Organizations often face number of challenges when expanding globally. Some of the challenges are unique to the particular industries while others affect all global organizations. However, several companies have demonstrated that it is possible to expand globally and make profits.
When expanding globally, organizations often meet three main challenges. They often have managerial problems. Running global organizations is more challenging than running domestic organizations. Managers operating internationally must have the skills to effectively perform tasks such as managing people from different cultures, understanding the laws and regulations governing international trade and communicating (Krueger, 2012).
Next, they face stiff competition. In the last 30 years, many companies in the US have been relocated to developing countries. Subsequently, competition is rising in the countries. Civil wars are consequences of stiff competition for resources. To maintain political stability and encourage local investment, host countries often provide subsidies to domestic traders. This often increases competition against products produced by foreign investors.
Another challenge facing global trade is the difficulty to maintain connections with the host states. Public companies have various shareholders from different countries. Shareholders of global companies always make decision in the interest of their companies. Certain decision often conflict with the needs of the host.
Whenever such conflicts arise, foreign investors risk losing the rights to operate in such states (Krueger, 2012). Auto Parts US might encounter these challenges during its operations and should work towards ensuring that it limits the consequences of the risks involved.
Additionally, Auto Parts US might also encounter some unique challenges. Currently, the global auto market is experiencing a shift in the production and supply of automobiles. Both developed and developing counties manufacture and assemble auto parts. As a result, companies are working towards reducing costs by balancing just in time delivery with global sourcing (Krueger, 2012). Besides, the company faces the risk of stiff competition from established companies.
There are auto supply companies operating in the US and abroad that already have control of the market. A Chinese largest auto parts marker recently purchased A123 Systems, a leading U.S maker of batteries ((Reuters, 2013). Companies such as A123 Systems are established and control the international auto parts market. Therefore, Auto Parts US has a difficult task strategizing to have a competitive advantage.
Further, the global auto business is highly risky for the young company. The company has built a pool of reliable connections. Moreover, the company does not have a clear understanding of all stakeholders that it is going to deal with.
Currently, tracking fraud cases across international borders is challenging and the company must understand how to manage and go about such issues in the best manners possible. Therefore, there are a number of challenges that an auto company planning to expand its operations and production globally may encounter prior to achieving success. Auto Parts US must be prepared to overcome the limitations (Penenberg, 2003).
Auto Parts US can learn from leading US based companies and enhance its operations. When Hematite began operating globally, it faced accusations of being insensitive to environmental needs. The company considered this a threat to its trade. It adopted a zero landfill waste policy to demonstrate its sensitivity to conservation of the environment. As a result, Hematite has been receiving more and more contacts (Automotive – Success Stories, 2009).
Global Auto Parts Manufacturer faced difficulties improving performance of the mechanical valve that was incorporated as an expanded regulating range. Moreover, it encountered problems cutting costs for their mechanic valve to help them deliver competitive products. The company used Goldfire to resolve its concern. The company has been able to assess potential solutions for technical feasibility and freedom-to-operate and is currently strengthening its market position (Industry, 2007).
Additionally, Jiffty-tite has faced unique challenges. Headquartered in Lancaster suburb of Buffalo, the company prides itself on efficiency. In 2007 and 2008, the auto parts company hit hard times and laid-off about a third of its labour force. The Company re-strategized to focus on product development. Presently, it is producing products for race cars and military vehicles. The company has re-employed about half of the laid-off workers (Leventhal, 2011).
Conclusively, Auto Parts US has an opportunity to expand its production and operations globally. To succeed, the auto company should train its managers, produce quality products to overcome competition and comply with laws and regulations governing international trade. Moreover, it should build reliable connections to have an ample opportunity to understand the auto industry. Finally, the company should learn from other established auto firms.
References
Automotive – Success Stories – Hematite. (2009). Government of Ontario, Canada. Web.
Industry. (2007). Goldfire Auto Parts Manufacturer Success Story . Knowledge- Enabling Decision Making. Web.
Krueger, A. O. (2012). Struggling with Success: Challenges Facing the International Economy. Singapore: World Scientific.
Leventhal, R. (2011). An Auto Company’s American Success Story | Fox News. Web.
Penenberg, A. L. (2003). Tragic Indifference: One Man’s Battle with the Auto Industry Over the Dangers of SUVs. New York: Harper Business.
Reuters, R. (2013). Wanxiang Group Buys American Battery Maker. The New York Times – Breaking News, World News & Multimedia. Web.