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Canadian Business Performance and Global Business Environment

Name: Aparna Vipin

Instructor: Cynthia Zhao

Institution: North Island College

Course: BUS-380

Date: 07/12/2018

Introduction

Modern business is dynamic, and these changes coerce the companies to spend more on research and development to ensure market survival. Business enterprises include norms such as mass marketing and production. Modern firms such as Loblaw Companies Limited are diversified and are described as either concentric, conglomerate, or horizontal diversification. Most businesses including Loblaw Companies Limited struggle to gain international markets due to continued global competition which takes advantage of science in the global economy. Large organizations with huge labour requirements continue to decrease as most businesses are, and most managers spend more time in paper shuffling and file pushing, and this is being replaced by information technology (Ambrosini & Thomas, 2016). There is a reduction of linear relationships between bosses, managers, and authorities downwards and obedience moving upwards.

Loblaw Companies Limited

This is the biggest pharmacy and food retailer in Canada and has over a thousand corporate and franchise huge markets functional in over twenty-two countries with its headquarters in Brampton, Canada. The products of this company include health and beauty, pharmacy, wireless mobile products, grocery, general merchandise, financial and apparel services in Canada and the United States. According to this company, it has three operating segments which are choice properties, retail, and financial services (Carson & Fyfe, 2013). The segment dealing with retails operates in the pharmaceutical, food, and other food products. The financial services sector provides credit card services, loyalty programs, banking, and other customer services. Finally, the choice properties own, manage, and leases commercial properties.

The benefits enjoyed by this company due to external operations include increased profit margins, global expansion, and the creation of new markets. Additionally, the company reaps the benefits of the increased volume of sales, diversification of risks, and program expansion providing strong company reputation. Forces of globalization supporting success of Loblaw Company Limited include critical company's strategies such as knowledgeable understanding and dedication to ideas which develop and maintain trust and partnership with the local market, government, indigenous people and other non-governmental organizations (Dashwood, 2016). The company also enjoys the benefit of comprehending the culture of the countries in which it is planning to invest in and identifying the competitive advantages of other bigger global companies.

 Loblaw Company made plans to target minorities who will buy most of their grocery commodities. Priority should be given to attracting minority consumers from a retailer as there is a large market segment which is untapped and can lead to long-term growth if intensely exploited. Merchandising strategies should be refined to emphasize more on customer attraction from a broader ethnic base (Etemad, 2009). The profit margins according to researchers are expected to decline due to the increased cost of production rather than a decline in revenue collection. This has led to negative net income while the growth for revenue increases hence margin expectations will decline.

According to Loblaw Companies Limited Yahoo Finance, the company employs over 200,000 employees both nationally and internationally. International operation of this company deals with franchises, food stores, and other products. The advantages accrued to this company when operating globally include flexibility of the products, massive production, and national events and trends protection, and getting the know-how of trends in international markets (Carson & Fyfe, 2013). Important factors are leading to the success of international operations understanding the differences, evaluation of global trends critically, performance maintenance, and critical company's strategies such as customer's well-being, respect, care, and commitment of the company and its employees towards service delivery.

Resource Based View

Resource-based view emphasizes internal resources and organization's capabilities and views companies as the number of capabilities and resources available for distribution of business units of the organization. Heterogeneity in resource and capabilities is the primary reasons for variations in the performance of the business in Canada (Ambrosini & Thomas, 2016). Therefore, sustainable bargaining power is not the product of business performance in the external environment but somewhat derivative from the internal resources of the organization which is more valuable, non-substitutable, and rare. The resource-based view is essential in settling the relationship between capabilities and resources of the organization and the competitive advantage through arrangement and coordination in the situations of the market. It also significant as it reveals the suitability of the planned capabilities and resources and the quality of the implementation of the strategy.

Market institutions are planned constraints by market parties and help define human interactions. It can be described as cognitive, normative and regulative activities and structures which provides stable and meaningful interactive behaviors. Researchers criticize the resource-based view due to the failure to give more exertion in establishments of suitable illustrations. Researchers advocate that resources of a firm have to be understood in particular market illustrations within which an organization is run. The resulting frustration has necessitated new perspectives to conquer the challenges in business. Institution-based view focuses on dynamic relations of organization and institutions with consideration of critical choices during the interactions with their customers.

Institution-Based View

Institution base view is based on the dynamic relations of organizations and institutions with significant consideration of strategic choices, for example, interaction. The strategic decisions are determined by informal and formal constraints, company capabilities and industry situations. This view in combination with a resource-based view helps to strengthen the ground of argument. Institutions are much firmer than background conditions and determine strategy implementation and formulation and competitive advantage creation (Peng et al., 2008).

