Global Business Expansion and Strategic Complexities

This assignment involves analyzing the role of global market strategy for Kenyan SMEs, coordinate a global expansion, purpose of an international joint venture, and interaction post-termination. It also covers risks and benefits of international expansion through joint ventures, factors affecting knowledge transfer in construction joint ventures, institutional and resource configurations associated with different SME foreign market entry modes, success factors influencing the location of international firms, partner selection in international joint ventures, collectivist values for conflict management, and substitutes of relational embeddedness in cross-border partner selection. The assignment requires identifying strategic complexities associated with operating in a global environment and understanding top risks for international businesses.

Individual Academic Report
1

Essay
Nowadays international joint ventures are seen quite often. Many organizations are
showing interest in becoming joint ventures whether it is within a nation or with another
organization overseas. Organizations consider forming joint ventures with other
organization that has similar product lines for getting different kinds of advantages as
well as for expansion of their businesses. There are a handful of reasons for
organizations to grow their business internationally. Such as, they can enter different
markets; share the risk, financial restrictions are minimized, etc. The capacity of joint
ventures mostly depends on the similarity of these organizations. A contract of joint
ventures between two organizations with out of the ordinary characteristics can bring in
a lot of benefits. The objectives of these organizations should be aligned. Otherwise,
there can be an occurrence of one organization profiting over others which can become
a reason for unnecessary conflicts among themselves. The organizations have to be
financially stable for these kinds of businesses since inadequate funds can put the other
party involved at risk. A resemblance in the plan of action should be prioritized. Legal
features of ally countries have to be checked properly and the suitability of the directives
have to complement each other.
When businesses situated in two countries or more than two countries collaborate is
called an international joint venture. Different organizations are taking different
measures for expanding their market. Entering a foreign market and do well regardless
of their differences need structured planning. It is one of the most significant ways of
enlarging a business globally. In this essay, confirmations and analysis of some
scholars regarding international joint ventures and intercontinental augmentation of
businesses will be delivered. There are lots of factors that encourage organizations to
enter the foreign market through international joint ventures. Such as expansion of
business, sharing risk, increased customer base, sharing knowledge, etc. There are
also some factors to be considered before signing up for an international joint venture
for more profits. The rationality behind using international joint ventures as a way of
entering the foreign market is also discussed here. International joint ventures are not
all about advantages. Several disadvantages have to be considered properly.
2

Otherwise, the joint venture will be a huge failure and both parties involved will have to
pay a fortune.
Now, to analyse the role of international joint ventures for the successful pursuit
into foreign markets, several pieces of research and conclusions reached by different
scholars will be explored. According to a research conducted by Park and Harris in
2014, for constructing receptive capacity, international joint ventures require proper
micro-foundations separately; procedure and organizational levels, and reasonable
interrelations between each other, particularly by making experienced and properly
trained international joint ventures managers learn who are given organizational and
process independence to spend on learning. For example, we can analyse Samsung-
Tesco international joint ventures that properly learned retail operation from one partner
and put it in the South Korean surroundings known to the other party (Park and Harris,
2014). In the research conducted by Watanabe et al., it was shown that due to Uber’s
strategy of using ICT- driven disruptive business model, it succeeded in international
augmentation and now, Uber is used over 479 cities in more than 75 different countries
globally. It was also recommended that the implementation of ICT- driven disruptive
business models not only in the transportation sector but also in other sections as well
(Watanabe et al, 2017). Businesses planning of entering the international market have
to focus on international market tactics, market analysis aimed at acquiring foreign
market intellect, innovation, and automation, conversion of product, adjusting services,
cooperative deal, an exhaustive vision so that they can succeed in the global market
which was discussed in the research directed by Osano in 2019. He also added the
considerable international market tactics variables include the integration of marketing
plans, globally publicizing, cut-throat pricing tactics, outer consultative services, quality
of the products, limitation regarding trade, foreign market intellects for finding out the
proper market for the business, international rivalry, distribution channels, expenditure
opportunities, cooperation with large organizations or company, etc.
According to Bondeson and Eliasson in 2019, some farms focus on supervising and
correlating between the restricted access to the firm’s resources as well as the speed
needed for their organization throughout the globalization process. Also, some activities
3

