Strategy of international business pressures

The strategy of international business entails analysing the development of globalization in the world's overall economy and how a company responds and what steps it requires, strategy-wise to remain competitive effectively beyond national borders. It involves business transactions crossing national edges at any stage of the exchange; it also will involve dealing numerous different civilizations and comprehensive field experience.


There a wide range of advantages for firms who expand globally such as increasing their profitability and higher development of revenue. Most basically it generates a more substantial market size. It allows businesses to reduce their costs through differentiation. Global expansion helps realize location economies, understand more expensive economies and earn a higher go back by exploiting any valuable skills from overseas actions.


The competition in the market place is not easy for the businesses. Firms on the market place usually face two types of pressures.

2. 2. 1 Stresses FROM COST REDUCTION.

One type of pressure is the main one they receive due to stresses for cost reductions. In response to this companies try to lower the expenses with their value creation. Ways a firm may do this could include mass producing standardized products in a location where it is most optimal to take action and realize economies of scale and location and/or outsourcing certain functions of the job to international suppliers that cost a lower amount to be able to keep your charges down. Most companies face problems distinguishing commodities since differentiating non-price factors is intricate.


The second pressure they face is the fact that from local responsiveness. Such stresses arise from differing differences in traditional procedures, infrastructure and customer's personal preferences and preferences. To react to this, organizations need to differentiate their products in each country to take into account all these factors.


Differences in the effectiveness of stresses for cost reductions versus those for local responsiveness affect the firm's choice of strategy. Companies typical choose among four main strategic positions when rivalling internationally. These can be characterized as a worldwide standardization strategy, a localization strategy, a transnational strategy, and an international strategy. The appropriateness of each strategy differs given the scope of pressures for cost reductions and local responsiveness.


Procter & Gamble was founded in 1837. It really is one of the world's most international companies. P&G offers over 300 brands including tide pampers, Crisco and IAM pet food.

Nowadays P&G is a huge global consumer product business that has sales of over $50 billion. Most of these sales are produced outside the United States in Canada, Britain, European European countries, Japan and other Asian countries. These expansions resulted in progress opportunities, created value by moving its business design to international countries and preempted other retailers which were also needs to expand globally. However the company began facing some issues and possessed to rethink their strategies of increasing globally.


Procter & Gamble, as discovered were initially following a global strategy, which was possible since they had low stresses to lowering costs and low stresses on local responsiveness. However their costs were growing and in 1993, in response to the increase of costs, they initiated a significant reorganization. In this they shut down thirty production plants worldwide and fired about 13000 employees. Furthermore they targeted their production on lesser crops so that they could reach regional markets and achieve better economies of level. It is obvious that P&G are moving towards a worldwide standardization strategy off their earlier international strategy.


This strategy is appropriate if the cost reduction stresses are high however the pressure on local responsiveness stays on low. Under this strategy the merchandise are standardized worldwide. They undertake an inexpensive approach on a global basis. They rarely try to identify their product offering because often their costs increase when customization is carried out. Because of this strategy, P&G reduced their costs by about $600 million but it still was not enough. Their earnings were still not favorable and sales were poor as ever.

4. 2 Firm 2005.

In 1998, P&G attempted yet again to regulate these increased pressures and embarked on its second reorganization. They known as it Organization 2005. The company hoped to improve the ways that their products were being innovated, created and sold. The strategy consisted of modifying the structure of the organization, culture and work operations comprehensively. It including laying off 17000 employees next three years and it improved its organization's composition by splitting up their four geographic sections and centering it on 7 global sections (GBU's). These models were derived corresponding to product categories which range from foods to baby good care. Each product was completely in charge for generating gains using their products and also their own marketing, creation and product development. Their emphasis shifted to only few large vegetation, endeavoring to build global brands where possible in order to remove differences in marketing among countries. It also intended to speed up the growing and starting of new products. It is visible that P&G is currently moving towards a transnational strategy because they're faced with high stresses to cost lowering as well as high stresses to local responsiveness. The international and global standardization strategies didn't succeed since P&G didn't take into account the falling barriers to trade and customers skills to trade internationally and for that reason upsurge in demand for variety of goods.


A transnational strategy is one where companies make an effort to keep their costs low while together differentiating the merchandise they feature across national borders and fostering a movement of skills across different subsidiaries in their operations network worldwide. This strategy is difficult and will involve the company in balancing the local market's needs for consumer products whilst concurrently aiming to save their costs. P&G's seven items are called global sections, but function on a very decentralized way. They develop their strategies locally or regionally and put into practice them. Quite simply their product development, delivery and marketing are conducted locally whereas the backdrop functions of money, payroll and human being source of information management is carried out on an internationally basis.

4. 3. 1 BENEFITS AND Hazards.

There are many benefits for pursuing a transnational strategy. It enables firms to gain scale economies as well as location due to the upsurge in sales in global level. It also helps transfer distinguishing competences and skills. The house country may maintain a number of competences and it is merely right to show it with other countries as well. Furthermore it simultaneously reduces stresses on local responsiveness. However one risk they face is wanting to differentiate the merchandise to respond to local demands in different geographic markets increases costs, which run counter to the goal of reducing costs.

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