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Global Economy

When every company wants to invest in other countries, the company will face too many

challenges. However, business accepts the risk because of the available opportunities in the

market. Nowadays, we are experiencing the trade between countries that were enemy in the past.

This strategy is considered as a common practice in every business in the world. This trend can be

because of the changing in people’s approach, which means the capitalism is spreading across the

world. Now companies can target new targets, and by a good penetrating strategy, they can gain

the market share in the numerous countries. One of the main challenges for the firms is to

determine the need of the customers who have a different level of income. In this way, the

company’s manager should recognize the risk associated with the bottom of the pyramid.

How to measure the competitiveness of nations

We measure the competitiveness by evaluating four elements:

 Factor endowment: we measure the factors such as skilled individuals, the amount

of production, and the infrastructures.

 Demand conditions: we measure the number of demands in the target country’s

market.

 Related and supporting industries: we evaluate the ability of the country regarding

the supplier of the supplier's power.

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 Firm strategy, structure, and rivalry: we evaluate the level of management in those

companies in the target countries, which can help us to understand better the

amount of rivalry we have.

Factor endowments: this element covers the elements of land, the number of individuals and the

amount of cash and capital that help us to build our production system. These pools of resources

can be inherited, or it can be created by the company’s investment. In this regard, we should

consider that the deployment’s speed of these resources will be more important than the existence

of these resources. For example, Japanese companies although they had some problem with their

inventory, they used from this problem, and convert it to just in time, as a competitive advantage.

Demand conditions

It refers to total demands that we will receive from our customers. It can be seen that whenever

the customers need a special product with specific features, the companies will look for that

specific features. So that demanding is very critical in forcing the firms to anticipate the future

demands and investing in the process of production. For example, now more than any time, people

want to use the environmentally friendly product in Canada, and this should become a critical

factor for those companies who want to invest in this country.

Related and Supporting Industries

This element will cover all those companies in different industries which can help the

company to effectively and efficiently manage their inputs. In this regard, we should look for find

the powerful suppliers, which can help us to have good inputs for our production. In this way,

companies should always look for building a strong relationship with those premium suppliers.

For example, the backup industry helps a company in this country to have a competitive advantage

than a county that does not have good supportive industries.

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Firm Strategy, Structure, and Rivalry

In every nation that there is a high demand for a particular product, we can see that the

degree of rivalry is so high. However, having a strong rivalry does not mean so bad as it can be

facilitative the process of developing, marketing, and distribution. It can be motivation for the

domestic company to look for new opportunities outside the country, and this can be a global

competitiveness creator. It is important to consider that a company that runs its operation globally

should be successful first in its own country.

Motivation for expansion

There is different kind of reasons why a company chose to expand its business in other

countries. Obviously, if we run our business in the united state, we only reach five percent or less

of the world’s population. So, one of the main reason for expansion can be targeting more

customers by increasing the size of our market. China and India can be a good example for two

countries who have an attractive market for international companies for investment. So, this

expansion helps the expanded company to increase its revenue, profit, and assets. In this way, we

consider the companies who operate in more than one country as an international one.

Moreover, the company can use from the concept of arbitrage, which is described as an

activity of buying a specific item and selling it in another market. For example, Walmart uses this

strategy, and this helps it to increase its profit. Also, the company can use from the amenities and

services in the country that has more affordable price than others. For example, when a company

who run a business in a country that is the producer of herbal flowers, it can buy it and transport it

to the back home. The isn’t a company can sell this product to other companies in the related

industry, and in this way make a profit. In this process, the capital can get from the banks of the

second country where it has a lower interest rate.

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Whenever we introduce our product to a new market, we can expand its life cycle, and it

builds motivation for our to develop our product. Even if we have a product that is on the last stage

of its cycle (decline), by getting the demand for this product in another country, we can transfer

the felicities to that country. In this regard, we can shift the decline stage to growth and maturity

stage, which means profitability for the business. This strategy also helps us to optimize all the

activities in the value chain, which is so critical in our business. For example, when we place our

research and development facilities that have less procuracy, we can increase the speed in this

division. It means that we can assign a different department to different location base on our map

for value chin’s optimization. Also, this can help us to increase our performance in those divisions

as we have more related resources such as professional labors, lands, and equipment that are

necessary to our division’s performance in that country.

Companies can also decrease the cost of their operation by investing in other countries

where they can find cheap workforces and other related elements. In this way, the company like

NIKE by investing in Asia reduced its operational cost.

Risk reduction also was one of the consequences of global expansion. At the global level.

