| Introduction | | | | that they have reduced the cost of doing international |
| The essay looks at key human resource issues likely | | | | trade. This will be possible if the company opts to |
| to be faced by Macro X company upon expanding | | | | transfer some of its production services to countries |
| into the international market. Owing to the fact that the | | | | that charge lower costs. Since the company |
| company already markets its products in the European | | | | specialises in the production of personal computers, |
| market, then chances of succeeding in the international | | | | then it would be favourable to take the technical |
| market are high. Besides this, the company has a solid | | | | aspects to Asian countries and direct its other types |
| human resource background characterised by | | | | of services to the western world which speaks the |
| performance management systems, strong | | | | same language as their mother company. |
| commitment to learning and development, mechanisms | | | | It is possible for the company to take advantage of |
| for employee involvement and sophisticated selection | | | | some of the perceptions that consumers have about |
| and recruitment methods. (Wilkins, 2004) | | | | their products. For instance, the company would still |
| Numerous companies have considered international | | | | offer a wide range of products under a similar name |
| expansion as an option both within the European Union | | | | after establishing themselves within the respective |
| and without. This is because international expansion | | | | market. This means that synergy need not apply to |
| provides millions of consumers at a business's disposal. | | | | only one particular product alone. (Wallerstein, 2000) |
| However, these benefits do no come easily. The | | | | It should be noted that the pursuance of horizontal |
| essay shall examine the challenges, methods of | | | | strategies cannot be considered a bed of roses for |
| tackling these challenges and organisational changes | | | | Macro X. the company is likely to encounter some |
| that can enhance internationalisation. | | | | problems along the way. Therefore, it is necessary for |
| Key HR issues likely to be faced by Macro X | | | | the company to study respective countries and then |
| Twenty years ago, international business had been a | | | | decide whether to horizontally integrate its products |
| reserve for large multinational corporations alone. | | | | there. For instance, the company is likely to have |
| However, globalisation has changed this attitude, these | | | | problems if it chooses to horizontally integrate in a |
| days even small companies consider international | | | | country that is saturated with the commodity. In this |
| expansion as a viable option. Going global presents | | | | case, the company may face anti-trust issues where it |
| numerous advantages but there are still so many other | | | | may loose millions in court battles with companies who |
| human resource issues that the company has to deal | | | | feel threatened by their integration. Therefore, |
| with. | | | | horizontal integration will not wok in all the foreign |
| Companies that choose to go global have the | | | | countries chosen for investment. |
| opportunity of harnessing opportunities that they would | | | | It should be noted that some products seem |
| not have access to in their own markets. If Macro X | | | | connected but they may not be in actual sense. Taking |
| chooses to go global, then they will have heightened | | | | the example of computer software and hardware, |
| their performance over and above their competitors. | | | | one might imagine that horizontally integrating |
| Besides that, the company will get an opportunity to | | | | companies that deal with computer hardware and |
| access suppliers who may be more cost effective | | | | software may bring about economies of scale. |
| than their local counterparts. As if the latter are not | | | | However, this perception is quite misleading. As a |
| enough, going global will allow the latter company to | | | | matter of fact, numerous companies have wasted |
| mitigate its risks. This is because by marketing one's | | | | their resources doing this yet they got no substantial |
| products across a wide range of companies, then one | | | | economic benefits. The company could integrate |
| reduces their level of dependence on a particular | | | | seemingly related commodities only after doing a |
| supply chain, production method and or sourcing | | | | thorough research in that particular country to ensure |
| method. Going global makes it possible for companies | | | | that they will receive tangible benefits by doing this. |
| to access fresh talent pools; For Macro X, they stand | | | | It is essential for the company to remember that the |
| to gain access to some of the creative minds in the | | | | benefits of horizontal integration do not come easily. It |
