International Business
Executive Summary
The Australian Medical Centre Company believes in invention in order to produce high quality and technological products. Recently, the company invented a medical kit performing similar functions as the existing product at reduced costs. The market responses within Australia have been characterized by high demand levels and positive responses from the consumer. As a result, the company is planning to expand internationally, specifically within the Asia Pacific Rim. This report therefore provides the different international entry modes Australian Medical Centre Company can utilize to expand. It discusses advantages and disadvantages of expanding internationally while focusing on political, cultural, and economic aspects in order to make a feasible recommendations and conclusion.
Introduction
Australian Medical Centre Company has been focusing on a revolutionary high technology medical kit. The company has been inventing the medical kit while ensuring that it performs similar functions as the existing product. It however functions and operates at reduced costs as the production expenditure is half the existing medical kit. The product has been tested locally and drawn attention increasing demand levels within the Australian markets. As a result, the company aims at expanding the product’s markets and distribution regions into Asia. This report therefore aims at providing marketing recommendations that can ensure the highly revolutionary medical kit is distributed into Asian Pacific Rim. It will provide guidelines on how to set up a wholly owned Asian subsidiary. It will focus on the pros and cons of expanding to Asia Pacific Rim while impacting local environmental host markets.
International Entry Modes
There are diverse entry modes into an international market in order to find unique and enviable positions. For example, a company can enter into an international market through direct export of products and services, setting up a joint venture, and licensing production operations. The best entry mode should however guarantee high domestic market growth rates, lower interference and interruptions, government support and accessible capital providing the company with unprecedented opportunities to grow and expand within the new Asian markets. For example, direct exporting refers to sale of products and services directly into the chosen market using firm resources. The company should therefore develop a sales program while relying on agents and distributors to represent and introduce the products and services to the foreign and unfamiliar market regions. The firm should ensure the agents and distributors identify and carry the firm’s image appropriately and positively (TradeStart, 2015).
Licensing on the other hand refers to the firm transferring the rights of using the product and service to another company. This is often undertaken by companies seeking to attract relatively large market shares in an international region they are targeting. The licenses can be allied to either production or marketing strategies applied to develop and distribute the product and services. Franchising refers to the process of rapidly expanding the market regions. It is undertaken by firms with repeatable business models such as food outlets as they can be easily transferred to new markets. This process involves two caveats to identify the franchise model. The model should be unique with strong brand recognition strategies that can be utilized domestically and internationally to create a competitive and successive franchise (TradeStart, 2015).
Lastly, partnering refers a process through which different business ventures with diverse market targets, contacts, knowledge, cultural norms, and customer base. This form of expanding to new international markets can also involve joint venturing through creation of third independently managed firms. The two firms have to agree and work together to set base in a particular market and share the risks and profits. Thus, Australian Medical Centre Company should focus on the following factors and how they are likely to affect the business upon expanding to Asia Pacific Rim markets (TradeStart, 2015).
Political Factors
Global political landscapes have been accelerating due to modernization and globalization. As a result, global nations are formulating political policies and decisions implemented to ensure the State achieves social, economic, and political growth. This explains why Australian and Asian policies handling financial crises differ due to diverse political landscapes. The policies further influence how business ventures operate and engage in commercial activities. This affects both domestic and international business communities as their stimulus programs to ensure they survive and thrive in the region are impacted by the political policies. Australian Medical Centre Company acknowledges globalization is the backbone of economic growth and expansion. However, international markets including Asia Pacific Rim have implemented policies aimed at regulating and protecting trade activities by domestic and foreign firms. For example, protectionist measures can be implemented in a sovereign State to protect local business ventures from foreign and international competition. This prompts the country to abandon even friendly business programs guaranteeing socioeconomic growth and development as political policies regulating trade activities in the nation are assumed to be unsuitable (Anna & Carolina, 2004).
Thus, Australian Medical Centre Company should affirm the following issues with the Asia Pacific Rim political environment. Foremost, the company should affirm its business activities cannot attribute to political instability in the region. The firm should also affirm the business investment are relevant hence crucial for socioeconomic growth and expansion of the Asia Pacific Rim marketing arena. The firm should also affirm the employees working at the international market will not attribute to social unrest especially through strikes, incites, and other forms of protesting likely to lead to political instability. More importantly, Australian Medical Centre Company should conduct a political research in the region. This is crucial as it determines the business risks and losses the firm is likely to incur incase the region suffers from political violence and instability in the future. The company should therefore undertake precautionary measures based on future political predictions based on historical events, political status quo, and warning signs of unrest, violence, and instability. For example, the clarity and predictability of Asia Pacific Rim legal system can assist in determining if the marketing arena provides a safe, peaceful, and stable business environment providing the firm with socioeconomic opportunities (Jungmin & Maria, 2011).
