Globalization
One of the core objectives of most business entities is to experience an expansion in its mode of operations as days go by. The aspect of expansion may involve a number of elements for instance a gradual increase manufacturing capacity, widening of the human resource fraternity, replacement of resources to cater for larger production as well as the expansion of the company’s market to cater for both local and international clients. The customers play a crucial role in enhancing the sustainability of a company; as a result, there is an inevitable need for an organization to have an in depth understanding of the market dynamics (Cairns and Sliwa, 2008). This strategy enables the organization to ensure that the products and services offered adequately meet the customers’ needs. A good understanding of the market involves a prefeasibility study in order to deduce the various factors which would influence the product’s reception especially in the new markets. This report entails the outcome of a feasibility study conducted in three prospective new markets for the Australian winery HolyCow Pty Ltd in the company’s bid to go global (Vallin, 2006). Through review of relevant literature and deriving the required informed from online sources, the report shall detail the various factors which influence the extent and nature in which the company’s products might be received in the intended new markets. In addition to outlining the factors required for consideration by the Winery, the report shall also be summarized a list of recommendations on some of the strategies that the business organization would establish in order to enhance its success in its bid to go global (Wren, 2007).
According to Amoako (2003) globalization is the expansion strategy by a business organization which may involve venturing into the international market after a careful consideration of basic determinants. The author therefore emphasizes on the need to have a clear understanding of the global arena before introducing one’s products in such markets. According to the Uppsala Internationalization theory, there is an inevitable need for companies to have a thorough study of the foreign markets before instilling its influence in such areas. The model stipulates that managers can achieve an effective exploration first by monitoring its progress in the domestic market in addition to understanding the varying client needs. Basing its conclusions on the assumption that the consumers’ reception remains similar irrespective of the location, the company can use its performance in the local environment to project the possible outcome in the international fonts (Cantwell and Narula, 2004). The model then suggests the introduction of small and occasional exports to the intended new markets and an analysis of the client’s reception before finally making the decision on the feasibility of the new project in the intended areas. The Australian Winery has adequately achieved this through its notable local success as it is one of the largest manufactures in Australia. It crushes over 5000 tons of grapes every year which is a clear indication of its relatively high input. Additionally, the brand’s popularity among consumers in Australia is remarkable. Consequently, a good understanding of the foreign market in addition to establishing effective strategies would probably enhance its success in the global arena.
Factors to consider
From the study, it was deduced that the following are the factors which the company ought to bear in mind while strategizing to go global:
- Political climate in the host country
- Level of infrastructural development
- Varying trends in customer preferences
- Variations in social and cultural attributes
- Government policy
- Presence of competitors in the prospective market
- Changes in product prices
The political climate in India, Southern China and Vietnam is crucial aspect necessary for consideration (Calof, 2009). The nature of the political atmosphere in the host country plays a crucial role in influencing the rules and regulations meant to govern trade especially in the case of international investors. While India is known for a fairly stable political climate, Vietnam and Southern China has had historical cases of wars and constant threats from other super powers. These aspects make the environment quite unpredictable (Caves, 2006). Venturing into such markets may serve as risky approaches for the company since in case of war, the organization is likely to close its facilities and distribution points which in turn leads to the incurrence of losses. However, these are only but predictions and not actual happenings hence should not be an obstacle to the company’s bid to go global (Cox, 2007). In summary, the Australian Winery LTD ought to have a thorough understanding of the political climate in each of these countries because:
- A good political environment attracts foreign investors and installs conducive regulations hence making it easy for foreign companies to venture into the market
- A good political environment enhances the free flow of activities and movement of people which in turn enables adequate distribution of products as well as services within the given market.
- An unstable political environment is likely to defy the incorporation of foreign business and may involve stringent policies which basically make it hard for businesses to establish their wares in the foreign markets.
With reference to the factors above, there is an inevitable need for the company to have a good grip on the current political trends in the three countries in order to project the future states (Dicken, 1998). Through historical records, the nature of governance in each of these nations has proved the capability to sustain a stable political system. As a result the company is well in a position to explore these markets and strategize on modes of establishing itself which could begin with occasional exports in reasonable quantities (Dunning, 2003).
