Palmtop Mobile Phones - Assignment Example

Full topic and Section # of Introduction PDA or Personal Digital Assistant is thepalmtop which become more versatile with time, is used as mobile and as small computer. Importance of PDA increases with the improvement in the quality pf PDA which now can access the internet, used as word processing and has Global Positioning System. We are initially manufacturing PDA for our domestic market, United Kingdom, but now our objective is top market our product at global level. Typical features of our product 1. Touch screen 2. Memory card 3. Wired connectivity 4. Wireless connectivity 5. Synchronization 6. Customization Current Domestic Market The current domestic market of our product is United Kingdom which is the fifth largest economy of the world with respect to exchange rates and according to purchasing power parity it is consider as sixth largest economy. It is the world most globalizes country whose capital is London which is the third major financial center of the world. The most recent official figures shows that the GDP growth rate of United Kingdom is 3.1% where as GDP grew in 2006 was 23/4% and more than 3% in 2007. According to 2006 rating, the GDP is $ 2.1 trillion where as commercial service imports increases to $ 600 billion. The population of UK according to 2006 was 60,587,000 and out of this 50,763,000 is living in England. International Market for PDA Initially 12 countries were choose by the firm, through screening process out of these 12 countries two countries were left and chosen by us as our product international market. The twelve countries selected by the firm are: 1. Australia 2. Canada 3. Chile 4. China 5. Germany 6. Italy 7. India 8. Japan 9. Malaysia 10. Pakistan 11. Poland 12. United States of America Screening Process International marketing of the product starts by assessing the international market and evaluation of the economic information that directly affect on the firm product [Alan M. Rugman and Richard M. Hodgetts (March 2000)]. Screening process for the product involves series of analysis; therefore, we have divided our screening process into many steps using economic indicators to represent that which two countries will suit best for the product. INITIAL SCREENING (Basic need and potential) The initial screening process of the firm requires knowing the basic need and potential of population in international market [Anant K. Sundaram, J. Stewart Black, (1995)]. A simple question "who might be interested in buying our product" is used to answer the basic need of the population. There are three ways to answer these questions 1. Current import policies: the current import policies of Australia, Canada, China, Japan and Germany are strict enough that it can cause a huge cost to our product. The taxes and other expenses on the import of these countries will be high as compared to other countries. As extra cost will incurred on the product that's why the cost of the product will be high in these market, causing less purchase of the PDA. Therefore, the choice of countries will exclude Australia, Canada, China, Japan and Germany. 2. Local production of PDA: Australia, Canada, Japan, China, Germany, Italy and United States of America are producing their own PDA's and therefore, establishing our market will in these market will not provide future establishment as these market already hold strong competitors for our product. China PDA's are now becoming more famous as they are using cheap technology and thus providing low price PDA's in the international market. On the other hand Germany, Italy, Japan and Australia are holding different international companies and national companies producing PDA's. 3. Demographic Changes: the demographic changes in India, Pakistan, Poland and Malaysia are in account and thus the potential for our product in these countries will be high [Lee J. Krajewski and Larry P. Ritzman (2003)]. Where as other countries are developed countries and already hold strong market conditions. The basic need of PDA's in developing countries is high than the developed countries as developed countries already include PDA's strong market. Whereas, United States of America already have PDA's market but still the need of mow price and high quality PDA's are more in its market. SECOND SCREENING PROCESS (Financial and Economic Conditions) The second step of screening process wills excludes those international market that fails to meet the financial and economic consideration. Financial conditions includes 1. Inflation rate: inflation rate of developed countries are usually high and stable where as inflation rate of developing countries are low and unstable. Taking in consideration, the inflation rate of Pakistan, Chile, Poland and Malaysia are low and unstable. Whereas, India's economic indicator shows that its inflation rate though not increasing but it is stable from last few years. 