Strategic Management Assignment Analysing Unique Challenges Of Global Strategy
Task: Prepare a strategic management assignment identifying and analysing the unique challenges of international strategic management. Use company examples to illustrate these challenges in practice.
The concept of international strategic management discussed within the strategic management assignment refers to the development of new strategies for permitting the organization to expand abroad and to compete internationally. It ensures that an organisation can enter within a specific market efficiently and is also able to operate for the long term. International strategic planning is mainly utilized for the procedure of developing a particular international strategy. It mainly determines the strategies for international operations partnership and allows the achievement of goals and business objectives. Companies such as John Lewis and Tesco Plc operating within the UK are highly focused on international expansion to gain high market value. Similarly, brands such as Walmart operate in different markets but requires proper strategic actions for dealing with various situations and conditions in different countries. This study deals with the presentation of various international strategic management challenges for global operations and the ways by which they can be managed.
Challenges of international strategic management
The various challenges of International strategic management have been stated as follows:
Currency rates: Currency rate fluctuation is one of the biggest challenges to be considered in international strategic management, especially for brands operating in countries with different political situations. Monopoly and duopoly cultures contribute to significant differences in currency management and transactions (Erkoc et al. 2018). Specifically, countries such as China and Bhutan that operate on monarchical rule have different financial regulations than that of other countries such as the UK and USA which leads to issues with proper currency management. Therefore, there is a need for constant monitoring of the exchange rates of currencies as a sudden rise or fall in values could lead to significant losses for international businesses (Lewis, et al, 2019). However, small fluctuations do not have any impact and the development of the Free Trade Agreement (FTA) further decreases impacts on costs.
Communication and cultural differences: One of the major international business challenges include good communication and differences in cultures. Brands operating in different countries need to be understanding of the differences in cultures between the home country and the other countries in which it operates (Watson IV et al. 2018). However, it seems that communicating across the culture seems to be quite challenging, especially for organisations such as John Lewis due to a lack of presence of the brand in foreign markets. A lack of entry into the foreign market can affect the ability of the brand to track cultural differences and customer preferences and yet entry into the market without strategic actions can lead to higher opportunities for brand failure.
Political risks: Another important challenge in international strategic management are the political risks that cause uncertainty and instability. Here the chosen company is John Lewis, a British company that focuses on the provision of high-quality retail services such as home improvement products, lifestyle support products, garments and more (johnlewispartnership.co.uk, 2022). Some of the problems are unstable policies and practices of corruption (Coombs and Laufer, 2018). Moreover, if all of a sudden, there is a change in the current government, new rules and regulations will be implemented in place. Other than that, John Lewis loves to put all their updates on Facebook but several countries don't use any social media. It creates problems.
Environmental issues: It seems that sustainability is high on the agenda of several major global corporations. This type of problem is becoming an environmental risk and for this climate change is the main cause. Various business operations in companies involved in production often lead to high levels of pollution which can affect air, land as well as water. The increased Carbon Emissions from automobile factories lead to air pollution, radioactive sludge development from chemical plants affects water bodies and increased production and use of plastic bottles and the lack of ability for their disposal leads to land pollution (Zhou et al. 2018). The United Nations has presented 17 sustainable developmentsgoals and both environmental protection and the need for innovation have been stated as major goals to be achieved (Tsalis et al. 2020).
International accounting: Tax compliance is one of the major challenges to be proven in international strategic management when it comes to brands operating in different countries. KFC is well-known for the provision of high-quality food services and operates in a large number of countries worldwide. However, the brand has to be compliant with the levels of taxation that need to be provided for the product and service provisions (Mora and Sirvent, 2019). =
In order to ensure high brand growth and efficient expansion, the implementation of situational analysis is a highly important factor (Cortes, et al, 2019). In order to conduct this situational analysis, the example of John Lewis has been taken into account to evaluate Strengths, Weaknesses, Opportunities and Threats. This is followed by an external analysis of the brand using the PESTLE analysis model.
Internal and external analysis for strategic actions
SWOT Analysis for Internal Evaluation
The SWOT Analysis of John Lewis has been presented as follows:
- The company offers options for shopping online with international delivery (johnlewispartnership.co.uk, 2022).
- John Lewis is highly popular in other countries like Ireland and Australia (johnlewispartnership.co.uk, 2022).
- The International competitors of John Lewis have several types of awareness. While John Lewis has limited awareness. Therefore, its rivals are getting more customers than John Lewis.
- John Lewis has limited customers due to the high price. The customers are getting the same products at lower prices from other brands (Lewis, et al, 2022).
- Another greatest weakness of John Lewis is the inconsistent profitability.
- More inexperienced specialists live away from home and our brand and image are knowledgeable. Hence their prey group is improving fast.
