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TABLE OF CONTENT

PART A

QUESTION 1 1

QUESTION 2 3
PART B

QUESTION 1 6

QUESTION 2 8
REFERENCES 11

Internal
PART A:

QUESTION 1

Companies seek for growth in any industry it’s involved by expanding from local and
domestically to globally in which it gives access to more customers, more demands and also
bigger possibilities. Entering a new market especially globally, companies should consider in
changing their strategies in competing such as deciding whether to customize products or services
or keep on producing the same thing, to find a place with location advantages for production,
distribution and also service centers. There are also a few other practices for companies in order
to succeed in the global marketplace. Firstly, to form strategic partnerships with companies that
have already succeed in the industry. Next is to focus on the importance of innovation.
Companies must try the hardest to innovate at every stage especially in global expansion by
checking on market trends. By setting and practicing the mentioned ways, companies will have a
bigger opportunity to expand into global or international market and also to gain the edge over
their competition.

The word production refers to actions involved in order to create a product. Production is one of
the most important processes in sales as the growth of the company only comes from a good
quality and quantity of products produce by the company. Thus, it is also important to identify
the production strategy of the company domestically and also globally. As we are all moving
toward globalization, there is also an increasing pressure to companies in order to grow in global
production or manufacturing competitiveness. Apart from that, the development of new
production technologies is also an affecting factor for the competitiveness in global or
international business. Technology has important effects in most company operations as it has
tangible and intangible benefits that will bring money rewards and also to produce products that
could fulfill the demand of the customers. Thus, inventions and innovations play an important
role for rapid growth of companies.

Outsourcing occurs when a company pays a third party such as supplier or other company to
provide goods or services that were originally performed in-house by the company. Company’s
value-chain such as design, production, marketing and services processes are a few examples of
outsourcing or sub parts of the company to third party that specialize in the activities. Company
usually decided to do outsourcing in order to lower the costs of value creation and also to
improve the efficiency of resources in the company especially in allocation of the resources.

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Through outsourcing, the company can solely focus its attention in improving and maintaining
the business of the company and outsourced tasks are also a great help in reducing the time
needed for production. Outsourcing offers companies a way to compete with their competitors by
engaging to partners with the expertise and capability to bring new innovations to the market in
the industry. The partners with experience can also provide the accelerator for companies to enter
the market and also accomplish their business goals within the new global market.

Logistics refers to the process in obtaining and also transferring of product through the supply
chain, from suppliers to customers. Customer is the foundation behind the successfulness of any
companies as the main goal for marketing strategy in most companies is to identify and meet the
demands and needs of the customers. By considering that customers play an important role at all
stages of producing and marketing process, it will help the company to ensure the customer
satisfaction and to achieve it long-term goals. Logistics is commonly used to optimize cost but
through logistics, companies will also manage to capture competitive advantage and create value
for customer. Companies are aware about the importance of logistics through the advance
improvement of technologies, innovations, transportations and communications. The main
objective of logistics is to fulfill the needs and demands of customers at the lowest possible cost
and to control the flow of information in activities that include in logistics system from the
supplier to the customers. Logistics will manage to help companies to compete in being and
advantage at providing value to customers by offering services like delivering faster or on
schedule in order to create the customer value. Next is to provide cost advantage by partnering
with suppliers or also customers who involve in the business in order to improve efficiency.

American, European and Japanese have set great examples as organizations that managed to
compete internationally. They recognized their global competition and planned their strategy on a
worldwide basis that managed to change the rules of competitive game in the industry that they
have successfully conquered. In order to win the competition with their competitors, these three
countries always ensure that they are way ahead than their competitors by building barriers to
competitive responses based on the behavior of their competitors. Their financial resources and
commitment are the factors that helped them to succeed. Through the globalization, companies
these days tend to think of the world as one market instead of a pool of national markets as they
believe with a correct strategy, everyone will manage to get into international market. This
competitiveness between companies is a healthy competition that can be a catalyst for every
company to work harder in achieving their business goals.

