Business environment

Based on what we learned from strategy, state and describe two strategic challenges a US firm could face opening an international operation. One challenge should be within the firm (resources, capabilities, competencies, etc) the other should be industry related (5 forces, strategic positioning etc)

Example1:To begin an “international operation” can be a very relative term. It makes a big difference in strategic challenges if firms in the US are looking to expand to places like Europe and Asia versus Mexico and Canada. Mexico and Canada are geographically more convenient compared to overseas countries. For the sake of this discussion, I will be referring to “international operations” in reference to general issues and challenges a US firm will encounter.

Now two strategic challenges a US firm could face opening an international operation would be cultural/language barriers and more competition/cheaper substitutes. When a US firm decides to expand internationally they need to be able to understand the language so they can efficiently communicate with their overseas business partners, employees, and customers. Language is also necessary for bargaining, so it is more beneficial if a firm is able to communicate on their own without a translator, where things can be miscommunicated or misinterpreted. A US firm also needs to be able/willing to adapt to the culture, customs, and laws of other countries. Not adapting would be a huge sign of disrespect and could negatively reflect on one’s firm. The other huge challenge a US firm will face in international operation is that we will be considered a foreign company in other countries. They will have plenty of pre-existing competition in other countries along with their ability to manufacture products locally and for a lower cost. Before even considering going international it is vital for a US firm to evaluate other countries’ markets and make sure that their business can survive in the locations that they are looking into

Example2:There are many challenges US firms could face by taking their operations abroad. In terms of one they could face within the firm, organizational and managerial skills are a huge factor in their capabilities department. Without forming some sort of cultural profile on the country they wish to open operations in, the US could be doomed for failure from the start. There are vast cultural differences throughout the world that, if not adapted to properly, could lead to a tailspin and, ultimately, failure. Before even looking at available resources, a firm must do research on the country they wish to open in, study the culture, and determine if their current leaders and managers are equipped to handle the change. If not, they would need to either rethink their location or establish a new managerial sector for that country’s operation altogether.

As for industry related challenges, one challenge could be the power of the buyers. If the firm comes in with a standard commodity, not only do they need to worry about rivalry (another industry related challenge) but they would also need to consider the fact that with standard commodities come high power for the buyers. With standard commodities, buyers can easily shop around and obtain information on pricing of similar products to see if your pricing fair. Some countries do allow for the customers to bargain for products and in order to be successful, a firm must be able to compete. For instance, in the US, a lot of big chain retailers will price match each other. Now usually they require you to show proof including barcode information, price without deals and such info. However, in other countries sometimes it is just a free for all form of negotiation. If the customer knows they can get a better price elsewhere, they have the power to negotiate and talk down the price, maybe even lower than they would have to pay elsewhere, because the buyer has more power.