Firms in various economic sectors are increasingly considering expanding their operations beyond their local market. This has been amplified by a number of factors. For example, increase in the intensity of competition in the local market has led to a decline in their profit level. In addition, these firms are considering venturing into the international market so as to attain their profit maximization objective and diversify risk.
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For a firm to operate internationally, it must have the potential to compete with the major competitors operating in the international market. This is possible if the firm formulates and implements effective global strategies. Global strategies refer to the competitive advantages necessitating a firm to compete genuinely.
Riordan Manufacturing Industry is a company located in Hangzou, China. The firm produces a variety of plastics products which are marketed in a number of Asian countries. The firm has been able to supply its products to international markets through adaption of a global strategy.
In pursuit of its global strategy, Riordan has identified Australia as one of its potential investment destination. Considering the increased incorporation of the concept o internationalization by firms, it is vital for them to adopt global strategies relevant to help them expand their business beyond the domestic boundaries. According to Inkpen, it should be the managers’ responsibility to identify how a firm should position itself strategically and market its products so as to sustain its venture in the international market Inkpen (2006, p.58).
Strategic management process
Every firm has a vision which it yearns to achieve in the course of its operation. For the firm to achieve the vision, the management must decisively and correctly plan the way forward. This is facilitated by adapting an effective strategic management process. According to Tyndall (2000, p. 1-5), strategic management process has a number of phases as outlined below.
- Establishing a mission statement which describes the goals and the objectives of a firm. Scanning the environment to determine the risks and uncertainties the firm is exposed to.
- Development of the strategy an action that guarantees smooth flow of the planned activities.
- Development of the action plan that dictates the requirements so as to achieve the goals and objectives.
- Allocation of resources to the respective areas to guarantee success of the process.
- Measurement of performance to determine whether the desired goals and objectives have been achieved.
Domestic and international approaches
Both the domestic and international companies have different approaches in relation to strategic management process phases. When formulating a mission statement, a domestic company has narrow range of goals and objectives compared to an international company. Therefore, the international firm should approach this phase with great concern.
In scanning the environment, an international firm should conduct a comprehensive market research to identify the risks and uncertainties inherent in an international market. This arises from the fact that international market have different risk characteristic compared to domestic firms.
In the strategy development phase, international firms must develop strategies which are internationally compatible. The international firm should therefore approach this phase critically to avoid failure upon entering the market. This means that interntional firms should soberly develop their strategies.
With regard to action plan development phase, the international firm must develop an action plan that will guarantee a global competitive advantage to the firm. Local firms can capitalize on action plans developed by successful companies.
Optimal resource allocation should be conducted so as to exploit the international market effectively. In addition, continuous evaluation should be conducted to determine how the firm is performing in the market. Through performance evaluation, the firm will be able to determine whether the international market is a success.
Global comparison between the domestic and international approaches to strategic management
According to Harrison and John (2009, p.15), a multinational firm is exposed to diverse cultures, technologies and political influences. This is different with the local firms which are not so much affected by these threats. In venturing Australian market, Riodarn Manufacturing industry should analyze its strategic management to ensure that it is strategically positioned in its investment destination.
This arises from the fact that external forces such as those resulting from culture, technology and political influence can force the business out of the market. This is different from the domestic market where firms are capable of dealing with the external forces since they are locally generated.
Role of ethics and responsibility in the strategic management process phases
According to Key and Popkin (1998, p. 331-338), incorporating ethics in strategic management when making decisions guarantees effective strategies. This relates to both long term and short term strategies. In general, when the company is attending to phases of strategic management process, it should consider the ethical criteria in order to avoid contravening the rules of international trade.
The role of the entire strategic management process in the global strategy
Competitive forces are nowadays the determinants of whether an international firm will survive or not. Therefore, for the firms to operate profitably, they must accommodate the strategic management process in their daily operation. The process enables the firm to establish suitable competitive advantages necessary in a competitive environment. Therefore, strategic management process is used to design acceptable strategies.
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In an effort to effectively incorporate the concept of internationalization, firms should adopt global strategies that will best suit their business operation. Effective global strategies contribute towards a firm positioning itself effectively in the market.
Harrison, S. & John, H. (2009). Foundations in strategic management. Richmond: Cengage Learning.
Inkpen, C. (2006). Global strategy: creating and sustaining advantage across borders. New York, US: Oxford University Press.
Key, S. & Popkin, J. (1998). Integrating ethics into the strategic management process; doing well by doing good. Management decision. 36(5). pp.331-338.
Tyndall, R. (2000). Strategic planning and management guidelines for transportation agencies. Washington, US: Transportation Research Board.