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1. Introduction - International Strategic Management
Internationalization describes developing a product in a manner that it may be freely consumed across many nations (Rask, 2014). This approach is employed by organizations aiming to extend their worldwide presence outside their own native Market, recognizing customers overseas may have different interests or habits. In this respect, this study will speak about the suitable strategic management approach and formulation for the internationalization of the firm. This report will pick a corporation from the U.K. business sector and concentrate on how they will execute their strategic alliances via applying relevant theories and models in the internationalization business.
2. Define Strategic Management, Formulation, and Strategy Implementation
Strategic management manages an organization’s resources to meet its aims and outcomes. Strategy formulation includes establishing goals, studying the competitive situation, examining the internal organization, evaluating strategies, and guaranteeing that the strategies are implemented across the firm (Grabowska and Saniuk, 2022). Formulation of a strategy is the practice of utilizing available information to describe a business’s planned direction and the specific activities necessary to achieve its objectives. Strategy implementation is the management of the actions related to the execution of a strategy plan inside a workplace or business.
3. Company Background
TransferWise, which just changed its name to Wise, users can send money overseas, receive payments in other currencies, and use their Wise debit card to make purchases there. In 2011, the business began as a straightforward international money transfer service (Annus, 2022).
4. Discussion of Strategy Formulation
In order to fix a better and more beneficial strategic formulation, TransferWise has to employ various types of strategic approaches. These approaches will help this Company to evaluate the Company’s own competencies and position in the competitive Market. The implementation of these strategic approaches can help to make the right choices for the expansion of business in the business market.This helps the business develop all of its factors that can help it expand in both the national and international markets.
4.1 Environmental Analysis
Environmental analysis is a crucial aspect that has to be employed by an organization to expand their business as well as understand the situation of the current Market (Macioszek and Cie?la, 2022). In that case, PESTLE and Porter’s five models are the most suitable model which can help to understand the current situation of the business industry.
PESTLE Analysis
A PESTLE study investigates the major outside forces that affect an organization. It can be applied in a variety of situations and aid senior executives and human resource experts in making strategic decisions (Christodoulou and Cullinane, 2019). This particular model is based on six factors Political, Economic, Social, Technological, Legal, and Environmental. The analysis of these six factors can help a company recognize a country’s current situation that helps to expand the business values and strategic options.
Fig 2: PESTLE Analysis
(Source: Christodoulou and Cullinane, 2019)
Porter’s Five Model
The Five Forces of Porter is a framework for examining the competitive situation of a firm. Profitability is affected by the quantity and strength of a company’s competitive competitors, possible new market entrants, suppliers, consumers, and replacement goods (Bruijl and Gerard, 2018). This factor can be analyzed through this model, whichwhich helps the organization recognize the market’s current situation
Fig 3: Porter’s Five Model
(Source: Bruijl and Gerard, 2018)
4.2 Internal Environment
In order to understand the capability of the firm in the international Market, the Company has to check its resources. The proper analysis of the resources can help the Company reach the capacity of the business strength.
RBV Theory
In that case, TransferWise can check its resources through the RBV theory. The resource-based view (RBV) contends that a company’s persistent competitive advantage stems from its valuable (Freeman, Dmytriyev, and Phillips, 2021), uncommon, unique, and irreplaceable resources. The capacity of a company to generate or acquire these assets influences its efficiency and competitiveness with its rivals in the business market.
Competences
In order to make a greater business image among the competitors, it is essential to learn about the competencies of a firm. A business should know its abilities through it can expand its business with a wide level of competition. These competencies are the main business drivers that enhance the profit as well as expansion of the business (Bencheva and Stoeva, 2018).
Core Competences
In a business, there is a concept of core competencies. Maintaining the business standard, Ceaseless innovation, Incomparable value, and great customer service are the business’s core competencies (Eizaguirre, García-Feijoo, and Laka, 2019). A business necessarily maintains these while they compete in the industry. TransferWise can also achieve an extended success level if it has maintained its core competencies.
Strategic Agility
Strategic agility is a company’s capacity to adapt to or drive change swiftly and properly while preserving flexibility and concentration. Business circumstances always change for various reasons (Shams et al., 2021). Therefore, TransferWise has to take the concept of strategic agility that can help them adapt to the business’s scalability with the change.
4.3 Strategic Implementation of Models
Porter’s Generic Strategy
Porter’s generic Strategy has based on four components: Cost Leadership, Differentiation, Cost Focus, and Differentiation Focus (Islami, Mustafa, and Topuzovska Latkovikj, 2020). These four segments can help TransferWise Company employ their business value in a proportioned way.
Fig 4: Porter’s Generic Strategy
(Source: Islami, Mustafa and Topuzovska Latkovikj, 2020)
VRIN Analysis
Internally, firms utilize VRIN Analysis to categorize their resources based on whether or not they meet particular framework-described criteria (Mat, Mohamed, and Mohamad, 2022). A competitive advantage may then be identified by categorizing corporate resources in this way.
