International business strategy is a critical component of the holistic approach of organizations attempting penetrate international markets successfully. Business organizations have to create approaches which will cater to all organizational facets such as marketing, human resources management, operations management, risk management and other critical aspects of an organization if they have to put together feasible international strategies, which will suffice in overcoming challenges of entering international markets. Although there is ongoing debate on multinational corporations strategy over the approaches like standardization versus adaptation there is confluence of ideas and the recognition that multinationals have to put together working and feasible business strategies that will suffice for the volatile and distinct environs in which international businesses operate.There are various factors that exert significant pressure on international businesses to formulate working short term and long term strategies germane to the accomplishment of their objectives and goals. Upon the underlying fact that human needs are basically the same across countries and communities, sticking variances obtain in aspects cultural, economic, geographic, political etc. This means that international business management organs must be at the top of the game in ensuring that policy and strategy are appropriately aligned to yield desired results
Corporate strategy focuses on wide and far reaching goals and purposes of an organization. The strategy focuses on the accomplishments of set goals in line with expectations of the stakeholders. Other international business organisations leverage on Business Unit strategy which is a concept that boils down to the aspects of products and services or products being rendered. The other critical strategy component is the aspect of operational strategy which can also be used in international business strategy to yield desired results in as far meeting organization goals in concerned.
The success of Lafarge in the international landscape must have tapped in the advantages of some of these strategic concepts. The paper focuses on the factors which have affected the growth of Lafarge on the international landscape. The success of Lafarge points to the positive impact of these factors on the growth of the company.
The international cement industry is gradually transforming into an oligopoly through the creation of mergers and acquisitions, which culminate in capacity concentration, and the dominance of the international landscape by a few transnational players. The researchers however note that the international structure of the industry is still unstable with no single player with two digit market share. The major players lack the capacity to administer price discipline as they are subjected to increasing operating costs and depressed margins. The case of Lafarge makes for good reading in the international construction materials industry scenario because of its outstanding performance over the past years. The paper will involve a cross sectional exploration of the international construction materials industry featuring key aspects which have differentiated the position of Lafarge from that of its competitors through elements such as pricing and market segmentation among other key international strategy concepts.
Innovation in technology is highly likely to worsen the uncertainty climate that is permeating in the international business areas. The levels of uncertainty are obstacles to the strategies laid out towards the achievement of set cost efficiencies. The previous has however been looked at as an opportunity by international business player such as Lafarge which has preferred to focus on alternative energy sources and to continue with investment in production technologies as well as processes which must be sufficient for addressing the dynamic of higher energy prices.
The critical dimension which Lafarge have kept in focus is that of the diesel prices since about 60-70 percent of its products are transported on road using diesels fuel. The dynamics of diesel prices is critical to the need to manage and improve operational costs for business establishments like Lafarge.
The marketing mix plan of Lafarge has focused in the differentiation of its product a strategy that has been filtered down to sub-concepts of market segmentation. On the pricing technique of the Lafarge’s marketing mix drive the company has had to consider that demand is locationally differentiated. Cement standards are common across the borders and the demand for their product is largely influenced by economic factors such as population growth, interest rates and economic policies which directly or indirectly have a bearing on infrastructure development, is such policies are set. Another consideration is that cement is a homogeneous product with significantly low elasticity due to lack of substitute material. Lafarge international strategy is supported by the close relationship between the company’s product rage and the type of markets that is penetrates. James, Feud (2007, pp. 23) states that in Asia Lafarge considered the growth potential posed by the booming construction industry. As such the Company has focused much on providing the cement products as its chief product. Lafarge has used the same strategy especially penetrating African markets such as Nigeria and Morocco. In the areas such as Nigeria Lafarge has remained the flagship producer of the vital construction input. Lafarge international strategy is premised in identifying key needs in its target markets and aiming to satisfy the identify needs.
The international cement industry and market have been and continue to be affected by the launch of a chemically reinforced product known as Fly Ash which may replace cement effectively. According to the researcher in 2002 prices of specialty cement went up by 12 percent also characterized by an increase in demand of about 4 percent. Against the mentioned, in 2004 the specialty cement price increased by a further 9 percent, which triggered a 17% increase in sales of Fly ash. Baron, David (2008, pp. 36) outlines that high production as well transportation costs together with a sizeable initial investment make up strong entry obstacles to local companies in the international cement production industry. The scholars express that under such conditions cost efficient companies have the capacity to engage in selling on the basis of a marginal costs.
Like any international activity Lafarge faces various challenges in the current international business realm affected by the international economic crisis. Lafarge has to support its strategy in line with the goals of maintaining and consolidating the growth that it has registered over the past years. Lafarge will be able to accomplish this if it manages to break down the long term and medium term goals into five aspects outlined in the following paragraph. The first item on the list of priorities of the company’s overall strategy is the continuing of the growth registered in the past years. On this aspect, the growth rate may not be expected to match that of the past years but the bottom line will be that growth must be maintained and sustained. The second aspect deals with structural techniques. The company has to ensure the actualization of the benefits from its restructuring strategy. The third aspect is on the rapidity of integration. Lafarge has to consider the qualities of speeding up the integration of acquired businesses to quickly generate synergy and enhance value in the company’s systems and processes components.
On the fourth aspects, Lafarge must focus on the internationalization of its labor team. As Redman, P (2006, pp.45) concurs this will involve expansive training programs customized to empower managers with necessary skills in order function effectively and efficiently in diverse Lafarge markets across the globe. The training programs will also have to represent elements that will equip the managers with necessary skills of handling cultural diversity, which characterizes the international business play field. The last of the five aspects focuses on the management of the important human resource component that has doubled over the past years for Lafarge owing to the company’s rapid growth and expansion. The company has to support the fifth aspect on some of its human resources management strategy addressed as managing people the 'Lafarge way'. This will enhance the extensive human resource management approach since it already caters to the need to equip employees with flexibility and adaptability attributes required for best performance in culturally different international business backgrounds. Lafarge has a stable and practical market position supported by a strong financial structure. This signifies that the company is ready for future growth through successful market access as well as development. Som (2009, Online resource) states, “Lafarge, today, operates in 75 countries with 77,000 employees, and achieves 14.6 billion euros of annual sales through its four divisions. Barely five years ago, in 1997, Lafarge operated in only 35 countries with 35,000 people and had a sales turnover of 6.4 billion euros.” The foregoing illustrates the growth prowess of Lafarge. This implies that there is need to come up with a sales framework with important drivers aimed at customer profitability presenting a possible opportunity for Lafarge.