Wine Industry of Tunisia - Report Example

Business Table of Contents Part 3 Overview of the Wine Industry of Tunisia 3 Application of PND Model to the Wine Industry of Tunisia 4 Part 2 10 Contemporary Management Issues 10 Part 3 12 Market Entry Strategy 12 References 16 Bibliography 18 Part 1 Conducting business in any new location is one of the most challenging managerial tasks of the present day context. While there are several factors affecting barriers to business expansion, variables such as increased level of globalisation, internationalisation, wider adoption along with the execution of innovative technologies and prevalence of extreme business market competition play a pivotal role (Barfield, 2012). It is thus that with the intention of exploring new business opportunities, organisations often adopt internationalisation approaches in the foreign countries (Steinhoff & Burgess, 1993). Contextually, the report focuses on analysing the approach of a particular multinational corporation when expanding to a new market for ensuring maximum business growth in future. In this regard, the paper also attempts to analyse the wine industry of Tunisia wherein the organisation intends to take benefits of new business opportunities. Overview of the Wine Industry of Tunisia The global wine industry has grown significantly over the years owing to the increasing demand of products and/or services amongst the customers. A similar picture is also observable in the wine industry of Tunisia, which has also grown extensively in recent years, not only in terms of continuously increasing product sales but also in terms of rising number of organisations. However, although the trends in the year 2012 depict that sales revenue from wine products declined in Tunisia, it was primarily due to lack of abundance in grapes harvested rather than owing to demand fluctuations. Notably, the lacuna of materials needed to suffice the national demand for wine gives rise to an opportunity for multinational firms to expand in Tunisia. In addition, considering the fact that the wine industry of the country possesses marginal competitiveness, the sector becomes more advantageous for the multinationals to operate within the industry. To be specific, since the level of grape harvest is decreasing within the country on a continuous basis, foreign countries can enter into the market with their respective imported products and reap maximum benefits from the same, offering marginal competitive benefits over the local and national players (Euromonitor International, 2013). As apparent, this particular factor will influence the decision of the multinational corporation positively to enter into the wine industry of Tunisia. The industry and its various trends can be further explored with the help of applying the extended version of Porters National Diamond (PND) Model, which has been discussed in detail below. Application of PND Model to the Wine Industry of Tunisia Porter’s National Diamond Model (PND) is regarded as an analytical framework, which is being used to obtain adequate understanding regarding a particular industry from both resource-oriented and industrial viewpoints. In order to enter into a particular industry of a specific marketplace, it is important that companies implement the above stated model for acquiring a better idea about such industry and the respective national business system (Dagmar Recklies, 2001). Certain key factors are included within this particular model, which must be considered by multinational companies with the objective of reaping new business opportunities in overseas. These aspects comprise the resource availability qualities of the place, the demand structure of the market, the nature and prevalence of the supporting industry, the strategies and competitiveness of the sector and the intervention and other policies of the government among others (Porter, 2011). These factors have been accordingly elaborately below, in an attempt to analyse the competitiveness of the Tunisian wine Industry. Factor conditions. This particular section of the framework includes factors such as workforce skills persistent in the national market structure, availability of raw materials and shortage of labour among others, which altogether increases the suitability of the nation for hosting an overseas business. To be noted in this context, labour within the Tunisian wine sector is inexpensive as compared to other similar nations in the African continent, as salaries and wages are set based upon the skills and abilities of the people along with their experiences and credentials (Porter, 2011). In subsequence, the wage structure of the human resources in this particular sector largely differs in accordance with the business domains in which they work, owing to the limited governmental control it permits. However, as per the employment related rules of the government of the nation, mutual agreement amid the companies should be the only approach through which, wages are set. In this regard, the multinational corporation will have to understand the labour laws and other employment related issues prevailing in the sector to operate effectively in the long run. It is worth mentioning that the labour market of the country within the wine industry is quite complex in nature when considering the applicable laws within, which may