Multinational Research Paper
Table of Contents
- Question One
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- Question 2
- External Factors
- Internal Factors
- Business Model
- Financial Strategy
- Market Strategy
- Building a Global Business Strategy
- Using Motivators
- Using Structures
- Question 3
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Increased globalization made possible by advancements in transport systems and developments in information and communications technology has created an international market by breaking down traditional physical barriers. The internet especially has escalated global communication resulting in intense competition in the business world as firms aim to gain a share of the international market.
Best Buy, a company that deals with electronics was founded in 1983. The company is among the 100 Fortune companies with a total worth of $ 50 billion and $ 1.6 billion, in-store, online and mobile visitors. The company has subsidiaries in the United States, Mexico and Canada. The company offers five categories of family brands; the five star, future shop, magnolia audio video, pacific sales and the Carphone warehouse. The company has more than 160, 000 employees worldwide and is the 11th largest online retailer and the 4th favorite retailer in the world. The company is heavily reliant on credit cards in its online business (Best Buy, 2012). The company by venturing into China would be required to make some fundamental changes to its business operations. According to a report by APCO Worldwide (2010), China’s domestic market for electronics such as home appliances is strong. Though over 800 million people live in rural china the divide between rural and urban populations are shrinking as rural areas embracing development. The high population in China would require the establishment of numerous stores which would require heavy capital investments. The vastness of the country would also necessitate strategic changes in Best Buy supply chain in order to effectively serve the market. The company would also have to strategically establish a niche market as the Chinese electronics market is saturated with both local and global electronics manufacturers, especially in Shenzhen and Pearl River Delta where companies such as Gree, Midea, Galanz, TCl, Canon, Sony, Dell, Apple and Asus have established themselves. The Chinese government promotes technologies that facilitate energy conservation and emissions reduction. Electronic manufacturers have thus to promote high efficiency and low carbon products (APCO Worldwide, 2010). This may necessitate Best Buy to evaluate its product portfolio and determine the ones which meet such environmental concerns and investments in electronic waste management. These environmental concerns would also be incorporated in the supply chain network to reduce carbon footprints.
The Chinese government adopts various methods of restricting access to the internet by marking a division between global cyber space and the domestic cyberspace through a virtual firewall which acts as the largest filter and blocking system globally. The government has only approved nine agencies to establish an internet interconnecting network and license the operation of internet service providers. The nine networks are further required to go through international gateways controlled by the Ministry of Information Industry. The government further restrict individual direct international connection and strictly controls primary entry points and access to Chinese cyberspace (Cheung, 2006). Best Buy may have to restructure its global online portal and establish a domestic portal for use within the chines or negotiate with the Chinese government on use of the online business model. This compounded with the fact the 800 million Chinese people live in the rural may lack an internet connection may necessitate a change in online retailing.
Best Buy by making changes in its supply chain or outsourcing the supply function to established logistics firms within China and negotiating cyberfreedom/licences or structuring a domestic portal for use within china would enhance its profitability. Theis profitability would be supported by the managerial knowledge and skills adopted from other countries such as Canada and Mexico, the quality of its products, strategic partnership with manufacturers and the rising demand for electronic appliances in China.
First Solar Inc manufactures and sells solar modules with an advanced film semiconductor technology, designs, constructs and sells photovoltaic (PV) solar power systems. The company had in 2009 recorder over $ 2.1 billion in revenue and over $ 640 million in 2009 making it the low cost leader in the Photovoltaic Industry. The company prides this growth of strong markets, leading technology, strategic business models and financial capabilities.
First solar operaes in the semiconductor-specialized industry, competes with numerous firms in the solar PV market, solar energy market and fossil energy providers. The global solar energy market grows at an annual growth rate of 50%. Firms are attracted to the industry by government subsidies, feed in tariffs, renewable portfolio standards and the high industry growth rate. This and contraction of demand has increased competition since 2010. Competition from the far east was further fueled by the commitment of the Chinese government to solar power and domestic wind energy. Holding a mere13% market share stiff competition threaten First Solar Inc. The major First Solar Inc competitors are module manufacturers such as Suntech, Sharp, Yingli and QCells. Upstarts such as Solyndra and Nanosolar could form formidable competition.
The company has customers spread across Europe in Germany, Spain and Italy. The company holds established markets in China and USA. The company’s major placements and customers are placed in Europe and generates about 90% of the company’s revenues. Germany and Spain are especially critical to the company’s success. However, changes within these subsidy markets such as increased solar power un-sustainability within Spain, increased degression rates in Germany, complex subsidy’s in the USA and the wind industry in China threaten First Solar market leadership in the regions.
First Solar Inc to achieve low costs adopts use of moderate efficiency solar cells. The company uses CdTe thin film technology to make its solar cells as opposed to monocrystalline silicon cells. Though this technology raises toxicity concerns, the technology is well suited for large scale photovoltaic deployment as it provides low cost/watt at the module, system, manufacturing capacity and fast energy payback time. By satisfying these criteria, the technology facilitates the cost effectiveness of electricity production through good low cost conversion efficiency and low capital costs per watt production. However, the technology raises risks as its future success is not assured and emerging technologies such as c-Si solar cells which have the potential to outdo CdTe (Hallmon, Siegel, Burgelman, 2010).