It has been noted that economic growth rarely occurs when economies are ill-regulated. The strong economic growth of China and its formal institutional structures which are little leaves countries wondering on its supersonic growth with such institutional environment. Interpersonal networks used by managers may only solve this puzzle operates by substituting the free substitutes with formal institutional support. These relationships are meaningful as they create network strategies and alliances for the company's growth-supporting economic growth — the prevailing beliefs that network-based approaches in China are commodities from its rich culture favoring collectivism. Informal network emphasizes stronger dependence on relaxed constraints handling potential transactions and opportunism if there are immature formal institutions providing market support (Peng et al., 2008). In an institutional approach, resource-based and industry-based views do not give enough information on the differences between firms and other industries. Where weak formal institutions exist, informal institutions for example norms which rule interpersonal relationships play a more significant role in performance and strategies of an organization. Foreign market entrants create a positive impact on their relationships and networks during globalization revealed by abundant strategic alliances internationally with local markets. There are a lot of business opportunities and challenges that Loblaw Companies Limited faces locally as well as globally in the market.

Opportunities

According to Global Affairs Canada research in 2016, Canadian markets gain greater access to new customers. These markets penetrating international markets have the advantage of greater competition in the different environments and access to promising customers (Global Affairs Canada, 2016). Canada has a large number of populations, and therefore the government has to look for external markets as there are varieties of commodities produced and the local market is insufficient. According to Canadian Manufacturers and Exporters, access to foreign markets would be more beneficial and appealing for Loblaw Companies Limited in.

Globalization will lead to a reduction in costs. Access to external markets that is, offshoring means a modification of the expenses as companies can relocate to foreign countries. Loblaw Companies Limited has the advantage of opening new branches internationally with the creation of new operational activities in countries such as India and China with suggestions of cheap labour which are essential in cost reduction (Laing, 2011). Many states have cost benefits through the introduction and selling their products and enhancement of sales volumes, and this can lower overall and average production costs.

Another opportunity is business risk diversification as the risks involved in a constricted market are high and can only be minimized by gaining entries in foreign markets. Business risks show that there are potential risks that may occur and companies which are wholly depended on internal markets have the chances of reduced markets and supplies, natural disasters, political, and economic factors which are harmful and this can adversely affect the profit margins. It is therefore essential for Loblaw Companies Limited to try and gain more entrance to external markets hence access to broader markets and operations in various countries. This minimizes the adversities of operations due to increased operations from the different markets.

Challenges

Globalization is associated with political risks which are the influence of the government through disturbance and intrusion with businesses which arms business operations within a country. Newmarket entrance poses challenges for many companies and Loblaw Companies Limited and is not an exemption, and this is due to political instability experienced in international markets, terrorist activities, and military takeovers. These are the significant challenges and risks facing Loblaw Companies Limited while trying to gain international market access (Global Affairs Canada, 2016). Government instabilities create challenges and dangers which make it difficult for operations of companies and thus planning for the future becomes a mere dream. The government controls its taxes and establishes new regulations which might be harsh for companies planning to gain markets in such countries.

Another challenge experienced by Loblaw Companies Limited when entering global markets is the economic risk. The governments may create rules and regulations on property rights which might be stiff and this will force some companies to withdraw from the international markets. If companies are denied the property ownership rights, there is a risk of shrinking the profit margins especially if the property is rented and requires high rents. The government may also take the properties from which these companies operate without giving warnings, and this is the greatest challenge faced by companies from countries with political instability. Economic policies and conditions from some states may be strict thus scaring away foreign investors. The terms and conditions for trade may be nonnegotiable hence companies with lesser bargaining power will prefer to instead reserve operations locally than going global. Currency exchange rates may also have an unfavourable impact on the firm's operations — for example, the exchange rate of the Canadian dollar versus Chinese Yuan. This makes it very challenging for Loblaw Companies Limited which make it continue to experience tremendous risks due to unpredictable economies.

Tools and Strategies for Expansion and Entrance to New Markets

Domestic companies internationalize by opening up borders for trade with different countries and elimination of barriers of trade. Internationalization has been enhanced by easier communication and advancements in technology which are essential in ensuring that external markets are timely and adequately operated with minimal challenges (Goedl, 2013). Companies adopt the strategy of product exportation to foreign markets while strengthening their domestic markets. Some take highly aggressive strategies such as developing new alliances, firm's acquisition, joint venture partnerships, and the establishment of their subsidiaries (Etemad, 2009). There are two broad categories of modes of entrance for companies which are non-equity and equity modes. Non-equity modes are the contractual and export trade agreements while equity modes comprise entrance methods which are joint ventures and wholly private subsidies. Markets with which are most favourable that is, low level of risks and low market controls are the export and import markets (Dashwood, 2016).

