Global Strategy Business - BlueScope Company and industry - Case Study Example

Global Strategy Business Report Name Professor Institution Course Date Global Strategy Business Report Table of Contents Global Strategy Business Report 2 Table of Contents 2 1.0 Introduction 3 2.0 Background of BlueScope Company and industry 4 3.0 Methods used to collect and analyze data and information 4 4.0 Review of the current international business and economic environment 5 4.1 Porter's five force model 6 4.1.1 New entrants’ threat 6 4.1.2 The threat of substitute 6 4.1.3 The level of rivalry 7 4.1.4 Bargaining Power of buyers 7 4.1.5 Bargaining power of suppliers 7 4.2 Economic Factors 8 5.0 Analysis, evaluation, and justification of new target industry 8 6.0 Analysis, evaluation, and justification of most appropriate target country location where the firm can enter the new industry 10 7.0 Justification of most appropriate entry mode strategy 11 8.0 How best the firm should position itself to compete successfully in the new industry 12 9.0 Conclusion and recommendations 12 9.1 Training 13 9.2 Using Foreign Direct Investment to enter into Singapore 13 10.0 References 13 11.0 Appendices 15 1.0 Introduction Intensification of globalization has made companies to seek growth strategy which will help them compete with other established international brands (PricewaterhouseCoopers 2011). Therefore, internationalization and international operations practice has become an important part of contemporary companies. Global trade is growing and world markets have expanded as more companies seek entry. Spirig (2011, p.7) stated that firms which tend to play safe by remaining within their local markets could as well not just lose the opportunity to get into other emerging and booming markets but also face the threat of losing the market share to foreign competitors. Despite the opportunities in the foreign markets, the entry and operations is often marred with challenges entailing economic, political, technological, legal, socio-cultural factors. Therefore, managers must seek to get it right from the start from by having the right entry. In this global strategy business report, BlueScope steel company which manufactures flat steel seeks to Singapore Steel production industry on account that Singapore is ranked as one the top importers of steel (Research and Markets 2014). The steel firm has obtained some global inquiries, and currently intends to explore opportunities Singapore. Therefore aim of this Global strategy business report is to present the insight of Singapore in terms of economic environment, justification of new target industry. The report will use strategic alliance as its mode of entry into Singaporean steel market and justify why the mode is appropriate. Lastly, the report will recommend some business-level strategies to the newly formed international business. 2.0 Background of BlueScope Company and industry BlueScope Company is steel producer which was established in 2002 and has its headquarters in Melbourne Australia (BlueScope Company 2016). The company was separated from the BHP Billiton and renamed BlueScope Steel in 2003. BlueScope manufactures products such as steel slab, steel plate, hot rolled coil, automotive steel, corrugated galvanized iron, galvanized steel, "COLORBOND" brand pre-painted steel and "ZINCALUME" brand coated steel (BlueScope Company 2016). The company also used to produce tinplate but ceased in 2007. The company faces stiff competition from Arrium as they both have plants within Whyalla and Port Kembla respectively. BlueScope Company (2016) contended that the situation was prompted by cheap iron from other countries and dropping demand from the major markets leading to overcapacity and market saturation in Australia. This resulted to downsizing and closure of some companies. A notable example is where BlueScope had to close one of its plants within Port Kembla. Reportlinker (2014) claimed that the low demands of steel in Australia were registered in 2015-2016 as annualized rate fall by 6.2% to get to $10.8 billion. These reasons together with demand for growth has prompted BlueScope Company to seek expansion into the international markets to create product awareness, improves its competitiveness and maximize its profits. Analysis of world market has found out Singapore as an ideal market for BlueScope’s products. 3.0 Methods used to collect and analyze data and information International markets is full of challenges hence BlueScope Company must conduct the market research to understand the feasibility of the market. The market research will depend on both primary and secondary data and information for Singapore specific aspects including population, accessibility, market size, competitive advantages, GNP, risks levels and cost of conducting business. In particularly, secondary will use books, articles, company reports and websites to collect data about target market. This is mainly through quantitative methods and qualitative methods of data collection. These methods will seek to find about the data in terms statistics and numbers and will concentrate on of market size, countries GDP, GNP, number of employees in an organization, market growth and projected profits of Singapore steel market. Primary research will use questionnaires and interviews to directly understand the market needs, behavior, attitude, feelings and income distribution in the market (David 2011, p.34). The company can make online questionnaires to make their work easier, and will not need to travel across Singapore city to issue the hardcopy document. The questionnaires will have unstructured and structured data. Unstructured part will have general information about consumer and staff of companies interviewed. The structured part will have specific questions intended at obtaining data about market. Data from the market study will be analyzed through descriptive statistics and displayed in terms of charts and graphs to make them easier for interpretation of correlations between different factors. 