Management of International Business - Assignment Example

Management of International Business . Student’s Name: Student Id: Tutor’s Name: Date: Table of Contents Cover Page 1 Executive summary 3 County analysis 4 Regional Analysis 5 MNE analysis 8 Industry Analysis 13 Mode of entry………………………………………………………..…………………………14 Conclusion……………………………………………………………………………………16 References…………………………………………………………………………………….17 Executive summary This paper presents a report on international business mainly on how to expand an existing business to a foreign country where the business does not exist. This involves establishing McDonald’s food joint in Papua New Guinea. The analysis will present the challenges that will face the company in its expansion and the solutions to such problems. There is also presentation of the investment environment in the chosen country. It also involves the analysis of the fast food sector so as to identify the major competitors in the industry. This analysis will also help the company in identifying the problems that are encountered in the sector. The paper also involves identifying the most suitable market mode of entry into the international market. The mode of entry will be supported by advantages to the company so as to justify the mode and to weigh how beneficial the mode can be to the company (Dunning, Lundan, 2008). The investment environment in the chosen country will be analyzed so as to identify the opportunities the company can take to prosper in the country. The country analysis will also help the company in identifying the challenges and regulations in the country of the investment. The changes, which arise as, a result of these components will be analyzed in the report. It also suggests the most appropriate organisation structure that will head the company operations to the international market. It also presents a critical review on the effects of logistics and supply chains used by the company in the market to achieve success. It evaluates strategic factors that influence companies to venture in to the international market. It presents a critical analysis on regional investment in the APEC decisions and the impact it creates, once a company ventures into the international expansion (Dunning & Lundan, 2008). Another section will dwell on the region analysis to identify the investment in the APEC region. The analysis will research on the ways in which the regional organization shapes the environment for business in that area. The analysis will involve policy in relation to trade and investment and factors such as improvements to infrastructure, economic development, education, training and any other initiatives and policies aimed at improving trade and ease of doing business. APEC is the best region because the organization works towards reducing trade barriers to all non-member countries. This will help the company to acquire growth in the chosen country (Daniels, Radebaugh &Sullivan, 2013). Another section is the analysis on social, legal, economic, political and technological (SLEPT) issues in the region and the specific country. There is also a section on research and development. The third is implementation of the global strategy. The final section will look at global business in relation to marketing a business in the international market, and putting into considerations the supply chains. Country Analysis This section involves reasons why McDonald’s should venture into the international market especially in Papua New Guinea. Therefore, there is a need to look at the investment environment in the country. The country has a large population that will provide a big market for the company. The also has a lot of raw materials that will be of high benefit to the company because there will be no need of relying on raw materials from other countries. It also involves discussing how social, legal, economic, political and technological factors contribute to companies going global. The reasons include, economies of scale, the company will enjoy large profits by producing in large scale because it will cut down its expenses. The economies of scale are the benefits which are achieved by a company when it produces in large scale. Competition is another factor driving McDonald’s into the international market. The company feels that, companies, which are in, the fast food industry in other countries, earn a lot of profit, and they give substandard services. This drives the company in the market to increase and boost the profits and offer quality services to consumers. SLEPT is another reason why McDonald’s should invest in the international market. Regional analysis The social factors These relate to behaviour, lifestyles and tastes of consumers. The company should consider the consumer behavior because; their changes in cultural practices will lead to changes in their fashions and styles. They should also consider the population structure, that is, the age structure. This will help plan effectively on current market situation and to predict the future. McDonald’s should invest where there are a lot of young people because they form a large base of their customers. The company should work towards identifying the social changes that might occur in future. This will help them plan for the future market situation. The legal factors The legal factors should also be considered. These are the laid down rules and policies that companies should follow. McDonald’s have to identify such policies in their areas of investment. The legal frameworks include consumer protection, environmental legislations, health and safety and employment law. McDonald’s should work to understand the policies in time of their investment. The company should take proactive measures to ahead of such changes in case they occur. The company should, therefore, follow the laid down policies to the letter to avoid disturbances in the market. The company should ensure that they follow the set labor policies in the APEC region. The economic factors Economic factors are factors that directly affect investment and the company’s profits. They are to be considered before any international venture. They include interest rates, which is the cost of borrowing money. A company should invest when investment rates are low to avoid making losses when it comes to the time of payment (Hill, 2009). A boom is a time when company or a business is earning high profits. It is not advisable to invest during such a time because; it does not reveal the real image of the market. A slump is a kind of economy fluctuations when most businesses make huge losses and close down. McDonald’s should not, therefore, invest in such a time but should wait when the conditions are favorable (Hill, 2009). Levels of demand at this