Internationalisation is the process of expanding the activities of the company in the international market for gaining competitive advantage in such an era of global competitive market and become a reputed brand cross the globe (Hitt et al., 2016), Buckley and Ghauri, 2015). The main purpose of this assignment is to analyse the existing risks of internationalisation for the brand Global Furniture Ltd for identifying an appropriate strategy for exporting and importing so that the brand can expand their services across the globe. This assignment provides a scope to analyse whether exporting is the right strategy for the firm Global Furniture Ltd or not. Through effective analysis, it is possible to understand the right strategy of the brand through which they can internationalise the business successfully to a new international place. After identifying the right strategy, it is also important to understand the impacts of internet on the export market strategy and recommend some suitable payment methods through which the brand can export their products and provides efficient services to the customers worldwide (Regner and Zander, 2014). In this regard, it is also essential to suggest effective internationalisation strategies for the brand so that they can place it in new international place and gain competitive advantage over other competitive brands in the market.
There are several risks for the small business firms such as Global Furniture Ltd for expanding the brand in new international market. Due to the risk factors, the small enterprises sometimes fail to adopt the right expansion strategy for expanding the brand in the new market (Musso and Francioni, 2014; O’Callaghan, 2016). The risk factors for the organisation Global Furniture Ltd can be evaluated below:
There are mainly four risks for which the brand may suffer in expanding their business activities in new market place such as commercial risk, cross-cultural risk, currency risk and country risk (Brush, 2015). The risks for the organisation Global Furniture can be described further:
Figure 1: Risks factors during internationalisation
(Source: Nauwelaerts and Chakri, 2016)
In such an era of globalisation, the organisations face commercial risk in expanding their business activities in a new market place. Commercial risk may arise due to inefficient partners of expanding the business and operational problems. If the partners of doing business in a new international market are not efficient, it will be difficult for the company to conduct their operations efficiently by understanding the internal and external business environment in the country (Verbeke, 2013). Time to entry and gaining market information are important for the small size firms such as Global Furniture Ltd so that it can internationalize the brand successfully.
Cross cultural risk arises due to cultural differences in the country. It is important for the brand to acknowledge the actual needs and preferences of the customers in the local market for the quality furniture. Without understanding their requirements, it will be difficult for the brand Global Furniture Ltd to deliver quality furniture and efficient services as per their preferences. In addition to these, the brand also faces the issues related to human resource management due to differences in culture of the employees of the company (Ge, and Wang, 2013). Therefore, cross cultural barriers is another risk that may hamper the business activities of the small entrepreneurs (Brush et al., 2015).
Currency risk is another important risk that may hamper the profitability of the brand in conducting their business activities in a new market place. Currency fluctuation plays a crucial role in making profit of the brand as devaluation of the money indicates that the company may incur loss in doing business in the market. In this regard, currency fluctuation also hampers the asset and liability of the firm which will be risky for the brand to secure sustainable development in near future (Blackburn et al., 2013).
It is risky for the small entrepreneurs to acknowledge the factors that have crucial impacts on the business activities of the country during expansion of the brand in a new market place. The firms face the country risk due to government intervention, legal policies, legislative rules, economic factors, environmental practices in the country as well as social factors (Deshpande et al., 2013). Due to lack of market information, the brand sometimes lacks to understand the market of a particular country and identify the external factors that may hamper successful brand expansion in that country. It will be disadvantageous for the brand to expand their activities without knowing social needs and preferences, legal framework of conducting business activities, political legislation and environmental policies in the country (Cavusgil et al., 2014).
Due to these factors, the brands may face the risks of expanding their business activities in a new international market (Ciravegna et al., 2014). In this regard, it is important for the company Global Furniture Ltd to adopt effective internationalisation strategy and choose efficient partners from whom the brand can gain market information successfully (Cavusgil and Knight, 2015).
There are several internationalisation strategies through which the companies can enter into a new international market for widening scope of conducting business and gaining competitive advantage across the world (Hitt et al., 2016). The internationalisation strategies are such as direct exporting, licensing, franchising, joint venture, partnership business, Greenfield investment and turnkey projects. Through these strategies, the company Global Furniture Ltd can enhance global competition and share risks over a large market. In this regard, direct exporting is an effective strategy for selling the organisational products directly to the local customers of the country (Verbeke, 2013).