- Expanding the business network as well as the product selection of John Lewis can help to reach a larger group of customers and ensure long-term business goal achievement (johnlewispartnership.co.uk, 2022).
- The increase in purchasing power parity leads to the improved lifestyles of John Lewis (Cortes, et al, 2019).
- The greatest threat is the economic recession and financial instability in the UK can impact the purchasing power of the customers. The customers sometimes find problems in purchasing the products due to the prices.
- The rivals of John Lewis are offering the products at low cost. Therefore, the intense competition in grocery, supermarkets, stores are the greatest threat for John Lewis because they are all types of products that John Lewis are unable to provide (Bolat et al, 2020).
- Competition laws and lack of large-scale development of John Lewis space led to the merger of many convenience stores.
PESTLE Analysis of John Lewis for external analysis
The Pestle analysis of the John Lewis brand in regards to their operations in the UK has been presented below. However, for the brand to enter a new market, an assessment of that market may be more efficient and can be implemented similarly to that of these evaluations presented below.
John Lewis operates within UK which has a stable political condition. The country is currently recovering from the COVID 19 pandemic situation and thus the government actions are not stretched thin as that of the conditions in 2020. Therefore, it can be expected that the brand can gain aid from the UK government. However, before entering a new market, it is highly essential to assess the political conditions of the selected location as a lack of government support can lead to brand failure issues.
The entire United Kingdom economic condition is confronting recession and those are not agreeing to change the interest rates. Other than that, there is rigid competition within every sector of the retail sector and it helps in leading the retailer and provides lots of incentives to the customers. This economic condition will drive the company most of the time in future (Li, 2018).
The socio-cultural analysis affects the company very much. The customer shifting preference and their lifestyle often correspond to the opportunities for the business. However, as per Ilieva et al. (2019), several opportunities which are created by the customers are caused by the societies and these are becoming more and more materialistic. If John Lewis had to please more customers in a short time, then they would introduce more brands along with quality products.
In this era, online shopping is a new trend in the modern industry conditions (Vrtana, et al, 2020). The use of modern technologies and information systems lead to efficiency in brand operations and has positive impacts on continued business operations via digital transformation. This transformation to digital operations can contribute to increased long-term achievement of business capabilities.
The environmental products are cotton and wool and these are the renewable sources that are used in production. The environmental problems of John Lewis involve their contributions to the Carbon Emissions (Vrtana, et al, 2020). The brand is involved in operating online and provides high-quality of services via delivery using road transport or shipping processes. The use of vehicles for road transport often leads to negative impacts on the environment. This could contribute to significant issues with legal action against the brand and the implementation of change for the use of electrical vehicles can be efficient in dealing with these problems.
The brand is highly compliant with major legal factors and essential ethical or legal guidelines. They are compliant with the Equality Act of UK 2010 and discrimination laws which ensure positive relations among employees and employers within the brand. However, the brand needs to implement better actions in order to prevent issues with the lack of regard for environment and climate actions.
Competitive analysis using Porter’s Five Forces
To ensure high-value competitive advantages of the brand, it is highly essential to conduct a competitive analysis of the selected brand via the use of Porter's Five Forces. The idea of John Lewis has also been taken into account within this section.
The threat of New Entrants
The UK’s food segment has witnessed several fresh entrants from time to time like Aldi and Lidl who always compete with John Lewis/Waitrose upon price (Nightingale, 2020). Several businesses who are not within the business are accessing the market as a big that tend to be growing threat increasing annually. Also, the department store is highly steered by fresh innovation and products as fresh entrants within the sector always tried to disrupt the market accompanied through the specialized services and products (Kung’u, 2017). There is also another basic reason in view to the lower threat concerning fresh entrants is that the investors lack whole knowledge concerning the geographic area.
Threat of Rivalry
The segment also sees extensive competition by different leading companies who have are diversified their business into fresh non-core segments. John Lewis eventually has initiated the premium pricing strategy that has resulted in cutting down the prices given intense competition by the market. John Lewis follows the innovation and fresh products development in providing several products within the market (O'Higgins et al. 2018). The commitment made by John Lewis to their customers although the major point of difference concerning the company tends to be price reductions in line by other companies. The decrease in the price of the products nevertheless may result in tampering of the product specialization as well as a business image as it may result in psychological barriers within the consumer minds.
Bargaining power of suppliers
The Bargaining power of the suppliers for John Lewis is much less than it is considered as converselybeing differentiated to the bargaining power of consumers. John Lewis as a major retailer possesses good turnover and high sales that have made them the initial choices for suppliers for placing their products within the store shelves. Additionally, John Lewis also considers the integrated strategy that accompanies retailing as well as containing their brands, particularly within the segment such as textiles by where it buys raw materials and produces curtain, textiles, and soft furnishings as per their brand name.