time, is the consumers’ willingness and ability to buy. It should be highly considered during investment. The company should invest in a market where there is a rising demand. This is because; the company will be assured of a ready market which can be exploited. The rate of inflation, which is, a general hike in commodity prices, should be considered during investment. This is because; it could lead to collapse of the market when it causes the prices to rise beyond affordability of consumers. It will also make it expensive for the companies to do business leading them to losses. Wage rate is the pay that is going to the companies employees. The company should consider a venture where wage is low. The reason behind this is that, low wage rates means cost of production is low, and the company will make large profits while selling at a low price. Political factors Political factors are the changes that arise as a result of government influence. These include policies passed by the regional organization APEC. The company needs to consider such factors such as freedom of movement. The company should invest in a country where there is freedom of movement. This will enable the company to use their resources freely including human capital to strengthen the new ventures. Freedom of movement and other favorable factors increase competition, which will, help McDonalds, penetrate the market freely without any discrimination from international governments (Bartlett & Ghoshal, 2008). Technological factors Technological factors are the changes that arise from advances in communication. McDonald’s should be aware of technology used in the fast food industry. This will enable the company to be in competition with rival companies in the market and industry. They should invest in technology which will make the company outstanding and favorable to consumers. They should also use modern forms of technology to do marketing. This can be done through the social networks and other types of media. The modern technology enables companies to share information. McDonald’s should also invest in technology to cut down costs and improve in service delivery. The company should highly invest in research and expansion in order not to remain behind its competitors (Bartlett & Ghoshal, 2008). McDonald’s should go global after having considered all the above factors. The information will enable the company to realize the best time to invest in an international market (Hill, 2009). The company should also analyze the social, legal, economic, political and technological factors that might affect the company’s investment in the future. The company should take proactive measures to ensure they are not negatively affected by any changes in the market. McDonald’s will be able to penetrate the international market if all the factors and recommendations are put in place. Research and development This part of the report involves identifying the most appropriate market entry mode that will enable McDonald’s fast food Company, to penetrate the international market. There are different types of market entry modes, which include exporting, piggybacking, ownership, countertrade, foreign production, licensing, joint ventures, export processing zones (EPZ) among others. Each and every market entry strategy has its advantages and disadvantages. The advantages of ownership outweigh those of the other marketing strategies (Sitkin and Bowen, 2010). Its advantages also overturn the disadvantages of other marketing strategies. These make it the most appropriate marketing entry strategy to help McDonald’s fast food company to penetrate the international market. The company should invest highly in research so as to evaluate the current market of the fast food industry. This will enable the company to run ahead of its competitors even in the new markets. Multinational corporation analysis (MNE ANALYSIS) This part examines each and every market mix. These components of market mix are product, price, place, promotion, people, physical evidence and process. It also involves analyzing their applicability in the case of McDonald’s fast food company. It also considers the degree of adaptation and standardization of each and every market mix in McDonald’s venture. It also involves discussing how social networking is applicable as a method of market development (Dicken, 2011). Market mix Market mix is a business tool most applicable in selling of products and services. This tactic is used by marketing professional to attract customers. The market mix is also known as the 7 P’s with each P representing a component. Product This is a commodity to be marketed. It has to satisfy customers need. A product must add value to a customer. Products are either tangible or intangible. Tangible products are those one can touch and feel them, for example, McDonald’s goods are tangible because they are foodstuffs. Intangible goods are those one cannot touch, but derives satisfaction. An example of an intangible good is the hotel services which McDonald’s can venture into to widen the scope of its market. McDonald’s have been in the market so it does not require to introduce new products but to innovate, so as to improve their products. McDonald’s should take advantage of their already established brand name to exploit the international market. The company should exploit the already experienced employees in a positive way to achieve the best results and be the market leader in the fast food industry. The company should also ensure their many products compliment each other in the market. The company’s product should be clearly labeled so that customers can easily identify them (Sitkin and Bowen, 2010). This will enable them penetrate the international market with less difficulty. Price This is the second component of the market mix. This is the value by which a consumer is to pay for a product. The price is very important because it determines the company sales and profits. Prices should be competitive. McDonald’s should have a reasonable price so as to penetrate the market. There are different types of pricing, which McDonald’s, can use to set their price. They include price skimming, price penetration and neutral pricing. The company, since it is new in the international market should use market penetration. This will help them attract customers. In setting, the price elasticity of commodities should be considered. In McDonald’s case, a slight increase in price would lead to loss of customers to competitors’ goods. They should also consider referencing and differential values of purchasing. Reference value is where a consumer considers prices of competitor goods before purchasing therefore McDonald’s should have a price which is slightly lower to those of