Literature Review

 Title: Is it worth it to expand the business into a new region or country?

1. Literature Review

1.1 Introduction

After the globalization, the expansion of business becomes a common practice for especially big businesses and the scope of expansion is not rigid to big enterprises but it goes to the SMEs entities equally. Likewise, there is various countries small business which doing great on exploring the new or different market outside their boundaries through use of online channels.

However, the main cause of expansion of business into the international market is because of exploring new market, attract new customers and gain maximum recognition on sport span of time (Castaño et al., 2016). Thus, this expansion of business outside the local boundaries becomes an important aspect to grow and achieve the high profit margin.

But with the increasing competition, it becomes not easy to expand the business or operate the function outside the local market. This is because there are various external factors exist such as political parties influences along with the change of customer taste and preferences and many more factors that directly affect the firm sustainability into the another region. So, this area raise question that is it worthy to expand the business into new region or country.

Thus, this study will help to understand whether expansion of business across the global market is really proven worth for economy, society as well as for business (Lubinski et al., 2013). For this, the researcher used the qualitative methodology by undertaken different author journal articles and research papers etc. These help the researcher to critically analyze the worth of expansion concept for business.

1.2 Defining the expansion of the business into the international market

In the views of Melo et al. (2015), the expansion of business is considered as a process within which business moves from domestic market to international market for the purpose to make new potential customer segment, sales generation and gaining high recognition etc. however, the expansion of business tend to increase the size of business and helps them to reduce the risk of staying in one market.

There are various big brands that successfully expand their business across the boundaries. For instance, Nike is considered a global brand in the present scenario. It becomes possible only because of a firm careful selection of international sponsorships. Likewise, it previously comes into a partnership with Manchester united. This sponsorships helps them to gain high recognition and allows them to gain the customer positive behavior towards the brand.

McDonald’s is another global brand that includes the successful exploration of different markets. It gains such recognition only because it’s right strategy and the implementation process within which it earns the high satisfaction level of customers.

Moreover, differentiation or cost leadership is the strategy that supports McDonald’s to sustain in different markets and makes their international expansion successful.

However, these businesses become successful because they use the right international business expansion strategy. So, the selection of appropriate tactics is a must for every enterprise before moving into the international market.

Imports and exports of goods are that strategy which is largely used by the business and this option often choose first when business wants to make international exposure. In this, they brought or send goods or services from one country to another one. It is the easiest way to explore the foreign market.

Licensing:- Licensing is another yet effective way to expand the business internationally. In this, licensor is the firm which allows to using its intellectual property such as brand name, copying right, patenting and technology for some specific period of time.

Moreover, the licensor gets benefits in terms of royalty. This area usually used when the domestic production costs are too high and existences of strict government regulations etc.

Franchising is considered as a parent company which gives right to another company to do business using their franchiser’s name and products. It is different from licensing as franchisees need to follow much stricter rules. McDonald’s, Pizza Hut, Burger King and KFC etc are the example of Franchising.

Joint venture is another most used strategy within which different countries companies ready to come into partnership for entering into the new market. It is done through mutual agreement. The cooperation between the companies allows them to share production cost, technologies development and sales network etc (Tiago and Veríssimo, 2014).

Thus, these are the common strategies that firm used to enter the international market.

1.3 Benefits of expansion of business across the boundaries

According to Tolmay (2017), there are numerous benefits exist in the expansion of business across the boundaries. It majorly includes the sources of new revenue generation. It means that business get the opportunities to trade in new market and able to capture larger audiences which directly influences the sales and revenue of firm.

However, Lynch and Jin (2016) stated that the expansion of business also support the firm in term to greater access of talent once which is lack in current scenario. But the exploring of new countries allows the business to get skilled staff which helps the firm to grow and perform better in the present and future scenario. Furthermore, the business also gets the benefit in the form of learning about the new culture.

This would be possible only with the expansion of business across the boundaries where business able to interact with multiple culture and learn new area which helps in the business growth. Along with, foreign investment opportunities are another benefit that a firm gains with the expansion of business.

At the same time, the expansion of business also proves to be useful for the firm in terms to improve the business reputation. Likewise, it happens that some business fails in particular market then with the expansion, they get the opportunity to tap new market with the increasing chances of profitability.

In contrary to this study, Piekkari et al. (2014) depicted that expansion of business give rise to the support of various people in terms to improve their lives on some way. For instance, if individuals explore another environment then they get large chances of solving their problems. Thus, this way people can support the firm to achieve the objectives to a larger extent.

In addition to this study, Yun et al. (2015) depicted that expansion of business in another country also proves to be learning experiences for the business as with the merger and acquisition, the workforces develop their skills and contribute productive results to the business. At the same time, the interaction with new culture allows the people to exchange their ideas and views which prove to be effective for their sustainability on foreign market.

