Discussion
Vodafone is an Australia is an Australian telecommunication company that provides both mobile and fixed broadband services to the customers. This is one leading markets in the industry and most of the companies within the market have been significantly expanding internationally. Within Australia, Vodafone provides services to over 22 million Australians, this shows the significant market share the company has. This has led to the need for international expansion of the company to the other regions around the world. For this case two countries have been selected for analysis which is the best pick for the company to adventure into. China and Germany are the company’s pics hence the need for an extensive research to identify which is the best pick for the company to advance into. Both countries being among the worlds developed countries, Vodafone’s research needs to be extremely exhaustive since this means the company’s choice will determine whether the expansion or growth will impact its revenue (Zhou, 2017). The main reason for companies to venture into new markets is usually to increase their customer base and provide their services or products to more people hence in return increase the company’s income. But incase a wrong decision or strategy is taken during the expansion, this means the company incurs losses or slow returns from the growth venture. The report will cover different areas these includes the discussion section which will cover the macro environment and the geo political forces impacting each country that may affect Vodafone’s venture in the country, the business policies in both countries, the potential dangers, risks and opportunities in each country, conclusion and finally a recommendation of the best pick for Vodafone.
China is an Asian country which is among the leading companies with its rapidly growing economy. Most of the global companies have been investing and opening their multinational companies in the country due to multiple reasons such as the availability of resources and labour in the country. For Vodafone it is important to analyze different aspects with the country that would favour the company’s success in the country (Zhou, 2017).
Macro-environment forces can be defined as the external or uncontrollable factors that influence an organization’s decisions and end up affecting the performance and strategies of the company. These factors include legal policies in the country, political, social conditions and economic factors, natural forces and technological changes of the country (Toppinen, et al., 2014). On the other hand, geo-politic factors can be defined as the topographic, demographic factors, the natural resources factors that would affect the expansion of Vodafone into the country. In china there are multiple macro environmental and geo- political factors that would affect the expansion of Vodafone into the county, these factors are discussed below:
China
In china many of the administrative and bureaucratic tasks that have been significantly simplified in western countries are yet to be simplified in the country. This can simply fall under the macro-environmental factor that would affect the expansion of Vodafone in china, these processes in the china take an exaggerated amount of time to be accomplished. Research by (Zhou, 2017), shows that minor processes as seen in the western countries such as company legal registration in the country would take a month or more before they can be accomplished. The country lacks strong legal policies as well as inconsistent application of regulations which implies the processes of first establishing the company in the country are not well designed for international company’s convenience. For the company to successfully have its operations ready and running in china, an administrative office needs to be in place to handle the tedious company’s paper work (Zhou, 2017).
In china, the national government enforces rules and policies that are aimed at favoring state entities at the expense o the privately held firms where Vodafone comes in. Such polices are detrimental to initiatives that aim to attract foreign companies from expanding in to the country. Excessive regulations tend to hinder economic activities and entrepreneurial activities in the county since they lead to excessive expenses for the business (Allen, 2017). This seems as a major issue of concern for the company intending to expand in to china due to the excessive policies within the country. Some few examples of these include, the mandatory joint venture partnership in the country. The policy stipulates that the foreign investor or business is expected to have a Chinese government agency or local company as a partner. The policy evidently shows the biasness of the country’s governing system in protecting the Chinese locals. In most cases, these partners have been reported to conduct unfair, illegal and other unethical business policies which in return makes the investors or international companies skeptical of joining the china market.
Despite all these regulations the Chinese government has other favorable policies such as the provision of attractive financial incentives to the investors in the nature of tax breaks grants, subsides and low-cost government loans. Such a policy would be extremely effective for any company willing to invest in the country hence favoring the Vodafone’s need to invest in the country (Allen, 2017). The financial sponsored financial inducements provide the possibility of making a business gin more profits in investing the country within a small-time span.
The current macro-environmental and geo-political forces in the country
These include other general factors that affect a company the decision weather to invest in China but they are normally short term that can change randomly. These include things such as competitions in the country, communication in the country, human resource among other factors, these are also excessively sensitive matters in relation to the success of a company after its launched in another country.
China has been one of the most attractive destination for investors due to its development in infrastructures, resource availability such as labor productivity as well as the workforce skills. The country has significantly matured in the above sectors making it a top pick for the investors (Yan & Ferraro, 2016). These maturities have led to a change in multiple factors most investor look up for investing, the advanced infrastructure system lead to the reduced cost of transport in the country, the availability of labor leads to low charges also (Allen, 2017). This in return reduces the cost of running the business in the country for the investors as compared to investing in other countries. With these factors this results to a rise of the profits generated by the company. Vodafone significantly needs to consider this since the profit margins in the country will be increased in the country. Vodafone also relies on skilled labour force so as to enable the company provide services to all its customers, china has a leading rate of the most skilled work force at a low cost due to the competition, this also significantly makes the country more favourable for investing by the company.