other companies. The price, which is set, for a certain product should complement those of other products by the company. The company can also involve discounts and offer them as part of its pricing, so as to penetrate the market. The company should also ensure its prices are fairly distributed and are maintained. The company should invest in training agents who are well informed about the products and their prices. Place This refers to where a customer can get the product, and how a product reaches the selling point. The place where the consumer gets the product should be convenient. The customer should be able to get the commodity whenever they like, therefore, the company should introduce channels by which a customer can make an order. They can also introduce retail and wholesale shops to serve their customers conveniently. The company should ensure that they are covering each and every place. They should also consider their demand in relation with their production. The products at the store should be of sufficient quantities so as to satisfy customer needs. The company should also put into consideration storage, inventory and distribution which it should ensure are at an acceptable level. Promotion Promotion is the art of making people aware of a company’s product and where they can get them. It is the most visible form of marketing, and it is the one most people recognize and identify. It takes different forms, which include advertising, branding, corporate identity, special offers and exhibitions among others. It is a form of communication by the company to its customers. Promotion entails on telling the customer about the benefits of the product rather than its features. It must attract the attention of the customer; therefore, it should be appealing and have a message which is consistent. The message in promotional materials should be easy to understand. It should strongly show and give the customer a reason for buying from McDonald’s and not competing firms. The company should also ensure there is clear communication between the management and employees. The employees should have the correct information about the products of the company. This will make employee feel recognized and will work towards success of the company; therefore, they will let the customers know about the product and buy it (Wild, Wild, & Han, 2009). People This concept refers to each and every person who is involved in production and selling of the product. The company should ensure employees are well trained and have the right information about the product. This will help create a positive impression about the company together with the products. The company’s reputation and success depends on how the staff handles the customers (Rugman and Collinson, Simon, 2012). The staff should provide after sales assistance to customers. This will enable the company increase its popularity among customers. The management should show the staff that they are important, so as work towards achieving the objectives of the company. The staff can also give advice to customers, and this will help the company penetrate the market. The employees of the company should make the customers feel they are important. The success of the company depends on those people who are involved in the marketing and selling process. The company can also have a customer care desk to handle customers complains and compliments. This will show the customers their importance, and will aid the company to win and penetrate the market. The company can also issue catalogues and sales reports to help them purchase what they want (Hill, 2009). Process This refers to the method through which a service is delivered to a consumer. The company should ensure the channels used to offer the product are helpful to the customer. The process involves how long a customer takes to be served, and the time he or she takes to get the commodity. The company should, therefore, ensure products are provided in time. The customers get attracted to services such as credit. The company should know the customer is always interested in getting the services, but not how the company runs. The company should, therefore, ensure their channels and processes favor the customer by giving the best services in the industry. The company will be able to penetrate the international market if it treats the customers the right way (Wild, Wild, & Han, 2009). Physical evidence Physical evidence refers to the feeling the customers have after using a company’s product. McDonald’s provision of fast foods makes the company a service provider. Service being intangible goods makes a customer fear to buy or to order for fear of the unknown. The company should, therefore, invest in making the customer know the good better. This can be done by help of brochures and pamphlets. They will make the customer understand the product better and feel they know what they are buying. Physical evidence is also shown by how the company reception is organized and how clean the places the product is sold are. Those clean places will attract more customers than those which look substandard in terms of hygiene. The company should ensure its physical evidence is appropriate and goes hand in hand with the company’s reputation (Hill, 2009). This will live to customer’s expectations. Staff dressing code and uniforms are also part of company’s physical evidence. The market can lead to a company becoming most successful in the market if each and every mix recommendations are put into practice. The 7 P’s are very important to any company aiming success in the international market. McDonald’s should aim at developing the best products offered at the most competitive prices. This will attract a lot of customers, thus penetrating the marketing internationally. Industry analysis The company will venture into the fast food industry which is already established in the country. The company will have to work towards overcoming competition from the major fast food outlets in the country. The main competitors of the company will be tropical lunch Haus, Kais Bar and Lings Freezer. The three companies take the largest share of the fast food outlets in the country. The company through its mode of market entry will overcome the competition of these companies and acquire a large market share (Ball, 2010). Resource acquisition Global business to business marketing and supply chains considerations This part presents issues both affecting the company’s organisation and customer’s organisation. It also explains the meaning of global sourcing, logistics and supply chains issues. The part involves identifying the most suitable organisational structure to help control the company mechanism and help the company become successful in