further increase the problems of the multinational in turn (Porter, 2011). However, the problems for the company will be mainly witnessed in the domain of raw materials availability for manufacturing wine. Notably, with the decline in the harvest of grapes in Tunisia, companies operating in the wine industry have to deal with problems, primitively when selecting to either outsource or increase national production through backward integration. Contextually, the multinational corporation will need to focus on the import of raw materials and finished products to conduct their operations in the most efficient manner in Tunisia. Demand conditions. Demand of a particular market is also an important determinant, which can steer the performances as well as the decision-making procedures of the business units. Similarly, the demand trend of the wine market of Tunisia will also have considerable influence on the operations of the companies. Reports have correspondingly suggested that demand for wine in local markets is quite high throughout Tunisia (Bakan & Dogan, 2012). Since the government of the nation has introduced certain stern policies with the sales of wine or other alcoholic drinks, the presence of the retailers or manufacturers has been quite limited, which in turn has increased the gap between demanded quantity and quantity supplied. The gap although seems affecting the industry growth, it also provides a noteworthy opportunity to the multinationals in the domain. The demand for wine can mainly be observed at a rise in the cities of Tunisia, since the number of potential customers is gradually increasing with the influence of globalisation and internationalisation trends. In this context, the multinational corporation, while entering into the wine market of the country, will need to focus more on the customers of the urban sector (Bakan & Dogan, 2012). Furthermore, it can also be ascertained that the multinational corporation has to understand the policies of the respective government regarding sales of wine to assure smooth business operations. Notably, sales of wine is restricted in this particular part of the world after day hours, which further increases the flow of demand for wine products in a narrowed portion of the day. This particular aspect may also be taken into consideration when expanding in Tunisia to control consumer purchase behaviour (Bakan & Dogan, 2012). Related supporting industry. The growth and sustainability of a particular sector remains highly dependent on the approach of the support industries. This particular determinant, as included in the framework of Porter, primarily depicts the approaches made by the suppliers and other local industries. It is therefore to be affirmed that when companies belonging to the supporting industry operates with utmost efficiency, the overall nation and the economy is also improvised at the same time, which generates varied positive outcomes. Certainly, this particular aspect can be quite relevant to the operations conducted in the wine industry of Tunisia, as the companies operating within this sector, whether domestic or international, have been able to ensure innovation and creativity in product development and manufacturing segments. This again raises the benchmark for a new entrant to conduct operations in this particular sector effectively. Furthermore, the presence of limited number of suppliers within the industry has generated various positive outcomes, raising the degree of competitiveness prevailing within the domain (Thuy, n.d.). In addition, since the harvest of grapes and other natural raw materials in the country declined considerably over the previous few decades, companies have been encouraged to adopt innovative decisions that can work towards ensuring the sustainability of their operations in the long term. Such a trend also implies one of those opportunities, which the multinational company should consider while operating in the Tunisian wine industry (Thuy, n.d.). This particular factor is vital to be applied in the business to ensure superior competitive positioning and long-term sustainability, as compared to other competitors operating in the similar sector. Firms’ strategy, structure and rivalry. This particular factor of the diamond model primarily deals with understanding the core context of any industry within a particular region. Contextually, the multinational company, which tends to expand its operations in the wine industry of Tunisia, should possess adequate understanding regarding the competitive pressures existing in the sector, so that it can adopt strategies accordingly to deal with any undesirable situation in advance. This particular factor of the framework directly resembles those strategies that the rivalries mainly adopt to gain maximum exposure and accomplish greater competitive advantage. In general, competition in any particular industry acts as one of the most vital aspects that drive the operations of the companies at large, in any foreign sphere. Correspondingly, it can be affirmed that the competition degree observed within the wine industry of Tunisia is limited and less fierce when compared to other sectors of the country. With declined product sales in recent years owing to the decrease in quantity of grapes harvested, the number of companies operating in Tunisian wine industry has