Posted: May 25th, 2022

Management When businesses go international

International Management

When businesses go international, they have to face a number of issues and challenges from their external environment. The international business environment is much more complex and multifaceted than local environment. Business organizations have to deal with a number of environmental forces that directly or indirectly affect their business operations. These forces include political forces, economic forces, social, cultural, and demographical factors, technological forces, and competitive forces (Loudon, Stevens, & Wrenn, 2004). The international business expansion strategies also require the business organizations to analyze the local cultures, the kind of reception they anticipate from the local government, suppliers, distributors, and the community, control issues, and leadership, motivation, and communication issues and problems which their managers may face at the workplace (Hill & Jones, 2007).

This report acquaints the readers with an example of international business expansion strategy pursued by an American business organization into India as its new international market. The opening section of the report gives an introduction to the organization; its products, location, size and scale of operations, and other important profile elements. The next section proposes Australia as a potential target market; recommends an entry strategy for international expansion and gives rationale for this choice. The main body of the report consists of an analysis of the external environment which the company will have to face in the international market and different kinds of challenges which will be waiting for its managers in this market. These challenges include recruitment and selection, cultural diversity, leadership, motivational techniques, communication systems, control issues, and concerns of the host country and the local community. The report concludes by summarizing the key points from the discussion.

Fast Communications: The Company Profile

Fast Communications is a Latin American-based business corporation mainly engaged in providing home communication services to its clients all over the country. It was established in 1995. The main products and services offered by Fast Communications include fiber optic network of High Definition Television channels, high speed internet services through fiber optic network, advanced digital home telephone sets with multi-functionalities, and others. The products and services offered by Fast Communications are used by both home users as well as business clients. It high definition television channels provide full time entertainment to its home users like movies, music, TV shows, games, etc. The digital home phones and the Internet based on fiber network provide a fast and affordable communication system to home and business users.

Fast Communications is one of the fastest growing telecommunication service providers in the United States. It has a strong brand image and high level of customer acceptability in the eyes of household users as well as corporate clients. Fast Communication has a sound financial strength and strong business presence in the local market. It has a large customer base and supplier network all over the country. Fast Communications operates with more than 30,000 employees in both technical and non-technical positions. Keeping in view the potential opportunities in the international markets and advantages of internationalization for its business growth, Fast Communications has decided to expand its operations into some attractive market. The international expansion strategy will open new horizons of success and prosperity of Fast Communications in the Global market. It will not only help it in developing its brand image in the Global market, but will also make it stand among the multinational telecommunication service providers of the world.

Australia: the Rationale for Choice

Australia has been chosen as the most potential market for international expansion due to availability of vast investment opportunities and favorable environmental conditions for telecommunication services organizations. Australia is a land of opportunities for investors and multinational organizations. If Fast Communications invests in Australia, it will be able to grow its business in a very short period of time. Australia has a high per capita, one of the most stable currencies, a fast-paced service industry, and an advanced telecommunication infrastructure for households and industrial sector. Australia is one of the most developed countries of the world and has the most favorable economic, political, legal, social, and cultural environment. Fast Communication can find a large consumer segment in Australia which can become potential target customers for its telecommunication products and services. It can target households and business customers for its fiber optic-based television channels and internet services. The major cities which can be targeted in the initial phase are Canberra, Sydney, Perth, Brisbane, Adelaide, and Melbourne.

Entry Strategy: Joint Venture

Fast Communications has a strong brand image in the United States market. However, it will have to make efforts to develop the same strong brand image in the new international market. Therefore, direct penetration strategy into Australian markets through fully self-funded operations will be a risky investment for the company. There are various country penetration strategies which can be assessed by Fast Communications to choose the best way to enter this market. Keeping in view the different risks and challenges of international business expansion strategy, it is recommended that Fast Communications chooses joint venture to enter the Australian market in the safest and an effective fashion. The Joint venture will allow Fast Communications to enter this market without making huge investments and by sharing the potential threats with some existing well-established business (Hill & Jones, 2007). To make the joint venture, Fast Communications will first need to invite potential investors from the host country to make long-term business relationships and start operations on large scale in selective cities and towns. Once Fast Communications establishes its business presence in the most populated and developed cities of the country, it can purchase the shares from its business partners and become all in its strategic moves in the long run (Lambin, 2007).