5. International Aspects of Strategy Formulation
In order to internationalization a business, a company has to apply some strategic choices. In this scenario, TransferWise wants to expand its business in Latin America. In order to maximize the business agenda in a new country as a subsidiary, the Company has to apply some international strategies. Applying these strategic choices can help TransferWise take appropriate steps in the international Market.
5.1 Strategies for Internationalization
Four fundamental international methods are considered for multinational enterprises to select from (1) international, (2) multi-domestic, (3) global, and (4) transnational. These approaches differ based on two pressures: (1) a focus on efficiency and reduced cost, and (2) meeting cultural and societal demands locally (Schmid, 2018). In order to make a better image in the foreign Market, TransferWise can apply global Strategy in their technology-based money transfer process.
Fig 5: Porter’s Generic Strategy
(Source: Schmid, 2018)
The Global Strategy is one of the most suitable solutions because, through the Global Strategy, this Company can evaluate the global market trends. Based on global market trends, the Company can use the low-cost Strategy with high-quality services. Some modest tweaks to goods and services may be made in other regions (Ayden et al., 2021), but a global strategy emphasizes supplying basically the same products and services for each Market to achieve economies of scale and low prices.
For instance, Microsoft makes identical software applications available in several languages throughout the globe. Similar to other manufacturers of consumer products, Procter & Gamble looks for every opportunity to build worldwide brands in order to increase efficiency.
5.2 Country Selection
Country Selection is a core thing that is an essential part of the internationalization of business. Through the analysis of PESL analysis, TransferWise can choose the perfect country for expanding the business. PESL is the core aspect of the situation analysis of another factor (Popova, 2018). P stands for Political, E stands for Economical, S stands for Social, and L stands for Legal. These four aspects play a crucial role that can help TransferWise to navigate its mission in a new country.
5.3 Mode of Entry
In order to enter a new market, the conglomerates are applying some entry modes that can help them to situate their business as a subsidiary in a new target country. Through the entry modes, the companies are expanding their promotional Strategy easily in a new country and which has created a low financial risk situation. In that case, there are various types of entry modes for the Company that they can apply for their expansion of business in a new country.
Joint Venture
Cooperation between two or more persons intending to develop a single firm to make a profit while sharing the risks associated with doing so is known as a joint venture (Nippa and Reuer, 2019). It is required that the partners in the joint venture be comprised of two distinct natural individuals or organizations.
Exporting
Exporting refers to the sale of products and services made or delivered in one country to customers in another. Products and services typically come from the country that is selling them (Greaney and Tanaka, 2021). This way of entry is favourable for enterprises because it enables companies to eliminate the expense of confirming their activity in the new country.
Licensing
Licensing is a market entrance technique connected to transfer. It involves a firm offering a multinational corporation license to utilize its copyrights for a certain length of time (Munjal, 2019).
Franchising
Franchising is a mechanism for firms with limited resources to gain growth. International franchising is a mode of entrance that enables businesses to expand to new markets with minimal risk but limited control (Munjal, 2019).
5.4 Merger and Acquisition
One business takes over another one in a merger or acquisition. A merger is the joining of two businesses to form a new legal entity with a single company name. Through this, the Company can able to gain quality staff (Prayogi and Wibowo, 2022), Diversify the products and reduce costs and accelerate the business growth.
5.5 Wholly Owned Subsidiary
A parent business owns 100% of the shares in a subsidiary, which is referred to as a fully owned subsidiary. Wholly-owned subsidiaries allow parent corporations to diversify, manage, and potentially minimize risk.
6. Strategy Implementation
While a business makes the strategic choices for expansion, there should be some planning for implementation and evaluate the performance of the business post-implementation. In that case, the application of some strategic approaches can help the Company to make this appropriately.
6.1 Set the Objectives through SMART
The acronym SMART refers to Specific, Measurable, Attainable, Relevant, and Time-Bound objectives. Establishing these factors in relation to the target helps to make sure that the goals are reachable within a specified time period. Business objectives are essential for a business. Therefore, it is necessary to implement the proper objectives with the proper measurable sights. When a business sets some business objectives in that case, they have to measure its relevant objectives (Khatibi et al., 2021). In that case, a SMART objective is an essential approach that helps the Company to carry forward its objectives in some stages. In this approach, S stands for Specific, S stands for Specific, A stands for Attainable, R stands for Reasonable, and T stands for Timescale. SMART objectives are goals that are precise, measurable, attainable, realistic, and timely. These characteristics position a goal to be successful. The SMART approach contributes to going farther, providing the firm with a sense of direction, and assisting in the organization and completion of the objectives.
6.2 Milestone
An important event or action that takes place during the course of a project or Company’s journey and signifies a significant stage of development is referred to as a milestone. Milestones are not arbitrary long-term goals that the organization has little possibility of accomplishing; rather, they represent significant points along the way. They are pivotal points in the process of a project that reflect a certain amount of development in that process (Xiong, Zhao, and Fang, 2016). In a business, doing proper planning is an important fact that helps a business to elevate its business objectives practically and authentic way.
