International Business Competition by Multinationals

Many companies are expanding their business activities into foreign markets to explore opportunities inherent in the international market. To succeed, a multinational corporation may have to pursue integrated, global strategies to exploit its full potential, make aggressive investments, and manage its operations carefully (Hout et al., 1982). In their article How Global Companies Win Out, Hout et al. (1982) explore three corporations with unmatched global competition. This paper reviews these corporations’ unique global strategies to discern opportunities for engaging in international business today.

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Caterpillar, Erickson, and Honda exploited several leverage points and tool unconventional actions, enabling them to dominate their businesses worldwide. Caterpillar established local assembly lines and developed similar equipment designs, allowing it to reduce transportation costs, earn huge profits, and strengthen its position worldwide. Erickson leveraged innovation to develop a unique modular technology aligned to their target segments’ preferences, consequently creating cost advantages. Similarly, Honda leveraged innovative and aggressive marketing to coalesce global demand for its products. It targeted new consumers and established centralized manufacturing and logistics, which generated scale economies in production, distribution, and marketing (Hout et al., 1982). These integrated global strategies allowed the three firms to gain competitive advantages in their respective markets worldwide.

One motivation for international expansion is efficiency associated with economies of scale in production and distribution. Global expansion always requires significant financial investments and dynamic capabilities (Deng et al., 2020). For example, it took seven full years of investment before Honda sustained profitability (Hout et al., 1982). Nevertheless, expanding into national markets generates increasing returns on the scale in production, distribution, and marketing (Kim, 2017). The economies of scale can be realized through lowered costs. For example, Coca-Cola leverages its sheer size, geographical reach, global distribution system in over 200 national markets, and globally distributed production system (Brondoni, 2019). Similarly, McDonald’s operates over 38000 restaurants across 120 countries, which produce standardized mixtures of ingredients (Panwar & Patra, 2017). In addition to reduced distribution costs, local production lines allow these corporations to source raw materials and talent from the local markets, creating economies of scale.

Furthermore, firms should expand globally to access and exploit new, more potential markets. Most retail markets in America and Europe are saturated due to the high concentration of producers (Kunc & Križan, 2018). Consequently, many multinational corporations are increasingly expanding into new, emerging markets to exploit their huge potential. For example, Honda leveraged aggressive marketing to penetrate the European and American motorcycle markets. Similarly, Coca-Cola and McDonald’s have capitalized on strategic innovations and aggressive marketing to expand into new, emerging markets in Latin America, Asia, and Africa to reach more customers. Both countries adapt to the needs of the local segments they serve by developing products that match the unique requirements of those cultures of specific countries. In this respect, international expansion provides today’s businesses to conquer new territories and grow their market share.

Moreover, foreign markets can enable companies to diversify their assets and product lines and gain a competitive edge over their rivals. By forming a joint venture in Japan, Caterpillar neutralized competition from its fierce rival, Komatsu (Hout et al., 1982). Similarly, Coca-Cola has established operations in India, China, Europe, and Africa to diversify its assets and block its position in those markets. Diversification can help firms secure their bottom line against unforeseen events (Gupta & Moudud-Ul-Huq, 2020). For instance, a company may offset poor performance in one market by operating successfully in another (Hout et al., 1982). Therefore, the international business environment provides excellent opportunities for building a strategic position worldwide.

In conclusion, Coca-Cola and McDonald’s adopted strategies similar to that Hout et al. (1982) discuss in their article. Notably, both corporations forged integrated, global strategies to maintain their global leadership. Consistent with Hout et al. (1982), both multinationals see competition as global and pursue a unified approach with an international focus. Each corporation has strategic innovations in its product design, production, distribution, and marketing, which trigger fierce global competition and protect its competitive advantages. They have built long-term resources that help sustain their competitive advantages and leading positions worldwide. Finally, both firms execute their global strategies aggressively compared to their opponents. These strategic considerations contribute to steadfast success in the international market.

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References

Brondoni, S. M. (2019). Shareowners, stakeholders & the global oversize economy. The Coca-Cola Company case. Emerging Issues in Management, (1), 16-27. Web.

