Degrees of International Master of Business Administration
KNP shall before hand focus on an economic imperative by applying a world wide strategy; That shall find its base on segmentation, differentiation and cost leadership that in the global market should be successful. KNP products are generic, consequently it doesn’t have to be sold based on the name brand or support service. This characteristic make it more difficult to develop differentiation that can be used as a competitive advantage; other steps needs to be developed so that KNP should take are addressing the political imperative, emphasizing quality imperative and implementing coordination strategy.
In formulating its strategy for the next decade, KNP should consider becoming more global. Before the company goes global, there are many factors the company must determine. The first and most important issue that KNP must consider is the risk that comes along with the potential profit(s) of being a global company. What is the demand/need of KNP’s products outside the Netherlands? Who will the company be competing against? Foreign markets for KNP have proven to be a success for the company with their exports to neighboring countries and the development into the European Community.
KNP was successful in the expansion into the European Community since language and cultural barriers did not exist. Many of the company’s executives spoke numerous European languages. They created excellent communication and understanding of one another, which is a plus in doing international business. From these numbers, we can see that KNP has potential growth in the international borders beyond Europe. With KNP’s sales outside the European Community being only 14%, the company should focus on increasing this number.
The company currently has the technology which will allow them to produce volume to be sold around the globe. KNP is known as a multi-focal international business strategy. The paper goods produced by KNP are considered to be global products; however the company itself not considered to be a global company. The reason for this statement is KNP does not produce the merchandise in the vicinity they (the products) are sold. Therefore, if KNP would like to be a globalize company, they must consider producing their products in the areas in which the products are sold.
To do so, the company has two choices: 1) purchase existing paper manufacturing company in the local community or 2) set up a new paper manufacturing plant in the local community. There are positives to each option. By purchasing an existing paper manufacturing plant, the company is avoiding the hard work of government regulations in regards putting up a new plant and all the laws that are attached when setting up a new business in a foreign country. However, if the company was to start completely new and fresh in a new area, things can be done their way.
The company will be bale to run operations as they see fit, not having to worry about the customs of the employees or prior company rules. (Hodgetts/Luthans, 2003) Currently the firm is using subsidiaries; this is defined as a large company owning an amount of small companies. KNP owns a separate packaging division that owns 9 plants. KNP now owns 4 German packaging plants which manufacture boxes. This company increased the capacity of packaging divisions by 60%.
In addition to the 4 packaging plants, KNP owns box making operations in the Netherlands, Italy, and Spain. These are only a few of the many other plants that KNP owns. If KNP expanded operations into North America, they should use the international division structure. This handles all of their operations out of one division. This will allow the CEO to have direct contact with the head of international divisions. I would recommend there be more managers that are in contact with the CEO. This will make it easier to communicate, and also to control the companies.
The organizational arrangement the company currently practices involves KNP to come together with paper merchants in European countries such as Belgium, England, and France. To coagulate their place in the English market, KNP hired “an English merchant, Contract Papers Limited, to distribute their products. KNP now owns 45 percent interest in the company” (Hodgetts/Luthans, 2003, 367). If the company chooses to expand their operations into North America, the structure I would recommend them to use is global area division, since the company has a narrow product line of paper products.
In a global area division, operations of the company are organized based on geographic area instead of product lines. This will “allow division managers to cater to the taste of the local market and make rapid decisions to make rapid decisions to accommodate environmental changes” (Hodgetts/Luthans, 2003, 314). For KNP, this will allow them to focus on quality and style of paper is needed in the specific area. A change I would recommend for KNP is to decentralize the management system.
Once a company goes global, it is important to allow different levels of the organization to have an input on decisions occurring within that organization. By decentralization, KNP would be “pushing decision making down the line and getting the lower-level personnel involved” (Hodgetts/Luthans, 2003, 329). The idea of decentralization fits well the idea of a global area division. It will allow lower-level associates to make decisions based on their local/surrounding views without having to go to higher management, whom may not be aware of the local surroundings.