Institutional-Based View of International Business Strategy
Professor:
International Business Strategy
Topic:Consider one successful foreign subsidiary case and investigate potential factors responsible for
the successful results in an extension (1) institutional-based view and (2) resource-based view
Company and the essay should be UNIQUE/original !!
The term paper will be graded based on 8 key points: (1) demonstrated knowledge; (2) paper structure;
(3) development & application of a conceptual framework; (4) in-depth interpretation & analysis of results;
(5) clarity of arguments; (6) creativity/uniqueness/solid & thorough discussion; (7) clear implications of the
study for scholars & practitioners; & (8) quality of references. ?
Abstract
What are some of the factors that drive an organizations strategy in International
Business in an institutional-based view and resource-based view? What are some of the factors
that determine the success of these firms within the international boarders? These are some of the
Surname: 2
questions that this paper seeks to determine (Chan, pp. 625. 2005). Primarily, it is essential to
consider that in conducting this study, the paper will employ two perspectives that are developed
to address the intent of the study.
An institutional-based view points out to the fact that conditions within the institution
have the capacity to determine the organizations performance and strategy to a larger extent. On
the other hand, the resource based view exemplifies that the institutions specific differences can
drive the organizations strategy and performance (Barrutia, & Echebarria, pp. 70. 2015) The
study will lastly take a closer look at one of the foreign subsidiaries and determine the manner in
which they have achieved success in their operations in line with the two concepts detailed.
Introduction
It is vital to consider the fact that the success of an organization wholly depends on an
institutional based view. Institution in this case defines and describes the rules of the game. In
carrying out business in the international markets, it is essential for organizations to cognition of
the formal rules that include laws and the informal rules that determine the values that aid in
governing the element of competition within the international market (Barrutia, & Echebarria,
pp. 70. 2015). When organizations venture into foreign and international businesses within a
different economy, it is essential to work within the institutional frameworks or in other words
the formal and informal institutions that are developed within such economies with the aim of
governing the individual and the organizations behavior in the country. Organizations that fail to
undertake proper research into determining these elements within an international market are
bound to fail in the process.
Surname: 3
On the other hand, through a resource-based view, variables are constituted in the sense
that while the institutional-based view primarily focuses on the externalities of the environment,
the resource-based view takes a closer look at organizations internal resources and its capacity.
This can be achieved through observations (Brotspies, & Sellani, pp. 5.2009). Considering the
fact that there are some unattractive environments for businesses, organizations may either suffer
or take an exit. This can be seen in an instance where the Soviet Union showed hostility towards
the US during the period of the Cold War. During this period, PepsiCo carried out its business
operations in this nation where most retailers had struggled in meeting up with the recession in
this country, a factor that caused many organizations to drop out of this market.
Wal-Mart on the other hand has been viewed as raking in its profits every year with the
company’s profits growing at a rate of 4% in 2013 and another 5%increase in 2014 (Brotspies, &
Sellani, pp. 5.2009). This clearly raises an eyebrow in determining the manner in which these
organizations thrive in highly un-attractive and hostile environments. However, it is essential to
consider the fact that Wal-Mart and PepsiCo are likely to have certain unique and valuable firms-
specific resources and capacities that may not be shared by their competitors in the same
business environment.
Background
Wal-Mart Stores Inc. was developed in 1969, a factor that saw the organization engages
in retail and wholesale operations in various forms in the world. The company is dedicated
towards offering an assortment of merchandise and services that are fairly priced with its
operations conducted in three primary segments that include Wal-Mart International, Wal-Mart
US, and Sam’s Club respectively (Ghazzawi, Palladini, & Martinelli-Lee, pp. 13. 2014). Wal-
Surname: 4
Mart operates close to 50 stores in the United States, Puerto Rico and in Washington DC where it
employs the digital retail system.
This company’s international segment is one that consists of operations that run in 26
other countries that are based outside the United States and that include other formats that are
divided into the three primary categories (Ghazzawi, et.al.2014). Sam’s club under the umbrella
of Wal-Mart consists of warehouse clubs that operates in 48 states both in the United States of
America and other States.
Theory
Wal-Marts management team over the past years have been faced with the challenge of
determining whether the companies same approach and strategy that was adopted can be utilized
to maintain the company’s performance over the next decades. Over the last ten years, the
company achieved a strong and constant growth in its sales and income. This is attributed to the
fact that this company maintained a top position in the U.S retail industry and has turned out to
be the largest retail entity in the world (Mårtensson, & Westerberg, pp. 5. 2016). Considering the
maturity of the industry that is coupled with a powerful competition from other companies that
are rivals to Wal-Mart, the company has been in a position of maintaining its performance.
Taking a closer look at the company’s institutional view, it is essential to determine that through
the Porters Five Forces gives a clear indication that competition between this company and its
rivals remains one of the essential motivators in the industry that is driven by the aspect of price.