A business strategy plan cannot materialize into a profitable firm in the absence of milestones (Xiong, Zhao, and Fang, 2016). Milestones are a useful tool for a company to put its business strategy and goals into action. In the same way as a milestone by the side of the road indicates how far the company operations have progressed, a business landmark tracks the progress that’s been made as the firm expands and carries out its Strategy.
6.3 Monitor the Different Parts of the Strategy Formulation Model
In order to implement the Strategy, there is various models exist that help the Company enhance its business in a market. Instead of sitting back and waiting until market forces demand it, organizations are compelled by the formation of the organization’s future to contemplate the idea of change anytime soon and to make plans for it. This is in contrast to the traditional approach of waiting until the industry demands a change. Because of the strategic formulation, the Company can plan and budget for its capital expenditures. They are there to guide the Company’s expansion (Akaegbu and Usoro, 2017). According to what has been discovered by researchers, strategy development is a process in which a corporation determines the appropriate path to take in order to accomplish its commercial objectives. The procedure may be made easier by using several models and strategies.
When used in businesses, the term strategy refers to the pursuit of an advantageous and long-term position in the industry’s competitive landscape, as measured against the factors that shape that environment (Wehinger, 2018). The Strategy has provided a road map for decision-making about the relationships with rivals, the responses of which cannot be expected. It would be a means to fight for the choice of consumers among rival firms. There are really six primary phases in the process of formulating a plan. Although these procedures do not always occur in a strictly chronological sequence, they are quite logical and may be carried out in this order with ease.
Set the Organizational Objectives
Every statement of Strategy should include a section in which the long-term objectives of the Company are outlined. It is common knowledge that the purpose of Strategy is to act as a platform for the accomplishment of business objectives. Objectives, as opposed to strategies (Wehinger, 2018), focus a greater emphasis on the fact that the condition is already there. The strategy encompasses not only the articulation of desired outcomes but also the methods that will be used in order to realize those aims.
Evaluate the Environment of the Organization
Establishing the strategic and long objectives is an essential component of any strategic framework. It is generally acknowledged that Strategy acts as the vehicle for accomplishing company objectives. Compared to Strategy, goals emphasize the fact of being there greater. The strategy includes formulating objectives and how they will be accomplished (Khatibi et al., 2021). Therefore, Strategy is a more generic term that relates to allocating resources to achieve objectives. The present product line of a company must be evaluated in terms of both quality and quantity. So that managers may evaluate both their own and their competition’s advantages and shortcomings, this analysis is meant to identify the characteristics that are critical for tournament advantage in their Market.
Set the Quantitative Goals
At this point, the quantitative target values for particular of the organization’s goals have to be determined in a manner that is consistent with reality. This is done to compare the results with those of returning customers to evaluate any possible contributions that may come from a variety of product categories or operational divisions.
Performance Analysis
Performance assessment involves identifying and evaluating the discrepancy between actual and expected performances. An in-depth evaluation of the firm’s past accomplishments, present status, and anticipated future needs to be completed. This critical review determines the extent to which the strategic and long aspirations and actual realities diverge (Akaegbu and Usoro, 2017).
Choice of Strategy
This is the last phase in the process of formulating a strategy. After taking into account the organizational objectives, organizational advantages, possibilities, constraints, and external opportunities, the optimal plan of action is really determined to be taken in the situation (Akaegbu and Usoro, 2017).
Therefore, through this step, the Company can monitor its all aspects and implement the proper strategic formation models that help this business to enhance its performance. The stages help to control the business process that can be associated with the models in a precise way.
6.4 Identification of Areas of Improvement
After implementing business approaches, it is important to find out and evaluate the areas of improvement. Through this process, TransferWise can elevate its strategies. The identification of the fragile areas is the essential process that can help the business for further improvement. Skills, attributes, or capabilities that an employee has the potential to acquire or improve are referred to as areas of improvement (Anastassiu et al., 2016). Time management, delegation, organization, communication, and involvement are all possible areas in which there is room for development. Through the improvement, the Company can enhance its service quality, product development, and other processes.
In that case, the feedback system is an essential factor that can help a business to gather essential feedback from the clients. The feedback system is helpful in identifying the lacking points of the Company (von Leipzig et al., 2017). Through the feedback from the clients, the Company can expand its business as per the choices of the clients. This is helping the business to implement their business policies as per their client’s feedback.
7. Conclusion
Internationalization refers to the process of designing a product so that it can be openly utilized across different countries. In this regard, from the above evaluation, it has been seen that to expand the business in another country, some strategic approaches help the business to expand. In this regard, this report has chosen the company TransferWise and suggested to this Company some appropriate theories and models that are helpful to expand their business as a subsidiary in another country. This report has also explained detailed information about the monitoring process regarding the different parts of the strategic model formulation process. In this respect, this report has also explained how, through the feedback process, the Company can enhance its performance in the process of internationalization of business.
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