Strengths and Weaknesses of Elecdyne - Report Example

Introduction: Elecdyne is a Japanese SME that is found Tokyo, having begun its operations in the year 1990. In beginning its operations, the company initially employed 5 workers; however, the company now has an employee base of 100 workers. Elecdyne is a company that produces a wide range of electricity products, and this includes CD players, televisions, MP3 players, hi-fi equipments, etc. The company does not have its own technology in producing these electronic gadgets, and this is mainly because the company relies on the technological licenses of a variety of multi-national companies that operate in the global atmosphere. Elecdyne currently operates in the Japanese market, and it is a market leader based on the prices of electronic products. However, in the past two years, the company has failed to achieve a growth in the sales of its products, and on this basis, the company risks making losses. Furthermore, the company experiences high wage rates, compared to the wages in Eastern European countries and the Chinese. Furthermore, due to its financial limitations, the company is unable to attract highly qualified graduates for its Research and Development, because of competing multi-national companies such as Matsushita and Sony, who offer very good wages. To solve this problem, and increase its profitability, Elecdyne seeks to look for new international markets. This paper seeks to identify the best country in which Elecdyne needs to invest in, and this is between a choice of countries such as United Kingdom, India, and United States. To achieve this objective, this paper will conduct a STEEP analysis, for purposes of predicting the trends of Elecdyne for the next five years, after which it will conduct a SWOT analysis of the company, analyzing its major strengths,, weaknesses, opportunities as well as threats. This paper will further conduct a PESTLE and SWOT analysis of India, United States, as well as United Kingdom for purposes of finding the best country to invest in. It is important to understand that the final choice in making the decision on where to invest is through an analysis of a weighted table. International Environment: In the year 2008, the global economy was facing severe challenges, which resulted to the global economic recession. This international financial crisis was able to cause great harm to the economies of United States, United Kingdom, as well as to the economies of the entire world, spreading to emerging countries. Due to this financial crisis, the demands for consumer products decreased greatly in the European Union, as well as in the markets of the United States (Tomalin, 2010). However, with the recovery of the global economy, there is a continuous improvement in the demands of consumer products, and this includes electronic products. The following STEEEP table will provide a prediction, as well as an analysis of the global trends that would affect Elecdyne in the coming five years (Visser, 2012). Table 1: STEEP analysis: Social For purposes of reducing labor costs, there is a need of shifting production to countries with low wage rates. This therefore means that the company will employ few people in Japan. The modern society depends heavily on electronic products; however they also have a negative effect on the environment, as well as the health of their users. For example, mobile phones are important communication gadgets, however, if inappropriately disposed; these gadgets can cause environmental damage (Zettinig and Vincze, 2011). The emergence of the social media is an opportunity for the company to use these online facilities for advertising. Electronic engineering and design is an important subject in Japan, and this is because most students aspire to pursue this field. Technological: Advances in technology have made it possible for the electronic industry to develop. Japan has a good infrastructure that supports the electronic industry. Economic Chances of labor costs increasing in Japan and the world. An increase in the consumption of electronic products. Environmental Electronics usually contain harmful products that can cause pollution to the environment. Political: Favorable policy that supports the evolution of electronics industry in Japan. Liberalization of the global economies. Trends: It is a known and clearly proven fact that there was a financial crisis in the year 2008 that affected virtually all the industries in the global economy. However, the global economy has recovered from the financial crisis of the 2008, and most industries are beginning to experience a growth in their business operations. Furthermore, Kline (2005) explains that the financial crisis of 2008 made various companies to come up with innovative measures aimed at protecting their companies from collapsing, due to the financial crisis. Furthermore, most countries of the world began recognizing the importance of information technology, as a means of improving