Global Business Assignment 1

8/10/2019 Global Business Assignment 1

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FACULTY OF BUSINESS ANDSOCIETY

Final mark awarded:_____

Assessment Cover Sheet and Feedback Form 2014/15

Module Code:ER3S72

Module Title:Global Business

Module Lecturer:Gabor Horvath

Assessment Title and Tasks:Business Report

Assessment No.1

No. of pages submitted in total including this page:23

Word Count of submission(if applicable):3050

Date Set: Submission Date:07 January 2015

Return Date:

Part A: Record of Subm ission (to be completed by Student)

Extenuating CircumstancesIf there are any exceptional circumstances that may have affected your ability toundertake or submit this assignment, make sure you contact the Advice Centre on yourcampus prior to your submission deadline.

Fit to sit policy:The University operates a fit to sit policy whereby you, in submitting or presentingyourself for an assessment, are declaring that you are fit to sit the assessment. You

cannot subsequently claim that your performance in this assessment was affected byextenuating factors.

Plagiarism and Unfair Practice Declaration:By submitting this assessment, you declare that it is your own work and that the sourcesof information and material you have used (including the internet) have been fullyidentified and properly acknowledged as required1. Additionally, the work presented hasnot been submitted for any other assessment. You also understand that the Facultyreserves the right to investigate allegations of plagiarism or unfair practice which, ifproven, could result in a fail in this assessment and may affect your progress.

Details of Submission:Note that all work handed in after the submission date and within 5 working days will becapped at 40%2. No marks will be awarded if the assessment is submitted after the latesubmission date unless extenuating circumstances are applied for and accepted (AdviceShop to be consulted).

You are required to acknowledge thatyou have read the above statementsby writing your student number (s) inthe box:

Student Number(s):

14050323

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1University Academic Integrity Regulations2Information on exclusions to this rule is available from Campus Advice Shops


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14050323 Assignment 1 Global Business ER3S72

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Part B: Marking and Assessment(to be completed by Module Lecturer)

This assignment will be marked out of 100%

This assignment contributes to 50% of the total module marks.

This assignment is bonded / non- bonded. Details :

Assessment Task:

Please see Blackboard.

Learning Outcomes to be assessed (as specified in the validated module descriptorhttp://icis.glam.ac.uk):

Demonstrate an understanding and ability to critically analyse, evaluate and appraise the key internal andexternal contexts in which global business operates, and the ways in global business reacts to those contextsand changes in them in terms of comparison, evaluation, and subsequent strategy integration, synthesis,formulation and validation

Grading Criteria:

Marks available

The rubric to be used in marking the assignment will be as follows :-

Criteria: % of Total Marks for that criteria

Discussion-Content 10%

Discussion -depth of research 10%Data included 10%Literature 10%Applied data presented 10%Theory presented 10%Practicality - Understanding of practicalissues

10%

Structure of Assignment 10%Originality of recommendations 10%Presentation 10%
http://icis.glam.ac.uk/http://icis.glam.ac.uk/http://icis.glam.ac.uk/


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Feedback/feed-forward (linked to assessment criteria): Areas where you have done well:

Feedback comments will be provided through GradeMark for work submitted online

Feedback from this assessment to help you to improve future assessments:

Other comments

Mark: Markers Signature: Date:

Work on this module has been marked, double marked/moderated inline with USW procedures.

Provisional mark only: subject to change and/or confirmation by the Assessment Board


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Part C: Reflections on Assessment(to be completed by student optional)

Use of previous feedback:

In this assessment, I have taken/took note of the following points in feedback onprevious work:

Please indicate which of the following you feel/felt applies/applied to yoursubmitted work

A reasonable attempt. I could have developed some of thesections further. A good attempt, displaying my understanding and learning, with

analysis in some parts. A very good attempt. The work demonstrates my clear

understanding of the learning supported by relevant literatureand scholarly work with good analysis and evaluation.

An excellent attempt, with clear application of literature andscholarly work, demonstrating significant analysis and evaluation.