Economic/Business Factors
These factors are often related to the tax regime, trade agreements, and corporate governance frameworks of the international marketing arena. Australian Medical Centre Company should therefore ensure that, the region’s regulatory framework is open to Foreign Direct Investment (FDI) in order to strike a balance between secure and effective corporate governance and environment within the industrial sectors and entrepreneurial freedom. These regulations eliminate socioeconomic discrimination that often affects foreign investors seeking to expand their market in an international arena that is neither trying nor willing to welcome new and unique products. The company should also ensure the corporate tax rates are appealing in relation to existing State based, withholding, and consumption taxes (Ernst & Young, 2010).
Australian Medical Centre Company should appoint a market analyst before setting base at Asia Pacific Rim international marketing arena. The analyst ought to affirm the organization fulfills its taxation duties while operating at the international arena. However, the analyst should ensure the taxation duties are correct, as some nations tend to overtax foreign investors. Lastly, the analyst ought to determine if the free trade agreements indicate the economy is open and friendly to foreigners. The openness and friendliness of trade agreements is based on governmental support. The support plays a vital role of protecting markets against unfair competition. Thus, an international marketing arena is likely to avoid discriminate against foreign investors in order to protect domestic markets from international competition. Thus, the marketing analyst ought to ensure the taxation rates, trade agreements and treaties do not discriminate to favor domestic markets as this can incur the company extra costs of expanding to the international marketing arena (Anna & Carolina, 2004).
Cultural Factors
Asian Pacific Rim international market region is diverse with intricate cultural norms, practices, and beliefs that can be a nuisance concerning a business setting. Thus, the international market is likely to pose cultural threats and intimidation towards Australian Medical Centre Company. For example, Australians are accustomed to firm handshakes. However, either Asians are accustomed to softer handshakes or other forms of greeting that do not involve touching such as bowing as a sign of respect. Asians mainly from Taiwan and Hong Kong are also keen on how a business honors the concept of time. For example, an Asian customer does not appreciate receiving their products later than the delivery time. They consider this as a rude gesture translating the business does not value the customer’s needs, wants, desires, and expectations. Australian Medical Centre Company should therefore get accustomed to such cultural shocks to ensure the business survives and grows, and expands within the international marketing region. Socio-political factors allied to use of social networking sites have also transformed the culture of conducting business in Asia. Australian Medical Centre Company should therefore avoid posting products, services, and remarks on the firm’s website, Facebook, Twitter, and other networks that can be regarded as culturally rude and politically incorrect or misleading. This is because the firm can face premature closure, legal suits, and/or temporary disruption of business operations incurring huge operational losses (Anna & Carolina, 2004).
Advantages of Expanding to Asia
Asian markets are globally recognized as large and diverse. More so, they comprise of emerging middle class and strong growth forecasts with steady socioeconomic growth rates. For example, China and Japan are considered to be among the largest economies globally. Thus, entering the Asian markets provides the company with ironclad guarantee success. It provides Australian Medical Centre Company with several growth opportunities. These opportunities involve recording and increasing sales, enhancing revenues and profits and attaining and sustaining consumer loyalty as well as a competitive advantage. Thus, the Asian market provides an opportunity for Australian Medical Centre Company to enhance consumers’ confidence in use of the medical kit. This is because economic growth rates in Asia Pacific Rim are driving force towards the company-setting base, targeting Asian markets, growing consumerism, and increasing as well as expanding profits and revenues. This will further fuel demand-driven revenue growth due to expanded sale of medical kits (Jungmin & Maria, 2011).
The Asian markets are also globally recognized as highly profitable during the growth phase of a company. Although this does not eliminate the likelihood of the company defaulting payments, it reduces such chances. More so, Asian currencies have always remained strong without being adversely affected by recession. This guarantees the company will earn from imports especially when the medical kits are imported to nations with weaker currencies. The business operations involving import of medical kits will therefore guarantee the company grows sales, profits, and revenues especially due to the rapid economic growth rate driven by middle class citizens (Accenture, 2015).
Disadvantages of Expanding to Asia
Asian markets are large. However, they are not homogenous. This is because they are influenced by diverse cultural heritages, norms, languages, as well as business functions and operations. Thus, expanding into Asian markets is likely to incur the company-hidden costs. These costs include expenses of ensuring the company learns the basic factors influencing business functions, operations, and practices in Asia. For example, it is important to learn cultural norms and requirements in order to avoid conflicts and misunderstandings between the company and consumers. The company also ought to investigate packaging requirements fulfilling consumer needs while purchasing products and services. Regulatory red tapes should also be identified which can incur the business extra costs of setting up a distribution company within Asia Pacific Rim. More importantly, company employees ought to undergo training to acquire business etiquettes allied to the cultural norms within the Asia Pacific Rim (Jungmin & Maria, 2011).