The level of infrastructural development in the intended market area could be analyzed basically by reviewing the network of roads and communication systems in the given region. A good network of roads as well as a stable communication system both plays a crucial role in enhancing the free flow of activities (Flyvbjerg, 2001). The levels of development in Vietnam, Southern China as well as India have given room for the establishment of good transport and communication systems. Apart from the good roads, these countries equally have other effective media of transmission which include rails, water and air transport. Each of these elements of infrastructure would be crucial for the company in its bid to venture into the global market. These merits are summarized below
- The countries have efficient air transport terminals including air strips and airports.
- This mode would be crucial in enabling the winery to executive speedy deliveries
- The mode could be useful especially when the demand level increases hence the need for supplies in short notice.
- The mode is however quite expensive hence the company might need to set aside extra funds to ensure the success of the new project.
- The good road and rail networks in the countries would be essential for easy movement of products and company employees especially during the process of distribution.
- This mode would be effective for local distribution of finished products especially over short distances.
- The costs involving road and rail transport is relatively low. Consequently, the company is likely to incur less cost especially when availing the finished products to the clients.
- This mode of transport would be effective especially in Southern China and Vietnam where the countries have adequately invested in water resources to come up with effective transport channels.
- The company would use this mode in distributing bulky products to a large number of buyers especially for the market areas located near water bodies.
- This is a crucial element within an organization especially when interacting with its customers.
- The target countries have good communication systems due to the emergence of technology. These include phones, tablets and other technological tools which enhance both verbal and written communication.
- The company can therefore trace and establish the locations of the customers hence making the distribution of products quite achievable. Additional, through the provisions of technology, the winery can establish a website through which it can establish the client preferences and feedbacks.
- The other important factor which the company ought to consider before venturing into the global markets is the varying trends in the customer preferences as one moves from one country to another.
- The local reception of the company’s products might differ from the nature in which these products are received in the global arena. A study of the markets in India, Vietnam and Southern China reveals the presence of foreign brands in the markets. For instance, the annual sales report in Vietnam reveal that of the total market for wines in the country, the foreign brands constitute about 40%.
- This reveals that the rate of consumption of imported products in these markets is remarkable. It can be deduced that the customer preferences in these areas are positive which gives a liberal ground for the company’s globalization strategies.
- Consequently, the company needs to identify the particular brands largely consumed in the foreign markets and hence come up with the necessary competitive strategies. The products ought to be such that they can remain relevant for a wide variety of markets ranging from the low economy societies to the high class categories (Freeman, 2010).
The other vital factor that the organization might need to adequately factor in before venturing into the foreign markets is the dynamic nature of the social and cultural lives of individuals as one moves from one society to another (Malakooti, 2013). For instance, the cultural practices in a given region may be characterized by prohibition of the intake of particular products which may include alcoholic drinks and wines (Friedman, 2006). In such case, the market for the related products may be largely influenced leading to low reception and subsequently poor sales. However, the target nations comprise various social and cultural activities which happen during certain periods in which the consumption of wine and other drinks is likely to escalate. For instance, in India and Hong Kong, there are various annual cultural events and celebration occasioned by drinking of wine in addition to other products (Harrison, 2011). Consequently, the company is assured a stable market for its products in this areas hence the possibility of good returns. In line with this factor, the following points can be established:
- Hong Kong, Vietnam and India are countries with rich cultures and numerous productive social practices
- The cultural and social approaches in these nations offer a conducive environment for business practices especially those involving drinks as is the case of Australian Winery
- The changing social and cultural trends may imply a change in the company’s modes of manufacturing in order to adequately fit the noted variable trends.
Political climate
The forms and structure of government leadership is an aspect which equally tends to differ as one moves from one region to another. The form of governance may include democratic designs while in some cases, power revolves round specific individuals and families as it trickles down to other people in the hierarchy (Harvey, 2007).. The government institutes the rules meant to govern various activities within the country. For instance, the government has the power to come up with and even change the policies meant to regulate both internal and international trade. In some cases, these policies may be stringent and hence act as obstacles to the establishment of foreign investors in the host countries (Hartt, Mills and Durepos, 2012). However, research studies reveal Hong Kong, Vietnam as some of the most attractive environments for international investors. This could be attributed to the relatively acceptable terms and conditions established to control the incorporation of foreign distributors into their local markets. Consequently, we can note that:
- The nature of government determines the types of policies it finally outlines
- Government policies on international trade affect exports and the amount allowed for the same. This may minimize the size of the market when not adjusted
- Government policies may also affect product prices hence the need for the intending company to project the expected changes in products valuation before venturing into the foreign market.
- Positive government policies however attract foreign investors; this is actually the case in Southern China, India and Vietnam where the terms are conducive enough for globalization.
