Since the term globalisation, which can be defined as ‘the advance of human cooperation across national boundaries’ (Boudreaux, 2008) occurred in the 19th century it is getting more and more important nowadays. Globalisation is the result of political decisions, which lead to a higher deregulation of trading between the borders but also of the faster growing and developing information technology. If globalisation can be seen as an advantage depends from which point of view it is considered. Therefore the competition between the companies increased and consequently the products for the customer got much cheaper, for example they are able to buy less expensive products from China now- otherwise, the companies find themselves under a great pressure to adapt to the volatile markets. Another disadvantage may be that the workplaces had been depleted. (Boudreaux, 2008)But once entities want to be successful with their ideas not only in a national, but in an international environment, the companies have to adapt to foreign cultures to manage proper international business and also the negotiations with the business partners. If a company wants to enter a new market, various aspects have to be considered first before this decision is made, because there are so many issues you have to be aware of.
The following elaboration deals with the impact cultures have on every international business, what affection the different cultures have at the analysis of the own and other companies and their success, and how companies are able to manage these cultural differences for effective negotiations. To give an example the well-known company Coca-Cola will be dissected using the theoretical tools explained on top.
Firstly, there are various intentions for every company to influence the decision of founding a new site of their entity in another country. One might be that the companies are trying to get access to a multitude of new markets and consequently gain more percentage of these new markets. Maybe they are even discovering new markets abroad because they havenï¿½ï¿½t got so many competitors there which is an advantage if theyï¿½ï¿½re attempting to get the market leader. Another reason could be that the brand of a company is already quite popular in a region and the company has the intent to get the brand known in other countries as well. But there is also the possibility to open up new territories because of the higher taxes in the origin country. The entity might have an advantage in economise taxes. Finally, the main reason why firms are entering new markets is to catch the opportunity to make more money. (Dicken, 2007)
Secondly, when the company has decided to realize their plan, they all have to consider various aspects before actually converting this plan. It has to be made sure that there are already contacts there to business partners which could be built on events or conferences in companies for example. But even the stakeholders of a company could lead to good business relations, which can be built by the customers, suppliers, distributors, agents or consultants and not to forget the government. (Johanson & Vahlne, 1990)
After that companies have to reflect about their market entry modes and direct and indirect exporting is one of these. On direct exporting the company is exporting the products, which they are manufacturing in their home country, to the new markets. The difference of indirect exporting is that the products are exported by distributors and the company has actually no influence where their products are offered. There could also be built a joint venture with another company and share your risks. Many companies decide to franchise, so their product is getting more established all over the world and they havenï¿½ï¿½t got the risk but get money when they allocate the licenses and also get a percentage of the future income of the Franchise enterprises so they only have to care about the brand. (Lee & Carter, 2009)
Obviously there exist a view factors which can influence the companyï¿½ï¿½s ability to succeed in foreign countries. These are the PEST-Factors which mean Political, Economic, Societal and Technological factors which have impact on entities.
Political factors that should be considered are any regulations from the government on external companies or if they might get any subsidies.
The second one, Economic, means if the idea is even profitable in these new countries. Societal factors involve the needs of the society within that country. If you are offering products which the people donï¿½ï¿½t need or donï¿½ï¿½t want to buy, you will not be able to sustain. That is the reason, why paying attention to the customer’s needs is substantial. Otherwise they will not know about what they need, sometimes the entities have to introduce some new inventions to the customers from which they didn’t know yet to require them. Lastly the Technological factor is also playing a role because people want to buy things which are at the state of the art. Additional environmental and legal factors can be mentioned also because the awareness of the citizens concerning the protection of environment is steadily rising. To complete the equipment industrial forces should be added lastly, which means the complexity of entering a new market and indicate the high competition between the companies. Large concerns may demoralize smaller corporations which try to establish oneselves. (Ho, 2014) This issue will be captured and characterized below at the model of Porter.
Regarding the strategy of a company it has to know its own internal and external factors which could influence their business. They have to regard their strengths and weaknesses as internal factors and also the threats and opportunities as external factors. This practice is known as SWOT- Analysis which helps entities to detect on which point they are actually located. (Dyson, 2004)
But thatï¿½ï¿½s not enough because if they want to discover how the right way of acting is looking like they have to take another step forward and carefully do the TOWS- Analysis. This expression includes a system of taking the outcomes of the SWOT- Analysis together and making pairs of them. Observing these results commonly will give the enterprise a good advice of how to act next.
