New Markets Opportunity for Breezy Auto Parts Company - Case Study Example

Report on New Markets Opportunity for Breezy Auto Parts Company A) Summary Analysis of Breezy’s Current Situation: Currently Breezy Automotive Supplier Company is facing a challenging situation. If we look at the past history of the company then we may come to know that Breezy Company has enjoyed a strong position of mega supplier for the major portion of the market for the North American automobile manufacturing industry as a supplier of air filters and carburetors. Initially Breezy Company was focusing on the major manufacturing companies but as the globalization trend increased and many of the small automobile manufacturers entered the market, they changed their operational strategies and thus started focusing on the maximum of the customers. This change of the strategy helps them to overcome the industry and thus it became the largest player of the supplier market. Now the as the Company is facing a declining trend in the sales of the automotive parts just because of the reason that automobile sales is reducing for increasing prices in the fuel in North American boundaries, the Breezy Company managers are planning for the major alterations in the company profile. This alteration can be of two directions. One opportunity is to redesign the product portfolio, which means to change the products and fit it according to the demand of fuel efficiency or may increase the customization level in the production department. Another opportunity is to expand the target market and thus enter into a new market where there is a demand of automotive parts and thus the company can operate in a flourishing industry. Key Challenges for the Company: The Breezy Company is operating well in the past few years but now there are some challenges, which are creating a hurdle in the way of success and development for the company. The most important and considerable challenge for the company is from the external macro environment that is the increase in the prices of the Crude oil and thus its effects on the usage and the sales of the automobiles. The sale of automobiles is declining and thus the Breezy Company as a supplier of carburetors and air filters is also facing a decline in the sales of its products. Due to the declining sales, the profit margin of the Breezy Company is reduced because of the higher fixed costs of the plant and the machinery. Key Competitive Strengths: One of the most important and highlighted key competitive strength of the breezy Automotive parts supplying Company is the technological advancements in its operations. They are implementing Just in Time inventory techniques. In this way, they are the most efficient suppliers in the current market. This key competitive strength can be most beneficial for the expansion plan in the market of India. The Managers at the Breezy Company have also introduced Electronic Data Interchange EDI, in its working, which may help to track the contracts and dealings with the suppliers and the customers. In short, words, we can say that being technological is actually the key competitive factor for the breezy Company. Another key strength is the flexibility in the product design and the manufacturing plants of the Company, earlier they were serving only the mega customers but after the entry of foreign companies they modified their production and thus interact with the new comes in the industry. This means that the company’s manufacturing plant is flexible enough to absorb the changes. Is Company Well Position For Expansion? As the research, analysis of the Breezy Company suggests that it is operating well in the current industry and the problem is only in the external environment. The increased prices in the crude oil and the fuel are affecting the sales of the Breezy Company. Otherwise, it is in a good condition, infact we must say, it is in a good competitive condition. The managers at the Breezy Company are well conscious about the Customization and the market demand about their production. Therefore, they can well serve the new markets. The Breezy Company is following many of the technological interventions in their operations, which is very helpful for the company. The most important point or the opportunity is the competitive advantage of the Breezy Company that is Just in Time inventory system at the company. This can be a good and attractive point from the industry point of view. Therefore, we can say that Breezy Company is in a well position to expand and thus enter a new market. B) PEST-C Analysis of Chosen Indian Target Market: PEST-C analysis is the true depiction of any new market, which clarifies the attractiveness of the particular industry in any country. The Breezy Company managers require PEST-C analysis of the Indian Automobile industry for their expansion plans. These include political, economic, social, technological and the cultural factors of the new markets, which can influence the operations of the new business in good or bad way. Therefore, it is really necessary to do this PEST-C analysis before taking any final decision. The PEST-C analysis of the Indian market is given below. Political Condition in Indian Market for New Businesses: The Indian Automotive industry is one of the best considered and the most profitable industry in the country. The Indian Government plays a role of facilitator for the industry players. The Government is trying its best to provide better infrastructure so that this industry can be profitable globally. Growth oriented economic policies and the attractive investment policies are a great point of interest for the Breezy Company (Andrea 12). Just because of the attractive rules and laws of the industry, there are giant players who are making their huge investments in the industry. Therefore, there is a very competitive environment in this automobile industry of the India. Breezy Company is already having a competitive advantage therefore the Indian market will be a good opportunity. Economic Conditions in Indian Market for new Business: The increasing GDP of the India country