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International Business:CeramiCo Ltd. Birmingham, UK - Essay Example

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International Business: CeramiCo Ltd. Student ID Number & Code Date Total Number of Words: 2,998 Introduction Operating in Birmingham, UK, CeramiCo Ltd. is a small to medium size enterprise that specializes in the manufacturing of ceramic tiles…
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Download file to see previous pages 68 – 69). Since both the UK and Turkish government are highly promoting the practice of free trade, barriers to potential new entrants is relatively low (Stonehouse et al., 2004, p. 120). Since business people can easily penetrate the ceramic industry in Turkey makes the threat of new entrants high. Applicable in both UK and Turkey, low barriers to entry clearly explains why there is a very tight market competition within the ceramic industry in Turkey. The threat for product substitution is also high. Instead of using ceramic tiles for flooring, the public consumers can choose from a wide-range of non-ceramic floor tiles like vinyl flooring, vitrified tiles, porcelain floor tiles, quarry tiles, eco surface recycled rubber flooring tiles, congoleum tiles, laminated flooring, baseboard tiles, natural stones like granite, floor tiles made of wood, etc. (Castano, 2012; Roberts, 2012). Therefore, the bargaining power of buyers is very high. The local manufacturers of ceramic products has long-time been dominating both the domestic and international markets. This explains why there is a high number of potential suppliers of raw materials for ceramic floor tiles. Since CeramiCo can easily move from one supplier to another, the bargaining power of suppliers is very low. (See Figure I – Summary of Porter’s Five Forces Analysis on page 3) Figure I – Summary of Porter’s Five Forces Analysis The global demand for ceramic tiles is continuously expanding despite the global economic difficulties in most parts of the American and the EU nation. However, the recent economic turmoil in Euro zone is making the exchange rate more volatile. Therefore, CeramiCo’s board of directors are more concern with the long-term impact of volatile exchange rate on its cost of production and overall sales and profit. Furthermore, a significant increase in the global demand for ceramic tiles would mean encouraging more business people to join the ceramic tiles industry. With regards to its production expansion plan in Turkey, CeramiCo’s board of directors have a strong doubt with regards to the Turkish government’s support on free trade. Since Turkey had a history of strict government regulations and red tape, potential foreign investors decided not to expand their production facitilies in Turkey despite its promise to offer cheaper operating costs. In relation to the case of CeramiCo Ltd., this study will examine the economic arguments behind the idea of expanding its production line in either UK or in Turkey. Eventually, this study will present some useful advises on how the company can improve its pricing stategy in both domestic and international market. Economic Arguments behind the Expansion Plan in Turkey To determine the market competition within a specific industry, it is necessary to examine the market structure of ceramic industry in both UK and in Turkey. According to McEachern (2009, p. 176), the market structure focus on analyzing “the important features of a market such as the number of suppliers, the product’s degree of uniformity, the ease of entry into the market, and the forms of copetition among firms”. Furthermore, several studies explained that the market structure is all about examining the number of companies that are currently selling homogenous products (Tucker, 2011, p. 136; Tucker, ...Download file to see next pagesRead More
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