The consumer preferences in Asia Pacific Rim are likely to differ from Australian. This may require more research in order to understand consumer needs across the different regions in Asia Pacific Rim. Although this is crucial for the survival and growth of the company in the new international market, it can be costly without guaranteeing success and returns. The company also requires gathering information before engaging in import and export business operations. The Asian markets require relying on distributors and agents located in the target market as they are locals with skills, knowledge, and experience. This will incur the company extra costs as the company ought to pay travelling and accommodation costs on behalf of the agents and distributors (GSA, 2015).
The last issue associated with expanding into Asian market is due to the high risk of the high revolutionary medical kit being imitated by copycats. They often produce low quality products that are sold at reduced costs in order to achieve and sustain a competitive advantage. This is because technological growth and advancement has been fueling business operations in Asia. The company should therefore invest and ensure intellectual rights of the medical kit are protected within Australia as well as internationally especially in Asia (Jungmin & Maria, 2011).
Recommendation and Conclusion
It is evident Asia Pacific Rim is a large international market with diverse opportunities guaranteeing the company survives and grows through distribution of the medical kits. Although it is not homogeneous, the following factors prove that Australian Medical Centre Company ought to expand to the international market. Foremost, the region’s economic infrastructures to grow and expand economically can be described as well oiled and strong. This is mainly due to expansion of highly advanced technologies that regularly support new and profiled companies to set base in the region. Companies in Asian markets rely on large capital, talented, educated, skilled, and experienced employees, and affordable operational costs to survive and grow. The Australian Medical Centre Company should therefore ensure these factors are fulfilled in order to succeed expanding into Asia Pacific Rim (Anna & Carolina, 2004).
The Australian Medical Centre Company has enough capital to invest in the process of expanding to the international market. Thus, it should not spare costs in ensuring it achieves a prominent market position within Asia Pacific Rim. The company should however ensure it is not associated with illegal and unethical business operations to prevent facing regulatory barriers as well as legal and cultural repercussions that are often costly. Australian Medical Centre Company should also acknowledge that, established markets translate to greater competitive forces. The company should therefore develop a group of talented employees fluent in non-native languages of conducting business in the international market. This will ensure the company immediately develops a rapport with the market, as the main priority is to replicate a successful and expansive business in Asia Pacific Rim as the one established in Australia. Thus, Australian Medical Centre Company ought to acknowledge that a firm survives, grows, and expands across international markets based on the talent hired to undertake business responsibilities at a startup point (Jungmin & Maria, 2011).
In conclusion, the Australian Medical Centre Company should acknowledge expanding to Asia Pacific Rim international markets is a business opportunity to grow and be recognized as a firm producing quality and high revolutionary technological medical kits. However, the firm should accumulate enough capital to set base in the international market without risking closure and entry barriers before commencing business operations. In order to meet and fulfill these requirements, the right talent should therefore be hired. The talents should be accustomed to the socioeconomic and socio-cultural factors influencing business practices in the region. This is appropriate if the company decides to achieve market expansion through direct exporting, franchising, and joint venturing (GSA, 2015).
Alternatively, the company can rely on piggybacking to gain entry into Asia Pacific Rim markets. This refers to the process through which a company introduces a new and unique product or service in an international arena as it continues to supply to domestic markets. As a result, Australian Medical Centre Company should visit the region and ensure the unique medical kits are not part of the international market. This reduces risks and costs of market expansion while guaranteeing the firm sells domestically after identifying a larger international arena to market and increase sale of the same product. This form of marketing entry is appropriate as the firm retains the intellectual rights, reduces risks and costs, and controls the mechanisms of promoting the product. Thus, Australian Medical Centre Company should also consider piggybacking in order to gain entry, survive, and grow within the Asia Pacific Rim international marketing arena (Anna & Carolina, 2004).
References
Accenture (2015). Helping Asian Companies Realize the Value of their International Expansion Strategies. Accenture Report.
Anna, F., & Carolina, K. (2004). Factors Influencing SME’s Choice of Market Expansion Strategy. International Business and Economics Program.
Ernst & Young (2010). Twenty Issues for Businesses Expanding Internationally. Institute of Chartered Accountants in Australia, Business Briefing Series.
Government of South Australia (GSA). (2015). South Australia: Investing in Innovation, Opportunities for Partnering and Investment. Adelaide Research and Innovation Report.
Jungmin, C., & Maria, M. (2011). Influence of Internal and External Factors on Expansion Strategy. Linnaeus University.
TradeStart (2015). Market Entry Strategies. California, TradeStart Report. Retrieved on 2nd June 2015 from http://www.tradestart.ca/market-entry-strategies