their economies (Shehu, 2009). This made it possible for an improvement in communication trends, leading to the diversification of the global business, as well as partnerships. On this basis, the opening up of the global business organizations for SMEs, like Elecdyne is beneficial to the company. On this note, Gebremeskel (2009) explains that SMEs contribute approximately 99.7% of the global business enterprises, particularly in highly developed countries of the world. This therefore has an implication that SMEs are able to play an important role in the economic development of world, as well as in the development of innovative tendencies. Analysis: Two important aspects of decisions that Elecydne will provide an analysis include the external as well as the internal analysis of the company. This analysis will also affect the country that Elecdyne selects to invest in. The potential countries of investment include United States, United Kingdom, as well as India. A comparison and contrast of the data belonging to the three countries will be based on the PEST strategy, which is an important factor that would further enable an analysis of the external factors of the countries and company. In this analysis, the scores range from between – 10, to + 10, in reviewing the levels of each and every factor in the potential market of the company’s electronic products. In using the SWOT strategic analysis, the company will provide a separate table for the strengths and opportunities of the company. This is because they are the internal factors of the company. On the other hand, because the opportunities and threats of the company emanates from the outside sources, these would be considered under external analysis. Table 2 depicts the internal factors of the company, which includes its strengths and weaknesses. Threats and opportunities will be considered within the framework of the PEST analysis (Treadway and Wong, 2013). Table 2: Strengths and Weaknesses of Elecdyne: Strengths: They have the knowledge of the Japanese Market. Implemented a successful pricing strategy. They have a labor force that is specialized and experienced. A good public image that has taken them 20 years to develop. They have a license relationship with multi-national companies that are successful. Workforce that can speak multiple languages, which includes English. Weaknesses: Loss of important and key employees. The company produces old electronic products. The company is faced with an increase in the internal costs, such as increased labor wages for employees. High licensing costs for the company. Its market of operation is highly competitive, facing stiff competition from Japanese companies such as Sony, and Matsushita. A decline in the electronic sales of the company. A decrease in the market share and value. The company has a weak R&D department, mainly because it has been unable to attract qualified R&D graduates to the department. Analysis of Strengths and Weaknesses: Based on this SWOT analysis, we can denote that the company should develop an internationalization strategy based on its strengths. This is because the company will manage to effectively utilize the strengths under consideration to achieve a competitive advantage over its main competitors in the international market. Furthermore, to achieve success in entering into the new international market, there is a need of the company to collect data on the market conditions of the country that it seeks to invest in. Buckley (2009) explains that a company that enters into a new market without sufficient information will not manage to compete effectively with companies found operating in the new market. On this basis, Elecdyne should seek information concerning the consumer needs of the new market, the purchasing habits of the target customers, as well as government regulation policies regarding electronic products. Furthermore, the company should also analyze the nature of competition that it faces in a country that it seeks to invest, and this is mainly because having knowledge of the organizations competitors and their strategies, will enable the company to come up with measures and strategies that are efficient and effective in tackling the competition that emanates from these companies. Table 3: PEST Framework. Table 3 gives an illustration based on the PEST analysis of the industry under consideration. The PEST analysis compares countries such as the United Kingdom, United States, as well as India. It also contains an analysis of Japan. It is important to understand that the table contains the threats and opportunities that Elecdyne would face while in the process of internationalization of its business. These are external factors (Ng, 2013). Category of factors The Factors Japan United States India United Kingdom Political The Risk of war Short term political risk Risk of government action and government control. % on the tax rate on the corporation. The Power Distance 2 (0) 1 (0) 1 (0) 25.5% (0) 54 (0) 1 (1) 1 (0) 1 (0) 35 (-4) 40 (2) 4 (-1) 1 (0) 5 (-5) 33.6 (1) 77 (-4) 1 (1) 1(0) 1 (0) 28 ( -3) 89 (-8) Economic Rate of GDP growth in 2013 Growth rate of industrial production in 2011 Rate of unemployment in 2013 2014 inflation rate. Minimum labor cost 2011 percentage of investments: The Special business transactions. GDP purchasing power. 