| computer games industry especially from the United | | | | will take a while before the company begins realising |
| States and the Asian market. By doing this, the | | | | cost savings. Consequently, the company should stick |
| company will be increasing their growth rates. | | | | to its company strategy as it expands the business |
| Initial project plan for organisation's internal strategy | | | | because this will be the guideline for implementing |
| Given the above advantages, the latter company must | | | | horizontal strategies. Jumping from one approach to |
| make several decisions regarding their expansion | | | | another could only bring about problems for the |
| strategy. First, the company could analyse which | | | | respective company. (Alfaro, 2003) |
| countries are the most profitable or the most | | | | Vertical integration |
| promising. The company also has to consider the most | | | | Vertical integration is another option that the company |
| appropriate time to make this move. Besides, that, it is | | | | should consider while entering the international market. |
| also necessary to look at some of the macro | | | | This may be described as the process by which firms |
| economic factors that are likely to affect the | | | | acquire companies that operate in different levels of |
| company's expansion process. This means that an in | | | | the value chain. It should be noted that integration can |
| depth look at how global trade is currently being run | | | | occur either forward or backward. There are a variety |
| needs to be taken into account. In line with these | | | | of reasons why Macro X should consider this method |
| considerations, Macro X also has to take into account | | | | as a viable option. First of all, the company will reduce |
| the political issues within target markets. It is most | | | | the level of uncertainties in certain parts of the value |
| appropriate for the company to consider countries that | | | | chain. Additionally, the company will reduce costs of |
| have earned a reputation for being economist/ | | | | conducting transactions between these levels of the |
| investment hot spots. Besides that, the company | | | | value chain. |
| needs to look at issues such as climate or health | | | | The issue of vertical integration has brought about |
| threats. (Brewer, 2003) | | | | great benefits. Taking the example of the United |
| Given the current economic conditions, it would most | | | | States; this country created a amass market during |
| favourable for Macro X to consider the Asian | | | | the nineteen sixties only through the process of |
| countries. Examples here include Thailand, India and | | | | vertically integrated corporations The corporations had |
| China. These latter mentioned countries have attracted | | | | the following elements: |
| numerous foreign investments owing to their incentives. | | | | - Well coordinated |
| Besides that, the latter countries' economies have | | | | - Vertically integrated |
| been performing very well in the past years. This | | | | - Hierarchical |
| means that Macro X will have a cushion for their | | | | - Large |
| operations there and will not have to worry about | | | | At that time, the latter qualities necessitated the use of |
| regulatory concerns. The latter countries are also quite | | | | various divisions within single enterprises thus bringing |
| viable owing to the availability of computer related | | | | about the notion of vertical integration. (Williamson, |
| items i.e. it is dependable there. The quality of labour | | | | 2001) |
| within these countries is also quite high and is very | | | | When Macro X chooses to vertically integrate their |
| affordable in comparison to workers in the European | | | | commodities and services, then they will be making an |
| market. Foreign exchange risks in these countries are | | | | otherwise external process to become an internal one. |
| also relatively low compared to what other companies | | | | This means that the company will have acquired an |
| offer. These facts indicate that Macro X stands to | | | | advantage that their competitors can only imagine. This |
| minimise problems in the supply chain by using such an | | | | is possible owing to the fact that vertical integration will |
| approach. . (Wallerstein, 2000) | | | | be a way of allowing the respective company to |
| Macro X should also look at the most applicable | | | | respond to the technical aspects of their operations. |
| business model to use in the international market. The | | | | However, it should be noted that other industries |
| company needs to be ready for handling numerous | | | | necessitate greater levels of coordination than others, |
| markets at the same time. The company should also | | | | consequently, if vertical integration occurs across |
| focus on creating a substantial market base within the | | | | borders, then it would be difficult to coordinate them. In |
| respective market countries. This is because one must | | | | this case, the computer games industry is one such |