should be avoided since these don’t focus on the big picture and responsible for slowing
down the globalization process. Informal liaison procedures are more useful than the
formal ones in this process (Bondeson and Eliasson, 2019). International joint ventures
are a well-known way of getting into and utilize a new market and make many
researchers intrigued to analyse different stages and activities undertaken by
international joint ventures (Parameswar, Dhir, and Ongsakul, 2018). According to
Nippa and Reuer, an international joint venture is a sort of international strategic
alliance that is very important and it is an attractive topic for intellectuals for doing
researches (2019). They also stated that several experimentation scopes would help
both international joint ventures and intimately connected literature and subjects,
hypothesizes of intercontinental organizations, etc. Quick international economic growth
and relaxation have expanded the stimulations and opportunities for the organization for
their entrance into the international joint venture contracts. It was also verified from the
research that there are different effects of cultural differences among different aspects
as well as the disparity in the design of interrelation among cultural differences. Also,
the perpetuity of international joint ventures depends on their age (Tower, Hewett, and
Fenik, 2019). There are several reasons for an organization to be interested in
international joint ventures. Those are lower production cost, beneficial financial
conversion rate, fewer taxes, etc. But several disadvantages have to be considered.
Through an appropriate constructed agreement can lessen these risks (Dinu, 2016).
According to Khamaksorn, Kurul, and Tah in 2017, international joint ventures among
intercontinental organizations among developed and developing countries are
contemplated as a successful approach for getting all kinds of benefits in the
internationalized business world. Transferring knowledge is a significant procedure
where an organization learns different tactics and measures implemented by another
organization. An organization’s efficacy in studying and transfer of knowledge is
dependent on different factors that ease the ability of an organization to obtain and
utilize knowledge. Knowledge coordinators, different techniques of transferring
knowledge and tools, etc. are included in these.
According to Oparaocha in 2015, organizational network connections have a favourable
influence on the globalization process of SMEs. But the importance of this influence is
4

uninterrupted and interrelated in the separate phases of the globalization procedure.
The partner preference is a principal factor for becoming successful in setting up a joint
venture because the high failure rate of connections between organizations is often
caused by unsuitable partners without thorough due diligence and the prospects for
relationship difficulties. Reliance, dedication, and identical goals are necessary for the
association with the partner in international joint ventures. In a research conducted by
Lindsay, Rod, and Ashill in 2017, in the case of SME globalization, there are several
funding- organizational layout which are related to foreign market entrance procedure.
According to Al Qur’an in 2020, several significant factors play important parts in the
preference of an advantageous international market. Those are, the understanding of
the prospective international market, international business professionalism of the
preferred organization’s manager, internal and external discussions with international
business leaders, and recognition of reliable and internationally knowledgeable
managers for the international activities. According to Wong et al., 2018, socialistic
principles support collaborative dispute management that in turn benefits joint venture
knowledge and performance. On the other hand, individualistic principles promoted
competitive dispute management which aggravates international joint venture’s
performance. Future analysis should concentrate on the development and extension of
hypothesizes with regards to the strategy aspect. Also, the connection between the
principle entry mode components has to be resolved (Shen, Puig, and Paul, 2017).
According to Meuleman et al., collaborating with previous business partners is a well-
known strategy of joint ventures but not necessarily the best one during investing in
overseas countries. That’s why an organization must have proper organizational level,
legal frameworks, institutional orientation so that it eases cross-national partnership. In
research conducted by Ge et al., they stated that for acquiring a particular performance
target, advancing absorptive dimensions and the selection of the most appropriate
partner is necessary.
Currently, intercontinental marketing has become a common expanding movement
where this development is being influenced through international joint ventures which
help two business organizations to collaborate and attain competitive gain. Making a big
expenditure and achieving competitive advantage, wastes a lot of time and bears a risk.
5