2. Interest rate: the higher the interest rate in the market, higher will be the cost that the firm will face [Jeff Madura (2003)]. Interest rate of developed countries is higher than the interest rate of developing countries. Interest rate of Pakistan, India, Poland, Italy, Chile, china and Japan are not as high as Interest rate of Australia, And Canada. Whereas, the interest rate of United States of America are neither high nor very low. 3. Expected return on Investment: the expected return on investment in few markets is high as United States of America, India and Italy. Where as investing in other markets might not give high return as they have already established in PDA's market and has high market cost. 4. Buying habits of customer: the buying habits of customer in United States of America, India, China, Japan, Australia and Malaysia are high as compare with other countries. 5. Availability of credit: the availability of credit in developed countries is considered to be high rather than other countries. The availability of credit for PDA market is high in India, United States of America, Australia, Canada and Malaysia. Economic consideration Economic consideration of the countries include market indicators as market size, market intensity and market growth [Ian Brooks, Jamie Weatherston, Grahan Wilkinson (April 2004)] 1. Market size: market size of the market is the size of market as a percentage of the world's population. The mobile and PDA market for the industrialized countries are high whereas, the countries with large market size but if are not industrialized than the PDA's market in such country is not suitable. That is the reason the china has the largest amount of mobile subscriber in the country. Therefore, in our screening we will choose the market for our product which is more industrialized. 2. Market Intensity: market intensity defines the degree of purchasing power of the country relative to other countries. For instance, the Canada, USA, China India and Japan are considered to be the best for automobiles, telephones and computers as compared with other countries. The reason is that buying power of these markets is high as compared with other countries. 3. Market growth: market growth relates to the annual growth of sales. The annual growth of telephones, mobiles and PDA's are high in USA, India, China, Japan, Canada Germany and Australia. These countries show high sales of High-tech products and their accessories. According to 2005 indicators, one in four Latin Americans have portable phone. For economic consideration four types of analysis are taken in account and these are given as 1. Trend analysis: the estimation of future demand by analyzing the past from 3 to 5 years considering that the trend of buying the mobile will remain same. Trend analysis shows that the high industrialized countries will show a high trend in using the high-tech products. The market of India, USA, Canada, Japan, China and Australia will increase in the trend of PDA's and thus these markets will be very suitable for our products. 2. Estimation of Analogy: a method of estimating the market for PDA's by estimating the information generated. For instance, as the Industries increases, the use of PDA's will increase. Therefore, we can use different information's such as increase number of industries and level of education to measure the demand of PDA's. Therefore, results shows that in India the IT industries and level of IT increases and thus PDA's market will suit better in this country. Whereas, China, Japan, United States and Canada also have high-tech industries and thus the PDA's market will boost in these countries also. 3. Regression Analysis: this is a mathematical tools used to measure the decline of demand in different market [N. Gregory Mankiw (1998)]. 