Management of International Business - Assignment Example

Management of International Business Contents Contents 2 Executive Summary 5 Country Analysis 6 PESTLE Analysis 6 Political Factors 6 Economic Factors 6 Social Factors 7 Technological Factors 7 Legal Factors 8 Environmental Factors 8 Analysis of Regional Organisation 9 Policies Relating to Trade and Investment 9 Infrastructural Improvements 9 Economic Development 9 Education and Training Related to Trade 10 Initiatives and Policies in Enhancing Foreign Trade and Investment 11 MNE Analysis 11 SWOT Analysis 12 Strength 12 Weakness 12 Opportunity 13 Threat 13 Industry/Sector Analysis 14 Porter’s Five Forces Analysis 14 Bargaining Power of the Consumers 14 Bargaining Power of Suppliers 15 Existence of Substitutes 15 Entry Barriers 15 Existing Market Competition 16 FMSS/Mode of Entry Analysis and Recommendation 16 Self-Service Formats 17 Franchising 17 Mergers and Acquisitions 18 Big Box Retiling 18 Specialised and Private Label Retail Formats 19 References 21 Executive Summary The following paper focuses on potentially evaluating the Australian region as one of the effective regions for Wal-Mart to expand. In terms of evaluation the region is scanned pertaining to macro-environmental factor sets like political, economic, social, technological, legal and environmental that would tend to impact the retail operations of the grocery retail store in the region. Further along with the above the paper also tends to incorporate the use of other strategic tools like Porter’s Five Forces Model and the SWOT Framework to effectively evaluate the external industrial paradigm of the Australian Grocery Retail market and also gauge the Strength and Weakness of Wal-Mart to exploit the emerging opportunities and counter the rising threats. After having conducted the evaluation along such fronts the paper proceeds to render effective recommendations to the strategies and activities that Wal-Mart can pursue to gain an effective entry into the Australian region amidst other potential competitors. In the course of conducting evaluation the paper reflects on the different obstacles both in the macro and micro organisational framework that tend to deter the entry of large scale grocery retail formats in the region. From the total research carried out it becomes evident that Wal-Mart can gain entry into the Australian region through the creation of small retail formats basically through the specialised or co-branding modes to counter the decisions of the Australian government pertaining to the restrictions rendered in establishment of large retail formats for grocery retailing operations. In other directions the company can also take resort to the mergers and acquisitions framework to gain hold of potential markets in the region. Country Analysis The analysis of the Business Environment of Australia would be conducted based on strategic models like PESTLE Analysis hinting on the Political, Economic, Social, Technological, and Legal and Environmental parameters. PESTLE Analysis Political Factors Regulatory paradigm rendered by the central and regional retail and government regulatory authorities in the region result in putting restrictions on the size of retail outlets to be established in specific regions. In rural areas thus establishment of larger retail outlets is restricted that fail to meet the daily needs of the people and rather render weekly services. Similarly the establishment of larger retail outlets are also restricted along certain corners of the region by such regulatory and government authorities. These political and government regulations are being practiced in a stringent fashion to increase the entry barriers for other foreign firms (Commonwealth of Australia, 2011, p.217-223). Economic Factors Relating to the economic scenario of the retail industry in Australia it is observed that the level of consumer spending on purchase of retail commodities has considerably gone down from the previous case with higher incidence on the parameters of saving and spending on services. Food, financial and other services happen to be the larger domains inviting consumer interests. Despite the above fact however large amount of capital and infrastructural investments are continually being rendered to help enhance the productivity and growth of the retail sector in the Australian economy. The Australian retail sector however contributes to reduced labour productivity in the region (Commonwealth of Australia, 2011, p.70-71). Social Factors The social factors impacting the retail sales and services in the Australian region relate much to the development of retailing activities in terms of online and cellular mediums. Growth of sales and purchases via these mediums has brought about adequate demographic segmentation in the Australian region where people below 17 and above 65 years were found to take less resort to virtual purchase and sales medium. Again while people aged between 20 to 44 years reflected moderate interest in online retail activities the people in the age bracket between 45 to 54 years reflected the highest interest than that in the age group of 55 to 64. Other than gender factors where men tended to gain higher interest on online purchase the existence of higher knowledge and income paradigm triggered the growth of online purchase in the region (Commonwealth of Australia, 2011, p.96). Technological Factors Technological factors like the large scale introduction and penetration of broadband network to several household communities