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International Business Strategy

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* Reflective Essay * Case study I: GHEMAWAT, PANKAJ. (2001). Distance still matters. Harvard Business Review. 79 (8), 137-147. * Case Study II : GHADAR, FARIBORZ, SVIOKLA, JOHN and STEPHAN, DIETRICH A.. (2012). Why life Science Needs its own Silicon Valley. Harvard Business Review. 90 (7/8), 25-27. * Case Study III : BEAMISH, PAUL W AND LUPTON, NATHANIEL. (2009). Managing Joint Ventures, Academy of Management Perspectives. Harvard Business Review. 23 (2), 75-94

Reflective Essay

I have always been scared of strategies, I used to always think that I will get confused after studying the module business strategies but I was wrong. My parents have always told me that nothing is difficult unless you try it and I never believed them until today. When I started my assignment I was scared of reading 3 big case studies and I always use to ask myself , how am I going to read all through this pages and write notes on this. The most difficult part was to summarize it only 500 word each case study which had a lot of vital information. But eventually I did it. I tried my best to cover all the important points. I have always been very inquisitive about the word strategies. It can be used in many things like game, work, business and many more. The word strategy is to make a plan before you implement, and one has to make a plan before doing anything. Spontaneous plan do not work every time, so to be on a safer side most of the people plan it. And today I am going to tell you that how this module, the assignments have helped me in many ways. I have overcome from being scared of the word strategy, and this module has played a very important role in doing that. When I started my semester B, I thought that I’ll learn only about “how companies plan their strategies for their business, and I was again proved wrong. Business strategy methods are applicable in our day to day lives and if we implement it then our life becomes very easy. Business strategy talks about different types of strategies that the enterprises around the world use to market their product, and learning those strategies help me understand that how do we get attracted to some products and not all. Sometimes we don’t even know much about the product and we still prefer that as our product? why? it’s because it is their company strategy and we are part of that and we still don’t realise it. I started to see the world in a different way, and I always try to see that if there is any strategy being involved in whatever I do.
The three case studies which I went through as my assignment were so much in depth that I realised that when handling an enterprise or a business not only business related activities matters but a lot more than that. Cultural difference, political impacts, administrative and many more. The first case study I read was about the STAR TV. From this case study I learned that after liberalization and globalisation still there are many factors one has to look at before expansion. And the same mistake was done by STAR TV. They did not take many factors into consideration before trying to expand. When expanding, distance is not the only thing to be considered but factors like traditional and cultural, GDP, administrative, political, same currency should also be given importance. When I read this case study I didn’t agree with the cultural part and after researching and giving a thought for some time I completely agree with the fact that culture plays an important role in expansion in different countries. Not only cultural but even political impact plays a decision making role. It also made me understands that why some country does not allow FDI, its positive effects and negative as well.
The second case study was cluster. When I read the heading, I was quite amazed that why a teacher will give us a case study about Cluster. After reading the entire case study I was not impressed with a research which said that Cluster is beneficial because it has shown that a group people working in the same surrounding with the same goal or similar objectives leads to progress easily and quickly compared to people working across the globe. After this statement I started to think that can this be true or not. After thinking and discussing with my friends I agree with the research and ill tell you why did I think that cluster can be helpful. At first I thought we live in 21st century, where internet, mobile phones and transportation everything is available then why build a cluster. After brainstorming session about this study I made an example about university, thinking that would it be any difference if I stay on campus or off campus or commute from London. The answer which I though was best for me was on campus accommodation. And why did I choose on campus because everything is close by me, my lecture halls, library, teachers. And I meet many people from my course and exchange ideas about the assignment, and the same rule goes for cluster but in a very sophisticated way.
The third and longest case study was about Joint venture. I was familiar with the word JV but I learned more about JV then what I had learned in my degree. I really liked the third case study because there are lot of reference given and it is very simple to understand. The concept of JV was crystal clear mostly because of the examples given were easily observed and understood. It also made me learn about the consequences and side effects about the JV if not done in a proper way. There was a lot of research done on IJV and it gave me a better understanding the important difference between mergers and JV. I was always under the impressions that instead of doing JV why not merge it but even this concept was clear by the end of the case study. A venture should be planned and researched properly because once the joint venture is done, then there nothing one can do but incur a loss or shut the joint venture.