become quite limited too (Thuy, n.d.). Since grapes are believed to be the prime ingredient of wine manufacturing, lack of availability of the same has imposed negative impacts on the performance of the business units at large. This particular aspect can be regarded as a positive factor for the operations of the multinational company, which intends to penetrate the Tunisian wine industry. Since there are only a few major players operating in this particular industry, the multinational company can take advantage of the same and perform operations in an efficient manner. Suggestively, the company may import its products from the parent company to remain unaffected from the declining quantity supplied in Tunisia (Rolstadas, 1995). One of the most prominent players of the wine industry of Tunisia is Union Centrale des Coopératives Viticoles (UCCV). The entity is much appraised and regarded as competitive in distributing quality wine in this particular region that accounts for more than 70% of the overall production of the sector, while it also covers 85% of the total exports of Tunisian wine. Hence, the multinational corporation, which is intending to enter into the wine industry of Tunisia, will have to face stiff competition from UCCV and others possessing an influential industry positioning. Furthermore, the structure followed by the wine companies in the nation might also influence industry competitiveness by a certain level. Notably, most of the companies operating in the wine sector of Tunisia follow a centralised business approach where the top designated officials of the companies adopt decisions, as relevant to the operations (Euromonitor International, 2013). It is noteworthy in this context that UCCV intends to deliver quality wine products to the customers on a continuous basis in order to raise customer loyalty level and ensure long-term sustainability of its business. Furthermore, since the company takes centralised decisions within its operations, the decisions mostly yield positive results although these are subjected to effective implementation throughout the chain of command. Furthermore, innovation in business operations has also been one of the prime determinants for operational effectiveness of the present players in the Tunisian wine industry. It is thus that the present major players of the industry, such as UCCV, make deliberate attempts to ensure continuous innovation in their wine production techniques with the aim of delivering better quality products to the end users. This aspect might also enhance the competitive positioning of the business units by a considerable degree altogether (Rolstadas, 1995). Hence, it can be determined that though the wine sector of Tunisia possesses few major players, the degree of competition prevailing within the sector could not be ignored at the same time. Part 2 Contemporary Management Issues In the current unconventional business environment, companies need to ensure efficacy in their respective business practices and make decisions for surviving in this competitive landscape as well as operating with utmost competitiveness. In this regard, the role of proper business management is quite prominent in the present day business environment. Identifiably, with the conduct of proper management in the workplace, business units are able to ensure efficient or optimum use of the resources towards the attainment of the predetermined organisational goals. However, when a particular business enters into a new marketplace, certain specific management related issues are likely to arise. In this context, internationalisation of business is often regarded as a complex and challenging process, which involves risks of sustainability and competitive advantage for the companies (Kurtolli, 2012). Notably, when companies operate into a new market or region, they realise the need of aligning their respective operations with the trends and preferences of the customers belonging to that particular region. The problems in this regard for the companies can be mainly measured in the form of understanding the buying patterns as well as the preferences of the customers and formulating their respective strategies accordingly. Managing conflicts and difference in values along with ethics amid the workforce also refer to two major management issues, which must be considered while entering into a new marketplace. Since, the multinational corporation might need to employ its workforce from diversified domains, managing a cluster of different people from varied backgrounds might act as a challenging issue. Furthermore, in case, the company is able to align with the local players through merger and strategic alliance to operate the business, the management might face problems in mitigating the gaps persistent within the work cultures (Naik, 2012). The above theoretical understanding relating to the management issues in the context of international business expansion implies wider association with the operations performed by the multinational corporation in the Tunisian wine industry. It is obvious that the multinational corporation intends to expand its operations in the wine market of Tunisia for attaining maximum profitability with assured long-term sustainability. It is in this context that certain managerial challenges might be faced by the business, while operating