Running head: INTERNATIONAL BUSINESS
Discuss the three attitudes or orientations that affect how a company and its managers adapt to foreign cultures
Companies, in the world, adapt to various attitudes with an aim of coming up with organizations that deal well with the challenges facing international businesses. The common and most used attitudes are, Ethnocentrism, Polycentrism, and Geocentrism. The three attitudes form a model better known as EPG model. It is this model which various companies put into play to help overcome international businesses’ challenges. The model is useful in pin pointing a company’s focus as at times, due to various influences like foreign culture, a company may lose its focus and end up indulging in activities which do not benefit it. Many companies have grown out of national levels, when it comes to business, and on involving themselves in international businesses, the companies need to restructure their organizational strategies and procedures while planning. Care has to be taken as managers find themselves in a dilemma, whether to use the domestic strategies in international markets or come up with new strategies targeted at international markets only. Thus, for this purpose the various international companies put to play the EPG model.
EPG model is an abbreviation for Ethnocentrism, Polycentrism, Geocentrism model, and it stands for three attitudes put into place by international companies. Ethnocentrism is a strategy put into play by companies that has mainly international strategic orientation. Management is responsible for initiating the attitudes, as for ethnocentrism, it sees the employees as quite important and tend to use domestic techniques and employees. The management sends out their home employees to the host countries, mostly done when setting up a new branch of the company in the host country. The benefit which comes out of this strategy is that the employees are exposed to new things such as new culture, and they get to learn a lot. This, in turn makes running of the organization’s branch, abroad, much easy as the home employees utilize the new skills and knowledge in running the branch. Basically, the attitude of Ethnocentrism is based on the notion that one’s own group is at an advantage or is superior to any other group.
Discuss the alternatives available to a company when facing import competition that threatens its market position.
When imports in a country increase to high levels, the country is bound to face different difficulties. This may be unemployment as a result of high and cheap labor services from abroad plus companies in that country lack market within the domestic country as people may go for the cheap imports flowing in the country. Subsequently, this affects the country’s economy as unemployment would be on a rampage and domestic companies suffer as a result of lack of market in the domestic country (Kandilov, 2010).
The foreign countries pose as a competition to the domestic companies, and in a quest to deal with this completion, various alternatives can be put to play. One is requesting the domestic government to intervene and carry out investigations on the quality of the cheap imports. Often, the cheap imports people buy are of low quality that explains why they are cheap. In a mission to determine the quality of these imports, the government can deploy standard and quality bureaus to do so. In case the quality is compromised, the government is obliged to stop the importation of the cheap goods at the advantage of the local companies.
Alternatively, the government may seek to increase taxes on the imports as a way of curbing cheap imports. This can be done when the local companies seek their government’s aid in curbing foreign competition. Subsequently, this leads to the foreign countries finding it difficult to bringing in their products as a result of high tariffs in the foreign countries, thus leaving the available market to the domestic companies. Import licenses are also a way of reducing competition to the domestic companies. The import licenses are issued by the government, subsequently allowing only certain imports. All these act as trade barriers, which are imposed by the government, to protect its economy and industries at large. This also reduces unemployment within the country (Bhagwati 1982).
Other than seeking the government’s help, domestic companies have the alternative of relocating to foreign countries to cut on the costs they face. If the foreign countries provide a cheaper ground for production and a better market for the finished products, a company may shift its production and market base to deal with the high competition back at home. However, this leads to firing of the employees back in the domestic country leading to an increase in unemployment within that country. Competition within the country leads to low sales and low profit margins due to the high costs of production. Initially, the company on shifting to a foreign country may face high costs of shifting but once settled in the foreign country the production costs reduce as well as the completion thus the sales are high and the profits (Katics and Petersen, 1994).
The company experiencing competition from the high imports within the country may, as an alternative to reducing import competition, try and increase their quality of products or services. This will in turn attract domestic consumers who would see their country’s products as high quality and opt to purchase those other than the imports. The domestic companies may also subsidies their product prices as a way of reducing the competition. This also attracts the domestic consumers as they would compare the local products to imports and go for the domestic which have subsided prices.
Since the companies are in the race to reach the same consumers with similar products, an alternative way the company may opt to take to face competition from imports is choosing a creative marketing strategy. Using unconventional methods to market the products to the consumers will aid the company in dealing with the high competition that faces the company from the foreign companies. Coming up with a unique product campaigns will attract more consumers, thus, beating the foreign competitors. In addition to using unique advertisement, the company may also research on untapped market within the country and dominate it. The domestic company has an advantage over the foreign companies, in that, it is familiar with its country’s market and can be able to locate the untapped markets easily and at a less cost than foreign companies. This will see to it that the company’s market is vast and widely spread and in turn receive less competition and at the same time maximize their profits.
Differentiate the strategies of diversification and concentration. Provide examples of situations in which each would be used.
Companies employ various strategies to maximize their profits and ensure their businesses are vast and well known among their consumers. Among the various strategies companies employ, diversification and concentration are two strategies, which stand out as contrasting methods and employed by different companies. Diversification and concentration strategies are both methods imposed in business activities by different companies with an aim of specialization in one area and for others, in many areas, respectively. This sees to it that the company’s profits are maximized, and the company develops (Flouris and Oswald, 2006).
Diversification strategy is employed by companies which aim at having different products or services available for the market. In addition, it also targets different markets to establish their activities. This subsequently leads to the company growth as it ventures into different industries in the market. One of the causatives behind a company’s decision to utilize diversification strategy is the availability of excess resources of which not unless the company ventures into more activities other than its main one the extra resources would go to waste. An example is a sugar company, where the industry manufactures sugar and produce molasses as a by-product but instead of throwing it away, they venture into production of methane gas from the molasses (Smith 2006). There are two types of diversification strategies and they are;
Related diversification strategy
Unrelated diversification strategy
Related diversification strategy refers to a growth method applied by a company to maximize its profits. It involves the company maximizing production by venturing into activities which results to synergy among them. The different activities the company indulges in at some point they overlap, may it be the production of the goods or even the provision of different services. When the company exploits its resources in a quest to diversify, an overlap occurs either in the resources used, both human and material, or the markets supplied, the operations carried or in the products manufactured. Creating an overlap in the various areas ensures that the company does not create a duplicate of that overlapped service, rather uses one in different areas, subsequently cutting cost which eventually ensures a higher profit margin. An example is in the clothes manufacturing industry where the company may manufacture its cloths, at the same time create branding industry and eventually sell the cloths (USC Marshall, 2008).
Unrelated diversification, on the other hand, involves a company involving itself in operations in different industries which have no relation to the main industry. In this type of strategy, the company diversifies in various strategies but there is no synergy in the activities the company carries out. Holding companies act as examples of companies which involve themselves in unrelated diversification as they tend to indulge into unrelated businesses such as real estate businesses.
Concentration strategy involves a method employed by a company with an aim of growth and it involves the company concentrating on one line of business, the core industrial activity. The strategy is applied by a company which chooses to be in one line of business. The strategy has an advantage as the company concentrates its efforts on one activity, thus, developing the industrial core activity. The company indulges in one type of business and it can involve the company taking on one type of market and establishing its core activity on that market only. An example is a steel industry involved in only manufacture of steel products only (Flouris and Oswald, 2006).
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