Environmental Analysis

The international business environment will bring a number of challenges for Fast Communications. These challenges will be imposed by different environmental forces which are the part of Australia’s business environment. These forces include political, legal, and governmental forces, economic forces, social, cultural, and demographical forces, technological forces, and competitive forces (Luther, 2011). Each of these forces will have a direct impact on the company’s business operations and its effective performance in the industry. These are now explained below in detail:

1. Political, Legal, and Governmental Forces:

Political, Legal, and Governmental forces are among the most important environmental forces that impact the businesses of new entrants in a country. These forces consist of laws, regulations, and regulatory frameworks which every business organization has to follow in order to operate and grow in the country in the legal way. Fast Communications will have to adhere to the local laws and regulations which are imposed by the Australian Government for business organizations in general; and telecommunication service providers in particular. Fast Communication will see a favorable governmental behavior in Australia as the Government of Australia has always been showing a positive response and support to the foreign investors that wish to setup their business in this country. At the same time, Fast Communications will have to keep itself fully aware and updated of the policies and procedures that are set by the Australian Government from time to time. These policies and procedures are mainly related industrial relations, business and marketing ethics, social welfare concerns, environmental protection measures, audit and compliance procedures, investor relations, international trade, taxation policies, and others.

2. Economic Forces:

The second most important force in the external business environment is economic force. This force consists of factors that deal with the earning and spending patterns of the general public, business organizations, and the Government in a country (Lord & Ranft, 2000). The economic conditions of Australia are quite favorable for foreign investors. Reason being, it is one of the fastest growing and well-developed countries of the world with high per capita, low unemployment, massive exports, advanced telecommunication and financial infrastructure, and strong outer world relations. However, Fast Communications will find the same high prices of technological products and other services in this country as they were in its parent country. To deal with the high prices and expensive running of business operations, Fast Communications will have to move in the industry in a very cost-efficient and tactful way. It will have to manage its business costs effectively and cut down unnecessary expenditures in order to ensure high profit margins and superior financial performance over the years (Hill & Jones, 2007).

3. Social, Cultural, and Demographical Forces:

These forces are related to the life styles and preferences of the general consumers with respect to their local culture, societal values, and demographics. Australians have a contemporary lifestyle where they are pretty close to the high-end technological products and fast-paced communication networks. The per capita income in Australia is also among the highest in the world. Keeping in view the life styles, preferences, and income level of Australians, Fast Communications can confidently offer its communication services like high definition television channels network, super-fast fiber optic internet, and advance digital home phones to a large consumer segment. It will find the most potential customers in the major cities of Australia like Perth, Melbourne, Sydney, Canberra, etc. After establishing its presence in these cities of the country, Fast Communications can expand its operations to other cities and towns in order to grow on a continuous basis.

4. Technological Forces:

Fast Communications operates in the telecommunication industry. Therefore, it not only has to make huge investments on Research and Development in its own country, but also has to keep itself abreast of the changes in the technological environment in the entire world. While penetrating in the Australian market, Fast Communications will first have to analyze the competitive environment in the country, i.e. The strategies and actions of the local firms in Australia. In order to keep itself on the competitive edge, Fast Communications will have to provide products and services that are advanced, well-priced, and able to cater the needs of the target customers.

5. Competitive Forces:

Competitive forces entail the pressures and threats which are imposed by the competitor firms from the industry. Fast Communication will have to compete with these local competitors in order to survive and ensure a sustainable future in the industry. These local competitors may consist of well-established large scale businesses as well as small scale telecom service providers. Competitors are an important environmental force because it directly impacts the customer base, sales volume, and profitability of the company. Fast Communications will have to deal with this competition if it wishes to develop its presence in the new market, gain a high market share, and become a successful multinational telecommunication service provider (Kotler & Armstrong, 2008).

Cultural Profile

Australia has a diverse culture — the population consists of local citizens as well as large number of immigrants from other countries and regions. All types of family systems are found, i.e. independent, joint, and separated. Overall, Australians are open-minded and eager towards modernized products and services. Fast Communications can mainly target families for its high definition television channels and home digital telephone sets; students (youngsters and teenagers) for games, music, and movies; and professionals and business corporations for super-fast internet services.

