Doing Business in Cambodia - Term Paper Example

Doing Business in Cambodia Introduction The purpose of the strategic planning memo is to analyze the specific issues regarding the necessary steps, which are significant and intended to prepare the management for meaningful business in the country of Cambodia. We are going to outline the company objectives, then describe a brief strategic program stating the issues that our company needs to know to be able to do successful business in the country. Similarly, we are going to design an action plan to enter into this market because it will help us evaluate the possibility of running a successful business in the country. Therefore, in response to your request for a current strategy regarding the environments in Cambodia, we will highlight a number of important recommendations regarding the business situation in the country. Our decisions will be informed with the current business environment in the country and a prospect for the future. If the recommendations are implemented, Microtek’s market in Cambodia will take a new twist, because the authority will not interfere with the Company’s services. Internationalization Market Share and Entry The Company’s main objective is to be the World leader in consulting, and be able to provide the necessary and modern information about business environment and communication tool, that would make its operations in the country successful. Moreover, the rationale for investing in the world market is the clientele that is targeted. Indeed, with the growth and development of the information and communication technology, Microtek targeted the vast opportunities in the country before initiating its businesses. Company Resources and Market Size Due to the growing nature of the company in terms of resources and size, the involvement of the management and other technical staff has bees intensified to meet the dire needs of the clients. The other objective is to establish Cambodia’s current population and their likes. According to the available statistics, As of July 2012, Cambodia's population was 14,952,665 people (Communicaid 1). This provides a good market opportunity for Microtek to utilize the population, and roll out their services. Being among the emerging economies of the world, and also the fastest growing. Business Opportunities and Internal Environment Cambodia represents a better ground for businesses opportunities for an enterprising company in the country. Therefore, it is believed that Cambodia has approximately fifty percent of its population in the rural areas and twenty percent of this population lives below the poverty line. Certainly, there is enough population in Cambodia to use the elaborate services that the company provides. Therefore, the assertion by Communicaid (11) that it is the large population available that presents a great opportunity for products and services targeting different population needs can be reliable. The other important objective in making decision about business in the country is to look at the economic variables in the country, such as inflation, Gross Domestic Products, Industrial production and the population growth and structure. In addition, the company may also be convinced that, the economy of the country is stable due to the increase in the Gross Domestic Product and the Industrial added value. Such would mean that the people may be having the ability to use the products and services of the company. Inflation Rate in the Country The management of the company must consider the increasing rate of inflation in the country as a potential threat. According to the available statistics from Insights for Action, the rate of inflation rose from 4.9 percent in 2010 to a margin of 5.4 percent in 2011 (p. 35). This trend might not be healthy for a company. Despite this inflation, the company might negotiate with the government of Cambodia to allow it operate, assuming that the inflation would be short-lived. The company may not be interested in re-locating to another country, but only hope to convince the Cambodian Authority to allow the company to operate. Procedure/ Steps for starting a Business in Cambodia Registration Process As outlined on Company Registration in Cambodia, the following steps are strictly followed when registering a private or limited company in the country. Registering a company in Cambodia with the Ministry of Commerce takes about 5 days and the total cost is US$ 900.00 (Company Registration in Cambodia 1). Name search is conducted to check availability. The business owner applies for publication the country’s Bulletin. The applicant declares non-guilt or non-civil servant. The applicant fills the required receipts. The Ministry of Commerce then conducts filer declaration. Once the Name is available, the Ministry of Commerce receives and signs all the required certificates and documents. The certificate can then be collected by the applicant or his/her representative. Tactical Implementation Recommendations Gross Domestic Product (GDP) The economy of Cambodia, on the Inflation, the Gross Domestic Product and the Population size for the same period, from 2007 to 20011 is compared with the Company’s policies and goals. Therefore, it is recommended that the company should utilize market forces of demand and supply to initiate its business activities. Absolute Advantage As evidenced by the high population, the demand for the company products will be high, thus it should provide goods to the targeted population (Insights for Action 35). Note that Cambodia is also coming to economic terms with the same distinctiveness of clients. GDP and Inflation Trend Considering the GDP of the economy it remained fairly stable with marginal changes in Cambodia. It was 9.7%, in the year 2011. In Cambodia, the Inflation was 13% in 2007. In year 2010 and 2009 it was 8.7% (Insights for Action 72). These are quite good performance for Cambodia as a country, but generally, Cambodia has a better business environment. The only limitation in Cambodia is the low population threshold. A company that wishes to work in search environment would therefore settle for Cambodia. According to the findings, it would be advisable for Microtek Company to negotiate the deals for Cambodia (Insights for Action 72). Therefore, the company has a competitive advantage in Cambodia due to the high population of that country might not be favorable to business. Initially, the inflation in Cambodia was fairly stable thus; it did not