This assessment will cover the following questions:
- Sainsbury plc is a retail supermarket chain of the United Kingdom. Critically analyse the international policies and strategies used to deal with dynamic business environment.
- Identify the relationship between national and organisational cultures in Sainsbury.
- What are the factors influencing the organisational business structures?
Business environment is identify as an effective combination of external and internal factors that highly effects of company's operating situations. Along with this, International business environment is multidimensional considering the cultural differences, political risks, exchange risks, taxation and legal issue. Therefore, international business environment includes the regulatory, political, tax, economic, cultural, social, technological and legal environments. In this essay, chosen organisation is Sainsbury plc which is the retailer and supermarket chain in the UK. Main purpose of conducting this essay is to identifying the importance of internationalisation business process. This essay divided into two parts which coves different methods of internationalisation for retail organisation in expanding their business operations and functions into large emerging markets. It is essential for the company to maximise possibility of business success and minimise risk of failure. Evaluation of internationalisation method as explanations of the business internationalisation process also included in this essay.
Internationalisation is identify as an effective process of maximising involvement in international operations. In addition, it is the procedure of integrating a global, intercultural and international dimension into the functions, goals etc. Sainsbury plc is a largest retailing industry at Holborn, London, UK. It was founded in 1869 by John James Sainsbury. Company decide to expand their business operations into large emerging markets such as China and India. For this, company could be follow different methods of internationalisation. This method divided into three parts such as export based, non-equity based and equity based. All these are important but Sainsbury only use equity and non-equity based which are determined as under:
Joint Ventures is identify as an arrangement of business in which two or more companies agree in order to pool their major resources for the motive of achieving a particular task. In such type of entry mode, all participants is liable for losses, profits and costs associated with it. Sainsbury wants to follow this mode and enlarge their business operations and functions in China and India. Thus, it will be more essential and significant for the success and growth of company at large scale and within predetermined time period. Joint venture create an unique identity in which bot partiers take active responsibility in making decisions and formulating business strategy systematically. This method of internationalisation can assist Sainsbury in order to share and lower the high-risk costs. It will also help them in gaining economics of scale and creating a basis for more impressive future competition in the retail sector. Joint venture also support an organisation because with the assist of this mode, Sainsbury welfare from a local partner's knowledge or skill of the local culture, market, political systems, language and business systems. Joint venture is refer as an essential and significant entry mode in international marketplace. There are different strategy of joint venture such as critical driving forces, strategic synergy, great chemistry, win-win, operational integration, growth opportunity, sharp focus, commitment and support. All these are more essential and important for the organisation to maintain strong and long lasting position at international market such as China and India.
Licensing and Franchising is also identify as an effective and important method of internationalisation which is also follow by company to enlarge business operations successfully. Beside this, licensor grants the proper rights to non-physical property to the Sainsbury for a particular time duration. In return, licenser get a royalty fee from the company. Franchising is mainly based on the marketing concept which is followed by an enterprise as a business expansion strategy. Both methods are more effective and essential for the company to enlarge their operations and activities in given time period. This will also support the Sainsbury to retain long run sustainability at China and India. Main purpose of choosing franchising is to avoids the risks and costs of opening up an international market. With the support of this method, Sainsbury can quickly and easily build a global and effective presence.
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Direct investment and foreign manufacture: International investment in actual products e.g. building, land, equipment etc. In addition, it is entirely owned manufacturing grants are considered by international company for different reasons. It is completed for getting raw materials run at lower cost of manufacture for avoiding barriers of tariff and satisfy local content needs. Foreign direct investment is also identify as an investment in the means of controlling ownership in an organisation in specific nation by an entity based in many other nation. With the support of this method, company can easily accomplish better and effective results within predetermined time duration.
Strategic Alliances is identify as an effective term that explains an entire series of various relationships between organisations that market in international level. In simple word, strategic alliances identify to cooperative agreements and statement between actual or potential competitors. This mode is more essential and effective for the Sainsbury to enter into the foreign and emerging market directly. With the help of strategic alliances, company can easily achieve better results or outputs within given time period. Strategic alliance is refer as an organisation relationship established by two or more organisation to cooperate out of common requirement and to share risk in accomplishing a mutual objective. It is important and essential for the Sainsbury to achieve competitive advantages within predetermined time duration. There are different types of Strategic alliances such as technology, production and distribution based alliances. All these are essential and useful for the growth and success of company at international market.
