Slide 2. Introduction.
Entering international market can be a painful experience even for the highly developed domestic companies. A company entering the global market should realize that it lives by its own rules where you appear to be a newbie. It can be compared to a startup in the following ways:
- No initial sales;
- No knowledge of market peculiarities;
- No marketing infrastructure (Arnold, 2003).
Therefore, expansion is always a risky enterprise, and the company should be reasonable about entering global market.
Slide 3. What are the common mistakes companies make?
- Seeing expansion as an opportunity of risk diversification;
- Starting expansion without proper market examination;
- Seeing market as an opportunity to promote currently existing product (Arnold, 2003).
Slide 4. How does it impede the expansion?
- Minimization of risks is not compatible with startup situation. The company’s branch appears to be in an uncertain position when many issues are still not clarified, and much work needs to be done to secure its position on the new market.
- Market research should be conducted prior to expansion. The company needs to evaluate its domestic position on the market, competitors on the global scale, resources available, and only then start planning expansion.
- The existing products may not have a high demand on global market (Arnold, 2003).What seems to be popular and highly demanded in one country may turn out to be useless in the other. For example, Ferrari will not open a new store in Rwanda for the population does not have enough purchasing power to let Ferrari get profits.
Slide 5. Challenges of entering the global market.
- Legal issues for conducting business internationally;
- Communication issues;
- Business culture;
- Human resources;
- Relationships (US-Pacific Rim International, Inc, 2010.);
- Identifying market needs;
- Delusion of the brand name (Hill, 2014).
Slide 6. Legal issues
- Differences in supplier and customer countries’ regulations. Sometimes a triangle company – supplier – buyer is located in three or more different countries, therefore, additional efforts to establish a smooth transition between legislations is of a vital importance;
- Establishing reliable and legal payment system;
- Lack of legislation enforcement in a foreign country. Corruption and uncontrolled bureaucrats can be a painful experience for the expanding company because such violations of power use provide competitors with an unfair advantage and slow down the growth of the company (UK Trade & Investment, 2013).
Slide 7. Legal issues of conducting business in China
- Time-consuming bureaucratic tasks;
- Lack of rule of law;
- Paperwork procedures that require stamps. Such practice contributes to the violation of power and slows down the process of developing and advertising a product on a new market. For these reasons foreign companies usually hire a full-time administrative team to resolve legal issues whereas the marketing people design the product. (US-Pacific Rim International, Inc., 2010).
Slide 8. Communication issues
- Poor cross-border communication results in financial losses;
- Proper cross-border communication trainings are required;
- Difficulties to find new partners;
- Can slow down the progress when business ties get more complicated (Economist Intelligence Unit, 2012).
Slide 9. Communication issues (supporting facts)
- 90% of big US companies’ (with revenues over $500m) executives believe that a cross-border communication contributes to company’s market share, revenues, and profits;
- 47% of executives complain about poor trainings in language and communication skills;
- The emerging economies quickly expand their market share and require specific approach;
- 44% of Chinese executives believe that common understanding of business procedures will enhance both partners (Economist Intelligence Unit, 2012).
Slide 10. Share of world imports
Slide 11. HRM issues
- Recruiting talents;
- Creating unique corporate values for all employees;
- Costly trainings for deployed employees;
- Benefits and compensation plans with regard to particular country’s situation (International HRM Association).
Slide 12. HRM issues (supporting facts)
- Developing efficient methods of evaluation and recruiting managers among locals, expatriates, home-country nationals, and third-country nationals;
- Tensions between western flexible managers and Chinese employees accustomed to rigid management approaches;
- Designing corporate culture with respect to national holidays and mandatory days off (0 in Great Britain, 5 in Luxemburg) or employees’ expectations from the company (Japanese employee expects life-time employment) ;
- Special medical insurance in China, phone communication compensation in Russia, or inflation compensation in Mexico (International HRM Association).
Slide 13. Conclusions
- Globalization of the company does not decrease risks but opens new prospective towards increasing the market share if the whole process is managed properly;
- Entering global market requires cultural, communicational, organizational changes in addition to a clear vision of market prospective;
- The company should be ready to sacrifice resources and redesign its HR policies;
- Rapid growth of developing countries’ trading share requires drastic changes in managerial practices and exceptional communicational skills to establish a long-term partnership with such countries.
Arnold, D. (2003, October 17). Strategies for Entering and Developing International Markets | What Is Different about International Marketing? | FT Press. Retrieved from http://www.ftpress.com/articles/article.aspx?p=101588
Economist Intelligence Unit. (2012). Competing across borders. How cultural and communication barriers affect business. Retrieved from The Economist Intelligence Unit Limited website: www.jku.at/zsp/content/e48784//Competing_across_borders.pdf
Hill, B. (2014). What Are Some Challenges That Firms Face for International Marketing? | Chron.com. Retrieved from http://smallbusiness.chron.com/challenges-firms-face-international-marketing-3356.html
International HRM Association. (n.d.). Managing Human Resources in an International Business. Retrieved from http://wps.prenhall.com/wps/media/objects/728/745520/chapter13.pdf
UK Trade & Investment. (2013, June 13). Selling services overseas: international trade regulations - Detailed guidance. Retrieved from https://www.gov.uk/international-trade-in-services-import-and-export-regulations
US-Pacific Rim International, Inc. (2010, December 13). The 5 Biggest Challenges Businesses Face When They Expand To China - Business Insider. Retrieved from http://www.businessinsider.com/the-five-biggest-practical-challenges-for-foreign-smes-in-the-chinese-market-2010-12