Managing Across Borders-internationalisation of an MNC
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Internationalisation has opened the gateways for the entities to conduct business operations through conducting business expansion in foreign countries. This study sheds light on the evolutionary stages of internationalisation of an MNC. Real world case study of Starbucks has been referred to have a clear understanding about the strategic differences adopted by Starbucks to operate its business in different corners of the world.
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Adaptation of Free Trade Policy across different countries in the world and expectations among the business entities towards expanding its business in foreign markets has increased the rate of foreign trade in the last two decades (Knox, 2018). In order to diversify the product portfolio and generate revenue in foreign currencies, majority of the companies irrespective of its industry is more inclined towards import and export trading or entering into contractual agreements that allows the international firms to use products and services from companies of other countries through adaptation of franchising and licensing (Roelfsema and Zhang, 2018). This study highlights on internationalisation along with discussing the evolutionary stages of internationalisation of a Multi National Company along with providing real world examples of internationalisation.
2. Defining the term internationalisation
From the outlook of economics, Internationalisation is referred to the process that helps in increasing the association of business entities in foreign markets (Torkkeli et al., 2019). Though the term internationalisation is complex to be defined, it is considered as the process of planning and implementing products and the services to ensure that the product or the services are easily adapted in a particular local language, and culture, rather within a process called localisation. On the other hand, internationalisation theory tends to focus on the imperfections prevalent in the intermediate product markets, where the two main types of intermediate products are the flow of knowledge linking to research and development to production, and flow of raw materials and other components from upstream production facility to downstream one (Knox, 2018).
3. Explaining the evolutionary stages of internationalisation of an MNC
The gradual development of a domestic entity towards an MNC is a consequent process, where the entity involved in domestic services starts importing or exporting products in order to understand the foreign market for fruitful business operations. The revolutionary stages of internationalisation of an MNC are discussed herewith:
- Stage 1: The domestic entity – Commencement of a business always takes place with the tagline of domestic entity, where the entity limits the operations, mission, and vision within the political and geographical boundaries. The prime operational motive of a domestic company remains towards searching for domestic market opportunities, domestic suppliers, and domestic buyers. In case of domestic companies, it has been observed that majority of the companies tend to adopt diversification strategy of entering new domestic markets when the company has grown beyond capacity. Presently, a certain percentage of domestic companies are seeking for penetrating the international market through internationalisation strategy and adaptation of new products and technologies (Tolentino, 2017).
- Export operations – The companies that are involved in export operations are more likely to target selling the products in foreign nations and the primary target market is the foreign countries. These companies are concerned about generating foreign revenues and at the same time keeping the production process within the domestic borders in order to keep the production cost low. Domestic production setup and foreign export accounts for higher profitability for the companies indulged in export (Fleury et al., 2015)
- International company – Companies that have grown beyond production or domestic marketing process are more likely to consider internationalisation of business. These companies believe that products and people of the domestic entities and the business practices adopted by the domestic entities are superior to the products being manufactured in other companies. The prime focus of these companies is to conduct domestic business and at the same time focus towards expanding the business wings in the foreign nations for (Jack et al., 2019). These companies clearly develop a suitable marketing mix based on the competitive scenario of the foreign country and in most cases, the companies extends the marketing mix deployed in domestic countries to derive success internationally.
- Multi-national companies – Companies thatalready make a move in foreign business are more likely to expand its business in multiple nations. These entities depend on shift in orientation from ethnocentric to polycentric through expansion of business through expanding offices/branches/ franchises or even as a subsidiary of an existing MNC. These companies are likely to adopt domestic policies in respective nations and the strategies are developed as the requirement of respective markets (Głodowska, Maciejewski and Wach, 2019)
- Global company – A company following a global marketing strategy or global operational strategy is considered as a global company. These companies either manufactures products in home countries and focuses on selling these products in global markets or manufactures these products globally and focus on selling these products at domestic markets
- Transnational company – From the perspectives of a transnational company, the products, markets, investments, and operations are scattered around the world and these entities are basically integrated global companies, which concentrates towards linking the global markets at profitable revenue position. Basically, transnational companies are quite similar in characteristics of the global companies (Luong and Wang, 2019)
4. Real world examples of Internationalisation of an MNC
Considering the real world example of Starbucks, which is presently operating in 63 nations with around 20,000 stores, has emerged as one of the most popular coffee chains has made its marks from Asian countries to Latin American nations, where the success of the company was questioned because of the preference of tea over coffee in some of the Asian nations, especially in China (Ingenbleek, 2019). The management of Starbucks developed different strategies in respect to the trends and requirements of specific nations.