4.0 Review of the current international business and economic environment This global strategy business report reviews the current market situation using Porter's five forces to understand degree of competition and attractiveness of Singaporean Steel market. Analysis of the market and company using this model enable it to review its business environment and come up with strategy which can help it solidify its market. The five forces which shape the competition and attractiveness in Singapore steel industry include threat of substitutes, bargaining power of buyers, competitors, threat of new entrants, and bargaining power of suppliers (Peng 2012, p.35). 4.1 Porter's five force model 4.1.1 New entrants’ threat The competition and attractive of a market is normally affected by how it is easy for new companies to enter in the market (Peng 2012, p.35). Singapore steel market is a free and open-market economy, practice which has increased the number of companies entering into this market. The friendly nature of the government of towards business has also attracted new business to invest in Singapore steel market. In addition, Research and Markets (2014) asserted that the increasing demand for steel fuelled by growing activities in building industry has attracted many companies to seek expansion in the market. However, attractiveness and interest to invest in Singapore is discouraged by the fact that setting up a new company is expensive and need large capital (Research and Markets 2014). Therefore, level of new entrants’ threat is medium. 4.1.2 The threat of substitute The level of substitute in the market affects competition and attractiveness because it enables customers to choose substitute over your product (Peng 2012, p.43). In Singaporean Steel market, the level of the threat of substitute is high due to presence of aluminum, iron plastic, graphite, glass, ceramics, concrete and wood among others. Therefore, companies offering substitutes are threat to BlueScope Company performance particularly, making profit (Research and Markets 2014). Therefore, BlueScope Company will need to either produce high quality steel or lower its prices so as to prevent customers going for substitutes. 4.1.3 The level of rivalry Competition in Singapore steel industry is very high due to the fact that it involves both local and international companies, and is even projected to increase in future. In domestic level, BlueScope Company has to scramble for the market with Lysaght, Mma Steel Products, Niho Singapore Ltd, NatSteel Group and Asian Steel Group Company (Reportlinker 2014). On the other hand, at international level it has to compete with Arrium and Esmark. The stiff competition means BlueScope Company must adopt various strategies such as pricing, product features, promotion, placement and innovation to take advantage (BlueScope Company 2016). Nevertheless, high completion might see BlueScope Company making losses. 4.1.4 Bargaining Power of buyers This aspect analyzes how buyers have the capability to influence the prices (Peng 2012, p.42). In Singapore, buyers have a high bargaining power owing to presence of numerous producers of steel. Research and Markets (2014) claimed that the buyers have several alternatives companies which they switch to whenever they want. In this process, BlueScope Company can compete on price and product quality. 4.1.5 Bargaining power of suppliers This aspect analyzes the capability of the suppliers to influence market prices (Peng 2012, p.41). Singapore is not known for mining of steel alloys hence most of it is imported and manufactured in Singapore (Research and Markets 2014). Therefore, the market has several suppliers. It means that bargaining power of suppliers is very and can drive the market prices. According to Peng (2012, p.41), BlueScope Company can then act as a supplier and a producer to reduce expenditures. 4.2 Economic Factors A research into the Economic condition of Singapore shows that the country is a free-market and also rate as a vibrant economy (World Factbook 2016). The free nature of the economy has been attracting more companies to expand into this market. Since many companies are expanding and local business is growing, use of steel has highly increased leading to more demand. Singapore is one of the leading importers of steel. According to World Factbook (2016), Singapore is today rated top in ASEAN in terms of the per-capita income. In some context people will be willing to spend in products such as steel to build house or business structure due to high income. High income will encourage people to spend hence leading to demand for products such as steel. King (2008, p.7) posited that Singapore has over the years been regarded as tax haven place for some businessmen and women owning to its low rate of tax. For instance, businesses are currently enjoying the tax exemptions on the foreign-based capital gains and income (Paul, 2007, p. 69). 