Ultra Fryer Business in China - Case Study Example

Ultra Fryer in China Executive Summary Business expansion is an important and essential goal for any business that is expanding and wants to create a global presence. Businesses going global are expected to have a perfect understanding on the business environment in which they are expanding to. this is important since it helps the company to develop its brand recognition and other important elements that are in tandem with the cultural aspects and expectation of the people in that new business environment. Ultrafryer Systems, Inc., is an international company located in San Antonio in Texas in the United States. The company, which boosts of more than 100 employees with up to $15 M in annual sales produces and sells different kinds of gas and electric fryers (Standex International Corporation, 12). The company has been in existed for more than three decades, having been registered in 1969. The company makes both domestic and commercial ancillary equipment, which are essential for commercial kitchens in residential and commercial premises. This report examines market expansion and expansion strategies that this company is exploring in order to expand and exploit the marketing opportunities in the Chinese Republic. It outlines some of the effective strategies that can be used in the expansion process so that it can effectively benefit from the new market in China. 2. Significance of the Chinese Market China is one of the countries in the world with a large and growing population. In this case, many companies have been trying all they can in order to create their presence in the Chinese market and take advantage of the lucrative market that exists because of the company’s population. It is important to note that the success of any business lies in the success of its marketing programs. In this case, the products being sold have to be accepted in the market by consumers. The company engages in a lean production line, in which its products are made after an analysis of the particular market. In this case, the company manages to avoid any wastages in the process of its production, which in most cases, is because of overproduction and underproduction. In most of its marketing activities, the company relies on various pricing strategies depending on the market characteristics (Hill, 78). For instance, the company uses skimming strategies where it wants to break even and make profits before other companies identify and join in the market to create competition and reduce its market share. Alternatively, in places where other companies have already existed, the company uses a penetration strategy where it charges cheap prices for its products and increases them gradually as it creates a substantive market share. 3. Competition In the process of expanding to other countries, businesses have to understand that other companies already exist in the new business environment. In the Chinese market, Ultrafryer Systems, Inc., stands to faces some competition from other established companies that sells the same and other related products. One of these companies is Alibaba Inc., which produces and sells different kinds of consumer electronics including gas and electric fryers for domestic and commercial use. 4. Strengths and weaknesses of the company Alibaba has been an old successful company in China, where it has been making different kinds of electronics and selling them to customers in China and many other countries in the world. The company has had a good trading history and has a substantive market share in china. One of the advantages that the company has in trading in the Chinese environment is its perfect understanding of the Chinese market. By trading in the company for a long time, Alibaba knows the particular needs of the Chinese market and produces products that are tailor-made for its consumers. However, one of the limitations that Alibaba faces is that it does not specialize in the production of certain products. In this case, it may not be highly skilled in producing products in a certain line. It is important to realize that specialization is important in business because it gives the business the much needed knowledge and skills that ensure quality on the production of goods and services. This is something the gives Ultrafryer Systems a cutting edge over Alibaba because since its inception, the company has been dealing in the production of a single line of products. In this case, the company is better placed to produce goods that appeal to the needs of different clients in the different countries it has reached. 5. Country of Origin Advantage Having been registered and licensed in the United States, Ultrafryer Systems have certain trading advantages compared to their competitors. It is important to understand that the business environment in the United States is very liberal, having different kinds of companies that offer various kinds of goods and services in the United States. Additionally, the United States has a multicultural business environment that has people from different countries and places. In this case, trading in the United States is an added advantage to Ultrafryer Systems since it has managed to deal with customers of varied cultures, tastes and preferences. On the other hand, trading in the United States for most of its life can also pose some disadvantages to Ultrafryer Systems because it does not have much experience dealing with customers beyond its borders. In this case, the company has a responsibility to make a careful study and analysis of its business environment before deciding to launch its products in the Chinese market. 6. Attributes of the Target Market Currently, China is the most populated country in the world, having approximately 1.3 billion people. China is multicultural, having about 56 ethnic societies. The country has a developed a one-child per household policy in a bid to ensure that it controls its population growth. Most of the population in China is evenly distributed, with many people having invested in the cottage industry. In general, the company has a large labour force, which is because of its large population. Having this large population means that the country offers lucrative business for companies dealing in various consumer related products. The Chinese government has created reliable infrastructural facilities that facilitate business functions and processes. For instance, the government has managed to develop proper and reliable transport infrastructure in many of its small and large cities. In this case, movement of people and goods from one place to another is always very easy and fast. Additionally, China has also managed to create an elaborate banking system through which it has made it easy for people to access and use credit. By its large population, the banking systems have managed to create and advantage