Exploring Potential Research Topics

GLOBAL STRATEGY

Introduction

Globalization has become the current trend for companies that have significant operations and have large market shares. However, a firm may opt to globalize all its operations or only a part of them. Most organizations internationalize a part of their operations and leave the other part to operate domestically (Aaker, 2012). In our case, we shall have Hewlett – Packard (HP) as our case study.

This is a global company with headquarters in Palo Alto, California, United States. It is an information technology firm that provides computer hardware, software and also services to its consumers. Internalization is good but not appropriate for all operations of a company. In my case, I would internationalize the services part of the firm but the manufacturing part would remain in the home country. This is because it's easier and convenient to monitor the quality of the produced hardware and software as they are centrally made.

With the services part, the available staff can be adequately trained and equipped and deployed in different regions internationally so as to help solve out the client issues (Capron & Chatain, 2008). The central monitoring of production enhances consistency in quality that leads to adequate customer satisfaction hence leading to brand loyalty. It is also important to centralize the main management but at the same time decentralize the support management to the different locations that the firm has its presence.

Internationalization

In order to internationalize operations, a company has to consider the potential of growth and performance in the various regions or countries. It's majorly enabled by carrying out market research and survey; that makes it possible for the firm to speculate its future in the respective regions or country. I would consider expanding the operations of the business to the United Arab Emirates and East Africa regions. The popularity underpins this that the products of the firm have in these regions (Hitt & Hoskisson, 2012). The economic performances in these areas also support the move. The UAE is a more developed economy while a country like Kenya in the East Africa region is a developing country. It gives the demand for technology, and thus the products and services of this firm will be highly required.

In the UAE, HP has a 27% market share. This is an adequate evidence that the firm`s products have been accepted in this region. It is the firm that has the largest market share in comparison to its competitors in that region. The economy of UAE is stable because it is dependent on oil extraction. With that kind of industrialization, IT services are mostly required (Cartwright & Cooper, 2012). 

The firm has enough capability to handle the IT needs of such operations while at the same time providing advisory services to them. The oil prices in the UAE are fairly low which help in taming inflation and thus providing a healthy economic environment for the firm to thrive. Alongside this firm, there are also other competitors who are players in the same industry. These include companies like Dell, which has a market share of 15% and Acer which has a market share of 14% and IBM which has a market share of 9%.

The UAE has been reporting trade surpluses between 2000 and 2015. It's attributed to the export of petroleum products. The country exports oil and natural gas that constitute 40% of the country`s total exports (Haouas & Heshmati, 2014). The country also imports other consumptions such as precious metals and stones, machinery, transport vehicles among others. The last balance of trade amounted to 503,694 AED million. The cost of labor is fairly small because the unemployment rate now stands at 4.2%.

The current exchange rate of the AED against the US dollar stands at 3.67. In taxation, there is no difference between residents and non-residents in UAE. The corporate tax rate in exception of oil and gas companies and subsidiaries of foreign banks stands at 0%. The tax that applies to all businesses is the duty deducted by the municipality in each emirate during issuance or renewal of trade licenses. It's 10% of the annual amount for renting offices as well as warehouses and 5% of the annual amount paid by companies to accommodate its employees (Haouas & Heshmati, 2014).

The federal laws in the UAE require that nearly all foreign-owned companies to have at least 51% ownership by UAE nationals or a company wholly owned by UAE nationals. However, the government of each emirate has sought to encourage foreign direct investment by allowing 100% percentage ownership of foreign companies in the free zones. This region has no anti-damping actions. It also does not have competition legislation.

On the other hand in the East Africa, Kenya is a good market to expand operations. This is because of the nature of their economy and their vision 2030 which is aimed at moving towards industrialization. This move thus requires intense IT services that can readily be offered by this firm. HP still has the largest market share in the IT industry followed by Toshiba and Dell respectively. The Kenyan market has been fluctuating, but the inflation level is reducing and stands at 5.53% currently (Kaburi & Sewe, 2013).

Kenya has been recording a deficit balance of trade and in November 2014 it recorded a deficit of 78707 Million KES. The current exchange rate of Kenyan shilling against the US dollar currently stands at 91 while in the previous years it has been at an average of 87. The primary exports from Kenya to other markets include agricultural products. Kenya has tea and coffee as the primary exports with other products such as horticultural products forming part of its exports. On the other hand, it imports other products such as oil, machinery, vehicles among other products. The costs of labor in Kenya are quite high for the skilled labor but readily available and in most cases the costs match the quality of work done (Kaburi & Sewe, 2013).

Kenya has been offering tax holidays for foreign investors who manufacture goods in their local economy for export. The local corporate tax is 30% while for foreign company’s stands at 35%. It has had the liberalization in trade and business freedom. There exists minimum government intervention in the economy, but the government seeks to control spending in the economy. The foreign ownership of the firms listed in the Kenya`s stock exchange currently stands at 60%. It reduced from previously 75% requirement. The government has controlled product standards and upholding of intellectual property that has a large benefit on both industry and the consumers.

