Twasco Furniture

Potential Benefits in Expanding in Canada

Twasco Furniture is a leading furniture manufacturer in the United Kingdom. The company has been supplying furniture to the five star hotels, households, schools and restaurants across the United Kingdom. Presently, Twasco is planning to expand its business globally and the first stop is Canada.

As the intensity of global competition increases, many businesses are forced to make some reevaluation to their niche in the international world of market. For business entities, this entails strengthening their domestic position against competing foreign products. According to Doz, (1987) other business establishments do respond by aggressively expanding their business operations into foreign markets. Most of the businesses, according to them, collaborative agreements with other businesses are an effective alternative to the more traditional approaches. These partnerships, which can extend to strategic alliances, may be viewed as intermediate positions between a focus on domestic markets and full-scale global operations (Doz, 1987).

The contribution of government institutions for promoting furniture production was practically nil, since foreign entrepreneurship was the driving force behind the adaptive change in technology (Hansson, 1993). In reality, foreign enterprises were the ones responsible for the construction of infrastructure and, even, the operation of the transportation system; because the various government defaulted and could not easily obtain foreign credit. Government and private institutions were also important in initiating exports and maintaining competitiveness of staples. But while government support, which included the availability of credit and technical know-how, coupled with the provision of the essential infrastructure for marketing, was important at the outset, competitiveness was secured by private entrepreneurship and skills rather than state ‘dirigiste’ measures (Hansson, 1993). The role of private institutions also changed through history. The competitiveness of furniture exports relied on imported, rather than domestic, capital and skills.

However, the successful initiation of exports cannot be explained by a simple availability theory based on climatic and geographical considerations. As in the staples theory, international demand was the catalyst, and market access at competitive prices was possible due to the modernization of transportation (Harpelle, 2000). The degree of cost competitiveness depended also on the adaptive change of labor, land and many more.

Moreover, social factors in regards to furniture manufacturing includes the low wages for workers, job diffidence, excessively long work hours, denial of the right for freedom of association and communal deal. Furthermore, while technological change in transportation, allows access to the new emerging markets, set the conditions for promoting export-led growth, production of furniture could rapidly take place by expanding a largely unutilized frontier in a ‘vent for surplus’ fashion. As a result, the initial stage of furniture production did not involve a significant opportunity cost for the economy, since the cultivable area had little alternative use (Hansson, 1993). Modernization of the shipment service brought about alternative arrangements which decreased the cost of transporting furniture to Europe to about half the price.

Competitive Strategy

Although business environment factors, organizational factors and industrial factors are also reasons companies engage in collaboration or alliances (Ohmae,2000), it can be argued that globalization is the latter’s main driver. Due to globalisation, changes within firms are inevitable-they will have to form new associations that will be more effective and efficient in the globalised, technology-oriented, and industrially competitive environment. (Procassini, 1995) Further, in this new environment: global competitiveness will be a key factor in maintaining a nation’s standard of living, and a nation’s industrial leadership will be essential in achieving this goal; strong government-industry partnerships will be necessary in order to develop the high-tech industries necessary for maintaining the living standard of a nation’s citizens; greater emphasis on equal partnerships--not only of government with industry, but also of companies with other companies, associations of companies in an industry, and environmentalists with industrialists--will increase. (Procassini, 1995) There will be less emphasis on mandated relationships and greater emphasis on the need for individuals and organizations to voluntarily cooperate; along with global competitiveness and a rising national living standard there will be a renewed concern for domestic affairs, namely, health reform, welfare reform, environmental conditions, and economic security. (Procassini, 1995) Military security will be of lesser concern; organizations in all phases of organized activities, whether government, industry, associations, education, or medical services, will become broader, more efficient, and quicker to respond; knowledge-based industries, technology-developing organizations, and educational and training institutions will all contribute to an ever-increasing fund of technical advances and progress in products, services, and activities for the enhancement of personal well-being; and, a middle sector (comprised of trade associations, consortia, informal groups, and interest groups) will be of greater importance in every nation that leads in global competitiveness, because the private and public sectors will no longer be so clearly separated. (Procassini, 1995, p. 7).

The world economic events and technological advances are deepening the structural interdependence between nations-and particularly that between advanced industrial nations--the diamonds of competitive advantages of those nations become linked in such a way that enterprises find it advantageous to disperse at least some of their home bases from their country of ownership to other countries. (Dunning, 1999, p. 114). In order to keep up with the rapidly changing technologies, gain access to specific foreign markets and distribution channels, create new products, and ease problems of worldwide excess productivity capacity, global strategic alliances (GSAs) are being used with increasing frequency. (Parkhe, 1991). Global strategic alliances also bring together partners from different national origins, with often sharp differences in the collaborating firms’ cultural and political bases, and there may also be a considerable diversity in firm-specific characteristics which can be bonded into each firm’s national heritage. (Parkhe, 1991).

