Memo to Paul Taylor: American Equipment Incorporated - Term Paper Example

Paul Taylor (Insert 18th November Memo to Paul Taylor - AM Equipment Based on the stiff competition experienced at the international market, it is imperative for AM Equipment Incorporation to adopt effective marketing and managerial strategies that will make the company to be competitive at the global level. Being a company that targets wide range of customers from various sectors such as military, mining, recreation vehicles and marine among others AM has a potential to create a strong customer loyalty that is vital in enhancing its profitability. Three major countries that AM Equipment will establish its operations are Australia, South Africa and Britain. One of the major steps that AM should take is to prepare going global. This entails establishing of various managerial positions that will be responsible for overseeing effective distribution of the products in the new markets. In its efforts to enter the three foreign markets, AM should establish an export sales department. Based on the fact that the company is currently based in US, the export sales department will ensure linkage between the production facilities is US and the sales outlets in the three countries. Additionally, AM should employ skilled marketing managers who will be responsible for overseeing the company subsidiaries located in the foreign countries. One of the advantages of the export sales department and the hiring of experienced marketing managers is that new policies such as effective pricing, extensive promotion and creating strong customer awareness will be created. For instance, the company will emulate penetrative pricing policy (Joshi 47). Through this policy, AM will enter the new markets using low prices without compromising the quality of its products. This will ensure that it acquires large customer base. However, the company will need more financial resources to cater for the marketing managers wages. In the same way, AM should establish an international division whose main duty will be to initiate marketing strategies that will be adopted by the foreign subsidiaries. For example, the office will enhance formation of joint ventures and mergers with other companies thus effectively facing off key competitors in the industry. After preparing to go global, AM should find the right market that will provide ready market for its products and skilled human resources. One of the key factors to consider is the population of the foreign countries. Additionally, the company should take into consideration the competition, political stability and regulatory environment among other factors. Being one of the developing economies with large population, South Africa is a viable country that AM should enter. In the same way, Britain and Australia have strong economies and high customer’s purchasing power thus proving a market opportunity that will enhance the sales and the profitability of the company. It is also vital to note that in order to encourage investments, South Africa, Britain and Australia have flexible regulatory environment that is essential for foreign direct investments. For example, South Africa has entered into double taxation agreement with US. As a result, AM will not face a lot of taxation challenges that may hinder its operations in the country. Additionally, South Africa taxation for foreign companies stands at 35% which is not so high. One of the major aspect that make the three countries viable markets that AM should consider is that they experience political stability that is essential for foreign and local investments. Even though AM Equipment Incorporation will be exposed to stiff competition from the well established firm in the three countries, the company will undertake extensive advertisement and promotion thus effectively putting at bay its competitors. Based on the political and technological development in the three countries, AM will benefit from adequate availability of classical factors of production that includes labor, capital, land and entrepreneurship. For instance, Britain has advanced technology and skilled labor that will be of great significance in the production and marketing of the windshield wiper systems, AM primary product. In the same way, South Africa and Australia have expansive land that is beneficial for establishment of more AM production facilities. One of the major challenges that AM Company will face in searching for the right market is high capital that is required to undertake primary research in all the three countries. AM performance will largely depend on the strength of partnership with international partners. As such the next step that AM will initiate is to find international partners. One of the benefits of forming partnership is that it would allow the company to easily access funds that is vital in the expansion of AM. Additionally, the company will benefit from abolition of tariffs once it forms partnership with international organization. In the South African market, AM will form partnership with Southern African Development Community (SADC). SADC involves countries in the southern part of Africa. In the same way, the company will need to join the European Union as a way of strengthening trade with other member states. Based on its role in expanding business and providing donation to the existing and new businesses, World Trade Organization (WTO) has significantly contributed to growth of trade in developing and developed countries. This implies that AM Equipment will need to join WTO as a way of ensuring it benefits from the financial grants that are imperative in its endeavor to go global. Through forming partnership with WTO that was earlier referred to as general agreement on tariffs and trade (GATT), AM will