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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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P5/ P6

Identify why businesses operate internationally. Why would HG choose to operate internationally?  There are many reasons why HG trades internationally, or wants to have a worldwide presence.  And

P6

Explain the business strategies used by HG operating internationally.

Reasons for HG to operate internationally:

1. There are many reasons why HG trades internationally, or want to have a worldwide presence. Their reasons could include:

a. Growth for the business by increasing the value and volume of sales or market coverage.

b. Need for diversification to reduce the risk involved in specializing products or services.

c. Opportunities in emerging markets that allows HG to increase market shares and sales.

d. Benefit from economies' of scale when HG purchase and produce in bulk.

e. Opportunities for cost reduction as undeveloped or developing regions may provide cheaper workforce, transport etc.

f. Opportunities to benefit from a lower taxation regime when HG sets up a free trade zone.

g. Opportunities to take advantage of less regulation and fewer legislative requirements, making it easy for HG both to set up and move.

h. Increase brand awareness and internationally presence.

i. Expand in other regions if there is heavy competition in domestic market.

It cost time and money to expand abroad so it is import to select an appropriate  set-up, operational and management strategies to use business resources efficiently and effectively.

Marketing:

Here are a number of strategies available or HG desiring global presence.

These strategies allow HG to be more adaptable and flexible t a lesser cost than setting up their own company or subsidiary in another country.

HG could:

1. Co-produce   ( produce with a business in the country)

2. Enter a joint-venture with another company in the country ( like in Spain )

3. Under license producing of the product in the country they want to be in.

Identifying markets

It is important for HG to undertake market research to identify the target markets, trends and consumers behavior, in order to make informed decisions. Market research can be conducted by contracting external organizations that specialize in market research.

For example, researched information might identify the best location for a distribution plant, or whether the product can be standardized for the global market.

Data analysis

Data analysis helps HG to consider the following:

a. The type of strategy it will use to trade abroad.

b. The creation of policies, eg recruitment, legislation and pay levels.

c. The development of the marketing mix for products from HG traded internationally.

Marketing information systems

This involves gathering, storing, analyzing and distributing up-to-date, accurate and reliable marketing information to relevant decision makers. It may also include he record of past and current organization performance.

Marketing mix.

Promotion, product, price and place.

Promotion:

Making international investments, HG needs to consider whether legislation in the country of investment will affect how the product is advertised or promoted.

Product:

Consumers expectations of HG products will affect how a product  should be marketed in a country. Products may need adaption or standardization, licenses may be required and legislation may differ in different countries.

The strategy used by HG, to set foot in other countries, is basically based on the following:

Standardization of the product. HG products look the same in every country, except for the labeling, which is done in the language of the country.

Product differentiation, because of cheap production costs in some countries, the manufacturing of parts for HG products is done in other European countries ( Spain / Uk), by lower costs.

Once he parts or ingredients of the product are  manufactured, the assembly will find place in Almere.

Product pricing.  

Once the product is manufactured, and ready for global sale, they are sent to various countries, to be priced based on the local market, manufacturing costs, operational costs, the economy and competitor's pricing strategies.

Logistics

Logistic is the process of managing distribution and flow of materials and services from the point of origin to the point where they are used, either by the consumer or organization. It takes into consideration:

1. He costs of transport

2. Whether the product is perishable

3. The agency of supply

4. The most appropriate location for effective supply to the consumer

5. He most appropriate channels of distribution.

HG chooses for 4 countries, to take care of  logistics and distribution channels.

For distribution to UK related countries, the UK,

For distribution to West Europe  Belgium,

For distribution to other European countries Spain and

For distribution to Asia and US,  China.

Transportation from these countries, is cheaper than transporting from Holland, because of price differences in transport costs. It looks illogical to transport from China, but the cost of storing and Labor, are hat low, that still a considerable amount of profit can be made .

Because of the labor expertise of the highly educated, but yet cheap in cost staff, China is a good choice for HG, to put up a distribution channel in China.

Labor is cheap, in China and the advancement in technology in transportation gives them an ahead start in making profit of their products.

Technology

Technology plays an important part in encouraging globalization as it ha created an invisible network that helps businesses to build relationships and share knowledge.

By setting up and developing countries, HG is essentially transferring their technological expertise and knowledge to that country. It will help the industrial development of that country  just to benefit from the economies of scale, deregulation and financial incentives provided by governments or international institutions.

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