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QUESTION 2

Michael Porter (Harvard Business School, 1985)’s theory of competitive advantage provides a
tool to analyze competitiveness and it contributes an understanding of competitive advantage in
international trade and manufacturing or production. The theory basically focusing on individual
industries in which the principles of the theory are applied and builds up to the economy of the
country as a whole. A competitive advantage is an essential in order to make the business’s
products and services manage to fulfill the customer’s demands. A company needs to create goals,
strategies to achieve the goals, and operations in order to build a sustainable competitive
advantage that could last for a long period of time. Porter mentioned the three basic ways for
companies to achieve sustainable advantage which are cost leadership, differentiation and focus.
Cost leadership is how companies provide reasonable value of product and service at lower price
to improve operational efficiency by paying their employees less. Companies usually change an
option in paying their employees by offering intangible benefits such as stock options or
promotion. Apart from that, they also make a full use of their unskilled labours. Through
differentiation, companies need to ensure that they deliver better benefits than any other
companies by providing a unique or high-quality products and services. Companies usually
achieve their differentiation point through innovation, quality and customer service. For focus, the
leaders of the company need to understand and focus on their target market better than any other
companies by choosing a very specific target market such as local small business or high net
worth individuals.

There are 3 factors need to be consider in order to create a competitive advantage. The first factor
is the benefit from the product or service that will be provided by the company. The product and
service must fulfill the customer’s needs and also offer real value that will give benefit to them. In
order to satisfy this first factor, company needs to ensure that it’s up-to-date with new trends that
includes new technology. Second factor is target market or who are the customers of the company.
The company needs to know exactly who would buy from them and how to fulfill the needs of the
customers in order to create demand that could help the economic growth of the company. Lastly,
competition. The company needs to identify who are the real competitors not only from similar
companies that produce similar products but also includes anything that customers could do to
meet their need. In simpler words, to become a successful company, it needs to be able to
understand and manage to express the benefit that will be provided to the target market that is
better than other competitors.

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There are a few real time examples of countries which have shown competitive advantage in
specific fields. Firstly, China. The main competitive advantage of China recently is it has a low-
cost but well-educated labour force. The growing of 15 percent in China’s exports is the result by
low labour costs but also following industrial policies, increasing the level of education of the
work force, creating more than 500 special economic zones and etc. The rapid growth of exports
in China can be seen in textiles and apparel industry, electronics and home appliances industry,
metals and chemicals industry and most recently in automotive components industry. Almost
every company in China implemented three ways for savings. First is in labour and raw materials.
For labour, the manufacturers made a full use of their workers but also giving flexible working
conditions at average hourly salary of 50 cents. Apart from that, China often offers raw and
processed materials at cheaper price but still manage to match the quality at global standard. Next
is by taking a step in “capital avoidance” such as by lowering down the setup, land and factory
expenses. “Capital avoidance” can be taken by outsourcing the product manufacturing in order to
save the cost at the factory. Lastly, low-cost product design and research and development
activities also help the country in savings.

Next example is India. It provides workers who are skilled, technical and also English-speakers at
reasonable wage as a step in moving from cost leadership towards differentiation. Although India
is a developing country, its economy is giving a major impact in global trading as it has a large
market base and fast-developing workers. The competitive advantage in India is mostly focusing
on their IT field. Low-cost skilled labour is the main factor that contributes to the competitive
advantage of India. Most of technically trained manpower in India speaks good English in which it
contributes to its competitive edge. India also has an advantage in price as it has a low costs in
setting up their software unit. Innovations in technology also one of the main factors that helped to
increase the competitiveness level of India as it always strive for their best to step up in creating
value-based pricing models, building domain expertise and designing new technologies. In the
future, India is believed to have and will always continue to achieve competitive advantage in the
international field.

The last example is Japan. Japan’s automobile industry has been rapidly growing and helped the
country to gain the title of world’s leading automobile manufacturer. Japan has an advantage in
financial and industrial domination in today’s era. The economic structure of Japan always
ensures to maximum their cooperation between government, industry and its financial structure.
An entity that competes with Japan usually also competes with the whole nation. In 1990, Japan
was the largest automotive producer in the world. As the 5 th most densely populated country,
Japan is advantageous for a large domestic market. The economy of the country also went
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through a strong growth from reconstruction and also with a great support from the US. The
country also started to restrict the citizens to import cars from other countries. In 2016, Japan
changed their monetary policies to depreciate Japanese yen compared to other currencies
especially USD to increase their profit and stock price of export-oriented companies such as
Toyota which is also the top contributor in Japan’s economy.

In conclusion, every nation needs to ensure that they are aware with their competitive advantages
in order to achieve their goals. Through the advantages they will manage to strive forward towards
being the best nation in their own field. Competitive advantage helps companies to perform better
than their competitors and manage to achieve superior margins and also to create value for the
companies. Constructing a competitive advantage needs to start from scratch by acknowledging
the benefits from the decision that will be made, recognizing the target market and how to cater
them and lastly identifying the competitors as it is important for the companies to understand the
competitive landscape. Competitive advantage contributes to higher prices, attracting more
customers and on the brand loyalty. Setting up the advantage is essential to ensure the companies
successfulness and without it, companies might need to face the difficulty to survive.

