Background of Haigh’s Chocolates
Business expansion is the most critical strategy that is used by any firm. However, at the time it has become an important business strategy due to the increasing globalization of the business world (Cavusgil, & Knight, 2015). Amin motive behind the industrialization or expansion of a business is to own to the growing global business market. The base of an international expansion of any company is all about the opportunities available in the international business market to take a competitive advantage for the business purpose (Zhang, Ma, Wang, Li, & Huo, 2016). Small and medium enterprises face various issues while expanding their business in foreign countries. A basic requirement for business expansion is a complete market analysis of the target country to make a business sustainable and growing.
In this report business environment of New Zealand is analyzed in terms of its FDI policies and other business environmental factor affecting an FDI. This report analyses market policies and their suitability for investing in New Zealand by Haigh chocolates.
Haigh’s Chocolates is an Australian family business based in Adelaide, South Australia. Alfred E. Haigh found this company in 1915. Today company has its own stores in four states of Australia. In these four states, this company has total 17 outlets. Today, the company successfully employs 550 people throughout the factory and administration of the company. This Company has a vision of delivering excellent chocolates to its customers (Haigh’s Chocolate, 2018a). To achieve this vision company has some business values like collaboration, clarity, respect, and responsibility to make the business more successful as well as sustainable in long run (Haigh’s Chocolate, 2018b).
Haigh’s Chocolates manufactures chocolates to serve the best chocolate experience to its customers since 1915. Product list of the company includes the chocolate manufacture in its factory categorized into seven categories as Boxed Chocolates, Loose Chocolates, chocolate Confectionary, Chocolate Bar, Chocolate Novelties, Chocolate Blocks, and Haigh’s Selection. These chocolates are also available online (Haigh’s Chocolate, 2018a).
Business expansion has become an essential strategy for an organization to take their business internationally and make it more sustainable (De Mello, Ghauri, Mayrhofer, & Meschi, 2015). Today, the company is successful in its home country and growing well. Now, it is the time to expand its business overseas to take the business in global reach. In order to expand the well-established business, the company has selected the target country like New Zealand. However, for any business expansion, before investing in a new market, it is very important to analyze the business environment for FDI in the target country. To expand a business in a foreign market there are different international strategies. Some of them are as discussed below:
International expansion: Opportunities and challenges
This is the strategy used to compete in the international business market. In other words, global strategy defined as a strategy to expand a business in the global market to compete for other international businesses. This strategy used to make business in different countries and exporting and importing of products as well.
Companies use this strategy to invest in operations of the company in both the home country as well as abroad. However, directors and managers of individual market are decision makers of their respective regions. In addition, local management only has to do all the R&D work for their respective regions.
International strategy used to increase the profit of the company. In this strategy, the company sells its products to international customers through international suppliers. However, does not have any office or factory in a foreign country (Hitt, Li, & Xu, 2016).
An international strategy would be the best alternative for the company to make an entry in the global business market. Through this strategy, company would be able to increase its profitability as well as testing its sustainability in the foreign market. Being the first step to take the business globally, the feasibility of sustainable market growth in the foreign market is very important to make a huge investment in a foreign country.
To make a huge investment company has to analyze its market sustainability and Ansoff’s matrix can make it easier for the company (Chiang, Chen, & Ho, 2016). Ansoff’s matrix defines four different strategies defined on market and product scale. These strategies are market development, market penetration, diversification, and product development strategy.
Among all these strategies, market penetration strategy suits best for Haigh’s chocolates. This strategy applied for the existing market as well as an existing product. In this strategy, the company can make more profit with new market penetration of New Zealand.
In order to expand a business internationally, various entry modes are available to the companies. These entry modes help the organization to expand their business in the targeted country with the help of a pre-existing company already established there, partnership business, or any other method (Andreu, Claver, & Quer, 2017). Some of these international market entry modes are as below:
Typically, exporting is the easiest way to enter a new country market. This mode of international entry makes a fast entry as well as with the lowest risk. Along with these advantages, there are several disadvantages of the mode as low control over the market, less knowledge about the local market, and potentially negative impact of the local business environment.
Ansoff’s matrix and market development strategy
Strat3egic alliance with a local partner is another way to enter a foreign market. This strategic alliance includes a contractual agreement between partners stipulating the business in a new country. Both the parties will corporate in a certain manner for a certain time-period to achieve their common objective to make more business. To adopt this entry company has to determine whether the partner has the market value worth of making an alliance with or not. This mode has advantages as shared cost to reduce their investment needed, low risks, and achieve local customer with the local brand value of partner-company.
Acquisition entry mode is a transaction to take control over a local enterprise in the target country to expand a business overseas. This acquisition transaction takes place in terms of purchasing acquired business’s stocks, exchanging stocks, or paying a purchase price in case of private companies. This entry mode has its own advantages as a fast entry with recognized brand value, well-known market, and established operating business network and operations. Also, it has some disadvantages as high cost required to acquire the target business and integration issues with the home office (Ferreira, Santos, de Almeida, & Reis, 2014).
Among these entry modes, exporting entry mode will be the best entry mode as it is the first-ever international market entry for the business. Therefore, exporting will have least risks for the business as well as well as is the fastest entry mode a business can have for international expansion. In addition, this entry mode will help to enhance the production of its manufacturing factory in Australia. This will help the company to enhance the R&D research to create new invent new products of flexible their product list according to the target market. Moreover, this entry mode reduces the cost of intermediates and makes the business more profitable.