5.0 Analysis, evaluation, and justification of new target industry Numerous changes have taken place in the Singapore steel manufacturing industry. The industry has grown from one of the lowly rated sectors 3 decades ago to one of the highly growing in the 21st century. In 2009 to 2013, steel sector faced strong economic downtown leading to low demands (Research and Market, 2014). Singaporean steel industry experiences a total revenue decline of -7.8% from 2009 to 2013. However, the industry started a steady growth making it more attractive to foreign investors. Today, Singapore steel industry is estimated to be worth $302.5 million and ranked as the six growing sector after financial, biotechnology, energy, infrastructure and telecommunication (Huat 2015, p.12). According to Research and Market (2014), the market performance of steel is projected to grow with a forecasted CAGR of 5.2 percent for the next five years between 2015 and 2020, and anticipated to accelerate the market to be worth $354.5m by end of the period. The growth in this industry has been complimented by the top six named sectors. For instance, the demand for steel products has been enhanced by increase income in Singapore. Trade and business has enabled Singaporeans to accumulate wealth leading to high income. Makos (2015) argued that with high income, the consumer are trying hard to fulfill their materialism desires by seeking to have steel made houses, home appliances and electronic made of steel. The situation had led to high demand of steel in Singaporean markets. The growth of income has also been made possible through trade by its neighbors in trade bloc name four tigers (Hong Kong, Singapore, Taiwan and South Korea). Akhtar and Arinto (2009, p.54) asserted that the need for infrastructure has enabled the government to embark on construction or roads, rails, industries, housing, schools and other public amenities. These projects make use of steel and its products to make it last for years to come. Therefore, infrastructure development has resulted to high demand for steel in Singapore. A research conducted by Huat (2015, p.15) has ranked Singapore as one the major importers of steel in the world. The report positions Singapore at number 10 out of 20 major importers in 2013. The practice provides a good opportunity for BlueScope Company to invest in the market. By investing in Singapore, BlueScope Company will be providing an alternative solution to consumers; instead of importing they will be buying steel local and the company’s plant. The process can help consumers reduce cost of importing and lead time. 6.0 Analysis, evaluation, and justification of most appropriate target country location where the firm can enter the new industry A significant interest in Singapore has increased over the years due to its attractive investment climate created by geographical location, political factors, pro-business atmosphere, natural environment, infrastructure and technological growth (Huat 2015, p.1). In fact a research carried out in Asia held that Singapore is the most attractive market for the foreign direct investment. Despite the general attractiveness of the country, not all places with Singapore can favor investment of steel company. Some islands which make up Singapore are small and only favor residential houses. However, Bedok has been found to be one of the locations best for a firm to enter into Singapore market. King (2008) opined that Bedox Island is wide and enables a company to set up a large plant away from residential areas. In addition, the town is more developed and is still developing in terms of infrastructure such as roads, rails and skyscrapers, business premises and technology. The development of infrastructure will enable BlueScope Company to transport raw materials from the port to the manufacturing plant. Similarly, BlueScope Company will benefit from the developed transport infrastructure in distributing the finished products to the Singapore local markets. King (2008) pointed out that Bedox also has a large port where which it can use to receive crude steel and also use it to export steel slab, steel plate, hot rolled coil, automotive steel, corrugated galvanized iron, and galvanized steel to the regional markets of Malaysia, Indonesia and Taiwan. According to Eisingerich and Ghardwaj (2011, p.20) corporate social responsibility is one factor which forms core values of Singapore companies and even influences business performance. Singapore is considered as one of the nations with oldest culture of corporate social responsibility. The practice is intensely embraced by most firms particularly the local ones owing to the facts that it is cultural or emotionally attached to traditions of Singapore (King 2008). For that reason, BlueScope Company must be ready to adopt CSR if the management wants to attract more consumers. Recycling, using of environment-friendly process to manufacture and store steel products and participating in social activities will boost BlueScope Company’s image. 7.0 Justification of most appropriate entry mode strategy Strategic alliance stands out as the best entry mode into Singapore Steel industry. Since Singapore industry has not been known for steel and just developing new foreign investment might face a lot of challenges; strategic alliance would suit BlueScope Company. Strategic alliances with Safa Steel Singapore Ltd will provide a platform upon which BlueScope Company can expand their geographic reach, access new markets, complement major competence and skills, and get improved technology (Christoph 2008, p.48). There are several companies which operate in Singapore market including Mma Steel Products, Niho Singapore Ltd, NatSteel Group and Asian Steel Group Company hence strategic alliance with a local company will protect the company from competition and economic risks. BlueScope Company highly requires technology to manufacture and markets its products. Lunnan and Haugland (2008, p.548) argued that the alliance will offer the company an opportunity to benefit from its partners technology. The practice will help BlueScope Company reduce its cost of operation, particular the cost of purchasing new technology. 