Introduction
In the modern context, diversification of markets is one of the most important dreams for organizational managers. Companies are increasing expanding their market area to cover more than one nation, region and continent. Thanks to technological advancement, most companies are advancing towards achieving this goal through globalization of markets. WRSX is an example of a company that is currently seeking to enter foreign markets hoping to tap the opportunities presented by the modern trends of business diversification. After attending four boardroom meetings spanning over four years, the researcher wishes to develop a compressive analysis of a strategy for WRSX Company to enter into foreign markets.
The four boardroom meetings involved a comprehensive analysis of the market opportunities and market entry strategies available for the company as it seeks to go global. The purpose of this paper is to develop a personal focus on the decisions arrived at the four boardroom meetings. It will assess theoretical basis for the decisions arrived and consider possible reasons for the success or failures of the decisions. This will be achieved through response to specific questions.
Original strategic position and the impact of new information on original decision and choices
It is evident that the strategy experience obtained from attending the four boardroom meetings that took place over the last two years produced significant changes to the original decisions. A large volume of new information was obtained from the experience, which caused significant changes to the original decisions.
First, it is worth considering the status of the original summary. At the beginning, the summary attempted to emphasize on the need to diversify the market for the company, mainly focusing on the emerging markets in Southeast Asia. For instance, the summary indicated that the emergence of the new markets in the region provided a wide range of new opportunities, focusing mainly on the large population in countries such as China. Moreover, the initial summary considered the decreasing economic prowess of various nations in the western world, including the decline in market growth rates in the US, the UK and various nations under the European Union. With these considerations, the summary argued that the emerging markets in southeastern Asian region were the best option for WSRX. It is also worth noting that the summary ignored countries like India, assuming that the country is still a developing world with a high population in the low-income class and a high rate of unemployment. Thirdly, the summary ignored Africa, assuming that the continent as a whole is still “an area of disease, poverty and wars”.
The summary further assumed that the biggest challenge in southeastern Asia was not competition, but the strategies involved in initial market entry. In fact, the summary ignored the rise of multinational organizations in the region, only focusing on market entry strategies as well as the opportunities presented by the large population in the region. The summary further assumed that the Chinese market is homogenous and similar to the European or American market. In essence, the summary assumed that the geopolitical boundary that marks China is essentially the same boundary that defines the Chinese market. There was little consideration of China as a large nation with huge but diverse population located over a very wide area and presenting evidence of heterogeneity in terms of language, culture and human behavior.
The summary also considered the US as the mother of technological invention in the modern world, assuming that most other nations borrow technology or technological ideas from the US. The summary assumed that the US is still the leading nation in terms of creativity and innovation, attracting the best brains from the rest of the world, especially from the developing world.
However, attending the four boardroom meetings over the last two years has produced a number of changes due to acquisition of new information and experience. Accordingly, the initial decisions have been affected by the new experience and information.
First, the first boardroom meetings focused on the analysis of different markets around the world, including economic, demographic and socioeconomic trends. The lecture by Andy Carnelley, a business analyst at WRSX, mainly focused on issues happening in the external business environment. The lecture focused on the world economy. It was learnt that the US still dominates the advertising industry, accounting for more than 50% of the world’s total revenue obtained from the sector and an annual growth of 4%. This information is relatively new. It affected the initial decision because it had been assumed that the US advertisement market is declining.
Secondly, the lecture provided additional information regarding the position of the US technologically. While it had earlier been assumed that the US is the mother of technological innovation and invention, we realized that the rise of Asian countries is a major challenge to the US. We learnt that the Chinese technology is a challenge to the US, suggesting that the US is no longer the mother of technology. As such, the new decision will consider Southeast Asia as a technologically potential market. The lecture further provided evidence of potential growth in the Indian market. While the initial decision ignored this country, the lecture indicated that India is a major world market due to its large population, increasing economic growth and improvement of industrial growth over the last few years.
Strategic position and decisions: The decisions pursued and reasons for pursuing them
One of the specific decisions arrived at one time during the four years was to propel WRSX inorganic growth rather than opting for conventional market entries in China and South Korea. The idea involved in this particular decision was to ensure that the company cuts on the costs involved in direct market entry. In particular, the decision involved acquisition of local advertising companies in the country, which would reduce costs and time needed for market entry. Theoretically, most organizations in the modern world are increasingly opting for inorganic growth even in their countries of origin. A number of reasons are cited.
