International Business Archives

Strategic International Business Management

Business Management, IKEA, IKEA strategies, Mission, Successful Strategic Goals, Swot Analysis

Pages:13

Introduction

Management performance tends to handle the operational process in organizations through regular feedback. The scope of business management is enhanced when a business model is invigorated. It is vital for a company’s success that several changes should be implemented (Korsgaard, Rask &Lauring, 2007). The process of strategic management is to implement a strategy in an organizational framework that allows the accomplishment of strategic goals. This kind of operation is to get more customers who spend more, so longer retention is made. (Lechehab&Kamassi, 2016) The monitoring and planning analysis in an organization need specific processes to meet the objectives. This report will discuss international strategic business management in IKEA regarding Malaysia. The report will discuss the mission, strategic goals, and SWOT analysis.

Company Overview

IKEA is a global brand that was found in 1943 by Ingvar Kamprad. The company is famous for its famous and modern stores. Its different kinds of products are eco-friendly and cost-effective. IKEA operates in 389 stores worth of 42.9 billion. It also has few branches across the world with such as KungensKurva, in Shen Zhen, and Texas. It has presented an example of trendiest with low-cost furniture. IKEA is considered a recognizable brand at the globe with best practices. The trademark of the company is well designed and functional regarding frugality experience. These practices are related to the principle that offers competitive advantage (Soh, Wong & Chong, 2015). The image, quality, and affordability of products is an asset for the company. The company has the opportunity to be streamlined about its customs, franchising, and popularity.

IKEA is successful in terms of its management operations. Its formulation processing is based on the right demographic framework. IKEA stores are customized to offer a better experience to customers in terms of fluid shopping (Hultman, Johnsen, Johnsen & Hertz, 2012). The living room and domestic style experience for customers are exciting. They need to take a code linked to the selected item when they buy furniture. The functional layout of products is seen as a mass service for a product offering that fulfills the basic needs of consumers. Some basic features of the firm are high quality, wide variety, the flexibility of products, less disruption, and easy supervision.

Mission

The mission of the company is to build a strong culture that will deploy crucial factors for the continued success of IKEA. The concept of sustainability is inherent because furniture is considered a necessary value for people’s lives (Korsgaard, Rask &Lauring, 2007). The recognizable brand name and concept are linked to low valued price and home furnishing products. The company has a wide range of its products and allow frugality practices for being the first choice of consumers as compared to other brands. The culture of IKEA is to work within everyone, create and develop it further, so people live with this vision. This concept is building a core competency of the company against others. IKEA has established its long going capacity in Malaysia with the science and technology concept and managerial practices. The developing economy of Malaysia is offering huge potential to the company to produce furniture due to newly identified competitive advantages (Garnier&Poncin, 2019).

SWOT Analysis

IKEA is a valuable furniture brand in the world, and in 2019, its worth is estimated at US$45.4 billion. The strengths of the company are its brand image and brand name. The reputation and awareness of the company are its key strengths (Johansson &Thelander, 2009). A most significant strength is its low-cost affordable furniture because it aims to sustain in the lives of people, so it is cost-conscious. The philosophy of IKEA is to keep costs low and incorporate new technologies, advances, and innovation to allow profit margins(Arrigo, 2005). This is associated with the profitability, efficiency solutions, and cost-effectiveness methods in handling products. In Malaysia, IKEA has a competitive advantage in producing products.

The combination of effective packaging and low price furniture startup in Malaysia is a big strength for the company. The products of the company are new, different, and allow extraordinary shopping experience to people, so consumers are engaged in decision making (Soh, Wong & Chong, 2015). It is different from other brands because of the wide variety, selection, and offering a chronological order. Just as its competitors are working in Malaysia, IKEA aims to maintain long term relationships with customers, so optimizing its cost and transport timing.

Its weaknesses are less focused on improvement policies while working in less developed countries like Malaysia. It also has inadequate support policy as well as limited visibility regarding marketing and promotion. The sparsely located few stores in Malaysia can be less responsive to increased demand of the population (Minkes&Minkes, 2005). It has to employ more staff to enhance the buying experience of customers by attracting them. The packaged furniture and its technical nature is different and needs more focus on assemblage. It depends on the third party to assemble and assist in purchasing products that can be a weak point for IKEA. There is an absence of detailed instructions that can accompany products and retain consumers when they go for detailing.

There are some opportunities for IKEA to further develop and boost its concept in Malaysia. It can increase its clientele by educating people more about environmental waste and pollution. If wastes are reduced regarding furniture usage, it can develop a strong concept as an opportunity in corporate social responsibility (Hultman, Johnsen, Johnsen & Hertz, 2012). With Malaysia and other less developed counties like India and Indonesia, IKEA can fully develop its network of furniture supply. It has the advantage of working on broader concepts by developing effective solutions for business. This will provide solutions to reduce environmental pollution, so a sustainable life at home will be easy. In Malaysia, the potential exists regarding natural resources and others like advanced technology and science, so it can promote a technical friendly product (Garnier&Poncin, 2019).

Some external factors can work as threats to the company in Malaysia. There are many low-cost retailers in Malaysia that can share market value and specialty of furniture with IKEA; there is a need to produce more economical and consumer-friendly products to compete with the rivals. The financial conditions of a country are other luring threats for IKEA. Any financial crisis and economic downturn in the economy can cause threats to IKEA (Lechehab&Kamassi, 2016). The size and scale of the company is also a threat because it has to focus on the operating economy where experts believe watering down of innovation due to less targeted consumers in Malaysia. The company is steadily acquiring a household place in masses, so it has to improve quality and standard with its expansion (Fröding& Lawrence, 2017).

IKEA strategies and its associated plans

IKEA’s marketing strategy through which the organization searched out cultural and advanced customers and also searched a sufficient market to sell its products. IKEA sends its designs to concern professional people to its homes and provide them feedback(Arrigo, 2005). This strategy allows the ministers to make the market decisions that are based on people’s life’s experience; this experience might be collected from survey and data collection. IKES Strategies considered all elements that are involving around product and price into mixed marketing. IKES tries to present its best product on the lowest market rate, and it is also called the 7Ps of marketing, in which position, development, methods, characters, and material elements are taking place (Hultman, Johnsen, Johnsen & Hertz, 2012). IKEA was established by Kamprad in 1943; this term developed when the home furnishing stores are used for monetary purposes around the world. All IKEA retailers are running their own franchise business.

IKEA of Sweden concerns all product ranges, which are associated with IKEA; the entire production differentiated with tags, designs, and quality. To start IKEA’s strategies, find the solution to various questions. IKEA knows about consumer satisfaction and how much it is important. Consumer relations influence the business significantly (Stanciu, Zlati, Antohi&Bichescu, 2019).

Different research objectives also take place in this term, like investigating the consumer demand theory. Establish a referencing and suggestion system for company development. The basic purpose of this theory is to satisfy the consumer at any cost, either the consumer belongs to any category of life. In those days’ customers have awareness about the brand and its worth; at first, the consumer judges the product, and its services afterward estimate his personal experience and, at last, make a decision whether the product is appropriate and meets its exceptional level or not. After using the product, if the product fulfills its requirements, then the customer will purchase it again. Otherwise, he contacts any other commodity. In this fast business establishment affairs, customer relations are critical to managing. Customer satisfaction shows that he will purchase the commodity afterward to satisfy the demand that would be a long-term relationship to company and customer till then the other product may not facilitate its needs. An efficient marketing program consisted of all terms and conditions to evaluate the mix marketing concerning the market objectives which a company has to occupy to compete for the other rivals (Fröding& Lawrence, 2017).

IKEA base the business success on superior marketing strategies that must be the same around the world, which consisted of the description list it must be in written form in 17 languages and color should be blue and yellow, the color of the Swedish flag. This technique applied to the customer that they are free to purchase any commodity. The price also is shorter than other brands because the consumers, first of all, focused on the price (Johansson &Thelander, 2009). To understand the IKEA business strategy, it is necessary to be based on business conception and formulation prepared by IKEA 12th January 2009. It also provides a wide variety of sketches, functional, and other home decorating products at a low price thus can purchase every kind of class. The main objective must be centralized the objectives and purposes of IKEA’s business strategy. It also provides a guideline on work; these rules implement all sectors of the strategy, whether they belong to the country or around the world. IKEA focused that the environmental designs are presented into its home decor items; for this purpose, it launched a plan in 2015(Arrigo, 2005). This plan will combine the cultural, environmental, and financial and commercial crises. IKEA follows SWOT analysis to gain its objectives (Carter, 2009). This is a developmental business tool. It also assists the business to focus on its fundamental issues. SWOT is a planning stage and focuses on strengthening and weakening and also deals with the internal and external aspects of the business, and also face all threats that are affecting the company matter and associated with other business merchants. The SWOT business plan also concerns retailing, production departments. It also can deal with economic situations, social variations, and technological advancements. IKEA also emphasizes that every business holder has to sense its strengthening aspects to overcome its future challenges. IKEA also focuses on attracting the fundamental group of customers to establish a brand in a world community. It also provides different business techniques at a low price (Alänge, Clancy &Marmgren, 2016).

To maximize the profit, the brand has to establish a trustful relation to the supplier, retailer, and customers. It also embraces several strategic techniques to create customer trust and gain worth in a market. Long term relations to customers or retailers also provide a profitable sense to the business. IKEA emphasizes making good relations with customers by fulfilling their expectations and trying to find out how the new customers ties in a long-term relationship (Baxter & Landry, 2017).

Successful Strategic Goals

The world economy is booming, so the furniture market is also going up with rapid development. 70% of the global market is acquired by traditional furniture companies. The scenario is easy to understand due to increased production capacity, technical advancement, and strategic management. IKEA has also managed to enter in China, Indonesia, and Malaysia by focusing on the key significant strengths and its strategic goals. In many less developed countries, it has developed its concept of competitive advantage and working to show greater potential. Its production is increasingly focused on matching quality standards in Malaysia and beat its competitors. The clear mission of the company is to sell a wide range of furniture with reasonable prices that allow people to buy and get involve (Baxter & Landry, 2017). The wide range offering is a keyword in functionality because consumers, in this way find a place where everything is present. The strategic goals that IKEA has considered to enter in Malaysia are creating high efficient sales department, offering best ideas for home furnishing and serving customers with the best shop of furnishing ideas.

The aim of IKEA at Malaysia to offer them successful appearances and a perfect shopping experience for whole family (Carter, 2009). The people and environment is always a concern for IKEA so its management try to manage every day’s life with a better notion of commitment. It has also responded any rising public concern regarding sustainability, choice of the communication and product range. In Malaysia, effective focus on transportation and raw material was easily maintained due to easy access and prevalence of raw material. This situation helped company get its green targets and spread impact. In Malaysia, it is working on the original approach of dealing customers, i.e. self-serving method. The catalog allow people select whatever they want so they choose their products and put and assemble at home. The centralized strategic direction at IKEA is increased with its expansion (Alänge, Clancy &Marmgren, 2016).

The rapid internationalization has enhanced the challenges for company in a broader scenario so there is also increasing difficulty of managing and responding needs. It is considering cultural and social factors while operating in new premises so emerging demographic trends are easy to tackle with a focused strategy(Arrigo, 2005). IKEA is also focusing on varied level consumer groups by implementing its strategies. The power of strategic management is significant under the organizational structure. It is focusing on maintaining a balance between autonomy and country-level centralized intervention, which will be attributable to franchisee autonomy and subsidiaries. Its suppliers are located in low-cost countries that are an advantage for Malaysia based IKEA (Stanciu, Zlati, Antohi&Bichescu, 2019). They can access raw materials so effectively reach out to distribution channels. The suppliers are selling standard products with broader dealing at the same time.

IKEA’s brand is focusing on innovation mix, advanced, and quality furniture. A combination of low-cost high quality furniture is the business model that is further being tackled with new innovations and techniques to expand and cut costs. Its simple idea of keeping costs low for manufacturers and customers is workable because it doesn’t own its sole manufacturing facilities. The upstream innovation and research & development activities are centralized in Malaysia. The strategic and operational strategies are workable and acquired a steady scope due to global policies.

Challenges

While operating in a global market, an international brand may face some challenges. For instance, while operating in Malaysia, it has to focus on its internal capabilities, ceasing activities, and incorporate key strategies to make its reputation (Carter, 2009). It has to work in an intensely competitive environment because targeting consumers is not easy, and there are multiple brands considering similar operations. It has been facing external and internal challenges in Malaysia regarding raw material, transportation, and availability of the latest technology. Some competitors are focusing on influential corporate decision-making strategies to make effective decisions for the firms. The management team has identified key threats from this business point objective so IKEA has to implement consumer related methods. It is facing diversification issues to boost sales (Alänge, Clancy &Marmgren, 2016). Some internal cultural issues are also prevalent. Due to geographic factors, IKEA is facing different taboos in Malaysia so it has to focus on to improving furniture design.

Conclusion

IKEA in Malaysia is working on competitive strategy with low cost initiatives. It has opened new stores, with an aim to use stability strategy. This will be helpful to monitor performance of the products and allow well operating conditions for business. The stability factor increases productivity of a company so it can take profit based features. Low cost operating methods, effective decision making approach and a business formulating method for its consumers are main pillars of Malaysian market that company is focusing. IKEA is working at global level so a focus on price and differentiation is a key to maintain. The price cost of company is linked to the cost of production, under strategic management framework, this scope is maintained. Globalization is a central aspect of strategic management, so IKEA in global market places, is expanding this view by gaining better competitive advantages and profits. The trend of consumer products at global marketplace is emerging and IKEA is viewing this phenomenon in Malaysia to reap a better growth.

References

Alänge, S., Clancy, G., &Marmgren, M. (2016). Naturalizing sustainability in product development: A comparative analysis of IKEA and SCA. Journal Of Cleaner Production, 135, 1009-1022. doi: 10.1016/j.jclepro.2016.06.148

Arrigo, E. (2005). Corporate Responsibility and Hypercompetition. The Ikea Case. Symphonya. Emerging Issues In Management, (2). doi: 10.4468/2005.2.04arrigo

Baxter, M., & Landry, A. (2017). IKEA: Product, pricing, and pass-through. Research In Economics, 71(3), 507-520. doi: 10.1016/j.rie.2017.03.003

Carter, R. (2009). Will consumers pay a premium for ethical information?. Social Responsibility Journal, 5(4), 464-477. doi: 10.1108/17471110910995339

Fröding, K., & Lawrence, G. (2017). Sustainability at IKEA. Linnaeus Eco-Tech, 67. doi: 10.15626/eco-tech.2010.008

Garnier, M., &Poncin, I. (2019). Do enriched digital catalogues offer compelling experiences, beyond websites? A comparative analysis through the IKEA case. Journal Of Retailing And Consumer Services, 47, 361-369. doi: 10.1016/j.jretconser.2018.12.011

Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal Of Purchasing And Supply Management, 18(1), 9-21. doi: 10.1016/j.pursup.2011.11.001

Johansson, U., &Thelander, Å. (2009). A standardised approach to the world? IKEA in China. International Journal Of Quality And Service Sciences, 1(2), 199-219. doi: 10.1108/17566690910971454

Korsgaard, S., Rask, M., &Lauring, J. (2007). The Diversity Management Paradox in Globalization – The Swedish IKEA Way. SSRN Electronic Journal. doi: 10.2139/ssrn.1135570

Lechehab, S., &Kamassi, A. (2016). The Benefits of Implementing Lean Management System at IKEA Malaysia Company. مجلةالباحث, (16), 55-66. doi: 10.12816/0034358

Minkes, J., &Minkes, A. (2005). Decentralisation, Responsibility and Ethical Dilemmas. Social Responsibility Journal, 1(1/2), 16-20. doi: 10.1108/eb045790

Soh, K., Wong, W., & Chong, C. (2015). Strategic Choices: A Composite Model for Logistics Service Providers. Journal Of Southeast Asian Research, 1-10. doi: 10.5171/2015.652416

Stanciu, S., Zlati, M., Antohi, V., &Bichescu, C. (2019). The Development Analysis of the Romanian Traditional Product Market Based on the Performance Model for Sustainable Economic Development. Sustainability, 11(4), 1123. doi: 10.3390/su11041123

A Critical evaluation for an organization to have one common recruitment and selection strategy which HR practitioners believe will be the challenges for the recruitment and selection of workers from Europe, considering the ongoing Brexit negotiations.