benefit from non-discrimination practices that the company may experience at the international market. GATT also is focused at ensuring that all its members undergo transparent procedures. In its effort to look for appropriate international partners, AM will need to fulfill some conditions. This may be a challenge to the company based on the fact that it is not a well established firm thus making it unable to fulfill technical and financial conditions that the international partners may demand. To succeed in the international market, companies must emulate an effective international structure that will ensure effective co-ordination of the branches in the foreign countries with the parent company. AM Equipment will have two choices of enhancing its international structure. The first one is direct structure. This will entail establishing a major office in the three countries thus ensuring that all the subsidiaries are interconnected (Timmons 31). Similarly, the use of direct structure will allow employees especially in the marketing department to try new things that will ensure strong customer awareness that is needed to make AM effectively penetrate new market. Based on the fact that AM is likely to face stiff competition from the well established Britain companies, the company management can also employ a more rigid structure. This implies that strategic decision that covers marketing policies, production and expansion strategies will be made at Eugene. To make appropriate decisions, top level management will need adequate information from the various branches. In this regard, it will be the duty of the branch managers in South Africa, Australia and Britain markets to ensure effective communication system. In order to ensure that AM products are effectively distributed and new customers are fully aware of the benefits of the company products, the company will hire sales representative who will be recruited by assistant human resources managers located in various branches. Such sales representative will be provided with commissions among other benefits that will motivate them thus enhancing their performance. To ensure their performance is not hindered by cultural differences and the social life of the customers, it will be paramount to initiate an extensive training that entail on how to handle the customers. One of the major advantages of establishing foreign offices in the three countries is that it will make the registration of the company fast and easier. Additionally, such offices will allow the company to deal effectively with cases of tax issues that may arise during day to day operations of AM Equipment. On the other hand, the company will be faced with a challenge of limited financial resources based on its current size. In addition, since the company is dealing with technological devices that require hiring of experienced and skilled manpower, AM will need significant finance to cater for their wages an aspect that will make the company to increase its borrowing thus increasing its liabilities and reducing the gross profit. Based on the changes that are currently experienced in the international market, it is imperative for firms intending to go global maintain and make changes in their international operations. For example, AM Company will focus on offering training to its marketers in all subsidiaries particularly to make them acquire skills on e-marketing. In the same way, the company top level managers may use expatriates who will be sent to the three countries to ensure that the policies such as pricing and general operations of the subsidiaries are at per with the goals of the company. In this way, divergence from the policies designed and implemented by the top management will be avoided. Due to economic changes that are occurring as the country enters full development, AM should employ economic analysts in the country to ensure that currency changes does not affect the activities and revenue generation (Mishkin 14). Even though this is a benefit to the company, it also a costly venture since it will lead to increment of the company expenses resulting to low profits in South Africa branch. To mitigate the problem of loss making in poorly performing branches in the three countries, it will be prudent to ensure that the company headquarters provides financial assistance. This implies that during the time of low sales as a result of reduction in demand of AM products, the parent company will provides monetary assistance that will enable the branches caters for the running expenses and wages. Conclusion As AM Equipment focus on going global, it is necessary for the company to analyze political, economic and social risks that will influence its performance. Taking into consideration that the company has not sold any products in other countries apart from US, the company will need to enter South Africa, Britain and Australia markets with effective marketing strategies. These include penetrative prices that entail low prices at the initial stages, extensive advertisement, strong customer care services and creating of strong customer-product relationship. The success of the marketing strategies will call for extra financial resources that can be obtained by looking for international partners such as WTO and European Union among others. AM should ensure that it puts in place international operations that are sustainable and flexible to cope up with the changes and challenges in the international market. Works Cited Joshi, Mohan. International Marketing .New York: Oxford University Press, 2005.Print. Mishkin, Frederic. The Economics of Money, Banking, and Financial Markets, Boston: Addison-Wesley, 2004.Print. Timmons, John. New Venture Creation - Entrepreneurs for the 21st Century. Chicago: Irwin, 1994.Print. Read More