For instance, it improves knowledge and understanding of the target market because the acquired company has some prior experience with the market. Secondly, inorganic growth allows the corporate leadership to take advantage of changes in the marketplace by experiencing the satisfaction of the corporate vision and missions. In addition, the decision was considered because organic corporate growth has the capacity to provide WRSX with an opportunity of growing at a preferred rate. In addition, another reason for pursuing the above decision was backed by the evidence collected from the lecture on the homogeneity of the target markets.
For instance, the boardroom meetings proved that there are some difficulties and challenges likely to affect the company as it seeks to diversify its presence in the global markets. First, we realized that the US is a single market while some countries like India and China are, in fact, various markets. We realized that a difference exists between the geopolitical boundaries and market boundaries. In essence, it was learnt that China, for example, is made up of different cultures, languages and provinces equal to different countries. As such, market homogeneity is relatively low. This means that the new decision will consider different market entry methods for different parts of the China.
The lectures further improved the existing knowledge in terms of strategic development and implementation. Information about market analysis was obtained. For example, we learnt that determination of what constitutes a market growth opportunity is a process that should involve a number of issues. For instance, it should involve an analysis of the existing gaps in the market and the cause of these gaps. It should also consider client opinions in considering the existence of market opportunities. For instance, the lecture provided evidence that some companies such as Universal Motors have embarked on hearing presentations from their clients, which provides a new strategy for determining the existence of market opportunities.
There were a number of outcomes expected from the decisions at the time. For instance, it was expected that the decision would improve market knowledge, reduce entry costs and enhance product acceptance in the target markets. It was also expected that the decision would allow the company to acquire existing companies that have already matured rather than setting up new ventures that are difficult to establish, manage and maintain. Moreover, the lecture provided evidence that some nations in Africa are potential markets for WRSX because the continent is no longer the place of war, poverty and disease, owing to the recent evidence of economic growth.
Theoretical framework underpinning the decisions
As mentioned above, an important decision pursued in the strategic experience was to enhance WRSX growth in foreign markets, especially in China, through inorganic method. In theory, inorganic market entry and growth is an example of indirect market entry (Bruner 2010). It is a set of methods available for companies, especially in foreign markets where the existing information about market structure and nature is limited. Moreover, these methods are important in cases where legal and social constraints affected foreign companies. In theory, organic growth has been considered one of the most important methods for corporate growth in the modern works.
However, there are several limitations that make it less favorable compared to acquisitions. For instance, there is evidence of diseconomies of scale. Due to hierarchical structures, communication problems are set to increase significantly, which slows the process of making decisions. Secondly, organic growth is affected by overtrading (Bruner 2010). For instance, if the company grows beyond its means, it may face reduction in customer trust and loyalty. For example, taking too many orders may lead to inability to control and manage human resources. Therefore, the decision to choose acquisitions in the Chinese market was based on these facts. Moreover, theories of inorganic growth prove that organic growth is not effective in foreign markets due to the increasing need for structures. If the company decides to enter the target market using organic means, it is expected to develop its own structures, which requires time, money and effort. In addition, special managers will be required, especially those familiar with the market.
Therefore, these theoretical aspects prove that acquisition is the best decision for WRSX to enter the Chinese market. It will allow the company to choose a partnering company that has some experience in the target market and use its knowledge to market its products. There will no need for new managers because the partners have their own structures and management familiar with the markets (Bruner 2010).
Reference
Bruner, BF, 2010, Applied mergers and acquisitions, Vintage Books, New York, NY. Web.
Appendices
Appendix A: Summary of performance log
- The group was introduced to the board in the meeting. The meeting was conducted in the company boardroom. In brief, the tasks involved an overview of the company, the board members, tasks to be discussed and the need for strategic choices. In addition, the group was introduced to the position of the company and the opportunities available for expansion.
- A general overview of the global markets was analyzed. the presenter analyzed the demographic and market positions of various regions. In particular, the US, Europe and Asian markets were analyzed
- Technological, economic and social aspects of the emerging markets were compared with those in the western world.
Appendix B: Strategic position
The choice reached for strategic position was to expand the WRSX into the Chinese market. The following was the position of the choice:
- To expand the company products into the Chinese market
- The Chinese market is highly heterogeneous, but presents a good market for the company due to its large population
- Market entry needs an analysis of the market structure
Appendix C: Strategic Choices
The analysis preferred to enter the market through inorganic growth, specifically through acquisitions. Reasons:
- Reduced cost of entry
- No need for new managers
- No need for new structures
- Market knowledge is available
- Reduced cost of advertisement