RESEARCH PROPOSAL

WHY COMPANIES ARE SUCCESSFUL

NATIONALLY BUT FAIL INTERNATIONALLY.
WHAT PROBLEMS OCCUR WHEN A FIRM
GOES INTERNATIONAL?

[Student name] [Student id]

NAME OF INSTITUTE
 1- INTRODUCTION:
It has been observed that most successful brands and companies when expanding to the foreign
countries, failed to lure the market the way they captured market of their home country. When
the companies get tremendous positive feedback from their local market they decide to expand in
the foreign market for better opportunities and revenues. But this process is full of hurdles, not
every locally successful organization can survive competitively in the international market
[ CITATION Sis20 \l 1033 ]. A firm's success is not guaranteed when it goes international just
because the host country has a favorable environment to do business. Some firms will survive,
and some will struggle and face various problems along the way. The purpose of this paper will
be to discuss the various reasons why companies are successful nationally but fail
internationally. When a firm enters an international market, success is not guaranteed just based
on the fact that the environment in the host country is favorable. [ CITATION KEI91 \l 1033 ]

The companies face a variety of internal and external challenges ranging from their own
structural, policy, and marketing issues to the economic, cultural, and legal challenges of foreign
markets. According to the study, the branding of the new firm to establish its demand and trust in
the foreign market is essential for the success of the organization in the foreign market. The
organization that did not handle that well failed to operate in a new environment [ CITATION
Afo17 \l 2057 ].

Some business strategies look all good on paper, but when it comes to practical implementation
they fail miserably. Target is one of the examples of those companies that saw immense success
nationally, but could not survive in the international market [ CITATION Nik15 \l 1033 ].
Moreover, technological knowledge of the host country also plays important role in the survival
of the multinational firm. The companies which are not well versed in the technology of host
countries often fail to perform. Therefore it's essential to be well aware of all technology, and
administrative skills of the target market before deciding on internationalization [ CITATION
Nas12 \l 2057 ].

Furthermore, The founder of parcel lab emphasis the role of finance for the success in the
international market by saying that going global has a cost moreover the founder of NOYS
agreed with the stance of Parcel lab's founder by emphasizing that any firm can go global if they
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have big budgets [ CITATION Afo17 \l 2057 ]. Thus, The consumer and nature of the market
vary from country to country which makes it difficult even for successful firms to compete
without planning in the international market. In the era of globalization, it is impertinent for the
firm to go global for the growth of the business. Therefore, the study and in depth grip of those
most common and major constraints which curtailed the growth of even successful organizations
in foreign markets is essential to study. Hence, this study aims to analyze the major problems
which firms face when they go global and what are the most common mistakes that led to the
shutdown of even the most popular brands in foreign countries, the focus of this study is
especially on the problems faced by firms of developing countries when they try to expand their
business Internationally. Furthermore, this study will present the proven strategies and plans to
become successful by overcoming the challenges of the foreign market.

2- RESEARCH QUESTIONS:
1. What are the overall major factors behind the failure of successful firms in international
markets?
2. Why survival of developing country's firms in the developed market is tougher than
those from developed countries?
3. What are the major external constraints for going global in the era of extreme
nationalism?
4. What are the most proven internal deficiencies in an organization which led them toward
failure in a foreign culture?
5. What strategies are applied by the multinational organization for successful expansion in
foreign markets?

3- RESEARCH GAP:

After the comprehensive study of literature related to the failure of most competent firms in the
international market, it is been noted that recent studies that can reflect the changing dynamics of
today’s world are missing. Most studies done on this subject are old enough to be studied in this
modern globalized world. Moreover, there is no consensus of studies on the commonality of the