What I found most difficult

about this assessment:

The areas where I wouldvalue/would have valuedfeedback:


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Table of Contents

LIST OF TABLES ....................................................................................................... 6

I. Introduction ........................................................................................................ 7

II. Global Trends STEEP Analysis ...................................................................... 8

III. Situational Analysis ........................................................................................... 9

3.1. Po tenti al Co unt ri es ..................................................................................... 9

3.1.1. Vietnam ................................................................................................. 9

3.1.2. China ..................................................................................................... 9

3.1.3. Pakistan ................................................................................................. 9

3.2. Data Analy si s .............................................................................................. 9

3.2.1. Internal Environment (SWOT) .............................................................. 10

3.2.2. External Environment (PEST) .............................................................. 10

3.3. Fin di ng s and Summary ............................................................................ 16

IV. Internationalization and Choosing Mode of Entry ......................................... 16

V. Conclusion ....................................................................................................... 19

References .............................................................................................................. 20


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LIST OF TABLES

Figure 1: STEEP Analysis for Elecdyne ............................................................................... 8

Figure 2: Internal Environment of Elecdyne ....................................................................... 10

Figure 3: Table of Weights ................................................................................................. 11

Figure 4: External Factors - Political .................................................................................. 12

Figure 5: External Factors - Economic (Cost-related) ........................................................ 12

Figure 6: External Factors - Economic (Market-related) .................................................... 13

Figure 7: External Factors - Socio-Cultural ........................................................................ 14

Figure 8: External Factors - Technological ........................................................................ 15

Figure 9: Final Scoring ....................................................................................................... 16

Figure 10: FDI ChoicesGreenfield ................................................................................. 17

Figure 11: FDI Choices - Joint Venture .............................................................................. 18

Figure 12: FDI Choices - Merger ....................................................................................... 18


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I. Introduction

Elecdyne, a Japanese company founded in 1990, specializes in electronic products

but has been on a struggling type of situation due to the complete reliance on

domestic market and called for an effective strategy to help it turn around from the

crisis it has been experiencing.

The Elecdynesmanagement team had a discussion on measures which they can be

able to overcome the current difficulty while still achieving strategic objectives of

reducing costs, gaining access to technological expertise, and expanding their

market, thus a plan to go global has been made.

This report will aim to evaluate the current issues and global trends which is likely to

affect Elecdyne by using STEEP table framework, and critically analyze the

internationalizing strategy towards three most attainable destinations including China,

Pakistan, and Vietnam.

In order to gain an indeepth understanding of those countries to be able to compare

with Japan, this report will conduct a comprehensive analysis of the business

environment within the countries stated using SWOT framework for internal factors

and PEST weighted analysis for external ones. These frameworks allow the company

to evaluate the competitive advantages and disadvantages involved in the global

context.

At the end of this report, it will come up with the best destination for Elecdyne and

combine with chosen entry mode of FDI which is most suitable for the company to

implement their internationalizing strategy, thus give an eventual conclusion and

recommendation.


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II. Global Trends STEEP Analysis

It is important for Elecdyne to examine those current issues as well as potentialtrends that they may face when going global. A STEEP framework provides a wideoverview to consider how the macro-environment might change (Henry, 2013). Ithighlights five key factors including social, technological, economic, environmental,and political, which clearly determine a broad view for Elecdyne to make optimumdecisions.

Current Issues and GlobalTrends

Recommendations for Elecdyne

Social

Users tend to move niche networks torecover the intelligence and communityfeel to social interactions

1

Improving customers interaction to geta competitive advantage via socialmedia.

Content marketing is an optimumalternative for traditional marketing

3Generating and allocating relevant,valuable, and consistent content toattract and acquire a clearly definedaudience

Aging population is increasing rapidly inemerging economies

4Elecdyne should consider the shifts intastes and preferences of electronicproducts due to aging

Technological

3D and 4D printing use technologyborn of paper printing to make actualphysical objects

1

There is certainly a good investment toconsider especially in printing-relatedproducts.

Connectivity, time scarcity, the internetof things, andmobile payments, arechanging shopping behaviors1

Elecdyne could satisfy demands forimmediacy and surprise by offeringpersonalized service, integrated offlineand online value propositions.

Cloud service adoption across theenterprise is a growing reality

9Accumulating personal clouds andexternal private cloud services is an

imperative in customer interaction

Economic

The locus of economic activities arebeing shifted by the economic growth ofChina and other emerging countries

2

Emerging economies are potentialinternationalizing destinations

The rapid fall in world petroleum pricesleads to both positive and negativesides

5

Elecdyne needs to evaluate the impactof lower prices to see if they are energywinner or loser.