| look at these three options | | | | industry. The company would be faced with major |
| - Taking a brand as it is to the international market | | | | difficulties trying to deal with different aspects of |
| - Creating a new brand to suit specific markets | | | | production from different countries. This means that |
| - Purchasing a brand from the respective country | | | | the company will only reap the benefits of vertical |
| In the case of Macro X, it would be more appropriate | | | | integration if it restricted these to value chain levels |
| to create new brands for the local market. This is | | | | within the same country. |
| because if the company adopt purely international | | | | Despite these anomalies in the process, the firm will be |
| tactics in the target markets, then it will lack a local | | | | able to enhance their revenue through the approach. |
| touch and may never be fully accepted. | | | | Additionally, the company will also avoid the issue of |
| The company should also change its business | | | | perfect competition. Perfect competition makes Macro |
| processes in such a manner that it incorporates the | | | | X particularly susceptible to normal levels of economic |
| respective locals. This is because doing so will | | | | returns. The returns will be greatly increased if the |
| encourage diversity. Successful multinationals are | | | | company chooses to vertically integrate their products |
| those ones that have a diverse workforce. This goes | | | | or services. |
| a long way in ensuring that problems are solved using | | | | The following aspects are key to the success of the |
| a conceptual framework. Macro X should realise that | | | | company is it considers to vertically integrate |
| the use of a formulaic approach to problem solving will | | | | - Organisation |
| not work in the international arena. | | | | - Rarity |
| It is necessary for the company to incorporate local | | | | - Costliness in imitation |
| business cultures within its own operations. If the | | | | - Valuable |
| company carries its business practices from the | | | | The company ought to ensure that their vertical |
| European continent into other international markets | | | | integration strategies are unique. This means that the |
| without changing them, then it is likely to face | | | | company ought to look for new ways of transacting |
| numerous hurdles while implementing them. | | | | using this approach. By so doing, the company will |
| Consequently, it would be more favourable to change | | | | have made their benefits above average. However, |
| business culture to suit respective environments. In line | | | | the definition of rarity largely depends on the value |
| with the latter strategy, the company should also | | | | created by the integration and not on how common |
| incorporate the rule of law within those respective | | | | this kind of strategy is in the industry. (Wells and Fagre, |
| countries. Some countries have very high standards | | | | 2002) |
| for the rule of law while others do not. Besides that, | | | | In the event that the vertical integration strategies are |
| the company should be more ready for different | | | | not that rare, then the company should ascertain that |
| financial systems. Some countries highly regulate their | | | | they are at least costly to imitate. By doing this, the |
| money market and accessibility to financial markets in | | | | company will have substantially improved their |
| such countries may be difficult. It would therefore be | | | | competitive levels. It should be noted that the |
| necessary for the company to look for alternative | | | | definition of rarity does not just depend on the nature |
| methods of financing itself if the laws within the target | | | | of the vertical integration; instead, it depends on the |
| countries happen to be less stringent. (Dunning, 2001) | | | | sort of value created by the commodity if a |
| Another crucial aspect that will form part of the global | | | | competitor chooses to imitate it. Rarity comes about |
| strategy of the Macro X company is the issue of | | | | as result of historical uniqueness that is only |
| governance structures. Once the company goes | | | | synonymous to a certain company. It also comes |
| global, it will be catering to a wider range of | | | | about as a result of the social complexity that is unique |
| stakeholders. Consequently, there will be need to | | | | to the commodity. A service or product maybe socially |
| integrate them in the governance structures. In line with | | | | complex when small numbers of marketers exist. |
| this thought, the company should take corporate social | | | | Besides that, if the capital requirement required for the |
| responsibility very seriously. This means that the | | | | service are prohibitive. Besides that, it is also possible |
| company should apply ethical standards and | | | | to create rarity by causal ambiguity. |
