International Business Around the World

International Business Around the World

Executive Summary

As organizations are growing increasingly competitive, the need to extend to other entry modes varies considerably in terms of not only cost incurred by firms but also benefits and disadvantages.

This essay will discuss the relevance of environmental scanning and its fundamental importance in deciding what the firm’s strengths and weaknesses are as well as external environmental factors.

The second part will then look into exports as to why it is the best choice to enter a host market for the very first time. Its alternatives, franchising and joint venturing, will also be looked at briefly.

The third section will touch upon the conclusion. It has been concluded that exporting is an important process and paves way for other forms of internalization.

The Global Marketplace

Over the past decade, the global phenomenon of expanding businesses internationally has grown to an astounding rate. Whether or not a company wants to participate directly in international business, it cannot escape the effects of the ever increasing number of firms involved in exporting, importing and manufacturing abroad. Today, it can be said that most business activities are global in scope.

In reaction to conform to global trends, the implementation and development of a comprehensive market strategy would usually involve selecting a foreign mode of entry. By definition, foreign mode of entry is an institutional arrangement that allows firms to exchange products or services (Rasheed, 2005, p. 41). Firms are presented with a variety of different forms of entry ranging from exporting to foreign direct investment (FDI). Evidence has proven that, regardless of mode of foreign market entry, significant increases in returns on sales and assets are expected (Rasheed, 2005, p. 41).

Environmental Scanning

A Holistic Approach to Identifying Change

In order to make well-informed strategic decisions a wide array of data about the external environment is needed. Information derived from within the company has limited strategic value when it comes to the analysis of the task or general environments. In situations such as these, the collection of external data is necessary. Environmental scanning, the process of acquiring data and involvement of exposure and perception of information, is one of the inherent formulations when developing firm strategies (Hough & White, 2000, p. 781). Scanning of these aspects would allow multi-national corporations (MNCs) to recognize existing opportunities and threats; so as to gain a sustainable competitive advantage over others. This view is consistent with the views of Belich and Dubinsky (1998) who argues that acquiring such market information is vital for business planning. Subsequently, most successful firms are those who are sensitive to changes in international events and forces are likely to anticipate and respond quickly. The elements most commonly identified include political-legal, economic, social-cultural and technology (PEST analysis) aspects which will be further discussed in the later parts of the essay.

Environmental Scanning Activities used by Hotel Industries

In relation to the hospitality industry, environmental scanning helps managers to foresee favorable and unfavorable influences and initiate strategies which will enable their organizations to adapt to the environment. In a study carried out on hotel chains based in Portugal, regarding environmental scanning activities, two distinct groups, those who had a formal written strategic plan (Intenders) and those who did not (Realisers) were contrasted. Interestingly, results revealed that both comparison groups identified excess workload and cost/benefit of information processing as barriers to formal scanning. To overcome these barriers, conditions for scanning focused on the direct relationship between the cost and improvement of overall performance. As observed in Table 1 (Refer to Appendix), it is clear that environmental scanning is seen as relevant by both groups. Requisites such as the quality of not very reliable data, need for structured format and decision makers approach were regarded as positive, allowing for greater efficiency and quicker decision making (Costa & Teare, 2000, p. 156). As reflected by the results, it can be said that environmental scanning is relevant in not just providing quality and insightful information but to also help solve structural problems.

Similarly, another survey which highlights on the expansion of trans-national companies (TNHCs) into lucrative markets, notably, China and Eastern Europe, pointed out that 53% of the luxury hotel chains operate only one hotel in each country, which