Brexit, HRM for International Business

Introduction

The dynamic rise in the trends and practices of globalization and internationalism in the past few decades has yielded a great number of benefits and advantages to the business organizations and companies around the globe. It has equipped them with the tools and resources required to not only strengthen their businesses in the local markets, but it has also enabled them to explore and expand their business activities to markets which had previously been impenetrable. The practices of globalization have eliminated the limitations imposed by geographical borders and barriers and have opened new opportunities and avenues for the business community in a similar fashion as it has done for the rest of the world.

Firstly, the essay looks at the concept of expatriation and its role in the growth of multinational organizations in the modern world. Secondly, it evaluates the framework of international human resource management presented by Perlmutter (1969) and analyzes the impact of ethnocentrism on the progress of modern day business organizations. Thirdly, it presents some of the advantages and disadvantages of utilizing an expatriation strategy for multinational corporations and provides the example of Coca Cola, which utilizes expat managers for its multinational business operations. Lastly, the essay looks at some of the challenges and implications for human resource practitioners posed by Brexit as they attempt to develop a common and an effective recruitment and selection strategy.

Expatriation

Siljanen and Lämsä (2009) suggest that “expatriation in the traditional sense refers to individuals working in subsidiary offices of multinational enterprises in different parts of the world.” The concept of expatriation in multinational enterprises also falls in line with the ethnocentric approach to recruitment put forward by Perlmutter (1969). His ethnocentric approach to staffing argues for the recruitment and selection of managers of the same nationality as the parent organization. The development of a recruitment strategy involving the processes of expatriation is, therefore, central to the ethnocentric approach to recruitment and selection.

Minbaeva and Michailova (2004), through their research work on the topic, argue that the multinational business organizations and their managerial leaderships rely heavily on the practices of expatriation in order to conduct their business operations and activities in subsidiary offices in an effective and efficient manner(Minbaeva and Michailova, 2004). They also suggest that “the primary goal of expatriation was explicit and well-defined control and coordination: by relocating expatriates, parent organizations have been able to exert control and achieve global integration across subsidiaries” (Minbaeva and Michailova, 2004).

However, given the developments and the evolutions that have characterized global business operations and strategies over the past few decades, the nature of expatriate assignments and projects has also changed(Harzing, 2001). The expatriate employees and managers today are not only expected to maintain organizational control within the subsidiary offices of the company, but they are also expected to develop the local talent within the subsidiary units in accordance with the company’s vision and to support the effective transfer of skill and knowledge from the organizational headquarters to the local offices. (Harris et al., 2003)

Perlmutter’s Typologies and Ethnocentrism

The work of Perlmutter (1969) is considered by many to be fundamental in the domain of human resource management practices in order to effectively deal with the evolving relationships and dynamics that exist between a corporate headquarter and its subsidiaries (Minbaeva and Michailova, 2004). The EPRG model of human resource management presented by Perlmutter is considered to be a significant tool in order to understand the relationship between the headquarter of a multinational company and its subsidiary offices situated in foreign counties. The EPRG framework involves four basic principles namely ethnocentrism, polycentrism, regio-centrism, and geo-centrism(Onodugo et al., 2017).

The Polycentric approach to recruitment revolves around the idea that multinational corporations restrict their hiring practices for subsidiary offices by only recruiting management native to the country in which the foreign office operates. The polycentric approach allows for the organization to understand the local cultures, business practices, and other dynamics that influence market operations in a more effective and efficient manner(Lakshman et al., 2017). The regio-centric approach to hiring, on the other hand, focuses on the recruitment and selection of managers and employees from countries in which the organization operates. Similarly, the geocentric approach to recruitment and selection in multinational organizations refers to the hiring of the best and the most skillful employee irrespective of the nationality that he may belong to. The geocentric approach enables the company to fill its organizational ranks with the most suitable managers that can take the company forward. (COLLINGS and SCULLION, 2006)

The ethnocentric approach to human resource recruitment and selection focuses on the deployment of managers from the organization’s headquarters to its subsidiary offices. The ethnocentric approach calls for the recruitment and selection of subsidiary management that is essentially of the same nationality as the location of the parent company. Banai (1992) argues that the “general rationale behind the ethnocentric approach is that the staff from the parent country would represent the interests of the headquarters effectively and link well with the parent country”(Banai, 1992). The ethnocentric approach to recruitment and selection generally involves four primary stages, namely self-selection, the creation of a candidate pool, capabilities assessment, and identifying the most suitable candidate for the foreign role. (Michailova et al., 2017)

The ethnocentric, polycentric, geocentric, and regiocentric approaches to international staffing can be utilized solely or in combination with one another depending on the workforce requirement and the nature of the international job responsibility(Isiaka et al., 2016). The selection of the best possible hiring approach for multinational business operations is influenced by range of factors and dynamics including monetary resources, time constraints, immigration procedures, sensitivity of the foreign job, impact of culture and language etc. The managerial leadership of multinational enterprises should, therefore, critically evaluate and analyze such factors associated with international hiring before deciding on a common recruitment and selection policy for its subsidiary offices. (Thoo and Kaliannan, 2013)

Merits and Demerits of Using Expats

Using expatriate employees and managers for foreign and subsidiary offices and divisions is one of the most common human resource and management practices used by the multinational organizations today. There are many merits and advantages of deploying expatriate employees and managers in subsidiary divisions that the organizations can exploit in their bid to strengthen and expand its business operations and activities. Firstly, it allows the managerial leadership of the organization to maintain their control over the business activities and operations of the subsidiaries(Yamin and Andersson, 2011). Secondly, it keeps the strategies and practices of the subsidiary employees in line with the strategic goals and objectives that the organizational headquarters has set and, ultimately, helps them in achieving such goals in an effective and efficient manner. Lastly, the usage of employees as expatriates enables the organization to transfer essential knowledge and skills to subsidiary offices. It also allows the management to instill and cultivate a culture of leadership within its foreign offices in order to foster leadership and managerial qualities amongst the employees of the subsidiaries. This, in turn, enables the organization to not only prepare managerial leaders for the future, but it also helps in the retention of the best employees (Harzing, 2001).

However, there are certain demerits and disadvantages that are also associated with the deployment of expat employees and managers in subsidiary offices. One of the primary disadvantages of using expatriate employees in subsidiaries is creating a culture of control and centralization. Expatriate managers are most commonly used to exercise and maintain control of the subsidiary and foreign business operations and activities. Hence, it can develop a sense of frustration and dissatisfaction within the workers of the subsidiary offices if they believe that expat managers restrict their freedom and workplace independence. Another disadvantage of having expat employees and managers is related to the costs of implementing such strategies(Gabriela, 2013). The procedure of sending expat employees and managers to foreign offices can be very costly and time consuming for the organization as immigration and residential processes tend to be both lengthy and expensive. It is also evident from research surrounding the topic that expat employees are prone to high burn out rates. Due to demanding nature of expat assignments and lack of knowledge of local cultures, expats are generally called back earlier than the life of the project. This can be regarded as another substantial disadvantage of using expat employees(Bossard and Peterson, 2005).

Coca Cola, Expats, and International HRM

The Coca Cola Company is one of the leading multinational organizations in the world that utilize the strategy of deploying expat employees and managers to its foreign offices in a bid to manage business operations and activities in an effective and productive manner. The cola giant is present in nearly every corner of the world and sends expat managers to conduct its business operations effectively. The same is the case of Coca Cola UK which operates as the European headquarters of the multinational giant. Coca Cola UK generally sends its UK managers on expat assignments to its European subsidiary offices, but its approach is not ethnocentrism only as the company also utilizes polycentric and geocentric approaches depending on the workforce requirements. The company deploys expat employees to foreign offices primarily due either a lack of domestically available talent or a lack of appropriate experience amongst the managerial leadership within the subsidiary office in consideration(Baruch et al., 2002).

The selection of the right employee for the expatriation assignment also depends on a number of factors and dynamics. The nature of the expat project plays a critical role in the process of evaluation and selection. Similarly, the time limitations and monetary constraints are also critical in order to undertake such a decision. The cross-cultural suitability of the expat manager is, arguably, the most significant factor in the process as the success or failure of the project substantially depends on how well the expat manager is able to connect with the employees in the foreign office(Harvey and Moeller, 2009).

The Brexit Challenge

The issue of United Kingdom’s ongoing departure from the European Union (EU) is one of the most significant challenges for multinationals having business operations and offices both within the UK and in any other EU member countries. Brexit poses a number of different yet complex challenges and problems for the human resource practitioners of such multinational enterprises and severely impacts the recruitment and selection strategies that such organizations adopt. The managerial leadership, along with the human resource experts, of such entities have to address the issues and challenges created by Brexit in an effective and efficient manner in order to maintain the effectiveness of their recruitment and selection processes, so thatthe company maintains its growth and progress(Elliott and Stewart, 2017).

The most fundamental challenge that Brexit poses for the recruitment and selection strategy of a multinational enterprise is the issue immigration. The rules and regulations regarding the immigration of workers to and from other EU member countries are bound to change. It can severelyimpact the operational activities of the multinational enterprises as many expat employees and managers will have to obtain documentations in accordance with the new laws post Brexit. Another significant concern for the multinational companies is the retention of its existing workforce. The current organizational workforce might be comprised of employees belonging to other EU nationalities and their retention after Brexit becomes a major concern for the multinational organizations. If the human resource practitioners do not act effectively, the companies are at risk of not only losing potential best performing employees but then also face a significant challenge in filling vacant positions due to a shortage of talent caused by lack of foreign workers(Teague and Donaghey, 2018).

Conclusion

It can be concluded that a common recruitment and selection strategy can be developed to an extent for a multinational company with business operations in UK and France through the utilization of one or a combination of international staffing approaches discussed. The example of Coca Cola UK suggests that, when used properly, expat employees and managers can unlock several avenues of growth and progress for the company. The issue of Brexit, however, is a significant challenge that needs to be tackled effectively so that the multinational organizations can gain the most out of efficient recruitment and selection processes.

References

Banai, M., 1992. The ethnocentric staffing policy in multinational corporations a self-fulfilling prophecy. Int. J. Hum. Resour. Manag. 3, 451–472.

Baruch, Y., Steele, D.J., Quantrill, G.A., 2002. Management of expatriation and repatriation for novice global player. Int. J. Manpow.

Bossard, A.B., Peterson, R.B., 2005. The repatriate experience as seen by American expatriates. J. World Bus. 40, 9–28.

COLLINGS, D.G., SCULLION, H., 2006. Approaches to international staffing, in: Global Staffing. Routledge, pp. 33–54.

Elliott, C., Stewart, J., 2017. What are the (C) HRD implications of Brexit? A personal reflection? Taylor & Francis.

Gabriela, S.C., 2013. Expat-a Challenge for Employers. Ovidius Univ. Ann. Ser. Econ. Sci. 13.

Harris, H., Brewster, C., Sparrow, P., 2003. International human resource management. CIPD Publishing.

Harvey, M., Moeller, M., 2009. Expatriate mangers: A historical review. Int. J. Manag. Rev. 11, 275–296.

Harzing, A.-W., 2001. Of bears, bumble-bees, and spiders: The role of expatriates in controlling foreign subsidiaries. J. World Bus. 36, 366–379.

Isiaka, S.B., Aliyu, M.O., Abogunrin, A.P., Aremu, N.S., Abdullah, A.S., 2016. A Conceptual Analysis of Global Human Resource Practices: Challenges and Prosp. Covenant J. Bus. Soc. Sci. 7.

Lakshman, S., Lakshman, C., Estay, C., 2017. The relationship between MNCs’ strategies and executive staffing. Int. J. Organ. Anal.

Michailova, S., Piekkari, R., Storgaard, M., Tienari, J., 2017. Rethinking ethnocentrism in international business research. Glob. Strategy J. 7, 335–353.

Minbaeva, D.B., Michailova, S., 2004. Knowledge transfer and expatriation in multinational corporations: The role of disseminative capacity. Empl. Relat. 26, 663–679. https://doi.org/10.1108/01425450410562236

Onodugo, V.A., Adeleke, B.S., Ike, R.N., 2017. Ethnocentric Behaviour and Business Performance of Multinational Enterprises (MNES): Evidence From South-West Nigeria. Int. J. Adv. Eng. Manag. Sci. 3, 98–106. https://doi.org/10.24001/ijaems.3.2.17

Perlmutter, H., 1969. The tortuous evolution of the multinational corporation. ColumbiaJournal of World Business, 4, 9-18. Perlmutter94Columbia J. World Business1969.

Siljanen, T., Lämsä, A.-M., 2009. The changing nature of expatriation: exploring cross-cultural adaptation through narrativity. Int. J. Hum. Resour. Manag. 20, 1468–1486. https://doi.org/10.1080/09585190902983298

Teague, P., Donaghey, J., 2018. Brexit: EU social policy and the UK employment model. Ind. Relat. J. 49, 512–533.

Thoo, L., Kaliannan, M., 2013. International HR Assignment in Recruiting and Selecting: Challenges, Failures and Best Practices. Int. J. Hum. Resour. Stud. 3, 143.

Yamin, M., Andersson, U., 2011. Subsidiary importance in the MNC: What role does internal embeddedness play? Int. Bus. Rev. 20, 151–162.

Strategic Overview – European Aviation Industry

PESTEL, Porter's Five Forces, Scenario Analysis, VRIO

Pages:14

Executive Summary:

The report portrays a fundamental analysis of European Airline Industry with particular focus on Ryanair. Initially the report highlights the overview of European industry and demonstrates the key importance and highlights of the industry. After discussing industry overview, the report touches upon the introduction of Ryanair and carries out following analysis to strategically analyze the profitability and position of Ryanair.

The report used analytical tools like PESTLE, VRIO and Porter Five Forces analysis to recommend few useful strategies for Ryanair for the long term and sustainable profitability.

Introduction:

The main task of this report is to study the European Airline Industry and Ryanair to apply strategic and management concepts about Strategic Choice and Strategic Position. To assess the attractiveness of the European Airline industry, we would be using tools like Porter Five Forces Analysis to evaluate the competitive forces of the industry. We would also incorporate PESTEL analysis to do scenario analysis by which we would be able to judge the key opportunities and threats related to Ryanair. Moreover, VRIO analysis would also be used further to determine the capabilities and resources of the chosen airline.

The main target of this report would be to do the strategic analysis of the current position of Ryanair and suggest appropriate strategic choices for Ryanair.

Overview – Aviation Industry:

The aviation industry has never been as vital as it is in the current era; rapidly increasing interconnectedness among countries and growing levels of globalization have provided this industry a definitive boast. Global traffic of air travel passengers has increased by an average annual growth rate of 6.58% from 2010 to 2019, whereas the revenue of commercial airlines worldwide grew at a CAGR of 4.5% during the same tenure. Moreover, as per IATA, consumers are expected to spend around a total of $908 billion, amounting to approximately 1% of the total global GDP, on air travel in 2020. All of these statistics help us in understanding the current and future potential associated with the aviation industry.(IATA, 2019)

The aviation sector’s performance heavily relies on macroeconomic factors like GDP growth, level of personal income, and unemployment rate; any sluggishness in such factors can negatively impact the revenues of the sector. Furthermore, the dynamics of the aviation sector tend to vary from region to region. The European market is way different than that of the United States of America, where one key distinguishing factor between the two markets is “fragmentation.” Four airline groups control an 80% share of the total aviation market. In contrast, the European market is far more segregated, which results in fierce competition and a high level of rivalry among competing peers. Airliners in Europe are now taking robust and innovative measures like cost-cutting and utilization of technologies to remain competitive and sustainable in the current environment.(CAPA, 2019)

Moreover, in recent days, COVID 19 has severely damaged the revenue of the aviation industry; most of the Global, including several European airlines, is grounded as due to the ban on traveling. Amid such circumstances, Flybe has collapsed, and Norwegian Air stock has lost about 70% of its value in March 2020, with no end to the crisis in sight. Other key issues that are or will hinder the growth of the European aviation sector are geopolitical issues, slowing down of local economies, rise in the cost of maintenance, and increased rate of the cost of borrowing. (IATA, 2019)

As per the executive board of Lufthansa Group, the largest airline of Europe, the group has reduced its unit costs of operations for the fourth year in succession;

“2019 was another demanding year for the European airline industry. Slower economic growth worldwide, trade disputes, uncertainty surrounding Brexit, overcapacities the resulting price erosion also affected the performance of the Lufthansa Group.”

