Strategy for Internationalisation

The Motivation for Internationalisation

1. Essential reasons
The internationalisation of an enterprise widens the horizons for activities on various fronts like sales, procurement, production, developments and other operation activities across the country barriers. It provides a wider market and activity areas for any enterprise. For example, in the case of an automobile plant of Honda, which has been operating in America, it can be called as the internationalisation of the plant, which forms the base for the production activities.

Here, we shall try to see how the border crossing by any enterprise with regard to the market and activity zone differs from the regional expansion within the country. Further, let us try to study various topics of management which evolve as a consequence of internationalisation. The internationalisation of sales market has been carried out for quite sometime in the form of export of exports. Further, even the internationalisation of procurement market has also been in practice since Meiji era in Japan.

The essential reasons for carrying out type of internationalisation have opening of new market and acquiring the resources. The market opening here basically refers to the sales market and the internationalisation for acquiring resources refers to tapping of overseas procurement market for the management resources including the raw material, capital investment which are required to carry out production.

2. Secondary reasons
The above mentioned two reasons can be called as the factors responsible for initiating the internationalisation of the enterprise. However, the internationalisation of this sort gives birth to the following mentioned internationalisation resources.

The reasons responsible for the birth of internationalisation are the harmonisation with international political system, harmonisation with international economic system and the improvement of the efficiency of international management.

· Harmonisation with the international political system
Location of an enterprise in a foreign country for the sake of evading trade friction is a typical example of this reason. The location of an enterprise in a foreign country aims at avoiding the possibility of bad effect on the enterprise activity arising out of confrontation between the two nations due to the political interest.

· Harmonisation with the international economy system
This reason refers to setting up of production of procurement facilities overseas to checkmate the variations in profits due to foreign currency rates fluctuation, especially for those enterprises which have their major sales on dollar payment. In other words, this is a mechanism of providing defensive rules to avoid any negative influence of one’s activity arising out of the characteristics of international economy system. It also aime at turning this chartacteristic to one’s own advantage. The internationalisation of financial activity is an example where characteristics of international economy are being properly used.

· Improving the efficiency of international management
The production of goods like a television and stereo system etc. in a country having low labour cost, as seen in the case of Japanese electrical home appliances industry’s entry into South-East Asia, is a typical example of improving the efficiency of international management. However, the local production of automobiles in America and Europe by the Japanese automobile industry may also be called as the examples of improving the efficiency of management, in ultimate sense.

The local production of automobiles in the foreign nations, in most of the cases, was initiated for evading the trade friction originally. In other words, for the sake of Harmonisation with the international economy system. However, as a consequence of such an exercise, the efficiency of activity in American and European market increased and it became possible to provide the products matching the needs of time.

In this way, the improvement of efficiency in international management called for further developments of activity in the direction of further internationalisation so that the enterprise activities, which has undergone internationalisation for the sake of development of new market and acquiring the resources can be managed more effectively.

The above mentioned three reasons explain how the internationalisation differs essentially from the expansion of activities on regional basis within the country. Furthermore, the extension from essential reasons to secondary reasons shows the tendency of internationalisation of enterprises giving birth to further internationalization.

Problems of Strategic Alliance and its Management

Problems of strategic alliance is accompanied by a problem which is different from that of a single organisation. The probability of occurring of such a problem becomes inevitable when two different and independent organisations work together.

The difference of opinion occurs very often due to various reasons like difference in cognizance, difference of values, difference in aims and difference in alliance resources. These types of differences become important factors for the triggering of innovation. However, the strong motivation for promoting such transactions that are beneficial to one part alone may end up in damaging the relationship of trust. It is possible that the fruits of alliance cannot be materialised in the event of lack of strong relationship and it is also possible that the strategic alliance partners may turn rivals in future.

The strategic alliance which has such types of problems requires relationship, trust and devotion, in particular. The following nine pints can be listed as the conditions for the strategic alliance.