4. Cluster Analysis: cluster analysis use the group data taken from the market that will directly affect the PDA market. THIRD SCREENING PROCESS (political and legal forces) The third screening process involves notifying the political and legal forces that can act as a barrier for the market [William O Bearden, Thomas N Ingram, Raymond W LaForge (January 13, 2003)]. The identification of these barriers is important as they can directly impact on the PDA market. The rules and regulations of government and their stability are the major issues that can enhance the market of the PDA's. The government rules of Canada, Germany, Australia and Italy do not suit to PDA's due to high interest rate and other expenses whereas, the government rules of India, and America suit to enhance the PDA market. Moreover, the government is stable in United States and India rather than other countries. Another major consideration that the firm must take in account is the protection offered for patents, trademarks and copyrights. The more protection the firm gains against their trademarks, patient and copyrights, the more the firm can gain in these markets. Chine and Japan are the countries where the protection is high and this is the reason of flood on international markets in these countries. FOURTH SCREENING (socio-cultural forces) The socio-cultural process involves forces such as languages, habits, customs, religions and values of the market or country [Robert S. Pindyck, Daniel L. Rubinfeld (2004)]. Cultural aspect of the market greatly affects the MNE's and thus they are required to know that how well their operations will fit in the particular market. The Japanese and Chinese culture is totally different form the domestic market of PDA (United Kingdom). Whereas, United States of America and India are better then Germany, Italy, Canada, Chile< Poland and Australia. Therefore, the firm feels that the social and cultural environment of America and India suit better for their PDA market. The socio-cultural difference will greatly impact on the operations of the firm as the habits and language will be different. Moreover, the norms and values matter a lot. FIFTH SCREENING (Competitive Environment) The last step of the screening includes the competitive environment of the countries. The competitive environment informs the position of your competitors that are already present in the countries. The competitive environmental factors are divided as follows. 1. Fixed line and mobile phone Subscribers: the fixed line telephones charges are high in United States that is the reason that consumers are now shifting to portable phones. Whereas, due to high-tech product and industrialization, countries have more mobile subscribers than the other countries. The number of mobile subscribers is highest in China and Japan therefore, these two countries will not suit better for PDA market as the competition is high in these countries. 2. Internet users per thousand: this factor is used to measure the efficiency of the market as it will directly affect the use of PDA. The more the users of internet, the more PDA will be used by the consumers as it directly affect the PDA market. According to 2006 survey the results shows Australia: 710 internet users/1000 Canada: 670/1000 Chile: 345/1000 China: 810/1000 Germany: 550/1000 Italy: 329/1000 India: 880/1000 Japan: 790/1000 Malaysia: 45/1000 Pakistan: 567/1000 Poland: 710/1000 United States of America: 915/1000 3. Investment in Telecom: this is the other competitive factor to analyze the market for the PDA. Investment in United States, China, Japan and India is higher than the other countries. According to 2006 rating these countries where in top list as the investors in telecom. Therefore, the investment in these countries would be better than other countries. 4. Mobile Phone Subscribers: the mobile phone subscribers are highest in China and Japan, therefore, the competition in these countries would be higher. Where as, the subscribers in other countries like United States of America, Canada, Australia and Germany is highest. Whereas, the subscribers of Mobile phone in India are lowers but those present are very competitive such as Voda Phone and Airtel. 5. Telephone Mainlines: telephone mainlines in countries with huge po0pulation is low than other countries. For instance, according to 2006 ratings, the telephone mainlines in India and Latin America is lower than 0ther countries. This is the reason hat now people are switching to Mobile phones FINAL SCREENING Above all information help in the final selection of the two countries for PDA and according to this United States of America and India are more favorable for the PDA. What are the reasons to choose these countries The answer to this question is given below with the factors that are more favorable for PDA market. 