Competition

In the UAE

In the move towards internationalization, it is important to recognize the presence of other market players. It's prudent and rational to analyze competition and ensure that proper strategies are rightfully instituted to overcome the forces that come forth with completion. In the UAE, there are other existing competitors to HP. These include Dell, Acer and IBM (Haouas & Heshmati, 2014).

Dell: This firm has a 15% market share in the UAE and 12.7% global market. Dell has also earned a successful entry too in the market of UAE. It has used the globalization strategy to strengthen its revenue base alongside building its brand. It has some competitive advantages that include the Just-In-Time (JIT) strategy that helped the firm reduce the inventory level. It reduces the costs associated with inventory and gives it a cost advantage. Another competitive edge of Dell is the use of direct selling. This reduces the level of intermediaries involved thus reducing such costs associated with intermediaries. It also offers customizable products that are attractive and conform well to customer needs. It also situates its manufacturing plants close to the target markets hence utilizing low and high-quality labor force (Hitt & Hoskisson, 2012). 

Acer: This is another competitor to HP. It has 14% market share in the UAE and globally has 8.1% market share. It has widely used the multi-brand strategy in the market so as to keep it fit for the global market. It offers relatively cheaper products for the consumers that have made it able to gain a significant market share globally. The company also considers merging as one strategy to penetrate the global market. For instance, it has merged with Gateway so as to be able to gain a larger market share. The firm has had a competitive advantage of selling their products at the lowest cost in the market. It serves the customers more cheaply and also focuses contacting the customer that enhances customer and brand loyalty.

IBM: This is another competitor to HP. It has a 9% market share in the UAE. It however sold its PC business to Lenovo, which constitutes 19.4% global market share. The firm has had a competitive advantage in data analysis. It is so far one of the fast data analyst globally which gives it an advantage over others and thus creating customer loyalty (Packard, 2014).

In Kenya

In Kenya, however, HP faces competition from other players. Some of the competitors are recurrent. The competitors include Dell, Acer, and Asus.

Dell: It has a 10.7% market share in the Kenya`s economy. The very same strategies applied by Dell used as discussed above apply to the Kenyan economy. These range from the JIT approach that seeks to reduce the inventory levels hence reducing the costs associated with the same. Direct selling is also a major advantage of Dell that helps curb the intermediary cost. Customizing its products also aids in incorporating the customer demands. It helps to meet the client needs adequately and wants hence enhancing customer loyalty and hence sustain and create demand for the products (Packard, 2014).

Acer: In the Kenyan market, this firm has 10.4% market share in its industry and 8.1% globally. It employs the same strategy as in other markets. It has concentrated on offering relatively cheap products that those of its customers that have created a demand for its products. The volumes attributed to the large sales volumes are what has enabled it remains in the Kenyan market. Its products are designed in a manner that is friendly to the customers hence create demand for the products.

Asus: This is another key competitor of HP in the Kenyan market. It has a 6.9% market share in Kenya. This firm is also gaining popularity and has used some strategies in order to gain popularity and competitiveness. The firm has adopted strategies of engaging customers in their product formation. They do research regarding what features of their products the customers want and eliminate what the customers do not want. It enables it enhance customer attachment to the firm and their products and hence give it a competitive advantage. The firm has also adopted the strategy of lowering costs and hence makes their products more affordable for their target customers (Aaker, 2012). 

Conclusion

From the above analysis, it's evident that the move to globalization is dynamic as a process. It requires keen analysis and strategic moves (Capron & Chatain, 2008). Apart from the internal strengths and weaknesses of a firm, the external environment should be well scanned. It justifies our analysis of the competition arena done above. From the analysis of the competitors, it is prudent that one gets to know the different strategies applied by them and how the firm can reorganize itself in a manner that helps outsmart the competition. The market environment is also a factor that should be considered by a company that includes knowing the different regulations and legislations that have been put in place and the government role in the economy of the target market

Recommendations

I would recommend that the firm involved, HP, employ strategies that outsmart those of the competitors. This can be done by offering the best quality possible so as to enhance customer value. I would also recommend that the manufacturing of hardware and software be centralized, but the supply and services are globalized so as to reach out to the target customers. The staff in the different target regions should also be adequately trained to meet the global standards. Finally, there should be a central management in the center of manufacturing and other support management in the areas of operation so as to enhance efficiency.

References

Aaker, D. A. (2012). Building strong brands. Simon and Schuster.

Capron, L., & Chatain, O. (2008). Competitors' resource-oriented strategies: Acting on competitor resources through intervention in factor markets and political markets. Academy of Management the Academy of Management Review, 33(1), 97–121.

Cartwright, S., & Cooper, C. L. (2012). Managing Mergers Acquisition and Strategic Alliances. Routledge.

Haouas, I., & Heshmati, A. (2014). Can the UAE Avoid the Oil Curses by Economic Diversification?

Hitt, M., & Hoskisson, R. (2012). Strategic management cases: competitiveness and globalization. Engage Learning.

Kaburi, S. N., & Sewe, T. (2013). ENTREPRENEURSHIP CHALLENGES IN DEVELOPING ECONOMIES: CASE OF KENYAN ECONOMY. In Scientific Conference Proceedings.

Packard, H. (2014). HP ConvergedSystem.