· To have a clear understanding about the present and future capability requirement for one’s company (there are many cases when company’s jump over to grab any opportunity to meet the immediate needs, in actual practice).
· To study the alliance which has the possibility of covering a very wide scope.
· To seriously study the capability, zeal and values of the other party before entering into alliance relationship. It is necessary to understand the actual state of affairs of the other party.
· To consider beforehand, the risk of knowledge getting stereo typed, disclosure of knowledge and optimism etc. The two partners will have to harmonise and cooperate with each other, while they complete with each other at the same time.
· To avoid over dependence. It must be kept in mind that the alliance is not an alternative method to the development from inside. It should act to supplement the information resources of one’s company or improving upon them.
· The alliance of enterprise must be constructed managed in the form of an independent enterprise.
· The partners should have complete mutual trust. Trust and liberal communication are indispensable for the success of any alliance.
· The core type activity and the traditional organisation of one’s company must be modified so that the results achieved as a consequence of alliance are received with flexible mind.
· It is the responsibility of the leader to clearly communicate the purpose, importance and reasonability of the alliance through his or her speech and conduct. It is necessary that the leader must set a model example concerning the devotion, patience and flexibility.

As the enterprises adopt strategic alliance more frequently with an aim of acquiring and learning the knowledge, the management of overall alliance patter will gain importance over the individual alliance management. And with the progress in the process of forming alliance the significance of contribution of individual alliances to the strategy and basic purpose of enterprise will become less important. Rather, it will become necessary to study how various alliances affect the growth of the enterprises.

In this world of knowledge leadership based competition, the pre-dominance on the basis of the product is no longer a continuous possession. The knowledge which is difficult to transfer alone has become the real and basic asset for an enterprise.

However, the information resources which have higher degree of independence and are difficult to transfer also have some peculiar problems attached to them. The typical characteristic features like non-general purpose utility and fixed types etc of such information resources normally lead to loss of sensitivity, flexibility in behaviour and maneuverability towards the changes in the environment of the organization.

Strategic Alliance of Knowledge Chain

In the strategic alliance of product chain, the cost reduction, limiting the risk, accelerating the sales speed, expansion of competition opportunities, building flexibility and weakening of strengths of rival enterprises etc. can be carried out part-by-part.

However, this type of alliance is insufficient for assuring the pre-dominance of the competitive strength on a continuous basis. This is because of the fact that the pre-dominance is acquired on the basis of easily transferable information resources. Therefore, the pre-dominance of competitive strength which is gained through this type of alliance is gained through this type of alliance is of fragile nature and it can be lost very soon.

On the other hand, the competitive pre-dominance which is generated on the basis of difficult to transfer information resources through strategic alliance of knowledge chain is of a very strong nature. It is not very easy for any rival company to acquire the same pre-dominance state continuously.

The information resources which are difficult to transfer are different from the information resources which are easy to transfer and these can be obtained only through a cordial and cooperative working between the two organisations. The degree of originality is very high. Therefore, it forms the basis which generate continuous competitive pre-dominance as against the other companies or groups.

Two types of Strategic Alliance

The strategic alliance can broadly be classified into two different types. One is known as “strategic alliance of product chain” which aims at assuring mainly the transferable knowledge which can be easily transferred or acquired. The other type is called as “strategic alliance of knowledge chain” which aims at acquiring the knowledge through close relationship and is namely concerned with acquiring knowledge which is difficult to transfer.

1. Strategic alliance of product chain
This is the link on the basis of product or the parts, with alliance among the enterprise as the center of focus. The initial stage of alliance between G.M. and Suzuki which began in 1981 is an example of strategic alliance of product chain. G.M. required small car on immediate basis and Suzuki wanted an access to the transportation system in America as well as the capital investment for its self-designed sub compact car, without incurring the cost and risk of constructing its own dealer network.

The strategic alliance of product chain like this had played only a very small role in acquiring knowledge.

2. Strategic alliance of knowledge chain
In this type of strategic alliance, focus is laid on knowledge and it aims at learning the knowledge as well as creativity. This type of alliance is not restricted to similar enterprises only and is carried out even among the wide range of different organizations also. A typical example of this type of alliance was the tie up between I.B.M. and Seimens, which was made public in 1990. The two companies aimed at acquiring new technology for design and manufacturing of computer chip for developing the second generation chip which would have an accuracy higher than the most advanced chip, through this alliance.