You enter your project team meeting with Mike and Tiffany to hear them discussing the tools that they found to conduct an analysis of the industry and competitors. “Mike, there are so many more tools than I even realized to give us some good data,” Tiffany states.
“I know,” Mike says. “That’s why I wanted to take some time to look at our options and figure out what information we really need to support the board’s decision.”
Mike and Tiffany both found some great tools from their research on the subject. Complete the following:
- Based on your classmates’ discussion posts for Week 2, do you still believe the tools that you selected will work best for a global strategy? Why or why not?
- What evidence do you have to support your decision?
- How would you refute the people who chose an additional tool rather than one of the tools that you selected?
- Based on the tools that you selected, provide a brief analysis of your market, using those tools.
My posting for week 2 Discussion Post
A Global Strategy can be defined as a guide or guidelines used by organizations to ensure smooth interactions and integration between the governments of different countries, other companies and people around the globe. The global strategy may be important for organizations that need to reduce their costs significantly but the pressure to supply and satisfy the local market. The global strategy, when used by an organization, will enable it to sell a consistent product throughout the globe. The global strategy employed by an organization should be able to identify the extent of the available market in the major markets of the world. It should also create a global presence that is essential for the organization. The global strategy must also identify the best locations around the globe for the value chain activities. It should also describe how to turn an organization’s presence around the world into a competitive advantage against their competitors.
Apart from the global strategy, other international strategies can be used by organizations around the world. They include the transnational strategy and the multi-domestic strategy. A firm that uses multi-domestic strategy does not pay much attention to efficiency; they focus more on emphasizing what is required by the locals within each of its markets. These organizations often customize how they offer their product and their market strategies just to match different national conditions. Production and marketing of the products are carried out independently in each major market where the organization carries out its business.
The transnational strategy is a hybrid of the global strategy and the multi-domestic strategy. The transnational approach is suitable for organizations that need to balance their efficiency throughout the globe, and at the same moment, they need to modify their activities to local preferences within the countries they operate in.
The United States of America, Russia, China, Taiwan, and Canada are some of the countries that have practiced globalization over the years. The furniture industry has also been in existence for a long time in these countries. For example, the IKEA furniture company has been in existence in Russia, China, and Taiwan. In Russia, it is the largest retailer of furniture in the world with operations in various markets across the world (Armistead, 2010). IKEA’s entry into the market and its expansion globally was as a result of strong product development process, close attention to the details of operation and consistency in controlling their costs.
In China, IKEA’s customers want furniture with western influence and at the same time of higher quality unlike in Russia where customers want quality products which also have a Russian touch. To maintain long-term customer relations in China, IKEA makes use of three marketing activities namely; product design, pricing, and advertising. IKEA’s marketing activities in China takes advantage of the geographical proximity and the culture of the region.
The Ashley furniture industries have been in existence in the USA and Canada. The company is also the leading and largest manufacturers and retailers in North America (see Ashley Furniture, 2011). The main activities of the Ashley company in Canada and the USA are producing marketing and distributing the products.
When these two companies sell their products across the world, they control the economies of scale. This increases the efficiency of the companies because they purchase their materials in bulk and this allows them to save on a lot of costs. Also, when these businesses can sell their products worldwide, they can get life cycle for their products. If they have unsold stock or old stock in a particular part of their market, they can launch the same product in a different market area that is less developed.
However, when these furniture companies decide to sell their products globally, they may face a microeconomic risk. Some markets have different tastes and may react differently to prices. Sometimes a product is more popular in one country than in another country and deciding which country the product is popular is sometimes a problem. Situations like this may bring losses to the companies. When these companies decide to trade globally, their operations may get interfered with. If the laws of a particular country in which they are operating changes, this will affect operations. If natural disasters occur the operations in those market areas may be interfered with.
China could be the best location to set up a furniture company and have it use the global strategy. The packaging of the product in China aims at appealing to the culture in china’s homes. The showrooms in China are also to suit the cultural styles of the Chinese (Armstrong and Kotler, 2006). Price is a critical factor that controls the buyer of the products (Usunier, 2000). To ensure that IKEA could still make a profit even after reducing their prices so that the goods could be affordable, they had to source for raw materials locally in China instead of importing them as they did when they began. The availability of raw materials in China has enabled the company to capture the highest customer value at the lowest cost possible. Advertising in China is easy for IKEA because of the Chinese culture where IKEA ensures that they transmit their messages in the Chinese dialect which is the most spoken language in China and this also allows them to remain relevant to the culture to effectively target the local customers.
Other student posting
What is global strategy and how do we know when we are want to consider it?
As the home office they would want to set goals to maximize efficiency. The strategies that they have in place are the goals that they would want to achieve domestically. A global strategy will be their strategic guide to maximizing efficiency globally in the different geographical markets. They will want to perform better than the competition while achieving higher profitability and success.
