Institutions and Strategies in Business Business Advancement

Question: Discuss about the Institutions and Strategies in Business for Business Advancement. Answer: The rapid technological advancement and globalization have resulted in a similarly rapid growth of the existing and emerging economies. As a result, companies; new and existing, are trying their level best to match up as they face the challenges regarding market entry. Various companies are employing different entry strategies in order to make it in the perfect way and fit. However, the question of what determines a foreign market strategy remains unanswered since no particular entry strategy has been recognized as the Universal approach. Before deciding on which entry strategy to adopt, a company has to take into consideration some other factors, and institutions are amongst them. However, some companies have a lot of focus on their internal resources and capabilities (Ang et.al, 2015). Of course, that is important but might not be beneficial minus consideration of other factors. Definition of the term institutions in the context of business strategy Many economists have come up with various definitions of the term institutions in line with business strategy. However, of all the other meaningful definitions, this paper adopts the definition by Richard Scott that explains institutions as the regulative, normative, and cognitive structures and activities that provide stability and meaning to social behavior (Peng et al 2009, p.64). In an attempt to make this definition sound more clear and relevant in the context of business strategy, it is further supported by the similar definition by the World Bank. The World Bank have it that institutions are the sets of rules that governs the actions of organizations and individuals (Chen, 2004). It further models it as the interaction among participants in a development process. All these sum up the makes it understandable that institutions consist of rules, laws, and regulations that govern a body or an operation, in this case, the market entry. Therefore, institutions can be viewed at another angle as the rules devised by human and affect the incentives that ultimately determine the international differences in prosperity. Having said that, it comes out clear that the institutions would at some given point affect business, company, or a country in international trade (Ebner Beck, 2008). Most economists argue that many investors view that as not a useful framework for providing a solution or a resolution in the business arena. The notion stands that even if a strategy is put in place to come up with the best and an all-inclusive institution, there would still be losers and beneficiaries going by the institution. In an attempt to solve such a scenario, Etrin and Prevezer (2010) talks of an efficient institution as the one which caters for both the losers and the gainers. For instance, he talks about the need to compensate the losers or to allow the beneficiaries to make an attempt of imposing their choice. However, in the real sense, compensating the losers has never been effected anywhere. This variation clearly shows why some societies adopt institutions that appear to be disastrous to the economic growth. This has been evident especially with the institutions that shape the incentives and determine the distribution of resources. As a result, the need of the society to participate in making the decision over conflicting situations becomes necessary. The role of institutions in a foreign market entry Whenever foreign companies enter the market of another country, the country has to identify and adapt to the hosts institutions. The institutions here do not only streamline the structure and operations of the foreign-based company but also points towards safeguarding the local similar companies. To survive and grow, the foreign companies or the multinational corporations (MNCs) have to balance their internal and the external institutional pressures (Hielscher Pies, 2016). Such companies would be subjected to two external institutions one from home and another from the foreign country. However, the role of the institutions majorly is after conformity and survival of all the companies whether local or foreign. Going by the Crux of institutional theory, the set institutions guides a company in determining the best market in the world (Peng et.al, 2009). For instance, selection of appropriate market and environment for an operation depends on with the possibility of the firm to conform. With this, the institution would ensure that the company or the firm is a legitimate failure to which it cannot survive. These guidelines, therefore, puts the firm on course until it becomes adapted to the new market. Another role played by the institutions in determining the foreign market entry is on the knowledge of the international firm and adaptability. As illustrated by Meyer et.al (2009), whenever a firm enters a foreign market, the firm tends to be disadvantaged in various ways. The firm would be lacking the essential knowledge regarding various dimensions in the host country such as legal policies, political stand, social norms, and customers preference. Therefore, the set of rules and regulation that forms the institution would act as a guideline that would eventually make it easy for the foreign company to adapt and do the right thing. Furthermore, just to make everything simple, most foreign companies do strategies their entry by involving an existing local company in the form of a partnership like a joint venture or strategic alliance. All these are done just to simplify the procedures stated out in the market entry institutions. Role of culture in shaping the institutions Culture is broadly viewed as the social norms and individual beliefs that contribute to the shaping of individual incentives. This interpretation according to Meyer (2010) shows that culture is one of the aspects of broadly defined institutions. In this context, culture directly influences ones behavior through values and preferences. However, it is not easy to determine the relationship between economic development and the effect of culture given that culture is endogenous going by the modernization theory of development and predictable effects of culture on economic development. Chen (2004) brings out the correlation between culture and institution by citing how Maghribi and Genoese traders different cultures effected the development of various institutions during the medieval period. How the Institutions affects Entry in the Chinese Market One of the currently booming markets nearly in all fields is the Chinese Market. Even though it is a new lucrative opening, most of the firms are finding it really difficult to enter the rather complicated market in China. Given the totally different cultures of the Chinese compared to the European countries, even the institutions are challenging and leave the foreign firms and companies frustrated to cope. Besides the culture, another source of conflicts and disagreements among companies venturing in the Chinese market is the language. Even though a translator can break even the language barrier, the toughest of all is the Chinese values that must be inculcated by firms entering their market. According to Chen (2004), the Chinese have a strong belief in honesty and discipline, a virtue that cannot be taken appropriately by many foreign companies which believe in exploitations. This implies that even though the Chinese market is lucrative, coping and adapting by foreign firms and com panies might remain a nightmare. In conclusion, it is a reality that institution influences how firms manage their resources. Furthermore, the resources of the firms in return affect the strategy, especially when it comes to the international growth strategy. However, globalization and advancement in technology are far reaching the whole world as the foreign market entry simplifies. References Ang, S. H., Benischke, M. H., Doh, J. P. (2015). The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), 1536-1553. doi:10.1002/smj.2295 Chen, J. (2004). International institutions and multinational enterprises. Cheltenham, UK: Edward Elgar Pub. Ebner, A. Beck, N. (2008). The institutions of the market. Oxford: Oxford University Press. Estrin, S., Prevezer, M. (2010). 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