That’s why, by finding out a worthy venture which is operating in the identical market in
a foreign country, business organizations attempt to enter these foreign markets.
Intending to make a profit in marketing, share proficiency, skills and intellect are the
main causes of entering an international market. To overcome the monopoly in the
international market, globalization is an effective approach. The joint venture of Sony
Corporation and Ericsson can be one of the examples. The world’s third-biggest
producer of mobile phones was Ericsson in 2002. When the profit of Ericson suddenly
decreased, it had to cut down the labour. Afterward, it collaborated with Sony
Corporation and became a huge success.
Competition with other organizations is not necessarily the key purpose of a joint
venture. Sometimes augmentation and the ability to produce diversified products can be
an influencer in the expansion. To conquer the restriction of entrance into foreign
markets as well as stimulate separate organizations to join forces and set up joint
ventures. Sometimes to mitigate the debate and to gain assistance, there can be an
occurrence of amalgamation with dealers also which is called vertical alliance which is
an upstream process. Associating with distributors and customers is the vertical alliance
which is a downstream process. Reduction of unpredictability, threats, and costs is
feasible with joint ventures. Funds and wealth are allocated among the partners who aid
in creating utility. The value of an organization increases with its size. International joint
ventures assist to speed up the business and the operational range increases as well.
There are several complexities of working in the global market. Those are 1.
Dissimilarities in culture. Complexity appears from subcultural perspectives because of
different lifestyles, different demographics in the involved countries, likings, and disliking
of consumers, religious faith, and knowledge of corporate social responsibilities. But
nowadays cultural differences are decreasing since these values are not restrained
within a single country anymore. But day by day it is becoming hard to decide whether
products or services should be personalized or be made consistent as a consequence
of varieties of consumer fondness within a specific cultural group. 2. Country. Since the
activities of international joint ventures are interrelated with organizations from different
countries, it becomes tough for each of them while analysing each other’s market.
6

That’s why these organizations should form their strategies aligned with each other for
the global expansion but act locally to reach each of their goals. 3. Currency risk. In an
international joint venture, foreign currency exchange risk is always there. This situation
takes place when the value of financing shifts due to moderations in currency
interchanges rates. Also, changes in the interest rate and the intensity of inflation are
alarming issues in international joint ventures.
There are several reasons for the trades between nations. The instant reason for
international trade is the existing dissimilarities in the prices of products and services
among the countries. This dissimilarity appears due to the variation in supply
circumstances or due to the variation of demand circumstances or due to some merger
of both. There are several international trade theories out there. But the significant ones
are Absolute advantage by Adam Smith and Comparative advantage by David Ricardo
Absolute advantage theory states that when one country has an absolute advantage on
top of another country in a particular sector and the country also has an absolute
advantage on top of the first country in another particular sector, both countries can gain
by exchanging the products they have absolute advantage on with each other. On the
other hand, Comparative advantage theory states that when a large country has an
absolute advantage in both sectors over a poor country, then the poor country focuses
on the sector which has a comparatively less absolute disadvantage and focuses on
producing that product and the large company focuses on the sector in which it has
comparatively more absolute advantage. By doing that both of the countries can trade
with each other and gain an advantage.
Some major factors impact the strategic decision of joint ventures. Those are 1.
Political factors. As managers try to cover objectives, in the long run, they have to
consider several political factors since political factors are not constant and vary in
different districts, states, and countries. 2. Economic factors. Economic trends are
dynamic. Due to these uncertainties, interest rates be convenient or inconvenient, the
intensity of inflation can fluctuate from time to time. Employment rates and trade policies
can also be favourable or unfavourable. 3. Cultural factors. Cultures vary with each
other in different groups of people. Since these cultures are not similar, organizations
7

