Internationalization is the expansion of firms' services beyond national boundaries. In the 21st-century, internationalization is among the most modern approaches adopted by almost all corporations intending to expand (Kelly, 2015). Internationalization has attracted significant interest from nearly every company as a way of expanding market opportunities, diversifying risk, and attaining economies of scale (Meyer & Estrin, 2014). A firm's readiness to internationalize refers to the firm's efforts to expand in other countries. Arabian International Company (AIC) is a firm whose practices reveal that the firm is ready to internationalize because it has export experience, can manufacture high quality and quantity steel products, has skilled human resource employees and foreign market intelligence from its operations in Europe and China. The methods the firm can use to assess industry market potential include simple trend analysis, monitoring key competitors and close relationship with suppliers as well as the sampling data sources.
The Arabian International Company and Its Readiness to Internationalization
Arabian International Company is a Saudi Arabian owned structural steel engineering, fabrication, and manufacturing Company founded in 1994. AIC headquarters are in Jeddah with secondary plants in the United Arab Emirates (UAE) (Al Khaimah, 2011). Since its formation, AIC has focused on tackling the most challenging projects, which demand high-quality output to enable the firm to have a good reputation. In its initial stage of development, the company built an extensive reference in an array of businesses primarily on issues related to aluminum smelting and fossil power projects. AIC has a good partnership with main contractors in Saudi Arabia hence becoming their steel supplier (Al Khaimah, 2011). The company has managed to earn reputation in plate works, piping, sheet metals, telecommunication and power transmission. Below are some of the factors to consider in determining AIC readiness to internationalize
AIC has export experience as it has made investments beyond the Saudi Arabian domestic market. Internationalization is a complex undertaking that demands sufficient organization and coordination of the teams and resources in the international markets. The desirability and feasibility of exporting are among the primary phases of assessing a company readiness to export (Cavusgil, Knight & Riesenberger, 2016). Domestically, AIC controls the local market in steel fabrication within Saudi Arabia. In its business strategy, the company has considered its ability to expand beyond national borders as it has set up secondary plants in UAE, China and Europe (Arabian International Company for Steel Structure, 2018). Due to the high productivity of the firm, AIC has discovered that the domestic market is limited in demand and would possibly organize, produce, source, market and carry out activities that add value in the international scale.
The manufacturing capacity of a firm is its production volume (Kadric & Rangelova, 2013). AIC can invest in the international business regardless of the stiff competition in some foreign markets as it has a high manufacturing capacity. In construction projects, the company can erect and construct complex steel structures irrespective of their height and weight (Al Khaimah, 2011). Due to its large-scale benefits, the company can acquire modern and high-tech machinery and equipment to sustain its competitiveness in the construction and steel fabrication sector (David & Cariou, 2014). As a result, AIC has managed to make steel supplies in foreign countries such as Qatar, Bahrain, Algeria, and Europe despite the level of competition posed by local firms in these countries. It, therefore, indicates that AIC has high manufacturing capacity.
Highly skilled employees are important to the success of a firm in the global market (Venkat, 2015). According to Arabian International Company for Steel Structure (2018), AIC's HR employees have the competence to recruit competent workers to work in new markets. It has enabled the firm to have a highly skilled team and experienced engineers who enable the firm to offer quality services and produce quality products in the global market. They regularly undergo training to acquire up to date health and environmental safety guidelines among other protective practices to conform to the international standards and requirements of the construction industry.
Foreign Market Intelligence
Firms need to have information on legal, social, economic setting of a country before expanding their operations there which is referred to as foreign market intelligence. Foreign market intelligence involves acquiring essential data to understand the logistical costs, political, social and legal setting, level of competition and trade barriers (Griffin & Pustay, 2012). From some of the projects AIC has carried out in foreign nations, the company's management has acquired skills and ample knowledge to coordinate resources and collaborate with intermediaries and facilitators. The intermediaries are part of the international supply chain who would provide the company with a variety of logistics and marketing services in the foreign market (Arabian International Company for Steel Structure, 2018). Facilitators would guide AIC through international business transactions, foreign policies, and variations in competition. AIC has interacted with several intermediaries and facilitators in some of the projects they have undertaken. Therefore, the selection of helpful partners in business would not be a challenge.