a large pool of credit facilities that are a good of proper trading activities in the country. Many of the businesses that have been stabilized in the Chinese market have achieved much of their success in business strategies they have developed to exploit the business opportunities in the Chinese republic. The Chinese people are respectful and hospitable and value their culture. In this understanding, businesses entering the Chinese government have to understand the cultural aspect of the Chinese people before deciding on the kinds of business activities that they need to launch. One of the important aspects that businesses have to consider is the language that they have to use in the branding and other promotional activities. Most of the Chinese people do not have proficiency in many internationally spoken languages like English among others. For this reason, a business developing presence in the Chinese market, like Ultrafryer has to ensure that it develops its marketing strategies to be in line with the language and other cultural practices to be in tandem with those of the Chinese people. 7. Modes of Market Entry In entering foreign markets, companies have the option of choosing between many methods depending on their perceived advantages and ability to bring the desired returns. One of the strategies that Ultrafryer Systems can use in this case is that of making direct exports. In this case, the company can decide to make its products and sell them directly to the Chinese market through its sales representatives and agents. In this strategy, the company will have to engage selected local wholesalers and distributors to become its sales agents and representatives (Markusen and Frank, 47). It will then set trading agreements that will have to be agreed and signed by the two companies. One of the advantages with this entry strategy is that it allows companies that use it to select the foreign markets and choose companies that are to be its foreign representatives. This is important since companies can choose companies that they feel will help them achieve their goals and objectives, thus getting the competitive advantages. Additionally, this strategy has a reliable communication system that provides reliable feedback to the original company, which is important in streamlining its marketing strategies. The company has to create a sustainable relationship with its representative companies in the trading process. Additionally, since the representative company understands the market dynamics of the local market, the original company is saved the task of researching and understanding the local market before launching (Ller, 43). However, this strategy also has some disadvantages that can be potential threats to the success of the company in the new environment if not carefully addressed and analyzed. First, the market entry strategy requires a lot of information requirements, which may be expensive to establish. It s important to realize that the original company and its representative are expected to be in constant communication so that any information relating to changes in the market environment can be dealt with to achieve the stated goals and objectives. Additionally, this method requires high amounts of start-up costs as opposed to exporting directly to the consumers. The method also has numerous risks that can affect the success of the expansion process, first, the business is made to engage a new company that it may not have known and understood its trading activities. In this case, the business can lose much money in the process of creating this trading relationship. 8. Pricing Pricing is important in the marketing process because it may attract or discourage customers that want to try out new products by the new company in the market. In making its pricing strategy, Ultrafryer Systems will have to consider several factors. First, it will have to check on the cost factors. In this case, the price it will give t its final products will include a certain mark up on the costs incurred in the production process. This is the general approach used by many companies whenever they are expanding into foreign companies. However, market factors are also important in the choice of marketing strategies; Ultrafryer Systems will have to ensure that it puts prices to products, which are in line with those of other similar products offered in the market. The company will have to ensure that it produces goods whose prices are not very high to discourage customers or too low, to lead to looses in its marketing approaches (Bilgin, 64). Alternatively, it will also have to ensure that it focuses on the government regulations stipulated in the market for the kinds of goods and services offered in the market. In line with the above strategies, the company has to chose a skimming pricing strategy that considers the market factors in order to beat the competition posed by rival companies in the market. This is important because the company has to ensure that it creates a competitive advantage and market position. 9. Conclusion Business growth and expansion is necessary for the success of companies. The current wave of economic globalizations has lead to creation of various trading opportunities across the world making many companies to diversity their trading activities to take advantage of this growing opportunity (Weiss, 37). China, with its large population has always been the target of many growing companies, which seek to take advantage of the increasing demand for various products and services by the Chinese population. Ultrafryer Systems, after having had success in its trading companies in the United States is better placed to take advantage of the various opportunities in the international markets like china. The development of reliable strategies will go a long way in offering competitive advantages to the company. Works Cited Bilgin, Zeynep. Drivers of Global Business Success: Lessons from Emerging Markets. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan, 2004. Print. Hill, Charles. International Business: Competing in the Global Marketplace. 7th ed. Boston: McGraw-Hill/Irwin, 2009. Print. Ller, Thomas. The Multinational Enterprise: Foreign Market Entry, Transfer of Technology, and Technology Spillovers. 2003. Print. Markusen, James and Frank Hler. Endogenous Market Structure and Foreign Market Entry. Cambridge, MA: National Bureau of Economic Research, 2009. Print. Standex International Corporation. Standex Expands Presence in Food Service Chain Fryer Segment with Acquisition of Ultrafryer Systems. 2014. Web. 17 November 2014. < http://www.standex.com/about/news-releases/2014/06/23/standex-expands-presence-in-food-service-chain-fryer-segment-with-acquisition-of-ultrafryer-systems> Weiss, Linda. States in the Global Economy Bringing Domestic Institutions Back in. Cambridge, U.K.: Cambridge UP, 2003. Print. Read More