Increasing network organizations

Exploiting collaborative technologies toincrease their use of partnering,independent workers, and outsourcedservice.

Crowdfunding moves towards themainstream

10Elecdyne should consider using thismethod to finance their business.

Environmental

Demand for natural resources outpacessupply.2

Elecdyne should invest more onapparatus that could help in minimizingthe dependence on natural resources

Customers are more likely to chooseenvironmentally-friendly products

8Focusing on environmentally-friendlyproducts becomes important.

Political

Conflicting between citizens and theirgovernments, policies, well presentedin the Middle East, South Africa, andCentral Asia.

7

Avoiding these regions in choosinginternationalizing countries

Policy reform including eco-taxes,technology-specific incentives, or lawson recycling due to climate change.6

Seeking specific opportunities inrenewable energy assets or developingnew technologies.

Figure 1: STEEP Analysis for Elecdyne

1. Stoklund (2014);2. CECP (2014);3. Bagley (2014);4. Badkar (2014);

5. Globalissues.org (2014);6. Greenrhinoenergy.com (2014);7. Mancini (2014);8. Green Business (2013);

9. Itbusinessedge.com (2014);10. Smallbizlabs.com (2014)


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III. Situational Analysis

3.1. Potential Countries

3.1.1. Vietnam

The country has been securing social-political stability.

Positive economic prospects in terms of growth.

Cheap, young and more and more technologically qualified laborers.

Based on the free market, the government committed to creating an

attractive and fair business environment for oversea investors, and to

introducing economic reforms.

(Dung, 2014)

3.1.2. China

Witha wealth of manpower, a strong potential, and potential partners eager

to learn and develope, China is an appropriate country for low cost

manufacturing.

A rapidly growing market, which was not excessively influenced by the

financial crisis.(Santander Trade, 2014)

3.1.3. Pakistan

A potentially large market with a population of 196 million people and

significant natural wealth.

The positive GDP growth in recent years highlighted by the development in

industrial and service sectors.

Higher purchasing power due to a decrease of the poverty level by 10%.

Development spending has been raised in the past few years, including a

50% budget allocated for development.

The government has made efforts in introducing more FDI attraction

policies and economic reform.

(Santander Trade, 2014)

3.2. Data Analysis

In order to achieve specific strategic objectives, its important for Elecdyne to address


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both the internal and external environment. This could help Elecdyne to craft

innovative strategies to leverage internal strengths and take advantage of external

opportunities. (Johnson et al., 2013)

3.2.1. Internal Environment (SWOT)

When it comes to internal environment, the SWOT framework is extremely useful for

understanding a companys Strengths and Weaknesses, and for identifying both the

Opportunities open to them and the Threats they face. This could help in reviewing

strategy, position and direction of a company or business proposition.

(Businessballs.com, 2014)

STRENGTHS WEAKNESSES

People

Experienced people International education background English speaking managers Respectable Japanese

personalities

Lack of abroad working experience Extra costs on working abroad

Operations

Experienced in the industry More flexible when enter a new

market Good reputation in Japan

Losing cost controlLack of international experience

Resources

Wide range of products Good quality of products

Relies on large multinationals in

licensed technology, depends onlocal suppliers

Lack of innovation

Figure 2: Internal Environment of Elecdyne

3.2.2. External Environment (PEST)

Changes in external business environment can both create opportunities and pose

threats for organizations. PEST Analysis is a widely used and simple framework that

allows companies to examine changes in their business environment in terms of

Political, Economic, Socio-Cultural, and Technological aspects. This framework helps

in understanding the "big picture" forces of change that Elecdyne is exposed to, and

from it, getting benefits of the existing opportunities.

(Mindtools.com, 2014)

The table of weights presents how important each factor is to Elecdynes strategy.

Economic factors are regarded as most significant importance because the company

focuses on cost reductions, and expand new markets. And technological and politicalfactors are also important afterwards since its effect on access to technological

expertise and ease of establishing and managing an international company. Lastly,


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the socio-cultural factors are weighted with minor importance, due to less relevant

validity of sociological aspects of the company.

