Why firms go international ? & Problems faced

Why firms go international & Problems faced by MNC’s in introducing a new product

One of the advantages of the multinational corporation (MNC) is that it can exploit new product ideas globally rapidly. This raises the issue of control of MNC new product introductions. It has been demonstrated that control over MNC subsidiaries differs depending on the strategic role assigned to the subsidiary. In addition to its role in the MNC, a subsidiary also has a role in a business network of relationships with important customers, suppliers, and other business partners. There is a latent conflict between these two roles.

There are various reasons to go internationally, but the goal of every company grows or expands its business, whether a company hires international employees or searches for a new market and expands its customer base. Some reasons are as follows: 

1. Growth: Every company wants to grow in its business, Launch products in the International market to increase customers, and capture more market share to become a leader.

2. Employees: Every company wants skilled and well-trained employees to it. So the company goes internationally to find an alternate source of labor and look for lower-cost manufacturing, technical assistance, and other services to maintain a competitive advantage.

3. Resources: Some companies go for resources that are not available in the domestic country at a better or competitive price.

4. Ideas: Companies go internationally to collect different ideas from different countries’ different cultures.

Marketing on a global scale is rarely easy. The efforts and costs required in establishing a marketing base in foreign countries can be significant. This often means only the largest firms become full-fledged global marketers. While the Internet helps make all companies visible throughout the world, being truly a global player requires much more than a website and a FedEx or UPS shipping account.

Instead, companies looking to go global must invest significant capital, manpower, and time if they want to compete in foreign markets. For marketers, this includes gaining a deep understanding of the markets they are entering. And this is no simple task as each country is different, and the marketing decisions needed to reach customers in each country may be different.

While expanding beyond a home market is risky, for marketers who become global players, the rewards are often well worth the effort as foreign markets offer new opportunities to grow a business. Additionally, for other marketers, becoming a global player is necessary if the marketer wants to stay in business, especially if the marketer’s home market is showing signs of slow growth.

This story looks at how marketers embrace globalization in the Asian market by painting a nice picture of what companies, such as McDonald’s, General Mills, and Pizza Hut, are doing from a customer research side to make sure sales continue to grow. While the story looks only at examples in the Asian market, the overall ideas presented here are fundamental to virtually all global markets.

While choosing new markets, MNCs need to consider several macro and micro factors.

Macro issues: 

• Political/regulatory environment, 

• Financial/economic environment, 

• Socio-cultural issues and technological infrastructure.

 Micro issues: 

• Competitive considerations and 

• Local infrastructure such as transportation & logistics network 

• The availability of mass media for advertising is important.

While entering new markets, an MNC has various options. Include:

• Contract manufacturing,
• Franchising, 
• Licensing,
• Joint ventures,
• Acquisitions and
• Fully-fledged greenfield projects.

Conclusions 

Global marketing strategies have to respond to the twin needs of global standardization and local customization. In their quest to maximize local responsiveness, companies should not overlook opportunities to standardize and cut costs. On the other hand, an excessive emphasis on generating efficiencies through a standard marketing mix may lose flexibility. The challenge for global marketers is to identify the features which can be standardized and build a core product. Then customized offerings can be designed around the core product for different markets. In real life, striking the right balance between standardization and customization can be extremely challenging.