International strategies include: global, multidomestic, and transitional.
Global Strategy focuses on efficiency while foregoing sensitivity to local societal preferences. This means that while they produce the furniture in the country, they would change little of the design to match the style of the culture.
Multidomestic Strategy focuses on sensitivity to local societal preferences while foregoing efficiency. This means that they would tailor their furniture to meet the needs of the local people focusing on society’s preferences.
Transitional Strategy would fall in the middle between global and multidomestic. If the furniture store chose to use this strategy we would keep our core designs or color schemes yet change to meet society.
Here are three possible countries and location options for globalization:
Pros: Recently, China eliminated the minimum amount of capital needed to start a new business, this makes it much easier to move in and set up shop. However, the regulatory framework overall is still very intricate, random, and irregular (Heritage, 2017). One of the largest pros for producing in China is that the labor laws are lax and the workers are inexpensive (Heritage, 2017). Trade is China is very important to the economy. “The value of exports and imports taken together equals 41 % of GDP” (Heritage, 2017). In China, “the typical applied tariff rate is 3.2 %” (Heritage, 2017).
Cons: China is one of the leading countries manufacturing furniture today.
Pros: India is the largest democracy in the world. Again, as in China labor is inexpensive.
Cons: India’s economy; “the value of exports and imports taken together equals 49 percent of GDP. The average applied tariff rate is 6.2 percent” (Heritage, 2017).
Pros: In Russia trade is very important and imports and exports equal 51 percent of GDP (Heritage, 2017). “The average applied tariff rate is 4.9 percent, and export taxes interfere with trade” (Heritage, 2017).
Cons: Heavy regulating hinders private growth; the regulatory system suffers from corruption and a lack of transparency and labor is not easily found in Russia due to this system (Heritage, 2017).
What country would you choose? What evidence can you provide in support of your choice?
The country that would work best for this furniture company is India. They are politically stable and have inexpensive labor laws. India also has room to grow in the furniture department so the company would not have as many rivals as some of the other countries.
What evidence might somebody else, who does not agree with you, provide to support his or her choice?
Someone else may say that China is the better choice, due to the overall cost of operations.
What could you tell somebody else to show he or she is wrong?
I believe that the amount of furniture produced there already would be too much competition.
Other student posting
Global Strategy is an organization’s plan to expand on international level by determining how they can best provide value in different geographic markets over an extended period. A well designed plan will include plans to gain an advantage over other companies competing in the same foreign country and where to compete in those countries in order to best utilize their advantages. International strategies include the multidomestic approach, global approach, and transnational approach. The multidomestic approach relies on decentralized management where key people in each region are responsible for individual management of each location. The global approach is centralized from its home country. Products and processes are kept similar across regions in order to keep costs low. The transnational approach consists of a network of specialized units.
Canada, Vietnam and Mexico would be three countries to consider for globalizing in the furniture industry. Proximity, good trade relations and similar governments are the primary reasons why Canada would be a good choice. Canada has made significant improvements in human rights since the 1980s. Unions has contributed to making Canada of the best countries for employees to work. Currently, 93 percent of Canadian furniture exports go to the United States. The recovering U.S. housing economy will help with their export growth to the U.S. Vietnam has been and continues to grow its economy. Vietnam has a long history of exporting furniture to European countries and has only recently started expanding that export into the United States. The United States has also recently started outsourcing its furniture manufacturing to Vietnam. 15 percent of Vietnam’s furniture manufacture’s focus on export of their product. Vietnam’s labor is less expensive compared to other countries. Its labor laws are improving, however there is still cause for concern in current working health conditions. Mexico’s biggest advantage is once again proximity to the United States. Mexico exports furniture to the United States and takes imports from the United States in order to cover the high demand of furniture at home. Exports to the United States continue to grow. A high local demand and good import and export relations with the United States make Mexico a good choice. However, like Vietnam, Mexico’s human rights are improving but their current state of labor laws are a concern.
Originally, I thought Vietnam would be the best choice. However, after reading more about their current working conditions I think Vietnam is too risky. My choice would be Canada. It is hard to find a risk or negative in expanding globally into the furniture market of Canada. The biggest advantage Canada has is a proximity and export history into a county with a recovering housing market, the United States. A recovering housing market in the United States means increased exports of furniture from Canada. Someone else may argue that the labor costs of Canada are too high in comparison to other choices. Vietnam and Mexico, for example, have much lower labor costs. I would argue that the risks of those countries outweigh the rewards. There is almost no concern that government or labor would cause any interference in Canada. As mentioned above, there is more concern that labor laws and government could cause interference from Vietnam or Mexico.