When Fast Communications will expand its business operations from local to international level, it will have to deal with diverse people from different cultures and regions. These people will eventually become its customers, employees, suppliers, distributors, and investors. In order to deal with the diverse kinds of customers, Fast Communications will have to train its employees in different sections of customer services like public dealings, problem solving, technical services, etc. The same issues will be faced when it will have to do recruitment for its international offices. The recruitment of new employees will be done from the host country. The workforce hired for this international expansion project will consist of members from different cultural backgrounds, races, nationalities, and religions (Lancaster & Withey, 2007). The management of this culturally dispersed workforce will also be a hard challenge for Fast Communication’s managers.

Fast Communications will receive a positive response from the local governments, suppliers, distributors, and other key stakeholders whereas a revolting response from its competitors. The local government will take this international expansion project of Fast Communications as a positive sign for the country because it will facilitate in improving its telecommunication infrastructure, bring more capital in the industry, increase the level of employment, and attract related industrialists to take advantage of this investment in the country. The suppliers and distributors will find a new customer for their business in the form of a well-established Latin American corporation.

Organizational Chart

Figure 1 shows the proposed organizational chart for Fast Communications for its international business expansion strategy in Australian region. The President and CEO of the Australian region will head all the Chief Operations officers of the company like Chief Finance Officer, Chief Operating Officer, Chief HR Officer, etc. The Chief Operating Officer will supervise the performance of all the directors of the company and will report to the President and CEO. This organizational structure is proposed because Fast Communications needs a functional structure in order to perform effectively in a multifaceted and complex environment (McDaniel & Gates, 1998). In this way, the Directors will not directly report to the President. Instead, they will have to show their performance to the Chief Operating Officer who will report their progress and formulate policies in the supervision of the President.

Director Social Media

Director Diversity Mgt.

Director Supply Chain

Director Marketing

Director Finance

Director HR

Director Operations

Director Brand Mgt.

Director Legal Affairs

Director Production

Corporate EVP [Supply Chain]

EVP, Chief HR Officer

EVP, General Counsel and Secretary

Chairman

Chief Operating Officer

EVP and Chief Financial Officer

Chief Brand Officer

EVP Operations

President and CEO

Australian Region

Figure 1: Organizational

Chart

for Fast Communications in Australia

Staffing Policy for Top Managers

Fast Communications can make hiring of top managers from both parent and host countries. In either case, it will have to offer attractive salary and compensation packages. These packages should be competitive enough to keep the managers motivated and committed towards their job responsibilities. While doing recruitment for its international project, Fast Communications can invite open applications from host country as well as from third countries. At the same time, it can call highly qualified, talented, and skillful managers from its parent country offices and Headquarters to perform their duties as expatriates on its international assignments. The extra financial and non-financial benefits which Fast Communications may have to offer to its expatriate managers include housing allowance or Cost of Living Allowance, Hardship allowance, travelling allowance, medical and health insurance, etc. (Tellis, Stremersch, & Yin, 2003).

The expatriation of managers from parent country is recommended to the company because it has an edge over other staffing policies. That is, the managers who will come from parent country to serve their company on its international projects will be familiar of its policies, working patterns, operations, and internal culture. They will not need to be trained before they can join the company in Australia. On the other hand, newly recruited staff will take time to learn the organizational working patterns and cultural values.

Leadership and Motivational System

Fast Communications will have to use directional and transformational leadership styles on its international project in Australia. Through directional leadership, the employees will learn the company’s mission, vision, and strategic goals; whereas transformational leadership will keep them attached to their job responsibilities through effective guidance and training. The newly recruited employees will have to undergo a complete training session before the start working for the company. This training session will consist of initial orientation and subsequent workshops in which employees will learn the organizational values, working pattern, work options, their specific job responsibilities, and the expectations of the company from them.

The managers will also have to use different motivational techniques to encourage their newly recruited employees to work harder and more dedicatedly. The most effective motivational technique is individual attention to each employee. The managers must look over and supervise the performance of each employee who comes under their control and assess his progress over time. The high performing employees should be given a fast-track to move upward in the organization whereas low performers should be motivated to perform well. In order to ensure high employee commitment, superior organizational productivity, and low employee turnover, Fast Communications should offer mark-to-market salary packages to its employees. Money is the biggest motivational factor in the business world. If Fast Communications wants to get its work done in an effective and efficient fashion, it will have to keep its employees motivated through both monetary benefits as well as through performance appraisals on periodical basis.