Factor Multiplier

Political 1-7Economic Cost 1-10

Economic Market 1-10

Socio-Cultural 1-5

Technological 1-7

Figure 3: Table of Weights

In order to compare the countries, every index within each factor will be ranged

between +/-10, which are illustrated as better/worse than Japan. Those figures will bemultiplied with the weights of each factor as above discussion.

POLITICAL JAPAN CHINA PAKISTAN VIETNAM

Transparency of governmentpolicymaking

7

76 64 48 50

*2 0 (-3)*2=-6 (-4)*2=-8 (-4)*2=-8

Political Instability Index6 3.8 4.8 7.8 4.3

*2 0 (-2)*2=-4 (-4)*2=-8 (-1)*2=-2

Corruption Perception Index5 74 40 28 31

*4 0 (-1)*4=-4 (-2.5)*4=-10 (-2)*4=-8

Corporate Tax Rates2(%) 35.64 25 34 22

*6 0 (6)*6=36 (1)*6=6 (8)*6=48

Ease of Doing Business Index

(1=most business-friendlyregulations)

29 90 128 78

*3 0 (-4)*3=-12 (-6)*3=-18 (-2)*3=-6Overtime Payment on regulardays

4(%)

25 50 100 50

*6 0 (-2)*6=-12 (-4)*6=-24 (-1)*6=-12

Time of Business SetupProcedures

3(days)

23 33 21 34

*6 0 (-4)*6=-24 (3)*6=18 (-4)*6=-24

Legal Weekly Duration3(hours) 40 40 48 48

*7 0 0 (3)*7=21 (3)*7=21

Burden of GovernmentRegulation

7

(1=highly burdensome, 7=notburdensome)

3.5 4.1 3.1 3.1


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*5 0 (4)*5=20 (-1)*5=-5 (-1)*5=-5

The International PropertyRights Index

8 7.8 5.5 4.3 4.8

*5 0 (-3)*5=-15 (-5)*5=-25 (-4)*5=-20

TOTAL 0 -21/10=-2.1 -53/10=-5.3 -16/10=-1.6Figure 4: External Factors Political

1. World Bank (2014);2. KPMG (2014);3. Santander Trade (2014);4. Paycheck (2014);5. Transparency International (2014);6. Views Wire (2010);7. World Economic Forum (2014);8. IPRI (2014)

ECONOMIC (COST-RELATED) JAPAN CHINA PAKISTAN VIETNAM

Minimum Hourly Wage (US$)1 5.64 1.73 1.23 0.56

*10 0 (4)*10=40 (5)*10=50 (7)*10=70

Inflation Rate4 -0.6 1.7 7.5 4.8

*3 0 (-1)*3=-3 (-3)*3=-9 (-2)*3=-6

Imports of Goods AndServices

4(% GDP)

17 24 20 77

*8 0 (3)*8=24 (2)*8=16 (7)*8=56

FDI Flows in the HostEconomy

3(Millions of US$)

1732 111716 858 8368

*5 0 (10)*5=50 (-1)*5=-5 (5)*5=25

Property Prices Index (%Income)

8.3 28.09 13.76 19.10

*6 0 (-5)*6=-30 (-2)*6=-12 (-3)*6=-18

Customer Price Index2

96.69 52.64 31.47 44.2

*7 0 (-2)*7=-14 (-4)*7=-28 (-3)*7=-21

GDP Per Capita4(US$) 38,634 6,807 1,275 1,911

*2 0 (-2)*2=-4 (-4)*2=-8 (-3)*2=-6

TOTAL 0 63/7=9 4/7=0.6 100/7=14.3

Figure 5: External Factors - Economic (Cost-related)

1. National Master (2012);2. Numbeo (2014);3. UNCTAD (2012);4. World Bank (2014)


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ECONOMIC (MARKET-RELATED)

JAPAN CHINA PAKISTAN VIETNAM

Unemployment Rate5(%) 4.3 4.5 5.1 2

*6 0 (3)*6=18 (5)*6=30 (-1)*6=-6

Economic Freedom Index

2

72.4 52.5 55.2 50.8

*3 0 (-1)*3=-3 (-1)*3=-3 (-1)*3=-3

GDP Avg. Growth Rate inrecent 3 years

5(%)