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PART B:

QUESTION 1

I agree with the first statement as I believe that international alliance is a great opportunity for the
partners to achieve business goals with the help of the partners. But I have to disagree with the
second statement on how working with partners will complicate the operations. The differences
between countries especially on cultures, institutions and level of economic development is
undeniable would bring an effect to the alliance but as we are moving towards the globalization
and willing to accept the different and learn more about another partners, we will manage to
achieve the business goals together. More efforts by all partners would bring great rewards to the
alliance in the future. An international alliance is commonly set up when a company have a plan
to enter into a related business or into the new geographic market with a new target market. There
is also an issue in which the government is prohibiting imports into their country in order to
protect their domestic industry and this issue can be overcome with the help of an alliance in the
country. Alliances are usually formed by two or more companies with their based in the home
country in a specific period of time. As example, Nokia and Microsoft have both entered the
market as they planned to combine their assets and also develop products that are innovative at an
unrivalled scale. Through both companies strengths and expertise, these two which were at first a
competitors, manage to survive the new international mobile ecosystem and marketplace.

There are a few advantages of the global strategic alliance. First, to get a fast market access. By
creating an alliance with the local market, company will manage to speed up the entry into the
new market. By the speed of entry, companies will also manage to gain new opportunities to
establish their position in a new market in which they already have a foothold that come from
their alliance from the country that they are entering. The next and most common advantage is
through the global strategic alliance, companies will manage to gain new skills and technology.
Emerging with a more developed and successful alliance will help the companies to improve
their technologies and skills. Companies will also manage to gain more knowledge about
international customs and culture. By knowing the customs and culture from the other partners,
companies could understand their customers better in which it will be a great help to attract more
customers in buying their products or using their services. Thus, the image of the companies in
the world marketplace can also be established and the strength of their brand in the international
trade can be improved.

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There are a few steps in ensuring that international strategic alliances will be more effective.
Firstly is to select proper partners with the same business goals. An example of selecting correct
partners can be seen in the case of Starbucks and Purchase N.Y. in creating popular drink
Frappacino. As they both have the same strategic and operational goals, the managed to ensure
that the alliance between the two companies would bring a great profit for them. Next is to share
the right information to the partners. Not all information is meant to be share but company can
always choose what to share and what not to share with their partners. As example,
pharmaceutical companies such as Eli Lily and Takeda Chemical Industries in Japan. The
companies joined together to develop a drug for the treatment of type-2 diabetes. There are
supposed to be competing but they choose to work together in order to achieve their goals in
creating a new product to the consumers. Apart from that, international alliance can also choose
to negotiate a deal that includes risk and benefit analysis in order to ensure that their strategic will
be more successful. As example, IBM has chosen to focus on their alliances as their key revenue
generators and managed to gain $86 billion revenue and 30% of it came from variety of their
alliances. They are seeing their alliances as the best way to offer their customers the best
solutions to fulfill their needs. Instead of competing with another software vendor like San
Mateo, they chose to be partners with them. Lastly, to have a mutual, flexible commitment on
what is appropriate to change measure and share within each partner’s culture. Each partners
need to ensure that they truly understand the culture of the other partners. By doing so, they will
manage to win the hearts of the consumers in the partner’s country. As example, Lesser-known
entrepreneurial companies like Irwindale, Calif.-based Ready Pac Produce packages salads for
your convenience with technology developed in a strategic alliance with Scaline , a French
company. Egos had to be put aside to manage through the cultural, language and personal
differences in this alliance.

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 QUESTION 2

Joint venture is a form of partnership by sharing the ownership and risk by two or more
independent companies. Those companies need to agree to work together in a chosen market and
create a third joint venture company. Joint ventures are a great alternative to build a wholly owned
company that offer benefits such as sharing in capital outlay, risk can be reduced as example less
government intervention if the joint venture is formed with an indigenous business and lastly
companies can have closer control over production, marketing and also other operations in the
company. Nevertheless, there is also a disadvantage of joint venture such as the possibility for
conflict of interest to occur is very high especially on profit shares, amounts invested by each
company and also the management of the company. In order to mitigate the disadvantage, a
careful selection of partners is needed and the creation of jointly beneficial contracts is also
important.

