The may deny to work with the company

The
term multinational enterprises means that the companies which operate on an international
level. There are many definitions which give an idea of what truly are the
global enterprises and one of them is basically is by how much sale the company
did globally, which is said to be around, at least 30% of its sales in each of at
least three different continental markets. So, a company where 70% of their
sales are done in Asian continent would not be considered a global or
multinational enterprise even though they might have significant operations in
more than one country, but one where 30% of sales are from each of Asia, Africa
and Europe would be considered a multinational enterprise .To have a certain
idea of multinational enterprise here are some companies-

·      McKinsey,
Unilever

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·       Wipro

 

In a study by
Proffesor Michael E Porter on five competive ways to go multinational , he says
that there are five key points:

 

1.   
Potential
Entrants –

 

a firm which wants to
enter the global market in the right conditions, in the prosepective of
marketing. This potential can be turned into actual results when an
existing enterprise or firm can make an above average profit or above the
normal profit  then it can be called a
potential entrant. In case of upcoming firms we can define it by if the
enterprise potentially enters the market and is conquering the market by
defeating the barriers of entry.

 

2.  
Suppliers –

The
bargaining power of suppliers is also described as the input in market.
Suppliers of materials, labour, services and human resourses are the are the
key for the enterprise when there are few alternatives. Suppliers may deny to
work with the company  or charge
excessively high prices for unique resources. Potential factors are:

·     
Supplier
switching costs relative to firm conflicting cost

·     
Impact
of inputs on cost and differentiation

·     
Presence
of substitute inputs

·     
Strength
of distribution channel

 

 

3.    Buyers –

The bargaining power of buyers is also described as the market
of quantity of goods or services produced in a given time period, by a
firm, industry,: the
ability of customers to put the company  under
pressure, which also affects the customer’s sensitivity to price changes. The
enterprises can technically handle the pressure adopted by the buyers by implementing
certain measures. The buyers will be more dominant if they have a certain
options for the same products, and where as the pressure decreases if there are
less alternatives or rivals for the company.

4. Substitute
products –

when we have a look in a given enterprise, the denoting factors which
effect the threat of substitutes may not apply. But some, if not many,
certainly will. And of the factors which apply, some may indicate a very high
threat of substitute products and some may not be a bigger threat for the
enterprise. Therefore, it is necessary to consider the analysis and the
particular circumstances of the given company and enterprise when using these
data to evaluate the competitive structure and profit potential of a market,
Mr. michael E. Porter described the high risks by:

·      Substitute product is cheaper than the product given
by the company.

·      Substitute product is having a better or equal quality
than the product given.

·      Substitute performance is equal or superior to
industry product performance.

 

5.    Rivalry
amongst existing firms –

The rivals are the most important factor for a company
to look into there is only two things the rivals or competetors will do to an
enterprise and that is to motivate them or perform better than the firm.Competition
amongst industry can affect the industries profit , due to the rivals the
company has to manage the price of their products, the enterprise will also
focus on the quality of the product if the competetors give a better product
ina decent price it would affect the eterprise. Then there is the advertising
part which oftenly affects the company if the advertisements and products are
appealing in the mordern world the costumers will automatically be attracted
towards the product and the services provided by the companies also hold a key
factor. In economics, a monopoly industry structure earns the most profit while
the “perfect competition” industry structure earns the least. An increase in
competitive rivalry among existing firms brings an industry closer to the
theoretical “perfect competition” state.

The
major approach for all industries or enterprises are to go and grow
internationally, where a economically good enterprise go global. Having a
motive to grow from domestic businesses to international enterprises and
improves sales and build brand reputation.These businesses will have just one
headquater where they opereate from but eventually they will have thei set up
in different countries as well as the production to make the business and make
it even more approachable, by doing so they cover many expenses like import and
export charges, labour sourses, raw material’s availability, tax differences.There
are various factors why the firms go international. These firms seeking for an
opportunity to explore International markets have to have a look on many
decisions as these markets involve high risk and uncertainties. The three basic
decisions that a company contemplates before expanding into the foreign markets
include the decision as to which market to step into. Another important issue
is to understand the political and economic issues that eventually affect the
attractiveness of a foreign market. It is also vital to lookout for factors
such as the market size with respect to the demographics, the purchasing power
of the consumers and the expected growth of the country in the future. Time of
entry into these markets plays a key role, for example it may not be practical
to expand or enter new markets during times of recession and vice versa during
periods of economic boom. Lastly, the multinational enterprise has to consider
the mode of entry besides deciding on whether to enter the market on a large
scale or a small scale basis. Not many firms have the resources to enter a
particular foreign market on a large scale. Firms that are established in large
scale in their home country prefer to enter at a small scale into other nations
which enable them to build brand reputation later on.

Here I would light this argument
by giving an example of the Crumbs Bake Shop which was launched in the year
2003, by the year 2010 it was rated amongst the fastest growing businesses and
by that time the Crumbs had a standing of approximately sixty six billion
dollars and each share was about 13$. The shares then in the year 2014
drastically decreased and came down to 0.15$ and now they are just left with
some outlets, so when the company was doing well and then got bankrupt the one
and only reason for both was the “CUPCAKES”.As we know the cupcakes were
upcoming trend during that time and Crumbs expanded their business by opening
different outlets at different places but did not  expand their products except the cupcakes and
the craze of cupcakes declined very soon as these cupcakes are the treat and is
not a day to day need .

What
can we learn from them?

 

Not a lot of people will have craze for
cupcakes for a long time .The Crumbs could have expanded the number of items in
their outlets and which should be a day to day need or which could have been
consumed not as a treat, they could have expanded their bakery and should have
added some products like coffee, rolls or even sandwiches. The Crumbs did not
even focus on their planning as they till date have many outlets but they just
offer deliveries in the NEW YORK and even though they do not take the orders
online. These simple tricks of engaging more products and getting some services
like delivery could have given great results and the company could have made
profit or could had even managed to get the cost of maintenance and other
expenses.

 

CONCLUSION –

 

There are many ways an enterprise can go international and going
multinational is not a being deal but if a company does not properly plan their
strategies can somehow fail to grow properly. “For me, the most fun is change or growth. There are definitely
elements of both that I like. Launching a business is kind of like a motorboat:
You can go very quickly and turn fast.” Said
by the CEO of Zappos.com –TONY HSIEH ,is perfectly suitable for this sitiuation
.The key factors which motivates an enterprise to go multinational are mainly
for making more profit, the demands of customers, labour and
transportation  and to an extend the
rivals which somehow motivates each and every firm to go internatinal.