International Business Strategy (Essay Sample)

International Business Strategy for Suzlon
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International Business Strategy for Suzlon
Porter Diamond Model
The potential entrants in the industry are relatively low because the wind-production industry is a capital intensive one. Furthermore, those who already exist in the industry have created a niche for themselves through certain competitive advantages that are difficult to imitate. The competitors are moderately strong because although they are few, they are quite formidable (Pradhan 5). Many of them have developed innovations that are hard to back up and they also have a first-mover advantage in certain regions of the world. Supplier power is high because the resources needed, like steel, gearboxes and turbines, are scarce and difficult to control. Suzlon has overcome this challenge by becoming vertically integrated. Consumers in the wind energy industry have moderate strength because they tend to be large buyers. Government contracts from various parts of the world have formed the greatest bulk of orders for Suzlon, so they can control the company’s operations. The threat of substitutes is moderate because wind energy is green, virtually inexhaustible and has few operating costs. On the other hand, if crude oil prices lower and other green energy sources are perfected, then it may be difficult to remain highly profitable.
In the PEST analysis, Suzlon and others in the industry are affected by government subsidies for wind energy as this lowers production. Their expansion strategies are determined by the legal and political match between themselves and the target countries. Increasingly, the government is recognizing the significance of natural resources (Earnest & Wizelius, 2011). The political environment is in favor of natural resources, such as wind energy, which offer pollutant free energy. The government is supporting companies that are offering pollutant free energy. Thus, as part of this, Suzlon can utilize the support from various government initiatives, which are meant to boost investment in the clean energy sector. The government is offering tax exemptions and subsidies in areas that enhance employment and green climate initiatives (Pachauri & Chauhan, 2012).
In the economic arena, wind energy producers are affected by foreign currency shifts if they choose to go global. The state of a country’s GDP as well as taxation policies can affect how well manufacturing operations can occur there. The economic environment informs the nature of the current business environment (Ram & Selvaraj, 2012). The global economic climate is experiencing resurgence from recession. Thus, it presents significant opportunities of covering the untapped markets, as a wind energy producer. However, As Suzlon seeks to expand into untapped markets around the globe, it faces significant exchange risks. Suzlon faces a default risk of exchange risk fluctuation (Kumar, 2013). In the last couple of year, the exchange risk fluctuations are becoming extremely high, which makes it more risk for Suzlon to do business globally. Socially, the industry is affected by the markets demand for wind energy as well as the reception of disruptive manufacturing businesses especially in rural areas (Ramamurti, 2012). The awareness of green energy including wind energy is increasing, people realize the significance of renewable energy sources that is cost effect and results in a steady growth and expansion, which presents Suzlon with more business opportunities. The rise in consumer awareness means that they have begun to save energy and attempt to minimize pollution. This factor is favorable to wind producing companies, as it offers a better alternative to thermal energy, which is responsible for raising the pollution levels in the environment. Hence, wind energy offers the benefit of no pollution, which offers Suzlon a high growth opportunity (Ram & Selvaraj, 2012). Technology is a highly relevant factor in wind energy as new innovations like gearboxes and large turbines are always being made. In the current technological environment, technologies are becoming obsolete at a rapid rate, as new and better technologies are being introduced. Thus, Suzlon has to adopt new technology in order to compete effectively in the market. Suzlon has adequate technological abilities, as it has skilled workers, who have enabled the company to be able to design products of its own (Earnest & Wizelius, 2011).
Micro Analysis
VRIO analysis starts with examining the value of company strengths to customers. The three key strengths for the company are its vertical integration, its high rate of innovation and low cost options. When a firm is vertically integrated it can reduce production costs, lower prices of commodities and deliver seamlessly (Pradhan 17). Suzlon adopts an integrated business model, which ensures that they do not have to source their raw materials from external suppliers. The company utilizes its vertical integration model for supporting its production activities. Hence, it does not have to rely on suppliers (Pachauri & Chauhan, 2012). High innovation rates are applicable to customer owing to their ability to meet their needs such as the use of larger turbines to deliver lower unit costs and controlling product range. Strength should also be rare from a competitive viewpoint, and vertical integration is not common among other wind players, so this qualifies. Strength must also be difficult to imitate; Suzlon took advantage of openings in the industry to acquire new international firms. It is unlikely that others will be as lucky as the company. Furthermore, its innovations are often customized to meet local needs, and this is also difficult to copy. Finally, one ought to consider whether strength is efficiently organized, and Suzlon also seems to pass this test.
Suzlon has entered into strategic acquisition, which is enhancing its main strength of vertical integration, as well as, offering an opportunity to integrate vertically further. Suzlon acquired HANSEN, the second largest producer of gearboxes in the world. Suzlon offers a wide range of diversified product portfolio, which is designed to cope with specific climatic conditions and offer optimum results (Earnest & Wizelius, 2011). Suzlon being the market leader strives to offer value to its consumers. The company sets up the prices in the market while other follow. However, it is fundamental for Suzlon to produce and sell its products at low cost. Thus, to offer more considerable value, Suzlon offers a cost effective production capacities, which offers value to consumers, as well as the company (Earnest & Wizelius, 2011). Suzlon is highly organized to take advantage of its capacity. The company has a highly energetic and qualified workforce that strives to ensure that they exploit the company’s resources and capabilities. The company stretches its capabilities through employee training and modern research facilities. The modern research facilities enable the company to exploit the available resource and generate value (Earnest & Wizelius, 2011).
A value chain analysis illustrates that inbound logistics for the organization merged with their operations as Suzlon has control over the supply chain (Pradhan 19). The marketing and sales opp...