Business Problem and Decision-Making Process of Australia Tech - Case Study Example

Virtual Business Design Australia Tech Australia Tech Virtual Business Executive Summary As owner, Director and operator of Australia Tech it is highly important that our foreign companies are successful and appropriate in their environment while also meeting cultural needs and sensitivities. In developing our business relationships we must be devoted to addressing issues as they arrive in a timely and consistent manner, ensuring employees, customers and clients remain loyal to us. As an organization conducting business outside of our home Country it is crucial that we are conscious of cultural business practices and mirror these in our day to day activities. It is the purpose of this document to plan for the challenges of foreign business operation and devise means of implementation of those plans. Organizational culture is a direct reflection of global success. Australian management styles are higher in egalitarianism in leadership beliefs than most European counterparts and this culture can have a direct bearing on the outcome of the company’s strategy. Australia Tech has recently been challenged at our Ecuador location by a new, local competitor whose product is very similar to our own. Study will be completed on Ecuadorian culture and practices in order to better contend with this competition. In researching our competition there are factors that we will need to consider and be aware of in planning strategy to meet this challenge. Our primary goal is a plan that meets both the needs of Australia Tech and local practice, while remaining in strong competition with the Ecuadorian competitor who has the advantage of being a local based company. Ecuadorian’s are generally consumers who are accustomed to and acceptable of lower quality product. Local manufacturers may be able to provide pricing that is much lower because of quality differences. Australian management and organization culture is very weak when it comes to competition, it is their lowest rated characteristic and product innovation is rated low as well. Local companies are small and family run, not trusting outsiders. Few labor organizations exist and market studies are difficult. Using product innovation and differentiation will allow Australia Tech to maintain their share of the market. Utilizing locals for manufacture of the product can keep pricing as low as possible and hiring top quality local management can allow Australia Tech to meet local custom in marketing campaigns. Targeting current customers with special promotions and pricing can ensure that Australia Tech keeps loyal consumers. Australian management style may have benefit in Ecuador as companies are small and tend to use more familiar employees such as family. An egalitarian management style can keep relationships close and contribute to more productive working environments. Establishing well defined objectives and goals should be completed at the start of the marketing campaign. Strengths and weaknesses should be able to be measured in profit and customer satisfaction. Using objectives and goals will help Australia Tech develop the best plan to meet these goals and objectives. Using special management to oversee innovation and product differentiation, the company should be able to remain competitive with the original product yet reduce the competition of the similar product. Introduction………………………………………………………………………………………..6 Review of Australian Organizational Culture……………………………………………………………………………………………..6 Review of Ecuadorian Organizational Culture…………………………………………………………………………………………….7 Ecuadorian Competition…………………………………………………………………………..8 Australia Tech Organizational Strategy…………………………………………………………...8 Recommendations…………………………………………………………………………………9 Evaluation………………………………………………………………………………………..10 References………………………………………………………………………………………..11 Introduction Australia Tech is an Australian based company providing products and services in Ecuador. As a European company practicing in Latin America it is imperative to be aware of local custom and culture in business practices. Focusing on consumers and implementing management styles similar to that of locals will ensure an understanding of the work force and ability to compete in a foreign market. Business strategy should consider each factor of the location and implement target objectives and goals, meeting local supply and demand conditions. It is the ultimate objective of this report to provide background on Australian management styles, Ecuadorian management styles and to define and strategize. Recently a new local competitor has entered the market offering a product very similar to Australia Tech. After developing a strong business strategy to address this problem recommended actions will be provided along with evaluation of the strategy. Australian Organizational Culture Australian management tends toward the egalitarian style (Baird, Harrison, and Reeve) with each structured level having authority and equality. Organizational culture is the values held by members of an organization which directly contribute to the global success of that organization. This culture affects each level of organizational activity; production, performance, commitment and financial stability of the company. A 2002 study completed by Sarros ranked seven key factors in Australians’ organizational culture, structured in degree of prominence. In a paper addressing the question of which comes first, leadership or organizational culture- theory’s and evidence from each side are presented though ultimately it is a fact that strong organizational cultures are closely associated with strong organizational leaders (Sarros, Grey, Densten). Using the O’Reilly organizational culture profile two thousand Australian managers were surveyed to determine leadership and management styles in 2002 and 2005. This is one of very few studies done on Australian organizational culture. Culture and strategy have been consistently seen as synonymous when analyzing an organization. The highest ranking of the seven factors was performance orientation followed by social responsibility. These factors encompass enthusiasm for the job, being result orientated, organization, reputation and philosophy. The factor most troubling is that competitiveness ranked the lowest which included factors such as emphasis on quality, being distinctive and innovative, risk taking and taking advantage of business opportunity. A second similar study ranked job security and stability lowest (Sarros, Grey, Densten, p15). Performance orientation could in some business practices include a high degree of competitiveness which would negate the statement and conclusion of the study showing this to be the least important factor to Australian organizations though the fact that this was rated lowest in survey shows there is often not a large focus on this area. Outcome orientation combined with performance orientation are what guide many Australian organizations. This leadership style focuses on the group and egalitarianism is the primary management style of Australian organizational culture, with management engaging on a social level with employees while still maintaining, advancing and nurturing their careers. Australian organizational culture will need to adopt and adapt to the organizational culture and business practices of Latin America in order to be successful in Ecuador. Ecuadorian Organizational Culture With Ecuador being a Country with political turmoil and a capitalist society, organizations and businesses operate on much smaller scales. On average a business in Ecuador is small and local. Much of the