Hence I would like to conclude that I have learned a lot different things from the module and assignments and it has given me a better understanding about the different concepts which I was not aware of .

GHEMAWAT, PANKAJ. (2001). Distance still matters. Harvard Business Review. 79 (8), 137-147.
(Case study: I)
To tap down the overseas market, one often underestimates the cost of doing business overseas. And the same mistake was done by the Star TV. After reading the article I learned that the following factors should really be taken into consideration and I totally agree with it. One of the factors of this mistake was using CPA. Country portfolio analysis (CPA) is a technique to decide a company should compete or not. It highlights more on potential sales and ignores the risk of starting a new business in a new market. When expanding your business, many factors other than geographic distance are important like traditional and cultural, GDP, administrative, political, same currency and many more. Let us take few factors and discuss them in detail. Every country has a different culture, and it’s really important to understand the culture before expanding or starting a new business. Star TV ignored the cultural distance in Asia and incurred in to a massive loss. Culture plays an important role in trade and deciding the product, example Japan origin prefers small household and automobiles; and if the company sells giant products, then it will be a flop. Star TV started English language programming in Asian countries instead of people preferring local language. It did not give much importance to the preference of the local people. They also underestimate the significance of Administrative and political factors. Not all countries are liberalized and welcome foreign multinational companies to invest in their country and increase competition. Even if the country allows Foreign Direct Investment in their country, still there are barriers to enter the market. Some countries do not allow FDI or allow little FDI to protect domestic industries, import protection, reflecting a kind of patriotism, security purposes (like telecommunication industry and satellites rights), over exploitation of natural resources and more. One should always keep an eye on the political factors of the country. Corruption and security of the country should also be kept in mind. Law and order being followed and strict rules and regulation and a good judiciary system attract FDI, while corruption, bribery, loopholes in Law & Order discourages interest in their country. China banned foreign satellites because it permitted people to bypass government controlled news sources. Geographic factors are also not to be taken lightly. Geographic distance does not only defines the distance from your country but it also cover the physical size, transportation facilities, communication, borders, topography etc. all the above factors should be considerate because it affects the cost of transportation. Companies prefer direct investment in local plant and equipment if there are geographic barriers. It has a diminishing effect on investment and trade flows. In brief transportation infrastructure and information network should be kept in mind. Last but not the least is Economic factors. Income of consumers plays a vital role, luxurious or high end level companies prefer rich countries rather than poor countries for their sales. They can take advantage of cheap labour and resources for their manufacturing in poor countries. There are some products like garments, foot wear, where one can trade in poor countries as well. Most of the poor countries trade with rich countries because it is much easier for them to explore the market.

GHADAR, FARIBORZ, SVIOKLA, JOHN and STEPHAN, DIETRICH A.. (2012). Why life Science Needs its own Silicon Valley. Harvard Business Review. 90 (7/8), 25-27.
(Case study: II)
It is believed that very soon a cluster will be formed by varieties of companies, research institutes, entrepreneurs and scientist. Their main goal will be to exploit the rapid discoveries about the human genome. Genome is the genetic information of living things. This will give rise to new ways of diagnosing and treating disease. If this happens then there will be a major change in the field of genomics, it will help to create jobs and bring esteem to the area that organises it. Any country which will start this will have great advantages and U.S.A has started to work on this project already.
It took around $ 4 billion and 13 years to research on Human Genome Project and to make a first complete map of a person genome. Today one can make a person genome in weeks with only $2000. Beijing Genomics Institute is on the correct path to produce 10000 entire human genome sequences a year. Sequencing technology has already started to show positive effects, a genetic mutation was responsible for a five year old severe dehydration. It was also known because of sequencing that identical breast cancers have different genetic profiles. It’s not only helpful to discover innovative treatments but also in economic factors. It created more than 116000 jobs and $16.5 billion in economic output, and yet the study on genome is still incomplete. It is a very long and hard way to complete the entire research. Only 5% of sickness can be diagnosed by single mutation disease.
Cluster has been formed since a long time, there have been many clusters formed before like jute industry in Scotland, diamond cutting in Surat India, electronic cluster in Dongguan China, and many more. Cluster is beneficial because a study has shown that a group people working in the same surrounding with the same goal or similar objectives leads to progress easily and quickly compared to people working across the globe. There has been no theory or technique on how to create a cluster, it is unpredicted, and it can take place in any unusual place. For this to take place, government support is very essential. Government support is not only in financial (tax benefits) but in other forms like demand for product, infrastructure, incentives etc. A renowned example was Scottish government supporting the cluster which ultimately grew to include more than 200 companies, 30 research institutes and 4 research hospitals. Government can also help with clear accessible source data and research which can help the cluster to achieve the goals.
For the government to give accessible source data, one has to spend a lot of money because data for genomics is more than any normal data. It includes more than DNA findings like information on disease outbreaks, patient’s family history and environmental exposure and many other related source. A several billion dollar will be spent to collect and analyse data regarding genomics and few countries have already started to implement on this, especially U.S.A to contribute blood samples and health life style information. Many research institutes collaborated on a $4.5 million breast cancer study which also aims at gathering genomic data and make it available. U.S hosted several clusters but in vain. R&D and institutes are important for the studies.

