocentric orientation – this is a strategic orientation where the parent company strives to combine its own predispositions with those of the region being considered, thereby resulting into a region-sensitive compromise.
d) A geocentric orientation – this is a strategic orientation where a multinational company adopts global systems approach to its strategic decision making, placing emphasis on global integration (Aswathappa, 2010).
7.) Explain the control problems that are faced by global firms.
First, global firms often face an inherent control problem in the form of relying on financial policies designed for the parent company, which are usually less responsive to the goals of the host nations (Aswathappa, 2010). The built-in bias often creates inconsistency between the different departments of the multinational, between the multinational and its host and home countries, as well as between the host and the home countries themselves.
Second, global firms also face control problems due to the different financial environments that render normal standards of company behavior relating to the sources of finance, structure of capital and the disposition of earnings relatively challenging (Aswathappa, 2010). This makes it highly challenging to measure the performance of its international departments.
Third, there exist significant differences between measurement and control systems in a global firm as planning is often complicated by county to country attitude differences toward work measurement, and by differences about government requirements on disclosure of information.
9.) Describe the market requirements and product characteristics in global competition.
Market requirements for a global market usually demand much more than merely shipping well-receive domestic products to the foreign markets. A firm need to two crucial aspects of customer demand i.e. customer’s demand for standardized products and the desired rate of product innovation (Burney, 2006). The products need to be standardized in all markets but customized for different customers from one market to another.
Also, products are often positioned along a continuum i.e. products not subject, frequent product innovations, and products often upgraded (Burney, 2006). Industrial machinery and computer chips have fast rate of change, while steel and chocolate have slow rate of change, for instance.
Chapter 6
1.) Describe SWOT analysis as a way to guide internal analysis. How does this approach reflect the basic strategic management process?
SWOT is an acronym for internal Strengths and Weakness of a company and the environment/external Opportunities and Threats to the company. SWOT analysis is traditional tool through which managers access the firm’s strategic situation. The analysis provides lots of inputs and outputs associated with basic strategic management process, thus is a logical framework to be utilized in guiding internal analysis of a firm (Hill & Jones, 2013).
When leveraged holistically, the analysis information obtained from conducting a SWOT analysis can be used by the company to decide the most desirable options harmonizing its resources (strengths and weaknesses) with its external environment (i.e. opportunities and threats). Thereafter, the firm can formulate its short- and long-term objectives, annual targets as well as its grand strategies (Hill & Jones, 2013). In addition, the management can utilize periodic SWOT analyses in monitoring and assessing the effectiveness of current strategies in attaining the organizational mission and goals.
2.) What are the potential weaknesses of SWOT analysis?
SWOT analysis has a number of limitations. First, the technique has a tendency of overemphasizing the internal strengths of a firm while downplaying its external threats (Hill & Jones, 2013). This implies that strategies in the company risk developing strategies basing on the strengths of the firm while not considering the impact of the external environment on those strengths.
Second, a SWOT analysis is often static and can risk overlooking changing circumstances as it is a one-time perspective of a changing situation (Hill & Jones, 2013). The failure of most planning processes is as a result of this static nature of SWOT analysis, whose findings are often relegated to the manager’s shelf while he continues with the actual work of the company.
Third, SWOT analysis can have the weakness of focusing on a single element or strength of a firm’s strategy (Hill & Jones, 2013). Success of the firm could be depended on a single strength of the firm such as economies of scale which could fail in the long run.
References:
Aswathappa, K. (2010). International business. New Delhi: Tata McGraw Hill Education.
Burney, A. M. (2006). In pursuit of globalization: Learning from the
hard lessons. Retrieved from: www.qu.edu.qa/business/…/CBE_Journal_Vol12_Issue1_57-68.pdf
Hill, C. W. L., & Jones, G. R. (2013). Strategic management theory.