Cultural misunderstanding is one of the main challenges that has been arising as a result o miscommunication in china. This has significantly affected so many international companies that have ventured in to the chines market (Wooster & Paul, 2016). For a company to find a team which is proficiently competent with the chines culture and the western culture has been also a major challenge hence establishing communication hinders the investments of most companies since this leads to increased expenses on the HR sector of the company so as to ensure this does not affect the company’s productivity. In return this reduces the company’s profit margin (Allen, 2017). Vodafone needs t put this factor under consideration since this is a significant risk in entering the Chinese market.
This is one of the highly developed countries in relation to its social market economy, in the whole of Europe Germany has the largest national economy and the fourth largest by nominal GDP in the entire world. As for the case of china, Vodafone needs to carry out a research in respect to different areas to enable the management identify the advantages of investing in the country as compared to china or does china stand a better position (Glänzel & Scheuerle, 2016). As seen in the other country analysis it is important to address the macro environmental and geopolitical factors as well as the Potential dangers, risks and opportunities in the current or short-term policies in china (Allen, 2017).
Red Tape
Germany has multiple favourable macro-environment factors that are extremely welcoming for investors to expand their businesses in the country. Some of the government policies have significantly increased the number of investors in the country for instance different policies such as inviting incentives. The German government has placed attractive incentives to investors in the country by setting uncomprehensive programs that support the broad spectrum of business activities al all stage of investment process in the country (Carè, & Wendt, 2018). These incentives range from cash incentive program via reimbursement of the direct investment among others such as labour incentives. Unlike the chines government policies such as the joint venture, the German government ensure the launching of the business in the country is less complicated which reduces the amount of funds needed for the international business launch in the country. When compared with the Chinese government, most of the investors would rest with German macro- environmental factors (Hill, et al., 2007). Other factors such as the country’s competitive taxes; as per the new policies in the country, the corporate taxes have been reduced. This reform has greatly helped companies invest in the country due to the new reforms. Vodafone needs to consider such policies which shows the country’s interest in the growth of businesses in the region. The government raft of reforms to improve the general tax framework and keep indirect labor cost down is opening up opportunities for every investor (Yamey, Campe, & Fewer,2015). This is such a great opportunity the any company can grab and utilize for the expansion of the business. Germany being a leading economy country makes it Europeans economic engine. The investors in the country profit from the economic performance of the world’s number for leading economy. The country has the advantage of offering a large domestic market and an easy access to growing market especially for the investors in the country. This means more profit for a company such as Vodafone that would wish to invest in the country.
The demography o the country also provides the geo-political factors that contribute the decision of whether to invest in the country. Germany has a high population which provides market for the services the company offers. Vodafone being a telecommunication service provider a large population implies an increase in the levels of serves the company provides. The other worth addressing factor is the quality of life in the country. The country is a modern, cosmopolitan and tolerant society which has an excellent standard of life. This shows the high opportunities for the growth of any investor interested in growing the company.
There are several risks involved in investing in the country such as the increased levels of competition. The telecommunication industry in the country has a number of competitive companies which have already capture the market and established their market share. Vodafone needs to be ready to address such competition (Bock, Huber & Jarchow, 2017). Despite the seen risk there exists their opportunities such as the county’s advancement in technology.
Conclusion and recommendation
From the research it is evident that both countries have shown that there is an existent market for Vodafone to expand but it has been evident that for the company to success German would be the correct pick due to its advancement in economy and its value for investors (Smith, 2015). The management is supposed to consider all the covered factors during the selection of the right strategy on how to expand.
References
Allen, C. W. (2017). Investing in China: Key challenges and mitigation strategy.
Bock, C., Huber, A., & Jarchow, S. (2017). Growth factors of research-based spin-offs and the role of venture capital investing. The Journal of Technology Transfer, 1-35.
Carè, R., & Wendt, K. (2018). Investing with impact: An integrated analysis between academics and practitioners. In Social Impact Investing Beyond the SIB (pp. 5-45). Palgrave Macmillan, Cham.
Glänzel, G., & Scheuerle, T. (2016). Social impact investing in Germany: Current impediments from investors’ and social entrepreneurs’ perspectives. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 27(4), 1638-1668.
Hill, R. P., Ainscough, T., Shank, T., & Manullang, D. (2007). Corporate social responsibility and socially responsible investing: A global perspective. Journal of Business Ethics, 70(2), 165-174.
Toppinen, A., Zhang, Y., Hansen, E., Korhonen-Kurki, K., & Li, N. (2014). Role of corporate responsibility: Insights from three forest-industry multinationals investing in China (No. IUFRO World Series no. 32).
Smith, P. (2015). Practical Applications of Investing with a Purpose.
Wooster, R. B., & Paul, D. L. (2016). Leadership positioning among US firms investing in China. International Business Review, 25(1), 319-332.
Yamey, G., Campe, S., & Fewer, S. (2015). Germany, the G7, and global health. BMJ: British Medical Journal (Online), 350.
Yan, S., & Ferraro, F. (2016). State mediation in market emergence: Socially responsible investing in China. In How Institutions Matter! (pp. 173-206). Emerald Group Publishing Limited.
Zhou, J. (2017). The development of impact investing and implications for China (Doctoral dissertation, Massachusetts Institute of Technology).
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