International Business

international business

I know there are cultural and institutional factors needed to be considered but actually I only put them in an inferior position when considering an entry mode. From this article I know that cultural and institutional problems are quite complicate and it is time-consuming for the foreign companies to manage them successfully.

For the selection of foreign markets, I focused a lot on the host market size and its potential growth. If the foreign country meets these standards, I thought it would be worth to invest, but I neglected the impact of culture and institution which form the whole macroeconomic environment. I acquired from this article that firms prefer to enter markets with similar cultures because they understand better consumers’ needs and thus take fewer risks. And I acquired the knowledge that one country’s unique culture could influence customers’ behavior which is helpful for a foreign company to design its international product strategy.

I’ve re-identified and considered the choices of entry mode from a cultural and institutional perspective. National culture and institutions may have an interaction effect on the modes chosen to enter international markets. Take strategic alliance as an example, alliances allow foreign and local parties to share the risks and costs of entering new international markets. To decrease the potential risks and uncertainties caused by limited knowledge about host country’s culture and regulation, it is common to build an alliance with a local firm to gain access to local knowledge, distribution channels, and customers’ aesthetic value. Foreign company’s strategies, such as management, distribution method, advertisement may not fully suitable the local environment. It will exhaust a lot of financial and human resources to get valuable information about the market when the company wants to operate independently. But if the foreign company finds a local partner, these concerning problems will mostly disappear. They can be complementary and thus contribute positively to alliance performance, such as providing linkages to the government.

Another example is acquisition & merger. When a company uses this mode to enter a new international market, it is acquiring knowledge about the host country and its markets. How could multinationals handle well the merged or acquired company? I think very essential point is that they should integrate and internalize prudently the transferred knowledge. Cultural and institutional factors pose barriers on knowledge transfer. And different culture and institution background cannot be changed in a short time.

More consideration as a manager

I have learned a lot from this article, not only the above referred, but also some other experience I should pay attention to as a future manager working in an international company.

Firstly, I should strengthen my conscious on importance of culture, institution. Secondly, before I make a decision on which foreign market to be chosen, I will analysis whether the culture and institution environment is favorable. I shouldn’t only keep an eye on the foreign market’s potential growth in this industry. For