The resource-based view determines that Wal-Mart has achieved success in the
implementation of strategy that involves the inclusion of low-cost in its products through an
approach that inculcates cost efficiency within the organizations corporate culture, operations
Surname: 5
and management system (Mårtensson, & Westerberg, pp. 5. 2016). The company has also been a
pioneer in the adaptation of technology that is directed towards streamlining the organizations
supply chain that is developed to respond and understand the demands of the consumers. Wal-
Mart has additionally developed strength in guarding its position in the market that has opened
opportunities for the expansion of its business. It is essential to consider that Wal-Mart also faces
threats in the industry, with this making the entity vulnerable to weakening its corporation in
different regions. The organization has a strong financial strength that is backed by an effective
management and operational skill that allows it to enter into different markets.
Methodology
It is essential to consider the fact that Wal-Marts expansion in international markets has
generated profits for its stakeholders, a factor that has put the organization in a competitive
position (Parnell, & Lester, pp. 14. 2008). In considering the success factors that have supported
this organization to gain a competitive edge in the market, there is a need of diagnosing the
organizations institutional aspects that includes the external environmental factors and the firms
internal resource capacity
External Environment
In considering the organizations external environment, it is essential to take consideration
of Porters five-force model that provides the organizations approach. The factors that need to be
considered include:
Potential of New Entrants
Surname: 6
The potential of new entrants in this company’s market is considerably low since the
discount retail industry remains a highly competitive environment that requires big plays that
compete for the market shares. Additionally, it is essential to consider the fact that price remains
one of the key aspects of competition that has placed this company in the competitive edge
(Hörisch, Johnson, & Schaltegger, pp. 765. 2015). Wal-Mart has also established a stronger
supply network that has seen the company achieve superiority in its logistical and distribution
system that is weaved through technological support system with an established brand name with
a deep financial resource. On the other hand, Wal-Mart has been in a position to achieve a
competitive edge in the market and success since the organization has a cost advantage over its
rivals.
Substitutes:
The threats of substitutes are considerably low since the consumers have a choice to
make purchases from this store. This is attributed to the fact that some of the small stores do not
offer a wide range of products (Hörisch, et.al.2015). Wal-Marts online purchasing has also
offered advantage to the shoppers by offering a substitute means. This has however resulted in a
challenge since the shipping costs and the delays in shipping may fail to meet the needs of the
consumers.
Industries Competition
The competition that the organization faces in the market is considerably high since this
industry is mature in nature, with a few large competitors who are determined to dominate that
market (Hicks, pp. 56. 2008). Price structure is one of the advantages that this company has
Surname: 7
achieved since the company has a favorable price structure that has enabled it to stay competitive
in different markets.
Bargaining Power of the Suppliers
The bargaining power of the suppliers is considered as low since most of the company’s
suppliers supply the company with a wide range of products. This has placed Wal-Mart of a
strong negotiation position with its supply system that gives the organization flexibility in storing
a wide range of products that meet the consumer’s needs (Hicks, pp. 56. 2008). The company
also has the capacity to operate its transport and logistical networks without relying on the
vendors.
Bargaining Power of the Buyers
The bargaining power of the buyers is considered as moderate since the organization is in
a position to switch costs for the buyers. In most of the markets that this company has ventured
into, the buyers are price-sensitive and are driven to buy the company’s products since they are
fairly priced (Hicks, pp. 56. 2008). Product differentiation in this industry has also been low, a
factor that has given this company an advantage in the market.
On the other hand, it is essential to note that this organization has managed to neutralize
some of the political challenges that come from environmentalists, labor unions and other
interest groups, with this giving the organization an advantage that favors its growth. Some of
the factors that have enabled this company to be successful include its ability to maintain low
costs by having effective and efficient operation, it ability to make bulk purchases from the
vendors who are in a position to enjoy the discounts and the payment of low wages (Lund, pp.
237.2014). Additionally, the company has been in a position to create a differentiation in its
Surname: 8
products by stocking its shelves with a wide range of products and the convenience in location
that enables the shoppers to get the products they need.
Internal Resources and Capability
It is essential to consider the fact that this companies corporate strategy that is directed
towards improving its business functions as a low cost leader reflects the rationale for its
existence. The company’s strategy has been effective and has helped in the achievement of its
success. This can be depicted in its continuous growth in sales and revenues that has increased its
net profits considerably (Ziesemer, pp. 193. 2013). Its net sales has over the time been
increasing, a factor that has aided in the development of a strong balance sheet that has an ample
cash balance. On the other hand, the company has been in a position to make a return on its
investments and equity. The growth of Wal-Mart has been impacted by the expansion of its
products and services including its geographical positioning.
Evidence
Some of the key factors that have aided this organization to achieve success in the market
include the inclusion of low price structures and the offering of a wide range of products within
convenient locations. Its capacity to reduce its costs is aligned to the external environment that
has been embedded in the managements systems and within the organizations culture (Ellickson,
Misra, & Nair, pp. 750. 2012). An instance of this can be seen in the company’s strategy to
invest and successfully adapt to the introduction of technology in its supply chain and logistical
systems, a factor that has made it one of the best system in the world.
