Strategic Analysis of the Companys Entry - Essay Example

Norrie Sinclair is the chief executive officer of CVO. Heading the company for more than three years now, Sinclair has a vision of a huge company that will uphold the vision of the founders by pursuing a very aggressive growth plan. Part of his growth strategies includes geographical expansion: in which he aims to establish a presence in the Western European region by entering London, UK as a first move. His other strategy includes divisional expansion, by going into the payroll sourcing and personnel leasing markets. For the latter, an opportunity to buy the Polish company Center Group in Warsaw has unfolded. However, he is faced with some major considerations.
II. Issue
Should Norrie Sinclair establish a presence in London? Should he aim to purchase Center Group? How will he overcome the challenges of the limited demand from the Polish market? How will he integrate the new businesses into the existing structure?
III. Alternative courses of action
A. Geographic expansion: to enter the UK or not to enter the UK
1. Pros
To enter the UK market is a prerequisite to divisional expansion. The majority of the market for payroll sourcing and personnel leasing can be found in Western Europe, therefore establishing a presence in London offers some advantages.
2. Cons
The major drawback from entering the UK market is the company’s doubts of offsetting the financial risks that it will face given the current mix of the products that CVO can offer—online services and traditional recruitment services. Because it is a Central and Eastern European company that would venture as a player in a fragmented segment of the HR services industry.
B. Divisional expansion: to purchase Center Group or not to purchase Center Group
1. Pros
The major advantage of purchasing the Center Group for CVO is that it can enter the larger payroll sourcing and personnel leasing industry, which demands are great in the Western European market. Because there is ample room for growth in the industry, as indicated in the exhibit, entering the industry can be a wise decision for CVO. As for the demand in the Eastern European region, CVO will have the opportunity to usurp the market leader position and push the demand for payroll sourcing in such a region, where it can reap substantial profits by increasing the market potential of the industry.
2. Cons
The major disadvantage in purchasing Center Group, at least for CVO is the lack of industry information where the company can base its forecast to measure the company’s value for the purchase. Because the industry has been less documented in the Eastern European region, CVO finds it hard to find information from where to base the value it can offer the owners of Center Group. As is previously mentioned, this market for payroll sourcing and personnel leasing is underdeveloped which has its share of pros and cons when it comes to entry decisions.
IV. Recommendation
My recommendation for the company is to both enter the UK market in order to establish a presence in the Western European region, and by the Center Group in Poland in order to expand its divisions.
The justification for this recommendation is the company's growth objective which requires both choices to be included. For one, if the company purchases Center Group in Poland, the major obstacle it faces would be the sustainability of demand from the Polish market for payroll sourcing and personnel leasing. While according to the exhibits, the huge market for payroll sourcing and personnel leasing could be found in Western Europe, where companies have started to see the benefits of specialization into the efficiency of their Human Resource departments. Therefore, if CVO is to buy Center Group, establishing a presence in the Western European region is crucial; hence, it's a plan for London. The major concern for putting a Western European presence in London, aside from the acceptability of the company as a Central and Eastern European company, is the huge financial risk if the company offers its traditional services. However, by entering the payroll sourcing and personnel leasing industry through entering the Western European region, the company can find substantial demand to offset these financial risks. Therefore, in order to succeed, Center Group should be included in its strategic business portfolio.
After these SBUs are in place, the company can utilize a cross-functional team based on countries comprised of the different managers from three functions: e.g. the Estonia team would be comprised of managers as representatives from the online services, from Professional People, and from Center Group. This way, the country team comprised of representatives of three functions can ensure integration in terms of the services of the company. As they tailor services to clients from each division, the company has a better way to leverage its name. CVO's clients can choose from services that CVO's online business can offer, Professional People can offer, and Center Group. This can solve Norrie Sinclair's dilemma of putting walls for the new division, but appealing to the same clients. The CVO brand can offer a larger set of benefits to its clients then. Read More