Discuss why organizations may choose one strategy over another when expanding into the international market.

1.Herman Montgomery Iv

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Choose two international strategies, compare and contrast them, and discuss why organizations may choose one strategy over another when expanding into the international market.

Joint Ventures: Joint ventures is an international strategy that “requires a greater level of commitment. Also governed by an agreement between the two parties, a joint venture requires the formation of a separate corporate entity jointly owned by the two parties.”(Abraham, 2012) The issue with international joint venture strategies is the fact a company needs to be concerned with the company and the country in which they are attempting to partner with. Companies that are interested is setting up an international joint venture need to “take measures to protect against government expropriation such as by limiting the circumstances in which it would be considered legal, defining a lump sum in U.S. dollars should expropriation occur unexpectedly, and taking out expropriation insurance before signing an agreement.”(Abraham, 2012)

Acquisition: Is the fact of acquiring another company. However, with international acquisition there are still numerous things to be concerned with. On a positive side with acquisition companies tend to purchase because of the infrastructure of actual store fronts and locations are already in place. Companies in the business of acquisitions need to “realize that negotiations to acquire a company in another country are more complex than those for a domestic acquisition and must deal with two legal systems; only about 20% of cross-border bids lead to a completed acquisition compared to 40% of bids for domestic acquisitions (French dressing, 1999).”

Both of these international strategies can aid a company when they are trying to expand in an international market. The big thing is the fact why would a company acquire another versus just doing a joint venture. Acquisitions take a lot more effort and time to complete. It is easier for the most part for companies to do a joint venture or alliance.

Abraham, S. C. (2012). Strategic Management for Organizations. San Diego, CA: Bridgepoint Education, Inc.

French dressing. (1999, July 8). The Economist, 53–54.

2.Scott Ogden

Scott Ogden

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There’s something comforting about McDonald’s regardless of where you are in the world. You know a Big Mac in Japan will taste the same as a Big Mac in France. Moreover, if I want a matcha tea McFlurry, I can get one at McD in Japan while in a Paris McD, I can enjoy a warm croissant with a grand crème coffee. With this in mind, I’ll examine franchising strategy and multidomestic strategy.

Franchising offers an opportunity to acquire a brand that has already been successful in its own market (Williams, 2018). Some benefits include an established name, brand reputation, and a fully functioning business partner prepared to offer guidance and financial backing. Examples of international franchise success stories are Sixt Rental Car (Germany-based), Eversheds Sutherland Law (UK-based), and Nandos (South Africa-based). It’s one thing to launch in a foreign country, but how well do you know the market? This is where multidomestic strategy becomes valuable. Multidomestic strategy is “when cus­tomer demands and needs vary substantially from country to coun­try, forcing a company to modify any combination of product fea­tures, packaging, advertising, ser­vice-delivery methods, and pricing… (Abraham, 2012). In order for a franchise to be successful, the business owner to understand consumer needs and cultural preferences. Burger King is an example of a large American-owned company who initially failed in France. Rather than examine French dining norms, BK maintained it’s unhealthy American style fast food options and neglected to include a few healthy options. The chain soon closed their restaurants and took a 15-year break before re-launching in a small airport in South France.

Organizations may select franchising for growth opportunities overseas, profit margin gains, and decreased reliance on the domestic market. To ensure success, multidomestic strategy is a factor. Meeting customer needs and demands is a necessity to generate revenue. Organizations should consider country-specific cultural preferences, religious concerns, size constraints, etc. to be successful when operating in a foreign market.

References

Abraham, S. C. (2012). Strategic management for organizations. San Diego, CA: Bridgepoint Education, Inc.

Williams, N. (2018). What is master franchising. Business Franchise, (274). Retrieved from http://search.ebscohost.com.proxy-library.ashford….