face different kinds of challenges because of their different tastes. 4. Technological
factors. Businesses have to identify whether the other organization works in the market
where they accept technological changes so that the business can be smoothly
operated. Because several places have put barriers on the usage of the internet. 4.
Environmental factors. The environment can be different in different districts, states, and
countries. The businesses should analyse the environment where the other organization
works and align their strategies. Otherwise, it can lead to failure. 5. Legal complications.
There are different laws used in different places. Businesses should conduct proper
researches and create joint ventures with an organization that is situated in a favourable
position and with minimum restrictions of the law.
There are several advantages as well as disadvantages of joint ventures. The
advantages are the opportunities to gain intellect, skills, and technologies are
broadened by developing joint ventures. It will be simple to grasp the nature of the
market through partnership. The organization doesn't need to form long term
commitment since these kinds of agreements are mostly formed on a short term basis.
Expenditure and risks are allocated among the partners where losses and benefits are
equally distributed. Since there are no restraints in allegiance, selection of strategies, it
enables the business partners to operate flexibly without any restrictions. If a partner
wants to stop the joint venture, there is the opportunity of discontinuing the partnership.
The disadvantages are: There is rarely certain and vivid objectives in the joint ventures.
Sometimes elasticity is regulated which might be responsible for the separation of joint
ventures. Equality in liability, involvement by both partners is scarcely seen. Companies
do not agree with each other all the time. Imbalances among funds, wealth, skills are
often seen. Variations in management strategies and organizational culture sometimes
create conflicts that hamper the productivity of the joint venture. When joint ventures are
created, the opportunities to work in various fields become limited. Communication gap
among the partners and lack of trust gets in the way of productivity.
It is more challenging to operate international joint ventures than domestic
ventures. Because to form a joint venture, proper researches must be conducted.
When joint ventures are formed domestically, it is easier to conduct these kinds of
8

extensive researches. In the case of international joint ventures, many issues arise
while conducting these kinds of research. Those are the authenticity of the information,
constraints regarding researches, etc. When organizations need to conduct researches
on international organizations, they find it difficult due to the unavailability of trusted
connections in other countries. That’s why the information they get through research
can be manipulated which can be disadvantageous for any organization. But in the case
of domestic ventures, such occurrences can be avoided. Also, in international joint
ventures, there are constraints regarding culture, technologies, legal frameworks,
acceptance of technologies, economic and currency-related difficulties which are
comparatively less in domestic ventures.
Those who want to enter the international business have to consider four
fundamental decisions. Those are: 1. what products to use. In the case of
internationalization, the selection of an organization based on a product line is
important. If the services provided by both of the organizations do not align with each
other, then the business will not be successful. For example, an apparel company in
one country have to collaborate with another apparel company in another country. If it
collaborates with a company that works with petroleum, it will lead to failure. 2. What
markets we are going to. We have to select the markets based on the product lines.
Like, from the previous example we can state that the apparel company should consider
going into the textile market for better results. 3. Mode of entry. There are several ways
of entering the international business. Those are joint ventures, strategic alliances,
import and export, licensing, franchising, etc. These modes have to be researched
properly and select the best mode which can be beneficial for the organization. 4.
Speed of entry. Depending on the characteristics of business we have to select the
mode of the entrance which is the fastest and more convenient than the others. It will be
beneficial for the optimization of the organization's objectives.
For expanding business operations globally, international augmentation is performed by
the organizations. Many organizations are operating their businesses globally
successfully by using several strategies. Pre globalization strategies are important to
enter the foreign market. But after globalization, post-globalization measures are as
9