0.8 8.2 4.3 5.6

*3 0 (7)*3=21 (5)*3=15 (6)*3=18

Affordability Index3 1.98 0.41 0.48 0.4

*6 0 (-1)*6=-6 (-1)*6=-6 (-1)*6=-6

Labor Force Rate (%Population)

51 58 33 57

*4 0 (7)*4=28 (-2)*4=-4 (7)*4=28

FDI Flows in the HostEconomy

4

1732 111716 858 8368

*5 0 (10)*5=50 (-1)*5=-5 (5)*5=25

Big Mac Index1(US$) 3.64 3.04 2.73 2.83

*7 0 (-1)*7=-7 (-3)*7=-21 (-2)*7=-14

TOTAL 0 101/7=14.4 6/7=0.9 42/7=6

Figure 6: External Factors - Economic (Market-related)

1. The Economist (2013)2. Heritage Foundation (2014);3. Numbeo.com (2014);4. UNCTAD (2012);5. World Bank (2014)


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SOCIO-CULTURAL JAPAN CHINA PAKISTAN VIETNAM

Quality of Education System5 69 63 56 53

*2 0 (-1)*2=-2 (-2)*2=-4 (-2)*2=-4

Intensity of local competition5

6.4 5.4 5.1 4.9

*4 0 (4)*4=16 (6)*4=24 (8)*4=32

Electric power consumptionPer Capita

4(kWh)

7848 3298 449 1073

*4 0 (-3)*4=-12 (-6)*4=-24 (-4)*4=-16

Population1(Million) 127.1 1,355.7 196.2 93.4

*2 0 (7)*2=14 (0)*2=0 (0)*2=0

Consumer Spending PerCapita

3(GBP)

13080 1464 268 747

*3 0 (-4)*3=-12 (-9)*3=-27 (-6)*3=-18

Quality Of Life Index7

156.25 21.18 -1.29 23.52

*1 0 (-3)*1=-3 (-5)*1=-5 (-3)*1=-3

Labor Participation Rate % ofWork Force

4

59 71 54 77

*3 0 (7)*3=21 (-1)*3=-3 (9)*3=27

Business cost of Crime andViolence

5

1.8 2.2 4.2 2.5

*4 0 (-2)*4=-8 (-10)*4=-40 (-3)*4=-12

Safety Index7

84.73 72.7 39.4 49.83

*4 0 (-1)*4=-4 (-3)*4=-12 (-2)*4=-8

CO2 emissions (metric tons percapita)

9.2 6.2 0.9 1.7

*4 0 (2)*4=8 (9)*4=36 (7)*4=28

Uncertainty-Avoidance2 92 30 70 30

N/A

Long-Term Orientation6 80 118 70 80

N/A

TOTAL 0 18/10=1.8 -55/10=-5.5 26/10=2.6

Figure 7: External Factors - Socio-Cultural

1. CIA (2013);2. Hofstede Centre (2014);3. Trading Economics (2014);4. World Bank (2014);5. World Economic Forum (2014);6. The Vietnamica (2012);7. Numbeo.com (2014)


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TECHNOLOGICAL JAPAN CHINA PAKISTAN VIETNAM

R&D Spending Per Capita(US$)

1,2

1260.42 217.69 14.68 5.8

*3 0 (-5)*3=-15 (-8)*3=-24 (-9)*3=-27

Logistics Performance Index3 3.93 3.52 3 2.83

*5 0 (-3)*5=-15 (-5)*5=-25 (-6)*5=-30

FDI & Technology Transfer4 4.8 4.5 4.3 4.2

*4 0 (-1)*4=-4 (-2)*4=-8 (-2)*4=-8

University-IndustryCollaboration in R&D

4

5 4.4 3.2 3.3

*2 0 (-3)*2=-6 (-8)*2=-16 (-6)*2=-12

High-technology exports (% ofmanufactured exports)

3

17 26 2 14

*7 0 (-4)*7=-28 (10)*7=70 (5)*6=35

Availability of scientists andengineers

4

5.4 4.4 3.8 4.3

*5 0 (-4)*5=-20 (-6)*5=-30 (-4)*5=-20

Quality of Scientific researchinstitutions

4

5.8 4.3 3.4 3.3

*2 0 (-4)*2=-8 (-7)*2=-14 (-7)*2=-14

Technological Readiness4 5.6 3.5 2.8 3.1

*3 0 (-4)*3=-12 (-6)*3=-18 (-5)*3=-15

Alternative and nuclear energy

(% of total energy use)