in the Australian region coupled with the enhanced development of mobile networks has contributed to the development of online trading activities. Significant technological changes are rendered through the introduction of smart phones with wide screens along with notebooks and desktop equipments to help the consumers enjoy online trading activities for retail products. The above factors are noted to enhance the application of the concepts of mobile and internet commerce in the region with growth of adequate infrastructural and capital resources related to such. Similarly technological changes are also being rendered pertaining to retail operations to generate considerable effectiveness in customer servicing (Commonwealth of Australia, 2011, p.102-103). Legal Factors With the growth of online purchase and sales activities in the Australian region the parameter of legal factors is found to gain larger scope relating to online trading activities. The regulatory and legislative authorities in the region have started devising regulatory norms to promote the scope for safeguarding the interests of the consumers relating to safety and quality of the product purchased by the consumers online for use and also the price factors related to such. Thus consumers in the present climate are endeavouring to trade in a protected medium and thus are gaining awareness of the different regulations related to such. Other than countering threats from dubious pricing policies of retailers the legislative paradigms are also being formulated to cease the activities of retailers in conducting fraudulent activities online to attract the attention of consumers. Thus fraudulent retailers are prone to face the impact of law suits in cases where the product delivered does not match the specifications rendered online (Commonwealth of Australia, 2011, p.116-136). Environmental Factors Significant environmental factors that tend to govern the operation of the retail landscape in the Australian region include the evaluation of the usage parameters concerning water and other energy resources and also the management and measurement of the carbon footprint on regular intervals. Similarly the retail concerns are also required to strictly evaluate and reduce the level of greenhouse gas emissions both from their own and stakeholder like supplier’s point of view thereby enhancing the parameter of social responsibility. Further the retail concerns operating in the Australian landscape are also required to significantly reduce the wastage of its packaging products and rather explicitly depend on recycling materials to help render a greener environment (Citi, 2010, p.1). Analysis of Regional Organisation Policies Relating to Trade and Investment Infrastructural Improvements Infrastructural improvements related to the development of infrastructural pursuits in the Australian landscape relate to the introduction of policies relating to the improvement of rail, road and port infrastructures. Development of such infrastructures would help in the easy reaching of the retail commodities from the manufacturing centres to the distribution centres and also to the hands of the end consumers. Similarly policies are also being brought out to help in the development of infrastructures pertaining to the incorporation of information technology resources both in the retail outlets and the distribution centres. Online technology resources like the incorporation of Electronic Data Interface and information technology to enable the growth of intranet applications linking the distribution and other retail centres to each other. Moreover the development of online infrastructural systems in the grocery retail sector also helps the retail corporations gain a larger consumer population in the previous case (Fjermestad, Romano and Romano, 2006, p.177-178). Economic Development The policies relating to the economic development in the Australian region count on the focus of gaining avid foreign direct investments from developed countries round the world that would in turn contribute in optimizing Australia’s potential in exploiting the natural base of resources. Moreover the economic development in the country has led to the growth of the employment sector in the country helping in the growth of disposable income in the hands of the people to use on consumption purposes. Similarly other economic developments taken by the Australian government focus on the enhancement of relationship with other Trans-Pacific nations like those pertaining to China, Japan and Korea. Relationship with these countries helps in the gaining of voluminous amount of imports from these nations thereby contributing in the economic and social development of the Australian people. The larger concentration of labour forces in the Australian landscape is observed to operate in the categories of manufacturing and services thereby relating to the growth and development of operations in concerns pertaining to such category (Central Intelligence Agency, n.d.). Education and Training Related to Trade The training and educational development opportunities in the Australian region are largely enhanced through the actions and policy measures taken in by the government and other regulatory bodies. Policy directions brought out by these bodies contribute to the development of both professional pursuits in the region and also help in the development of opportunities for candidates focusing on to gain overseas education in the region. Training and education packages are prepared by the