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major causes of these failures. Each study discusses different causes and gives preference to
different factors. None of the studies presented the complied picture of those most occurring
causes. For example According to the management models of internationalization major factor
affecting the process of internationalization is the risk of the new market [ CITATION McD97 \l
1033 ] However,r the study of Shrader revealed the even most important than new market risk is
the company own strategy of internationalization as according to him the risk is manageable
[ CITATION Sie07 \l 1033 ]. However, another study discussed the case study of four
organizations named Tripda, link bird, parcel Lab, and NOYS. The study revealed that they were
new to the market and their lack the established brand image in the foreign market made their
operations difficult. [ CITATION Afo17 \l 2057 ]. On the other hand, according to the study of
Chris organizations need a strong strategy and commitment to move their business abroad. In the
case of expansion of family businesses it requires strong coordination and understanding
between the family members and other stakeholders abroad, this establishes the foundation of
success in global business.[ CITATION Chr06 \l 1033 ]. Moreover, the previous studies did not
support those causes of failures with figures. Research is done only on a handful of the
international organization that failed in their venture in some parts of the world without revealing
the frequency of that same cause behind the failures of other similar organizations. Thus this
study aims to gather the latest data and research on the causes of failure of most competent
national firms in foreign countries especially in the context of developing countries. Moreover,
this study will also focus on researching the proven success strategies for firms to go global.

4- Literature review
The challenges and reasons for the failure of most successful national firms in foreign countries
have changed from time to time. For example during the first wave of globalization when
national firms got the chance to operate globally they were facilitated with resources and easy
contracts. However, the biggest challenge they faced at that time was to manage their logistics to
export their commodities to other countries effectively. Similarly, during the period of the great
reversal, the main challenges encountered by firms were political. The need of the hour was to
develop political relations with the host governments and to encourage the setup of local

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management. The firms who did not embrace these changes could not survive in foreign
countries [ CITATION Jon20 \l 2057 ].

4.1- Economic challenges:

The study shows those organizations who started their operations in foreign countries came
across with economic challenges as well. Those firms who could not deal with these economic
challenges effectively eventually could not survive in foreign markets. Firms faced two types of
economic challenges, internal and external. The high operating cost of the business in foreign
markets and financial constraints remained hurdle in the way of the success of the organization

The study conducted by McKinney boldly highlighted the constraints for firms of developing as
well as developed countries to operate in international countries. According to the study, the
dynamic shift in the economic and demographic patterns reveals the low growth of these family
businesses in their home markets. So to survive they have to work on increasing their revenues
from the international market. However, the constraints which create hurdle in their expansion
can vary from resource constraints to risk of the new market but the financial resources were
highlighted as a major constraint in going global [ CITATION Ete04 \l 1033 ]

Not all family business would be having the high financial resources to operate in a foreign
market thus due to limited human resource and financial resources they may choose to operate in
more familiar local markets The example of this is then non-American small family business
who imported the nurses from developing countries to fill the resources gape but due to limited
resources they did not comprehend the training, cost and cultural issues which resulted in
failures of those firms [ CITATION Vij12 \l 1033 ]

4.2 Cultural challenges:

According to Lillis, the deciding factor for the success of the organization is its knowledge about
the contrasting characteristics of different cultures. Those firms which are inefficient to build
market image according to culture suffer [ CITATION Tia10 \l 1033 ].

The study revealed that Tripda when went international it had to face issues like trust, security,
and reliability which were connected to the culture of the host country. The major challenge that

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they faced was to understand their business concerning the local culture of that country.
Moreover, the study discloses that the newness of the firm in the foreign market along with
language barrier and lack of knowledge about the foreign culture are challenges which almost
every firm has to face while going global. The four-organization mentioned in the case study
faced these newness issues due to their small size in the foreign market too [ CITATION Afo17 \l
2057 ].

The recent studies reveal that globalization as well as cultural integration are necessary for firms
to survive. Although through globalization the dissimilarities are vanishing but still the cultural
variations among different ethnic groups and regions are more highlighted than before
[ CITATION Tia11 \l 1033 ].

According to Hofstede, the culture of the country has always remained an important factor
influencing business operations [ CITATION Sah16 \l 1033 ]. According to the study, Wal-Mart
could not understand the culture of Germany. The ethical code made by Walmart was seen as
disrespectful and intervention in the privacy of the employees[ CITATION WuM06 \l 1033 ].