It is still a mystery for many corporate entities regarding the success of Starbucks across continents and in countries with differentiated cultural and ethical backgrounds. Starbucks being a coffee-chain of American origin, the focus of the management has always being on global basis. The company went on to ensure that all the franchises of Starbucks bring a feel of local coffee house based on the culture, ethnicity, and preference of the consumers (Naidu et al., 2019). Despite of undertaking a local approach, the management ensured that Starbucks never lose the brand consistency. In USA, Starbucks have kept provision for coffee types that are well suited for the people of the USA and on the contrary, while operating in countries like China, where the majority of people are more fascinated about drinking varieties of tea, Starbucks adopted differentiated strategy of selling teas and opting out from selling teas.
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Once Starbucks gradually gain confidence of the customers through selling products as per preference and suitable price-list, Starbucks requested people to taste the different coffee varieties and even provided coffee at free of cost, which clearly highlighted the localism approach adopted by Starbucks (Ingenbleek, 2019). Even in other Asian countries, Starbucks arranged seating provision for larger groups, which is not likely to be observed in USA. Business strategies like free birthday coffee, digital strategy that is more customer-oriented, henceforth, Starbucks never feels like an impersonal American corporate giant, rather a local coffee shop.
Considering the case study example of Starbucks, it is evident that localism approach has been a major strategic approach for the American coffee chain in order to ensure success in internationalisation of business. The factor of success depends on the approach towards a particular demographics or community. However, internationalisation has been a boon for Starbucks and therefore, presently Starbucks is one such corporate entities that depends on foreign market more for revenue generation.
- Fleury, A., Shi, Y., Leme Fleury, M.T., Ferreira Jr, S., Henrique Cordeiro, J. and Liang, X., 2015. Framing international operations management: contributions from emerging country multinationals. In Emerging Economies and Multinational Enterprises (pp. 351-377). Emerald Group Publishing Limited.
- Głodowska, A., Maciejewski, M. and Wach, K., 2019. How Entrepreneurial Orientation Stimulates Different Types of Knowledge in the Internationalisation Process of Firms from Poland?. Entrepreneurial Business and Economics Review, 7(1), pp.61-73.
- Ingenbleek, P.T., 2019. The Endogenous African Business: Why and How It Is Different, Why It Is Emerging Now and Why It Matters. Journal of African Business, 20(2), pp.195-205.
- Jack, R., Huang, Y., Sun, J.M. and Guo, F., 2019. Internationalisation of Chinese banks and financial institutions and its implications for IHRM.
- Knox, J.L., 2018. Mitigating Internal Export Barriers for Small and Medium-Sized Apparel Enterprises (SMEs) in Washington State: Internationalization and the Renegotiation of the North American Free Trade Agreement (NAFTA). American Journal of Management, 18(3).
- Luong, N.A.M. and Wang, L., 2019. Factors Influencing E-commerce Usage within Internationalisation: A study of Swedish small and medium-sized fashion retailers.
- Naidu, G., Widhianingtyas, V.K., Alenzi, J.M. and Alfahad, A., 2019. Studying the E-commerce based Business conglomerate (A Study Case: Alibaba. com). Journal of the community development in Asia, 2(1).
- Roelfsema, H.J. and Zhang, Y., 2018. Internationalization and Innovation in Emerging Markets. Foresight and STI Governance, 12(3), pp.34-42.
- Tolentino, P.E., 2017. Technological innovation and emerging economy multinationals: the product cycle model revisited. International Journal of Technology Management, 74(1-4), pp.122-139.
- Torkkeli, L., Kuivalainen, O., Saarenketo, S. and Puumalainen, K., 2019. Institutional environment and network competence in successful SME internationalisation. International Marketing Review, 36(1), pp.31-55.
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