government of Australia in close coordination with the industrial and technological needs of the region. Moreover the educational and training facilities in the region are further enhanced through the incorporation of web technology as potential infrastructures helping in the development of potentials of people dwelling along remote areas. State-of-the-art technology coupled with development of professional networks help in the development of the operational potential of the Australian people (Australian High Commission, n.d.). Initiatives and Policies in Enhancing Foreign Trade and Investment The government of Australia through the creation of the Australian Trade Commission focuses on gaining significant trade and investment opportunities through the development of cooperation with other global nations operating within the APEC Framework. The Trade Commission of Australia operates through a network of 50 different countries to help promote the cause for trade and investment opportunities. Moreover the body operates in attracting foreign direct investment from and to developing economies to promote development and growth of potential opportunities. Government and regulatory bodies in Australia focus on promotion of both the development of both private and public organisations through the highlighting of investment opportunities by foreign nationals. These foreign investments gained are penetrated to the territories and states to contribute to the holistic development of the country (Austrade, 2011, p.4-5). MNE Analysis The analysis of the MNE chosen, Wal-Mart would be conducted based on SWOT Analysis. The SWOT Analysis would be based on the parameters of Strength, Weakness, Opportunity and Threat parameters such that the Strength and Weakness would be based on the analysis or evaluation of the company’s internal scenario while Opportunity and Threat relate to the external environment of the firm pertaining to the Australian region. SWOT Analysis Strength Wal-Mart reflects an expansion potential to gain enhanced market in the Australian region through the process of acquisition activities. The grocery retail firm is observed to gain the opportunity of developing its networks with existing supermarket chains Coles Myer and Woolworths operating in the Australian landscape. The American based retail company focuses on investing in the Australian region owing to its ingrained potential in developing effective relationship with the supply chain bodies operating in a foreign region. Moreover the company tends to evaluate the opportunity potential in the region through the use of its effective strategic information base that contributes to the gaining of potential information about key target markets and investment and revenue opportunities (Evans, 2006). Weakness Relating to the weakness parameter of Wal-Mart in its endeavour to expand over to foreign market places the company is observed to suffer from the problem of bribery and unethical operations carried out by officials of the company working in foreign countries. This practice of taking bribery and unethical activities by the company officials happens to put a black mark on the company’s goodwill such that it suffers from the loss of potential consumers. Thus the company management is focusing on taking stringent steps to reduce the incidence of such events to help sustain the potential of consumer trust and loyalty to the concern. Moreover the management of Wal-Mart also focuses to continually evaluate ethical parameters of its foreign operations such that the managers continually evaluate the actions of its different stakeholders like suppliers. The actions of these stakeholders and company staffs are observed so that they render quality products and services to the customers and thereby sustain and enhance the goodwill of the company (The New York Times, 2012). Opportunity The region of Australia hones up potential opportunities for the grocery retail business in that the rate of employment and economic growth prove favourable in helping consumers gain potential income to procure commodities offered by retail markets. Moreover the region also hones up an effective supplier base for food and dairy products thereby creating a competitive business environment for retail companies to thrive. Again the government and regulatory authorities are continually working to promote the cause for investing in business functions spread along the rural and remote areas that in turn creates opportunities for Wal-Mart to expand its business functions in the Australian region. The consumers in Australia are also found to gain enhanced confidence pertaining to conduct sales and purchase operations in a virtual network through use of online and cellular facilities. This fact renders a large amount of opportunity for the company to use its website and other internet applications to thereby gain a more effective and sporadic entry into the Australian retail consumer market. Threat The government and other regulatory bodies pertaining to the Australian region tend to work on the creation of effective barriers to the entry of large scale foreign grocery and food retail business in the region. It is observed that these regulatory bodies decline to promote effective land for the establishment of large retail spaces in the region such that small retail outlets in the local context tend to meet the daily needs of the people. Thus this fact acts as a potential threat for the large grocery retail firms like Wal-Mart to explicitly reign in the foreign