5.9% (0) -3.5 (0) 4.0 (0) 1.6 (0) 8. 32 per hour (0) 20.9% (0) 1 (0) 4,554 (0) 2.4 (3) 4.1 (4) 8.20 (-8) 3.3 (2) 7.25 (1) 12.4% (-4) 1 (0) 16245 (10) 4.7 (4) 8 (7) 9.0 (-9) 8.59 (-6) 0.28 (10) 50 (10) 1 (0) 6, 355 (5) 1.9 (2) 4 (4) 7.8 (- 7) 1.8 (5) 10.02 (-5) 19 (1) 1 (0) 2,417 (-5) Social HIV prevalence rate Rate of population growth Rate of literacy Uncertainty avoidance 2.1% (0) -0.08% (0) 99% (0) 92 (0) 0.6% (-5) 0.7 (7) 99% (0) 46 (5) 0.3 (2) 1.41 (- 4) 74 (3) 77 (7) 0.3 (2) 0.7 (7) 99 (0) 35 ( 5) Technological Internet Usage, 2014 Research and development 99,000,000 (0) 3.6 (0) 246,000,000 (10) 2.7 (2) 569,000,000 (-2) 0.9 (-2) 44,000,000 (6) 1.7 (-4) From the results of the data above, the following is a score of each country, and this will play a role in determining the choice in which the organization will invest in. Factors Japan India USA United Kingdom Political 0 -9 -1 -10 Economy 0 21 -8 -5 Social 0 8 7 14 Technology 0 -4 12 2 0 16 10 1 Interpretation of the Results: Based on the above results, India has a total score of 16, making it the suitable choice of investment for the company. In as much as the Indian government has the capability of micro-managing its economy, this is when it is compared to Japan, United Kingdom, and USA, India has highly liberalized its economy. This is for purposes of encouraging private investments, as well as foreign direct investments. One of the stronger points of the Indian economy is that it has a very low wage rate for its employees when compared to Japan, United States, and United Kingdom. This low wage rate stands at 0.28 dollars per hour. It is important to understand that one of the problems that faced the company was the high wage rate that employees in Japan were demanding. On this basis, investing in the Indian market is an opportunity for the company to solve this problem. Furthermore, India has a very large population, who are literate, as well as who have an access to the internet. This population of more than 500,000,000 people presents a potential market for the company. Through proper advertising through the social media, chances are high that the company can penetrate through this market, and hence achieve growth in sales and market share (Stanusch, 2012). However, it is important to denote that one of the major disadvantages of the Indian market is that its rate of inflation is high, when compared to Japan, United Kingdom, and USA. In as much as this is a problem, with proper cost reduction strategies, the company will gain the capability of beating inflation, and making profits in the market. Choice Strategy: After a country of investment is chosen, the company will therefore make a choice on the strategy to use in investing in India. The following are the available strategies that the company can use to invest in India, joint venture, acquisitions, and import trade. The following table depicts the strengths and weaknesses of these strategies (Ng, 2013). Strategies Strengths Weaknesses Acquisitions Helps in overcoming the barriers of entering a new market. The company can use the resources of the acquired company, as well as benefit from information it possesses concerning the market. It is a very expensive process. It has very high financial consequences. There is too much attention and focus on the acquired firm. Import Trade Have some low risks. High custom taxes. Low returns. Strict regulatory control. Joint Ventures Sharing of investment risks. Sharing of resources and technology. Weakens the influence of cultural differences. The organizations can have different objectives. Difficulty in coordinating interpersonal relationships. By analyzing the strengths and weaknesses of these strategies, it is important to denote that the best strategy in entering the market is through the use of a joint venture. There are two major reasons as to why this method is appropriate. The first reason is that it would save the operational costs of the company, and this is because the company will use the resources of its partners in entering the market. The other reason is that by entering into a joint venture, the two companies will share the investment risks, and thus benefit each other. Conclusion: In conclusion, this paper has analyzed and determined the best country in which Elecdyne should invest in, for purposes of bailing it out from the financial crisis that it is facing. The use of a joint venture as a strategy is useful because it is cost effective, and will ensure that the company gets the right partners to help it penetrate the Indian market. Bibliography: Buckley, P. J. (2009). 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