International Business Case Study

There are a multitude of risks and issues for corporations and industries operating in the international environment. No doubt, issues such as inferior quality of products manufactured by companies that engage in outsourced production, or the use of chemicals in the manufacturing process of edible products imported back to the U.S., which our regulatory system considers toxic and which are regulated against within our own borders. These types of issues can result in a tremendous impact to a corporation's bottom line, from the financial impact to sales to brand damage that diminishes their reputation in the marketplace. Why does a company need to grow?

Suppose you started a company using an innovative product idea you designed and your corporation was the first one to market and sell this exciting new product in your home country. Sales immediately took off and your company found itself growing and branching out in cities all across your nation. Soon, competitors followed your leadership position, chasing your market and successfully absorbing some of your sales. In order for your firm to remain the leader, or to even continue to survive, you would need to develop strategies that allowed your firm to continue to grow its market share. If you failed to maintain your market position, over time you could lose enough of your customer base so as to become unable to financially continue to stay in business. Not only would you close your doors, but your employees would lose their jobs.

Corporations spend a large amount of time developing strategies that allow them to remain competitive in the marketplace, earning profits and re- investing them into the business in order to grow. When a firm reaches a saturation point in its home market, one strategy it can deploy to remain profitable is to move into the global marketplace. The key to remaining competitive is to constantly, and continually, innovate. For global firms, innovation is exponentially more challenging. Profit and Loss - What are they and how do they impact global strategies?

In order to develop sound global strategies, it is critical to understand profitability. Simply put, profitability means the degree to which a corporation has been successful at earning revenues and managing expenses. The difference between its revenue and its expenses is called the net profit and the ratio of net profit to revenue is called a net profit margin. Net profits and net margins are tracked and monitored carefully by a firm's finance department, along with all other financial data Net margins

reflect how much of each dollar earned by the company has been translated into profits and is determined by dividing the net profit by revenue.

While some industries operate on very low, or thin, margins, others operate on much higher margins. Understanding a firm's finances and industry profitability norms, assists financial experts in assessing the health of the firm, as well as predicting and identifying industry and firm trends. These factors are incorporated in a company's growth strategies, both domestically and abroad.

The firm's financial statements, which are produced quarterly and annually, contain three basic statements:

• Consolidated Balance Sheet • Income Statement • Cash flow statement The Balance Sheet contains data regarding a firm's assets (items of tangible and intangible value) and liabilities (items owed by the company such as loans, notes, and accounts payable). The Cash Flow statement is a corporation's record of all cash inflows and outflows, much like your own checkbook register.

Finally, the Income Statement is a corporation's record of revenue and expenses for a given period. This statement provides a firm with all of the data necessary to monitor and track profit and loss. Click on the link below to access a brief tutorial on the Income Statement. Competitive Market Strategies - Leader, Follower, Challenger, Nicher

In order to remain in business, corporations must continue to excel at innovation in their markets. For corporations doing business abroad, the type of market strategy they choose to deploy may be different from their domestic strategy. In their home market, they may be a challenger to a market leader, and they may choose to move into new overseas markets ahead of their competition, and deploy a market leader strategy in the foreign nation. But, any competitive market strategy they deploy must align with their strengths and weaknesses as well as with the broader macro- environment.

The basic types of competitive market strategies are:

• Market Leaders - corporations who hold the largest market share in their product or service area, or who command the most revenue earned in their markets

• Challengers - corporations who have a strong presence in their markets and have the market strength to challenge the market leaders. Their objective is to eventually become the market leader.

• Followers - corporations who imitate the products or services of market leaders, but who stand to earn substantial profits from their market activities. Whether they are imitating, adapting or cloning products and services, they can capitalize on the opportunities opened up by their more aggressive competitors, and

• Nichers - corporations who operate within smaller markets, or niches, that are little interest to the larger market leaders. Within these competitive strategies are multiple tactics, and global managers must design their offensive and defensive strategies within their markets in a manner that will exploit their strengths, minimize their weaknesses and reduce or mitigate their risk. Finally, competitive strategies need to have a strong degree of sustainability. It is only through sustainable competitive strategies that firms can continue to grow. Building a sustainable competitive strategy

Corporations leverage multiple tactics for creating and sustaining their competitive strategies. In addition to mounting tactical offenses and defenses in the marketplace to expand their market share or defend against challengers, corporations also leverage their competitive advantages in areas such lower production costs, or differentiation of their products, in order to grow their sales and their market share.

Additional Resources

• Global Gamesmanship MacMillan, Ian C. (2004). Global Gamesmanship. Retrieved from Harvard

Business Publishing.

• Chabros International Group: A World of Wood Ivey, Richard. (2010). Chabros International Group: A World of Wood. Retrieved from Harvard Business Publishing. What is competitive and comparative advantage, and why does it matter?

The answer is that competitive advantage allows a company to generate more sales and revenue, or to retain or expand its customer base. The more sustainable the competitive advantage a firm can achieve, the less vulnerable that firm may be to loss of sales or customers to its rivals.

Competitive advantages are the attributes or strengths that a specific corporation has that give it an advantage over its competitors. Competitive advantages are comprised of two sub-types: comparative advantage, or the ability to produce goods and services at a lesser cost than a competitor (whether that is a corporation or a nation), and differential advantage, which is the ability to create a product that is differentiated from your rivals to such an extent that it creates a superior competitive advantage (think iPhone).

Global corporations can leverage comparative advantages in two ways: they can exercise a comparative advantage over their rivals with lower production of similar goods, or they can produce goods or services at a lower cost than their host nation can produce them, and export them into that nation.

The key to competitive advantage is to create sustainability. In a dynamic global business environment, corporations that have developed sustainable competitive advantages continue to grow their business, which in turn creates larger revenue streams, and if they are managed correctly, helps them to achieve their ultimate objective of maximizing shareholder wealth.