Competitive Strategy

Competitive Strategy

The goal of any business is about the reach of the business to ensure brand loyalty, service, and profitability. Localization of any business helps us get these superpowers, and most business has become multi-national company (MNCs) for the same purpose. Entering international markets has shown and proven any business’s increased profitability and success. For Instance, Mcdonald’s is one of the best-case studies where we can understand how an organization effectively placed its hold on gaining a global share by localization and with great products for the consumers in different zones of operation. It is a step-by-step approach where an organization begins its operation in the home country and gains the trust and credibility of the parent country, followed by exporting their product based on the demand, then eventually penetrating the global market by localization of their product for the market the organization enters (Lu, Y. C., et al., 2021). It also improves the relationship between the organization and local group, which benefits each other where the locals have increased job opportunities, global products etc., In contrast, the organization can increase their profitability, improve its product/service sales, increase consumers, etc., by just adapting its core principles for the local network.

Localization is not just limited to an external market. Still, it can also benefit the internal market, leading to increased local traders’ growth, new investment and urbanization of local zones with various development. Various industries and markets are untapped due to various factors, such as investments, resources and sometimes government regulations. My Uncle works in the automotive industry, and when I pitched the same questions, the response related to the international market, strategies, and business policies are below.

What are the main benefits of localizing products or services in your industry?

 Localizing a product or service in an automotive is considered a cost-saving strategy based on the market it is trying to penetrate. For Instance, Markets like India, China, and many South Asian countries are great markets for automobile localization as it benefits the organization in areas like raw materials (resources), workforce, energy, government subsidy, etc. Let’s consider Honda Motors in India as an example established in 1999; they employed a unique strategy as there was less or limited market research performed. They initially debuted with economical two-wheelers suitable for Indian road conditions (effect of localization) through a joint venture with Hero Motors. It was a huge success as they integrated a great Japanese engine with local design and user preference at an affordable price range.

Customer retention or brand loyalty is one of the major pillars of any business; This joint venture ensured it benefited the users in all possible areas, such as price point, gas mileage, durability and aesthetics that appealed to the local group. They also exported the same product to nearby nations with similar conditions increasing their userbase and profitability. In 2011, they ended their 26-year contract. Honda debuted their world-hit products like CBR- the 250, CBR-500, Honda Active scooter, Honda Navi, etc., which also gained a huge reception from users making their localization initiative a huge success.

How do you manage the resulting complexity of localizing products or services?

Considering the same example of Honda Motors, it was not a smooth journey as it will always be accompanied by challenges like legal, financial, and local group operations, etc., that can make the process more tedious. During their tenure, there were local riots concerning water consumption and reformed laws. In India, each state has local and central policies, unlike other nations, which means that the pricing structure, product specification, financing, etc., takes a hit before the purchase.

A Honda CBR-250 costs $2000; the purchase can be carried by digital payments, cash or financing option based on the specs, other factors and, most importantly, the state/local automobile policies. Hence the organization sets a base price irrespective of the states it operates and re-adjusts according to the local pricing structure to tackle this complexity.

Do you need to localize other value chain activities (such as HR management)?

I believe the localization should not be limited to any specific sector of the organization. Still, also it is very necessary to have hybrid integration for smooth operation with maximum efficiency. For Instance, the work nature may or may not be similar between the host and partnering nation. For Instance, the automotive sector in India has an average work hour of 62 with six working days, while Japanese models contrast with 60-70 hours for five working days. This could potentially impact the local workforce resulting in improper management and deliverables.

I understood the hybrid work nature for human resources, engineering, and quality control would be more effective than localization. At the same time, local suppliers, logistics, etc., can be localized as it can reduce labour costs and bring a local advantage that can benefit the organization. For instance, the core engineering team can be focused on innovation with a hybrid structure. At the same time, the supply and delivery of the product internally can be carried on a 100% localized division of the origination where the barriers of negotiation, language, etc., do not concern the operations.

Then ask yourself this question: Do the responses indicate that the organization is guided by established industry best practices or systematic strategic analysis of the internal and external environment?

 I always believe that localization is an effective strategic move of an organization when the vision in the global forum as the relation of product performance is directly related to the user base. Unlike software, each product or service isis custom based on the first market and needs constant tweaking to deliver the best performance possible. Similarly, various factors like language, useability, environment, etc., vary from place to place; ass localization of a product happens, the alteration of the existing successful product can be a great strategy for the local market to experience the global product with a local touch. It also can improve various factors, such as R&D, operations, business management, etc., when the localization is employed and functioning efficiently (Porter, E. M., 2022).

References

 Dess, G., McNamara, G., Eisner, A., & Lee, S. (2020). Strategic Management Creating Competitive Advantage (10th ed.). McGraw-Hill Education.

Lu, Y. C., Hsiao, C. H., Shih, M. T., Yen-Chieh, W., & Wang, F. J. (2021). Exploring the professional sports team’s localization and home business strategies -Formosa Dreamer case study. Asia Pacific Management Review, 26(3), 120–128. https://doi.org/10.1016/j.apmrv.2020.11.002

Porter, E. M. (2022). Competitive Strategy: Techniques for Analyzing Industries and Competitors Kindle Edition (2nd ed.). Free Press; Illustrated edition (June 1, 1998).

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“In this course, we discussed how several companies, such as Ford (Learning from Mistakes opening incident) and Coca-Cola (Strategy Spotlight 7.4), adopted a localized international strategy.

Competitive Strategy

Interview a manager in an organisation with foreign market exposure and ask the following questions:

(1) what are the main benefits of localising products or services in your industry?

(2) how do you manage the complexity of localising products or services?

(3) do you need to localize other value chain activities (such as HR management)?

Then ask yourself this question: Do the responses indicate that the reorganization is guided by established industry best practices or systematic strategic analysis of the internal and external environment?

Present a report of your interview.