Marketing management assignment on: Report on international business
1. Executive Summary
This report highlights the various options which could be adopted when an international business needs to establish in any other nations. The report majorly deals with the establishment of surf ski in the South Eastern Asian countries. Surf Ski has been rendered to as one of the biggest businesses in Australia.
After choosing its target audience, the next step for the organization would be to select one of the entry forms which would help to establish its business in other nations as well. The various options available would be licensing, develop a wholly owned subsidiary & export of goods. The organization Quick Gold would prefer to adopt export as its entry form as it has been rendered to one of the most inexpensive method. With the export entry form, manufacturing set up must be done at the home country i.e. Australia but the surf ski would be exported to the dealers in Asian countries.
2. Introduction
Quick Gold is an organization in Melbourne, Australia that manufactures surfboards. It uses the shell material that is available at a low cost. The quality for the surf board made is better than the leading brands in the world. Quick Gold has a great competitive advantage of the same. With the increasing business that the organization aims in Australia, it is also attracted to cater to other markets as well. At this point of time, the profit share of the organization is around 15%. Since the organization has a very niche market segment covered in Australia, it is looking at other international markets to do business. The current operation strategy of Quick Gold is cost differentiation. This makes it the lowest cost best quality product in the market. It aims at maintaining the quality but increasing the market share in foreign markets. In such a scenario, it is very important to learn the culture of the foreign country and also the market analysis to understand the consumer behavior. Not just marketing, but also political and legal complications needs to be taken into consideration. It is a case of capturing new market with new government rules and new ways to do business.
3. Discussion
With the best quality surf ski made in Australia, the company plans to move to other parts of the world. There are various options of countries where the organization can plan to set up a manufacturing plant or develop a market. In both the cases, the organization has to plan and implement the legal complications, duty tariff of the host country. The nature of business will be of an international level hence there has to be lot of deliberations in order to select the correct channel (Hill, 2009).
With surf ski of Quick gold, it is very important to not only set up new manufacturing plants but also get the distribution channel tight and working. The market that is targeted in this case is the Asian countries. Analyzing all the aspects of market in South East Asia, following is the deduction of the various aspects. To begin with, analyzing the customer is one important issue. In South eastern countries like Malaysia, there exist three types of customers. One is the local residents, who adopt surf ski as a sport. The next is the local resident of different states that come once a while in a year or half-yearly and rent off the ski then i.e. on a regular basis. The last type of customers is tourists who visit from different countries only once and rent off then.
4. Options with Quick Gold
The operations of the organization are currently based out in Australia. To establish and sell the brand in the other countries, it is very important to check the various options available for international business. The options include license to sell, establish an export facility in the host country or a wholly owned subsidiary.
4.1 Licensing:
Licensing is a process in which the company registers for the patent in the foreign country to sell the product. This would include the licensing cost and the transportation cost of the surf ski on a regular basis.
Licensing refers to one of the major entry forms in which the manufacturer would enter into an agreement along with a licensee in the foreign country. This entry form would help in order to provide a right in the processing of the company. This refers to one of the easiest ways with which Quick Gold would be able to target the Asian countries (Andexer, 2008). This also refers to one of the only ways with which the Quick Gold would be able to enter the most planned economies. This means that, with the help of licensing very less amount of expenses along with very less distribution costs would be utilized (Hill, 2009).
Some of the advantages of licensing which should be kept in mind by Quick Gold would be as follows:
Þ Low levels of investment would be utilized by Quick Gold in order to enter into the Asian markets.
Þ The levels of risk involved in this entry form are the least as compared to export & wholly owned subsidiary.
Þ With the help of licensing, the organization i.e. Quick Gold would be able to investigate the market.
Þ Licensing would also help the enterprise to procure high levels of Research & Development.
Þ The risk of the failure of product would be lowered down with the help of practicing licensing.
Some of the disadvantages attached to licensing have been discussed as follows:
Þ By using licensing, the opportunities in the Asian markets would be reduced.
Þ Licensing would also to costly as well as tedious proceedings which might hurt the sentiments of both the parties.
Þ High levels of misunderstandings could be aroused amongst the parties involved.
Þ The secrets could be leaked out while entering into a licensing agreement.
4.2 Export:
Export to the other country need not require patents but requires a duty tax that is involved in transportation. Every time the goods are exported from one country to another there is a duty tax that needs to be paid to the government of the foreign country. Thus the major cost involved in this circumstance is the transportation cost including the duty tax and the other taxes involved in transportation (Hill, 2009).