The companies can use from reverse innovation, which is the process of design and testing a

product that fits the developing countries, then transferring it to the developed countries. It means

that

This practice can provide several benefits for the business. It can ease the sale process as

it is designed for the local market by the approach of local talents, who knows the environment

and the real needs of the market. Second, the demands for this kind of country can be increased

sharply. Also, the cost of this innovation process is relatively low as it is done locally.
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The risk of international expansion

In every adventure, we face different risk, and in international expansion, this risk can

increase both revenue and profit. The first risk in every international expansion is about the

political. As in developing countries, the change in the political system can not be predicted. For

example, those American companies started their business in Iran, had to shut down the business

by changing the regime in the country. This is because the new government did not allow American

to have any business within the country. Even now, the problem can be seen from the other side,

the sanction that the united state impose against some countries can put the whole business of an

international company in danger. Another risk in operation can be threats to the intellectual

property, which is a common threat in developing country. For example, the protection of the

software industry is very difficult in the developing county.

In this way, we have the concept of counterfeiting, which described as stooling this right

directly, and in 2015 the number of this practice was $1.7 trillion. Another risk is the currency-

related risks. As several elements can affect the currency of parent and host countries, this factor

should be evaluated seriously. The process of management also contains several risks. First, it is

critical for managers to know the culture of the host country as there are some important lines that

should be considered in the decision making. For example, when a foreign company has an

operation in an Islamic country, the time of pray should be considered the daily schedule of the

workforces. Another example is the concept of face-saving that is a common practice in Japan.

This concept refers to the practice that the managers and colleagues do not critic other employees

directly even if they have an opposite opinion.

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Global Dispersion of Value Chains

For this purpose, we use from the concepts of offshoring and outsourcing, which can justify

why in the automobile industry, several countries are working on specific parts of the production.

To illustrate more, outsourcing refers to those activities that let other companies provide the

product or service that were being done in the company previously. There are many reasons behind

outsourcing; the mains reason can be cost’s reduction.

Offshoring refers to sending the operation to another country.in this way; we can see that

Microsoft selected India where it found numerous India scientist less expensive than the parent

country. This is considered as a good strategy for those companies in the modern country to cut

their cost by placing different part of their value chain in different countries in the world. In this

way, we should consider the productivity of our workers as well as their salary. Sometimes, an

unskilled person needs to spend more time on a specific task, which can increase the duration of

the project. It means that we can not only compare the level of salary in our decision making about

going to expand in other countries. In other words, we should consider the indirect cost of our

decision which probably can be the need for training and supervision. Also, we should consider

the time that it takes to transfer an input in our operation in a developing country to output in the

developed country. This long time can decrease our ability to make a good response to the market,

and we can lose our agility.

Competitive advantage in global markets

There are two forces that are placed opposite of each other when we inter to the global

market. Some think that standardization should be used in the production of the good in a way that

the products can be used in every market across the world. This approach was based on the

assumption that the good quality with affordable price can motivate individuals to ignore their
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specific interest to the ideal product. Moreover, with this approach, we can take advantage of

economies of scale both in production’s process and sales and marketing activities.

By facing to competitive pressure in the market, firms are looking for some ways of

decreasing the units cost as the customers can be sensitive to the element of price. So the

integration of two pressure of local adoption and price pressure can determine four strategy groups

of global strategy, transnational strategy, international strategy and multi-domestic strategy. So

based on the degree of pressure, companies will use from the mentioned strategies.

International Strategy

Companies will face a low amount of pressure in both decreeing the price and adapting to

the local. In this way, the strategy is based on the accepting the knowledge of the parent country,

and the subsidiaries are only capable of making slight changes to the products which the ideas

come up from the parent country. In this system, we use from the centralized approach especially

in research and development, but we can place our marketing and manufacturing abroad. However,

over the recent years, because of increasing the demands for a decrease in price the usage of this

strategy is very difficult. Now, whenever the firm cannot find the such of necessary competencies

in the target country, it will use from the international strategy. In this way, the company can take

advantage of optimization in the supply chain by choosing the right location.

Transnational Strategy

In this strategy, we distribute all the facilities base on the best location, and in this way, we

are looking for having innovation in our production. In this strategy, we emphasize transferring

the knowledge flows in the whole organization. In this way, we have a chance to adapt to the

market easily and use form economic scales.

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Global strategy

In this strategy, we use from a centralized competitive strategy which can help us to control

the whole units. It means that we use from standardization in our process which covers both service

and product. However, in this strategy, we will not take advantage of the potential innovative ideas

in the local market. Also, we use to form the economics of scale that by using the standardization

in few subsidiaries. This works when in satiation when the market puts too much pressure, and the

need for adoption is low. This strategy will lead to having a certain quality in our products across

the world. There some risks associated with this strategy, and there is the geographic location,

which an isolated location can lead to decreasing the ability of the company to be agile in regards

to market’s need. Besides, it can increase the dependency of other subsidiaries on a particular

facility, which can cause several problems.

Multidomestic strategy

For adapting quickly to local markets, we can use from this strategy which can help us to

differentiate our products in several markets. In this way, even finding the right name can be

considered for the companies to see the customer’s needs. However, this strategy can cause

overproduction in some situations, and decrease our ability to use economies of scale.

