Strategic partnerships and international expansion
Every country has its own unique circumstances; therefore, it is essential to work with strategic partnerships that have knowledge of local circumstances. Some of the key catalysts for choosing local partners or persons with local expertise include their ability to navigate through government policy, local competition, local culture, and language. A target market usually has certain cultural practices that have a direct effect on business.
In the hospitality industry, they expect to find local cuisine or hotel accommodation that has a local touch. Partnering with businesses that have knowledge of these cultures will ensure that the best services reach those who matter. Language is a key component of success in international markets. When a global firm enters a new market, it needs to communicate with its market directly, and local partners can help them do that (Chinomona & Sibanda 48).
Local partners are familiar with existing laws in target markets. Having an understanding of these regulations can make the difference between succeeding and failing in these locations. Some countries have anti-trust laws that disallow unfair competition. Their definition of unfair competition is dependent on the entity under consideration. In some countries, the law may forbid vertical integration, false advertising, or multi-level marketing. Therefore, local partners are essential in showing global companies how to adhere to legal regulations and laws in their countries.
One of the critical advantages of having local partners is accessing their knowledge of the local competition. Many of them know where competitors are and what their competitive advantage is. Additionally, a number of them have critical knowledge of what it takes to outdo the competition. As a result, they can be a vital resource during global expansion.
Understanding consumer attitudes and needs are rather difficult for foreign companies that have never operated in a target market. For instance, some countries have a concentration of the wealthy in urban areas or capital cities, and this may imply that luxurious items will do well there. Consumers may focus on price over quality, so foreign companies need to understand these mindsets. Such information can guide their marketing, product portfolio, and distributional choices.
A foreign market
A possible foreign market for the company to target is Luxembourg. SBE mostly focuses on the US and its neighboring countries. Its new partner will assist the company to enter European countries (Businesswire 19). Therefore, a possible destination for the partnership could be Luxembourg. Statistics indicate that the country has the highest GDP in the world. This implies that the population’s purchasing power is relatively higher than most individuals in the developed world. The company will have plenty of customers who can afford its offerings. Furthermore, its capital city is home to most EU institutions. This market would be ideal for a company in the hospitality industry because several diplomats enter and leave the nation frequently.
Tourism is not a key component of the country’s economy. Therefore, the competition will not be high in this market. Additionally, most competitors have diverse offerings, which implies that SBE can find a niche for itself and succeed. Some of them offer sports adventures; others dwell on cultural activities among others (Euromonitor International 50). The government of Luxembourg did a lot of promotion in the tourism industry, so there are plenty of foreign and domestic tourists to consume SBE’s services.
Other factors that make this nation ideal are its friendliness to business, its political stability, and its use of a principal continental currency; the Euro. Infrastructure is quite reliable, and distribution channels are available. However, labor costs are high, but high demand will offset them.
The company should enter the market through a formal joint venture so as to give each partner control during decision processes. Additionally, this approach lessens the risks involved in foreign markets because both companies have a stake in the venture. The partners will control and own resources equitably thus giving the partners an incentive to contribute aptly (Garcia-Canal et. al. 103).
Competition among locals
In Luxembourg, SBE will have to deal with problems of customer loyalty to certain brands. Some luxury hotels and brands in Luxembourg have made a name for themselves in the local industry. Therefore, SBE will have to convince them that they offer hospitality services with more impressive international standards than the locals. The firm can solve this problem by having a clear marketing strategy that sells their superior standards (Peng 55).
Beverage styles, human resource practices, food presentation, and décor are peculiar to Luxembourg. Local competitors are already familiar with this landscape and practices, so they are better able to meet local needs. The company should use its local partner to harness knowledge about the country and incorporate these into their service offerings. It should also hire reputable chefs from the country who specialize in the country’s cuisine.
Spikes are rather common in the hospitality industry. Local competitors are better equipped to deal with these fluctuations than new foreign entrants. For instance, they already know where to source additional staff and how to make pay structures accordingly. SBE will need to purchase hospitality industry reports in Luxembourg so as to understand its patterns. It should also carry out its own forecasts so as to be prepared in the future.
Works Cited
Businesswire. 2011. SBE announces strategic partnership with Colony Capital to fuel the US and international expansion. Web.
Chinomona, Richard & Dennis Sibanda. “When global expansion meets local realities in retailing: Carrefour’s glocal strategies in Taiwan.” International Journal of Business and Management 8.1(2013): 44-59. Print.
Euromonitor International. 2012. Travel and tourism in Luxembourg. Web.
Garcia-Canal, Esteban, Cristina Duarte, Josep Criado & Ana Llaneza. “Accelerating international expansion through global alliances: A typology of cooperative strategies.” Journal of World Business 37.4(2002): 91-107. Print.
Peng, Mike. Global business. Mason: South Western College Publication, 2009. Print.