In order for the company to achieve competitive advantage, Twasco Furniture must implement the following:

· Economies of Scale and Scope in manufacturing and strategic marketing and textiles development.

· Unique Quality Technology owing to heavy emphasis on Operations Management

The company’s commitment to strategic marketing & development activities has always been one of its top strategies to remain competitive in the market.

· Differentiated Products

Through the production and marketing of differentiated products originating from the strategic marketing and development activities, the company is able to create its own firm-specific advantages. The continuous pursuit of strategic marketing and development processes enables the company to produce a steady stream of originally differentiated textile products which makes it difficult for competitors to find substitutes. Because of this differentiated approach, the company is able to market their products in various retailers worldwide, which enables them in turn to maximize the returns on strategic marketing and development expenditures.

Cultural and Legal Environment Issues

When a successful firm in a local market had decided to compete in the international market and for them, strategic alliances are as an effective means of operating within a global marketplace, they must grapple with questions about the nature of ownership and control within the alliance. Should the partnership be limited to the contribution of resources or know how? Should a more substantial equity investment be made by each partner? These important issues involve more than simply determining how responsibilities and rewards are to be divided between partners. Difficult managerial and legal problems also arise, such as how decisions will be made and how conflicts will be resolved.

The distinguishing characteristic of collaborative alliances involving ownership is that each participating firm has an invested equity stake in the partnership. This is in contrast to other alliances in which firms contribute machinery, technical know-how, or even money to the partnership but do not directly participate in a joint ownership structure.

According to M. Meckler (1996), collaborative venturing or also known as joint venturing are important for companies who decides to enter the international market. Joint ventures, strategic alliances and other forms of inter-organizational partnerships are popular arrangements for pursuit of international business goals. Porter (1975) predicted the growing importance of joint ventures between large multinational corporations. Market entry is facilitated by partnering of foreign firms with local firms. Cultural barriers are eased through use of local management and partnering with a firm that is familiar with the social and political systems of the environment. Some countries have adopted nationalistic policies that require multinational firms to partner with locals. Withiam (1995) describes how Microtel's joint venture strategy has allowed the hotel chain to grow ever in an environment hostile to growth.

The structure of the competition is also an important influence on the choice of a collaborative venture strategy (Millington and Bayliss, 1995). Some organizations find partnering is helpful in maintaining competitiveness under the pressures of an increasingly unified single market. Millington and Baylis had described the joint venture as a possible corporate restructuring tool, allowing potential buyers to become familiar with an operation before purchasing it.

Not all collaborative ventures are successful. There are also some instances that the engagement between the two companies do fail to be productive in their own ways. The reason for this failed collaboration is because the foreign company didn’t investigate more about the nature of the country they wanted to make business, in other words the foreign firm didn’t pay much attention to research and development. Research and development or simply R&D is an important concept to gather all of the information the company needed to make the foreign business successful on operating their establishment in the country they wish to expand

Venturing is a definite option for a company who wishes to operate in the other country and it will bring, but there are also some disadvantages when venturing internationally that may result for the company to fail. According to James and Weidenbaum (1993), these partnerships often generate lower growth potential than other global strategies, such as direct acquisitions of overseas production facilities. Firms that use a combination of approaches, however, such as joint venture with a cross-licensing agreement, are usually more profitable than those that do not. The formation of strategic alliances such as joint ventures usually requires complex and detailed contracts delineating the precise nature of the venture. This may be especially true between countries with vastly different cultural or social norms. The importance of complex, detailed contracts in the development of joint ventures with Canadian companies may also be the result of the domination of business negotiation by lawyers. Marketing research didn’t pay any of their role when marketing internationally. For firms, research and development are very costly that will only result to a lesser capital.

The foreign company must know all of the information on the local company in that country they wish to collaborates so that differences will be sorted out. Organization cultures or management styles may differ among participating firms, especially between Asian and foreign companies. Consequently, the partnership might be more flexible and responsive to changes within the market than if the company were to attempt to operate alone. Moreover, the partnership may be able to take advantage of local changes quickly because joint ventures are a little more distanced from the outside company's headquarters.

Bibliography

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Dunning, J.H. 1999, Governments, Globalization and International Business. New York: Oxford University Press.

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Meckler, M.R. 1996, "Predicting Success and Failure of Joint Ventures". Florida Atlantic University Journal. FAU, Florida

Millington, A. and B. Bayliss. 1995, “Transnational joint ventures between UK and EU manufacturing companies and the structure of competition”. Journal of International Business Studies. 26(2) 239-54

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Ohmae, K. 2000, The Invisible Continent: Four Strategic Imperatives of the New Economy, Nicholas Brealey, London.

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Porter, M. 1980. Competitive Strategy. Free Press, New York

Procassini, A. 1995, Competitors in Alliance: Industry Associations, Global Rivalries, and Business-Government Relations. Westport, CT: Quorum Books.