Country depends on Ecuador’s supply of oil and it is a struggling environment for most locals. Small businesses in a developing Country are especially important and contribute most of the gross national product (Busch, p70). Ecuador does not market good internationally and because most businesses are small they have unique and specific problems, styles of management and organizational culture. While Australian management tends toward the egalitarian style, Ecuadorians tend toward an opposite extreme. Many business owners do not feel that they are able to trust outsiders and will only employ family members and well known friends. Management is usually untrained and poorly educated or perhaps with no education. This is a large problem among business’ in Ecuador, with education being cost prohibitive and time consuming. Very few of the population are highly educated or hold degrees in management and do not have the knowledge, experience or ability to be successful managers. Manager’s and business owners surveyed frequently complained that neither employees nor other management were able to follow given direction (Busch, p71). It is suggested that this might stem from a culture that places little value on quality. Because the Country is poor and accustomed to lower standards products that are only mediocre are acceptable. With a lack of trust among managers and organizations trade information and cultural practices as a whole are seldom shared, with contributes to the problem of these organizations remaining small and inefficient, not taking advantage of better business practices that other’s may promote through business and origination associations. A handful of organizations in Ecuador belong to trade unions and are able to develop culturally and share management styles and information through this union. An Ecuador Country Political risk report of 2009 showed that there was a high 18 month forecast to international businesses for turmoil (Ecuador). The Country’s state of constant political unrest and certainty plays a very heavy and crucial role in developing organizations. The President adopted a socialist model of economic development in hopes of stimulating and improving economy after the fall of oil prices. Though this might be of benefit to some, most small organizations will remain in the same condition. Ecuadorian Competition Australia Tech has recently gained local competition from an organization with a very similar product. This represents a problem for Australia Tech in that this product, being local is likely manufactured locally and by a small organization able to offer a lower price. With Ecuadorian’s being used too and accepting of lower standard products it is likely that this competition will take many of Australia Tech’s customers and clients. Ecuadorians style of using family employees and those that they know very well gives them an advantage over Australia Tech in that they are more familiar with their labor force. Despite this fact they often complain that employees are not able to be relied on or depended on and do not take good direction. Australia Tech Organizational Strategy As an Australian based company Australia Tech has the distinct advantage of being more likely to employ high quality well educated management. The disadvantage is that not using management from the local labor pool may make it more difficult to employee reliable skilled and talented employees able to meet product demands. With the language being primarily entirely Spanish in Ecuador this may also create a barrier to a manager who is not native. Depending on the Ecuadorian labor pool for strong organizational management ability may be hazardous and they may be more difficult to work with as a foreign company. With a strong management team in place Australia Tech will still be relying on locals to supply the labor force. Australia Tech management needs to be culturally sensitive and aware of the differences. The labor force will likely be poorly educated and accustomed to providing second quality labor. This can have a direct effect on the company’s output. Recommendations Product differentiation is important when a competitor offer a product that is very similar. Using marketing designed to draw attention to the differences in product and to highlight the strengths of Australia Tech’s products will utilize locals and company reputation. Differentiation might be accomplished with color, model, etc., while not changing the essential features of the product. Concentration ratio should be determined and cost and profit studies should be initiated to determine if either is adjustable and comparison studies with competitor product should also be included. It is possible that Australia Tech may not be able to offer similar pricing if manufacturing is not completed on a local level due to import and production costs. If this is the case Australia Tech will have to depend on the strength of their product entirely and this may present a problem with Ecuadorian’s being acceptable and accustomed to lower quality products. Planning strategy with the competitor is another possibility that should be considered though this is also not a likely solution when most businesses in Ecuador are small and secretive. Product innovation can be accomplished with small changes that may not have an effect on manufacturing cost and this is something that Australia Tech may not have used to distinguish their product. By establishing their product as more functional, higher quality, more efficient or better in some ways competition can become more difficult for the competitor. Attempting to gain brand loyalty by offering special promotions and pricing to current customers can keep profit consistent and increase loyalty. Managing innovation could be more efficient by assigning to a special management team. Because the competition is a local company it is likely that they are more familiar with the local market elasticity and also the local consumers. Utilizing the highest quality local management possible would be well worth the cost and bring to Australia Tech the benefit of individuals who are aware of the usual custom and culture of the local people in business competition. Using marketing campaigns that the locals consider unscrupulous or without respect to the native people and local company’s and economics can prove disastrous for a foreign company. Evaluation In order to evaluate Australia Tech’s efforts at maintaining market share comparative measures can be used. Objectives and goals should be clearly defined before undertaking any new strategy or business plan. Objective Product pricing will remain the same or become reduced Market share will be calculated based on units sold and remain consistent Surveys will be used to determine consumer satisfaction with current product and suggestions for improvement in order to retain customer loyalty Local marketing campaign’s will solicit feedback of customer input Special management will be assigned to differentiate product while also retaining loyal current customers References Baird K, Harrison G, Reeve R. THE CULTURE OF AUSTRALIAN ORGANIZATIONS AND ITS RELATION WITH STRATEGY. International Journal Of Business Studies [serial online]. June 2007;15(1):15-41. Available from: Business Source Premier, Ipswich, MA. Accessed December 30, 2011. Sarros, J. C., Gray, J., & Densten, I. L. (2002). LEADERSHIP AND ITS IMPACT ON ORGANIZATIONAL CULTURE. International Journal Of Business Studies, 10(2), 1. Busch, E. T. (1989). SMALL BUSINESS HURDLES IN ECUADOR. Journal of Small Business Management, 27(1), 70-73. Ecuador. (2010). Political Risk Yearbook: Ecuador Country Report, 2-18. Read More