Babycenter Was Facing Several Strategic Case Study

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[. . .] In many other ways, however, BabyCenter's international expansion reflected the international expansion for a usual company. Indeed, it would need to adapt its products to the local markets, paying a serious attention to each of the specific characteristics of the markets in cause. Additionally, it would have to take into consideration building a local network for the product distribution and for customer service, as well as for addressing the customers' needs. BabyCenter needed to evaluate which strategic option would best fit its international expansion plans.

Practice had showed that there were three specific strategies that e-companies could pursue in the case of an international expansion. The first one referred to licensing. This was a quick way of penetrating a foreign market and generally brought high starting revenues, because it provided an immediate entrance on the market. However, if the wrong local company was chosen, the mother company could lose image capital and the brand could be negatively influenced in the future.

Subsidiaries brought the advantage of a direct and maximum control over the operations. The main advantage of control was somewhat counterbalanced by the fact that the measure was not a particularly cost-saving method: it implied a lot of costs and a rather centralised decision taking process. I would also add the fact that it would imply a greater level of risk in what implementing is assumed. I am considering here the fact that the company would enter the foreign market on its own, without splitting the risk with a local licensing company or with a franchise. In general, economic theory does assert the fact that direct implementation is a riskier way of entering a foreign business.

The joint venture option seems to be half-way between the two: it allows the company to exercise its influence while being less financially burdensome. However, such a strategic approach implied a full cooperation from both participants and recent cases had shown that most participants in a joint venture preferred to reserve the best specialists for their own companies and that the contribution made to the joint venture were generally smaller. This could mean a lack of efficiency and productivity for the joint venture and a minimised chance of success. Additionally, in BabyCenter's case, the unique model the company provided, with the combination of content and commerce made it more difficult to use such a model. To this I would also add the fact that, as I have mentioned in the lines above, the market BabyCenter operated in was not particularly predisposed to alliances, but was rather more fragmented, with a 'everybody on their own strategy'.

I have briefly described each strategy for expansion in order to determine the one best fit for BabyCenter. We should keep in mind the three principles on which BabyCenter's international expansion is based: a powerful global brand, near-term risk and long-term value creation and a minimised impact on the current financial resources. If we look at these three principles, they seem to rather hit each other in the head: licensing provides a cheap and low risk option, but it may affect the company's long-term value, not to mention the fact that the powerful global brand may be affected as well. The subsidiary option provides important perspectives for the long-term creation, however, it is costly and we cannot be sure it will actually fulfil condition number three.

However, I am taking into consideration the fact that BabyCenter has already identified the markets it wants to operate in and that some of these have particularly high requirements for the commercialised products (I am referring here to the German market, for example, where higher standards need to be met). In this sense, the subsidiary strategic option is probably best because BabyCenter will be able in this way to better control its decisions and best be able to build a powerful global brand. The financial aspect is to be taken into consideration, however, it is my opinion that this is probably BabyCenter's best choice.

As for the third strategic issues that need be discussed, regarding eToys's proposal, we should evaluate this from two perspectives: the present position of BabyCenter and how capable it is of building a global business on its own and the differences between the companies, in order to determine whether such a merger may be successful. It was obvious for BabyCenter's management that the etoys could help the company grow, however, the important question that they should have asked themselves would have had to be "can we grow by ourselves?." In my opinion, the answer is yes.

The company had proved that it could develop a local and then national brand and that it was already one of the key players in the field. Additionally, eToys was deemed to be different in many ways and this may constitute a reason not to join forces with them.

However, in making this evaluation, one has to take into consideration some of the challenges I have described in the lines above and that I will resume here. The international expansion process is itself a large challenge, formed from several smaller challenges. We should only consider for example, the other competitors, the particularities of this market, the choices facing international expansion, the financial challenges, etc. On the other, hand, staying competitive in the home market, where BabyCenter already constitutes a brand recognised within its targeted market, is also a serious challenge, given the numerous competitors, both… [END OF PREVIEW]

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Babycenter Was Facing Several Strategic.  (2004, March 29).  Retrieved February 22, 2019, from https://www.essaytown.com/subjects/paper/babycenter-facing-several-strategic/9827611

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"Babycenter Was Facing Several Strategic."  Essaytown.com.  March 29, 2004.  Accessed February 22, 2019.
https://www.essaytown.com/subjects/paper/babycenter-facing-several-strategic/9827611.