Overview – Ryanair:

Ryanair is one of the largest airline groups of Europe, which started in 1996 with just 12 aircraft; currently, the airline has more than 450 aircraft with around 19,000 aviation professionals. Ryanair also owns other small airlines like Lauda, Malta Air, Buzz, and Ryanair DAC.(Ryanair, 2019)

Ryanair claims to carry approximately 154 million passengers every yearfrom 82 different bases on more than 2,400 flights daily. The airline group travels over 200 destinations in 40 different countries. (Ryanair, 2019)

Competitive Forces Analysis (Porter Five Forces):

The intensity of Industry Rivalry:

Generally, the aviation industry is considered as one of the most competitive industries where the rivalry among the peers are very rigid. As it is challenging to differentiate the services from other competing peers, the airliners have to be very keen and determined to offer the best services at the most optimal prices. As mentioned in the overview paragraph, Lufthansa Group has successfully cut its operating cost per unit for the 4^th consecutive year; such an attitude has to be a must if airliners want to survive and thrive in this throat, reducing competitive environment. Other aspects that make the aviation industry very high in the rivalry is negligible consumer switching cost, overcapacity, and high concentration. (Laurence Frost, 2020)

As a general rule, the more competitors, the more intense the rivalry; the European aviation industry is very highly fragmented with several large and small carriers. The population of the European Union is roughly 50% more than that of the United States of America, amounting to 500 million approximately. But in the USA there are just ten airlines which carry millions of passengers in a year. In contrast, the European aviation industry is quite splintered, having 20 airlines that are comparably equal in size.(Natasha Frost, 2019)

Due to a large number of aviation players, overcapacity is another factor that comes into play when considering industry rivalry. However, European airlines have understood this issue and are gradually slowing their pace of the growing number of seats. In 2019, the number of available seats increased by a mere 3.1%, the slowest since 2013, and lower than the ten-year CAGR (2009 to 2019) of 4.5%. (CAPA, 2019)

The threat of Potential Entrants:

The risk of potential new entrants is generally considered low in the aviation sector amid its requirement of significant capital, regulatory issues, need of highly technical staff, and the cost advantage to large players due to economies of scale.

Establishing an airline from scratch and entering into a market that is already highly fragmented with players that have deep pockets is a tough task. However, airliners these days have opted lease and rental model instead of purchasing aircraft, still, the initial amount of capital required is staggering. Amid high risks attached to the aviation sector, the cost of raising money is also higher than the average lending rates. As per the financial statements of the Lufthansa group, the weighted average cost of capital in 2019 was 4.2%; even though Lufthansa is one of the biggest names of the aviation sector, its cost of capital is higher than the standard lending rates.

Other hindrances in entering the aviation sector are acquiring the licenses and fulfilling other regulatory requirements, which can be time and capital consuming. Recruiting and retaining technical aviation professionals in a highly competitive industry is another key hurdle. Finally, airline groups gain from economies of scale, and so players who have bigger fleets are advantageous over players who are small in comparison.

All of the above-discussed factors make entering into the aviation industry difficult, which means high barriers to entry.

Bargaining Power of Buyers:

Considering the aspects that the aviation industry is highly splintered, service is homogeneous, several substitutes are available (number of airlines), the negligible switching cost for consumers and a large number of frequent air travelers are very price sensitive; this makes us conclude that the bargaining power of buyers is substantially high.

Bargaining Power of Suppliers:

Suppliers of the aviation industry can be segregated in few categories like; suppliers of aircraft and providers of maintenance services (giants like Airbus and Boeing), fuel suppliers, catering suppliers, and hoteliers who rent out their rooms to the transit passengers and aircraft operators.

Bargaining power of suppliers that supply aircraft, their parts, and maintenance services to the aviation industry is robustly secure as the number of such suppliers is quite concentrated. Amid such circumstances, several large airliners are investing heavily in research and development and trying to move towards backward integrations.

The bargaining powers of other suppliers, like fuel, catering, and hotel rooms, are not that strong.

The Threat of Substitutes:

The aviation industry on an industry level doesn’t face any risk of substitutes; however, the substantial threat of substitutes exist when talking at a level of the company. As mentioned previously, the homogeneous nature of service, no cost of switching from one company to another for consumers, a large number of players, and intense competitive rivalry enlarge the threat of substitute of the airline groups.

It matters a great deal these days that how an airliner can differentiate itself from the other competing players, and if we analyze carefully, we can see notable attributes on which a plane can differentiate itself from other players.

PESTLE Analysis

Political:

Being an international airline, it is of crucial importance that airline keeps its harmony with the political forces of the region where it travels. Political factors play a very fundamental role in the profitability of any airline; moreover, who successful an airline is in making its revenue sustainable heavily relies on its political linkages. Several political threats can hinder the growth of Ryanair and damage profitability.(Ryanair, 2019)(Laurence Frost, 2020)
Increase in taxes: If the government decides to increase the taxes on air travel, it will negatively impact the profitability of Ryanair. People will lessen their air travel and would prefer to use other means of local travel like buses and trains. What Ryanair can do is to anticipate any such hike in the tax rate beforehand and make strategies to deal with such an increase in taxes.(Ryanair, 2019)(Natasha Frost, 2019)
BREXIT: Another key challenge faced by all European airlines, including Ryanair, is of BREXIT. Ryanair is a persistent traveler in Europe, and flying to and from England is a prevalent and profitable route. However, till now, no objection or ruling putting restrictions or ban on crossing the air space of England has been coming out, but still, it remains a threat. Ryanair should envisage new destinations and shouldn’t be dependent on just a single goal. (Ryanair, 2019)

Fuel Cost: One of the main operating expenses for all airline groups is off fuel, which highly depends on the geopolitical environment of the world. Any heat up among key oil players like Saudi Arab, Russian, Iran, or USA can shoot up the prices of crude oil. However, it is so challenging to hedge such risk, Ryanair should strategize the usages of derivatives to minimize the risk and should also focus on increasing the fuel storage.

Economical:

A macroeconomic indicator such as interest, inflation rates, GDP growth rate can have a straightforward impact on the performance of the airline sector. During the financial crisis of 2009, several airlines went into severe losses. Slow growth in the economy of the region can severely harm the business of the airline. Sluggish growth of GDP can give rise to unemployment and lower the income level, which can result in lower revenue as people will give up business and leisure traveling.(Sean D.Barrett, 2014)

Another critical impact of the economy on the financial health of Ryanair could be of the weakening of Euro in which the company maintains its books. (Natasha Frost, 2019)

Social:

The current era has been dominated by millennials who are obsessed with traveling. Such demographic changes can have a positive impact on the revenues of Ryanair. However, to take complete advantage of such demographic and social changes, Ryanair should focus on what these millennials want. The management should focus on their likes and dislikes and should introduce customized services for the younger generation.(CAPA, 2019)

Technological:

Technology has been rapidly changing the travel and logistics industry. If we analyze the taxi industry, now it is being ruled by tech giants like Uber and Lyft. Tech gurus are predicting that such massive innovations can also disrupt the airline industry. To be relevant and sustainable in this era, Ryanair should embrace technological advances. It should allow secure booking systems through an app or mobile phone with quick and secure payments. (Laurence Frost, 2020)

Legal:

One of the critical challenges faced by European Airlines currently is off dealing with two regulatory bodies, the European Union and England. This will surely present a tough time for Ryanair. (Natasha Frost, 2019)

Environmental:

The world has started to worry about the carbon emissions and other pollutants been released by industries and automotive sectors. Airlines are also facing the heat as planes emit a little amount of carbon while traveling. To deal with these issues effectively, Ryanair should invest in research and development and improve its fuel efficiency, which will help in reducing carbon emissions. (CAPA, 2019)

Scenario Analysis

Case Scenario 1: Rising of regulatory issues after BREXIT

Brexit has happened now the decision remains pending that what changes would European airlines face in terms of regulations regarding air boundaries. Would there be new clauses or restrictions for the airlines entering the boundary of England or not. This issue can rise troubles for Ryanair and can hurt its profitability a England is one of the key destinations for Ryanair.

Case Scenario 2: Hike in the crude oil prices

As discussed in the PESTLE analysis, crude oil prices are highly dependent on geopolitical environment, any upheaval in the tension between key oil states like KSA, USA or Russia can push the oil prices up. If there is a hike in oil prices it can severely hurt the profit margins of Ryanair.

Case Scenario 3: Slow-down in the regional economy

As mentioned above, revenue of airline industry highly correlates with the performance of global and regional economies. Any sign of slow down or sluggishness can impact negatively on the profitability of Ryanair.

Case 4: More restrictions on Carbon Emission:

As the world has started to worry over the grave issue of global warming due to high emissions of carbon particles, it has raised new issues for global airline industry as one of the main sources of carbon emission is the burning of jet fuel. If such movement against the carbon emissions take pace, it can create problems for Ryanair which can result in low revenue.

VRIO Analysis:

Resources / Capabilities	Value	Rareness	Inimitable	Organization	Competitive Advantage
Low operating costs	Yes	No	No	Yes	Sustained/Above Normal
Global and Local Presence	Yes	Yes	Yes	Yes	Sustained/Above Normal
Large Fleet	Yes	No	No	Yes	Sustained/Normal
Strong Brand Portfolio	Yes	No	Yes	Yes	Sustained/Above Normal

For VRIO analysis, five most essential and critical resources/capabilities have been picked, which are its ability to operate at low cost, widespread global and local presence, its large fleet, and robust portfolio of brands.

Low Operating Costs:

The fundamental reason behind the success of Ryanair is its ability to function at a little cost. This ability indeed provides value, but when it comes to rareness, it might not be the only airline to do so. There are several low cost operating airlines like Southwest or Airjet. However, it is not effortlessly perfect and the organization itself is very well organized to take advantage of this capability; hence it is a sustained competitive advantage. (Ryanair, 2019)(Paolo Malighettia Stefano Palearia Renato Redondib, 2009)(Thomas M. Box,, 2005)(Friedrich Gröteke and Wolfgang Kerber, 2016)

Global and Local Presence:

Ryanair enjoys a ubiquitous presence, both locally and globally. Such resources provide great value in terms of economies of scale, are also rare, and very hard to imitate. Moreover, the organization is very well poised to take full advantage of this resource. Hence it is a sustained competitive advantage. (Ryanair, 2019)

Large Fleet:

Another reason for how Ryanair has been so successful in providing low fare flights. A resource which indeed offers excellent value but isn’t rare as there are several airlines which have even larger fleets. Whereas the organization in itself is very well established to enjoy the benefits.(Alberta Giorgi e Luca Raffini, 2015)

Strong Brand Portfolio:

Ryanair is a parent group of few other aviation giants which provides an ultimate edge to its consumer preferences and competitive advantage. A strong brand portfolio, however, is not rare, but indeed it is hard to imitate, hence being a sustained competitive advantage of Ryanair.(John F.O’Connell, 2005)

Strategic Choices Ryanair should adopt to improve its chances of being persistently profitable:

After a thorough analysis of strategic position of Ryanair, we can recommend few strategies to the management to improve its chances of being persistently profitable:

As it has been observed by our analysis that its key strength is that it is a very low cost operator, the airline should continue the trend and should invest more in research and development by which it can introduce other different ways to cut cost further ahead.
Technology is taking over almost all industries; in order to remain profitable and sustainable the Ryanair should focus on new technological advances and embrace new innovation by which it can make it further easier for the travelers to travel and book flight tickets.
Try to be more environment friendly by investing in new planes which have better fuel efficiencies.
Build good relationships with regulators and institutions.

Bibliography

Alberta Giorgi e Luca Raffini, 2015. Love and Ryanair : academic researchers’ mobility. Mobilidade Científica & Imigração Qualificada.

CAPA, 2019. European Airlines: 2020 outlook characterised by uncertainty. CAPA, 26 december.

Friedrich Gröteke and Wolfgang Kerber, 2016. The Case of Ryanair – EU State Aid Policy on the Wrong Runway. ORDO.

IATA, 2019. Annual Report 2019, s.l.: IATA.

IATA, 2019. ECONOMIC PERFORMANCE OF THE AIRLINE INDUSTRY, s.l.: IATA.

John F.O’Connell, 2005. Passengers’ perceptions of low cost airlines and full service carriers: A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines. Journal of Air Transport Management.

Laurence Frost, 2020. Coronavirus to drive European airline industry shakeout. Reuters, 19 March.

Natasha Frost, 2019. European airlines are confronting the same grim reality their US counterparts faced decades ago. Quartz, 6 November.

Paolo Malighettia Stefano Palearia Renato Redondib, 2009. Pricing strategies of low-cost airlines: The Ryanair case study. Journal of Air Transport Management.

Ryanair, 2019. Annual Report 2019, s.l.: Ryanair.

Sean D.Barrett, 2014. The sustainability of the Ryanair model. International Journal of Transport Management.

Thomas M. Box,, 2005. RYANAIR (2005): SUCCESSFUL LOW COST LEADERSHIP. JOURNAL OF THE INTERNATIONAL ACADEMY FOR CASE STUDIES.

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BRL Hardy: Globalizing an Australian Wine Company – An International Business Negotiations Perspective

BRL Hardy, Business Negotiations

Pages:12

Introduction

The case study looks at the challenges and issues faced by the managerial leadership at BRL Hardy. It provides certain meaningful insights and information to the reader in order to help them to understand the magnitude of the dilemmas faced by the senior managers of the company as they attempt to analyze the various risks and rewards associated with taking up one potential business project or the other. The case study enables the reader to think and analyze the problem from the perspective of the acting manager and gives them an inside look into the procedures and processes of the corporate business world.

BRL Hardy is of the leading wine companies operating primarily in the Australian wine market. The case study introduces the reader to Christopher Carson, the managing director of the organization’s Europe and UK division. It focuses on the conflict that arises between BRL Hardy’s headquarters team in Australia and the company’s UK team under the leadership of Carson on the determination of potential business ventures and projects that are best suited for the future of the organization. The report attempts to examine and analyze the conflict between the two managerial camps from the perspective of international business negotiations and tries to determine the best course of action that should be followed by the management in order to resolve the issues at hand.

Company Background

BRL Hardy came into existence in June 1992 as a result of the merger of two Australian wine companies, namely Thomas Hardy & Sons and Berri Renmano Limited (BRL). Thomas Hardy & Sons began operations as early as 1857 and exported hogsheads to England. By 1912, the company not only became the largest wine maker in Australia but also the most respected in the business through an excessive focus on the aspect of quality. BRL, on the other hand, was the country’s first cooperative winery and established business operations in as early as 1916. It focused on “fortified, bulk, and value vines” and became the largest grape crusher in the country by the 1990s.

While Thomas Hardy & Sons followed more “traditional and cultural” values and operational practices, BRL’s business operations were centered around a more “aggressive commercial” philosophy. At a time when Thomas Hardy & Sons encountered financial problems as a result of its three European acquisitions, BRL was also on the lookout for new avenues in order to expand and upgrade its business portfolio. The two companies decided to merge their operations in 1992under the name of BRL Hardy in a bid to capitalize on the combined resources and capabilities of both the organizations. The merger was played down by industry experts and analysts at the time and the new company did experience some difficulties during the first year of its operations. However, effective management and leadership from CEO Steve Millar soon established the operating procedures of the new company and guided the organization to sustainable business operations in the following years. (BRL Hardy: Globalizing an Australian Wine Company, 2003)

The Strategic Focus

Under the managerial leadership of Steve Millar, who was also the managing director of BRL before the merger with Thomas Hardy & Sons, the operational strategy was to focus on growth though the sale of branded bottled wine, while, at the same time, protect the company’s share of the bulk cask business portfolio. The merged company initially focused its operations and targeted its business activities on the domestic Australian market. It allowed the management to sort out the merger efficiencies from both the companies and capitalize on its combined resources before launching its export operations.

Another area of focus for Steve Millar was the organizational culture and management practices within the merged company. He realized that the senior managers of both the companies had different management styles. Millar wanted to incorporate a more independent and decentralized management structure into the company which gave the senior management enough freedom and decision making capacity to identify, analyze, pursue, and own their individual business projects. Such an approach was particularly difficult for the managers that came from the Hardy’s side of the business as they had worked under a more centralized operational structure.