The company’s strong brand name and reputation for the inclusion of a wide range of
products and low prices is another aspect that has enabled Wal-Mart to achieve success in the
Surname: 9
industry (Clulow, Barry, & Gerstman, pp. 19.2007). Through the integration of technology, the
organization has been in a position to manage its logistical system, a factor that has enabled the
entity to develop a good relationship with the suppliers.
Conclusion
An institutional-based view points out to the fact that conditions within the institution
have the capacity to determine the organizations performance and strategy to a larger extent. On
the other hand, the resource-based view exemplifies that the institutions specific differences can
drive the organizations strategy and performance. It is vital to consider the fact that the success
of an organization wholly depends on an institutional based view. Institution in this case defines
and describes the rules of the game. In carrying out business in the international markets, it is
essential for organizations to cognition of the formal rules that include laws and the informal
rules that determine the values that aid in governing the element of competition within the
international market.
Surname: 10
References
Barrutia, J, & Echebarria, C 2015, ‘Resource-based view of sustainability engagement’, Global
Environmental Change Part A: Human & Policy Dimensions, 34, pp. 70-82, GreenFILE,
EBSCOhost, viewed 11 March 2016.
Brotspies, H, & Sellani, R 2009, ‘WAL-MART: GETTING BACK TO GROWTH’, Allied
Academies International Conference: Proceedings Of The International Academy For
Case Studies (IACS), 16, 1, pp. 5-13, Business Source Complete, EBSCOhost, viewed 11
March 2016.
Chan, RK 2005, ‘Does the Natural-Resource-Based View of the Firm Apply in an Emerging
Economy? A Survey of Foreign Invested Enterprises in China’, Journal Of Management
Studies, 42, 3, pp. 625-672, GreenFILE, EBSCOhost, viewed 11 March 2016.
Clulow, V, Barry, C, & Gerstman, J 2007, ‘The resource-based view and value: the customer-
based view of the firm’, Journal Of European Industrial Training, 31, 1, pp. 19-35,
Teacher Reference Center, EBSCOhost, viewed 11 March 2016.
Clulow, V, Gerstman, J, & Barry, C 2003, ‘The resource-based view and sustainable competitive
advantage: the case of a financial services firm’, Journal Of European Industrial Training,
27, 5, pp. 220-232, Teacher Reference Center, EBSCOhost, viewed 11 March 2016.
Ellickson, P, Misra, S, & Nair, H 2012, ‘Repositioning Dynamics and Pricing Strategy’, Journal
Of Marketing Research (JMR), 49, 6, pp. 750-772, Business Source Complete,
EBSCOhost, viewed 11 March 2016.
Surname: 11
Ghazzawi, I, Palladini, M, & Martinelli-Lee, T 2014, ‘THE WAL-MART STORES, INC.: AN
AMERICAN DREAM THAT TOUCHED THE WORLD’, Journal Of The International
Academy For Case Studies, 20, 2, pp. 13-33, Business Source Complete, EBSCOhost,
viewed 11 March 2016.
Hicks, MJ 2008, ‘Estimating Wal-Mart’s Impacts in Maryland: A Test of Identification Strategies
and Endogeneity Tests’, Eastern Economic Journal, 34, 1, pp. 56-73, Business Source
Complete, EBSCOhost, viewed 11 March 2016.
Hörisch, J, Johnson, M, & Schaltegger, S 2015, ‘Implementation of Sustainability Management
and Company Size: A Knowledge-Based View’, Business Strategy & The Environment
(John Wiley & Sons, Inc), 24, 8, pp. 765-779, GreenFILE, EBSCOhost, viewed 11
March 2016.
Lund, J 2014, ‘Towards a more balanced view on the potentials of locally-based monitoring’,
Biodiversity & Conservation, 23, 1, pp. 237-239, GreenFILE, EBSCOhost, viewed 11
March 2016.
Mårtensson, K, & Westerberg, K 2016, ‘Corporate Environmental Strategies towards Sustainable
Development’, Business Strategy & The Environment (John Wiley & Sons, Inc), 25, 1,
pp. 1-9, GreenFILE, EBSCOhost, viewed 11 March 2016.
Parnell, J, & Lester, D 2008, ‘Competitive Strategy and the Wal-Mart Threat: Positioning for
Survival and Success. (cover story)’, SAM Advanced Management Journal (07497075),
73, 2, pp. 14-24, Business Source Complete, EBSCOhost, viewed 11 March 2016.
Surname: 12
Ziesemer, T 2013, ‘A Knowledge-Based View of the Porter Hypothesis’, Environmental Policy &
Governance, 23, 3, pp. 193-208, GreenFILE, EBSCOhost, viewed 11 March 2016.