8.0 How best the firm should position itself to compete successfully in the new industry The research on the BlueScope Company in comparison to products of other companies such as Arrium, Bluescope Lysaght, Mma Steel Products, Niho Singapore Ltd, NatSteel Group and Asian Steel Group Company in the market demonstrates that it they a have high quality, value and benefit hence high prices (BlueScope Company 2016). High prices create a perception that the company offers quality products. Therefore, the company can position itself as market leader rather than a follower. Gilligan and Wilson (2009, p.4) posited that claiming the top spot in the market makes the company become the first choice for consumer. The company can therefore be positioned on the top left of the conceptual map a shown on appendix 1. The company is placed high than its rival companies. 9.0 Conclusion and recommendations Globalization is fast increasing change in the business environment prompting more companies to look for new markets to invest and expand their operation. In this report, an analysis of Singapore has identified as an attractiveness destination and target market worth BlueScope Company expansion. The report has demonstrated opportunities in Singapore Steel particular the ease of starting business, low tax, free corruption, and political stability, economic and technological growth. Despite the several opportunities presented by Singapore cultural differences present a challenge to few employees of Australian origin who will be sent to work in Singapore. Similarly, the strategic alliances has is shortcoming which might affect BlueScope Company’s operation in Singapore. Therefore, the report recommends the following which might be used to reduce these challenges; 9.1 Training BlueScope Company will require need to invest in training of staff from Australia. Training has the aptitude of inculcating cultural intelligence on employees and to make the global citizens. In so doing, the staff is likely to drop their cultural diversities so as to focus on corporate culture. 9.2 Using Foreign Direct Investment to enter into Singapore Strategic alliance has their shortcomings which include sharing of resources, creating a rival, uneven alliance, opportunity costs and foreign confiscation. In strategic Alliance arrangement, normally the partners share their resources, know-how, skills and profits. The practice in most case exposes company’s business secrets and knowledge. One partner can withdraw and use the business secret to compete against its partner hence creating rivalry. Similarly, strategic alliance prevents partners from getting some opportunities which might be beneficial. To avoid such situation, the company can use direct foreign investment mode so as to take control of their operations. 10.0 References Akhtar, S & Arinto, P2009, Digital Review of Asia Pacific 2009-2010, SAGE Publications India Pvt Ltd, New Delhi, BlueScope Company 2016, BlueScope Company Official Website, viewed 29th March 2016 from www.BlueScopeSteel.com Christoph, L 2008, Market Entry Strategies: Text, Cases and readings in Market Entry Management, Chrisoph Lymbersky, New Delhi David, F.R 2011, Strategic Management - Concepts and Cases (12nd ed.), Prentice Hall India Eisingerich, A.B & Ghardwaj, G 2011, Corporate Social Responsibility: Does Social Responsibility Help Protect a Company's Reputation? MIT Sloan Management Review, Vol.52, pp. 18–28. Gilligan, C. & Wilson, R.M.S 2009, The Formulation of Strategy 3: Strategies for Leaders, Followers, Challengers and Nichers, Strategic Marketing Planning Huat, C.K 2015, Doing Business in Singapore, RSM International King, R 2008, The Singapore Miracle, Myth and Reality, Insight Press.  Lunnan, R & Haugland, S. A 2008, Predicting and measuring alliance performance: A multidimensional analysis, Strategic Management Journal Vol.29.No.5, pp.545-556. Makos, J 2015, PESTLE Analysis of Singapore, Pestleanalysis.com, viewed 29th March 2016 from http://pestleanalysis.com/pestle-analysis-of-singapore/ Paul, T.K 2007, Renaissance Singapore? Economy, Culture, and Politics, NUS Press Peng, M.W 2012, Global strategy, 3rd Ed, Cengage Learning. PricewaterhouseCoopers 2011, The World in 2050: The Accelerating Shift of Global Economic Power: Challenges and Opportunities, PricewaterhouseCoopers, viewed 29th March 2016 https://www.pwc.com/gx/en/psrc/pdf/world_in_2050_jan2011.pdf Reportlinker 2014, Analyzing the Global Steel Industry 2014, PR Newswire Research and Markets 2014, Steel in Singapore, Research and Markets Spirig, R 2011, International, Market-Driven Expansion Strategies in General and in Private Banking Specifically- Achieving Sustainable Growth in Times of Uncertainty, University of St.Gallen World Factbook 2016, Singapore, viewed 29th March 2016 from https://www.cia.gov/library/publications/the-world-factbook/geos/sn.html 11.0 Appendices Perceptual map Price (premium) BlueScope Company Arrium Safa Steel Singapore Lt NatSteel Group Brand Basic Premium Asian Steel Group Company Niho Singapore Ltd Price (affordable) Appendix 1: Perceptual map of BlueScope Company (positioning) Read More