The decentralized focus incorporated by Millar later led to negotiating problems and difficulties between the Carson, the UK office lead, and the managerial leadership at the Australian head office. Carson, acting on the delegation principles and values that Millar had pushed, identified and pursued his own business ventures that he thought could bring sustained profitability and operational advantage to the company. Millar and his team, on the other hand, wanted to control certain essential aspects of the final product in a bid to keep the products brand centric and in line with the organizational vision and values. (BRL Hardy: Globalizing an Australian Wine Company, 2003)

The Challenge

There were two major problems and challenges in regard to business negotiations that can be pointed out from the analysis of the case study. At the outset, Carson wanted to execute his plans for the new line of wines under the brand name of D’istinto developed and worked over extensively by his team for months. He had taken his plans for the new brand to the Australian team in order to launch in the UK market but had run into problems regarding their approval. The Australian management under Millar had raised serious questions regarding the joint venture with Italian farmers as a similar project previously initiated by Carson had not fared well in the market. Millar had also raised questions over Carson’s commitment and dedication to the company’s established products and wine ranges as he feared that excessive focus on new product lines might be detrimental to the performance of the existing products.

The second challenge faced by Carson was a head to head battle between two proposed brands for the United Kingdom market, namely Kelly’s Revenge and the Banrock Station. Kelly’s Revenge was the pet project of Carson’s team developed specifically for the UK market, with a target focus on younger consumers. Carson, acting on the principles of delegation pushed by Millar, had given the creative freedom to his team in order to develop a new entry level product range for the local market and Kelly’s Revenge was their answer. On the other hand, Banrock Station, was a new entry level wine line introduced by Millar’s team in the local Australian market. The sales had exceeded expectations and Millar was convinced of the global brand potential of the product. Hence, the Australian team pushed Carson to launch Banrock Station in the UK and European markets as a new entry level product. Carson, on the other hand, felt that Banrock Station was not ideally suited for the UK and European market and aired his reservations regarding the new range of wines.

The dilemma faced by Carson was of epic proportions; on the one hand, he had a product range specifically developed by own team for the local market, on the other, he had a domestically successful product range from the Australian headquarters for the UK market that he felt was inappropriate for the local European market. Similarly, Millar, the managing director of the company, had his own set of challenges and dilemmas. While he wanted the managers to express freedom and practice decentralized business procedures, he also wanted to keep the new product ranges aligned with the company’s global branding vision. Millar also pondered over his response and the manner in which to negotiate with Carson in the event that Carson decided to push Kelly’s Revenge instead of the product Millar wanted to launch in the UK market, the Banrock Station.

Roots of the Conflict

A number of reasons can be identified from the examination of the case study that led to the clash between the Australian team working under the leadership of Millar and the UK team working under the leadership of Carson. Firstly, the merger between the two companies with contrasting management styles and philosophies led to cultural conflicts and autonomy problems. Most of the senior managerial roles were given to former BRL managers which was taken negatively by the former Hardy managers and employees. They felt like outsiders in the merged company and had to prove their worth in order to attain the creative freedom that Millar and his team promoted. Furthermore, the decentralization structures and practices incorporated by Millar created tension between the Australian and the UK offices.

As a result of unclear and imprecise negotiations and discussions, a rift was created between the two teams as Carson believed that he had control over product branding, labeling, pricing, and other essential aspects for the UK and the European market. In contrast, Millar assumed that the Australian team controlled the essential aspects of branding, labeling, and pricing while the distribution, promotion, and sales strategy was decentralized to the UK team working under Carson. Millar was of the opinion that the branding and labeling practices of the product ranges should be controlled by the headquarters as they attempted to keep the new products in line with the global branding effort of the company. Carson, on the contrary, believed that his team should determine the labeling, pricing, and branding aspects of the products in the UK market as they were more equipped with the dynamics and underlying forces of the European wine market.

Secondly, in an attempt to embrace the concept that the BRL Hardy wine ranges had to be global brands, Carson successfully negotiated a business contract with Italian grape farmers in the Sicilian region and partnered up with them in order to develop a new wine range under the brand name of D’istinto. The new product range was targeted at the average wine consumer in the UK market who necessarily did not have the knowledge or the expertise in regard to wine tasting and purchasing. Through the development and pursuit of D’istinto, Carson also acted in accordance with the expectations of delegation and decentralization put forward by Millar. However, when Carson presented the idea of the new product to the Australian team, Millar, along with others, was standoffish and unreceptive about it. This issue highlights yet another aspect of faulty communication and imprecise negotiation between the two parties.

Lastly, another decision that became a source of discord between the UK team and the Australian team was the hiring of Paul Browne. Carson, upon Millar’s suggestion that he needed to reconnect more effectively with the Australian team and delegate responsibility to subordinate managers, appointed Browne from the headquarters to the post of marketing manager in his team. Browne was given the responsibility to identify and develop new product ranges by Carson in order to fill up the gaps created by moving “Stamps” and “Nottage Hill” to a higher price range.Browne and his team came up with Kelly’s Revenge after months of work and finalized the product for launch in the UK market. But the project created tension between the two teams as Millar argued that it did not represent the organization’s collective branding message. Evidently, the lack of clear business negotiation between the two teams had created another problem for both sets of managers. (BRL Hardy: Globalizing an Australian Wine Company, 2003)

Business Negotiation Frameworks

Much research has been carried out over the years that attempts to indicate the best and most effective practices and strategies when it comes to the negotiation regarding crucial projects and business ventures either between different teams within the organization or between the company and its suppliers, distributors or other important actors.

Competitive vs Cooperative

Aslani et al. (2016), in their work, highlight the influence that cultural differences can have on business negotiations and conflict resolution attempts between an organizational team and a subsidiary team. They argue that information sharing, insights and a cooperative mindset when negotiating for joint goals and objectives occupy substantial importance in order to resolve the conflict in an effective and efficient manner. The study also suggest that business negotiation processes characterized by influence and competitive aspirations are more likely to result in further disputes between the teams.

Applying the work of Aslani et al. (2016) to the case of Carson and Millar, it can be argued that the most effective and efficient avenue in order to arrive at an acceptable resolution for both parties is to engage in business negotiations in a cooperative manner. Information sharing, openness, trust, and meaningful insights regarding priorities can result in an adequate and appropriate solution of the problem for both Carson’s and Millar’s teams. It will not only help them in resolving the conflict effectively, but also result in higher joint gains for the company in the long run. (Aslani et al., 2013)

Business Negotiation Model

One of the fundamental models for international business negotiations was presented by Ghauri (2003). The model for business negotiations can be used in order to simplify the process of negotiation and conflict resolution between companies and its subsidiaries.

Ghauri (2003) argues that the business negotiation process is influenced by a number of factors that can primarily be categorized into strategic factors, cultural dynamics, and background factors. The strategic factors comprise of the presentation of arguments and information in an effective manner, the strategy devised by the negotiators in order to attain their desired results, and the circumstances that play a crucial role in the decision making process of the negotiating parties. (Schoop et al., 2010)

Similarly, the cultural factors can be divided into time restraints, individual and collective goals of the negotiator and his team respectively, the presence and usage of emotions and feelings during the process of negotiation, and the relationship between the actors. The background factors can be defined as the objectives that a negotiator has before the process begins, the environment of the process, and expectations that negotiators have from the procedure. All these factors can be applied to the case of Millar and Carson in order to gain a better understanding of the negotiation processes between the two parties.(Fjellstrom, 2005)

Although Millar wanted to demonstrate his principles of delegation within the organization, his team still argued for controlling the essential aspects of the product ranges. This shows that Millar wanted to keep the power dynamic for the Australian team as his team felt that too much decentralization can have detrimental affects for the health of the organization and its global brands in the long run. Carson, alternatively, had many attachments that were bound to influence his decision making during the negotiation process. He had worked extensively on the D’istinto project and felt that it was unfair of Millar to slow down its approval on the basis of the previous Chilean joint venture. Similarly, Browne had emotional attachments to his project as well – Kelly’s Revenge. He even tried to block the launch of Banrock Station in the UK by playing politics. This shows that both the parties clearly wanted to hang on to their objectives and made up for a difficult negotiating journey.

The Negotiation Atmosphere

The atmosphere that existed for negotiation between Miller and Carson was a tense one. Both the parties had clashed over previous issues and problems. Carson, being a former Thomas Hardy employee, already felt like an outsider due to the merger. Although he had performed well and had “earned his stripes,” he still felt that crucial aspects such as labeling, branding, and pricing of the product should be the domain of the local team, not the corporate headquarter situated miles away. He had also gone through a difficult negotiation process with Millar and his team before when he wanted to move the Stamps and Nottage Hill to a higher price range. Hence, the feeling of unresolved tension and uneasiness governed the current atmosphere for negotiations.

References

Aslani, S., Ramirez-Marin, J., Brett, J., Yao, J., Semnani-Azad, Z., Zhang, Z.-X., Tinsley, C., Weingart, L., & Adair, W. (2016). Dignity, face, and honor cultures: A study of negotiation strategy and outcomes in three cultures: Dignity, Face, and Honor in Negotiation. Journal of Organizational Behavior, 37(8), 1178–1201. https://doi.org/10.1002/job.2095

Aslani, S., Ramirez-Marin, J., Semnani-Azad, Z., Brett, J. M., & Tinsley, C. (2013). Dignity, face, and honor cultures: Implications for negotiation and conflict management. In Handbook of research on negotiation. Edward Elgar Publishing.

BRL Hardy: Globalizing an Australian Wine Company, (2003).

Fjellstrom, D. (2005). International Business Negotiations. Sodertorn University.

Ghauri, P. N. (2003). A framework for international business negotiations. International Business Negotiations, 2, 3–22.

Schoop, M., Köhne, F., &Ostertag, K. (2010). Communication quality in business negotiations. Group Decision and Negotiation, 19(2), 193–209.

GLOBALISATION AND EMERGING MARKETS

EMERGING MARKETS, Entry Strategy, General Business Strategy, Global Warming, Local Business Environment, PESTLE Analysis

Pages:13

Abstract

Manufacturing industries contribute to the Gross Domestic Product of an economy, so it has to keep up with the latest trends and key emerging societal factors that are aligned with the cultural factors. The construction and manufacturing industry is helpful for a much-skilled labour force because it integrates high-value parts, design, research and development, and marketing. In Hungary, there are several global chains of multiple industries that are further comprised of millions of medium, small, and large manufacturers that are facing intense demand from consumers, and manufacturing innovating products. Today, global economies are ignited by macro-environmental trends. The report discusses a comprehensive scenario of the economy of Hungary as an emerging market. Key conditions in the local business environment, socio-economic and political factors and key entry strategies to enter in a new market are a part of this report. The research report elaborates the involvement of business in the economic growth of a country and key role played by industries to involve people under economies of scale.

Introduction

Hungary is a part of central Europe that has transitioned from a planned economy to a market-based economy (Lane, 1995). Emerging technology is changing the direction of business and overall industry and further involving new strengths, capabilities, merchandisers, and professionals (Bae, S. Y., 2018). Aerospace, agriculture, and healthcare sectors are now specializing in better development aspects and have gained a strong position worldwide. This research report is going to discuss Hungary as an emerging market, in future it will be changing the economic patterns. The report will examine Hungary economy as an emerging market, and it will analyze the local, cultural, legal, and political factors that are shaping this overall economy. In addition the following will also be discussed key market entering strategies, the overall performance of the economy, trends, risks and challenges, entry and long term strategies to minimize risk as well as recommendations to businesses looking to enter this market.

The Local Business Environment

Under global strategy, Hungary’s economy has gained significant importance due to the marketing mix and segmenting the local market. It has been seen that this economy is an attractive destination for international business now, and it is going to be in the future. Business and service industries are considered a powerful segment of the economy that cannot only change the future of the labor market but also create more opportunities for business (Eszes, L., & Muhlemann, A. 1993).With the rapid expansion in transport, trade patterns, and communications, the international market has provided easy access to all businesses(Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018).

To fulfill consumer requirements, world is getting harmony in all its processes, such as technology, lifestyle, transportation, capital, and travel. Resurgence in global standardization at international level provides many motives to global firm’s decisions about trade. International marketers focus on right standard balance in global businesses so that performance can be optimized (Chan, E., 2019). Integration level is viewed at a global level due to global marketing strategy and role of marketing tactics. Technological advances have a significant role in the economy.

Global expansion caused the industry to push its product launch regarding automation, knowledge-based products, and biotechnology (Eszes, L., & Muhlemann, A. 1993). Economy can better explain the consumption perspectives of an industry when it comes to its specific features and products (Chaudhry, H. and Hodge, G., 2016). Value, when produced in commodities, undertake cultural and political-economic approaches to fulfill the historical trends. Marxist economists focused on linear commodity trends to discuss the concept of production and consumption. Individual production network tends to acquire vertical structure systems for the provision of consumer goods.

Approach of economy regarding the interaction of horizontal factors undertakes all political, socio-economical, and cultural factors, about consumables that move from one country to another. In Hungary, the automotive industry is advanced, and leading edge technology is implemented in biotechnology sector (Lane, S. 1995). A regulatory environment for the development of pharmaceutical products and biotech products is implemented. Through low cost and quick method of manufacturing, consumers engage in the ever-changing collection of affordable commodities; for instance, capital sources are involved in corporate development and spin-off activity. The rapid changes in trends and evolving lifestyle perspectives have shaped the industrial products (Cox, H. and Mowatt, S., 2012). On a broader culture, tremendous stress is placed on the system of production that can be labor-intensive. Hungary has a broader scope regarding fashion and footwear due to potentiality of factors; for instance, high-end fashion, products for the younger generation, and luxury brands are an important part of Hungary’s economy (Eszes, L., & Muhlemann, A. 1993).

Hungary’s economy focuses on broader business initiatives; for instance, construction industry is facing local regulation and strong price competition. The economic position of Hungary is based on GDP, and it’s per capita income is two-third of the average of EU-28, while in 2018, its GDP was $155.7 billion (Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018).Current markets are performing good and high competition is see in main global brands, their high quality of products, and performance is causing difficulty for new firms to enter(Lane, 1995).Opening of a fashion company in a new place is based on certain factors, some of which are difficult. In Hungary, supply of raw material and transportation is advanced level and moving towards sustainability and therefore making the competition intense (Eike, R. J., 2018). Hungary economy is performing a competitive role in the education and ICT segment of the industry. Socioeconomic and demographic factors and trends are likely to shape its future potential as an emerging market (Lengyel, B. and Cadil, V., 2009). For global trade supplier finance, capital is made available to the suppliers, who are engaged at the global level, to practice better policies. To open a business in Hungary, its cultural and social factors are important to consider; for example, if fashion textile industry decides to open its brand in Hungary, it will have to focus on its market, economy, and social aspects (Jarmuzek, M., Orlowski, L.T. and Radziwill, A., 2004). Consumer values, socio-cultural patterns, ethnicity, and perceptions of consumers are some key factors that will change the future market and its potential (Gardetti and Muthu, S., 2020).

PESTLE analysis

Industrial development is competitive in terms of the provision of quality and sustainability of products in Hungary. Segmentation, targeting, and promotion policies of different companies are conducive to increase sales and consumer spending (Lengyel, B. and Cadil, V., 2009). PESTLE analysis deals with all political, economic, technical, social, legal, and economic factors at a place. For instance, if Apple is planning to open in Hungary, it has to consider all the factors in the IT industry in Hungary regarding segmentation.New entrants in Hungary will face intense competition because stable socio-economicsystem.Political system is stable, yet some after-effects are due to the international worsening of global issues that will cause new incumbents to focus on their cost structure. Before 2019, Hungary’s fashion market has faced good performance, and its recorded revenue reached $75 billion, according to the National Fashion Chamber Hungary (Jacobs, and E., 2016).

Healthcare in Hungary is facing some global uncertainties, yet it is providing opportunities to British companies such as investment projects, management consultancies, supply of medical equipment, and hospital management services (szikinger, 1999). Economic situation in Hungary is much better due to the presence of many luxuries, lifestyles, and consumer goods in the Lombardy region (Kim, E.-D., 2000). A multi-party democracy of Hungary is divided into conservative right and opposition.

Legal system in Hungary is strict and composed of many regulations and rules. Fundamental law in Hungry is considered a parliamentary republic. For sustainability in the environment, the rule of law is established. Many implementations are faced with business networking (Mcgrath, P., 2013). The commercial communication system is established to know about products’ sustainability. Legal factors are persistent in following the rules and product’s life cycle as well as to reduce any impact on the environment. Specific manufacturing elements have to undertake to license regarding product’s packaging or supply chain and transportation (Lee, J. K., 2018). Legal system also provides confidence about state laws, product features, and fashion-based networking. Property laws and intellectual property elements prevail in the economy that is helpful for whole industry brands.

