Globalizations of business

Every business, no matter how big or little, has internationalization as one of its top priorities. There are many definitions for this term; there is no single, widely accepted definition. However, from an economic perspective, internationalization refers to the situation where the majority of business operations are focused on the global market. In the modern world, businesses begin their operations by focusing on the domestic markets before developing plans and strategies for potential future expansion into the global market. The phenomena of internationalization has substantially altered the playing ground for many organizations, producing an expanded market environment with fierce competition from other businesses in the market. Companies decide to venture into the international market for many reasons, these reasons, however, vary from one firm to another depending on their goals and objectives. However, there is a common reason as to why most firms are eying to venture internationally. It is the pursuit of a more dynamic market since the domestic markets have since become congested and inadequate to sustain a certain number of firms. They, however, venture into the international market due to the economies of scale as well as the diverse opportunities that are presented in the international market. Any business executive with a vision would always try to find another market, in the event of the success of the domestic market. The Airbnb is an example of a company that has broken all the odds by entering the international market, this essay will examine some of the unique strategies which they used to become relevant in such a competitive marketplace.

Reasons for Firms Entering International Market

The international market offers an arena of business opportunities for all kinds of firms, from Small and Medium Enterprises (SMEs) to large businesses. Their goals may be varied, either selling or sourcing products from the global market. The global market is comprised of around 7 billion people, this is a very big market, and tapping into such a market provides diversified opportunities. Academic researchers have shown that businesses which go internationally are less likely to fail than those which rely on the domestic market. Instead, the firms which venture internationally becomes more competitive than the domestic ones. The Management of any firm needs to portray the desire for commitment to ensure that the business grows to attain the heights of the international market. The following are some of the reasons that necessitate successful firms in the domestic market to venture into the global market:

Increase in Profits and Sales

When a business is doing well in the domestic market, then the chances for it to be accepted in the international market is very high. Expansion to international market will enable an increased revenue for the firm. The economic growth rates of USA, Japan, and Europe are very low as compared to the highly lucrative emerging market. The population of Europe and the United States of America is around 300 million, but some of the emerging markets such as India and China, which has a population of more than 2 billion people serves as a big and potential market for investment, such a population definitely has a high demand for products and services. This is an indication that consumers are global, and when a company targets an offshore market, then there is a real potential in terms of the possibility of success. If a firm or company deals with a highly unique product or services which are rarely available to other international competitors, then this will amount to a definite success in the international business. There is a possibility also that an international market may offer fairly higher prices for products and services as compared to domestic markets, this, however, will translate to higher revenues to the firm or company. Most of the imports are normally paid in terms of premium brands and products, hence the more the sales in the foreign market, then the more the revenue, as well as profits.

Security

When a firm ventures globally, then it will be secure, there will be minimal risks in business which are caused by the downturns and constant fluctuations of the domestic markets, the firm would have diversified its operations to the global marketplace, thus there will be a minimal effect. When it comes to instances of economic recessions, exports will only provide for a sustainable source of income to the company. When companies engage in a wider market, then the risks are diversified (Azuayi, 2016:3). The sales from the foreign market will sustain the company, maintain or even improve its productivity as well as its financial structure.

Advancement in Innovation and Management

In the event of a firm’s extension of its consumer base to global marketplaces, there will be the need of financing new product development. This will enable the firm to acquire an experience in the international market as well as taking lessons from the competitors and the competitive market. This will enable the firm to learn how to handle a sophisticated market as well as its consumers. This practice with a complex market structure and experienced international competitors will be very beneficial for the firm, this will reflect on the firms marketing and product design, thus making their performance in the world market better and better.

In a majority of the sectors, the participation of a firm in the international market is considered as a basis for the qualification of becoming a world brand or leader, even though the profit margins are still very low, this shows that there is a promising future since the firm is associated with the market leaders. The lead market currently is the United States, especially when dealing with information technology and software, France and Italy are leading in Textile and fashion, Japan is the leading producer for electronics and Germany leading in motor production. There are also so many other leading markets such as China and so on, once a firm is in the market with such giants, then the system has to be improved. The firm, for it to maximize the advantage of learning from the leading market, it has to fully participate by using its own subsidiary. It is best to learn directly from the market, other than direct dealers.

Economies of Scale

Going international or exportation is a very important way to expand any business, especially when the firm’s products are widely accepted around the globe. When a firm gets into the international market, especially from the manufacturing sector, then the possibilities of achieving a greater scale of the economy are very high. In some cases, a company may seek to take advantage of intellectual properties or their differentiating advantages such as the patents of products, brand, and service model.

