GE has invested so aggressively in foreign expansion because of the potential development that is possible. The United States is a prominent developed country, while other countries are still developing. This gives GE the possibility to expand their business by giving the country new products and opportunities to develop their economy. GE takes advantage of the economic uncertainty of foreign countries to move into the country at a lower cost. For example, when “Asia slipped into an economic crisis GE spent $15 billion acquiring companies in just six months” (International Business, textbook p.37).
With this aggressive investment, the company’s then CEO, Welch, realized that the European Economy had a weak point in the year 1989 to1995 which he took advantage of and invested about $17. 5 billion in European market. With these amounts, half went to the acquisition of 50 new companies. Question No 2:- What is GE trying to achieve by moving some of the headquarters of its global businesses to foreign locations? How might such moves benefit the company? Do these moves Benefit the United States?
Answer:- By GE moving some of its headquarters to foreign countries they are trying to achieve a closer relationship with the people and government of the country. In many cultures like China, it is necessary to have great level of cultural sensitivity in order to be successful. This is very difficult for outsiders to obtain, so by having a local office you can gain this by bringing people of that culture into the company. By getting to know the culture and customs of the country GE would be less likely to make marketing mistakes.
Making a mistake of any size can be disrespectful to the people of the country and cause them to boycott the company’s products. Additionally, the company has had the advantage of increased revenues as a result of the dynamism of the Asian economies making it shift some of its jet engine headquarters to India and China who are the main purchasers of the same. Again, compared to the US market, the Asian market in china and India has huge investments in infrastructure mainly in Airports, Railways and power stations.
With this advantage, analysts have it that by 2012, the company will generate 55 to 60 percent of international business. This is therefore a means of achieving the true multinational or global company image. Other reasons for such relocations are the increase in revenues Through increased sales in the developing economies. These moves will benefit the states Just in the form of newer designs in equipments and with new ideas. Question No3:- What is the goal behind trying to“internationalize”the senior management ranks at GE?
What do you think it means to“internationalize”these ranks? Answer:- The goal in internationalizing senior management ranks at GE is to better understand their markets. This will allow GE to have a greater amount of local knowledge, as well as knowledge of the local culture and language. These both will help tremendously when GE is doing business all over the world. I believe that Internationalize describes the process of integrating foreign culture, traditions, and knowledge into a company in order to give that company a better connection and understanding in order to do business.
Internationalizing the high ranks means hiring country managers from within the country where the company needs to succeed. This means that unlike earlier on when the company only hired Americans for the top ranks in GE Company, internationalization will mean leaving slots in the ranks to be filled by managers from the foreign countries where the company has invested. For instance, in China, GE must leave slots to be filled by Chinese managers to enable the company to work effectively with the government and the local Chinese people.
This is as a way of effectively and efficiently achieving a touch of cultural sensitivity which would have been hard to achieve with the use of outsiders. Question No 4:- What does the GE example tell you about the nature of true global business? Answer: – For a company to achieve the true global image, it is necessary to ensure that they are Working in the closest range with their customers. These would mean evaluating their global market share to establish the locations which have had increasing and promising market trends for their services and products.
After, the company can relocate to their headquarters to those areas just to make sure that they esteem customers have the best of services in terms of quality and satisfaction. To gain a penetration in the relocated offices, the company must ensure that it is working with managers from the locality to give them the sensitivity of culture and win even more market. In other words, shipping products to foreign lands in not just enough, being closest to one’s customer works out best. QUESTION 1: Do you think Wal-Mart could translate its merchandising strategy wholesale to another country and succeed?
If not, why not? ANSWER 1: To date, Wal-Mart has found that in order to appeal to local markets, it must be willing to make some changes in its merchandising strategy. In Mexico for example, Wal-Mart hired local managers to handle its merchandising, and it an effort to better meet the needs of local customers Wal-Mart built smaller stores that people could walk to, and stocked more fresh produce. In China, Wal-Mart changed its packaging of meat and offered live fish because the Chinese prefer fresh meat and fish.
In the countries where Wal-Mart stumbled, Germany and South Korea, Wal-Mart’s discount strategy failed. Consumers in both countries preferred to shop at rival stores that stocked higher quality merchandise. Some students may wonder whether Wal-Mart might have succeeded in these countries had it been willing to stock some higher quality merchandise as well. However, other students may note that doing so would go against the strategy that has proved to be so successful for the company. QUESTION 2: Why do you think Wal-Mart was successful in Mexico?
ANSWER 2: Most students will probably suggest that Wal-Mart’s success in Mexico is linked to the company’s willingness to move in to the market slowly, adapt to local market preferences, and join forces with local retailer, Cifra. After entering the market, Wal-Mart quickly discovered that having a single large store selling large packages would not be successful in Mexico where many people walked to stores and lacked storage space. The company changed hired local managers who understood the market, and allowed the local managers to control the merchandising strategy.
Wal-Mart then worked to change the shopping habits of Mexican consumers to come closer a typical Wal-Mart shopper. By teaming up with the country’s largest retailer, the company was able to benefit from Cifra’s knowledge of the local marketplace. QUESTION 3: Why do you think Wal-Mart failed in South Korea and Germany? What are the differences between these countries, and Mexico? ANSWER 3: Wal-Mart stumbled badly in South Korea and Germany. In both countries, consumers resisted the company’s discount strategy, and chose instead to shop at rival stores that better met their shopping preferences.
Some students may suggest that Wal-Mart’s discount strategy worked better in Mexico because it fit better with consumer preferences. Other students may note that in both South Korea and Germany, Wal-Mart had to convince consumers to leave the competition and shop in its stores, whereas in Mexico, Wal-Mart teamed up with Cifra, a large retailer with a similar product line to the line carried by Wal-Mart. Some students may wonder whether the company might have had more success in Germany and South Korea had it also teamed with local retailers. QUESTION 4: What must Wal-Mart do to succeed in China?
Is it on track? ANSWER 4: In China, Wal-Mart seems to be following a strategy similar to its strategy in Mexico. The company is slowly expanding and is adapting its strategy to meet the needs of Chinese consumers. Wal-Mart has found that the Chinese share many buying behaviors with American consumers – they like the deep discounts offered by Wal-Mart. To ensure its success in the country, Wal-Mart has strayed from its traditional strategy to embrace the notion of unions. This decision has led the company to purchase a stake in China’s Trust-Mart chain, which should allow Wal-Mart to expand even further.
Wal-Mart now considers China its most important growth market. Most students will probably agree that Wal-Mart appears to be on track in the country. QUESTION 5: To what extent can a company like Wal-Mart change the culture of the nation where it is doing business? ANSWER 5: This question will probably generate some debate among students. Some students will probably suggest that Wal-Mart can indeed change the shopping habits, and therefore culture, of a country in which it does business. Students taking this perspective may point to Wal-Mart’s experiences in Mexico as evidence of this phenomenon.
Other students however, may argue that the shopping habits of Mexican consumers were not changed by Wal-Mart per se, but rather by the effects of globalization which allowed companies like Cifra and Wal-Mart to thrive. Students taking this perspective will probably note that China for example, already had successful discount chains like Trust-Mart when Wal-Mart entered the market. Students may further note that in countries like Germany and South Korea where consumers preferred other types of retailers, Wal-Mart was unsuccessful.