| procedures when doing business with local contractors | | | | Vertical integration may be done either through internal |
| and suppliers too. On top of that, the company needs | | | | development or through acquisition. In internal |
| to ensure that they exceed local standards of | | | | development, the company chooses to change the |
| production because they need to have an edge over | | | | way they go about their production process. However, |
| their competitors. | | | | in acquisition, the firm owns a supplier. But in either |
| Macro X should also be aware about the reporting | | | | case, the company will expand its boundaries so as to |
| duties to the mother company in the UK. This will be | | | | accommodate the new team player. (Alfaro, 2003) |
| largely governed by the stakeholders involved and the | | | | The company should be very careful about organising |
| nature of the regulatory laws within the respective | | | | their functions. This means that the level of competition |
| countries. | | | | and cooperation between these separate entities |
| Horizontal integration | | | | needs to be kept in check. The time horizon is another |
| The company should consider horizontal integration as | | | | thing that should be organised so as to make vertical |
| a viable option where horizontal integration in this case | | | | integration effective. Lastly, the company should |
| refers to the process of acquiring businesses that | | | | ensure that the desired value of the chain will be |
| operate within the same level or category of the value | | | | achieved and that there will be effective cooperation |
| chain. The company should examine all the products | | | | between the two functions. |
| and services that relate to it and see which ones are | | | | Conclusion |
| most viable. Taking the example of a company such | | | | Profits may only be realised after considering the |
| as Standard Oil Company of the US; the company | | | | various obstacles and challenges. These include |
| horizontally integrated its production process by | | | | language barriers, cultural differences, currency |
| acquiring forty refineries. The company chose the | | | | differences, availability of skills, disparities in |
| most directly related service i.e. companies that deal | | | | management structures between the investing country |
| with oil purification. Another example of a company | | | | and the target country, legal obstacles in the target |
| that horizontally integrated was the Harley Davidson | | | | country, administrative differences and many other |
| Company. This company was a motorcycle | | | | issues. The essay has examined the possible options |
| manufacturer but decided to venture into motorcycle | | | | that Macro X company can choose to counter these |
| utilities by acquiring companies that specialised in those | | | | challenges and human resource issues that the |
| products. (Buckley and Casson, 2006) | | | | company is likely to encounter when going |
| Macro X should consider horizontal integration as an | | | | global.(Dunning, 2001) |
| option because they stand to benefit tremendously | | | | Reference: |
| from such an approach. If the company chooses to | | | | Alfaro, L. (2003): Foreign Direct Investment and |
| horizontally integrate, then they can benefit from | | | | Growth: Harvard Business School |
| economies of scale. The company will increase its | | | | Brewer, T. (2003): Market Imperfection, Government |
| production capacities thus bringing about greater | | | | policies and FDI; International Business Studies Journal, |
| savings from these larger numbers. The second | | | | 24, (1), 101-120 |
| advantage of horizontally integrating is that the | | | | Buckley P. and Casson, M. (2006): The Future of |
| company will tap the economies of scope. This refers | | | | Multinational Corporations; Holmes and Meyer |
| to the use of similar resources for the same product. | | | | Dunning, J. (2001): The Multinational Enterprise; Allen and |
| The company will have the benefit of synergising the | | | | Unwin |
| common resources with companies they plan to | | | | Wells L. and Fagre N. (2002): Bargaining power of |
| horizontally integrate with. The other major advantage | | | | multinationals and host governments; International |
| of such an approach is the fact that the company can | | | | Business Studies Journal, 13, (2), 9-23 |
| gain greater access to supplier chains and other | | | | Williamson, O. (2001): The Vertical Integration of |
| members of the value chain. The latter would have | | | | Production; American Economic Review, No. 71, 112-123 |
| been exceptionally difficult if the company tried to | | | | Wilkins, M. (2004): The Maturing of Multinational |
| access the market on their own, as they would have | | | | Enterprise; Cambridge: Harvard University Press |
| minimal influence within those foreign markets. Besides | | | | Wallerstein, M. |
| that, the company will also go a long way in ensuring | | | | |