Airbnb

Airbnb is a firm which I believe penetrated into the international marketplace very easily and quickly. Since its inception in 2008, the company has spread further to covering more countries globally. It is an online market which provides hospitality services. The Airbnb enables people to rent or lease short term residing places or lodgings which includes renting apartments, hostel beds, vacation rentals, hotel rooms or even homestays. The company, however, does not own any of the above properties, but they just broker and gain certain percentages from the deal or commissions from both sides, the guest as well as the host in regards to every booking they make. The firm has expanded rapidly since its inception and has more than 3 million lodgings which are located in 65 thousand cities across the globe. The cities are from 191 countries, the cost or the fee per the lodgings is set by the owners or the hosts, the company just obtains commissions from their clients and the host (Airbnb).

With bedrooms and homes available in thousands of cities, and hundreds of countries, the firm operates in more than twice the number of regions as compared to the giant company, Uber. Unlike firms such as Pinterest or Snapchat which have only grown within the United States, the Airbnb does have access to territories beyond the boundaries of the United States, earning over $ 25 billion in the home sharing services, (Solomon, 2016). The largest market for the United States based firm is actually Europe. Even after such expansive markets, the Airbnb is still considering a further expansion to other markets.

Strategies used by Airbnb

It is rare to find companies which have experienced the rapid growth and global success like the Airbnb. A few years down the line, the company, as it started in San Francisco, it allowed people in the locality to turn their homes and bedrooms into vacation rentals. This is how small the company started, but currently, it has gone global and big, the firm has a target to list more vacation rooms, homes, and lodgings than the entire size of the Marriott empire, (Yip, 2017). The expansion of the firm is still in progress, and it is breaking banks into more foreign markets. For instance, in 2016, when Cuba opened its doors for the American businesses, the Airbnb seized the opportunity by acquiring a record of a thousand listings within a very short time. This raises a lot of questions: how did such a company break into the global market so rapidly? It is obvious that their products are unique and great, but it is very difficult to grow and expand too rapidly within a very short time in the international marketplace, even for the best and experienced companies in the market is very tricky, since there are clones, which personify established markets and register growth. What are the strategies used by Airbnb to break into the international market? In this essay, I am going to examine some of the lesser-known strategies that were utilized by the company to grab the international marketplace by surprise and registering an unwavering success over a very short period.

Localization

This is a unique strategy used by Airbnb. As a registered brand, Airbnb had to present itself as a global/world citizen. In this way, by registering itself as a global citizen, the firm has been able to adopt a variety of new languages, majorly spoken in the global market. According to Jason Katz, an Airbnb engineer, he says that it is very important for the company to be both a local company as well as a global company, (Yip, 2017). As a result of this, the company has taken steps towards localization, they have undertaken translation as one of their first strategy in attaining localization. As a result of this, Airbnb has managed to translate into 26 different world languages, this has enabled them to reach a vast number of clients all over the globe. The management of the vast languages is very difficult, but Airbnb has managed to acquire a lot of important and smart moves in engineering which assist them in management, this makes them stand out in the global market, (Yip, 2017). The Airbnb engineers have developed a software platform which is designed specifically for localization. They have incorporated what they call the Translation Management Tool, abbreviated as (TMS). The platform has been essential in allowing the company to integrate new languages as well as updating the existing ones. The tool comprises of some intelligent features, in the event of a new feature is introduced into the TMS, then the tool takes a screenshot and immediately sends it to the translators, then they edit it into the correct context.

Close Assessment of Variation in Language

Languages may vary from place to place; therefore, it is for this reason that Airbnb takes very close attention to prevent ambiguity. For instance, the language spoken by the mainland Chinese may vary from those living in Hong Kong. These distinctions are many times ignored by most companies, but Airbnb has the goal of demonstrating localization at all levels, (Yip, 2017). These variants are taken seriously, and specific sites are formulated for such instances. Language variation is a characteristic of language. It is a difference in saying the same thing by speakers, they may vary depending on the accent, lexicon, or even their syntax, (Marjory and Janie, 2001). The Airbnb engineers have developed applications which switch spellings from one region to another for instance, there is a difference in some spellings in American, Canadian, and British versions, and therefore the application will detect such variations and correct them accordingly (the change of the word holiday to a vacation). The application, therefore, changes into different versions of languages.

Translator Community

It is very difficult for Airbnb to translate the vast amount of data on its own, and quickly enough. To enable this, Airbnb has developed an in-house translation and crowdsourcing jobs. At the start of the localization process, the firm employed translators to form the crowd, and they utilize them to translate the worldwide languages that the guests and hosts speak. The crowdsourcing is cheap, quick and efficient. In case of any errors of accuracy and consistency, the localization management team and the in-house translators provide assistance by checking the translations from the crowdsourcing team and ensuring that they are fit.