TOWS Strengths Weaknesses
Opportunities S-O- Strategies W-O- Strategies
Threats S-T- Strategies W-T- Strategies
Based on this Matrix an enterprise is able to grow new strategies based on its own strengths and the opportunities which are a result from that. They might launch new products based on their abilities. The S-T- Strategies may include a tactic on which the company’s strengths could be used as a medium to keep the emerging threats small. Opportunities have to be caught as it is useful to be able to reduce the weaknesses of the company. For the last Sector, which includes Weaknesses and Threats, the entities have to construct a good strategy to minimize the threats and if itï¿½ï¿½s possible to get over the weaknesses. (Helms & Nixon, 2010)
To specify the threats of a company more the model of the five forces of Porter can be raised. He has divided the threats by which a company is affected into four groups. These are the threat of new entrants, the bargaining power of suppliers, the bargaining power of the customers and lastly the threat of substitute products or services. New companies entering a market of course always have the target to get a higher contingent of a market. Thatï¿½ï¿½s why probably every entity hast to find its own niche to be able to survive in the competition and also finding distributors which offer the products to the people. Being aware of governmental policy is also an advantage because one has to be aware of limitations or regulations the government might have set. They may be using IT to create certain barriers to their competitors and also to offer special and new products or services to their customers to make substitutes less appealing. Suppliers could influence the companies on two possible ways. The first is an increasing price of products and services which are offered by suppliers, the second listed is to bring down the lines and services quality. But customers are also able to drop prices of goods when the demand is sinking or they may require products at a higher quality level than offered to them. (Porter, 2000)
To sum up these are the most important factors which should be considered when the question of entering a new market is about to be discussed.
Nevertheless business people all over the world have to be always aware of the most enormous factor, which influences every of those strategies- the culture. As it is common there are five factors which define a national culture. In Hofstede’s written report there is power distance, uncertainty avoidance, individualism versus collectivism, masculinity versus femininity and long-term versus short-term orientation mentioned. Culture differs from nation to nation, because the mergers of people differ very strongly referred to these aspects. So every region has its own values, beliefs and behaviours and as a result paradigms. To begin with power distance, this term signifies the inhomogeneous distribution of power in a culture and it is connected with uncertainty avoidance. If there exists a high power distance, the people in that country usually show a higher uncertainty avoidance too because they tend to not trusting the people with power because thereï¿½ï¿½s a greater distance between the people. Next, collectivism and individualism show if the people set a higher interest in getting fulfilled oneself and only take care of their closest relatives or if there are wider groups also of relatives in which they are integrated and which help each other unconditionally. Concerning role models of the genera, masculinity and femininity describe the differences in the countries. The values of males vary significantly more than the females which remain steadier between the cultures. Lastly long-term and short term orientations are also relevant, which represent the endurance of a person or in a shorter context more the social factors. These could be that the persons strive after being acknowledged among the society. These were the factors which affect the way people act in different cultures, but not only the nations have cultures, even companies have their own organizational culture. Mostly organizations differ to each other concerning their way of doing things and their daily acting but their values and beliefs are more shaped from the national culture which denotes that there aren’t huge differences. The first of the 6 dimensions of organizational cultures are process-orientated versus results-orientated cultures which means that the first set more vales upon how the processes in the company can be optimized and the second is based on the results they reach. There are also job-orientated and employee-orientated cultures. Initial the employers only take care of the job performance of their employees and the second means that theyï¿½ï¿½re also mindful of other belongings of their employees. There are even professional cultures, which define themselves more throughout their profession and parochial cultures which set more value to the entity theyï¿½ï¿½re working at. To end it there are open- and closed- system cultures existing which reveals how the company is managing internal and external communication. (Hofstede, 1994)
To be able to observe and analyse the culture of an enterprise it is general to use a facility called the ‘cultural web’. With this useful instrument stories, symbols, the power and organizational structures, the control systems and the routines and rituals could be figured out. (Johnson, 1992) How to apply these factors properly will be demonstrated based on an example which will be the Coca-Cola Company. Using these illustrated tools is very helpful in an international context. PESTLE and Porters model will give an overview of the external factors influencing the companies’ success. While the SWOT- Analysis will state not only external but internal factors also and the entity will get to know where it is located currently. Lastly TOWS will be useful to receive advice and recommendation which way to go next.