Economic factors such as inflation, employment level, and per capita income in Hungary are stable for businesses to make companies more productive, and industry can gain its sustainability. Social atmosphere and socio-cultural aspects undertake values and norms, societal characteristics, customs, ethics, and other peculiarities that work significantly for fashion as an emerging market. These factors are important to consider when a business company tries to launch a new product or bring innovation in existing products. For instance, in 2018, US merchandise exports to Hungary were $1.75 billion, and the main exporting items were automotive components, IT equipment, vehicles, electric machinery, electronics, and other manufacturing supplies. It is also working on the economies of scale rule to target consumer’s standards and fulfill their expectations (Mitterfellner, O., 2019).

The socio-cultural factors in Hungary are traditions, values, and norms that people love to see in their favorite brands. In Hungary, despite sustainable implementation, an adequate legal framework about environmental rules is implemented. Activities of involvement with rules & regulations customers will be fruitful to enter into the market. Difference in attitude and culture is a key factor that multiple brands have to focus on while entering in an emerging segment of society. Sustainability of products in Hungary is maintained under specific guidelines of commercial communication to make sure that traders are focusing on green claims (Mcgrath, P., 2013). In Hungary, rapid industrialization has raised environmental concerns; therefore, product sustainability needs environmental protection policies.

Entry Strategy and General Business Strategy

Main driver of growth in Hungary is domestic demand; it was estimated in 2019 when rise in wages and high consumer confidence was observed. In same year, the foreign investment acted as a strong performing vehicle, and the electronic sector captured interest of global investors (Lengyel, B. and Cadil, V., 2009). Long term strategiesthat new business could adapt to mitigate risksarising from challengesare to be more competitive and revolutionized due to digital market ideas.In Hungary, there is a high wage rate, high profit margins and increased tax collection that can be an attractive entry point for new firms, so they can enhance a general balance of the economy. Due to business and industry growth, Hungary’s economy faced public debt going down, and International Monetary Fund anticipates that in 2020 this debt will be 65.1% and further will reduce to 62.9% in 2021 (Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018). There is a need for fiscal consolidation for the economy because its supply-side reforms need to maintain growth momentum so that global resilience can be built.

The economy of Hungary undertakes entry and long-term strategies that could mitigate risks arising from the challenges. The entry mode in international business segments adopts various policies such as product export, involvement in joint ventures, participation in the franchise sector, and making operational alliances or subsidiaries (Szent-Iványi, Végh & Lightfoot, 2018). IT, automotive, and construction sectors in Hungary can become more competitive by adopting growth features to get short and long terms success. Due to high competition at a global level, Hungary’s economy will focus on a continuum by nagging in low control to high control practice with resource commitment. Low control model needs more limited commitment of resources, so investment risk is reduced. However, in economy, some firms have little power in global operations that can result in declined financial outcomes (Sadachar and Manchiraju, 2016).

In this case, competitive business brands can enter in Hungary market by focusing on key cultural practices, norms, and involvement of values in the society. Foreign market expansion by any brand also has to focus on the skills and managerial expertise while entering into a new market (Mcgrath, P., 2013). Retail environment in the industry has to establish a competitive brand under specific format, assortment, and product offering. Retailer needs a specific kind of entry mode that matches with the global expertise and its international experience (Lane, 1995). This aspect is closely related to tackling foreign market challenges. The industry undertakes key cultural and market-related factors as competition because these factors are integral to understand economic and political stability. The company has to focus on supply chain management and distribution practices (Szent-Iványi, Végh & Lightfoot, 2018).

In Hungary, the government does not restrict foreign investment. Foreign direct investment is not limited and convenient to organize a large scale for specialized firms (Lengyel, B. and Cadil, V., 2009). Hungary’s industry is specialized in terms of multinational investment to cater to consumer demand. foreign firms win market share from incumbents by adopting different strategies like price wars, raising specific barriers, and making intense competition (Sweney, M., 2019). Competitive advantage in Hungary is considered complex due to the degree of internationalization. According to specialization of segments, the market diversifies and modify different areas of products to shift the market trends. Economy of Hungary is lucrative for global business firms because they can reap the benefits by acquiring a larger market share (Lengyel, B. and Cadil, V., 2009). New businesses can enter by analyzing their competitors’ profiles as well as researching the potential of the Hungary market (Eszes & Muhlemann, 1993). The pricing, product value, and advantages are important to consider. Consumer market has been focused on existing brands, division categorization, and product diversification is necessary to enter in the market because these aspects are inherently related to the economy.

Conclusions and recommendations

Economy of Hungary is set up on a competitive framework that incorporates the latest trends, expertise, and skilled labor force into the product portfolio. Countries engage cultural and social factors in their products because it is helpful for targeting better customers. Country-specific socio-economic & business factors must be considered by new businesses to gain a competitive advantage in Hungary’s market. Working in a foreign country requires a firm to consider its specific economic, political, legal, and environmental policies. New businesses have to focus on specific norms and values operating in Hungary regarding competition in industry because already present firms are operating in tough competition.

Some fashion and business brands have to undertake country risk uncertainty to survive in atmosphere and to ensure the profitability of the firm. In a foreign market, uncertainties like economic health, inflation, disposable income, and political stability and unemployment rates have a considerable impact on the company’s performance.

Key recommendations for new business, who want to enter in this market are research and development, flexibility, and a focus on high control models. They should be avoided to limit resource commitment. To be successful in the global market of Hungary, companies should select low control, entry models, because there will be a high country risk. New businesses have to consider government restrictions. It is recommended to maintain control in emerging market by complying with local rules.

Many competitive business attempt to start operations in Hungary, so they have to focus on political, economic, legal, and environmental factors in the Hungary market. IT, automotive, and fashion being sophisticated industries have to work on a diverse set of occupations. This research has highlighted the significance of certain institutional and cultural factors that play a significant role in the development of an economy and help elevate a firm’s business performance.

References

Bae, S. Y., 2018. Smart Fashion and Wearable Technology: Opportunities and Challenges for Future Growth. Journal of Textile Science & Fashion Technology, 1 (3).

Bobek, V., Maček, A., and Kros, J., 2019. International franchising in the fashion industry from the franchisor perspective. J. for International Business and Entrepreneurship Development, 12 (1), 49.

Chan, E., 2019. Condé Nast is launching a new sustainability strategy – here’s why [online]. Vogue Australia. Available from: https://www.vogue.com.au/fashion/news/cond-nast-is-launching-a-new-sustainability-strategy-heres-why/news-story/939e6e7a83c8d83b481800e143e3177b [Accessed 19 Mar 2020].

Chaudhry, H. and Hodge, G., 2016. Vendor-managed inventory systems in the apparel industry. Information Systems for the Fashion and Apparel Industry, 221–234.

Cox, H. and Mowatt, S., 2012. Voguein Britain: Authenticity and the creation of competitive advantage in the UK magazine industry. Business History, 54 (1), 67–87.

Eike, R. J., 2018. Review of Fashion, Technology and Health: Future Directions for the Apparel Industry. Trends in Textile Engineering & Fashion Technology, 4 (3).

Gardetti Miguel Ángel and Muthu, S. S., 2020. The UN sustainable development goals for the textile and fashion industry. Singapore: Springer.

Jacobs, B., Simpson, L., Nelson, S., and Karpova, E., 2016. Matching Sourcing Destination with Fashion Brands Business Model: Comparative Advantages of Bangladesh and Vietnam Apparel Industries. Fashion, Industry and Education, 14 (2), 11–23.

Kim, E.-D., 2000. A Study on the Global FDI Flow and Choice of Commercial Policies. International Business Review, 4 (1), 1.

Lee, J. K., 2018. Adoption of the “See Now Buy Now” Business Model in the Fashion Industry. Bloomsbury Fashion Business Cases.

Mitterfellner, O., 2019. Fashion marketing from a historical perspective. Fashion Marketing and Communication, 1–16.

Sadachar, A., Feng, F., Karpova, E. E., and Manchiraju, S., 2016. Predicting environmentally responsible apparel consumption behavior of future apparel industry professionals: The role of environmental apparel knowledge, environmentalism and materialism. Journal of Global Fashion Marketing, 7 (2), 76–88.

Sweney, M., 2019. Vogue publisher Condé Nast reports annual loss of £14m [online]. The Guardian. Available from: https://www.theguardian.com/media/2019/jan/03/vogue-publisher-conde-nast-annual-loss [Accessed 19 Mar 2020].

Eszes, L., & Muhlemann, A. (1993). MANUFACTURING MANAGEMENT IN HUNGARY: A PERSPECTIVE. European Business Review, 93(5). doi: 10.1108/eum0000000001923

Lane, S. (1995). Business starts during the transition in Hungary. Journal Of Business Venturing, 10(3), 181-194. doi: 10.1016/0883-9026(94)00038-v

Szent-Iványi, B., Végh, Z., & Lightfoot, S. (2018). Branding for business? Hungary and the sustainable development goals. Journal Of International Relations And Development, 23(1), 190-209. doi: 10.1057/s41268-017-0127-8

Jarmuzek, M., Orlowski, L.T. and Radziwill, A., 2004. Monetary Policy Transparency in Inflation Targeting Countries: The Czech Republic, Hungary and Poland. SSRN Electronic Journal.

Legvold, R. and Tucker, J.A., 2006. Regional Economic Voting: Russia, Poland, Hungary, Slovakia, and the Czech Republic, 1990-1999. Foreign Affairs, 85(5), p.173.

Lengyel, B. and Cadil, V., 2009. Innovation Policy Challenges in Transition Countries: Foreign Business R&D in the Czech Republic and Hungary. Transition Studies Review, 16(1), pp.174–188.

Mcgrath, P., 2013. Impact of Financial Deregulation on Monetary and Economic Policy in the Czech Republic, Hungary and Poland: 1990-2003. SSRN Electronic Journal.

Szikinger, I., 1999. A Letter from Hungary: Law Enforcement in Hungary During Transition to Democracy. Crime Prevention and Community Safety, 1(1), pp.71–77.

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Trade Protectionism in US – Literature Review

Donald Trump, Trade Protectionism

Pages:12

Introduction

Trade war is all about attack of one country over another with the help of quotas and taxes. Donald Trump has reckon trade wars, focusing it as an easy approach, which has shaken the global trade foundations (Rossi, D., Angelini, P., Metra, C., Campardo, G. and Vanalli, G., 2008). President Trump has slapped steep tariffs on goods from EU, Mexico, Canada and China. The tariff on billions of dollars goods coming from abroad is considered an easy approach for Trump, as he imposed 10% levy on £150bn products from China (Loriaux, S., 2018).The$100bn gain from tariff is intended to put in the agricultural sector to buy products, that will in turn sent to deserving countries under humanitarian assistance. Currently, US has a massive trade deficit for China, in 2019, it approached to $43.6 billion to $419.2 billion.

Literature Review

President Trump has obsession with trade deficit, not popular yet and critics mentioning this move of Trump administration as protectionism. US economy mainly gain net income from services.Trade protectionism is a restriction on global products such as tariffs to boost the products of own country by shielding the industry from intense global competition (Rossi, D., Angelini, P., Metra, C., Campardo, G. and Vanalli, G., 2008). For instance, Trump has aluminum and steel tariffs. In 2018, he announced 10% tariff on aluminum products and 25% on steel imports. According to the administration, the economy of US relies on other countries regarding metals, and in case of a war, the country could not make adequate weapons. US acquires most of its steel and metal products from EU and Canada. Taxing aluminum and steel means US companies will fulfill their demand from local industry. This notion provides that in this way, US aluminum and steel industries will boost up, since less goods will be coming from abroad that will increase revenue for local steel makes and prices increase (Loriaux, S., 2018).

The trade protectionism by Trump administration will not only increase the price of local finished product but also it will be dissatisfaction or consumers.China has retaliated this and taxed US industrial and agricultural productssuch as cotton, pork, steel pipes and cars. It is discussed that these are necessary countermeasuresagainst Trump’s tariffs. Donald Trump says, trade wars are easy and not bad when it is the matter of trade balance. International monetary fund expressed that the situation is scary, as the American trade policy is aligned on economic nationalism (Wu, W.-C., 2018). The extent of productive distribution of assets declined and longer term costs are acquired. This system by and large will in general diminish government assistance, so a checking impact over item assortment is watched.

New York Times reported that protectionist intensions can bring some warnings. The frivolousmanner of US trade is striking and increasing the complexity in the region. Intermediate goods are most significant part of the modern global economy (Rossi, D., Angelini, P., Metra, C., Campardo, G. and Vanalli, G., 2008). A tariff on steel can be helpful for producers but for the larger interest, consumers will hurt and that will impact the automotiveindustry. AFL-CIO is the main union association of US that has more than ten million members, such as steel workers. The body has shown its favor for protectionist policy by Trump. Patil, A., (2017) said that it will be helpful to increase the employment level in industry which would be protected by tariffs, yet it can be harmful for other sectors’ employment. Over the most recent two decades, the pattern about advancement has been expanded, yet money related emergency are intensified. The training details with respect to protectionism is found in type of complexities. US approaches in regards to protectionism is confronting serious outcomes, i.e., with China and different districts.

Tariff can boost the capital intensive sectors and can offer fewer jobs. According to Uygur, E., (2018) the reduction in imports will not increase the jobs but it will provide jobs to that particular country, which is ready to replace imports belong to china, previously. USA is helping out World Trade Organization to focus on trade disputes that has prompted a trade war. Any breach of rules that work on international trade rules is carried out by reprisals from affected countries. The trade protectionism has been causing a divergence of American relations with Canada, European Union and China. German Economic Analysis Institute has discussed that EU has exported €856bn in 2016 and paid 0.7% as tariffs, on average. USA exported €645bn to Europe paying 0.74% tariff. This situation provides that it is not possible to continue business with EU, as according to Donald Trump (Rossi, D., Angelini, P., Metra, C., Campardo, G. and Vanalli, G., 2008).

The trade war can increase the uncertainty of investment and investor’s perception. This impact of tariff can have limited impact, for instance, Citi data discussed if an increase of 25% is implemented on imports of car, the inflation will be 0.1%. This will escalate tensions and the uncertainty factors will also limit the positivity of Stock Exchange. It is also acting as a main volatility factor on stock exchange today in US. The intentions of Trump are departed from the broader US consensus that support open trade policy and it also limit the concept of immigration (Rossi, D., Angelini, P., Metra, C., Campardo, G. and Vanalli, G., 2008). The situation can bring distress of white voter and economic anxiety. The country level electoral data of US highlights that trade protectionism has gained negative views from the global world. The expanded protectionism isn’t huge for the market, since it offers ascend to twists. The since quite a while ago run costs increments because of this training and local enterprises face bail outs. The job of household creation is frustrated because of protectionism, and it has been seen by numerous investigations that in short-run, local creation limits are impeded.

Protectionist policy of US president is apparently a good suit for citizens. Research from University of Geneva presents that this policy of Trump has effects for unemployment and OECD countries’ welfare. Being negative in nature, such policies will also impact employment in US and Mexico. US Trump administration is openly implementing this concept on trade and economists considered it as a stark policy reversal. Unemployment level clearly demonstrates about economic health, so that protectionism can affect the employment rate. The study discussed that North American Free Trade Agreement was conducted by Trump by imposing 20% tariff on bilateral level in Mexico and US. This has reduced the average level of welfare in US by 0.31% and 6.6% in Mexico (Uygur, E., 2018).

The trade protectionism is also expected to increase the rate of unemployment to 48% in Mexico and 2.4% in US. The researchers revealed that this impact on economic policy is significantly related to the automotive industry. If US has increased the tariff on cars against import from other countries, it will decrease long term employment and welfare in all the respective car producing countries. The protectionism do not apparently show negative aspects and a president can only be satisfied from the result, during his power.

Rossi, D., Angelini, P., Metra, C., Campardo, G. and Vanalli, G., (2008) provided that trade protectionism is controversial debate, when viewed in terms of economic welfare. It has numerous economic impacts. Consumer limit their choices but they have to pay more. The quotas restrict the amount of consumption. The choice of consumers, in terms of quantity, quality and product choices decreased. The protectionist policies intend to provide jobs and safeguard industries but they decrease the consumer welfare by providing them less availability of desired goods and services. In addition, consumers set to low or poor quality goods. Patil, A., (2017) illustrated that paying high for limited goods can bring inflation in the economy. The limited choice of consumers will set them for low quality so they will either purchase low quantity or will not purchase at all.