1. High level of investment 2. Low competitors 3. Huge number of mobile users 4. Stable government 5. High level of demand 6. More protection to intangible assets (trademarks, copyrights and patents) 7. Low threat of barriers 8. Growing market 9. High level of market intensity and market size 10. Favorable import policies 11. Growing economy Furthermore, the 4 P's of marketing strategy needs a trade mission; the requirement of firm to visit the countries to analyze the marketing strategies in these countries. This trade mission and above analysis together suggest that India and USA will suit the PDA more than another country. Economy of India The best future is in the hand of those who work hard to earn it and according to Eric Hoofer, the prediction of future is only possible when the country is able to shape it. It must know that what factors that can initial a better future are present and how to sue them. Indian economy is always described as Will it be Giant or Pygmy in the future, Hare or tortoise These questions can not simple predict the future of the India. For our product, PDA (personal digital assistant) different economic indicators are taken in account that will directly impact on our business. GDP growth rate: GDP growth rate of India in 2007 was 8.7 seven. The growth of GDP in India remains increasing from last few years. Whereas, the GDP growth from 2006 to 2007 increases from 7.8 to 8.7. Therefore, economically the country shows that it has a growing economy. Physical infrastructure: the physical infrastructure of the India in 2002 was destructed by corruption, bureaucratic inefficiencies, urban-bias and inability to scale investment. Till 2002, India was unable to invest in power, construction, transportation, telecommunication and real estate and thus this result in lower GDP. But later in 2003 the government promoted their infrastructure by promoting private sector and foreign market to invest in India. Due to this foreign investment the growth rate of India increases to 9% for the past six quarters. The physical infrastructure of India is becoming stronger from 2003 and still lot of enhancement is done. Therefore, it is forecasted that this infrastructure will become very strong in the later years and thus PDA market in India will be a better choice. Custom duties and imports: the government reduces the custom duties and on imports from 4.5 to 5% to enable the private investment. Liberalization of government on import duties increase in rapid growth, specially the custom duties decreases on non-agricultural and agricultural products. It is forecasted that the import in the country will increase up to 11.1% thus strengthen the country. The imports duties in India enable the firm to invest directly in the India. Therefore, this factor of Indian market is suitable for the PDA firm to establish their business. Inflation rate: inflation rate increases from 5.8 to 6.4 from 2006 to 2007. Higher the inflation rate, higher will be the market risk, as the prices use to increase. For PDA market, the inflation rate will not affect as the rate is low and other hand, the use of high-tech product in India is more. Therefore, this little increase of inflation will be ignored as they have less affect on high-tech products. Market size: the market size of India is very huge and with time mainly becoming an industrialized market. The reason is the use of IT products in the market. Information technology and IT-enabled services are growing rapidly due to increase in industrialization. This industrialization increased due to the government rules that enabling the foreign market to invest in India. More over, the cost-advantage is present in the India due to low cost labor and low cost resources that can lower the internal cost of the firm. Taxation: the taxation factor directly affects the profitability of the firm. The lower the taxation rate, higher will be the profit. The taxation rate in India for foreign market is 40% however; government has lowered their custom duties in the present year. For our PDA product, the taxation rate will suit better as other developed and developing countries has taxation rate more than 40%. Industrialization: the more the market is industrialized, the higher will be the use of high-tech products [Philip R. Cateora and John graham (March 13, 2006)]. India is on 14th as factory output, showing the rate of factories and industries are increasing with time. The more the market industrialized, the more will be the use of PDA's. Therefore, this market in the coming future will be able to enhance the market for our product. Demand and supply of Mobiles and PDA's: The demand of Mobiles and PDA's increases from the last few years. The reason is high level of education, increase in information technology and increase in industries [Richard G. Lipsey, Alec Chrystal (2003)]. Moreover, the fixed line telephones are available to urban cities while rural cities still do not have facilities of fixed line telephones. On the other hand, the industry of telecommunication