affect the economic activities of the companies that were operating in the area (Insights for Action 35). Looking at the Inflation variable, the Inflation stood at 5.4% in March 2011 while it was 4.9% in the year 2010 the same quarter while in the year 2009 was 5.1% although in the 2008 was 5.9% 2007 was 4.7% (Insights for Action 69). It means inflation did not change too much for these five years. This is a fairly stable economy. Global Market Strategy Business Environment In order to device a global marketing strategy, it is important that the company need to have a cautious and structured approach, because the risks are high and the process is quite complex (Insights for Action 71). When companies transcend national boundaries, they face a host of constraints. While some of them are quite obvious, others are not. Differences in legal, economic, demographic, political, regulatory, and technological environment are easy to understand (Communicaid 1). Cultural Environment Understanding the cultural diversity is the biggest constraint for companies crossing their geographical boundaries. Client Environment It is also recommended that the company needs to know the characteristics of the online customer, which begins with the understanding that, the customer’s needs differ from the needs of the traditional consumer. Online consumers seek the same trusting relationships they acquired through brand identification on the internet with the businesses they patronize. Notably, various marketing strategies can help businesses identify the needs of their online client and gain a better understanding of how to market to their needs. Therefore, it is recommended that the company should conduct an internet market segment approach uses different online procedures to categorize possible or definite online customers into groups with comparable needs and characteristics. These tools allow marketing practitioners to plan their strategies accordingly to capture the attention of their target consumer (Communicaid 2). Industrial Environment In terms of industrial production, Cambodia had an added advantage due to the county’s ability to add value to the raw products. As shown below, Value addition was at 14.9% in March 20011, while it was 13.2% in the year 2010. In the year 2009, it reduced to 11% from 12.9% in year 2008. However, it was highest in year 2007 (Insights for Action 72). Cambodia has shown a rejuvenated ability to carry on with the value addition for sustained market leadership. Product Branding This is for any brand or product in a market, and the marketer initially concentrates on the segmentation of the target market. Therefore, it is recommended that the company should engage in value addition for its products to increase their preference among potential consumers (Insights for Action 74). Furthermore, the company may choose one or more segments and sells its product. Legal Environment From the knowledge so far gathered, it is recommended that the company has to negotiate with the Cambodian authority on the problems it faces. Additionally, it must also be ready to adhere to the legal requirements and listen to the set of recommendations that may come from the government of Cambodia, and adjust to such demands. This will enable the company avoid conflict with the authority, failure to which, its operations could be heavily affected. Strength and Weakness of Microtek Cambodia Competitive Advantage The introduction of this company in Cambodia provides a competition edge to the firm over its potential competitors. This allows customers to access the information relating to the firm for status updates like has been witnessed in other organizations. In addition the service enables customers to share pictures and other media content with a lot of ease (Communicaid 3). Finally, the service suites people who are constantly on move because a customer only needs to give buzz the current location, after which it gives the full details of that place. Technological Environment The company has a state of the art website, which is user friendly, thus reduces the amount of time spent while searching for information, an advantage that has not been observed in other internet service providers. Nevertheless, the weakness that comes with this service is its inability to keep secret of the company because once the information is online; it will be accessible to everyone who visits the website. Most people like privacy, therefore, any service that makes public their activities may fail to attract a large number of people that service. Conclusion In conclusion, the Microtek would remain in the Cambodian market to have local touch with the potential consumers and become widely accepted. This would go along way to continue its insistent pricing strategy and pull up its mind to work. Implementing the recommendations might be to change policies to have a good relation with the government so that it could avoid the possible political interference. With this kind of information, the company can build products that suit such customers and bring them into the consumer group of the company. Therefore, increasing the number of customers would also mean an increase in the information available, which can be used to come up with a new product that caters for specific target groups. Data captured in these systems can be used to analyze market demands and be used to create a new product for given groups or one that satisfies a given need. Such products would increase the revenue base of the company. Microtek can collect information about users of different websites which it can then use to target groups that visit such websites. Websites with high traffic such as social networking websites can provide information on certain target markets. Addendum I: The trend of GDP and inflation rates of Cambodia can be tabulated as follows: 2011 2010 2009 2008 2007 Inflation 5.4% 4.9% 5.1% 5.9% 4.7% Addendum II: Value addition in Cambodia (Extracted from the maim Table) Graph drawn below in the next page. Year 2011 2010 2009 2008 2007 Value Addition 14.9 % 13.2 % 11 % 12.9 % 18.5 % Addendum III: Value Addition Line Graph above Works Cited Company Registration in Cambodia, 2005. Web. 12 December 2012. Communicaid. Doing Business in Cambodia: Cambodian Social and Business Culture. London: Communicaid Group Ltd., 2011. Print. Insights for Action. Cambodia Country Competitiveness Driving Economic Growth and Poverty Reduction. Discussion Paper No. 7, 2009. Publication. Read More