Political, Economic, Social and Technological Analysis of Overseas Ventures - Essay Example

Table of Contents Overseas Ventures 5 The United Kingdom 5 China 5 India 6 SWOT Analysis 7 Internal Analysis (Strength and Weaknesses) 7 Political, Economic, Social and Technological Analysis 8 PEST Analysis and Conclusions 9 Internationalisation Options 11 Conclusion 11 Introduction Elecdyne is one of the Small-and-Medium-sized Enterprises located in the Asia region, specifically Japan. The enterprise was established in the 20th century with a main offices centred in Tokyo, the capital city of Japan. Currently, Japan provides the largest market-share to the company. The major products supplied by the company include electronic devices such as CD/DVD players, MP3 players, and Hi-Fi devices. Additionally, all its materials are sources from its reliable and nearby Japanese suppliers. In this case, the enterprise experiences a less aggressive and competitive market in Japan. Therefore, Elecdyne enjoys the dominance in the Japanese market despite having other major players in the industry based in Japan too. In recent cases, the organization had encountered slow growth. The slow growth of the enterprise could be attributed to restricted introductions to the Japanese markets. Indeed, restricted orientation to the Japanese market considerably lessens its intensity against extensive Japanese contenders. In endeavors to enhance its intensity, it is prescribed for Elecdyne to consider the conceivable outcomes of investing abroad. Perhaps, as a result of globalization and wider market base, oversea markets would enhance the growth of sales. STEEP expository system would be utilized to dissect the present and future business situations that relate with Elecdyne. SWOT analysis would be a major tool in analyzing the internal and external variables that face the enterprise. Considerably, the company can stretch its operations in some of the developing nations such as United Kingdom, India, and China with an aim of exploring new opportunities and potential outcomes. In addition, another tool called PESTAL will help to determine the capacity of Elecdyne to internationalize its production and distribution services in the global markets. Time Projection of Business Environment As a matter of fact, Bradfield et al. (2005) states that it will be workable for the organization to framework how the outer elements could affect it planning process. The STEEP, a tool used to investigate the structure of the enterprise, had regularly been utilized to quantify the different external business factors that would greatly influence the vital choices of the organization. The procedure is vital in evaluating the present and future business situations that the company would face. The analysis helps in determining the possible kind of decisions made by the executive members of the enterprise in order to improve the existing plans and structural frameworks. Without any doubt, STEEP system could be embraced amid times of vulnerabilities, for example, business developments. The systems helps to determine how any new highlights of the business sector would influence the general business introductions (Fleisher & Bensoussan, 2003). The STEEP investigation structure for Elecdyne, as shown below, can only be utilized whenever the organization experiences instabilities due to changes in the business environment. While utilizing the STEEP system, it is vital to note that some of the components are interlinked to each other. Moreover, there are no selective positions by any of these variables. Most importantly, it is accordingly essential for the enterprise’s executive department to recognize the relationship between these variables to in order to investigate the business sector patterns. The exercise will help managers understand any changes in the business environment. Also, the system helps the management body of the enterprise to prepare itself whenever they face new changes in future. The table is as shown below; Social Expanding utilization of online networking makes the electronic products relevant. Online networking may involve e-conferencing and socializing Through online media, buyers and seller can get information about each other. It provides a chance for the buyer to inspects the eligibility of a service before requesting for it Incorporation of simple feature on electronic devices such as CD/DVD players, Tablets, and MP3 players. The simplicity of such devices is widely accepted Consumers are able to access data and information at a cheaper cost Technological Due to the high rate of technological advancements, products experience shorter life spans in the market. New technology calls for new products hence increased pressure to comply with technological requirements The young population tends to consume highly differentiated products. Therefore, the demand for new products would disadvantage the aged population which is quite conservative with its choice of products Issues of counterfeiting and copyrights arise due to expansion and extensively differentiated products The need to develop of communication systems that would enhance continuous exchange of information and emerging trends Economical High requirements to increase the minimum wage for workers, a situation that is frequently experienced in the developing countries The availability and abundance of cheap labour, especially in India and China. The cost of energy sources, such as petroleum, as a result of shortages and price fluctuations Growing economies and availability of opportunities to venture into Environmental Expanding administrative structure to accommodate environmental issues Consumer awareness on benefits of environmental conservation Increased awareness to environmentally friendly products Utilization of cheap energy such as green energy Political Improved governance in localized authorities Legal restrictions of trade exchange Taxation strategies and labour law Smooth change in administrations and governance Overseas Ventures The United Kingdom The United Kingdom is viewed as a characteristic base for foreign organizations to get to the European markets. In addition, the United Kingdom is