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REGIONALIZATION AND GLOBALIZATION

BUSINESS EXPANSION STRATEGIES 1

REGIONALIZATIONAND GLOBALIZATION

Regionalization and Globalization

Globalization is the process by which the international exchange ofgoods, services, capital, knowledge and technology becomesincreasingly interconnected. Regionalization on the other hand is abusiness strategy that maintains focus on a particular region or areaand as such, this approach employs differentiation based on theregions. In the regionalization strategy companies establish theiroperations in one specific area before expanding to other areas inthat they take care of different demands in the local markets thatthey undertake their activities. All this are aimed at entering newmarkets and new countries, and the firms have to decide how best todo it.

When setting up, companies can choose to export, create a whollyowned subsidiary, franchising, licensing or create a joint venture orstrategic alliance. The options vary regarding how much control afirm has over its operation, initial cost of entry, how much is atrisk and what share of the operation’s profit the firm gets to keep(Kluyver, 2010). When considering competing in foreign markets,executives must consider the benefits and risks when making decisionsabout whether to expand overseas their current domestic demandconditions factor conditions, related and supporting industries andany structure and rivalry that could impact their success in theforeign markets (Kuada, 2016).

Thefirms that use globalization strategy do not pay attention torequirements within each of its markets for putting emphasis toefficiency. Products and services are modified slightly to fit thevarious markets. However, a global strategy stresses the need to gaineconomies of scale by offering essentially the same products orservices in each market. One of the basic decisions in globalstrategy begins by considering just how much local variation, if anythere might be for a brand (Kuada, 2016). Another fundamentaldecision might be whether to undertake any branding at all. Brandingis costly so many companies try to avoid the expenses involved withit or minimize activities of branding. The company will then identifyits resources for international expansion, especially those that havea competitive advantage (Kluyver, 2010). Then the company should setits objectives after finding out about its prospects in the globalmarket so as to set realistic and workable objectives. Whileconsidering market opportunities, the company will also have to knowthe politics and economic trends in the area, international tradebarriers, and the local and international brands that already existin the prospective market (Kluyver, 2010).

Acompany like Nike has expanded and evolved its global presencethrough the careful selections of international sponsorships such asits previous long-standing relationship with Manchester United.Although aid spending can be expensive and unpredictable, demandcosts tend to surge due to triggers like championships andtournaments these partnerships have certainly helped the brandcapture the attention of a global audience. Nike’s NikeIDco-creation has served as another strategy that the company is usingto appeal to international markets. By putting the power of designinto the hands of the consumer, Nike can deliver customized productsthat align with different cultural preferences.

Coca-Colais another great example of a company brand using internationalmarketing efforts. Though it is a large corporation, Coca-Colafocuses on small community programs and invests a lot of time andmoney in small-scale charity efforts. For example, in Egypt, thecompany has built 650 clean water installations in the rural villageof Beni Suef. It also sponsors Ramadan meals for children across theMiddle East. Additionally, the brand sticks to selling an emotionthat cannot get lost in translation happiness (Kluyver, 2010).

When KFC wanted to enter the Chinese market in the 80s, theexecutives had to find a proper way of doing that as the market waschallenging for North American businesses to come. Executives at KFCsaw China as an attractive country because chicken is a fundamentalelement of Chinese diets. After considering the various options forthe opening of its first restaurant, KFC decided to create a jointventure with three local organizations. However, KFC owned 51 percentof the venture having more than half of the operation wasadvantageous in case disagreements arose. Having these three localpartners helped KFC navigate the cumbersome regulatory process thatwas in place and allowed the American firm to withstand the scrutinyof wary Chinese officials. Despite these advantages, it still tookmore than a year for the store to be built and approved. Once open in1987, KFC was an instant success.

Statistics reveal the power of regional markets. For instance, morethan 85 percent of automobiles in North America are built in NorthAmerican factories more than 93 percent of the cars produced in theEuropean Union are sold in that region, and more than 93 percent ofthe cars registered in Japan are manufactured domestically. Thesestatistics show that in most industries, a regional approach isbetter than a global one (Kuada, 2016). Companies can source goods,technology, information and capital from around the world butbusiness activity tends to be centered in particular cities or areasin a few parts of the world (Kuada, 2016). Regions are becoming afocus of strategy analysis and organization. DuPont and Procter &ampGamble Company, for example, have rolled their three separate countrysubsidiaries for the U.S, Canada, and Mexico into one regionalorganization. This applies to other Multi-National Corporations(MNCs) operating in the NAFTA region. The same is happening in Europewith the European Union’s push toward greater economic integration.

Takethe case of Zara, the Spanish fashion house. In a cycle that takesbetween two to four weeks, Zara designs and makes items near itsmanufacturing and logistics hub in northwestern Spain and trucksthose goods to Western European markets. This rapid response lets thecompany produce what is selling during a fashion season instead ofcommitting to merchandise before the season starts. As such,home-based strategies work well when the economics of concentrationoutweigh the economics aspects of dispersion.

Toyota’sinitial investment in the United States is a good example of asuccessful portfolio strategy of regionalization. This seemed tiedtogether by little more than the desire to build up a manufacturingpresence in the company’s most important overseas market. Whatprevented this approach from destroying value was Toyota’s distinctcompetitive advantage: the famous Toyota Production System (TPS),which was developed and still works best at home in Japan but couldbe applied to factories in the United States.

Inconclusion, the strategies of regionalization and globalization areeffective ways of expanding a company. Discovering new markets andentering the same proves to be a perfect way to increase the globaland regional reach of a company. If properly implemented, thesestrategies are good for business, sales and increased brandvisibility.

References

Kluyver, C. d. (2010). Fundamentals of Global Strategy: A Business Model Approach. Chicago: Business Expert Press.

Kuada, J. (2016). Global Mindsets: Exploration and Perspectives. New York: Routledge.