soil. Herein, Wal-Mart thus needs to gain an entry into the Australian region through the use of its small retail store formats or the Express Stores. Further the Australian region is also characterised by concentration of a large number of retail companies that tend to dominate the retail market by operating to lower down the price below the average level. This fact also creates a problem for the retail formats to counter the power of suppliers in the region. Industry/Sector Analysis The analysis of the retail industry pertaining to the Australian region would be conducted based on the use of a strategic model like the Porter’s Five Forces to highlight the industry bottlenecks and constraints that would in turn impact Wal-Mart’s operation. Porter’s Five Forces Analysis Bargaining Power of the Consumers The bargaining power of the consumers in the Australian region has considerable risen from the earlier periods owing to the increase of online trading activities through the use of the broadband and the cellular medium. Consumers trading on the purchase and sales operations through such mediums tend to gain an enhanced view of a plethora of other product and service alternatives traded in by other retail firms in the region. Thus consumers would certainly go for such companies that tend to render quality products in different assortments and ranges and also at affordable prices. Moreover the existence of a stronger legislative climate relating to consumer protection regulations strengthens up the hand of the consumers in the Australian region to file suits in cases of problems faced. Bargaining Power of Suppliers The Australian region is characterised with existence of larger number of suppliers for dairy, meat, vegetables and other food and grocery products thereby making it a competitive network for supplier firms to compete with each other in gaining favourable trading contracts with supermarkets and other such small retail hubs operating in the region. On the other hand supermarkets and other retail firms to gain the optimal benefit of the supplier network needs to effectively bargain with them pertaining to the prices of the products and transport parameters. Existence of a larger supplier network in the region tends to increase the cost of switching over for the retail firms as an effective supplier can leave retail firm a switch over to serve another with whom the supplier body has earned a favourable contract (Fahrer, 2011). Existence of Substitutes The grocery and food retail market in Australia is constituted by large number of small retailers that tend to largely compete with the larger retail chains and supermarkets in gaining access to supplier bodies thereby attracting them to operate on favourable price terms. Apart from the existence of several small retail chains the existence of speciality retail hubs help to render quality services in a specialised category attracting the interests of the consumers. Similarly existence of different supermarkets along with the small retail hubs create a problem for larger retail chains international or regional to effectively compete in gaining on bargaining efficiency (Australian Government, n.d., p.118). Entry Barriers The Australian government along with other regulatory federations operating in the region continually work to safeguard the position of the existing retail concerns in the area. Thus stringent regulations are rendered relating to the monitoring of the creation of large retail formats encompassing a larger floor space based on the efficiency in meeting the demands of consumers. Cases are observed where the Australian government strongly worked on rendering barriers to the easy sourcing of land resources for creation of large retail formats thereby enhancing on the need for the existence of small retail hubs to meet urban standards (SGS, 2010, p.12-15). Existing Market Competition Observation made reflects that the current nature of the grocery and food retail environment in the Australian region tend to operate on a highly competitive note with small retail chains coupled with other supermarkets increasingly competing with each other to gain effective supplier and consumer bases. Moreover the increasing network gained by them with the supply chain groups that in turn help them to gain on margins such that they are found to practice highly penetrated pricing techniques to gain hold of a larger market share (OECD, 2005, p.143). FMSS/Mode of Entry Analysis and Recommendation The following section highlights on the different modes of entry into the Australian retail market by Wal-Mart. It would reflect on the potential benefits and problems that each of the different modes of entry would pose to Wal-Mart to effectively counter competition from the existing retail base in the region. The different modes of entry that can be gained by Wal-Mart to gain a sustained position in the Australian region can be rendered as follows. Self-Service Formats Wal-Mart can effectively focus on the development of self-service formats in the region through the designing of small retail formats wherein the retail consumers would gain considerable independence in selecting the required retail commodity on their own. This policy being existent in the region would help the regional government authorities and the people to help largely embrace and welcome such relating to the creation of Wal-Mart stores. Moreover, Wal-Mart can work on enhancing the customization standards through the incorporation of required technology to further enhance