situated as the 2nd biggest nation for the internal FDI stock. Due to its wide internal FDI stock base, it offers different advantages for remote organizations. Some of the benefits include adaptable work market, solid administrative environment that enhance development of new businesses, and aggressive corporate tariff rates. In addition, the United Kingdom is considered a global center for financial practices which could extraordinarily support organizations in their endeavors to internationalize their operations. These highlights would be valuable to support Elecdyne. However, the enterprise would be made to embrace strict legal policies while entering the exceptionally progressed European economies. It is additionally workable for Elecdyne to take advantage of the British legislative support for Regional Growth Fund. China Currently, China is one of the major destinations of companies that would like to globalize their operations. China is listed as one of the biggest economies of the world and a rapid growth rate. The Asian country, therefore, is characterized with two features that make it a possible candidate for globalization. Firstly, it has the cheapest workforce in Asia that is mostly found in assembly industry. Secondly, the country has one of the world’s largest biggest business and market due to its large population. According to Wei (2005), the open entryway approach in China had helped in cultivating more positive speculation conditions for FDIs. Due to the friendly environment for investment, FDIs have enhanced economic development in the region. With all honesty, such highlights may be helpful and exceptionally powerful for Elecdyne. A friendly investment environment will provide Elecdyne with the capacity to minimize its expenses without affecting the quality of its products and services. India Another Asian country, preferably India had been known to encourage more noteworthy investment ventures into the country. With existing legislative activities that encourage financial development and extension, India encourages foreign investment in the region. The economy of India demands productivity. Therefore, the economy provides better investment opportunities for foreign investors. It is evident that FDIs might likewise benefit from the grants and incentives offered by the Indian government especially for foreign investors. Elecdyne, as a foreign organization, would benefit from incentives provided by the Indian government. Some of the incentive may include capital for start-up businesses, and loans with low interest rates, accessible economic resources and raw materials among others. India has a wide market base as compared to other countries in the world. In terms of population size, the country is ranked as 2nd most populated developing countries in the world. With such a large population, new products will obviously have a considerable market. Moreover, India has consistently enhanced its innovative progressions by engrossing industrial-based learning. The education system in India has a rich curriculum that enhances industrial development and innovative abilities. Therefore, with such feature in India, Elecdyne are assured of dependable workforce and ready market for its products and services. SWOT Analysis Internal Analysis (Strength and Weaknesses) Most importantly, the organization had possessed the capacity to encourage information exchange to upgrade its representatives' abilities. In the same manner, the organization acquired and used authorized advances from abroad ventures. Elecdyne had possessed the capacity to keep up its presence in the Japanese market. In order to maintain its dominance in the Japanese market, the enterprise has stayed focused by implementing strict cost control mechanism. Elecdyne could diversify its products in order to compete with diverse product offered by different firs in the electronic industry. The diversification of electronic devices allows new opportunities for the enterprise and enables it to mitigate risks associated with its basic products. In the meantime, it is additionally essential to understand that the organization is as of now confronted with less workforce bases. Source of labor is an important aspect in the running and operation of an organization such as Elecdyne. Deficiency of skilled personnel would greatly affect the operation of the enterprise. Other factors that would affect the organization include the prioritization of reducing cost, differentiation of current products, and of products in new markets. Additionally, the expenses incurred in permits and licenses could greatly affect the operation and development of a business organization. Accumulated costs associated with licensing have adverse effects on an organization in the long-term. In order to curb costs incurred in raw materials, Elecdyne can get its raw material from neighbouring suppliers, given the fact that the cost of products in Japan are moderately higher than the costs incurred in developing nations. Political, Economic, Social and Technological Analysis A rating system was put in place to survey and analyze the external factors. In light of the examination against the same perspectives in Japan, the aspects discussed previously would be evaluated. The table below compares the PEST factors. Factor Category Risk Factors Japan China India U.K. Political Risk of War 2 3 3 1 Political Risks (Short-TERM) 1 1 2 1 Political Risks (Long-term) 1 2 3 1 Risk of Expropriation 1 5 3 1 Tax and Investment Relations 3.7 4 3.9 4.3 Economic Gross Domestic Product 4770 10355 2048 2848 Expansion of Industries 1 7.6 0.9 -0.3 Rate of Unemployment 4.1 4.1 8.8 7.2 Rate of Inflation 0.2 2.6 9.6 2 Unique Ventures 1 1 2 1 Social Rate of Population Increase -0.13 0.44 1.25 0.54 Rate of Literacy 99 95.1 62.8 99 Productive Population (%) 62 73.2 65.8 65.4 Technology 2014 Internet Subscriber (%) 99.18 389.00 61.34 51.44 R&D Expenditure Costs 5.8 4.3 3.8 4.8 Rate of Innovation 5.4 4.2 4 5.3 Technological Growth 4.7 4.5 4.2 5.2 PEST factors, for all the considered countries, were compared and analyzed. The table below shows the score of PEST factors for each country against the initial orientations of the