Born Global Company free essay sample

McDougall says â€Å"Born global company refers to the business organizations that, from inception, seek to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries †[1] A more quantitative definition, from another source, describes born globals as â€Å"companies who have reached a share of foreign sales of at least 25 per cent within a time frame of two to three years after their establishment†. [2] Born globals tend to be at a young age, medium-sized, which is obtaining a sustainable part of revenue from the sale of outputs in foreign countries. Also, there are many agency has investigated the how young the global born company is. However, they have found that the average age of the global born company is within three years. The global business is on a developing stage. According to the statements, the born global must be a young firm who has gained a portion of revenue from exporting their products. We will write a custom essay sample on Born Global Company or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page There are four reasons about why the global born company emerge. †¢ The niche market †¢ Entrepreneurship †¢ International management experience †¢ Net work The first one is the niche market. That the some organization realized that their resources and market are limited, which often happens in the countries with small domestic markets. They need to develop and focus on strategies to achieve international marketing goals to enlarge its market and make more profits. The niche market is crucial for the born global firms. The more accurate market they focus on,the more market share and more leading position they will get. [3] The second one is the entrepreneurship. Entrepreneurship is always among the born global firms, which is summarized as hardworking, pioneering innovation, the keen-to-change, the commitment to keep-faith, and the self-correcting inclusiveness. [4] The innovation plays an essential role in the entrepreneurship. The businessman who created born global company must have this entrepreneurship inside him. The third one is the international management experience. Competition is more fierce, which bring much benefits for the global firms, especially for managers who had working experience in abroad or who is with international background. They has outstanding profile in the industry and could give its unique knowledge and ability to look for the opportunities and develop its idea with a global vision. In addition, the company’s creativity and ability to find the optimal solutions through combining the available resources that can make the maximum value for the company is also a reason that contribute to global business. The fouth factor, network, also make contribution to the emergence of the Born Global Company. The enterprise network is based on interpersonal relationship. This interpersonal relationship network was established and demonstrated by cluster production and specialization. [5] Many people choose to study abroad. And the relationship network in turn contributes their businesses. Some born global companies choose to set up their factories abroad in order to avoid marketing risk. Then with the development of the zone, many firms are attracted to settle overseas factories due to the supply chain. [6] The example of the Born Global Company Logitech, the computer peripherals company who is the one of the excellent early examples of born-global firm. Focusing first on the PC mouse, the firm was established by two Italians and a Swiss. The company’s operations and research and development were firstly devided between California and Switzerland. The firm then expanded quickly in Ireland and Taiwan. Logitech hold 30 percent of the global computer mouse business by 1989 with its high quality of products, having $140 million in revenues. Its creative and stylish products contributed Logitech to be a global leader in computer peripheral devices. [] Logitech, nowadays, is a leader enterprise in the industry of the designing and manufacturing of computer peripheral devices. The technologic development and the research and the development are two important parts in the Born Globals. However, the human resources should choose the people who have technical profile. Technology is a key tool for Born Globals to coordinate networking with suppliers, contractors and all the members of the international network[9] It is also a channel of production, communication, and sales and connections with customers at the same time. [10] The institutional network is used by company to get the financial resources in order to be qualified to set up the innovative business. The conditions of the Born Global to be created Most of the born global firms are technological firms as result of some reasons. There are some conditions should be taken into the consideration. †¢ The potential customers of the company is people outside the home county †¢ The potential customers of the company may need the foreign products. †¢ The company have advantages in the field of industry globally †¢ The company’s competitors has already been internationalized or will be internationalized soon †¢ The products of the company is closely related to the logistic †¢ The products of the company has encountered new problems †¢ The market in the home country can meet the company’ needs The Born Globals must have a specific strategy that which activities should be performed in the home country and which activity should be outsourcing due to considering the efficiency and quality. The phenomenon of globalization was produced by technological progress. Some people think that globalization has resulted in a convergence of consumer demand. However, other people believe that improved technology infrastructure for the global marketing strategy’s implementation and other pressure increased competitive pressures caused by the global market. The globalization is consistent with the global marketing strategy . The impact of the Internet in the global marketing strategy to receive more attention due to the global nature of the Internet and communication possibilities. The born global are recognized as the young company, which is ambitious, niche focused, advanced with the great international vision. The global importance and standardization of global brand was born with the benefits of globalization . Global variables to achieve the the b2b born global stage , which is more than 50% of the total sales in mainland of China , with the companys global brand , global standardization . In addition , the empirical evidence suggests b2b born more dependent based on global marketing , promoting the emphasis on individual sales professional characteristics of their products for the global market segments in the industrial market . How are the born-global firms be able to avoid the stages of internationalization the born-globals ? The Born Globals definitely has special characteristics, which differed from the traditional international firms. Then I will describe it as below. 