4.3 Technological challenges:

When companies go global they face the technological challenges of host countries. This issue is
more severe for an organization that belonged to developing countries and want to operate in
developed countries because of the huge gape of technology in developing countries. Therefore,
the companies which are not well versed in the technology of host countries often fail to
perform. Therefore it's essential to be well aware of all technology, and administrative skills of
the target market before deciding on internationalization [ CITATION Nas12 \l 2057 ].

According to the study of Noe which was based on the global challenges of the firm revealed
that firm faces the challenges from three areas firstly it is market competition, secondly, it is
economic constraints and thirdly, it faces challenges from the information communication
technology side. [ CITATION RAY17 \l 1033 ].

4.4 Legal challenges:

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Another visible difficulty that makes the operation of countries in foreign countries difficult is
the legal laws of the host countries. For example, the study conducted on the market of India
revealed that the western companies who wanted to operate in India faced huge difficulties in
understanding and complying with the local law. The tariff system is highly complicated in India
the overall operations and the base of those laws are difficult to understand and apply. Moreover,
lengthy procedures also disturb the operations of western firms. Hence, the laws of the host
country also possess challenges for foreign firms. [ CITATION Nas12 \l 2057 ].

4.5 Political Challenges

There are also political problems that affect the growth of the multinational firm in foreign
countries. If the political relations between the host country and the country of Multinational
organization deteriorates then it would affect the operations and legal rules of operations of
MNC's as well. The multinational firms in such countries are usually subject to citizen boycott
and tough regulation which affects their revenues and eventually led them to shut down
[ CITATION Van19 \l 2057 ].

4.6 Internal and External challenges:

The success of multinational firms depends upon two factors. Internal factors and external
factors. The researchers of the global businesses focus more on internal factors of the businesses
which are the organization's' cost structure, their structure management, and strategies. But by
doing so mostly they neglect the external factors. Based on various strong literature the three
main factors that decide the failure or success of the multinational firm in a foreign market are
the host country's culture, statism, and market entry [ CITATION Shi14 \l 1033 ].

According to the study of Madsen, the availability of good human resources in the foreign
market is also crucial in deciding the success and failure of the organization. Moreover, the size
of the firm and the period it has spent in the new environment also decides whether the firm is
going to survive in a foreign culture or not. Furthermore, according to the Gallup survey 2007,
the lack of knowledge about the foreign country also lead to the failure of the firms. Proper
knowledge of the country's political, legal, and cultural environment is n necessary to operate
successfully in a foreign country [ CITATION Tag97 \l 2057 ].

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Those firms are most likely to fail in foreign countries whose culture is in contrast to their own
country culture. For example, China and America are two contrasting cultures where one follows
the individualism and other is based on collectivism. Where one country follows the rule-based
culture and others follow the relation-based culture. Moreover, another risk that multinational
organizations face in foreign countries is their entry mode. Those organization which enters the
foreign markets as joint ventures or franchises usually remain safe in the international market.
However, those firms who enter the market through acquisitions, especially if in sensitive
sectors, do not acquire the support of local industries as they make them
uncomfortable[ CITATION Shi14 \l 2057 ].

4.7 Newness, Smallness, and foreignness challenges:

The study of Zahra revealed that three factors influence the operations of the firms which go
global. Firstly it is their newness, followed by its small size and foreignness. The newness of the
firm makes its operations in foreign markets difficult by limiting its access to the networks and
resources. Secondly, the small size of the firm in the foreign market hinders its plans for
internationalization. lastly, the element of foreignness further hinders the success of the firm in
foreign countries by generating the challenges of entry barriers, establishing collaborations, and
acceptance of customers of the foreign land [ CITATION Zah05 \l 2057 ].

When firms enter international markets, they face difficulty in adapting to the organizational
strategies the local companies follow. The liability of foreignness includes all the costs the MNC
has to bear which the local company doesn't. [ CITATION Har17 \l 1033 ] As explained by
[ CITATION Set09 \l 1033 ] that the liability of foreignness has two types of cost. The first one
being the discriminatory cost which means the government restrictions, economic nationalism,
biases and the other is incidental costs which include cultural differences, communication
barriers, and lack of local information available. According to [ CITATION Daa07 \l 1033 ]
MNC's need to reduce these costs to survive. They can do so by interacting with the local
government more, increasing their exposure to localization, and learning more about the cultures
and practices.

