Integration-Responsiveness Framework & Transnational Strategy in Global Expansion – Part 1

This article is the first of two-part series on my research and analysis experience with the Integration/Responsiveness framework and the Transnational Strategy in the international business management landscape. The Integration/Responsiveness framework summarizes two basic strategic needs. One is to integrate value chain activities globally and other one is to create products and processes that are responsive to local market needs.

The company used for my research is a hypothetical company called XBdi Inc which is an established firm in providing cloud based business intelligence integration, big data analytic and Information Technology management consulting services to a wide variety of companies domestically in USA and a significant number of firms from other countries as well. The company XBdi offer three types of service offerings such as basic, professional and enterprise in addition to an open version with full features which is more tailored as a marketing tool to get feedback from their customers. The company was seriously considering setting up both Research & Development (Innovation Center) and core engineering teams in one of the emerging economies especially in India because of availability of top-quality talent in addition to other tax incentives. Furthermore, the management would like to develop new market for their existing service offerings in new geographical markets with different pricing model to attract different customers or create new market segments.

While doing research on launching a new market development for XBdi internationally, the following push factors for global integration and local responsiveness have been identified. In analyzing the pressures for global integration and pressures for local responsiveness, a set of 6 domain areas have been identified in each category.

Push Factors for Global Integration and Local Responsiveness

In my market research analysis, I found significant competitive benefits for XBdi to go global. With reduced cost of coordination, increased economies of scale, leveraged bargaining powers, cheaper factor inputs like availability of highly qualified labor resources and arbitrage benefits (use of cheaper factors of inputs in one part of the world to serve a demand in another region), there are direct competitive advantages or indirect cost advantages to the company while maintaining the global brand.

Furthermore, there are significant learning benefits which stem from the coordinated transfer of information, best practices and people across subsidiaries. Such transfer eliminates the costly ‘reinvention of the wheel’ and facilitates the accumulation of experiences and knowledge. With centralized provisioning and delivery model, I see a significant advantage in standardizing and customizing XBdi’s services to meet global customer needs. This will further help them scale their service offerings (also known as dynamic scalability or just-in-time scalability) based on customer demand without downtime. Additionally, the competitive threats in foreign and domestic markets call for the importance of global coordination in order to continuously monitor and respond to such threats. The social media and internet technologies like Facebook and Twitter changed the way how every company in the world especially in the advanced economies interact with their customers. With these powerful and innovative media solutions, the company can advertise their service offerings that transcend national borders.

Additionally, Twitter can expand their reach to customers and business partners by allowing them to engage in conversations with them. The value added is the focus on exchanging ideas and information which could be viewed as customer service and an effective way to extend and enhance their existing communication channels and receive valuable feedback.

While I understand that the company needs to respond to local needs, based on the surveys and customer feedback, I strongly believe that the management can still put together a business strategy around their core cloud based business intelligence and analytics service offerings without risking the benefit of globally integrated solutions since they are centrally provisioned as an on-demand service.  However, I have identified a number of push factors for local responsiveness that are mentioned above. XBdi’s  services are being largely utilized outside the country of origin than ever before as globalization brings about greater convergence in terms of consumer tastes and preferences. Conversely, an opposite force of divergence at work where they have to adapt corporate and business strategies, marketing and sales channels customized to local domestic markets.

Responsiveness to customers’ demands and customization are other factors that defeat standardization. However, this may not pose a problem for XBdi’s tailor-made services sector in which a local presence and a fast reaction to customer’s requirements are needed for competitive success. They also have to respond to the host country’s regulatory changes such as pricing decisions and manage risks associated with meeting legal requirements of doing business in a foreign country. However, with the inception of World Trade Organization, multilateral agreements in addition to lax foreign exchange and capital controls, governments are leaning towards a more open legislative landscape that favor globalization.

For part 2 of this article, please click here

Advertisements

About Vigil
Information Technology and Management Consultant

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: