Problems and opportunities that American food or drinks companies face when entering and doing business in Asian markets 06011 - Essay Example

Problems And Opportunities That American Food Or Drinks Companies Might Face When Entering And Doing Business In Asian Markets Introduction Companiesenter the new market for expanding customer base (Schuster and Holtbrügge 2012). There are many challenges faced by the company when it enters the new market as it is different from the home market. The challenges and opportunities appear as a result of different factors such as political factors affecting the doing business environment in the respective country.

Similarly, regulatory problems and government interventions are common elements of each country. Most importantly, culture also poses challenges as the culture that can be seen from far is just the tip of it. The depths of culture can create many complexities for the company as most of the cultural dimension is involved with the emotions of the people (Witcher and Chau 2014). Hence, in this paper, the challenges and opportunities are discussed and for the purpose the tool Pestle analysis is used.

In this paper, it will be tried that the maximum number of challenges are explored which many American companies faced while entering into Asian competitive markets. On the other side, the opportunities and relative strengths of the American companies in the Asian market would be highlighted to build a relative advantage for the American firms entering into Asia. PESTEL Analysis Pestle analysis is very much a helpful tool in determining the challenges and opportunities present in the environments.

It focuses on the six environmental dimension involved in bringing challenges for the companies doing business and are beyond the control of the business (Haberberg and Rieple 2008). Political Political factors in China such as a lot of red tapes due to non-automated process make processes lengthy and time consuming. For example, registering your company or getting approval for your product can drag months (Goh and Sullivan 2010). Another challenge is the transparency issues in the supply chains of these densely populated countries that in turn result in operating losses.

Competitors who are in the market know how to exploit these transparency issues (Joseph and Patterson 2013). Lack of transparency led companies like McDonald to use lower quality and contaminated ingredients in countries like China and Japan. The company is now facing sharp decline in its sales when the matter went public; hence, increasing challenge (C.R., 2015) The policy of the One Child in China created limitation of limited market for the American food and drink industry that was trying to make roads in country.

Starbuck converted the challenge into an opportunity and the innovated stores and restaurants as place where no sibling people come and make friends and connect with people (Detwiler,2013) Economic The cost of finding trained people who can understand the requirements of the business and can fulfill the critical positions is very much difficult in Asian markets (VentureOutsource n.d.). Starbucks has exploited this challenges and made it an opportunity by making long term investment in education sector for developing leaders in China (News Starbucks,2014) Disposable income of Asian consumers is on its surge as Asian economies are witnessing economic boom and rise in employment (Invesco 2011).

Large number of USA brands such as McDonald, KFC and Starbucks are expanding in India, China, Middle East etc (Attract China, 2015 and Fitch, 2014). The companies are not only entering but are also charging higher price as compared to other markets as the people are readily paying higher price (Schiavenza, 2013). Also, China and India being leading markets, a fierce competition is faced by American firms due China’s relatively high agricultural productivity. The barrier for entry in the production of most food products is quite low.

Low entry barriers have created many competitors for the food and beverage industry of United States (Joseph and Patterson 2013). Social From a social perspective, Asian countries carry an immense opportunity due to high rise in the population being around more than 50% of the world (Romeschchandra 2011). The Younger population is more seemingly on the go population that believes in grabbing the meals on the go. A celebration of special occasions is also seen to be more common among young people of Asian countries (Financial Times 2015).

However, social challenges are significant in Asian countries, especially in China. The cultural barrier main communication is main challenges. For example, many businesses fail because western counterpart does not understand the China unique features of doing business (Goh and Sullivan 2010). Another issue is the mindset of Chinese employees who are trained on the hierarchy structure where everybody has defined role unlike western system where team orientation is high (Goh and Sullivan 2010).

Similarly, unlike West where it DIY is increasing, Home Depot cited its failure reason as Chinese prefer do for me system (Burkitt 2014). Adaptation of local tastes is another challenge for the American food or drinks firms as for any other firm that is not familiar with the regional tastes. For example, in India, McDonald’s beef burger offerings became taboo for Hindu majority populations and McDonald’s worked for years to overcome the problem and by offering ample amount of vegetarian dishes it came out of that taboo (Financial Times, 2015).

Another challenge is that the curiosity of consumers in Asian markets about the food of big western companies is reducing significantly. Also, there is a rise in complaints and scandals of low quality or unhygienic food for western countries (Financial Times, 2015). Technological environment In technological environment, American firms have strengths or opportunities like (Tobak 2012). American companies have relative strength over Asian competitors in processing juices (Joseph and Patterson 2013).

However, Asian countries are considerably behind the technological systems that are required by established brands. Therefore, American companies export technology Asian countries and outsource the job to them. Further emerging economies are increasing attraction by investing in technology (Lowrey 2014). The juice companies from USA are balancing the decline in sales in home market by offering premium juice with different processing techniques to Asian market where such juices are increasing demand (Euromonitor, 2014) Legal Challenges Government interferes in the market is most important legal challenge in Asian markets (Yu 2011).

For example, Chinese government helps and support local Chinese firms in comparison with the foreign firms. There is another non-regulatory practice that includes issuance of licenses, in a survey conducted only 18% of firms said that domestic and foreign firms are treated equally. Delaying in the issuance of a license to the companies reduce their strengths of entering the market at the right time (Joseph and Patterson 2013). Recently, Kingdom of Saudi Arabia and UAE banned fizzy drinks for controlling obesity; hence, pose challenges for the business (Bouckley 2014; Shane 2013).

Environmental factors The environmental safety regulations and practices are not so vivid in the Asian countries, but people attention has to start shifting toward this issue as on study suggested. The consumers such as in Singapore are growing conscious about environment-friendly practices and prefer socially responsible companies (New Zealand Trade Enterprise 2014). On the side, the same study suggested that the preference given to socially responsible company do not stand against cost consumers pay.

The companies that offer cheaper products are preferred by socially responsible companies (Manaktola and Jauhari 2007). American companies that faced issues or failed in Asian Markets Collectively, above mentioned and other factors from external environment bring opportunity and poses a challenge to American business. For example, in India McDonald’s beef burger offerings became taboo for Hindu majority populations and McDonald’s worked for years to overcome the problem and by offering ample amount of vegetarian dishes it came out of that taboo (Financial Times 2015).

The Other American food company which failed in Asian market is Taco Bell. Taco Bell failed in the pacific Asia is due to its Mexican food offerings and nations are not familiar with the Mexican food. On the other hand Taco bell prices were high which made adaptation process further slow and Taco bell had to wind up its operations from Asian region (Wong 2014). Other Opportunity for U.S firms entering in Asian markets American firms are having relative strengths in many areas which help them in striving Asian markets successfully.

One of the great relative strengths is their specialization in the supermarkets as supermarkets are great drivers of sales. American firms have experienced supermarket chains such as Wal-Mart so by nurturing supermarkets in the Chinese economy would create a relative advantage for American firms (Joseph and Patterson 2013). Conclusion Entry in Asian markets for American firms does not look to be so easy, as many cultural and different business dynamics are involved in these huge markets. The challenges are significant as curiosity has reduced for the foreign foods and market dynamics are getting more and more competitive in nature.

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