Merger is refer as an external strategy for success and development of the Sainsbury. It is a combination of consolidation, amalgamation or integration of more business in which one party acquires the liabilities and assets of the different in exchange for cash or shares. It is more important and effective growth strategy and market entry. With the use of this method, Sainsbury can easily overcome competition and retain strong position at two emerging market such as China and India. In this a number of takeovers, consolidation and mergers have taken an effective place in the actual time period. Some important and essential reasons for mergers such as economies of scale, operating economics, synergy, growth, diversification, utilisation of tax shield, increase in value, elimination of competitions, better financial planning, economic necessity and many other. All these reasons are suitable and beneficial for the development and growth of organisation in limited time period.
Acquisition refers to transactions through which a firm controls another firm in different ways like exchanging and buying its stock. Cross-border acquisitions are increasing day by day in this modern business era. Acquisitions are attractive because they provide fast and established approach to new market to company. Organisations in a country with strong monetary system can acquire a firm in cheap way. In context to Sainsbury Plc Strong currency makes acquisitions cheap and powerful. To go for an acquisition strategy the firm should analyse the target country's legislations. Acquisition is a good plan for consolidating industries and when scale is required. According to different studies between 40 and 60 percent of acquisitions fails to gain acquired company's market value. It is the easiest way to expand a business by entering into new industries. A company's acquisition strategy should be according to the assumptions. Potential companies acquisitions will be easily available but in case of limited choice it should be according to suitability instead of expediency. Acquisition refers to a company's dominance on other company. The bigger company acquires smaller company's assets, shares and run it by larger company's name or by combined name. An effective acquisition plan leads to firm's development.
Wholly-Owned Subsidiary is another method of market entry which is more expensive. In order to have fully ownership and control of global operations, a Sainsbury opts for FDI(Foreign direct investment) to own international operations. There are some reasons an organisation would select to operate or run a wholly-owned subsidiaries method, rather than plainly interesting the acquired business into the central corporate operations. It is essential and useful method of internationalisation for the Sainsbury by providing tight control over business operations.
Therefore, above all this method of internationalisation is useful and effective for the Sainsbury to maximise chances of success and reduce risk of failure in a proper manner. With the support of all method, company can easily achieve long term growth and success within predetermined time period.
Critical evaluation of all methods related to internationalisation process:
Above discussed all methods are more effective and useful for the Sainsbury to expand their business operation and activities into emerging marketplace such as India and China. All methods has their own positive and negative impact on business which are determined as under:
Joint Ventures gives large amount of capital and more suitable for the major projects of Sainsbury. This method spread the risk among or between the partners which will help an enterprise to retain strong position into emerging market. In this, different parties are play important role and have various types of skills like technology, technical, marketing, human or expertise. Therefore, all these are show as a main reason for entering into new marketplace in a systematic and proper manner.
Joint venture is a method of market entry which is potential for misunderstanding. They output in disputes among different companies because of varied interests. For instance: interest of international organisation in developing nations would be to acquire the technology application from its partner while partner interest of an advanced nation would be acquire the marketing skilfulness from the international organisation.
Main advantage of Strategic Alliances is it spread and decrease the cost in international market. In order t produce or sell products in international market, a Sainsbury must obtain few fixed costs. Another positive effect of such method for company is to counter or avoid competition successfully.
Negative effect of Strategic Alliances is access to information. For collaboration or cooperation to work in effective way, single alliance partner may have to give information to the other, it would choose to keep secret. Thus it is not easy to analysis information requirements ahead of time.
Merger has positive effect on business operation when they maximised output, average costs of product automatically decreased. With the help of this method, company can easily get better interest rate which will further essential for the growth and development of company for long duration. It is important and valuable method for the Sainsbury to expand their business operations and activities into emerging market as well as achieve better results in given time period.
Integration difficulty is a main drawback of merger for the Sainsbury. These cover combining two different corporate culture which is link with different control and financial system. Beside this, Sainsbury is often encouraged in order to utilise essential leverage in order to finance sizeable acquisition. This method also fail to accomplish intended synergy due to different reasons including, skepricism, non-cooperation, managerial failure, emotional doubts and so on.