1) Most of the companies has many activities in the international markets The company started exporting global products or services after they found a few years and exporting 25 percent or more of the total output of the company. Many of them promote their international business through the stages and direct investment. From Denmark, beginning of internationalization and internationalization is not necessarily the objective process of founding. [7] Decided to participate in the process of internationalization of the company into a system by the nature of the new company. The special kind of technology is developed and produced by the companys expertise in a particular industry sector , the value chain , or market. [8] Other studies from Norway and France slightly different results , suggesting that specific market situation is very important . A born global , rather than a birth place or late global depends on the extent to which the company s early decisions. 2) Limited resources Most of born globals have encountered such of problems that the financial resources and tangible resources are limited. The global company is prone to be relatively small , which have less financial , human and physical resources compared to the large multinational corporations that are considered to be the leading global trade and investment. [9] 3) The managers have outstanding management skills The manager of the company do not regard the overseas markets as a pure addition to their home country’s market . They have a strong entrepreneurial mentality . They take the initiative and actively competitions in the international markets , they take risks, and to make innovations. The discovery of creativity , knowledge and wisdom from highlighting the importance is from the United States, Australia , the United Kingdom ,Canada, New Zea-land , Ireland , combining the role of the top management team and personal qualities , is not just a single entrepreneur. The skills of the senior management team have been found very key that the more active forms of internationalization , especially in knowledge-based industries. 4) Focusing on the different strategy Born global companies are usually advanced technology than other traditional companies. They are set up to develop business opportunities when new products and services’ quality and design is better than the competitor’s. 5) The company will use external intermediaries in the overseas market Most companies in the international expansion of the world engaged in direct international sales through exports or foreign resources independent intermediaries located [10]. Most of them depend on the external coordinator organization international shipments . Export and use of independent intermediaries allows flexible international business , including the ability to enter or exit the overseas market relatively quickly and easily . More experienced the global companies seem to take additional strategies. For example joint ventures and foreign direct investment. [11] From the characteristics of the born global company that I described above. I can easily make a conclusion that the born global companies can neglect the stages that the traditional international firms should focus on. That is the domestic market. This is because the born global companies are born to aim at the foreign markets. The marketing strategy they use is to meet the foreign customers’ needs. So they must do researches about the foreign market instead of the domestic market. The Born Globals begin with the leaders who holds the solid industry and international experience, unique knowledge, unique know-how that make them to bring creative methods into the international market. [12]And are motivated by desire to develop the market, which can bring him more benefits. Besides, the global vision of the leader is very essential, and it can makes him identify a true international business opportunity. Once the opportunity is identified by the managers, the company should take action quickly to desseminate its innovation and grasp the market share before the competitors arrive. What risks should be managed for the born global company? Not only the born global companies, every company will encounter kinds of risks if they want to make global business. And companies should know how to manage the risks or how to minimize them to the greatest extent. Only through managing the risks well, then the companies can make a successful global business. There are several kinds of risk should be noticed 1) Political risks As we all know, the born global companies is aiming at the foreign markets. If they want to make global business in other country. The managers should take considerations about the politics factors of the host countries. The political affairs and volatility is difficult for businesses to effectively in overseas countries because of not positive publicity and the individual effect of the government. A company cannot efficiently run all of its competence to make the most profits in the unstable country and unstable market. Just imagine that, if the present government are replaced by the new government. What about the foreign assets in the host country. There are several ways to manage the politics risks. The first one is to buy the international insurance. But the international insurance is very expensive, so it can also bring us the financial risks. The international insurance is only an option, not the only one. Also, the company can be proactive. The companies can hire a special manager to manage the political risks such as unstable political climate, the new president. All of these factors can make an effect on the businesses. The risks can be avoided by the examination and analysis of the current situation of the host countries. And another way to avoid the political risk is taking action when they come. Most of people do not believe this, but it is really useful. But the companies need to have strategies and the capacity to solve it. Finally, I would recommend that the company avoid the political risks by add diversity. Investment in basic principle is simple and versatile , so they are also applicable in this case . If the company want to invest in foreign countries. They cannot put all your eggs in one basket, which is too risky. Think about that political risks just will have influence on one part of the investment at a time . This is the most important method to avoid political risks. 