in this particular region. Owing to huge availability of labour within the wine industry of Tunisia, the company might approach towards recruiting people from different sectors of the society. However, due to the prevalence of a diversified workforce, it will be quite challenging for the management of the corporation to manage its human resources in an effective manner to attain the goals and objectives of the business. This issue of human resource management within the workplace must be taken into consideration while operating in Tunisia (Naik, 2012). Management of the business must need to develop a team, having the blend of varied talents including local talent from Tunisia who are experts in wine industry along with the human resources acquired from the parent company. In order to manage this diversified workforce efficiently, the management of the multinational company will need to ensure equality while treating its workforce, irrespective of their background and other differences. Again, the management must also need to avoid favouritism within the workplace, since it is one of the most crucial determinants to workplace conflicts (Naik, 2012). Another vital management issue, which often erupts in international business expansion, is the entry strategy of the companies. As companies can enter into a particular market implementing various strategies, including joint venture, strategic alliance and merger among others, the management should focus on developing a balance within its organisational goals and objectives with that of the vision and targets of the aligned market player. At this point, it often becomes quite complicated for the management to ensure that common and mutually benefiting strategies when conducting operations in an efficient manner. However, owing to the differences prevalent in the values and approaches of the business units, it becomes quite challenging and uncertain for those to align the operational culture of the two businesses (Lymbersky, 2008). Contextually, when entering into the wine industry of Tunisia, the multinational corporation must be adequately aware of these crucial aspects that will not only enhance its competitiveness, but also raise the chances of ensuring long-term survival efficiency. Part 3 Market Entry Strategy Expanding business into a new market relates directly with the approach of the business units to ensure its long-term growth and sustainability. Simultaneously, while attaining the above stated objectives, various considerable risks and challenges arise that are unignorable. Contextually, the role of adopting proper market entry strategy can be duly considered as quite vital. In this regard, a few of the prevalent market entry strategies in this contemporary business environment include joint venture, merger, strategic alliance and franchising among others. Based on its conceptual framing, joint venture can be regarded as the particular approach, which is adopted by the business units with the intention of entering into a particular business market. It involves developing an agreement with a local or other multinational companies and work together as a collaborative unit. It involves the formation of a new company under one new brand name and acts the most popular forms of market entry, which is largely prevalent in this present day business context (Lymbersky, 2008; Agency for the Promotion of Industry and Innovation, n.d.). Merger is another noteworthy market entry strategy, often being used by the companies to expand respective businesses in a new marketplace. It is quite similar to that of joint venture, since it involves the alignment of two player’s altogether. It involves mutual decision making that can be effective and beneficial for the operations of both the companies as well. However, the chances of having conflicts amid the two merged companies in terms of work culture and values are quite common and hence, the chances of negative consequences prevail in this form of alignment (Lymbersky, 2008). Franchising is another widely used market entry mode, identified in the present day business context. It involves using the brand image of the businesses and the practiced business models to perform operational functions in new business markets. It involves finding a local player who agrees to operate on behalf of a company with its brand name. The risks involved in such form of market entry strategy are quite minimal when compared to other forms of entry strategies (Lymbersky, 2008; Agency for the Promotion of Industry and Innovation, n.d.). Strategic alliance is also quite commonly used within the operations of the companies as a possible market entry strategy for establishing business in foreign markets. Notably, companies form mutual partnership with any other existing player operating in that particular market and work together towards the attainment of common business goals. Correspondingly, two or more companies work in a collaborative manner in resolving internal business issues, so that better operations of the combined unit can be ensured within the marketplace. The aforementioned methods of market expansion can further be considered as relevant for the purpose of entry of the multinational company intending to enter into the wine industry of Tunisia (Lymbersky, 2008; Agency for the Promotion of Industry and