The AIC Readiness to Internationalize - Research Paper

Introduction

Internalization is defined as the extension of firms' services past the national boundaries. Among the recent modern approaches used by most corporations with an intention to expand in this 21st century is internalization (Kelly, 2015). Almost every company has an interest in internalization as their way of getting market expansion opportunities, achieving the economies and risk diversification (Kelly, 2015). The readiness of a firm depends on the firm's efforts to grow in different countries. Arabian International Company (AIC) works on revealing firms that are ready to internationalize since it has experience in exporting, they can also manufacture quantity and quality steel items, have operated in China and Europe thus have intelligence on the foreign market. Sampling data source and monitoring and closely relating to key competitors are some of the methods that can be used in assessing the industry market.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

The Arabian International Company and its Readiness to Internationalization

Arabian International Company is a structural steel engineering, manufacturing and fabrication Company owned by Saudi Arabians. The company was founded in 1994. Headquarters for AIC is in Jeddah while the secondary plants are located in the UAE (Al Khaimah, 2011). The AIC with the main contractors in Saudi Arabia has a very good partnership; thus they have become their suppliers for steel materials. Moreover, this company has built its reputation in piping, sheet metals, plate works, power transmission, and telecommunication. The following are the factors used in considering the readiness for AIC to internationalize.

Export Experience

The AIC is much experienced in the export market; thus is market has expanded beyond the Saudi Arabian borders. Among the primary phases of assessing any company's readiness in export is feasibility and desirability (Cavusgil, Knight & Riesenberger, 2016). The AIC steel fabrication market has taken control of the local market in Saudi Arabia. The company has finally considered its abilities in expansion beyond the borders of Saudi Arabia since its secondary plants are in Europe, China and UAE (Arabian International Company for Steel Structure, 2018). That happened since the company discovered they have limited demand in their domestic market because of the high firm productivity and thus, they would source, market or do activities to add value in the international market scale.

Manufacturing Capacity

The manufacturing capacity of a company also refers to as its volume of production (Kadric & Rangelova, 2013). Despite the high competition in some external market, AIC can invest in the international business since it has high manufacturing capacity. The company can put up complex steel construction regardless of their weight and height (Al Khaimah, 2011). To maintain its competitiveness in the construction as well steel fabrication sector, the firm can obtain present-day and high-tech machinery with its massive benefits (David & Cariou, 2014). For this reason, AIC has been able to make steel supplies to sustain the external market which comprises of Qatar, Bahrain, Algeria, and Europe regardless of the stiff competition brought about by local firms in these countries. This is a clear indication of the high manufacturing capacity exhibited by AIC.

Human Resource

For a firm to succeed in the international market, there is a need for high-skilled workers (Venkat, 2015). AIC's HR employees are experts in recruiting proficient workers to work in new markets in accordance with Arabian International Company for Steel Structure (2018). As a result, the firm has been able to obtain a competent team and experienced engineers who facilitate the offering of quality services as well as the production of quality products in the global market. Acquisition of current health, environmental safety guidelines, and other protective practices are attained through frequent training. This helps the firm to match the international standards and compulsions of the construction industry.

Foreign Market Intelligence

Before the expansion of operations, a firm should seek adequate information on legal, social, and economic setting of a country which is known as foreign market intelligence. Foreign market intelligence entails the acquisition of crucial data to comprehend the logistical costs, political, social and legal setting, level of competition and trade barriers (Griffin & Pustay, 2012). AIC's management, therefore, has obtained skills and sufficient knowledge to manage resources and work together with intermediaries and facilitators following some of the projects the company has executed in foreign countries. These intermediaries form part of the international supply chain who would offer the company with a variety of logistics and marketing services in the foreign market (Arabian International Company for Steel Structure, 2018). On the other hand, facilitators would offer guidance to AIC through international business transactions, foreign policies, and fluctuations in competition. Selection of essential business partners is, therefore, eased by AIC interaction with some intermediaries and facilitators in some of the projects they have carried out.

Methods for Assessing Industry Market Potential

Assessment of the potential of the industry market concentrates on the quantity of sales approximation for an industry in a particular country. In addition, it examines the probable risks to market entry as well as identifying the promising markets. Determination of a firm's success in a host country through competition, various target customers and market gaps, as well as decision making, can be enabled by evaluation of the industry market potential (Cavusgil, Knight & Riesenberger, 2016). Some of the methods of analysis employed by AIC management to assess the industry market potential are explained below.