The second form of entry which could be practiced by Quick Gold would refer to exporting of the products offered. Export refers to forms which transport the goods from one country to another. Some of the advantages & disadvantages attached with the exporting of goods & services have been listed as follows:
Advantages:
Þ The first advantage attached with exporting of the goods refers to the ownership of the goods or assets.
Þ High international experience could be attained by Quick Gold while practicing the same.
Þ Exporting the goods would help in order to develop a differentiated strategy along with the value chain attached to it.
Þ The market potential of the Asian country along with the risk on investment could be seen with the help of this entry form.
Þ This method would also help in order to attain core competency over its products as compared to the other forms such as License, Wholly owned subsidiary, outsourcing, etc.
Þ Export would require very low levels of investments as compared to the other modes to enter into a new market.
Þ The rate of risk as well as the levels of investment is very low in case of export mode of entry.
Disadvantages:
Þ In case of small &medium enterprise, this entry mode would not be recommended.
Þ Selling of the goods & services in the small & medium enterprises would be quite difficult in the foreign market.
Þ High levels of investment risks have been involved with this entry mode.
Þ The demand of the customers would not be met by using this particular entry mode.
Þ Different types of tariff barriers would be laid with this type of an entry mode.
Þ High transportation costs would be involved while exporting the goods by Quick Gold.
Þ Management mistakes along with the improvements in the communication technologies could also be seen with this type of an entry mode.
4.3 Wholly Owned Subsidiary:
Developing the wholly owned subsidiary is the simplest option to follow. One only needs to start a manufacturing unit in the foreign country and sell in the local market. It is the best option in terms of convenience but is supposed to a long term investment. It requires large investment and large running cost as labor and manufacturing set up in United States will incur huge cost. Labor is cheap in Australia and even the manufacturing plant won’t cost much in that respect.
Wholly owned subsidiary refers to the type of an entry mode wherein the parent company would be given high levels of control. Apart from the levels of ownership, the entire cost & risk would also be attained by the same. In case of high levels of risk, the parent company has full liberty in order to either introduce an affiliate or an associate company who would attain a minor stake in the same (Andexer, 2008).
Some of the advantages & disadvantages attached to this type of an entry mode have been listed as follows:
Advantages:
Þ In case of wholly owned subsidiaries, proper control over the operations is being practiced.
Þ The levels of risk involved in such type of an entry form are the least as compared to any other form.
Þ The technical competence of Quick Gold would not be lost in form of the competitors.
Disadvantage:
Þ One of the major disadvantages involved with this entry form would be to put up with all the cost along with the high levels of risks attached to it.
Þ High levels of diversification with Quick Gold would also act as one of the main disadvantage to Quick Gold.
- Recommendations
Some of the recommendations for the CEO could be discussed as follows. They are as under:
Þ The first recommendation to the CEO would be to have an in depth knowledge about the target market i.e. South Eastern Asian countries. This would help the CEO to decide whether to focus on the same or not (Hill, 2009).
Þ The second recommendation to the CEO would be in regards to meet the requirements of the customers. This aspect would help the CEO to have a fair idea regarding the demand of surf ski.
Þ The third recommendation would be to decide upon any one of the following options available with the CEO. The three options would be licensing, exports or develop a wholly owned subsidiary.
Þ The option which should be adopted by the CEO in order to establish surf ski in South Eastern Asian countries would be with the help of Export entry option.
Þ The various advantages attached with Export entry option would refer to the ownership of the goods or assets, high international experience could be attained by Quick Gold.
Þ Exporting the goods would help in order to develop a differentiated strategy along with the value chain attached to it.
6. Conclusion
The steps that Quick Gold needs to follow in order to fully establish the new business in south eastern Asia are described in the consecutive paragraphs.
Due to the various advantages attached with the entry forms, the export option should be followed by Quick Gold. With the export entry form, manufacturing set up must be done at the home country i.e. Australia but the surf ski would be exported to the dealers in Asian countries.
The various advantages attached with Export entry option would refer to the ownership of the goods or assets, high international experience could be attained by Quick Gold while practicing the same, exporting the goods would help in order to develop a differentiated strategy along with the value chain attached to it. The market potential of the Asian country along with the risk on investment could be seen with the help of this entry form (Peng & Mike, 2001). This method would also help in order to attain core competency over its products as compared to the other forms such as License, Wholly owned subsidiary, outsourcing, etc. Export would require very low levels of investments as compared to the other modes to enter into a new market & the rate of risk as well as the levels of investment is very low in case of export mode of entry.
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