8.1 3.8 4.5 4.2

*4 0 (-3)*4=-12 (-2)*4=-8 (-2)*4=-8

Internet users3(% population) 86.3 45.8 10.9 43.9

*3 0 (-2)*3=-6 (-4)*3=-12 (-2)*3=-6

TOTAL 0 -126/10=-12.6 -85/10=-8.5 -105/10=-10.5

Figure 8: External Factors Technological

1. Subejo (2010);2. Nature Publishing Index (2013);3. World Bank (2013);

4. World Economic Forum (2014)


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multinational enter into a foreign country to construct a completely new venture.

Merger is a combination of two or more companies to create a new company,

whereas a joint venture is an arrangement between two or more organizations, in

which every party jointly remains responsible for pooling their resources to achieve a

specific goal.

(Investopedia, 2013)

The tables below will examine in detail each of those entry modes in order to provide

a comprehensive overview that helps Elecdyne to make the best decision for

internationalization.

GREENFIELD

Advantages

Exploiting the economies of scale and scope Greater control of the business. Best match with long-term strategies. Commitment to the market becomes more solid Easy to access vendor financing. There will be press opportunities.

Drawbacks

High cost

High level of competition Start-up procedures would take long time High barriers of entry No brand loyalty Disadvantage in the short term due to government regulations

Rating(The higherbar, thebetter rating)

Figure 10: FDI Choices Greenfield

(TCii, 2012)

Speed Control Cost Risk


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JOINT VENTURE

Advantages

Accessing additional financial resources. Sharing the risks with co-venturers Sharing the costs with co-venturers Widening economic scope fast Increased capability Tapping newer methods, technological advancement from co-

venturers Building relationship with vital contacts

Drawbacks Shared profit Diminished control over some important matters Unexpected outcome of the quality of the product or project

Rating

Figure 11: FDI Choices - Joint Venture

(Joint-venture.swimintheincomestream.com, 2014)

MERGER

Advantages

Network Economies (economies of scale) Better R&D Avoid Duplication and Competition Regulation of Monopoly

Drawbacks Cultural differences and clash Consumer perceptions mainly rely on previous companies Reducing the labor force of the two organizations

Rating

Figure 12: FDI Choices - Merger

(Pettinger, 2012)

According to the above analysis, the most suitable option for Elecdyne to enterVietnamese market should be a form of joint venture. It allows the company to follow

their strategy by focusing on cheap resources and labor, lowering the potential risk,




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and taking shorter time for setting up, thus makes the company find it easy to start up

a new venture. A greenfield sites, on the other hand, would be likely to cost more and

pose high risk due to the higher entry barrier and the longer time of setting up

procedures. Besides, a merger form would increase the risk since the cultural

conflicts and the loyalty of domestic customers and employees towards previous

images of the companies. Therefore, the recommended mode of entry for Elecdyne

is to create a joint venture with a Vietnamese local company.

V. Conclusion

The report has conducted a series of analysis to figure out the in-depth knowledge

that Elecdyne need to gain before going global. As the complex nature of

international business, the STEEP table combined with the companys strengths and

weaknesses has been evaluated to have an overall view about the environment, and

to choose one of three possible countries to internationalize. By using PEST

weighted analysis, the three chosen locations including China, Pakistan, and

Vietnam have been critically examined.

Vietnam matches best the companys strategic objectives with a certain socio-

political stability, positive economic growth, FDI attraction policies, and a young,

cheap manpower. Counterfactually, there have been some particularly weak points to

be considered before starting up their business. Although the government has been

undergoing reforms, the country has a weak economic structure, especially in the

financial sector which is seen as neither independent of the government nor well

regulated (Santander Trade, 2014).

In order to implement the companys internationalizing strategy precisely, a list of

entry modes has been made and analysed in detail. As discussed, a joint ventureshould be the best option for Elecdyne, since it allows the company to easily entry

the market, gain access to cheap labour, and establish relationships with local

employees and executives to minimize the risk of cultural conflicts, thus they are able

to succeed in the Vietnamese market.


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