Simple Trend Analysis

Simple trend analysis happens to be one of the methods used to assess market industry potential. This is a strategy used to depict the overall quantity of sales in a specific country by examining the cumulative production of the industry adding the imports and deducting the exports to obtain the size of the sales in that particular sector (Arsham, 2015). The firm would employ the financial data of the production of the steel industry in the US plus the steel imports in the US then deduct the number of steel exports in the US to approximate the current sales of the steel industry in the US could it expand its business into America.

Monitoring Key Competitors

Monitoring key competitors can also be used to assess the industry market potential. It is important that managers and sales experts carry out investigations of the number of activities done by the competitors in a target country to enable them to be aware of the international market potential (Cavusgil, Knight & Riesenberger, 2016). To obtain the volume of construction projects the firms secure in a particular period, AIC would focus on the number of projects executed by Kern Steel Fabrication Inc. and Euramax International if they were to assess America's market potential .data that they would require in this process is usually available in the public domain in form of annual report and financial statement and would it aid in formulating strategies of the company (Navarro-Garcia, Arenas-Gaitan, & Rondan-Cataluna, 2014). In addition, these competitors annual reports and financial statements can be used by AIC to estimate the probable amount of revenue which they can make in the foreign country.

Monitoring the Main Industry-Specific Indicators

To assess the market industry potential, AIC also monitors the main industry-specific indicators. With this approach, collection data from different sources to examine the industry propellers of the demand in industrialstry market is done by the management (Cavusgil, Knight & Riesenberger, 2016). In a bid to determine the potential market, AIC can assess the growth of housing development in the country of interest, the putting up of projects and the number of emerging industries (Wahezaman, 2014). Therefore, monitoring industry-specific indicators would, therefore, be important in assessing AIC's products in the target country of interest.

Close Relationship with Suppliers

Interaction of various suppliers while serving their numerous clients lay a platform for them to understand different operations of these clients (Kelly, 2015). Therefore, it is essential for companies to maintain good rapport with their suppliers to obtain information regarding competitors and present gaps in the market. By working together with various suppliers in the country of interest, AIC can comprehend the activities of their competitors in that specific area (Cavusgil, Knight & Riesenberger, 2016).

Sampling

Sampling the industry market potential can be drawn from different sources of data. For AIC the sources of data include the export market reports, national trade databases, import market reports, and competitors' annual reports in the target country (Cavusgil, Knight & Riesenberger, 2016). Drawing from the information gathered, AIC is in a position to determine the market potential regarding demand, income, and level of competition essential in global strategies

Conclusion

Following the expansion of AIC into China and Europe, it is a clear indication of its readiness to be an international firm. As a result, foreign market intelligence is acquired regarding different markets across Saudi Arabian borders. The ability of the firm to manufacture high quality and quantity of steel as well as having highly skilled employees proves its preparedness to internationalize. However, before investing in foreign countries, there is a need for the potential of the industry market. This can be done by employing methods such as, simple trend analysis which helps in the identification of the quantity of a sale in the country. The other method is, monitoring the competitors in the market to point out the market gaps. Import market reports and national trade databases are some of the sources of data AIC can use to obtain information on market potential. Having begun operations in countries like China, AIC has proven its determination to internationalize. Again, AIC's focus should be geared towards the expansion of its operations in more countries to increase its share in the global market in steel industry translating to an increase its revenue.

References

Al Khaimah, R. (2011). Arabian International Company for Steel Structures LLC. Businessgateways.com. Retrieved from https://businessgateways.com/aicsteel

Arsham, H. (2015). Time Series Analysis for Business Forecasting. Home.ubalt.edu. Retrieved from http://home.ubalt.edu/ntsbarsh/Business-stat/stat-data/Forecast.htm#rgintroduction

David, J. P., & Cariou, G. (2014). Evaluating the Firm's Readiness for Internationalization: from the Design to the Application of an International Qualification Framework. International Journal of Business and Management, 9(7), 1.

Griffin, R. W., & Pustay, M. W. (2012). International business. Pearson Higher Ed.

Kadric, E. S., & Rangelova, T. (2013). When is a firm ready to go abroad? An analysis of SME internationalization readiness.

Kelly, N. (2015). Seven Traits of Companies on the Fast Track to International Growth. Harvard Business Review. Retrieved 19 March 2018, from https://hbr.org/2015/03/7-traits-of- companies-on-the-fast-track-to-international-growth

Meyer, K. E., & Estrin, S. (2014). Local context and global strategy: extending integration-responsivenessness framework to subsidiary strategy. Global Strategy Journal, 4(1), 1-19.

Cavusgil, S. T., Knight, G., & Riesenberger, J. R. (2016)...