Finance for a Business Project Assignment

International Business Strategy

Introduction

International Business StrategyGlobal business environment is becoming competitive as different leading organizations are significantly adopting unique strategic approaches in the business operation management process for the better business growth and competitive advantages. Among different competitive strategies and approaches, international business expansion also can be regarded as an important strategic approach for several multinational firms, which help the organizations to improve business growth and profitability. In international business expansion, different organizations used to face different types of risk factors. Some organizations adopt unique approaches and control the risk factors quite effectively. On the other hand, some organizations decide to exit from the particular market due to the risk factors. In this assignment, the case facts of IKEA and McDonalds will be analyzed regarding the risk approaches in international operation process. In addition, the solutions and initiated approaches of the two multinational firms will also be analyzed.

McDonalds is one of the leading multinational fast food restaurant chains. It was established in the year 1940. The company is an America based company and the organization successfully has adopted the international market expansion approach. McDonalds has a strong presence in different emerging and developed nations. On the other hand, IKEA is also considered to be one of the leading multinational customized furniture manufacturing firms based in Sweden. The company has started its business operation journey in the year 1943. Both of the companies have successfully adopted resource seeking approach by focusing on the availability of the natural resources, strong skill level of the labors, creativity of the assets, and unique physical infrastructure in the international market places to become highly successful. Both of the countries have a strong presence in the Chinese market, but the organizations faced some risk factors in the Chinese market. This assignment will discuss about the strategies adopted by the organizations to overcome the risk factors.

Challenges for MNEs in Respective Countries

Before considering the critical analysis of the risk factors and adopted solutions, this will be important for the researcher of this study to determine the risk approaches. IKEA is popular for its customized furniture products. The company develops the customized wooden home appliances, office appliances and other products basis on the needs of the target customers. The company follows similar style of business operation in European market and other market places. On the other hand, this is also essential to accept that the Chinese market seemed to be attractive for IKEA. Therefore, the company entered into the potential Chinese market with similar kind of business operation process. The company management of IKEA faced challenges initially in the Chinese market as the local competitors copied the product designs and marketing approaches of IKEA. The management of IKEA did not lose hope and adopted unique marketing approaches to overcome the problems.

Similarly, the management of McDonalds also has understood that the Chinese market will be important for the company to improve the profitability and business growth. Therefore, the company management decided to enter into the potential Chinese market. Initially, the company management of McDonalds faced critical challenges in the distribution and supply chain approaches. McDonalds used to source the raw materials and resources from OSI. The Chinese media stated that OSI is responsible for the bad impact of the American fast food products on the health of consumers as the production process and quality of raw materials are not up-to-the mark. Apart from these challenges, the company management of McDonalds also faced language barriers in the Chinese market. In terms of the solutions, the company management and decision makers of McDonalds have decided to cut the ties with OSI in the Chinese market to improve the sustainability aspect. In addition, this is also important to accept that the company management of McDonalds is starting to recruit the managers and leaders from the Chinese regions to overcome the language and other cross-cultural issues.

Strategic Importance of the Market

It is already introduced that the company management of IKEA understood that the Chinese market will be profitable for the company. The decision taken by the company was right as IKEA is one of the leading organizations within the Chinese furniture manufacturing and distributing organization. The reason behind the targeting of Chinese market is that China is one of the leading and largest consumer markets, which helped the management of IKEA to improve the customer base, sales growth and overall profitability. On the other hand, the economy of China is considered to be booming economy due to rapid globalization and industrialization. The corporate houses and office buildings are being developed quite rapidly. Most importantly, the income level of common people is improving. On the other hand, the products of IKEA are not costly as the company management of IKEA follows the resource seeking approaches, which helps the company management to offer products at economic price level. This is considered to be competitive approach, which helped the management of IKEA to grow in the Chinese market. In addition, this is also an important aspect to admit that the demand of customized furniture products at economic price level in China is increasing rapidly. These aspects have motivated the company management of IKEA to enter into the potential Chinese market and helped the company to improve the business growth and profitability quite effectively.

McDonalds is one of the reputed brand names within the Chinese fast food restaurant chain industry. The company management of McDonalds always focuses on the expansion of the business network in the potential and emerging international markets. The management of McDonalds have understood that China is one of the potential markets for the fast food products like burgers, sandwiches, wings etc. However, the company management of McDonalds have become successful to penetrate the Chinese market place through the adoption and integration of the unique business operation activities. McDonalds also got motivated through the concept of leading and largest consumer market. China is the largest consumer market across the globe. This is also acceptable that China is becoming one of the economic superpowers day-by-day. Therefore, the Chinese market place is becoming one of the lucrative market place for the majority of the organizations. Most importantly, the price sensitivity aspect, product differentiation aspect, and local culture integration aspect are considered to be the important brand elements of McDonalds in the Chinese market places. These aspects have assisted the company management of McDonalds to gain success in the potential Chinese market.

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