Entrepreneurial Strategy

In this chapter, I learned that although a company by introducing a new idea can reach success,

sustaining the company’s position is more complicated than the introducing stage. So with the

fast pace of technology in the market, we should not only learn to provide creative solutions, but

we also should learn to sustain our competitive advantage in this regard. Also, we should
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consider the five porter’s forces, where there is a high risk of new competitors in the market can

help us to have a better understanding of the concept of competitive dynamics.

Start-up companies will form through different forms (figure 1), and for any of these forms,

three elements should be prepared, and there are (1) recognizing opportunities, (2) necessary

resources, and (3) willingness of team in the process.

Start-up
ventures

Established Major
institutions corporations

Start-Up

Family-
Non-profit
owned
organizations
businesses

How to Recognize the entrepreneurial Opportunities

When we want to discuss the source of opportunity, it can come from different

individuals, events, and changes in customer’s trend. In my opinion, this opportunity can target

an unmet demand, or it can create a new demand for customers. In this way, we should consider

that an innovator company should always not only look for changes, but they should embrace it

with their heart and mind. It is important to identify those ideas that have a potential to introduce

as a venture. This process contains two stage of discovery, in which we will be aware of new

concepts that could be happened even in one second, and evaluation. In the evaluation, we will
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test that is this idea good enough by seeing it from different aspects such as the customer’s

attractiveness, the operational and managerial resources we need for the process. So for this

stage, our idea should not only look attractive, but we should also achieve it with our resources.

Also, it should have some character to be attractive in a reasonable amount of time to create

enough values for us.

Identifying the necessary resources

For our success, we need a different kind of resources, and they are Financial, Human,

Social and government resources.

Financial capital

We should care about the cash level and the credit level, and in this process, we should

care about the stage and scale in venture development. For a small-scale entrepreneur, most of

them had been founded from the personal and their close relative funding. In our consideration,

we should consider the angel investors, those individuals who will care to invest in those special

and winning business model. Also, in venture capital, we will get fund by sharing the sales to

external investors. Over the recent years, individuals have been used from the concept of

crowdfunding, in which the plan will be posted in some specific website in order to catch

investors. Interestingly, in 2012 the values market for this investing reach $3 billion.

Human capital

If we want to analyze the Apple corporation since it started the biggest elements that

attract the investors and customers was their human assets guys such as Steve Jobs and Steve

Wozniak. Even now, when a famous manager selected as CEO in an unknown start-up, the mass

media will be bombarded by the potential success of that company because of that guy. So in this

regard, we need to an experienced manager that should play the role of leader for the company.
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In tough satiation, we need him/her to recognize the new trends and chose the best option. In this

regard, it is better to start the business in a team than individually as a team can see the problems

from different aspects.

Social capital

Having a better social network can help start-up to have a better performance, and this

means that individuals should use from the magic of his/her network that he/she build through

years both in professional and personal life. Even by having a good personal network, it is better

to make a strong strategic alliance with other companies. In this way, we can use from the

strategic alliance which can be in the area of technology, manufacturing, and retail. By having

these alliances, we can increase the capabilities, collaborating, reaching to more markets, and

consequently more revenue.

Entrepreneurial Leadership

Leaders in this area should have enough courage that assists their hardworking approach.

If we want to describe the necessary traits that a leader needs, we can use the big five personality

test. Generally, leaders with a low degree of agreeableness and high level of openness can be

more successful in their position. Also, we need leaders to have more self-confidence which can

be said that leaders should be emotionally intelligence. Among all the characteristics, leaders

should have a visionary approach, high sense of commitment and be also dedicated.

Entrepreneurial Strategy

Every new venture should select appropriate strategy base on the nature of their industry,

the opportunities in the market, the barriers, the rivals, the competition and all the factors that

affect the environment. For this purpose, they can use from different strategy such as entry,

generic and combination strategy. The entry strategy should consider severing factors such as
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having a good plan for talents attraction, creating credibility, targeting creating cash flow in the

quickest amount of time, and beating the newness’s liabilities. In this way, we create some

innovative way to solve the problems in the market. But we should consider that strategy should

be sustainable, acceptable and be attractive in the industry. In an adaptive way, we adapt to the

market, and focused on creating more value to the consumers, and in this way increase our

market share. In a generic strategy, we use from the overall cost leadership, differentiation and

focus strategy, which in every one we should have core competencies that support our strategy.

Combination strategy also considered as one of the effective ways for new ventures to get the

good position in the market. As these companies have more flexibility can offer the Highly

product and service that perceived as more valued item compares to the big organization’s

product.

Competitive dynamics

In this model, we will recognize the future action base on the change in the dynamic of

competition. It means that the threats from the competitors will be analyzed, and we evaluate our

capabilities to create a good response to those rivals that saw us a threat. By doing competitive

dynamics, we can identify the changes, and make a right reaction at the right time. So be

implementing competitive dynamics, we can prove a new solution to gain better market position

and be one step ahead of our rivals, which help us to develop our business effectively.