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International Business
Michael Viola
BUSI 701-B12: DISCUSSION BOARD FORUM WEEK 8-MODULE
Dr. C. Brandt Smith Jr.
October 18, 2020
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Introduction
Is the global market the right place for all businesses to be? What successful growing
domestic business, that is stretching their multidimensional boundaries, wouldn’t consider the
opportunity to expand into the global market? The thought of having a global footprint,
competing with the big companies internationally, can definitely be attractive to business leaders
and stakeholders. The foundational issues that must be considered are risk and reward. Zakic &
Radisic (2017) reflected in their research that analysts are saying the current conditions of
running a business at the global level is very difficult and challenging. They also acknowledged
there are many opportunities for success, but also many threats that can cause risk. What level of
risk is a business prepared to assume when entering the global market? Companies that are
considering a global strategy must be aware of the great risks, right characteristics, and sound
global strategies required to be successful in that arena. Hout et al (1982) outlined key business
characteristics in their writing that helped answer the questions around what it takes to be
successful in the global market. Hout et al (1982) also included in their writing three examples of
companies, Caterpillar, L.M. Ericsson, and Honda, that had great global business success.
Hout et al. (1982) explored the topic of global marketing strategy, specifically
showcasing Honda. Before Japanese motorcycles were commonplace in America, Honda
convinced middle-class Americans that riding motorcycles could be enjoyable. They did this by
targeting new customers and using innovative marketing (Hout et al. 1982). Honda’s innovative
global marketing strategy directly contributed to increased global market share and high profits.
Zou & Cavusgil (2018) pointed out in their writing that a foundational proposition in a global
marketing strategy is it leads to a positive effect in a business’ global performance. Zou &
Cavusgil (2018) went on to conclude in their research that there was no consensus if this was
actually true. Hout et al. (1982) proves otherwise with their example by Honda.
Prior to a business expanding into the global market, they need to consider the financial
burden and barriers to entry that come along with such an endeavor. They will be faced with
high marketing, R&D, innovation, production and transportation costs which all can have a
negative impact on going global (Hout et al. 1982). One way to minimize these costs is for
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businesses to create joint ventures with other companies in the same market. Caterpillar created a
joint venture with Komatsu, allowing them to contribute to market share and provide cash flow
(Hout et al. 1982). Gollnhofer & Turkina (2015) supported this point by concluding in their
research businesses can effectively use joint ventures as an entry mode into the global market.
Research and development (R&D) is a necessary and required business characteristic,
especially when you consider varying markets. Dehmer et al. (2019) proposed in their writing
that R&D is a risky but calculated global endeavor. Hout et al. (1982) used L.M. Ericsson as an
example of a company that succeeded in the global market by underwriting their R&D with
profits. In spite of initial R&D investments averaging more than $100 million in the
telecommunications market, L.M. Ericsson was also able to create supply chain economies of
scale to help them dominate the global telecommunications market (Hout et al. 1982).
Another characteristic of a successful global business is the ability to gain economies of
scale (Hout et al. 1982). Wu et al. (2015) framed what typical global supply chain layers are
across a supply chain in their writing. They included geographically dispersed suppliers,
inventory management, transportation, facilities, and retailers.
The topic of supply chain does not only relate to secular business, it is biblical, “But my
God shall supply all your needs according to his riches in glory by Christ Jesus” (King James
Bible, 1769/, James 3:17). God will fulfill all our needs if we seek and trust in him.
Conclusion
Even though the research by Hout et al. (1982) was accomplished years ago, their defined
characteristics of a successful global business are enduring and lasting to this day. There is
significant new empirical evidence that supports what their research concluded. Businesses that
are considering entry into the global market should strongly consider their appetite and level of
commitment to do so. One example that resonated with this research is by Hout et al. (1982),
when they wrote how Honda invested seven full years in Europe before sustaining profitability.
The global business market is not for every company and definitely not for the faint of heart.
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References
Dehmer, S., Pardey, P., Beddow, J., Chai, Y. (2019). Reshuffling the global R&D deck, 1980-
2050. Plos One, https://doi.org/10.1371/journal.pone.0213801
Hout, T., Porter, M.E., & Rudden, E. (1982). How global companies win out. Harvard Business
Review, 60(5), 98-108. ISSN: 0017-8012
Gollnhofer, J.F., & Turkina, E. (2015). Cultural distance and entry modes: implications for
global strategy. Cross Cultural Management: An International Journal, 22(1), 21-41.
DOI:10.1108/CCM-07-2013-0114
King James Bible. (2017). King James Bible Online.
https://www.kingjamesbibleonline.org/ (Original work published 1769)
Wu, T., Shen, W., & Zhu, C. (2015). A multi-period location model with transportation
economies-of-scale and perishable inventory. International Journal of Production
Economies, 162, 343-349. https://doi.org/10.1016/j.ijpe.2015.08.018
Zakic, K., & Radisic, B. (2017). Strategies of Chinese companies entering global markets. Book
of Proceedings, 169-180. https://search-proquest-
com.ezproxy.liberty.edu/docview/2070396197?pq-origsite=summon
Zou, S., & Cavusgil, S.T. (2018). The GMS: A broad conceptualization of global marketing
strategy and its effects on firm performance. Journal of Marketing, 66(4), 40-56.
DOI:10.1509/jmkg.66.4.40.18519
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