The aspect of competition is one of the major challenges faced by business organizations in their bid to expand and venture into external markets. The presence of competitors in the market does not only affect is capacity but also goes a long way in minimizing the profitability of new projects (Johnson and Turner, 2010). It is therefore important for a business organization to have detailed information regarding the presence of competitors in the intended new market. The markets in India, Vietnam and Southern China are filled with various other business entities supplying the same products as those manufacture by the Australian Winery (Katz, 2003). While the competitors may be the local distributors, there is equally the possibility of the emergence of other international organization exporting the same products into these markets. Consequently, it can be noted that:
- The presence of similar products in the intended new market may slow down the rate at which the company’s supplies will eventually be received in the given area.
- When the competitors offer similar products at relatively lower costs, the company may have to adjust its product prices. This in comparison to the production, manufacturing and distribution costs may result in losses.
- The company therefore needs to highlight the possible threats which may be posed by the competitors and hence come up with the necessary counter measures. For instance, the company could carry out adjustments in packaging, change the branding and improve the promotional mix in order to improve the popularity of the brand despite the presence of other similar suppliers.
Due to the changing economic times, there is a likely shift in product prices as one moves from the domestic market to the international fonts. The prices set aside for particular products may be determined by the level of economic development in the given region (Kegley and Wittkopf, 2001). For instance, the Indian economy may be far much below the Australian economy. Consequently, the company might need to adjust its price allocations in a bid to fit the economic standards of the host country. At the same time, the government policies may constitute a variation in the product prices. This therefore implies that the company ought to have the right details recording the economic status of the three countries before eventually venturing into the markets. In line with this factor, it can be noted that:
- Product prices are never fixed but flexible hence the company needs to apply the same flexibility in assigning product prices especially those meant for the foreign market.
- When the changes in prices are not noted in good time, the company may incur losses when it is suddenly forced to drop the prices as demanded by the changing circumstances.
- The assigned prices ought to be such that the projected outcome from sales leads to a positive return on investment.
This report has highlighted the various factors necessary for consideration before the company ventures into the foreign market. Due to the numerous essential factors needed for considerations by business organizations before going global, the following recommendations would as appropriate guidelines:
- The company ought to understand the current political atmosphere in the intended foreign market and hence establish whether the market would be feasible for the foreign venture.
- The company also needs to establish the level of infrastructure in the foreign markets and hence choose the most appropriate modes of distribution (Long and Mills, 2008).
- The Australian Winery also needs to have a prior understanding of the foreign markets in a bid to establish the presence of other investors who may offer competition within the market. The company can then strategize on ways of countering this competition and eventually conquering the market.
- To minimize the challenges associated with drastic changes in products prices due to the changing economic times, the company needs to highlight the economic trends of the three countries in order to project any possible variations in product prices.
- There is need to learn and understand the government structures in the host countries in addition to the associated policies. Through this the company is able to identify whether the polices are supportive or stringent.
- Finally, the Australian Winery ought to factor in the changing customer preferences as the variations in peoples’ cultural and social practices. This step would enable the company to manufacture and distribute products which conformed to the social cultural trends as well as the client preferences in the foreign markets.
Conclusion
The study which involved Southern China, Vietnam and India as the prospective global markets for the company revealed a number of factors which require consideration before the company ventures into the markets. These factors include; government policies in the host country, the level of economic development in the intended location, the changes in price products, variations in customer preferences, differences in social and cultural attributes as well as the presence of similar suppliers in the targeted areas.
References
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Hartt, C., Mills, A., Mills, J. and Durepos, G. (2012) ‘Markets, organizations, institutions and national identity: Pan American Airways, postcoloniality and Latin America’. Critical Perspectives on International Business, 8(1), pp. 14 – 36.
Harvey, D. (2007). A Brief History of Neoliberalism, London: Oxford University Press.
Johnson, D. and Turner, C. (2010) International Business, 2nd Edn., London: Routledge.
Katz, S.H. (2003) Encyclopedia of Operations Management. New York: Scribner.
Kegley, C. & Wittkopf, E. (2001) World Politics: Trend and Transformation, Boston: Bedford/St.Martin’s
Long, B. and Mills, J. (2008)’ Globalization, postcolonial theory, and organizational analysis: lessons from the Rwanda genocide’. Critical Perspectives on International Business, 4(1), pp. 389-409.
Malakooti, B. (2013) Operations and Production Systems with Multiple Objectives. New York: John Wiley & Sons
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