important to survive in this competitive business world. One of the renowned ways of
international expansion is an international joint venture. This can be described as an
agreement between two companies located in different countries to share intellect, skills
competence, goodwill, etc. Proper selection of partners is a primary requirement of a
successful international venture. Proficiency, intellect, technical skills, information are
the valuable resources of these kinds of businesses. Even though there are many risks
involved in this process, there are many examples of successful international joint
ventures. So for successfully operating these businesses, proper measures and
strategies have to be made and followed.
References:
Park, J.Y., and Harris, S., 2014. Micro foundations for learning within international joint
ventures. International Business Review, 23(3), pp.490-503.
Watanabe, C., Naveed, K., Neittaanmäki, P., and Fox, B., 2017. The consolidated
challenge to social demand for resilient platforms-Lessons from Uber's global
expansion. Technology in society, 48, pp.33-53.
Osano, H., 2019. The global expansion of SMEs: the role of global market strategy for
Kenyan SMEs. Journal of Innovation and Entrepreneurship, 8(1).
Bondeson, S., and Eliasson, N., 2019. Coordinate a Global Expansion: A study of How
Born Global Firms Control and Coordinate their Internationalisation Process.
Parameswar, N., Dhir, S., and Ongsakul, V., 2018. Purpose of an international joint
venture and interaction post-termination. Journal for Global Business Advancement,
11(6), pp.687-705.
Tower, A.P., Hewett, K. and Fenik, A.P., 2019. The role of the cultural distance across
quintiles of international joint venture longevity. Journal of International Marketing,
27(4), pp.3-21.
Dinu, A.M., 2016. International expansion through joint venture-risks and benefits.
Knowledge Horizons. Economics, 8(1), p.139.
10

Khamaksorn, A., Kurul, E., and Tah, J.H.M., 2017, December. Factors affecting
knowledge transfer in international construction joint venture projects. In Paper
presented at the International Conference on Civil, Architecture and Sustainable
Development.
Oparaocha, G.O., 2015. SMEs and international entrepreneurship: An institutional
network perspective. International Business Review, 24(5), pp.861-873.
Lindsay, V., Rod, M., and Ashill, N., 2017. Institutional and resource configurations
associated with different SME foreign market entry modes. Industrial Marketing
Management, 66, pp.130-144.
Al Qur’an, M., 2020. Success factors influencing the selection of the location of
international firms. Competitiveness Review: An International Business Journal.
Oliveira, S.M., 2017. Partner selection in international joint ventures: A framework for
the analysis of factors relevant to the selection of partners. The Marketing Review,
17(2), pp.199-215.
Wong, A., Wei, L., Wang, X., and Tjosvold, D., 2018. Collectivist values for constructive
conflict management in international joint venture effectiveness. International Journal of
Conflict Management.
Shen, Z., Puig, F., and Paul, J., 2017. Foreign market entry mode research: A review
and research agenda. The International Trade Journal, 31(5), pp.429-456.
Meuleman, M., Jääskeläinen, M., Maula, M.V., and Wright, M., 2017. Venturing into the
unknown with strangers: Substitutes of relational embeddedness in cross-border partner
selection in venture capital syndicates. Journal of Business Venturing, 32(2), pp.131-
144.
Ge, H., Chen, S., and Chen, Y., 2018. International alliance of green hotels to reach
sustainable competitive advantages. Sustainability, 10(2), p.573.
Nippa, M., and Reuer, J., 2019. On the future of international joint venture research.
Journal of International Business Studies, 50(4), pp.555-597.
11

Mannur, H.G., 1983. International economics: theory and policy issues. Vikas.
iQualify UK. 2020. Which Strategic Complexities Are Associated With Operating In A
Global Environment? - I qualify UK. [online] Available at:
<https://www.iqualifyuk.com/library/business-management-section/which-strategic-
complexities-are-associated-with-operating-in-a-global-environment/> [Accessed 1
December 2020].
Investopedia. 2020. Top Risks For International Businesses. [online] Available at:
<https://www.investopedia.com/ask/answers/06/internationalfinancerisks.asp>
[Accessed 1 December 2020].
12