Communication Problems

Due to a culturally dispersed workforce, the managers at Fast Communications will have to face serious communication problems at the workplace. The employees who will come from different regions will not be able to understand the cultural values or communicate with their coworkers effectively. In order to solve such problems, the managers will have to build a strong organizational culture at Fast Communications. They will have to make the employees learn the cultural values of other employees, respect their cultures, work with mutual efforts, and share their information with each other. The communication channels can be made more effective in order to boost up the communication process in both horizontal (between different departments) and vertical (from lower to upper) directions.

Control Issues

In addition to the environmental forces and cultural issues, the managers at Fast Communications may also face serious control issues in the company’s day-to-day affairs. In order to avoid these control issues, the managers will have to keep an effective check and balance of all the activities and affairs of their staff. The performance of the company should be monitored and reviewed on periodical (weekly, monthly, or quarterly) basis and compare this performance with the set benchmarks or standards. If any deviation from the standards is found, the managers must take some corrective actions in order to solve the problem and meet the set standards. Moreover, the company should also have a strong Internal Control which will be responsible to protect the company’s assets and resources from misuse and inefficiency. The internal control team will also check the managers’ performance and assess whether they have subordinated their personal interests to the interests of the organization or not.

Concern of the Host Country and the Local Community

Fast Communications will not only have to struggle hard for its business growth and profitability in the Australian market; it will also be supposed to show an equal concern for the community it serves. It will have to make investments in social welfare, environmental protection, and community development projects. These efforts will help it in proving itself as a socially, environmentally, and ethically responsible corporate entity. It can initiate by making investments in green environment schemes, educational reform programs, and natural resources protection initiatives, etc. Another step to become an ethically responsible company is to develop marketing campaigns carefully so that they do not hurt the cultural or religious values of any group of the society. In order to get the full support of the local government, Fast Communications will have to adhere to the local laws and regulations. Moreover, it will have to actively participate in projects where the local government demands foreign investors’ support and contributions (Perreault & McCarthy, 2002).

Conclusion

Fast Communications will find attractive opportunities to grow its business in the Australian market. It will find a favorable governmental behavior, an advanced telecommunication infrastructure, stable economic conditions, fast-paced industry, and well-off consumer groups. However, it will have to face certain issues and challenges in this market like competitive threats, technological advancements, environmental forces, etc. In addition, the company can also face some internal organizational issues like cultural diversity, communication problems, internal control issues, leadership and motivational systems, expatriation challenges in the staffing policy, and investments in social welfare issues (Wilson, 2002). All these challenges and issues will be an important part of this international expansion strategy. If Fast Communications wishes to establish its presence in this international market, it will have to carefully manage these issues and avail the attractive opportunities in an effective and competitive fashion (Cherunilam, 2007).

References

Cherunilam, F. (2007). International business: text and cases. India: PHI Learning Pvt. Ltd. Deresky, H. (2010). International Management, 7th Edition. U.S.: Prentice Hall

Hill, C., & Jones, G. (2007). Strategic management: an integrated approach, 1st Edition. U.S. Cengage Learning

Kotler, P., & Armstrong, G. (2008). Principles of marketing. 11th Edition. U.S.: Pearson/Prentice Hall

Lambin, J.J. (2007). Entry Strategies in the Foreign market, Palgrave Macmillan, Retrieved on December 18th, 2012, from

Lancaster, G., & Withey, F. (2007). Marketing Fundamentals. U.S.: Butterworth Heinemann

Lord, M.D., & Ranft, A.L. (2000). Organizational Learning about New International Markets: Exploring the Internal Transfer of Local Market Knowledge, Journal of International Business Studies, Palgrave Macmillan Journals, 31 (4): 573-589.

Loudon, D., Stevens, R.E., & Wrenn, B. (2004). Marketing Management: Text and Cases. U.S.: Routledge

Luther, M.W. (2011). The Marketing Plan: How to Prepare and Implement It. U.S.: AMACOM Division, American Management Association

McDaniel, C., & Gates, R. (1998). Marketing Research Essentials. U.S.: Taylor & Francis

Perreault, W., & McCarthy, E. (2002). Basic marketing: a Global Managerial Approach. U.S.: McGraw-Hill

Tellis, G.J., Stremersch, S., & Yin, E. (2003). The International Takeoff of New Products: The Role of Economics, Culture, and Country Innovativeness, Marketing Science, INFORMS, 22 (2): 188-208.

Wilson, A. (2002). The marketing audit handbook: tools, techniques & checklists to exploit your marketing resources. U.S.: Kogan Page Publishers

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