electronic device enterprise in Japan; PEST Factors Scoring Factor Category Risk Factors Japan China India U.K. Political Risk due to War 3 -1 -2 1 Political Risks (Short-term) 1 0 -1 -1 Political Risks (Long-term) 2 -1 -2 0 Risk of Expropriation 2 -3 -3 -1 Tax-Investment Relations 3 1 1 2      11.00 -4.00 -7.00 -1.00 Economic Gross Domestic Product 4772 6 -2 -2 Expansion of Industries 1 5 0 -3 Rate of Unemployment 4 0 3 2 Rate of Inflation 1 -3 -8 -2 Unique Ventures 1 1 -1 0      4779.00 9.00 -8.00 -5.00 Social Rate of Population Increase -1 3 9 3 Rate of Literacy 99 -2 -7 0 Productive Population (%) 62 4 1 1      160.00 5.00 3.00 4.00 Technology 2014-Internet Subscribers (%) 98 7 -2 -1 R&D Expenditures 6 -1 -4 -2 Rate of Innovation 6 -4 -4 -1 Technological growth 5 -2 0 3      115 0 -10.00 -1.00 TOTAL 10.00 -22.00 -3.00 PEST Analysis and Conclusions In spite of the fact that the United Kingdom has solid political environment with almost no political dangers to FDIs, it considerably not suitable for business ventures due to strict financial restrictions. Without any doubt, the United Kingdom imposes strict financial measures on foreign organization. The strict financial policies limit joint ventures with other foreign enterprises. On the other hand, the United Kingdom lags behind in terms of technological development hence making it unsuitable to start a business that requires high technological considerations. From the viewpoint, it could be seen that India is less favorable as compared to Japan in essentially all aspects with the exception of social aspects. Therefore, India would not be considered as target for oversea ventures. Elecdyne, being an assembly enterprise, would require a nation that has advanced technological element and with a cheaper and reliable labor. Elecdyne could conceivably get better production yield in China as compared to Japan. The condition is attributed to the fact that China considerably surpassed Japan in terms of Gross Domestic Product. The rate of technological development and a rampant industrialization help to drive the economic sector of China. Although the United Kingdom has a well developed education system and a considerable population, China has large youth base and young population. Therefore, labor is readily available in China as compared to the United Kingdom. Elecdyne can take advantage of the young and productive population in China as the major source of labor for their assembly sector. Also, the availability of labor enhances cheaper labor costs. In this case, the cost of labor in China would be lower as compared to costs incurred in Japan. Finally, China is considered as the best country to initiate joint venture by the enterprise. Therefore, the advantages of venturing in the Chinese environment surpass those of Japan, United Kingdom, and India. The selection of China as the favorable country could be considered as the most critical aggressive edge to provide support to the current business environment. China is known to have expanding quality of e-trade and online networking and advertising. By stretching its business operations into China, the enterprise could completely take advantage of all the benefits that come with a well developed e-trade. Also, most Chinese consumers are aggressive buyers and very much familiar with e-trade deals. Subsequently, as compared to other possible countries to venture into, China is considered to provide the best environment for investment and joint ventures Internationalisation Options Indeed, for Elecdyne to stretch their business operations in China there are a few entry modes to be considered. The table below describes the benefits and drawback that Elecdyne might likely experience when operating in the Chinese environment; Merits and Demerits of Globalization Options Expansion Strategies Merits Demerits Direct Importations Less costs incurred against political uncertainties Less space is required for establishment Low profits incurred especially during long business cycles Higher costs as a result of Trade duties Greenfield Elimination of custom duty cost Take advantage of cheaper labour Mitigate cost of transportation services Inability of the organization to construct brand loyalties. A great deal of start-up ventures are generally required Having less thorough statistical and market research Partnership Sharing business risks with accomplice Cost reduction through innovation and asset offering Minimising social negative impacts May acquire irregularities Generally hard to oversee the irreconcilable situations May have distinctive business structures Company Acquisitions Minimise rivalries amid the passage to new markets. Takes into account prompt use of remaining assets from the gained organization Requires generous measure of regulations to deal with the new pursuits due to high costs incurred Acquisition can be unreasonable Conclusion In light of the attributes displayed over, China is considered as the best country for the organization to venture into joint business operations. Elecdyne should consider partnering with Chinese firms or participate in joint ventures with Chinese accomplices. This is in light of the fact that moderately stable political environment in China. China is more politically stable as compared to other possible countries to venture in such as India and United Kingdom. Moreover, the economy and political situations are friendly as compared to Japan where Elecdyne is based. Besides, the choice to receive direct import may infer that Elecdyne would not have the capacity to understand the full advantages of the skilled workforce in China. It should be noted that Greenfield methods could be expensive and unsafe in examination to joint endeavor Rather, by embracing joint endeavor, Elecdyne could minimize its expenses from workforce. Furthermore, the enterprise should hold the advantages associated with prominent assembling yield in China. At the same time, the organization can moderate the dangers of seizure by sharing the economic risks to the nearby Chinese accomplices. Also, alternative to participate and conduct business is more favored in China. 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