1.4 Challenges faced by businesses on the expansion of business across boundaries

In the views of yan Zhang and Van Den Bulcke (2018), expansion of business is always proven effective for business for longer growth but at the same time, there are wide level of uncertainties lie within it. The major challenge which business faced are the cultural differences within which business usually find problem in term to maintain proper communication process at the workplace or with the customers.

According to Folk and Jomo (2013), the business faced the problem with culture because at new region, business hires local people so to make the coordination with diverse culture people become a tedious task for the firm. So, it creates conflict at the workplace which impacts the working environment negatively.

On the other hand, Grigorescu and Zaif (2017) depicted that cash flow management is another challenge which business faced while expansion as it occur with the differences on economic policies and legal system within which firm struggles to gain high cash revenue. However, the poor negotiation with the partners and vendors also create a problem for the firm in term to manage the cash into the business.

From the finding of Gillespie (2015), it is identified that learning to delegate the work is also considered as a challenging task for the business. This is because diverse cultured people have a different sense of perception or work skills. So, it creates an issue for the business manager to delegate the work to diverse cultural people. Sometimes, the incorrect delegation of work becomes a loss to the firm.

So, it is important for the business to learn about the workforce’s behavior or skills of particular culture so that right delegation of work can be done.

At the same time, the frequent market change on the international market is another problem within which entrants business find problem in terms to what product should be launched and who all are the target customers for the product. This is because the market change gives rise to the deviation on the customer preferences within which firm struggles to select which product or service.

In addition to this study, Pucciarelli and Kaplan (2016) stated that capital availability is something which also considered as a challenging task for the business to enter into the foreign market.

This is because there is a various firm which struggles for the entering into the foreign market with the lack of capital availability. So, the capital inadequate is also considered as the biggest challenge for the business to explore the international market.

In a similar manner, Borras et al. (2013) found that inappropriate skilled workforces is also challenge for the business as it become difficult to enter into the new cultured environment without the proper skills or market survey. The survival chances of business get declined.

Thus, it is important for business to analyze or assess the external market of host country properly for increasing succession probability.

1.5 Ways to implement the expansion of business in a successful manner

In respect to increase the success on international market, the business entities requires to firstly trained their workforces accordingly as every individual is not ready to accept chances especially culture one so it is must to prepare the workforces for international market.

At the same time, the adaptation of joint venture or partnership strategy is important to undertake for making the proper balance of cash-inflows. At the same time, Agwu and Emeti (2014) stated that firm usually faced the problem in relation to differences in culture or legal system. For this, the business entities require conducting the market research so that they can collect proper facts about the customer current taste and preferences and accordingly come up into the market.

So this strategy can increase the success rate of firm expansion. Moreover, the market survey also assist the firm to identify how much recognition and goodwill they possess in market so this will also guide them in their marketing activities.

It is suggested that business should adopt the online marketing for creation of recognition in the international market as social-site are the best sources to interact with larger cultured people and develop an healthy relationship with them. So, this strategy may help to develop positive goodwill over the international market.

1.6 Literature Gap

The literature consist of limitation in the form that it does not include any graphs or table related to any firm and due to which the study more arrive as theoretical in nature. Besides that, there is no focus on any particular country within which study provides wide aspect about what are the benefits of expansion of business on international market. At the same time, there is no use of newspaper letter within which authenticity of literature get reduced.

1.7 Conclusion

On the basis of above discussion, it is identified that expansion of business at international market proves to be effective for the business when it want to create new customer base and increase sale and revenue. The benefits of expansion not only stick towards the profitability but it also supports the business to increase their learning about the different culture. At the same time, business with the expansion of market able to target the large demographic segment whether based on income and age. This helps them to gain different customer segments which directly influence the sales of the firm.

But, it is also realized that there are certain challenges that also occurred with the expansion of business including the culture differences which is the major one due to which people struggles on developing proper communication with each other. Other than that, the frequent change in market also impacts the firm sustainability on international market as with the change on customer taste and preferences, the firm find problem to cater their needs properly. Otherwise, the expansion of business on the international market tends to be worthy especially in current scenario.

 References

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Folk, B.C. and Jomo, K.S., 2013. Ethnic Business: Chinese Capitalism in Southeast Asia. UK: Routledge.

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Melo, P.L.D.R., Borini, F.M., Oliveira Jr, M.D.M. and Parente, R.C., 2015. Internationalization of Brazilian franchise chains: A comparative study. Revista de Administração de Empresas, 55(3), pp.258-272.

Piekkari, R., Welch, D. and Welch, L.S., 2014. Language in international business: The multilingual reality of global business expansion. Edward Elgar Publishing.

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