the self-service retail formats into self-check formats. Through the incorporation of effective technology like weighing and paying systems the company can systematically help its customers to enjoy a thrilling shopping experience wherein they can self weigh and pay for the products procured. Herein though the company is required to render effective investment to the development of the retail formats along with incorporation of needed technology the requirement to staff the stores in an enhanced fashion is reduced. Henceforth the above stands out as a potential recommendation put before Wal-Mart to expand into Australia (Productivity Commission, n.d., p.13). Franchising Wal-Mart can also eye on another effective market entry opportunity pertaining to the Australian region where the company can work on developing franchisee relationships with other existing franchisee bodies to largely expand into the Australian retail market. This strategy put into effect would not only help the company to gain an ease of entry into the market place such that the company can gain on the existing advertising, promotional, distribution and supply chain facilities of the franchisee body in the region. Moreover, Wal-Mart can also gain on royalty fees from the franchisee bodies that would agree to operate in the market development for the company in the Australian region. However with the growth of potential competition in the Australian market place taking into hold the support from the franchisees the company can focus to gain the support of other grocery retail brands that has gained access to a franchisee support. This co-branding strategy is being pursued in the modern context pertaining to the countering of competition relating to the gaining of franchisee support by retail firms. Thus Wal-Mart can effectively gain hold of such franchising ventures to gain enhanced presence in the Australian region (Productivity Commission, n.d., p.14). Mergers and Acquisitions Wal-Mart can also effectively gain hold of another potential entry mode pertaining to the use of strategic models like mergers and acquisitions. Through the use of such strategic modes Wal-Mart can gain ownership of other small grocery and food retail firms operating in the region. This fact would potentially help Wal-Mart expand its operation base on a gradual basis to thereby compete with other larger grocery retail firms operating in the region. However before conducting such mergers and acquisitions the company is required to conduct an effective audit of the operational and resource scenario of the other small retail firms such that to make such strategic business acquisitions and mergers a feasible event in helping Wal-Mart gain on revenues and market share. Big Box Retiling Reflecting on its existent nature of retail operations the grocery retail company, Wal-Mart can also focus on starting its retail business in the Australian region through the opening up of large retail or Big Box retail formats. Creation of such big retail formats would help the company gain on economies of scale pertaining to both its use of labour and resources in the form of gaining stocks on a wholesale basis. However the creation of such big retail formats is largely restricted in the Australian region owing to the fear of loss of considerable business opportunity for other small grocery retail firms operating in the region. Thus gaining of larger spaces by big retail firms through foreign investment operations is being closely monitored by the regulatory bodies in Australia. Again existence of such Big Box retail formats at the very outset would require Wal-Mart to render potential investment both in the creation of such large retail outlets and also in the development of its regional warehouses along with effective supply chain networks (Productivity Commission, n.d., p.15). Specialised and Private Label Retail Formats Wal-Mart can also focus on the creation of large number of specialised retail formats in the Australian region wherein the company can effectively sale products pertaining to its private labels. Existence of such specialised formats can be made along the different product lines wherein the company can largely conduct sales of its private label brands. Creation of such private label specialised store units would help the concern gain considerable amount of consumer loyalty that in turn would help the company to compete with other regional competitors in the region working in the domain of grocery and food retail operations. Moreover the use of private labels would also enhance the scope of enhancing the brand awareness among the potential consumers in the Australian retail market. Wal-Mart can also gain effective control on the supplier and distribution networks while working through the creation of such specialised or private retail formats (Productivity Commission, n.d., p.16). The above strategies underlined count as the different entry modes that can be taken by Wal-Mart to gain an effective presence in the consumer retail market in Australia. References Austrade, 2011. Reform of the Australian Trade Commission: Maximising Our Value [Pdf]. Available at: http://www.austrade.gov.au/ArticleDocuments/1358/Reform-2011-Maximising-Our-Value.pdf.aspx [Accessed November 13, 2012]. Australia High Commission, No date. Australia’s Innovative Education Policy [Online]. Available at: http://www.india.embassy.gov.au/ndli/study4.html [Accessed November 13, 2012]. Australian Government, No date. 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