Trade protectionism is also affecting domestic firms, when they have to purchase parts of products but pay tariff, so they pass this additional cost to consumers. Nortasnom, A., (2019) mentioned this provides an increase in global competition by keeping the welfare of consumers low. Another effect of protectionism is declined growth of infant industry because there are many trade protection policies by government. The protection to the infant industry causes cost to government in the form of financial resources. This will promote the inefficiency in infant industry because when no longer incentives are provided to make it intelligence and smart, the industry will not mature (Loriaux, S., 2018). The protectionism will hinder the maturity and decline the capability of infant industry to be competitive in long term.

The trade protectionism causes nation to keep its value of currency low, so the deceased value will cause long term inflation. This issue is related to sell the products at international market in cheap prices. Necessities will be sold in high prices, so the consumers will have a good intention to help industry stay competitive at global level but they have to pay high prices at home. It is also a cause of trade wars among nations. If a country focuses on trade protection, a reciprocal action will be taken by others, for example, in case of US and China. No matter, if both countries are military and political allies, the nation will impose, quotas tariffs and controls over exchange rate. The case of Japan and US shows that they are long term allies but after the World War II, the administrative policies of trade and tariffs are invoked against one another (Jean, S. and Reshef , A., 2017).

According to the economic freedom index of 2008, US is ranked as fifth freest global economy. The index dimension highlights the trade that is free from the interference of government. In that index, US was considered as the leader of free trade. Multilateral trade under thegeneral agreement on tariffs and trade (GATT)was flourished that provided political stability in all partners. The method of trade protectionism came at front after the presidential elections and Trump administration took the charge. The GATT agreement was aligned in effect of trade protectionism to set quota ceiling about foreign products to limit supply and to increase the imported products price. The protectionism was considered to place hurdles for imported products under certain specifications and standards. Currency control was limited to manipulate the exchange rate and to access global currencies, in order to inflate the price of global products while reduce the domestic product’s prices(Jean, S. and Reshef , A., 2017).

Houngbedji, H., (2018) presented the protection policies was intended to maintain or increase the share of market and help domestic industry. Through this concept, counties restrict imports to own market. The protectionism supports argue that free trade is harmful for the local industry andnegatively effects balance of payment. The domestic demands are met by imports, so unemployment level increased andproduction level decreases (Gagnon, F., 2020). The metaphor of trade protectionism is opposite to the liberal trade practice. Free trade policies focus on liberalization practices in less developed countries regarding elimination of imports restriction, smooth functioning, and privatizationof state owned firms and exchange rate deterioration. Basically, protectionism roots are related to mercantilism because there are trends that support this concept.

From the survival of US since 1929 crisis, it has empowered its governmentto reduce the rate of tariffthrough law of bilateral trade. The newly emerged protectionistpoliciessince 1973dominated the scope, in order to protect the infant industry and reduce foreign competition. New protectionism focused on the protection of consumers, the sustainability of environment and public health provision.With the WTO formation, tariff reductions was actualized for the agricultural products. These measures were adopted as invisible measures (Demir, M.A. and Sepli, A., 2017). The supporters of protectionism claim that liberal trade disrupts terms of trade of developing countries. The terms of trade will be negative over time, if demand for exported agricultural goods is less than the industrial goods.

According to the protectionist, the domestic industries preservation against foreign competition is a contribution to protect unemployment. The imports restriction revives domestic product’s demand so it substitutes foreign goods. Increase in demand enhances domestic level of production. It will need more labor to produce, so reduction in unemployment (Daniels, J.P. and Vanhoose, D.D., 2017). The protectionist contend that national economy should be protected from dumping. It is a state of sales under the price of cost. The companies sell productsunder their original value so that they can reach market and compete with rivals. The situation gives rise to unfair competition in the economy and it needs anti-dumping tax to differentiate applied price and fair price.

The NAFTA trade agreement held an objective as a reduction of tariff in the good trade (Dadush , U., 2019). The agreement, for the larger part of the goods decided that final preferential tariff rate will be adequate for the period of ten years. USA levied low rate of tariff on Mexico and Canada at average. WTO member countries and gross household’s wage and income incur losses from non-tariff and tariff barriers. In Canada and Mexico, proportionate decline has been observed by studies. The retaliativemeasures regarding trade policy are seen by WTO members against US. Ciuriak, D., (2019) focused that it is also attributable to the domestic economies and strong dependency ratio on them. The individual countries are able to decline their loss due to some measures related to increase in tariff, however the single country cannot be able to compensate the incurred real income wages of household. The exchange protectionism by Trump organization won’t just increment the cost of neighborhood completed item yet additionally it will be disappointment or buyers. China has fought back this and saddled US modern and horticultural items, for example, cotton, pork, steel funnels and vehicles. It is talked about that these are vital countermeasures against Trump’s taxes.

The US protectionist trade policies are not significant for US to get benefit or to provide benefit to the rest of world. The consequences about NAFTA withdrawal is carried out by different members, such as US, Mexico and Canada. Bakhshi, S. and Kerr, W.A., (2008) argued that this has a significant impact on macro-economic variables because US protectionist policies are not in the favor of WTO because they come in combination with the retaliative response. The trend of protection has a moderate impact on the flow of trade so counties are restoring the measures related to protectionism. In the last two decades, the trend about liberalization has been increased, yet financial crisis are worsened. The practice technicalities regarding protectionism is seen in form of complexities. US policies regarding protectionism is facing severe consequences, i.e., with China and other counties. The exchange protectionism makes country keep its estimation of cash low, so the expired worth will cause long haul expansion. This issue is identified with sell the items at universal market in modest costs. Necessities will be sold in significant expenses, so the purchasers will have an honest goal to assist industry with remaining serious at worldwide level however they need to address significant expenses at home. It is additionally a reason for exchange wars among countries.

Chatterjee, D.K., (2011) discussed the increased protectionism is not significant for the market, since it gives rise to distortions. The long run costs increases due to this practice and domestic industries face bail outs. The role of domestic production is hindered due to protectionism, and it has been witnessed by many studies that in short-run, domestic production capacities are obstructed. The scope of efficient allocation of resources declined and longer term costs are incurred. This framework overall tends to reduce welfare, so a curbing effect over product variety is observed.The aims of Trump are left from the more extensive US accord that help open exchange arrangement and it likewise limit the idea of migration. The circumstance can bring pain of white voter and financial uneasiness. The nation level discretionary information of US features that exchange protectionism has increased negative perspectives from the worldwide world.

Conclusion

The discussion about the effect of protectionism related to trade by Trump administration revealed the reduced level of welfare for domestic industry. It is also argued by differentscholars that impact of these policies for international trade is hurtful. The effect of trade related agreements is significant to consider in this situation, however the impact is without bilateral trade. The overall discussion has concluded that impact of trade protectionism is significant on liberalization practices, so trade policy worse off infant industry, increases level of prices, thereby reduces welfare of domestic production. The risk of protectionism in near future can also bring distortion in trade related practices. The impact of increase in trade protectionism canbe negative for competition at global level. This indicates that countries will lose the benefits from trade and any related initiatives. The expected loss for implementing countries would be larger, if viewed in terms of specialized sectors. The different simulation model can be assessed in caseof multi country vision. US isimplementing such practices and lowering the overall welfare of domestic economy as well as consumers. This risk is associated with the financial crisis and a sluggish global recovery cannot be neglected.

References

Bakhshi, S. and Kerr, W.A., 2008. Incorporating labour standards in trade agreements: protectionist ploy or legitimate trade policy issue? International Journal of Trade and Global Markets, 1(4), p.373.

Chatterjee, D.K., 2011. Protectionist Policies. Encyclopedia of Global Justice, pp.912–912.

Ciuriak, D., 2019. How U.S. Trade Policy Has Changed Under President Donald Trump – Perceptions From Canada. SSRN Electronic Journal.

Dadush , U., 2019. Washington Slept Here: How Trump Caught Politicians Napping on Trade. Trade and American Leadership, pp.142–166.

Daniels, J.P. and Vanhoose, D.D., 2017. Regulating international trade—trade policies and their effects. Global Economic Issues and Policies, pp.101–137.

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ONE SMART EDUCATION INTERNATIONAL – Equity Analysis

Equity Analysis, Financial Analysis, One Smart

Pages:11

Summary:

Growing urban middle class, increasing trend of after-school education, and improving overall economics of Chinese people will lead the local education sector to further growth.
One Smart Education is an attractive buy at current level with a target price of $21.
In recent quarters, profits margins have shrunk because of increasing marketing, selling, and administrative expense as One Smart is currently focusing on expansion. We believe margins will improve over time which will result in positive upside in net income.

Introduction:

With 430 learning centers across 43 cities in China, One Smart International Education Group Ltd is an innovative and leading educational company which provides K-12 after-school education. One Smart Education caters kindergarten and primary, middle, and high schools (K12) segments of education industry and offers them tutoring services. By revenue of 2016 and 2017, One Smart Education is the largest K-12 after-school education service provider in China.

One Smart Education’s vision is to become the best and most trusted “Third Class” outside home and school by utilizing motivation, capability and perseverance of each and every student and bring the best learning power out of him. With customer focus, execution, innovation, and teamwork as their core values, One Smart Education aims to thrive further in the competitive environment of China and take the full benefit of opportunities provided by growing industry of education.

One Smart Education (One) raised $179 million by issuing 16.3 million shares on New York Stock Exchange on 27^th March, 2018.

Management:

One Smart Education was founded by Xi Zhang in 2008 in Shanghai, China. Xi Zhang did his master in business administration from Harvard Business School and had an experience of working with big multi nationals like Johnson & Johnson and Wrigley. Zhang was also recognized as a “Top 10 Most Innovative Entrepreneurs in China in 2012” by Global Times.

Honggang (Greg) Zuo is the Chief Financial Officer of One Smart Education. He completed his MBA from MIT Sloan School of Management in 2004. He has a vast experience of working in both, China and USA. Previously, he was engaged with Asian Special Situations Group of Goldman Sachs, MasterCard, General Electric, and PricewaterhouseCoopers.

XiaoqiangMeng serves at the senior vice president of One Smart Education and looks after the sales division. He has an experience of working in sales department of PepsicoLimited, Philip Morris, and Colgate Palmolive.

On the research and development side, Muyuan Ma uses his technical expertise to keep bringing latest updates to software of One Smart Education. He has a master degree from Warwick Business School.

One Smart Education currently employs 9023 employees. All of the top executives and employees of One Smart Education are well educated, experienced, and professionals in their respective fields.

Market Dynamics:

Business Outlook:

China’s economy is improving; poverty is on the decline and the overall living standard is rising. People are spending more money than ever on their kids’ education. China’s education market is poised to touch a mark of RMB3.36 trillion by 2020, increasing from a market of RMB2.68 trillion in 2018. (Source: Deloitte) The main triggers for this vibrant growth in the education sector are changing dynamics of Chinese demographics, increase in the governmental spending on education, and availability of capital to education sector through IPOs and VCs.

China is witnessing massive growth in its middle class population. With a middle class population larger than the total population of USA, it is estimated that there will 120 million applications for pre-school admissions by 2022, taking the pre-school school education market to RMB800 billion by2020. Moreover, these stats are also supported by the fact that the people born is 80s and 90s are becoming parents and they are more cautious regarding their kids’ pre and after-school education, including tutoring, as compared to their earlier generations. (Source: Deloitte)

The Chinese government has shown keen intention towards improving the educational standards in the country and making it more inclusive. In the budget of 2018, the government allocated RMB171.122 billion towards to educational sector, up by RMB10.501 billion, increasing by a growth rate of 6.5% as compared to last year. Preschool and high schooleducation received the most attention among all the other segments of education, getting a funding from government of RMB803million (increased by 35.6% from 2017’s actual spending) and RMB2.064 billion (increased by 21.5% from 2017’s actual spending). (Source: Ministry of Finance, China)

The capital markets and financial strategists also see a huge potential in Chinese educational sector. Eight educational companies proceeded towards IPOs in 2018 and deals worth of USD2.57 billion took place in the education sector in just the first six months of 2018, surpassing the number of total deals happened in 2017. (Source: Deloitte)

Industry-related risks:

This industry has no barriers to entry and this has started to trouble older players. With new players entering the market like Gogokid who are backed by big tech firms like ByteDance, the problems for One Smart Education will increase and this might result in shrinkage of profit margins and market share.

Another risk associated with this industry is very high customer acquisition cost. The firms in this industry typically spend a lot of money in trial classes, commission to sales employees and referral bonuses to teachers and parents. Sometimes the costs spent on acquiring customers exceed the profits which results in shrinking profit margins.

Corporate Strategy:

Going forward One Smart Education will eye following key strategies in order to retain its number one spot in China’s after-school education market and thrive further to grow its revenues.

For the next phase of growth, management of One Smart Education has made following strategies:

Reach national coverage and then scale:

One smart education wants to increase their coverage, open more class rooms and cater more students. From having 117 study centers in 2015 to 430 study centers in 2019, One Smart Education has executed this strategy fairly well. However, in order to boast its coverage to national level, it might have to face shrinkage in its margins. One Smart Education believes that once it has attained national coverage, it will scale and improve its margins.

Particular focus on “Premium tutoring services”

Although being number one in after-school education in China, One Smart Education only have 2.4% share of the Premium tutoring services market. The segment “Premium tutoring services” includes 1-1 class sessions or classes of very small groups; hence, increased instructor’s attention and better learning environment result in personalized and highly effective outcomes, leading to outstanding study results.

This particular segment of after-school education in China is poised to grow at a CAGR of 16% from the period of 2017 to 2022, faster than the overall tutoring market (9%). The key strategy of One Smart Education is to focus more on this segment and capture a bigger chunk of total market size. The aim of One Smart Education is to grow its share from 2.4% to 25% in the total market of Premium tutoring series, worth RMB433 billion.

Particular focus on key regions:

One Smart Education has strategized to focus on key regions and scale up the operations in the top 20 cities in order to increase revenue and improve profit margins.

Strengthening operational Excellency:

Work on core competencies in order to excel further towards being the market leader, drive continued product and services innovation through new technologies and revamp the incentive system to increase productivity.

Financial Analysis:

One Smart Education generates the largest revenue as compared to its peers.

According to our analysis, the stock of One Smart Education is an attractive buy at the current level of $7.26, with an estimated target price of $21. The main reason behind this projected upside is the increase in the net revenue because of the increasing of study centers and consumed class units. As per our forecast, the revenue will increase by 11.58%, 10.91%, and 10.50% in up-coming three quarters.

In recent quarters, the profit margins has shrunk slightly because of the increasing marketing, and advertising expense; we expect that profit margins will further deteriorate as One Smart will focus on expending and launching new study centers nationwide.

The decreasing profit margin is because One Smart Education is currently focusing on growth instead sustainability and retention. In order to increase the number of enrollments and to cater growing number of students, One Smart Education is spending much of its sales revenue on marketing and commissions.

We believe that profit margins will improve with time which will result in healthy growth in net income in future.

Lower SG&A Expenses:

SG&A expense of One Smart has declined in last two quarters and is lower than other of its peers.

Liquidity Management:

So far, One Smart Education has not been able to maintain a current ratio of above 1 which may not be a sign of risk as much of current liability consists of “Prepayments from customers”. However, the average current ratio of One Smart Education, since its IPO, is below than the industry average Current Ratio. (MRQ)

On the risk side, One Smart Education is highly leveraged and its net income has struggled in recent quarters due to high interest payments. We expect the interest expense to increase further in coming quarters as One Smart is focusing on expanding its operations right now; hence, further distress on net income is anticipated.

Price to book ratio of One Smart Education is in line with the industry trend with the exception of Puxin, which is slightly over valued as per the P/B ratio.

Valuation Methodology:

For the purpose of valuating One Smart Education, the analyst has used the “Discounted Cash Flow” methodology. After discounting the estimated “Earning before Income and Taxes” of next 3 quarters by an appropriate discount rate, the analyst has arrived at the target price of $21.

Conclusion:

One Smart Education caters kindergarten and primary, middle, and high schools (K12) segments of education industry and offers them tutoring services. One Smart Education is currently trading at $7.26, below its IPO price of $11, as recently net income has declined because of increasing expenses on advertisement and administration. But with key dominating factors like rapidly growing Chinese middle class population with increasing focus on children after school education, hike in government’s spending on education, and increasing influx of capital in education sector of China, we believe the stock of One Smart Education has the potential of reaching the a price of $21 in coming quarters.

