International Business Essay

        An increase in internationalised companies seems to be one of the most significant trends in today’s business environment (Yu and Ramanathan 2012). Wild and Wild (2012, p48) states that national business environment is one of the four distinct elements within the dynamic, integrated system of international business. This environment is defined as (Wild and Wild 2012, p49) each nation having its unique cultural, political, legal, and economic characteristics that define business activity within that nation’s borders. They also explained that each environment is different from each other until globalization takes place which then influences a firm’s strategy decision. Yu and Ramanathan (2012) claims that business environments start to evolve and companies who aims to adapt and expand its business in a global market faces with the complexity and uncertainty inherent in the dynamic nature of the market. Emergence of new business environments, unfamiliar consumer preferences, location choices for performing business activities, and effective co-ordination of global operations all affects a company’s strategic choice. For example, Barron (2011) as referred to Epstein (1969) stated that organizations should use governments as competitive tools for creating business environments that favour their activities. He also believes that cross- cultural management is crucial because it affects many different individual-level outcomes, including perceptions, beliefs and behaviours. Hence, managers should decide whether to use a differentiation or standardized strategy to meet customers’ needs based on the nation’s business environment so that the market can accept the company easily.

        Business environment has two dimensions according to Yu and Ramanathan (2012) which are hostility and dynamism. They state that hostile environments increases challenges such as price competition, rising business costs, low profit margins, legal restrictions, shortages of labour or raw materials, and unfavourable demographic trends. In contrast, environmental dynamism (Yu and Ramanathan 2012) refers to the extent of the unpredictability of change within the company’s environment, for instance, rate of change and innovation in the company’s principal industries, introduction of new products and services, and the uncertainty of competitors’ actions and customers’ preferences. Dynamic environment requires companies to contend with rapid changes in technology, customer needs and preferences, as well as competitive action.

        Appropriate operation strategy is crucial for the success of a business as national business environment differs in market, growth rate, labour and culture barriers. The companies must “think global” but “act local” (Yu and Ramanathan 2012). Yu and Ramanathan (2012) stated that companies should decide whether to standardised or adapt locally based on the resources and capabilities of the dynamic business environment. They had done a case study on a foreign firm in the China market and the findings were recorded. The case company’s name is reported as “A-Retailer” for confidential purposes. China market was reported to have unique shopping habits and lifestyle which makes differentiation strategy preferable. Most buyers are cost conscious and calculative on their purchase, thus purchasing decision emphasize on product price rather than store brands, making customer loyalty hard to maintain (Yu and Ramanathan 2012). Therefore, to remain competitive in China, A-Retailer tends to attract customer through low prices rather than quality. It also provided unconditional refunds, even without product quality problems to compete with local retailers.

Next, unique culture in China such as customer preference and taste, competitive moves, or government policy has shift decision to a more localized strategy. A-Retailer went into joint venture with Chinese partners to share its partner’s extensive local knowledge and operating expertise. For example, (Yu and Ramanathan 2012) Chinese people like to eat fresh foods, and therefore A-Retailer in its daily counter introduced hundreds of ready-to-eat, freshly-cooked foods in Chinese style. In addition, A-Retailer offered street style food such as little dumplings and rice cakes in its chain stores to meet local needs. According to the shopping habits of Chinese customers, during the promotional period and different season periods such as Chinese New Year, A-Retailer provided a large range of festival products, free storage service for reserved electrical appliances for three months and deliver on customer requirements. During that period of time, it also offered special services such as free consultancy service and repair service. Thus, differentiation strategy is mostly used by international firms as locals understand the market’s need better and most scare resources are controlled by local possessors.

In addition, (Yu and Ramanathan 2012) China is a big place, and because customer needs are very different across regions, it is impossible to run all stores from one central office. Understanding these regional differences, A-Retailer appointed three regional managing directors who will each look after different regions which is the North and North East region, the Eastern region, and the Southern region. Nevertheless, A-Retailer adopted a standardized international marketing strategy on “quality, value and service” to build a strong brand image in China market. This is to prove that it adheres to the same regulations, certification and quality control globally.

Research has further shown (Liu et al. 2015) that foreign companies found a positive correlation between localization and firm performance. Localization means that the firm operate according to local norms, adapt products to suit local tastes, localize a corporate image and become socially embedded in local networks. They propose that appropriate localization strategies are crucial when firms face uncertainty in host countries. This importance is emphasized as foreign companies depend not only on a host country’s human resources for local production, but also on marketing and information resources for local operations, adaptation and rely on some country-specific, non-substitutable resources for local market expansion.

Liu et al. (2015) states that business environment comprises risks which affect a company’s performance in host countries. They examined two risks which are industry and political factors which include input-market uncertainties, product-market uncertainties and competitive uncertainties. These uncertainties lead to different choices of strategy because the influence of customers, suppliers and competition in a host country differs substantially. Research found that (Liu et al. 2015) companies are not passive takers of environmental risks and strategies are adjusted to accommodate to different nation’s factors. Some companies’ products could be standardized such as Apple’s IPhone (Hovivian 2014). This product is sold in more than 115 countries without having the need of customizing its features and looks. IPhone is designed similarly regardless of its market region and still being accepted globally. Hovivian (2014) states that the benefit of IPhone’s standardized design is it establishes a global brand with a strong identity.