BEAMISH, PAUL W AND LUPTON, NATHANIEL. (2009). Managing Joint Ventures, Academy of Management Perspectives. Harvard Business Review. 23 (2), 75-94
(Case study: III)
Joint venture (JV) agreement is made in to create new products and services, enter overseas market or both. 2 or more companies enter into a contract to achieve economies of scale, produce new and better products, more reliable and more cheaply. In International Joint ventures (IJVs) local partners help foreign enterprise navigate unfamiliar business practices and policies and many times increase credibility in the local market. In this case study, JV management issues are presented in 6 streams and JV partnering process continues through four classifiable stages (a) strategic logic for creating the venture (b) selecting partner (c) negotiating the terms (d) implementation & ongoing management of the business. Vital decisions are taken by the managers at different stages of process and each decision made in one stage affects ongoing performance and management.

Appropriate indicators of JV performance are the subjective measure and goals vary and cannot be measured. Reformation of the JV shows that it is not performing as calculated. If parent firm are not satisfied with the JVs performance, this could indicate a failure of the parents firm to agree on strategic objective. Manager’s decision regarding performance proceeds is choosing the right and best JV option. It’s not mandatory to have similar objectives or goals but each must be willing to provide access to the resources necessary for its partner to achieve its goals. Secondly partners agree on how JV performance will be considered, which should already be stated in the contract which makes it easier for both the parties to understand before entering the contract. JV is really helpful to multinational companies who want to access local market and business practice expertise to develop local management talent. If all the partners in a JV share the valuable knowledge then there will be no competitive advantage over each other and if it does not share the knowledge then it’s difficult to co-operate and trust, but acquiring knowledge in wrong means can also lead to closure of JV and not giving vital information about the firm may also result in conflict among JV. JV will perform better if it each partner focuses on improving its own capabilities. Only trust and vital information doesn’t lead to improve performance but knowledge acquisition skills must be developed to give better result. Foreign partners mostly have a positive impact on JV performance due to transfer of production, knowledge from the parent firm. Chinese firm seek to access the technological & marketing skills of foreign partners than management skills. International experience and market power plays an important role & Chinese firm take advantage of that. To make the best out of JV, management control should be discussed (split or shared) and being open about their strategies, goals and trust. Cultural difference should also be kept in mind before entering in JV. Some experts believe that it makes a huge difference but some are totally opposite, but one has to do his research before entering. Hofstede identified few traits that relate to individuals work value, uncertainty avoidance and long term orientation.
Studies have shown that market has reacted positively when US firm acquire JVs with heavy investment in RnD and when entered IJVs it has reacted negatively due to perception of Cultural and political difference. Managers should communicate their intention to shareholders regarding how the JV will be used to create value, increase revenue, economies of scale, better management etc.
Reference

* GHEMAWAT, PANKAJ. (2001). Distance still matters. Harvard Business Review. 79 (8), 137-147. * GHADAR, FARIBORZ, SVIOKLA, JOHN and STEPHAN, DIETRICH A.. (2012). Why life Science Needs its own Silicon Valley. Harvard Business Review. 90 (7/8), 25-27. * BEAMISH, PAUL W AND LUPTON, NATHANIEL. (2009). Managing Joint Ventures, Academy of Management Perspectives. Harvard Business Review. 23 (2), 75-94

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