Moreover, One Smart Education has funding from strong financial players like GoldmanSachs and Black Rock which shows further credibility and strength of this stock.

Sources:

https://markets.ft.com/data/equities/tearsheet/profile?s=ONE:NYQ

http://www.onesmart.investorroom.com/index.php?s=120

https://www2.deloitte.com/cn/en/pages/international-business-support/articles/trends-in-the-chinese-education-industry.html

https://www2.deloitte.com/cn/en/pages/technology-media-and-telecommunications/articles/golden-age-of-the-chinese-education-market.html

Market Entry Strategy of Shell

Internationalization, Market Entry Strategy, Shell

Pages:9

Executive Summary

The purpose of this report is to outline the optimal strategy that the Shell, UK based company has to adopt to expand in a foreign market. The overseas market that we think the company should enter in China. While it has already to do this, we believe there is space for a lot more expansion and exploration. The challenges the company has faced in the past have been due to scandals that were posed on the company and the theft losses it had to face in Nigeria. Other than this, there is also, of course, a lot of competition for Shell now compared to when it was first founded. The strategy that seems to be the optimum for the company is joint-venture as it maximizes profit margin and minimizes risks.

Introduction

The United Kingdom-based oil company which is a multinational business today was founded back in 1929 by the name of Shell Chemicals. Not much later, the company became one of the world’s leading oil companies. Gradually the company spread its business across the globe and has come a long way since then. During its journey, the company has faced ups and downs and has continued to restructure and update its strategy according to its needs. There have been scandals such as the 2004 reserves scandal (Taylor, 2006), which tarnished the image of the company quite severely and it is still recovering from it. There are several challenges that Shell has to face. Firstly, concerning Nigerian Operations.

There have been countless cases of theft, and attacks on the oil infrastructure over there that have resulted in a lot of losses in the reserves of Shell in Nigeria (Boele, Fabig, & Wheeler, 2001). This hasn’t been the issue with Shell only. There were other companies in Nigeria that had to move out or cut down on their investments in Nigeria because of the crimes taking place there. So Shell has been forced to sell some of its Nigerian oil reserves to other companies. Hence, this is one challenge that it has to face. Shell faces Regulatory, legal and equipment-related challenges in its operations in Alaska concerning the environment and weather conditions over there (Raye, 2015).

Other challenges faced by the company reside in Motiva Refinery, where services were greatly hindered by unforeseen unfortunate events such as a fire. To combat these challenges, Shell has to come up with a more active international business strategy IBF. It needs to discover other places where it could expand the business and develop industrial bases. Improvement in strategy is the only way that Shell will be able to move towards relative success and acquire more partners across the globe. Hence, the purpose of this report is to analyze the best possible international strategy for Shell to overcome its challenges and enter new potential markets.

Different Market entry strategies

It is essential to realize that despite the setbacks, Shell has also been quite successful which is why it has earned an international label. Most of its strategies have been quite fruitful for the business. Just by 1938, Shell was providing 10 percent of the world’s crude oil supply after getting founded in 1929 (Grant, 2007). By the 1980s, the company had made a lot of expansion in the United States. Shell used a joint venture strategy to spread in Eastern European countries such as Hungary and Russia.

Once liquid gas technology became widespread, Shell also expanded via the same approach in Malaysia marking a whole new chapter in the business (Shell, 2016). Shell has applied different, useful market entry modes in different situations and has been quite successful mostly. The joint venture strategy has proved to be quite helpful for the company ever since its early days. In Brazil, Shell joined hands with the biggest ethanol producer Cosan, a local looking forward to establishing influence globally as well (Waltz, 2010). It helped Shell in expanding business in a whole new realm of biofuels.

Right now, this strategy is effectively working in assisting shell in making business ties with China. This will be discussed more in detail further on in the report.

Wholly owned subsidiaries are the second strategy for Shell in its internationalization process. The Nigerian aspect comes into play here. Shell built numerous subsidiaries in Nigeria. And has played an essential role in the development of the economy over there. Shell also has reserves in Nigeria. Shell has two sub-companies functioning in Nigeria, namely the Shell Nigeria Exploration and Production Company Ltd and Shell Nigeria Gas Ltd (Boele, Fabig, & Wheeler, 2001).

As the name suggests, these companies work on further exploration of reserves inside Nigeria. A third important strategy that we will consider here is licensing and franchising. Shall built a business out of licensing out technologies to other companies as a support for their development. This venture of theirs is called Shell Global Solutions. This license enables the client to avail assistance in how the processes should go about and how they can take their business up a notch using the licensed technologies (Shoemaker, 1992).

Optimal Market entry strategy for internationalism.

In light of all the different factors that affect a company’s optimal choice of the internationalization strategy, the right mode of foreign market entry is decided. Like all other companies, Shell also has to take into account firm and environmental factors, which would also include the social and economic implications. Shell has many sub-companies some of which are local and others that are international. It applies different strategies to them.

For expansion in a foreign market, companies generally tend to use the joint-venture approach. It enables the company to learn about the local market and economic conditions in that particular region. Shell also has been quite successful when it employed the joint-venture strategy. Owning subsidiaries, licensing, and franchising is strategies that a company uses during the process of expansion. Licensing helps reduce costs in a foreign market. According to our study of the different entry strategies, it seems that the joint-venture approach is the best for Shell to enter a new market.

Further details on the joint-venture strategy only make it more convincing why it should be the mode of entry for Shell. first of all, it helps in the foreign entry when there isn’t enough knowledge of the new market conditions. Hence, it reduces costs, risks, and uncertain setbacks. It is also easier to build up the standard of the company globally.
In order to form a joint venture, Shell would have to find a suitable partner company in the market. This company should have a similar, adjustable business model. The joint venture strategy is more successful if both the partnering members openly share information and resources whether they be capital or labor. There also has to be transparency and a proper framework for how input costs and profits will be shared and distributed. The investment strategy should be sound.

Foreign country to enter and why

the country that we think Shell should expand in is China. Shell already happens to have subsidiaries in China but there is still a lot of expansion potential over there. China is dictating the world market and business in China right now is quite favorable. Firstly, it has become easier to start a business in China because they have introduced an online registration system by simplifying security regulations.

Construction is also easier as China has streamlined the process of obtaining the permits. Quality control of buildings’ constructions has also improved as it has applied stricter regulations. The process of registration of property has also becoming streamline Electricity as a very important energy resource has been made cheaper and more accessible in China. China has also made the whole ordeal of paying taxes easier as taxes in themselves have been reduced over there. A drop in administrative charges has also lowered the cost of exports and imports.

Conclusion

The territory that we think Shell should enter and further expand in is China. China is an economic hub for the entire world. It is a superpower country having a lot of scopes for other businesses to enter. Although Shell has already had ties with China there is still a lot of growth potential. China also has ranges for bringing innovation for the company as it is itself very technologically advanced. Costs will also reduce if Shell plans to expand there as China is reducing import duties on chemical products.

This is why Shell can easily invest over there. Plus, other social, economic, and political factors are also quite controlled over there, so there would be a lesser chance of thefts and mishaps, as were the cases with Nigeria and Alaska.

References

Piwowarczyk, A. (2016). Expansion strategies as an effective way of competition on the global market on the example of the Royal Dutch shell investments on Polish market. Central European Review of Economics & Finance, 13(3), 95-107.

Waltz, E. (2010). Shell’s billions to convert Brazilian biomass into fuel.

Zhang, J. (2004). Catch-up and competitiveness in China: the case of large firms in the oil industry. Routledge.

Boele, R., Fabig, H., & Wheeler, D. (2001). Shell, Nigeria and the Ogoni. A study in unsustainable development: I. The story of Shell, Nigeria and the Ogoni people–environment, economy, relationships: conflict and prospects for resolution 1. Sustainable development, 9(2), 74-86.

Raye, R. (2015, March). Forecasting ice and weather conditions for field operations in Alaska. In OTC Arctic Technology Conference. Offshore Technology Conference.

Schoemaker, P. J., & van der Heijden, C. A. (1992). Integrating scenarios into strategic planning at Royal Dutch/Shell. Planning Review, 20(3), 41-46.

Kwee, Z., Van Den Bosch, F. A., &Volberda, H. W. (2011). The influence of top management team’s corporate governance orientation on strategic renewal trajectories: a longitudinal analysis of Royal Dutch Shell plc, 1907–2004. Journal of Management Studies, 48(5), 984-1014.

Grant, R. M. (2007). Organizational Restructuring within the RoyalDutch/Shell Group. Cases to Accompany Contemporary Strategic Analysis, 6

Shell, R. D. (2016). The History of Shell in Malaysia.

Zhang, J. (2004). Catch-up and competitiveness in China: the case of large firms in the oil industry. Routledge.

Related Keywords: Market Entry Strategy

International Business Strategy Unilever UK

International Business Strategy, Strategic marketing strategy, Strategic Plan, Unilever

Pages:8

International Business Strategy Unilever UK

Executive summary

This report entails the critical strategic marketing strategy of Unilever in the UK regarding international expansion. The foreign market is competitive and can create significant challenges for Unilever in terms of sales and revenue. Unilever is acquiring appropriate practices and ready to get into competition at the international level. The company is facing intense competition, digital marketplace, and sustainability issues. Due to its strategic marketing, internationalization approach, and educational campaigns, the key challenges can be tackled significantly. It has to expand its operations at the international level by reducing costs of operations, streamlining the raw materials transportation process, and looking at joint ventures at the international level.

Many subsidiaries of Unilever are gaining international fame and development due to their strategic market performance. An increase in sales and revenue is easy to attain on the basis of socio-economic interactions (Awards, 2019). The institutionalization and tackling risk and transaction cost-related issues are vital parts of the strategic plan by Unilever.

Furthermore, investors’ protection, contractors’ enforcement, intellectual property rights, and economic outcomes will be gained by adopting different modes to enter into the market. The functioning of the market mechanism by Unilever in the UK needs effective implementation of a marketing strategy that can continue to strengthen its business in the home market. It has to work with strategic alliances, joint control mechanism, and undertake investment opportunities.

Introduction

Unilever is a global consumer products company that deals in a wide range of products like food, beverages, personal care items, etc. Unilever believes in long-term strategic growth that can be attained by genuine purposeful performance (Maljers, 2005). The brand managers undertake a critical stance to spread the positive image of the company in the society while consumers focus more on brand image.

Unilever in the UK is operating across new divisions, and its portfolio includes iconic brands to meet the specific needs of consumers. The company is spreading a positive societal image with impeccable integrity. The challenges the company is facing in internationalization are related to intense competition, digital presence, and global opportunities.

Strategic plan

The internationalization path is necessary for firms to enter into the global world competition. Unilever has planned to enter in global market UK so that it can introduce its products at an international level. The internationalization strategy that Unilever will follow is ‘think global and act globally.’ This strategy is to focus on crucial competition at the global market and to adapt the comprehensive strategy by keeping in mind consumer preferences. Unilever focuses on three components of internationalization, i.e., firm-level, industry level, and country level.

The firm-level competition intends to compete with its rival brands to sell products on a global scale. It is also focusing on adding minor adaptations in products where necessary, engaging customers and to coordinate its actions (Relations, 2019). The comprehensive strategy at the industrial level tends to unify its operations to establish the brand image. This reputation at the international level implies that Unilever should coordinate its distribution and marketing activities. The successful implementation of brand concepts in the UK is vital to capitalize on growth performance. The optimal market entry strategy is a part of internationalization because its major rivals, such as Procter and Gamble, are developing new ways of product development, so Unilever strives to respond to changes at a faster pace.

Wholly-Own Subsidiaries (WOS) by Unilever are a vital strategy to enter into a foreign market. Principal shareholders of the company are Leverhulme Trade Charities Trust and Prudential Corpn plc. United Holdings and NV Elma hold 50% deferred shares in Unilever plc. The subsidiaries of Unilever are NV Elma and United Holdings and work under an individual shares basis. Some other subsidiaries of Unilever are Lipton, Sunsilk, Knorr, Exe, etc.
Unilever is facing sustainability challenges due to global innovation; thereby, it is creating initiatives like implementing the innovative solution, digitalization, and engaging entrepreneurs to tackle the key issues (UNILEVER, 2019). Sustainability challenges influence the strategic positioning of the UK, so it is working to safeguard the working environment and build sustainable leadership. The strategic framework, like institutional theory, applies to the working environment of Unilever to establish outcomes at the firm an industry level. The competitive strategies to acquire foreign competition are inherent to increase sales. The stable market performance by Unilever in the UK is attributable to strategic decision making while focusing competition with main rivals. The company’s decision to face intense rivalry from emerging markets is tackled by innovation and introducing the product in the UK, US, and Europe.

The institutional distance is about the analysis of risk and transactional cost of Unilever in the target market. In the UK, Unilever is targeting middle consumers by offering necessities and improving lifestyles. It is reaching out to customers by fulfilling their needs regarding personal care, hygiene, and nutrition. The institutional approach is to expand business based on customers’ needs and to keep ahead of their preferences. Improving product quality, innovation, and knowledge-based framework for consumers is a part of the decision making strategy. Unilever is acquiring the cost of transactions, thus gaining economies of scale.

Due to its corporate social behavior and healthy relationship with retailers, the company has implemented its strategic positioning at a different level. The competing foreign market as a marketing strategy is acquired under educational campaigns, global partnerships with development institutes, and healthcare projects with Australia and Brazil (Worldwide, 2019). A competitive presence at the international level is attributable to strategic decision making. Unilever’s competitive position is further accelerated by innovation. It is investing in research and development to acquire mass marketing strategies through cross-sectoral brand extensions. Competing at the international level is risky because global expansion on behalf of other institutions needs to focus on transaction costs, transportation, and prices of raw materials.

The strategic alliance undertakes different hybrid entry modes, such as franchising, licensing, and distribution arrangements. The market expansion tactics like franchising and licensing are carried out by Unilever. This brand value is promoted by the franchising of Unilever in different states. The company has regulated its merchandized processing through franchising. Licensing to various companies is carried out to generate revenue. There are different contractual agreements that Unilever has followed in order to get involved at the international level. Unilever has adopted opportunistic behavior to increase its loyalty rates.

The brand licensing is significant to tackle ethical complications and shape loyalty. Unilever in the UK is engaged in different licensing contracts to promote its identity at the international level. The licensing agreements are intended to protect intellectual property rights, thereby getting benefits from market size expansion. Licensors also demand high royalty rates when there is increased revenue and sales due to the brand name. Under institutionalization and licensing, Unilever has entered at the international level market and gained popularity. More influential brand-related programs are also being used at small kiosk outlets such as the Smile project in Nigeria to showcase different products at the international level.

Conclusion

Unilever should expand in the UK due to favorable socio-economic and political atmosphere. The intense competition among similar brands in the UK is creating hurdles for Unilever, but it can face challenges by improving its strategic decision making power and internationalization approach. The foreign expansion is easier when a company brings innovation and focuses on research and development of the product (Worldwide, 2019). With licensing, franchising, and contractual agreements, it can expand at an international level with less chance of unethical behavior. The controlled environment in the UK regarding stable economic policies is significant for business expansion.

References

Awards, Y. (2019). The Unilever Young Entrepreneurs Awards. Retrieved 22 November 2019, from https://www.unilever.pk/about/unilever-young-entrepreneurs-awards/

Maljers, F. (2005). Inside Unilever: The Evolving Transnational Company. Retrieved 22 November 2019, from https://hbr.org/1992/09/inside-unilever-the-evolving-transnational-company

Relations, I. (2019). Annual Report and Accounts 2018 Highlights. Retrieved 22 November 2019, from https://www.unilever.com/investor-relations/annual-report-and-accounts/

UNILEVER, F. (2019). Retrieved 22 November 2019, from https://www.unilever.com/Images/unilever-annual-report-and-accounts-2018_tcm244-534881_en.pdf

Worldwide, m. (2019). Unilever’s grocery market share worldwide 2012-2020 | Statista. Retrieved 22 November 2019, from https://www.statista.com/statistics/254613/unilevers-grocery-market-share-worldwide/

Innovation Strategy and Implementation in HP Company

HP, Innovation, Innovation strategy, New Product Development Process

Pages:13

Innovation Strategy and Implementation in HP Company

Introduction

Innovation is required to manage a strategic business structure. It is widespread at the global level because management seeks innovative practices for rapid development. Innovation is also significant to implement a productive business strategy for a business and tackle key challenges (Instrve, 2019). Management provides a clear strategy to practice appropriate skills and required behavior to improve efficiency. The HP Company is truly focusing on implementing an innovative strategy for business efficiencies (Development, 2019). Its value proposition is to focus on a resilient framework to innovate on b2c strategy. This report is about HP Company and its innovation. The report will discuss organizational direction, innovation patterns, objectives, and collaborative practices for new product development.