Positive effect of Wholly-Owned Manufacturing subsidiary is there are no risk of mislaying technical ability to a challengers thus achieving a competitive benefit. It is also significant for the Sainsbury by giving tight control over their activities and functions. This method of internationalisation also gives an ability to recognize location economics and learning curve. Thus, it is an essential and effective method for the company to enhance their growth and success at international market.
By following Wholly-Owned Manufacturing subsidiary, Sainsbury bears full risk and cost which is negative impact on its business operations and reputation in emerging market. For this method, company need an effective direction and supervision which highly increase rigidity. Thus, with the use of such method, an organisation faces different hurdles in the way of taxations and regulation in international countries.
Acquiring a firm by another firm has various advantages. The buyer have option to choose which assets they should acquire like intellectual property, liquid assets and liabilities – bank loans, lease, etc. Another benefit is the company can easily increase other business goodwill, experience and assets. In context to Sainsbury Plc, With the acquired assets and staff the company's profits and output will be increased. It bloods excitement between share holders. Acquisition also increases goods price and their investments equity. On of the essential merits of acquisition in Sainsbury Plc is that it integrates two different firm's culture.
There are some disadvantages of acquisition. Purchasing a bigger company needs enough cash and if the firm have limited cash then it can't spend money on other projects. In Sainsbury Plc it will be expensive and increase company's debt. After acquisition there are many employees performing similar operations and it leads to excess of employees. In this situation the buyer will terminate employees, as there are too many individuals. It leads to employees retention in the company. Having culture of two companies in an organisation may be not satisfactory for the workers and this will decrease employees productivity.
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Advantage and disadvantage of Franchising and Licensing
The main advantage of Franchising is reduced the risk of business failure. Sainsbury's business is based on a evidenced idea. Before committing their own business, they can check that how successful their competitors franchises. There is no need of marketing tasting because Sainsbury's goods and services are already build an effective market share. franchisees can adopt recognised trade mark and brand name for advertising the products and services.
The main disadvantage of Franchising is costs can be higher then expectation. The franchise agreement involves limitation on how franchisees drive the Sainsbury company and franchisees can not able to create changes for their local markets needs. Other franchisees can give the trade name a bad honour, so the need of recruitment process in the Sainsbury company.
The main advantage of Licensing is that Sainsbury company don't need to find wealth to commercialise their goods. They can create innovation and unique ideas to market faster. If they issue license to the company, then they capable to influence their involvement, experience and infrastructure. From licensing system, they easily able to generate revenues and profits. Company can keep ownership of their intellectual property. Licensing provides to suppliers, complementary businesses and competitors to certain rights over patent.
The main disadvantage of Licensing is loss of control over invention. Relying on the licensee's capability to effectively modify patent. Risk of poor execution and strategy harmful the product success. Poor quality management harm the product and brand reputation of Sainsbury company.
Direct investment and foreign manufacture
The main advantage of direct investment and foreign manufacture can impact the target of the Sainsbury's economic development and making a much conductive environment for the capitalist and benefits for this company. They can easily made international trade. Direct investment create new opportunities and employment and investors can invest in this company easily. This is increase in income and purchasing power of the customers which increase the profits of the company.
The main disadvantage of direct investment and foreign manufacture sometimes hinder the domestic investment which slow down the economic growth as well as the company's growth.
Therefore, above all entry mode are useful and essential for the Sainsbury to easily expand their operation into China and India. One of the best method for the organisation is Joint venture because with the help of this, they can easily save cost, risk, access to technology, expansion of customer base, entry into new technical markets and emerging economics and many other. All this will help for the Sainsbury to accomplish long term goals and objectives in given time period. It will also effective for the retail sector to maximise their profitability and productivity.
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From the above mentioned information, it can be concluded that there are different modes for the organisation to expand their business operations and functions into large emerging markets. Some methods such as Strategic Alliances, Joint venture, merger & acquisition and so on. All these are more effective and essential for the company to enlarge their operations in a direct manner. Thus, it will also important and significant for the enterprise to maximise their sales and profitability in a direct manner. All these methods has their positive and negative effect on business performance and productivity at large scale. All this methods also support an organisation to maintain long run sustainability at large emerging marketplace in systematic and direct way. Process of business internationalisation is also significant which is mainly related with key methods of entry mode and help a company to achieve their long term goals and objectives in given time period.
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