The Company Coca-Cola
To give an example PESTLE- Analysis will be applied to the Coca-Cola Company as a next step. Political changes in regulations and laws from the governments will have an impact on Coca-Cola Products. One possible scenario could be the latest development of the relationship between Russia and America. Like Popovï¿½ï¿½s article mentioned that few McDonald’s restaurants as an American company have now been closed in Russia. Those political processes might affect Coca-Cola in the future, too. (Popov, 2014)
An economic issue for Coca-Cola is that since the American politic has suspended the economic sanctions against Myanmar it has access to a new market, is able to gain more market share and as a result obtain a better performance. Instantaneously Coca Cola foundation made plans to enter that market. (Flicker & Winkles, 2012) The net income then could be used in Coca-Colaï¿½ï¿½s core business- marketing. The technological part is to ensure the efficiency of advertisement and marketing of Coca-Cola products. Once there preexisted glass bottles and then the plastic bottles lead to increased sales. Accordingly the attitude of people to environment has changed so Coca-Cola might have to find alternative ways of bottling materials which can be recycled. Referring to the social developments the people tend to change their lifestyle up to a better way and as a consequence they are buying healthier products. The challenge for Coca-Cola is to acknowledge the customers’ needs, defer to them and create healthier products. This is already happening with the launch of Coke-Zero Coke-light and the latest, Coke-life. As a matter of course Coca-Cola is including this strongly in their advertisement, there will be a doubling marketing spend in 2015 for their new products and theyï¿½ï¿½re doing a sponsorship of the Rugby World cup this year to connect their products with sportiness and as a result vitality and health. (Juner, 2015)
Obviously the strength of Coca-Cola is in the field of marketing. They have established a strong brand, which is known all over the world and to whom the customers are very loyal. Their weaknesses might be that they havenï¿½ï¿½t got a wide range of products; they are specified more on carbonated soft drinks. Also the negative publicity which emerged in 1999 at the Coca-Cola tainting scare in Europe might be a weakness for the company.
A threat is of course the changing demand of the customers which tend to buy healthier drinks like water, which competitors offer. Nowadays there is also a big variety of carbonated drinks and so the environment gets more competitive like Pepsi and Red Bull. But there are also the opportunities of entering new markets. Their weakness of having not distinguished their products enough could be also seen as an opportunity for the future. The bottling of water is also a big occasion because people appreciate clean, tasty water which isn’t so easy available from the tap in bigger cities.
To compare these discovered coefficients they will be put in the TOWS-Matrix. If strengths and opportunities will be combined, it can be assumed that Coca-Cola is transferring their successful marketing strategies into the sphere of bottling water and other new non-beverage products they could be even more prosperous. To consider their strengths and threats, Coca-Cola can use the trust of the customers to develop the water and other healthy products to remain competitive. Accommodating opportunities and weaknesses it could be submitted that the diversification of their products should be more on the focus. (Jurevicius, 2013)
On the last step analysing an entities organisational culture within the cultural web can be helpful to understand their specific way of doing things. The stories that are currently told about Coca-Cola are concerning the new, healthy way of sweeten their products- with stevia, which is gained from the identically named plant. Then there was squeal of the public because the new Coke-life contains nearly exact the same amount of sugar like the normal Coca-Cola and the company was accused only to affect healthiness of their soft drinks. (Dean, 2015)
Coca-Colas symbols are the white and read colors and the unique shape of their glass bottles. Furthermore they use the picture of Santa Clause as a symbol of familiarity and happiness. They are also highlighting the strategy to move to healthier products for the customers’ advantage. The company has a very low power structure and a low uncertainty avoidance which explains their reaction concerning the tainting scare in the European countries Belgium, France and Spain. These countries show a high power distance and uncertainty avoidance which is accompanied by a massive mistrust of the citizens in the powerful people. As Coca-Cola didnï¿½ï¿½t respect the customer’s fears they stopped buying Coke and also related products. (Taylor, 2000)
Also the Corporation is setting more value on flat power structures and encouraging collaboration with all stakeholders. (Staff, 2015)
There are integrated quality management programs included as control systems where the most controlled field is the safety and quality of their products. (Staff, 2012) Another value is set on motivating their employees for staying competitive and enhancing the company. (Staff, 2015)
In the end routines and rituals the history of the Coca-Cola companies is already 100years. It has enforced its products through time and is the oldest beverage company in the world. (Staff, 2015)
To summarize it all, the statement can be made that these all tools are very useful and important to be analysed and to figure out the strengths and weaknesses the companies have internal but also the external. Factors are meant that can touch the entities success in new markets abroad. Most important is also to be aware that culture is always shaping the peoples thoughts, their beliefs and values national and in each organization. That’s why the statement ‘culture eats strategy for breakfast’ (Drucker, 2015) was made. It means that managers who do international business negotiation may have the best strategy but if this policy doesnï¿½ï¿½t fit to the culture of which people you are negotiating with or it doesnï¿½ï¿½t please the customers necessities in that particular country you will have not even a slight chance to close a deal. To give a recommendation to Coca-Cola, it would be advantageous if they are able to gain the customers trust and loyalty back after this last accusation of selling nearly the same drinks containing as much sugar as the ones before below a coat of healthy advertised products. The issue is acknowledging the customer’s needs without abusing their trust by lying to them. They can also make use of the opportunities they have to launch new products and gain new market share in order to stay competitive in the global market. Only the companies which never stop advancing will be able to sustain in the volatile markets.
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