will support the economic conditions of the automobile industry. Due to increase in the annual GDP and thus the per capita income, the purchasing power of people has increased. Therefore, the sales of the automobiles are also facing an increase from the last five years. The rise in the per capita income actually force people to change their life styles and thus people are motivated to purchase the export cars or may the cars of the international buyers (Becker 23). Some of the market experts are of the opinion that increase in the money supply will affect the sales of the automobiles in a good way. Another positive sign is the sustainability of the growth of the automotive industry. Interest rates are very low and the financing opportunities are very vast. Therefore Breezy Company can even finance their operations at a very low comparative cost. Another research study shows the 13% expected growth in the automobile industry in the next five years (Yan 26). Therefore, we can say that there is a bright future of all the international investors. Social, Technological and Cultural Factors of the Indian Market: Despite political and economic factors there are many other social, technological and cultural factors which collectively make this industry an opportunity for the international investors. Indian people are technology loving people and thus they always try to modify their lives with the technology involvement in every sector of their life. Similarly, the automobile industry is also a technology loving sector. All the social and cultural factors support these modifications in the industry (Dhamija 12). Breezy Company is also a technology based company, which modify its strategies and operations as per its demand. Therefore, these factors will support the Breezy Company (Ovcina 27). Various Market Entry Options: All of the PEST conditions depicts the actual and infact an attractive picture of the Indian Automobile industry. If the Breezy Company decides to enter into the new Indian Automotive market as a supplier then there can be different ways, which they can adopt to operate in the industry. These can Selling Directly from their North American Office Opening a new Office or distribution Center in Indian Market Appointing an agent in the Indian Market US an Indian Distributer Having a Joint Venture with another Major Player of the Market All of these options can be adopted, based on the resources and the capability of the Breezy Company. Every particular option has its own advantages and disadvantages which may increase or decrease its value. While selecting any of the way of expansion, the only consideration should be the minimization of all the possible associated risks with any investment. The factors, which should be considered by the Breezy Company, are the direct and indirect costs involved in either decision. Opening up the distribution center in the Indian Market will not be a costly decision if the interest rates are very low. Similarly, the joint venture may reduce the image of the company. While having a joint venture, the managers at the Breezy Company should be aware of the company perception in the market. Joint venture will be a good option if the partner company has the same values a culture, which the Breezy Company is having in it. C) Final Recommendation: Based on all the above Company and new target market analysis, I can recommend that expansion or reaching a new market will be a good or beneficial decision for the Breezy Company. The Company is already serving a huge portion of North American Market with a competitive position; therefore, it will not be difficult for them to achieve that particular position in the new market. Though Company will have to face certain macro environment challenges but it is clear that the Company has very much flexibility in its operations, therefore they can adjust well according to the situation of the target markets thus fulfilling their demands. Bearing the high fixed costs is not at all a feasible condition for the Breezy Company because it has lower down the profit margin of the company; therefore, it is need of the hour to change the operational strategies. PEST analysis also clarifies the situation that India will be a good and attractive market for the Breezy Company because the automobile sector of India is an emerging sector. Due to high population in the country, the sales of automobile are high. The only step, which Breezy Company have to take, is to introduce customization in its products. The expansion will definitely create a diversity situation in the targeted markets; therefore, Breezy will have to modify its products design according to the demands of the market of North America and the market of India. Expansion of the target market is not a bad idea but it needs some modifications and Breezy Company can bear these modifications. Thus, it is recommended that Breezy Company should go for expansion in the target market. For the entry in the Indian market, Breezy Company should go for a joint venture with a company that has already an established name and brand image in the market. In this way, the breezy Company will not need to reestablish its brand name in the market. Works Cited Andrea, David, ‘The Indian Automobile Industry: A premiere Describing its Evolution and the Current State’, (August 23, 1993), Study of Automotive Transportation, University of Michigan Research Institute, page 12 - 17 Becker, Dieter, ‘The Indian Automotive Industry: Evolving Dynamics’, (October 13, 2010), KPMG Cooperative International, page 12 - 29 Dhamija, Ajay, ‘Strategic Management: PEST Analysis of the Indian Automobile Industry’, (September, 2006), Strategic Management, Page 1 - 15 Ovcina, Dino, ‘The Dynamics of Market Entry and Expansion Strategy in Emerging Markets’, (August 2009), International Business and Management, Number 23, page 1 - 23 Yan, Beiling, ‘Market Expansion and Productivity Growth: Do New Domestic Markets Matter as Much as New International Markets?’ (March 10, 2012), Economic Research Analysis, Research paper Series, Number 78, and page 15 - 30 Read More