While wholly owned subsidiaries are about subsidiary company or companies taking total
command from the parent company in order to take full control over the venture. Parent company
will hold all of the subsidiary’s common stock and has a full right to point the board of directors
of subsidiary’s company. There is a possibility that the wholly owned subsidiary or subsidiaries
may be in the same industry as the parent company or in completely different industry. One of the
advantages of wholly owned subsidiaries is vertical integration or the subsidiaries are under the
control of a common owner in which they will act as the suppliers and service providers. As
example, the parent is a car manufacturing company and it has several wholly owned subsidiaries
that re a tire company and several other different auto parts companies. Apart from that, the
financial reporting for wholly owned subsidiary is much simpler as the parent can consolidate the
financial statement of the parent and subsidiaries into one financial statement. Even so, there is
also the disadvantage to this type of business structure such as loss of operational flexibility. The
successfulness of the companies depends solely on the subsidiary’s achievement. As example, if
the company enters an international market through wholly owned subsidiary, the subsidiary will
be in charged in developing distribution channel, recruiting sales force and also establishing the
customer base. Operational risk is too focused under one company instead of spreading it across
multiple entities.

The most common difference between joint venture and wholly owned subsidiary is the ownership
structure. Joint venture is operated by two or more companies with the owners have an equal
partnership or one of the partners have a larger share in the business. While the owner of wholly
owned subsidiary is a single company that maintains control over it. Joint ventures usually to be
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preferred to wholly owned subsidiaries as the most appropriate mode for entering foreign nations
when the firms have a need to gain access to all assets owned by partner as the acquisition of the
assets might be difficult or costly due to uncertainty. The result from this situation usually leads to
the companies to choose a joint venture over a wholly owned subsidiary as they can avoid the risk
of asset distribution with their partners and also to avoid failure to solely receive the rent from the
assets transferred to the subsidiaries.

As example, the joint venture of Hyundai-Kia. As the group entered the Europe market, they
managed to produce more than 1 million units per year with their plants in Czech Republic,
Slovakia, Turkey and Russia. Kia was saved from bankruptcy by Hyundai in late 1990s as they
bought 34% stake of Kia and they started to share platforms, technologies and other business
functions especially on the sharing of engineering support. The group targeted the international
market in receiving bulk of sales which helped them to increase their production volumes.

Other example of successful joint venture is alliances in airline industry such as Star Alliance. The
alliance has 28 members of airlines and operates 4,657 aircrafts, serving at more than 1,330
airports in 192 countries on more than 18,500 daily departures. The members share airport
terminals also known as co-location. In 2017, the airline alliance reported revenue to the value of
194 billion U.S. dollars, up from 181 billion U.S. dollars in the previous year. The alliances in the
airline industry bring positive consequences not only to the members of the alliance but also to the
customers. The alliance can help the members to save the cost. As example, in buying the
materials for maintenance purposes, the members can buy in bulk and obtain bulk discounts. The
alliance could help to increase the number of passengers through the extension of network by
codesharing.

Next example is Docklands-Light Railway. It is a joint venture between French transport group
Keolis and infrastructure services provider Amey, part of Spanish multinational Ferrovial. The
partnership is split between the partners at 70:30 with Heolis as the majority partner. Since the
opening, the railway has become the busiest light rail network in the UK and manage to carry over
117 million passengers each year. The alliance managed to be successful as they offered a package
to new companies to set up such as no rent for 10 years. New companies saw this as great
opportunity and they decided to join the Docklands-Light Railway venture. Through the joining,
Docklands managed to revive their image and establish their brand in which managed to attract
more customers from all over the world.

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Other examples of successful joint venture are Vodafone and Telefonica in sharing their mobile
network, BMW and Toyota in co-operating together on research into hydrogen fuel cells, vehicle
electrification and ultra- lightweight materials, the West Coast joint venture between Virgin Rail
and Stagecoach and lastly the joint venture in creating Google Earth by Google and NASA.

As a conclusion, it is important for company to identify and recognize which method is suitable
before entering an international market. There are variety of options with difference cost, risk and
the degree of control. It is also important to recognize the main issues before joining the
international market such as marketing by identifying which countries, segments would be
suitable, how to manage and implement marketing effort, sourcing issue on how to obtain
products whether to make or buy and which option would be bringing more profits, and lastly
investment and control or also known as method of joining such as through joint venture,
international partner of acquisition through wholly owned subsidiaries.

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Subsidiary
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Access on July 09, 2019
8. Geoff Riley. Joint Ventures: Economics
https://www.tutor2u.net/economics/reference/joint-ventures
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