The main objective of this paper is to identify problems which companies face while entering and operating in global market and also to understand the solutions to those problems.
Background: Global business refers to activities carried out by companies to serve customers across the world. A Company that is well well-known in its local market realizes the limits to grow further in that market after a certain period, and starts looking for other options to increase its business. Company starts exploring the opportunities available outside the country. Company first focus on developing its operations in other countries after that focuses on increasing profits and revenues. A company needs to make its global strategies keeping in mind the environment, demands, consumption, economic condition, culture, government policies, and people of that country. In present situation competition is present globally as most of the big companies operate globally. One company is present in multiple nations along with same competitors. Few major characteristics of global business are; Competition is present everywhere, Attempt to capture as many markets as you can, Centralize management, Understanding the requirements of customers of different countries and provide them solution or product accordingly, Integration of activities.
Before entering into global market a company should look thoroughly into the followings: the importance of the services, concepts or products in the market and their use. Mode of entering into market means through direct trade or through simple investment. Source of raw material supply and instant availability as per requirements. What changes are required in existing product so that it fulfill the need of customers in other country. Existing competition at local and international level, and how company will take lead over the competitors.
Different countries are having different sets of needs thereby global companies started decentralization of their activities. Like establishment of local research and development department, Decentralization of decision making power, and introducing different type of products across the world. While establishing operation in other countries, companies face various challenges, which we will discuss further in the paper.
The major problems faced by any company, which is preparing to go global can be divided into two parts. Part one deal with the problems faced by company before and while entering into global market while Part two consists of problems faced by company while operating in global market.
Companies face problems due to unfavorable Government Policies. For any company while entering into global markets it is very important to understand the government policies of another country. What are the government policies, are they in favor of globalization or not, what are the terms and conditions etc. Standards and regulations specified by government are friendly for international companies.
Companies also face various problems because of Cultural Diversity and Geographical factors. Before entering into global market company need to evaluate its products or services on the parameters of cultural needs of potential country. Company should launch the product which does not have any cultural conflict. Company should also see the geographical conditions of country, its accessibility, environment and climate conditions etc.
Company has to face a variety of challenges from different competitors existing in the market. If company is not the first mover, it has to face lot of challenges. Company need to fight with local market player as well as other well-known international brands already operating in the market. Some time it becomes really difficult for a company to dominate over local player as they are having strong bonding with the customers and trust built over the time. Company need to position it products in a manner that they show advantage over existing products in terms of lowering down the prices or adding on few features and services etc.
Companies global strategy is generally focused on two main aspects uniformity and adaptation which itself is a challenge for companies. Uniformity of product means same product across the markets. Companies focus on basic need of customers and do only little changes while launching it in international market. The strategy is very cost effective and requires small investment.
On the other hand adaptation strategy is focused on customizing the products keeping in mind the local needs of customers. In present scenario where customers are very demanding a uniform product does not fulfill the need of customer. Companies need to focus on various aspects like buying capacity of people, cultural and environmental conditions of the country. There are various challenges linked with this strategy. Due to variety of products company incurred higher production cost. Company need to establish local Research and development center to understand the local needs and to study changing customer behavior pattern. Company need to decentralize its control and delegate the authority at local level.
If we go down one step further we will see many other challenges faced by the companies. Like Availability of good infrastructure and distribution network. If infrastructure conditions in target country are not good than operating cost for the company will be comparatively high. Companies also need to see the challenges related with production cost. There are various factors which influence production cost like; availability of cheap labour, availability of raw material, transportation cost and cost of technology etc.
Economy Watch. (n.d.). Retrieved October 5, 2011, from www.economywatch.com: http://www.economywatch.com/business/global-business-strategy.html
tutor2u. (n.d.). Retrieved October 4, 2011, from www.tutor2u.net: http://tutor2u.net/business/strategy/global-business-global-strategy.html