Bargaining power of buyers
The bargaining power of buyers is high considering the fact that there are a large number of organisations operating in UK that provide similar services as that of John Lewis. However, in order to deal with this issue, JohnLewis has again remodelled their strategy and ensured the provision of their products at low prices. This method can be stated as the cost leadership process and this method contributes to lower levels of buyer bargaining power (Bruijl, 2018). This has resulted in high competition, particularly with the sector such as retail that sees price war upon a continual term, the switching cost is less. Additionally, John Lewis possesses ahighly dependentarea within the UK market as the global recognition is less and therefore the bargaining power of consumers in John Lewis depicts highly.
Threat of substitutes
The threat of substitutes within the mentioned segment is portrayed as less big although there possesses a feature of a high optionfor substitutes by consumers focus into the discount store (Pervan, et al. 2017). For example, given shifts within the economy, several stores such as supermarkets, discount stores, specialized stores need the stock clearance that provides them in offering substitutes for the goods purchased within the department stores. Given such situations, customers may tend to be more inclined in purchasing from a discount store in comparison to the department store. In the same manner, given high disposable income and lower interest rates present within the economy then consumers would select the premium product as compared to the low-priced product. For tackling this type of situations John Lewis must consider the flexible pricing strategy, product specialization by private labels.
The strategic planning process for global strategic management
Determining the strategic position
In the preparation phase the stage is set concerning various organisations to make their development go forward. Identifying the core strategic issues for delivering the ethics and vision by a conversation with executives of the company, considering the customer insights, and gathering industry and market information will help brands such as Walmart in getting a portrayal of the position of the brand within the market and minds of the customers (Sengupta and Kim, 2021). Therefore, this process can allow Walmart to track their efficiencies in a new market and can ensure strategic development for improved achievement of the goals. It will also help review or create the company’s vision and mission in providing them with a concise image for long term business success. This will entail responding to their concerns, being honest within the expectations and fairly within the way of communicating the performance.
The brand needs to prioritize the objectives that they wish to achieve. These objectives in respect to Walmart have been stated as follows:
- Ensuring that revenues coming by the international markets should be accountable towards generating at least 45% of total revenues.
- To form a strategic partnership with a minimum of one local company in every fresh market Walmart enters (Clinton, and Whisnant, 2019).
- To ensure that Walmart can reach among the top 3 global department stores by the level of revenues by 2020.
Entering foreign market
There are different types of foreign market entries but organisations such as John Lewis follows wholly-owned subsidiaries' technique concerning foreign market entry that provides the company with different types of substantial benefits that entail freedom in picking up the strategy, safeguarding the technology, the capability of engaging within the global strategic coordination, as well as an ability to realize location and experience economies (Bruijl, 2018). For instance, the branding of John Lewis branding across the Chinese market will be structured in such a mannerin view to the brand will be depicted as interconnected to prestige, achievement and social status.
The selection of such strategy for branding within the Chinese segment is considered to be likely developed on the accountability of the cultural featuresconcerning Chinese customers that give value to social status and preservingthe face, and enhanced levels to the households’ income in Chinadue to fast economic development within the nation. The focus of John Lewis is on obtaining a minimum of 15% off the department store market within Beijing and Shanghai. Also, the company is focused on attaining an annual growth rate of nearly 18% across the global markets (Reuber, et al. 2018). In implementing the entry of wholly-owned subsidiaries approach in accessing the Chinese segment John Lewis must need in exploring the probabilities of developing strategic agreements by major businesses of China within a mutual benefitted technique. This will be as a form that do not compromise with the operation freedom and competitive edge concerning John Lewis.
By collaborating externally with the business, John Lewis has been focused on connecting to the company, making employees as partners is seen as core in the innovative development (Storey, and Salaman, 2017). Within the HQ of John Lewis, there is a consumer hub in which five customers per day, five days per week examine John Lewis's products, so that the team may tweak and refine it as needed. Such a scientific approach mixes execution and speed for ensuring the consumer experience is the core of the innovation.
Based on the study, it was found that the development of global operational strategies is highly focused on brand entry into a new market or the development of innovative services and strategies based on the market position of the selected brand. It is also acknowledged that the selection of the wholly-owned subsidiaries method for foreign market entry, is also linked to the different types of risks and disadvantages that may be referred to as high risk. To enter the foreign market, brands such as John Lewis highly needs to be dependent upon their traditional business strategy that has ensured their success within the UK marketplace when accessing the foreign market. This strategy generally involves targeting big earners and providing their high-quality products and services against the premium prices.
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