Defining Organizational Direction

HP Company is a global information technology framework that is situated in California, Pal Alto. The company is specialized in manufacturing software, hardware, and is engaged in technical solving problems. It is offering a broad range of services regarding small and medium businesses, large enterprises, and education & health sectors (Keogh, 2019). The product lines of the company are standard practices about networking products, servers, and imaging products. The company is engaged in consulting services for computers, laptops, and mobiles. HP is also the largest vendor for PCs. The computer industry is all about a wide range of services, PCs, tablets, Desktops, and hardware (Firth, 2019).

The industry has many competitors of HP, such as Dell, Sony, Gateway, Apple, and Samsung. The inbuilt technical framework and competitiveness of HP are advancing on the basis of new strategies. The rapid pace of networking is to stay sustainable in the computer world and to innovate in the marketplace. Global personal computer networking needs a solid and resilient atmosphere for the development of business. HP is focusing on the multi-step processes to evaluate the current offerings and involve in new business practices. For instance, the direction of the organization is moving forward to engage in diverse patterns to bring long term growth strategy (Igartua & Albors, 2011). The initial stage of business development is to ideate the solid concepts for innovation, and it is attained by launching new services. HP is generating new ideas campaigns for the formulation of innovation strategy. The organizational direction is orienting towards an effective customer portal to increase customers’ services. It is carried out with improved efficiency and increased customer retention. The direction of the company is also striving for the electronic fulfillment of needs. It is developed by dynamic personalization of information and creating innovative networking to target sales.

HP is working on launching creative channels of engagement to enhance the productivity of the customers’ portal. The fast response is integral for dynamic business needs, and it is also appropriate for the market shifts analysis (Schilling, 2019). The organizational direction is carried out by implementing the innovational strategy in all business frameworks (Solutions, 2019). The patterns of organizational performance are oriented to get diversification in product portfolio and to integrate services.

Sources and patterns of innovation

In HP Company, the innovative sources are divided into different sections. The reinventing journey of HP has engaged key influential ideas with a flow of new products. The creation of amazing technologies is inspiring everyone in the computing field. HP is also fulfilling requirements to embrace new ideas, conduct change related to marketing, and bring innovative concepts that can provide balanced opportunities. The assemblage of the powerful board of directors by HP is a step to bring in a diversity approach (Instrve, 2019). The core business strategy is aligned to implement innovative patterns on three main pillars. These pillars are core, growth, and future.

The pattern of constant innovation is related to playing progressively and protecting the core of the business strategy. HP has rolled over a new pattern of technology understanding. The core business growth strategy is managed by consumer preferences (Keogh, 2019). It has also managed print services with pocket-size sprockets. The technique is conducive for smartphone-toting millennials. The innovative commercial processes, such as Elitebook Folio G1, are beautifully delivered by HP (Development, 2019).

HP is capturing growth by pursuing in the adjacent technical markets. The A3 copier market with the LaserJet printers and Page Wide options, has accelerated innovation. The personal systems acquired commercial mobility solutions such as Elite X3, and it has also attained Mobile World Congress awards. The third pillar of the innovation pattern is creating for the future. HP has a rich heritage for innovation, and it is continuing with this tendency by establishing HP labs (Solutions, 2019). The undertaking of long and short-term perspectives of growth regarding computing and innovative 3D commercial printing system, has generated huge revenue, i.e., $12 trillion.

Choosing Innovation Projects

Bill Hewlett and Dave Packard, fifty years ago, strived for the innovative research lab. The researchers and designers of HP Company are focusing on the key ideas that can shape the future of the industry. The largest system of the world for the desktop scientific calculator is attributable to the HP labs. In the fields of immersive computing, 3D printing, the internet of things, hypermobility, and microfluidics, HP is working to establish innovative practices (Igartua & Albors, 2011). Shane Wall is HP’s global head of research and technology. He focused on the technology being used for HP labs, as it will be the idea of blended reality. The placement of people, things, and places for better interaction is based on digital reality. Communication is carried out on the virtuous re-enforcing cycle that can solve human needs. The technical innovation, company is focusing on is about disrupting technologies. There are different innovative projects that HP is developing, for instance, how urbanization can reshape future societies and the enabling of on-demand resources to maintain their standards.

In the field of 3D printing solutions and industrial solutions, HP is transforming manufacturing in terms of economies of scale and supply chains (Wall, 2019). Shane Wall has focused on a wide-ranging discussion about the impact of 3D on managing the industrial revolution of technology. The blended reality is another advanced line by HP that is blurring the boundary between the physical and digital worlds. This technology and innovation will improve the living standards of people living at home (Firth, 2019). The four HP labs, in this regard, are transforming products, thereby creating immersive experiences. This vision is opening up new technologies and streamlining the production ways to help investors.

Collaboration strategies

There are different collaboration strategies that HP is working to undertake customers’ co approaches. HP labs are forming an improved collaboration with its forward-thinking customers. This innovation is driving next-generation products while managing data analysis. The customer co-innovation is developing ideas into reality by encouraging investors to collaborate in research-based activities of HP labs. This collaboration is fostering technology transfers. The customer co-innovation techniques are engaging a multifaceted environment for investors to enjoy open innovation. Under this approach, the innovation research program initiative is developed at a global level (Keogh, 2019). The program is responsible for supporting the technical universities at a worldwide scale by undertaking big bet research projects.

Diversity is a key to innovation, and the thought-provoking decisions by HP are providing diversity experiences. HP lab researchers are bringing a new mode to collaborate with customers on the basis of change. The customers-co innovation project is bringing business partners closer on integrity grounds. Innovative products are engaged in specific collaborative approaches to enhance practical capabilities. The creative decisions of the company are working on competitive dynamics, customer trends, and investors’ perspectives (Development, 2019).

Organizing for innovation

The innovation organization is a dependable situation for HP in order to develop a new networking mechanism. The business customer strategy by the company is engaging customers and related policies to work on an innovative basis (Wall, 2019). The customer-focused approach is critical to involve in business leadership. It has also included the critical competitors in managing technology, thereby supporting new horizons. HP is organizing innovative yet redundant technical solutions for the spread of e-processes enterprising. The son’s rationalized solution for maintaining internet protocols and standards is also being implemented. The company is involved in intense competition about bringing resources together, hence giving rise to the increased strength of innovation.

A new culture for better future innovation is driving a growth mindset. HP’s culture of innovation is diverse with the spirit of long-term growth (Igartua & Albors, 2011). HR is applying its knowledge on future-oriented projects under HP labs to maintain its long-term growth positioning. The individual growth rate on the foundational belief is supported by specific intelligence and skills level approach. HP is driving innovation by learning new concepts about growth, employment strategy, and leadership practices. Change is being organized on the basis of learning and adding innovative tools to the existing learning portfolio. For instance, the launch of Brain candy in 2016 is to enhance the learning approach. It is already getting more prominent and engaging employees to network with shared interests. The growth-building mindset is conducive for future growth as it is implemented by the Human Resource department.

The innovative approach by HP is being organized by the growth mindset and anticipates new changes. The technology industry is diverse; hence, HP is not letting in the complacency. It believes in working with proactiveness. The tasks, making informed and bold moves, and situational networking is increasing learning opportunities for the company. Moreover, the company is also setting up a growth mindset by believing in its own potential for employees. The technological drive is leading innovative patterns. It is managing the commitment to bring a creative change in existing services. The growth mindset is conducive for all the employees and encouraging them to share their interests and expectations (Wall, 2019). Employees at HP are driving growth patterns, resonating growth perspectives, and improving the existing framework of working.

The social responsibility director of HP, Zoe McMahon, has focused on the specific code of conduct for employees to disrupt the industrial technical goals. The foundations of future products by HP Company are aligned on HP lab services and products with immersive scientific experience. The research has provided the significance of diversity as an essential part of innovation to get a meaningful change. Technology is being developed by transforming people’s lives, by propelling people’s growth. Innovation is considered a pivotal aspect to reinvent into the future. The innovative solutions that are oriented by the company are maintaining intense internal competition by leading technology.

Moreover, the duplication of efforts in the enterprise is all about availing significant growth opportunities and implementing changes quickly (Keogh, 2019). HP has put forward the service-oriented architecture as well as web services. The worldwide expansion is helpful to collaborate at a global level and focus on real-time decisions. This system provides aggregating information structure and a model for diversification on a single interface.

New Product Development Process

The product development workflows in HP Company are oriented on high performance and reliability. Due to a high level of innovation and practices, the product development process is designed to maintain software. HP workstations work to focus on expandability (Solutions, 2019). The Z workstations are designed professionally to offer reliable service to the customers. The preferred choice of professionals decides powerful computing solutions that can bring rapid ease. In addition to this, HP invests in people, partners’ relationships, and maintaining equipment. This service is related to the independent software vendor process that, in turn, ensures professional excellence. Leading software companies are working with HP to provide quality products (Development, 2019).

The process of product development engages the necessity of ease and quality. HP’s application and the certification process are related to choosing the best service for the workstation. The activities involved in this process are necessary to equip the independent software vendors with these workstations and testing for support. These are also significant to perform the in-depth testing system to measure relevant performance. They also coordinate with the hardware issues and help to resolve any complexity. This effect also maintains the relationship between technology partners. The innovative aspect of product development is linked with the publication of certified configuration (Firth, 2019).

The process of certificate development records the performance advisor activities that can facilitate the driver selection process. The certification regarding the product development process is crucial to work with confidence. It allows the hardware solution to be compatible with the software products. The technology partners of HP are working to increase the performance of products by testing, certifying, and engaging with the most reliable processes. HP is among one of the leading technology companies that can easily recognize any new innovation at the global level. This structure provides that HP is working to bring performance advisor specifications. The product development system works on the basis of HP labs ad research centers and ensures that the products are working at the optimum level. Applications and software are designed to perform specific functions and to innovate.

The product development strategy is to bring forth the key structural elements that can accelerate performance. This aspect is crucial to maintain efficiency and bring proactiveness to team members. The breakthrough elements in the product development efforts require the key functioning of individual projects (Wall, 2019). HP has designed its product development strategy in relation to innovation and to establish its research labs.

New Product Development Teams

The innovative strategy for HP Company is to monitor its key operations in all departments. The innovative application and design practices for the team members activate and standardize the product development framework. To minimize cost-related operations, HP is managing to build a strong collaboration with its investors (Solutions, 2019). The logistic strategy of a company is important to consider for its product development framework. It does not have warehouse management that can establish its transportation. The company is working with the product development team to minimize costs while maintaining a good business relationship with third parties. The selection of logistics companies on account of security is essential for a company to secure the product development process (Igartua & Albors, 2011).

HP value chain is a long-term strategic oriented framework, and it plans to cut down the cost to develop a sustainable financial statement.

The restructuring of HP is to manage the cost and improve the functioning of product development. The company is also simplifying its process of product development by engaging professional team members. The strategic option includes product differentiation strategy and personal computing (Instrve, 2019). It has an innovative framework for the implementation of a cost leadership strategy. The computing industry is wide on account of awareness and market share. It has to add new attributes to get loyalty to customers. The product differentiation strategy is to combine based on the software and HPs server. The development concepts are center, progress, and future. HP has advanced the administration of situated engineering just as web administrations. The overall extension is useful to work together at a worldwide level and concentrate on continuous choices.

The product focus strategy under teamwork is to maintain its generic strategy. For instance, it holds for targeting public sectors by improving its linkage with the management (Development, 2019). The printing-related business of HP is quite important to discuss new product development aspects and with the team members. HP is working to diversify the business by focusing more on 3D and 4D printing technology. HP also has significant experience in printing and acquiring a central position to be a market leader. Service decisions and enterprises are subjected to cloud technology, servers, and software. The product development specifications about team members allow a distinction to acquire great potential in the future market.

The HP product development strategy under members is to lead the market with research and development. The well-known specialists, technologists, and researchers are inducted into the company’s management team to innovate solutions. It is also investing a lot of resources to innovate technical expertise and to achieve the targets. The acquisition strategy is implemented to achieve goals and maintain the necessary skills for the development of a new product. HP is also maintaining its process development aspects by undertaking a key skilled workforce. The restructuring of its strategy is significant to acquire efficiency (Solutions, 2019).

The reorganization of HP in the product development sector is varying due to different endeavors. From a central viewpoint, the scope of the company and the implementation of new technology to maintain product development are appropriate to attain modern excellence (Instrve, 2019). Digital future and long-term growth strategies are linked to acquiring innovation in all the products and services. In addition to this, the company is maintaining its brand name for the development of new products, according to demand. The key notion to strive better is discussed for the acquisition of long-term growth strategy that is also useful to keep long-term economies of scale (Firth, 2019). The center business system is adjusted to actualize imaginative examples of important principle aspects of development.

Conclusion

Innovation is a key to achieve modern-day development, and a technical company always strives to acquire the successful implementation of technology. HP is implementing innovative practices for the better development of the business strategy. The inventive arrangements that are situated by the organization are keeping up the extraordinary inward challenge by driving innovation. In addition, the duplication of endeavors in big business is tied in with benefiting huge development openings and actualizing changes rapidly. The company mainly acquires the focus on resource mechanisms and investment in research and development through different collaboration strategies.

HP likewise satisfies prerequisites to grasp new thoughts, direct change identified with advertising, and bring imaginative ideas that can give adjusted chances. The gathering of ground-breaking top managerial staff by HP is a stage to get a decent variety approach. The structural approach is a significant notion that describes evidence of excellence and allows for a better implementation of the innovative strategy. The innovative practices are proved to be appropriate with the modern world business and technical specification.

References

Development, P. (2019). HP Workstations | HP® Official Site. [online] Www8.hp.com. Available at: https://www8.hp.com/us/en/campaigns/isv-certifications/mcad-isv-certification.html?jumpid=ba_yt8mgi675q [Accessed 23 Nov. 2019].

Bojinov, B. (2016). The Business Architecture in Strategic Management of Modern Company. SSRN Electronic Journal.

Brockhoff, K. (1996). Technology management in the company of the future. Technology Analysis & Strategic Management, 8(2), pp.175-190.

Gurzhiy, N. (2011). The Architecture Of Strategic Marketing At The Corporate And Functional Levels Of A Company. European Journal of Business and Economics, 2.

Piercy, N. (2010). Improving marketing–operations cross-functional relationships. Journal of Strategic Marketing, 18(4), pp.337-356.

Firth, S. (2019). Customer Co-Innovation at HP Labs: HP Labs Feature Article (February 2011). [online] Hpl.hp.com. Available at: https://www.hpl.hp.com/news/2011/jan-mar/customer_coinnovation.html [Accessed 23 Nov. 2019].

Igartua, J. and Albors, J. (2011). The implementation process of innovation management in a medium-sized company. Projectics / Proyéctica / Projectique, 7(1), p.105.

Instrve, M. (2019). Laptop Computers, Desktops, Printers and more | HP® Official Site. [online] Www8.hp.com. Available at: https://www8.hp.com/us/en/home.html [Accessed 23 Nov. 2019].

Keogh, T. (2019). Driving a growth mindset across HP | HP® Official Site. [online] Www8.hp.com. Available at: https://www8.hp.com/us/en/hp-labs/innovation-journal-issue5/growth-mindset.html [Accessed 23 Nov. 2019].

Schilling, M. (2019). Strategic management of technological innovation. New York, NY: McGraw-Hill Education.

Solutions, B. (2019). HP Business Solutions | HP® Official Site. [online] Www8.hp.com. Available at: https://www8.hp.com/us/en/solutions/business-solutions.html [Accessed 23 Nov. 2019].

Wall, S. (2019). HP celebrates 50 years of innovation | HP® Official Site. [online] Www8.hp.com. Available at: https://www8.hp.com/us/en/hp-labs/innovation-journal-issue5/HP-Labs-50.html [Accessed 23 Nov. 2019].

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