Licensing is another critical strategy acquired by companies to gain entry and expand in new markets. International companies providing licenses are known to be strict is issuing out patent rights, trademark rights, copyrights, and technological know-how on products and processes. Those seeking permits produce products of the licensor, pay the licensor's fee, and do territorial marketing, and in return, they get loyalties which are related to sales (Laing, 2011).

The final strategy used by businesses to gain new market entrance is a direct investment which is an arrangement involving full ownership by the company that is, no partnership involved. This strategy is made possible through acquiring direct market in foreign markets and through facility ownership. Some of the tools which are essential in helping the Canadian market gain access to greater market and scrap off the barriers to trade. Agreements on Free trade makes it easier for Canadian companies gain free entries to the foreign market without government interference (Laing, 2011). Promotion and protection of agreements on foreign investment make companies enjoy the external business environment. Agreements on double taxation are a standard tool used by many countries to regulate some market entrants. States imposing regulations on double taxation hampers the growth of Loblaw Companies Limited gaining entry in these markets and hence the Canadian government should negotiate for removal of double regulations taxes on behalf of these companies.

Recommendations for Canadian Businesses to Thrive in the Global Market

The Canadian market should target priority markets only and ensure full implementation of its Global Markets Action Plans. This should be done through economic polishing to locate markets with the potential of high growth depending on competitive advantage and industrial capabilities. The government should analyze the potential sources of technology, capital, and talents and develop important regional blocs for trade and partners for Free Trade Agreement (Perry, 2014). In addition to the provision of guidance to key market sectors in Canada, the government should also create business hubs in the value chain of global markets.

 The government of Canada should access an emerging market which has the interests of Canadian business ventures. These interests should demonstrate great capabilities of for the growth of the economy and success potentials, strong impact of government support and participate in platforms for trade. The government should also be quick in identifying emerging markets which has special interests and opportunities for businesses in Canada such as Loblaw Companies Limited. These markets must make it possible to create strong market links, stronger competitive advantage, infrastructural development, and easiness of signing trade agreements with partners (Laing, 2011). The competitive advantage in already markets should be strengthened to ensure that companies find it easy to penetrate lucrative supply chains in the global market with multinational corporations.

The government should also provide funds for conducting market research to Loblaw Companies Limited and other domestic companies through the Business Development Bank of Canada to ensure that firms with new ideas, skills, and products and services accelerate global market penetration. Finances for research should also be funded through National Research Council's Industrial Research Assistance Programs to promote development and growth of investments by firms at tender stages (Perry, 2014).

The government should also prioritize trade and trade-related agreements to all business categories to promote economic growth, job creation and workers and business opportunities. Trade is the primary determinant of economic prosperity and geography of any country, and due to continued market diversification, the Canadian market must develop methods to adapt in the new environments.

References

Ambrosini, V., & Thomas, L. (2016). The Resource-Based View of the Firm. Advanced Strategic Management, 178-198. doi:10.1007/978-1-137-37795-1_9

Carson, P.,& Fyfe, A. (2013). A Canadian Retailer's Perspective: Loblaw Companies Ltd. Greener Marketing (1st edition), 307-310. doi:10.9774/gleaf.978-1-907643-57-6_19

Dashwood, H. S. (2016).International Journal: Canada's Journal of Global Policy Analysis. The Rise of Global Corporate Social Responsibility, 177-216. doi:10.1017/cbo9781139058933.007

Etemad, H. (2009). Internationalization of Small and Medium-sized Enterprises: A Grounded Theoretical Framework and an Overview. Canadian Journal of Administrative Sciences / Revue Canadienne des Sciences de l'Administration, 21(1), 1-21. doi:10.1111/j.1936-4490.2004.tb00319.x

Goedl, P. A. (2013). IFRS framework-based case study: Barrick Gold Corporation—Goodwill for Gold. Journal of Accounting Education, 31(4), 383-399. doi:10.1016/j.jaccedu.2013.07.003

Laing, C. (2011). Canadian Manufacturers and Exporters Discovery Program. Proceedings of the Canadian Engineering Education Association (CEEA). doi:10.24908/pceea.v0i0.3797

Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution based view of international business strategy: a focus on emerging economies. Journal of International Business Studies, 39(5), 920-936. doi:10.1057/palgrave.jibs.8400377

Perry, G. H. (2014). Corporate social responsibility: A research handbook, by Kathryn Haynes, Alan Murray, and Jesse illard, eds. International Journal: Canada's Journal of Global Policy Analysis, 69(1), 122-123. doi:10.1177/0020702014521563

Global Affiars Canada, 2016. Global Markets Action Plan. 177-216.  

doi:10.1017/cbo9781139058933.007

Retrieved from: http://international.gc.ca/global-markets-marches-mondiaux/plan.aspx?lang=eng

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