In the last few decades, New Zealand has grown its economy with the help of international investments. New Zealand offers an attractive and open business environment to international investments. Transparent rules and regulations for foreign investment make investing a more straightforward process. In addition, the broad-based and low-rate tax regime of the country supports the long-term sustainability of foreign investment. New Zealand has a consistent political environment that supports good treatment for overseas investments and treats them on the same basis as domestic investors. Country has no restrictions over fund movement and repartition of profits within the country as well as out of the country (NZFAT, (2018). This makes the country best suitable for Haigh’s Chocolates expansion overseas. The success of the first expansion will motivate the company to grow rapidly and to make more investments in the international market. In addition, being a neighborhood country New Zealand will be easily operatable and accessible for the company to support its export operations in the target country. All these factors make the country worth investing in it and the best suitable option for the foreign investment for Haigh’s Chocolates.
International market entry modes
Companies use centralized/concentrated and decentralized manufacturing strategy according to their needs. Market strength of the company decided the best suitable manufacturing strategy for the company.
A concentrated strategy is manufacturing the products from one single facility or factory. This strategy can reduce the cost of per unit production as it uses the same equipment to produce different products. This allows the company to achieve a better economic scale. Research of non-profit organization shows that centralized manufacturing organization has manufacturing cost 3% lower than the manufacturing cost of a decentralized manufacturing organization. On a large scale, this percentage creates a big difference. For example, for an organization having an annual revenue of $5 billion, this 3% makes a difference of $150 million.
Decentralized manufacturing includes manufacturing of products from different manufacturing plants according to their availability as well as requirement. Organizations using decentralized manufacturing strategy have benefits like flexibility, being closer to their customers, timelier information, and ability to grab an advantage of low labor costs. Organizations having a large business network and a huge market strength can effectively utilize these advantages.
In case of this expansion of Haigh’s Chocolates, centralized manufacturing strategy will be more effective as this expansion is the first-ever expansion of the company and company has the ability to meet its demands with the existing manufacturing factory. Therefore, using a centralized manufacturing strategy will make its business cost-effective and a good profit margin as well.
In order to make this expansion more effective and efficient company will require performing some HR practices recruitment of employees to manage and grow the foreign business as well as talent management (Pološki-Voki?, 2016).
HR management of the company has to manage its human resources to manage the new business efficiently. For this, they might require to recruit new employees to deal the international operations and business management. For this, HR management has to recruit employees from both countries to increase the local market knowledge as well as meeting the company values of the business. This practice will ensure the proper supply of human resources needed for the new business adventure (Xiong, Xu, Hu, & He, 2018).
Company can use its existing talent to make its new business plan effective. For this purpose, HR management of the company has to manage its human resources in such a way that it assigns the execution task of the new business plan to the experts of the company (Sheehan, Grant, & Garavan, 2018). In this manner, these existing experts know the company values better than new employees this will help the organization to meet the business values of their company in the new business plan. This will make the organization able to utilize its own talent and can make the business cost-effective along with meeting the business value criteria in the new Target country as well.
Pros and cons of exporting as entry mode
Conclusion
The above report concludes that business expansion is the most critical strategy that a business adopts and at the same time globalization make is an essential strategy as well. In this order, Haigh’s Chocolates has done a brief analysis of different business strategies, matrix analysis, entry mode analysis, manufacturing strategy, and feasibility in the target country as well. This will help the company to plan more strategically and will help in the process of implementation as well. This report shows that the company has done a sufficient research and decided to adopt an international business expansion strategy with exporting entry mode to enter in international business. For this expansion, company has opted the centralized manufacturing strategy to make this expansion cost-effective and increase the profitability of the company. In addition to these, the company will use some strategic HRM approaches to implement the business expansion plan more effectively.
References
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Cavusgil, S. T., & Knight, G. (2015). The born global firm: An entrepreneurial and capabilities perspective on early and rapid internationalization. Journal of International Business Studies, 46(1), 3-16.
Chiang, Y. M., Chen, W. L., & Ho, C. H. (2016). Application of analytic network process and two-dimensional matrix evaluating decision for design strategy. Computers & Industrial Engineering, 98, 237-245.
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Haigh’s Chocolate, (2018a). Haigh’s Today. Retrieved from: https://www.haighschocolates.com.au/about-us/haighs-today/
Haigh’s Chocolate, (2018b). Store finder. Retrieved from: https://www.haighschocolates.com.au/stores
Hitt, M. A., Li, D., & Xu, K. (2016). International strategy: From local to global and beyond. Journal of World Business, 51(1), 58-73.
NZFAT, (2018). Investing in New Zealand. Retrieved from: https://www.mfat.govt.nz/en/countries-and-regions/north-america/united-states-of-america/new-zealand-embassy-washington/doing-business-in-new-zealand/investing-in-new-zealand/
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Zhang, X., Ma, X., Wang, Y., Li, X., & Huo, D. (2016). What drives the internationalization of Chinese SMEs? The joint effects of international entrepreneurship characteristics, network ties, and firm ownership. International Business Review, 25(2), 522-534.
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