international marketing (Ball, 2010). The company’s organisation will be affected by government influence and other factors. The company will have to adjust to make room for foreign government requirements. These requirements include paying taxes to the government which will reduce the company’s profits. Venture into the international market will strain the company’s resources both capital and human because they will have to cater for the new venture. The customer organisation will change due the new entrant in the market. This will increase his or her variety of products (Griffin and Pustay, 2013). Global sourcing This is an act out acquiring resources or goods from other countries, which share the, same political ideologies (Rugman and Collinson, Simon, 2012). The method aims at exploiting the advantages that come with such organisations and political blocks. The company will benefit from products from other APEC members (Ball, 2010). These advantages enable a company to deliver a product or service by incurring lower costs. This result from low cost labour, low cost of raw material and other favourable economic factors such as tax holidays and low trade tariffs. The company should also aim at creating supply chains, which are short. This will ensure the products reach the customer within the shortest time possible. This will increase the company’s productivity due to high production. Mode of entry Ownership This is a form of market entry where the organization that intends to do international business participates 100% in the operations of the company. It is a form where the company owns 100% all the assets in the new venture. It involves high commitment from the company in terms of capital and management of the venture. This will be a good strategy for McDonalds where the company will invest parts of the profits earned locally to expand a business internationally (Griffin and Pustay, 2013). Advantages of ownership Ownership as a market entry plan has advantages which outweigh those of other strategies. Its advantages also overturn the disadvantages of the other market entry plans. The advantages of ownership include planning and controlling of resources (Griffin and Pustay, 2013). The company will have an upper hand in determining the resources to use and when to use them. Planning also comes in during production because the companies’ management decides when and how to produce. This helps the company to overproduce and under produce which helps them produce what is enough for the market. The company also controls movement and acquiring of new resources. These resources include raw materials, human resource and any other asset the company may use in its operations. This helps the management to make a decision fast without waiting for authority from anywhere else (Hill, 2009). The second advantage is the flow of information; the company will have a smooth and free flow of information which can it use to penetrate the market and to counter its competitors (Griffin and Pustay, 2013). The company also uses the information to identify what the consumers require and how they need it. Another advantage is a faster market penetration, when McDonald’s is on the ground and carrying out its operations, it will become easy for the company to discover and identify the weakness of the market which will help them penetrate the international market (Hill, 2009). The company will also benefit from the advantage of visible sign of commitment. The customers see ownership by a company as a commitment to serve them and, therefore, become loyal to the company in terms of becoming their customers. This will enable the company penetrate the international market as a result of goodwill from customers. The company will benefit from becoming internationally recognized Multi-national Corporation. This part presents a market entry plan which is most suitable for ensuring that McDonald’s ventures into international markets and it has the capability of competing with rival companies in the same industry (Griffin and Pustay, 2013). The company will also receive subsidies from the country of investment country because the APEC foreign Multinational Companies to invest and own property in the region. This is a strategy to help in development of the APEC countries as well as offer employment. Recommendations The company should ensure that it has a strong research and development department that will ensure the decision makers have the right information. The company should also ensure that they adhere to all the set policies in the country and the region of investment. The company should ensure that they provide unique services that will help them have a large share of the market. Conclusion McDonald’s fast food company requires a lot of research to be successful in the international market. It requires implementing ownership as the best market entry strategy because, it outweighs all the rest. It should also consider an analysis of social, legal, economic, political and technological factors that might affect its operation in the international market. The company should also consider the components of market by analysing each one of them and weighing their applicability in their favour. McDonald’s, being a reputable company in the Papua New Guniea will register success in the international market given its experience in fast food industry. The company should also put into consideration its organisational structure that will cater for the company’s ventures, be it locally or internationally. McDonald’s have put all the recommendation in this report down to work in order to achieve success in the international market. References. Griffin, R.W and Pustay, M. W. 2013. International Business. 7th ed. New Jersey: Pearson Prentice Hall. Ball, et al 2010. International Business: The challenge of Global Competition. 12th ed. New York: McGraw Hill. Bartlett, C. and S. Ghoshal. 2008. Transnational Management. Boston: McGraw Hill. Daniels, J.D., Radebaugh, L. H., and Sullivan, D.P., 2013. International Business: Environments and Operations. 14th ed. New Jersey: Pearson Prentice Hall. Dicken P. 2011. Global Shift. 6th ed. London: Sage. Dunning, J. H., and Lundan, S. M. 2008. Multinational Enterprises and the Global Economy 2nd ed. Cheltenham: Edward Elgar (e-book available). Hill C, 2009. International Business: competing in the Global market Place.7th ed New Jersey: McGraw Hill. Rugman, A. M and Collinson, S. 2012. International Business. 6th ed. New Jersey: Pearson Prentice Hall. Sitkin and Bowen. 2010. International Business. London: Oxford University Press. Wild, J. J., Wild, K. L., and Han, J. C. Y. 2009. International Business: The Challenges of Globalisation 5th ed. New Jersey: Pearson Prentice Hall. Read More