Introduction
Most communication companies have gone international because of attraction by the in economic growth and disposable income in the 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 communication companies have gone abroad for the opportunities that are available for getting the challenges in the international market. The internal market has the following opportunities increase in market share, availability of cheap labor in some countries, increase in the streams of cash flows, increase and innovation, and other factors.
The international market has many hidden challenges that affect business therefore one company planning should recognize the path to international expansion may be strewn with obstacles, which may spoil the success of the company. When Global communications, was going international, like many organizations they looked at the following opportunities to counter the corresponding challenges.
Reasons International Expansion
As much as Communications companies initially held by governments and their management may try to eliminate the risks associated with international expansions, it cannot be done. The key to a successful international expansion is to anticipate, reduce and control those risks associated. This calls for developing a strategic plan. Prudent planning reduces risk. The major reason for most of these companies going abroad is the increase in cost and availability of stiff competition at home. Therefore to improve profitability and continual survival of the company international expansion has become necessary. Most communication companies initially owned by governments have gone under especially in third world countries. Forward-looking managers have developed plans to expand to international markets because of the 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 internal expansion this may include (1.) Underestimating the nature international market; most companies assume that their successful services in their country will be equally appealing in the international arena. More often than not, this fails because the service doesn’t fit the market, or the pricing is out of line with the consumers’ needs. This can be avoided by following existing clients when expanding into the international arena. This strategy results in a win-win situation. This is because the company will have a key resource that will help them in ensuring a successful expansion by providing a solid base for business in the international market. A company without a 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.
(2.) Operating costs: Operating an office or any other branch in the international market is not like opening a branch in the home country. To avoid this form of costs business leaders need to look for strategic partners in the form of alliances, acquisitions, mergers, and takeovers. (3) “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 a business grows” (RMS, 2007). Often these companies find open to fraud, outright theft, and other malpractices within a small business.
(4) Compliance with statutory requirement: Most communications firms have run into problems complying with laws and regulations of the market they are expanding to. For example, recently a South African subscriber with a UK association found them in a tussle with the 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.
Global communications, British telecom, and ATT $ T Problems encountered with the need to expand
As they were planning to go international they faced resistance from employees both senior and junior. The other stakeholders also were not impressed with the idea. In conclusion, we will realize from this quote that the major reason 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 electricity supply industry mean 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 in this sector. In the new competitive market, utilities will require a new orientation towards their customers. This will mean that changes are needed in the culture of companies as well as their operating 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. The new market will make new demands on utilities that wish to prosper.
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 to creating a growing understanding and commitment between the customer and the firm in order to obtain the advantages of a long-term relationship.
Utilities are recognizing, therefore, that their future success depends on the joint activity of keeping their most profitable customers and acquiring new ones from competitors. In the large user market for electricity in the UK, supplier choice has existed since 1990. Some 62% of large customers changed supplies shortly after restructuring. For example, London Electricity lost 30% of its business within a year, primarily to competitors with more attractive pricing propositions (Carter 1995).
This prompted sharp retaliation with pricing incentives and new packages such as 18-month contracts with cost-saving benefits. This has won new business and helped stop the flood of exiting customers. It is likely that relationship marketing techniques will now increasingly need to be employed as companies understand more about their customers and how they can keep them. Probably the most important issue is for utilities to remember that a customer who is lost through dissatisfaction with a service provider will be gained by a competitor. Keeping customers is, therefore, a key strategic issue for utilities to address. Customer retention helps predict the profitability of the company and therefore provides an excellent management tool for considering the success of quality and customer service programs. Retaining a customer allows a company to further develop the relationship with the customer. It has been found that there is a link between quality, customer retention, and profitability. This is not surprising — customers who are satisfied with the total value proposition offered to them will be loyal to the company.
Customer retention is of particular importance in intensely competitive markets, such as utilities. Knowledge of the 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 utility 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 befits accrued includes
References
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, 17 November, pp.29-30.
Evelyn, J. and DeCarlo, N. (1992), “Customer Focus Helps Utility See the Ught”, journal of Business Strategy, 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. Web.