remains poor since 2002 but later in 2005 the government is trying to enhance the telecommunication system, by privatization. Therefore, the foreign direct investment in telecommunication is increasing. Furthermore, the use of internet in India is highest. These all factors together increase the demand of PDA in India. Looking at supply side, still the supply of latest technology is low and requires foreign direct investment in telecommunication sector. Economic Data of India 2003(a) 2004(a) 2005(a) 2006(a) 2007(b) GDP at market prices (Rs bn) 27,654.9 31,266.0 35,671.8 41,257.3 46,379.0 GDP (US$ bn) 596.1 692.7 805.6 922.3 1,124.0(d) Real GDP growth (%) 8.4 8.3 9.2 9.4 8.4(d) Consumer price inflation (av; %) 3.8 3.8 4.2 6.2 5.7 Population (m) 1,049.7 1,065.1 1,080.3 1,095.4(b) 1,110.4 Exports of goods fob (US$ m) 60,895.0 77,939.0 102,328.0 123,208.0 144,426.5 Imports of goods fob (US$ m) -75,537.0 -105,975.0 -149,200.0 -184,362.0 -225,472.6 Current-account balance (US$ m) 8,773.0 781.0 -7,810.0 -10,357.0 -16,182.3 Foreign-exchange reserves excl gold (US$ m) 98,938.0 126,593.0 131,924.0 170,738.0 236,524.2 Total external debt (US$ bn) 112.9 124.4 123.1 131.1(b) 138.6 Debt-service ratio, paid (%) 18.8 13.7 13.0(b) 7.8(b) 7.3 Exchange rate (av) Rs:US$ 46.58 45.32 44.10 45.31 41.49 Data on the Indian Sector Origins of gross domestic product 2006 % of total Components of gross domestic product 2006 % of total Agriculture 17.5 Private consumption 56.4 Industry 27.9 Government consumption 11.3 Manufacturing 16.1 Fixed investment 29.5 Services 54.6 Stock building 2.9 Statistical discrepancy 0.0 Exports of goods services 23.0 Imports of goods services 25.8 Principal exports 2006 US$ bn Principal imports 2006 US$ bn Engineering goods 26.2 Petroleum products 57.1 Petroleum products 18.6 Machinery 32.7 Textiles clothing 16.1 Electronic goods 15.9 Gems&jewellery 15.6 Gold silver 14.6 Agricultural allied products(c) 11.2 Chemicals 7.8 Main destinations of exports 2006 % of total Main origins of imports 2006 % of total US 19.1 China 7.3 UAE 9.4 US 6.5 China 8.4 Germany 5.2 UK 4.9 Singapore 4.8 Key Indicators of India Key indicators 2007 2008 2009 2010 2011 2012 Real GDP growth (%) 8.7 7.8 7.2 7.4 7.7 8.0 Consumer price inflation (av; %) 6.4 5.8 5.5 5.2 5.0 5.2 Budget balance (% of GDP) -3.2 -3.1 -2.9 -2.8 -2.7 -2.5 Current-account balance (% of GDP) -1.1 -2.0 -1.1 -1.1 -1.7 -2.3 Lending rate (av; %) 13.1 12.8 12.0 11.0 10.0 10.0 Exchange rate Rs:US$ (av) 41.3 38.4 36.4 35.5 35.0 34.5 Exchange rate Rs:100 (av) 35.1 36.9 37.9 38.0 38.1 37.6 Economy of United States of America The economy of USA has been the world largest economy from the last 40 years. Its gross domestic product (GDP) is estimated as 13.8 billion according to 2007 economic indicators. It is a mixed economy with private investments making microeconomic decisions. USA is considered to be the highly productive country hitting to 302 million per year. The US government remains successful in maintaining the economy of the USA and this is the reason for the stability of the country. The second country that we have chosen for our product is USA due to high market size, increase demand and high level of Information technological advancement. GDP growth rate: the GDP growth in 2007 for the US is 2.2% and in figure it is 13.86 trillion. Though it is not highest in the world raking but US government remain successful in growing the GDP rate per year. The productivity level of America is $45,900 million. As it shows that this is the strongest economy and investment in such economy means boosting the market for our product. The level of education and IT is highest in this region and thus the demand will also be higher. Physical infrastructure: Physical infrastructure of the country from 2006 to 2007 becomes strong but still facing some problems due to corruption rate. The high-tech industries in the region remain high with time but still the country requires growing their foreign investment. Latin Americans still require growing their states as that region of US demand foreign direct investment. Moreover, the telecommunication sector is growing at rapid rate due to increase in technological advancement. This increases the chance for PDA market to grow in the US market. Custom duties and imports: The US government rules and regulation for custom duties and imports are lower than other developed countries. That is the major reason that we have chosen USA rather than other developed countries. The custom duties in America are lower than 50% depending on type of industries and thus this suit the high-tech industries in the country. Inflation rate: The inflation