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We are going international through geographical expansion and there are many benefits of international market. These include increased streams of cash flow, increased market share, avoidance of stiff competition at home among others. Apart from the benefits, there are many disadvantages associated with international market.
On Wall Street, confidence in the telecommunications industry is waning. Stockholders are bemoaning diminishing returns and speculating about the industry’s ability to rebound. Understandably, telecommunications companies are under tremendous economic pressure and Global Communications is no exception. Three years ago, its stock traded at $28 per share; today, the stock is valued at $11, more than a 50 percent depreciation.
The problem is obvious: Too much competition. Local, long-distance and international markets are all competing for the same business. New calling features and suites of local and long-distance services helped, but the industry suffered a huge blow at the hands of the cable companies, who stepped in to provide complete solutions encompassing computers, televisions and plain old telephone service (POT). Selecting and entering international markets yielded mixed results.
To pump up the volume, the Global Communications senior leadership team has developed a two-pronged aggressive approach. First, they plan to realize growth through the introduction of new services, primarily to its small business and consumer customers, who will now be served in both local and long-distance markets across the country. To compete with the local telephone and cable companies, Global has created alliances with a satellite provider to offer video services as well as a satellite version of broadband. Partnership with a wireless provider will allow the small business owner anytime Internet access using wireless telephone or PC cards. Even company information hosted in mainframes can be accessed remotely.
Second, the senior team has identified cost-cutting measures that will improve profitability. To maximize both of these initiatives, the company plans to market itself more aggressively on an international level with the goal of becoming a truly global resource.
Most companies go international because of attraction by the in economic growth and disposable income in international market arena, great competition at home, extra retained earning that needs to be invested and many other factors. The objectives of companies are to maximize revenue and compliance with corporate sustainability thus global expansion helps to develop new streams of cash flows to the company. Many companies have gone abroad for the opportunities that are available forgetting the challenges in the international market. International market has the following opportunities; increase of market share, availability of cheap labor in some countries, increase in the streams of cash flows, increase and innovate and other factors.
International market has many hidden challenges that affect business therefore one company planning to enter, should recognize the path to international expansion may be strewn with obstacles, which may spoil the success of the company. When we, was going international, like many organizations we look at the following opportunities to counter the corresponding challenges.
Method of entry to international market
There are many ways of entering into international market. However, our company has chosen strategic alliances with local companies in the country we are entering. Other methods like opening a controlled office has many disadvantages, which will be highlighted shortly. other methods like takeovers, mergers, acquisitions and many others need huge financial outlay.
Reasons for international market
The key to a successful international marketing is to anticipate, reduce and control risks associated with it. This calls for developing a strategic plan. Prudent planning reduces risk. The major reason of most of this companies going abroad is the increase in cost and availability if stiff competition at home. Therefore, to improve profitability and continual survival of the company international market has become necessary. Most companies initially owned by governments or individuals have gone under especially in the third world countries. Forward-looking managers have developed plans to expand to international markets because of urge to improve profitability and remain in the market, expand a profitable business and acquire new technology, incorporate strategic partners in terms of innovation and technology and achieve economies of scale and spread fixed cost over more business units.
It is easier said than the real situation. This is because there a number of problems associated with entering international market this may include:
- (Underestimating the nature international market, most companies assume that their successful services/products in their country will be equally appealing in the international arena. More often than not, this fails because the service does not fit in the market, or the pricing is out of line with the consumers needs. This can be avoided through retaining existing clients when entering into international arena. This strategy result into a win-win situation. This is because the company will have a key resource that will help them in ensuring a successful entry by providing a solid base for business in the international market. A company without strong home customer base will definitely fail in the international arena. “Regardless of steps you take to get started, you need to be committed for the long term and believe the investment has a reasonable chance of improving both your bottom line and prospects for future growth,” says Karnani.
- Operating costs: Operating an office or a any other for of branch in the international market is not like opening a branch in the home country. To avoid this form of costs business leaders need look for strategic partners in the form of alliance, acquisitions, mergers and takeovers.
- “Financial control problems that lead to theft and loss. In a typical start-up office for a global service expansion, companies will frequently deploy a small team of employees to support existing clients and develop new business. The early financial issues of an expansion office revolve around expenses — such as location costs, travel, meals, housing, and new business development — before gradually shifting to revenue management as business grows” (RMS,2007).Often this companies find open to fraud, outright theft and other malpractices within a small business.
- Compliance with statutory requirement: Most communications firms have run into problems complying with laws and regulation of the market they are expanding to. For example, recently a South African subscriber with UK association found them in a tussle with procurement system of a country called Kenya. They were expanding their market share to that region. Apart from this recent case the USA service companies have themselves in the same scenarios. “If a company does not have an internal resource skilled in international tax laws, experts say the next best step is to retain a business services provider that can handle payroll, bookkeeping, compliance and regulatory issues”(RMS, 2006).this can be very costly in the long run for the company.
In conclusion we will realize from this quote that the major reasons for international growth is competition “Cost cutting and competitive pricing strategies are likely to result in early wins in attracting customers from competitors. But slim margins in the —means that price advantages are unlikely to be a sufficient reason for customers shifting again (Carter, 1995). The inconvenience of changing suppliers for a small price advantage is not likely to be attractive, especially in residential segments, so developing strong relationships and cross-selling other services will be critical to success. This will mean that changes are needed in the culture of companies as well as their operational systems and processes (Croft, 1995). When customers do not have choices in supply there is no impetus for understanding customer needs and developing products to match these
Relationship marketing focuses on keeping customers and building a relationship with them, thus enhancing customer loyalty. It is now being increasingly recognized that the greater the satisfaction the customer has with the organization and its products, the more likely long-term customer retention and improved profitability will be enjoyed by the company. Recent interest in relationship marketing has led many firms to consider how to improve retention rates. This emphasis involves directing attention at creating a growing understanding and commitment between the customer and the firm in order to obtain the advantages of a long-term relationship.
Customer retention is of particular importance in intensely competitive markets. Knowledge of profit impact of a given improvement in retention rate, by customer segment, is essential so managers can decide on the relative emphasis to be placed on retention and acquisitions strategies. The Customer Retention Model provides an understanding of the profit impact of customer retention including the role of interacting variables, thus enabling utility managers to gain an understanding of the likely profit impact in their own businesses. The argument for improving retention rates in utilities companies is a compelling one based on the evidence of the profit impact of small percentage improvements in retention and the new highly competitive market environment. Relationship marketing and customer retention will prove to be key major strategic issues for utilities for the balance of this decade and beyond.’’ (Payne and Frow, 1997).
The benefits fits that accrued from international market include: Increased profits, Increase market share to avoid going under due to stiff competition at home,
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- Carter, M. (1995), “The Mains Attracficm”, Marketing Week, 18, No. 38, pp.36-39.
- Christopher, M., Payne, A. and Ballantyne, D. (1991). Relationship Marketing: Bringing Quality, Ctistomer Service and Iviarketing Together, Butterworth-Heinemann.
- Croft, M. (1995), “The Bill to Change”, Marketing Week, pp.29-30.
- Evelyn, J. and DeCarlo, N. (1992), “Customer Focus Helps Utility See the Ught”, journal of Business Strategy, January/February, pp. 8-12. 22, pp.34-38.
- Payne, A. and Frow P. (1997), Relationship Marketing:Issues for utility sector, Journal of Management pp 463-477.
- Payne, A. and Rickard, J. (1997), “Relationship Marketing, Customer Retention and Firm Profitability”, Working Paper Cranfield School of Management, considering international expansion? Avoid these four key dangers.