Supply Tactics

According to Rebecca Rosenfelt, the Airbnb’s Growth Product Manager, they have realized that the company cannot depend on only the online strategy, since most of the competitors are also relying on the same tactic, therefore they have resulted in the offline strategy, which they refer to as “Guerilla Strategy” (Yip, 2017). They believe that at some point, face-to-face communication is more appealing to human beings than online meetings. They understand that these may vary from different cultures. Citing an example of France, where the use of Facebook is very ineffective, therefore they invest in emissaries who are sent to meet the potential customers in such regions. The emissaries will be responsible for setting up flyers, setting up booths, and many other offline activities. The France emissaries yielded five times more than the advertisement of Facebook. This approach has also been used in Cuba, one of the new markets for the Airbnb Company.

Word of Mouth Marketing

This is another strategy whereby Airbnb believes that it is essential for growth. According to the Growth Product Manager, Gustaf Alstromer, he believes that the Airbnb users will tell the story better than them, therefore, the users are paid to spread the Airbnb services through various social media platforms, and other platforms known to them (Yip, 2017). The company has developed a referral which is aimed at encouraging the travelers to market Airbnb by offering credits to their accounts. This applies to both the recipient and the referrer. This was rolled out in the Asian continent more since people there tend to utilize the mobile phone browsing more than the other mediums. Airbnb ensured that the referral programs were made available for these people to spread the message about the company.

Alternative Strategies

Airbnb is arguably the most rapidly expansive firm globally. It has shown the relentless ability to conquer the markets, irrespective of the geographical differences and language, but there are markets which are dominated by other strong and experienced competitors thus making it more and more difficult to have a share of the pie. The following are some of the strategies that Airbnb management should use or could have used to penetrate such markets slowly and effectively:

Franchising

Franchising is a business concept where one business is given the right to use another firm’s business brand and model for a certain period of time agreed between the two firms. This will be a great idea for penetrating through even the toughest markets. Airbnb is already a successful brand, known globally, therefore, the management has to seek the other players and competitors in the market by approaching the business owners in hotels, and restaurants, tourist resorts, and many other businesses which are related to the services of Airbnb and give them the right to open their own businesses or even open branches of Airbnb in their premises. Then after establishing these with the potential customers, then they will pay Airbnb a certain agreed amount from the proceedings of the franchise.

This is the best way to break into new and competitive markets, and it is very easy. It is just taking up the existing business model and franchising it to already established business brands in the new market. This will enable Airbnb to not only dominate the world market but to stiffen the competition between its competitors. The best thing about franchising is that it allows for scouting to unlimited markets and provides vast potential to any business with a successful brand like Airbnb.

Partnership

Another strategy which can be or could have been utilized by Airbnb is creating a partnership with the already established companies in the new market. Airbnb can get a partner in a foreign country to assist in the marketing process; in this way, the partner will receive a certain cut from the profits made by Airbnb. Or an alternative to that is to find a partner in a foreign nation in which has invested in almost the same business as Airbnb, then they create a partnership by pooling resources. The partnership is very easy and cost-effective, and it eases the issue of adapting to a totally foreign market. The partnership has to be vetted properly to ensure that they meet the requirements of Airbnb, a partner who will contribute equally or even more to the partnership. This will enable a quick grip on the new market, and at some point might allow an easy transition in the case of the dissolution of the partnership. There are some tough markets which are very difficult for one to break into it, especially when it is a foreign company, therefore, a partner will come in handy in helping to break the market.

Conclusion

There are so many reasons as to why businesses try to break into the international market. They enter into this enormous market due to the need for an increased profit, economies of scale, the securities for their businesses, and much more depending on their goals and objectives. Some of them may take a lot of time to enter the international market, while others may break in too rapidly and easily. All these depend on the strategies which will be employed; the strategies should be unique and attractive such as Airbnb’s tactics which have been overlooked by most companies. Their unique strategies have enabled them to become big after a very short time in the market. I believe that when they include the above alternative strategies such as the partnership and franchising, then the company will be able to take the global market hostage.

References

About Airbnb. Retrieved from;

Azuayi, R. (2016). Internationalization Strategies for Global Companies: A Case Study of Arla Foods, Denmark.

Brian Solomon. (2016). “How Airbnb Expanded To 190 Countries By Thinking Glocal.” Retrieved from:

Marjory, M. and Janie, R. (2001). ”Language in social contexts”. Contemporary Linguistics (Fourth ed.). Bedford/St. Martin’s