Deng, P., Liu, Y., Gallagher, V. C., & Wu, X. (2020). International strategies of emerging market multinationals: A dynamic capabilities perspective. Journal of Management & Organization, 26(4), 408-425. Web.

Gupta, A. D., & Moudud-Ul-Huq, S. (2020). Do competition and revenue diversification have a significant effect on risk-taking? Empirical evidence from BRICS banks. International Journal of Financial Engineering, 7(01), 2050007. Web.

Hout, T. M., Porter, M. E., & Rudden, E. (1982). How global companies win out. Harvard Business Review, 8-108. Web.

Kim, D. (2017). Economies of scale and international business cycles. Department of the Economics University of Washington. Web.

Kunc, J., & Križan, F. (2018). Changing European retail landscapes: New trends and challenges. Moravian Geographical Reports, 26(3), 150-159. Web.

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Panwar, D., & Patra, S. (2017). Localization in Fast Food industry: A case study on McDonald’s strategy in India. Journal of Arts, Science & Commerce, 8(1), 70-74.

Annotated Bibliography

Brondoni, S. M. (2019). Shareowners, stakeholders & the global oversize economy. The Coca-Cola Company case. Emerging Issues in Management, (1), 16-27. Web.

This journal article explores Coca-Cola Company’s shareholders, stakeholders, and global strategy. Brondoni (2019) examines strategic considerations the multinational pursue to remain competitive in today’s competitive international business environment. Analyzing the firm policies the company implements to manage competition can generate valuable insights into how global businesses win out.

Deng, P., Liu, Y., Gallagher, V. C., & Wu, X. (2020). International strategies of emerging market multinationals: A dynamic capabilities perspective. Journal of Management & Organization, 26(4), 408-425. Web.

This article concentrates on how dynamic capabilities influence the type of strategies companies to consider when expanding into emerging markets. The authors explore the dynamic capabilities theory and its relevance to international expansion. They also develop several strategies for helping multinationals consider expanding overseas. Understanding the theory and the global expansion typology discussed in the article can help gain insights into how companies manage the international competition.

Gupta, A. D., & Moudud-Ul-Huq, S. (2020). Do competition and revenue diversification have a significant effect on risk-taking? Empirical evidence from BRICS banks. International Journal of Financial Engineering, 7(01), 2050007. Web.

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Gupta and Moudud-Ul-Huq (2020) examine the impact of diversifying revenue sources on competition and overall risk-taking behaviors in banking institutions. The study found that both competition and revenue diversification have a direct influence on risk-taking behavior. This article is useful because it exposes the risks and benefits of diversification, which is a major motivation for international expansion.

Kim, D. (2017). Economies of scale and international business cycles. Department of the Economics University of Washington. Web.

This article delves deeper into the concept of economies of scale, with a focus on its importance in an international business environment. Kim (2017) provides useful methods for estimating costs and illustrates how they are applied in practice. This paper is relevant to the essay because it demonstrates succinctly how firms can achieve increasing returns on value in the international business environment.

Kunc, J., & Križan, F. (2018). Changing European retail landscapes: New trends and challenges. Moravian Geographical Reports, 26(3), 150-159. Web.

Kunc and Križan (2018) explore recent consumption patterns in developed economies. The authors deconstruct major variations, trends, and challenges in the retail market across Europe. The paper applies to the current essay because the issues addressed in the article illuminate motivations, benefits, and the dockside of global expansion.

Panwar, D., & Patra, S. (2017). Localization in Fast Food industry: A case study on McDonald’s strategy in India. Journal of Arts, Science & Commerce, 8(1), 70-74.

This case study examines strategies adopted to remain competitive in the fast-food industry. Panwar and Patra (2017) discuss how McDonald’s adapts its global strategy to match local market needs and preferences. This article is relevant because it provides nuanced insights into international competition. Examining McDonald’s “localization” tactics in Indian can help appreciate the role of innovative strategies in maintaining a firm’s competitive position.

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