Innovation, n.d.). Contextually, two market entry strategies can be recommended to the company that it should consider during operations. One of the market entry strategies, which the company can adopt to enter into the wine market of Tunisia, is joint venture. By adopting this particular market entry strategy, the management of the multinational unit could be able to align its operations with a local brand, which is quite popular in the Tunisian wine industry. In addition, with the adoption of this particular entry strategy, the management of the multinational unit will be able to access more pre-constructed resources of the local brand, which can again be formed as a cost saving measure. Specially mentioning, since the local brand has the experience of operating in the wine market of Tunisia, it will enable the multinational corporation to understand the market structure in a better manner, which can again be regarded as a potential advantage of the same (Lymbersky, 2008; Agency for the Promotion of Industry and Innovation, n.d.). On the contrary, owing to probable differences persistent amid the two aligned business in terms of work cultures and operational approaches, problems relevant to conflicts of interest shall arise at a considerable extent. This can be justified from the example of merger amid HP and Compaq, which failed owing to the conflict in the work culture of the two companies. Post merger, both the companies were unable to align with one common goal that further inhibited the balance of the business negatively. Since, both Compaq and HP had different approaches when conducting operations, a collective agreement between the two lacked extensively (Lymbersky, 2008; Agency for the Promotion of Industry and Innovation, n.d.). Another market entry strategy that the multinational corporation can adopt is franchising to penetrate the Tunisian wine industry. In this regard, it must be mentioned that the method of franchising shall act as one of the effective market entry strategies, owing to its potential benefits. With the help of this particular approach, the management of the multinational unit will need to find local businesses within the wine industry that are willing to work under the brand name. Practical presence of the parent company within the market is however not required with such market entry strategy. With the adoption of this strategy, the management of the multinational unit would be able to operate in Tunisia with minimal investment, which further decreases the risk factors. Companies such as McDonalds, KFC and other players in various sectors of the world are well known for conducting franchising business in the global arena. Furthermore, winding up of company in case of failure to obtain desired results is a crucial strength associated with this particular strategy. However, the increasing probability of deteriorating brand image of the companies with such an approach can further limit the companies to conduct business efficiently (Seid & Thomas, 2007). References Agency for the Promotion of Industry and Innovation. (n.d.). Les vignerons de carthage. Retrieved from http://www.tunisieindustrie.nat.tn/en/salon.asp?action=mask&ident=511 Barfield, B. (2012). Modern day selling: unlocking your hidden potential (Google eBook). US: John Hunt Publishing. Bakan, I., & Dogan, I. F. (2012). Competitiveness of the industries based on the porters diamond model: an empirical study. Retrieved from http://www.arpapress.com/volumes/vol11issue3/ijrras_11_3_10.pdf Dagmar Recklies. (2011). Porter’s diamond – determining factors of national advantage. Retrieved from http://www.themanager.org/pdf/diamond.pdf Euromonitor International. (2013). Wine in Tunisia. Retrieved from http://www.euromonitor.com/wine-in-tunisia/report Kurtolli, E. (2012). Contemporary issues and challenges in management practice and theory. Academia, 1-16. Lymbersky, C. (2008). Market entry strategies: text, cases and readings in market entry management. US: Christoph Lymbersky. Naik, P. (2012). Challenge for business survival – managing workforce diversity. Journal of Business and Management, 9-12. Porter, M. E. (2011). Competitive advantage of nations: creating and sustaining superior performance. US: Simon and Schuster. Rolstadas, A. (1995). Performance management: a business process benchmarking approach. US: Springer Science & Business Media. Steinhoff, D., & Burgess, J. F. (1993). Small business management fundamentals. US: Tata McGraw-Hill Education. Seid, M., & Thomas, D. (2007). Franchising for dummies. US: John Wiley & Sons. Thuy, N. T. X. (n.d.). Supporting industries: a review of concepts and development. Retrieved from http://www.grips.ac.jp/vietnam/VDFTokyo/Doc/SIbook1Chapter2.pdf Bibliography Canada Business Network. (n.d.). Export market entry strategies. Retrieved from http://www.canadabusiness.ca/eng/page/2696/ Hong, S. W. C. (2008). Competitiveness in the tourism sector: a comprehensive approach from economic and management points (Google ebook). US: Springer Science & Business Media. INSEAD. (2015). Market entry strategy for India. Retrieved from http://executive-education.insead.edu/market_entry_strategy_india Slideshare. (2013). Market entry strategies. Retrieved from http://www.slideshare.net/vineetsansare/market-entry-strategies-16784323 Tallman, S. (2010). Global strategy. US: John Wiley & Sons. Read More