2) Technological risk Technological risk is a little part of the risk the company should take into consideration and to manage. If the company is short of the security in electronic business. The firm gets a high possibility of losing the costs of development of the technology and fail to develop the new product. If all of this happen at the same time. It will be very dangerous. 3) Currency risk The currency risk can bring the company the big financial problem, if the company do not manage the exchange rate risk. It will lead to a severe financial loss in the coming year. So it’ is very necessary to deal with if for the company can operate normally. And there are a couple of ways to minimize it. Firstly, the company can negotiate use US dollars to pay or receive. The currency risk can be transferred to another party through this way. Also, the company can be proactive about the currency risk. The CFO of the company must consider the future exchange rate before accepting a project. But it’s difficult for everyone to predict the foreign exchange rate. But the managers can make a hypothesis through reviewing the previous exchange rate. Another should be taken into consideration is that to think over the discounting. The company should check the exchanging rate carefully when sell the products or service into the foreign market. Finally, the diversity should also be included. Diversity can minimize the all of the risks. So if the company make an expansion to the marketing more countries, the risks can be avoided efficiently. 4) Credit risk The credit risk is related to financial crisis in 2008, which is a part of the international trade that the born global must encounter. The financial crisis still have some negative effect on today’s market. And it also can bring the born global company a severe financial management problem in the next year. So it’s every urgent to manege it. And there are a couple of ways to manage it efficiently. One way is to build the safeguards to minimize the negative impacts of the low frequency and the financial beings. The CFO of the company should make sure that the company now is capital oriented and emphasizing gaining the cash instead of the growth. Also updating the financial competence of the born global company is also every necessary and urgent. Finally, the born global company can build a good relationships with the banks. 5) Environmental risk The environmental risk is related to the environment problems in the host country. For example , if the company has settled a factory in the host country. It definitely will have a negative effect on the community the factory is in. There will air pollutions, water pollutions, noise pollutions. What’worse, it will negatively influence the local customers’ buying competence. So the born global company must make compensations to the local people to build a good reputation. 6) Terrorism risk Terrorism risks are formed by cultural differences and religious philosophy and abnormal citizens of host countries. This may cause some bad affairs such as the sabotage, kidnapping of the managers and employees. The terrorism risk is unexpected and difficult to be controlled. The only thing the born globals can do is to minimize the negative effects the terrorism risk brings. The company can buy insurance for the assets of the company , managers and employees. Conclusion The Born Globals must have a specific strategy that which activities should be performed in the home country and which activity should be outsourcing due to considering the efficiency and quality. [12] there are also some stages that the born globals can avoid compared to the traditional international business. Furthermore, all of the successful born global companies has excellent management skill of the risks. Only through managing the risks that the company will encounter in an appropriate way that the born global companies can develop fastly and steadily. References: [1]. McDougall and Oviatt (2000), â€Å"International entrepreneurship: the intersection of two research paths†, Academy of Management Journal [2]. McKee, D. , Conant, J. , Vanesa P. R. and Mokwa, L. (1993), â€Å"Success-producer and failure-preventer marketing skills: a social learning theory interpretation†, Journal of the Academy of Marketing Science [3]. David, C. and Farley, J. (1998), â€Å"Measuring market orientation: globalization and synthesis†, Journal of Market-Focused Management [4]. Maurer, J. (1999), The Proactive Personality Disposition and Entrepreneurial Behavior among Small Company Presidents, 37, 1; [5]. Bell, J. (2003), Towards an Integrative Model of Small Firm Internationalization Journal of International Entrepreneurship [6]. Cavusgil, S. T. (1980), On the Internationalization Process of Firms, European Research [7]. Saarenketo, S. (2002). Born globals Internationalization of small and medium-sized knowledge-intensive firms. 8]. Servais, P. Rasmussen, E. S. (2000). Different types of international new ventures, paper presented at the annual meeting of academy of international business [9]Youting Z. (2004). The born global firm, concept, phenomenon, cause and enlightenments (in Chinese). [10]. Garten, J. (1997), The Big Ten: The Big Ten Emerging Markets, Second Edition [11]Oviatt, McDougall (1995). Global Start-ups: Entrepreneurs on a Worldwide Stage. Academy of Management Executive [12]. Gray, B. (1997), Profiling Managers to Enhance Export Promotion Targeting, Journal of International Business Studies