When a company goes international the success depends on the firm, the industry, and the home
country characteristics. [ CITATION Das09 \l 1033 ] Believes that firms that go international

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already have lower firm values, so it is easier for them to adjust to another country. When a firm
experiences Liability of Foreignness it automatically faces a decrease in performance.

4.8 Economic competitiveness, Trade policies and innovation Challenges

According to the Rugman study to succeed in the foreign markets the company has to work on
three things that help the organization in differentiating itself and exhibits a strong position in the
international market. First of all the company should have economic competitiveness to survive
in the new market. Secondly, its policies should be strong enough to lure the trade regulations so
that the firm can enter the international market easily and can trade with foreign markets from
inside its own country as well. Thirdly, the organization needs innovation to survive in the
foreign market as ordinary products do not compete internationally [CITATION Ala00 \l 2057 ].

4.9 – Three challenges by Global Readiness survey

The survey conducted by Global Readiness revealed that only 10% of the companies believe that
they have all the required capabilities to survive in foreign markets. The survey was conducted
by a total of 362 executives. Mostly the small organizations face difficulties to go global because
they lack the resources to establish themselves in a foreign culture. High competitive strategies
as well as execution is required to compete in different countries. According to that research,
companies mainly struggle in three areas. The first issue is regarding the entry to the market,
management of logistics, and finally their value chain activities. . the second most issue
highlighted by the research was the common organizational goals. The organization when going
global fails to associate their practices to cushion the global agenda. And lastly, the third area
revealed by the research is the mishandled merger and executions which creates an issue for the
new firm in the international market [ CITATION Dom16 \l 2057 ].

Previously going global was perceived as strategic challenges but in today's world the focus is
shifted from globalization as a strategic challenge to the companies on capabilities that whether
the company possesses all those quality and core competencies to survive in the global market or
not. the ability to establish a strong global supply chain is a capability in which many
organizations fail. Moreover, According to study of the Yenera the major issue that Swedish
companies were facing was the import tariff which Russian government imposed on them which
ijncaresed the operational cost of those firms. [ CITATION Müj14 \l 2057 ].

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Moreover, it is easy to talk about globalization policies and strategies but only a few dare to fund
such high-risk projects. The inability of the firm to perform to compete well in the foreign
market shows that the company needs to invest in its staff and resources locally first to compete
in the foreign market [ CITATION Dom16 \l 2057 ].

4.10 Inability to understand the foreign market:

In order to survive in the American market the Tim Hortons company needed to redesign its marketing
strategy because in America they have loyal customers who are very much attracted to local brands. Till
the year 2008, the company tried to market itself from a Canadian perspective and it badly failed in
America. It remained an underrated brand in America where the local customers did not develop an
interest in their offerings. It was due to the inability of the firm to create its brand image by
understanding the local consumer taste and preferences[ CITATION Hie14 \l 1033 ].

4.11 Tough Competition from foreign players:

The most famous company best buy when entered the Chinese market failed. The major reason
behind the unsuccessful venture of best buy in china was its inability to deal with the highly
competitive market of china which was filled with competitive business and e-commerce sites.
Moreover, the company did not provide anything unique as compare to their local vendors, and
prices of the best buy were comparatively high [ CITATION Sam16 \l 1033 ].

4.12 International Trade War:

The international trade war between the USA and China was started in 2018 which according to
the [CITATION WTO19 \l 1033 ] declined the global GDP to almost 1.96% and world trade to
17%. The small and medium enterprises are consists of almost 90% production in both
developing and developed nations. These firms will face the negative impacts of a trade war in
their operations. The American companies operating in China may face tough regulations and
may untimely end up moving their supply chains out of the country [ CITATION CRS19 \l
1033 ]. Hence , Tarde war between the countries can also affect the internationalization process
of firms.

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