Methods for Assessing Industry Market Potential
Assessment of the industry market potential focuses on the estimation of the quantity of the sales in an industry in a target country. It investigates the potential risks to market entry as well as identify the promising markets. The assessment of the industry market potential is useful to AIC as it can enable the firm to determine its success in a host country through the competition, number of target customers and market gaps as well as make decisions whether it should invest in the country or not (Cavusgil, Knight & Riesenberger, 2016). Below are some of the analysis methods AIC management would use to assess the industry market potential.
Simple Trend Analysis
One of the methods used to assess market industry potential is the simple trend analysis. It is an approach used to quantify the overall amount of sales in a target country through the examination of the aggregate production of the industry plus the imports and deducting the exports to acquire the size of the sales in the sector (Arsham, 2015). If AIC could expand its business into America, the firm would use the financial data of the production of the steel industry in the US, add it to the steel imports in the US and deduct the number of steel exports in the US to estimate the current sales of the steel industry in the US.
Monitoring Key Competitors
Another method that AIC can use to assess the industry market potential is monitoring key competitors. For AIC to gain insight into the market potential of a foreign market, it is essential for the managers and sales experts to investigate the degree of activities by significant competitors in the country of interest (Cavusgil, Knight & Riesenberger, 2016). In America, AIC would consider the number of projects undertaken by Kern Steel Fabrication Inc. and Euramax International to get the volume of construction projects the firms secure in a given period. Most of this data is present in the public domain as financial statements and annual reports. It would be helpful in laying the company's strategies (Navarro-Garcia, Arenas-Gaitan, & Rondan-Cataluna, 2014). AIC can use the annual reports and financial statements of the competitors to estimate the amount of revenue it is likely to make in the foreign country.
Monitoring the Main Industry-Specific Indicators
AIC can also monitor the main industry-specific indicators to assess the market industry potential. In this method, the management team collects data from various sources to examine the industry drivers of the demand in the market (Cavusgil, Knight & Riesenberger, 2016). AIC can monitor the growth of housing development in the target country, the construction projects and the number of upcoming industries to identify the target customers(Waheeduzzaman, 2014). The data will enable AIC to determine the potential markets of its business. The ability to monitor industry-specific indicators would, therefore, be important in the assessment of the demand for AIC's products in the target country.
Close Relationship With Suppliers
It is important for firms to relate well with suppliers to acquire information about the market gaps and competitors. Many suppliers serve many clients, which enable them to learn different operations of their clients (Kelly, 2015). Therefore, a firm can acquire information about its competitors from suppliers. AIC needs to liaise with various suppliers in the target country to understand the activities of its competitors in the area (Cavusgil, Knight & Riesenberger, 2016). The information will enable AIC to identify the market potential and market gaps of the target country.
Various data sources can be used to sample the industry market potential. AIC data sources include the export market reports, national trade databases, import market reports, and the annual reports of competitors in the country of interest (Cavusgil, Knight & Riesenberger, 2016). Some of this information would give indications on the potential of the market regarding demand, income, and level of competition essential in global strategies.
AIC is a firm that is ready to internationalize because it has export experience as it has expanded into China and Europe. Its expansion into China and Europe also offers it foreign market intelligence on different markets across Saudi Arabian borders. The firm is also ready to internationalize as it can manufacture high quality and quantity of steel and has highly skilled employees. It is important for a firm to assess the industry market potential before expanding its business in other countries. Some of the methods AIC can use to assess the industry market potential include simple trend analysis to identify the amount of sales in a country and monitoring the competitors in the market to identify the market gaps. The other methods include monitoring the main industry-specific indicators to identify the potential demand in the market and having a close relationship with the suppliers to acquire information on competitors. Some of the data sources the firm can use to acquire information on market potential include import market reports and national trade databases. AIC is in the right path to internationalization as it has already began operating in countries such as China. It should focus on expanding its operations in more countries to increase its global market share in the steel industry as well as increase its revenue.
Al Khaimah, R. (2011). Arabian International Company for Steel StructuresLLC. Businessgateways.com. Retrieved from https://businessgateways.com/aicsteel
Arabian International Company for Steel Structure | AIC | Best Steel Manufaturer, Jeddah, KSA | Steel Structure Company. (2018). Aicsteel.com. Retrieved from http://www.aicsteel.com/
Arsham, H. (2015). Time Series Analysis for Business Forecasting. Home.ubalt.edu. Retrievedfrom http://home.ubalt.edu/ntsbarsh/Business-stat/stat-data/Forecast.htm#rgintroduction
Cavusgil, S. T., Knight, G., & Riesenberger, J. R. (2016). Internationa...
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