rate of the country is lower and remains stable. This inflation rate is the biggest advantage for the firm that will keep the price of PDA stable to attract the consumers. Moreover, this inflation rate helps the firm to capture the low cost resources within the country. Market size: The market size of the USA is considered to be the biggest. According to 2006 survey, the telecommunication and automobile sector suit best to USA and chain due to huge market size which mainly depend on industries. Therefore, our product will capture the maximum market share of the America. Taxation: The taxation structure of the US is strongest one providing boost to the new firms. The taxation rate for the firm varies with industries in US. The taxation rate of US is 40% on average that is a stable rate for mobile Industry. Industrialization: The level of industrialization is highest in the US market that directly impact on the use of PDA's. Due to this high level of industrialization, the information technology advancement is also highest in America and thus sue of PDA's will be highest. Therefore, we consider the US market as best for our product. Demand of Mobiles and PDA's in US market: The demand of mobiles and PDA is high due to high sue of internet and portable mobiles. The fixed line telecommunication industry is becoming poor in the market due to increase use of mobiles. The users of internet are higher. This all directly impact the use of PDA in US. Data on USA sector Origins of gross value added 2006 % of total Components of gross domestic product 2006 % of total Agriculture, forestry fishing 0.8 Private consumption 69.9 Mining 1.6 Federal expenditure 7.1 Utilities 1.7 State local expenditure 12.1 Manufacturing 12.6 Non-residential investment 10.6 Construction 5.4 Residential investment 5.8 Transport & warehousing 2.9 Stock building 0.4 Distributive trades 13.8 Exports of goods services 11.1 Finance, insurance real estate 17.1 Imports of goods services -16.9 Other private services 32.4 Government 11.7 Principal exports 2006(a) US$ bn Principal imports 2006(a) US$ bn Capital goods (excl automotive) 414.0 Industrial supplies 603.0 Industrial supplies 275.7 Consumer goods (excl automotive) 442.8 Consumer goods (excl automotive) 129.2 Capital goods (excl automotive) 418.5 Automotive goods 107.2 Automotive goods 256.7 Food, feeds beverages 65.9 Food, feeds beverages 74.9 Main destinations of exports 2006 % of total Main origins of imports 2006 % of total Canada 22.2 Canada 16.4 Mexico 12.9 China 15.5 Japan 5.8 Mexico 10.7 China 5.3 Japan 8.0 UK 4.4 Germany 4.8 Germany 4.0 UK 2.9 Economic Data of US 2002(a) 2003(a) 2004(a) 2005(a) 2006(a) GDP at market prices (US$ bn) 10,469.6 10,960.8 11,685.9 12,433.9 13,194.7 Real GDP growth (%) 1.6 2.5 3.6 3.1 2.9 Consumer price inflation (av; %)(b) 1.6 2.3 2.7 3.4 3.2 Population (m) 288.0 290.9 293.7 296.4 299.4 Exports of goods fob (US$ bn) 682.4 713.4 807.5 894.6 1,023.1 Imports of goods fob (US$ bn) 1,167.4 1,264.3 1,477.1 1,681.8 1,861.4 Current-account balance (US$ bn) -459.6 -522.1 -640.2 -754.8 -811.5 Foreign-exchange reserves excl gold (US$ bn) 68.0 74.9 75.9 54.1 55.0 Nominal effective exchange rate (2000=100) 104.3 91.5 84.0 82.7 82.0 Real effective exchange rate (2000=100) 105.4 98.7 94.1 92.8 92.4(c) Key Indicators of USA Key indicators 2007 2008 2009 2010 2011 2012 Real GDP growth (%) 2.2 0.8 1.4 2.7 2.5 2.5 Consumer price inflation (av; %) 2.9 2.9 2.0 2.4 2.4 2.4 Federal government budget balance (% of GDP) -1.2 -2.4 -2.2 -1.5 -1.4 -1.3 Current-account balance (% of GDP) -5.1 -3.9 -3.5 -3.6 -3.5 -3.6 US$ 3-month commercial paper rate (av; %) 5.0 2.4 2.9 4.5 4.8 4.8 Exchange rate:US$ (av) 117.8 104.0 96.0 93.5 91.8 91.8 Exchange rate US$:(av) 1.37 1.46 1.33 1.28 1.26 1.25 References Alan M. Rugman and Richard M. Hodgetts (March 2000) "International Business", Third Edition. Anant K. Sundaram, J. Stewart Black, (1995) "The International Business Environment" First Edition. Ian Brooks, Jamie Weatherston, Grahan Wilkinson (April 2004) "The International Business Environment" First Edition Jeff Madura (2003) "Introduction to Business" 1st edition Lee J. Krajewski and Larry P. Ritzman (2003) "Operations Management" Sixth Edition Philip R. Cateora and John graham (March 13, 2006) "International marketing", Thirteen Edition. Robert S. Pindyck, Daniel L. Rubinfeld (2004) "Microeconomics" 1st Edition N. Gregory Mankiw (1998) "Principles of Microeconomics" 1st Edition Richard G. Lipsey, Alec Chrystal (2003) "Economics" 10th Edition William O Bearden, Thomas N Ingram, Raymond W LaForge (January 13, 2003) "Marketing, Principles and Perspectives", Third Edition. Read More