The company initially adopted a narrow value chain involving cell and module manufacturing which provided the company specialization and scale benefits. The company vertically integrated into the US through downstream acquisitions such as Turner and OptiSolar aimed at catalyzing the US solar market. Downstream integration provides a competitive advantage as adopted activities such as utilities provide higher margin sales channels for the company’s modules. Integration assists the company to avoid marginalization issues and conflicts in the solar power industry. Cognizant (2012), argues that an integrated model incorporating downstream and upstream activities strengthens a firm’s operating model by facilitating enhanced and tight cost control and risk minimization.
First Solar Inc financial strategy aligns the company with the underlying business growth drivers and protects the business from volatile conditions surrounding start up technology companies. The strategy limits leverage or debts by emphasizing on carrying leverages that stress the business case and still maintain excellent credit ratings. The company’s projects are funded through 50/50 equity capital and cash flow from operations. Financing activities are currently related to project development, construction and term financing used to leverage the company’s investments to achieve lower rates on non-recourse debts (Hallmon, Siegel, Burgelman, 2010).
First Solar Inc relied on subsidies to sell its modules. This enabled the establishment of markets in Germany, Spain and France. The subsidy markets serve as the foundation for shifting operations to markets sustainable markets that support PV solar demand such as the US. Though the strategy contravened those of competitors it enabled the company to expand.
Building a Global Business Strategy
In building a global strategy, the central challenge is striking a balance between economies of scale and responsiveness in local conditions. The main goal of a global strategy is to manage the differences arising at border which can be achieved through the Adaptation, Aggregation, Arbitrage (AAA). Adaptation boosts revvenues and market share by adapting a firm’s products/services to the local context. Under this strategy First Solar Inc, should align its products with the changes occurring in its major markets in Europe. Aggregation delivers economies of scale by creating regional and global operations. Under aggregation, products are standardized and activities grouped together under development, production and marketing. First Solar Inc could group its market into regions and develop products that best serves the aggregated markets. Arbitrage involves exploitation of the differences between national or regional markets by placing parts of the supply chain in different regions. First Solar Inc, under this strategy would produce PVs its products in one region and supply the products to other regions (Verdin & Heck, 2007).
Under the Homebase strategy organizations locate their research and development and manufacturing activities in the country of origin. By adopting this strategy, First Solar Inc, would have to concentrate its research and manufacturing activities in the US. Under portfolio strategy, the company would establish operations outside the US. The regional operations would however be answerable to the central business in the US. The Hub strategy builds regional bases that provide shared resources and services to country operations. Under the strategy, First solar Inc would be required to build various operations in the countries it operates. The platform strategy reduces the number of basic products offered worldwide. Under the strategy, first Solar Inc, would concentrate on its core business of building solar modules. The Mandate strategy provides regions with the mandate to supply a firm’s products or play a firm’s entire role. This can be achieved by First Solar Inc through licensing of other cell module producers in the markets its yet to venture (Ghemawat, 2005).
Best Buy operates retail stores and websites under the brand names, Best Buy, Five Star, Future Shop, Geek Squad, Magnolia Audio Video, Pacific Sales Kitchen, Bath Centers and Speakeasy. Through the different brands Best buy has 6 different revenue categories; consumer electronics, home office, entertainment software, appliances, services and others. The company is divided into two segments the domestic segment and the international segment. The company in order to provide its customers with quality products establishes strong partnership with name brand manufacturers such as Sony, Hwelett-Packard, Samsung, Apple and Toshiba. These suppliers’ supply products to Best Buy stores within and without the home country. The retail part of the value chain is made up of partnerships with vendors, purchasing of goods, managing and distributing inventory, operating stores and marketing and selling products. The company has over 357 stores in US. The international market is made up of China, Europe and Canada. In Canada the company owns 182 stores. The company has cut the inventory held at the stores in order to reduce inventory costs. The online supply portals are essential in driving growth in the company (Raimo et al, 2009).
The technology business environment is very competitive as such emphasis on quality and knowledge on emerging trends is essential in achieving and sustaining a competitive advantage. Best Buy has strong competitors such as Wal-Mart among others would require efficiency and strong customer service. To maintain and efficiently run the global portfolio, the company can maintain its operations in the home country and sell its products through its online portals. By adopting such a model, the company would have to outsource some of their supply chain activities to companies in other countries or international companies such as DHL that already have established supply chain networks to supply goods in the international markets. Though outsourcing would reduce costs, provide the company with an already established supply network and enable the company to focus on other business activities, it may lead to loss of strategic advantage and create a dysfunctional reliance on the suppliers (Pearlson & Saunders, 2010).
The company rather than outsourcing its supply chain activities can adopt an offshoring strategy. This strategy would be driven by the need to create new markets, achieve efficiency and gain strategic assets. This can be done through a franchise system or building its own stores in distant countries. The company would then supply these stores or commission the manufacturers to supply the stores with quality products. The stores would then supply the products to consumers.