Issues Faced By Small and Medium Enterprises In A Global Business Environment E-Book

Marvin Müller

• Herausgeber: GRIN Verlag
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2016

Beschreibung

Seminar paper from the year 2016 in the subject Business economics - Company formation, Business Plans, grade: 81%, University of South Wales, language: English, abstract: The paper aims to analyse the current situation of a fictive company and moreover to work out an adequate internationalisation strategy considering the following three key objectives: 1. Reduce labour costs by shifting the production- centre to a low-income country, 2. Enter new markets in countries with a low level of market satisfaction, 3. Enlarge the range and variety of products through a highly educated R&D-Team. After evaluating the business environment, three potential target countries for the internationalisation process are assessed. In a next step the strengths, weaknesses, opportunities and threats are lined out. Moreover a PEST-analysis is conducted to prepare for the location decision. Finally, the most adequate method is selected and a brief conclusion and recommendation are given.

Leseprobe

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Table of Content

List of Abbreviations

List of Diagrams

List of Tables

1. Introduction

1.1 Problem and Objective

1.2 Analytical Structure

2. Current and Future Business Environment: STEEP-Table

3. Internationalisation Strategy

3.1 Country Selection

3.2 SWOT-Analysis

3.3 PEST-Analysis

3.3.1 Weighting System

3.3.2 Data Analysis

3.3.3 Location Decision

3.4 Choice of Method

4. Conclusion and Recommendations

5. Appendices

6. References

List of Abbreviations

List of Diagrams

List of Tables

Table 1: STEEP-Analysis-(Group-illustration-Marvin-Müller-Daniil-Timofeev)

Table 2: SWOT-Analysis-(Group-illustration-Marvin-Müller-Daniil-Timofeev)

Table 3: Weighting-System-(Group-illustration-Marvin-Müller-Daniil-Timofeev)

Table 4: PEST-Analysis-(Own-illustration)

Table 5: Decision-Table-(Own-illustration)

Table 6: Choice-of-Method-(Group-illustration-Marvin-Müller-Daniil-Timofeev-based-on-Faulkner-et.-al,-2000,-p.-690-688;-Kim,-2008,-p. 87-101;-Graft-et-al.,-p.-11;- Wei-and-Liu,- 2001)

1. Introduction

1.1 Problem and Objective

Elecdyne, founded in 1990 (Tokyo), is a Japanese SME operating in the electronic segment. Employing 100 people of staff and purely supplied by local companies around Tokyo, the entity offers electronic products, e.g. CD- / DVD-/ MP3-Players and hi-fi equipment, to the Japanese market. Although being competitive on price in the beginning, Elecdyne failed to increase its sales in the last two years.

Primarily the company is affected by the obligation to pay for licences, the high wages compared to e.g. China and the difficulty to hire highly qualified research staff. As a result, the company’s profits have been reduced significantly and losses are forecasted for the next FYE. Thus, there is a high need for restructuring Elecdyne in order to bring it back to a profitable situation and moreover the need for working out an adequate internationalisation strategy to prepare the company for the global business environment(Carrier et al., 2000; USW, 2015).

The following chapters aim to analyse the current situation of Elecdyne and moreover to work out an adequate internationalisation strategy considering the following three key objectives:

1. Reduce labour costsby shifting the production- centre to a low-income country.

2. Enter new marketsin countries with a low level of market satisfaction.

3. Enlarge the range and variety of productsthrough a highly educated R&D-Team.

After evaluating the business environment, three potential target countries for the internationalisation process are assessed. In a next step the strengths, weaknesses, opportunities and threats are lined out. Moreover a PEST-analysis is conducted to prepare for the location decision. Finally, the most adequate method is selected and a brief conclusion and recommendation are given.

1.2 Analytical Structure

In order to provide an adequate base for Elecdyne’s internationalisation strategy, three popular analytical structures: STEEP-, SWAT- and PEST-analysis are combined. As a result limitations of certain methods(Burt et al., 2006, p. 50-57)can be prevented or at least reduced by linking the focus of macroeconomic topics with current companies strengths and weaknesses as well as strategic issues to prevent rather unforeseen scenarios(von der Gracht, H. A. and Darkow, 2010, p.49-59).

Whereas the STEEPanalysis focuses on the macroeconomicenvironment of the company, the SWOTanalysis builds up on this and is a useful method to summarise the currentsituation (e.g. by listing competitive advantages) of a company(Lynch, 2015, p. 98)and helps to avoid threats by knowing weaknesses(Panagiotou, 2003, p.8-10). As there is an overlap between SWOT- and PEST-analysis, the opportunities and threats of the more specific PEST analysis are considered(Abdullah and Shamsher, 2011, p. 1447).

As demonstrated by Koumparoulis (2013) the PESTanalysis is an adequate tool in the framework of the strategicplanning of a company more in detail(Koumparoulis, 2013, p. 31-36). Since it is important to include the direct(Syazwan Ab Talib et al., 2014, p. 121)as well as the indirect impact of political, economic, socio-cultural and technological factors on Elecdyne in the framework of the required internationalisation, the PEST analysis has a high weight for the decision making process in this work(Ward and Rivani, p. 11;Zainal Abidin Mohamed et al., 2010;Pulaj and Kume, 2013, p. 296-297).

2. Current and Future Business Environment: STEEP-Table

In order to analyse and present the current and future business environment of Elecdyne the following STEEP-analysis is conducted.

Table 1: STEEP-Analysis-(Group-illustration-Marvin-Müller-Daniil-Timofeev)

3. Internationalisation Strategy

3.1 Country Selection

In order to pursuit the key objectives set by Elcedyne, the three countries presented below have been chosen. In the authors view they could help to improve the company’s situation significantly

Diagram 1: Selected-Countries-(Own-illustration)

Besides the key aspects shown in the diagram, various different ownership, location and internationalisation factors have been involved in the decision-making process. The countries show numerous potentials for Elecdyne which are shown in table 7 (appendices).

3.2 SWOT-Analysis

In order to analyse the current situation of Elecdyne, this SWOT-analysis based on a tool provided by Rapidbe, which suggests dividing the strength and weaknesses in six categories (see table below) is conducted.

Table 2: SWOT-Analysis-(Group-illustration-Marvin-Müller-Daniil-Timofeev)

Although Elecdyne is characterised by some significant strengths, such as a good management team and market experience, on the counterpart there are a number of weaknesses. Therefore, it is important for Elecdyne to expand to new countries in order to establish a stable and sustainable market position.

3.3 PEST-Analysis

3.3.1 Weighting System

This chapter aims to analyse the the proposed countries more in detail. In order to conduct a PEST-Analysis according to Koumparoulis (2013) it is necessary to define adequate weighting factors. As shown in the table below Elecdyne clearly sets a focus on cutting costs and expanding to new markets.

Table 3: Weighting-System-(Group-illustration-Marvin-Müller-Daniil-Timofeev)

3.3.2 Data Analysis

Having provided the base for an assessment, this chapter aims to analyse in detail the political, economic, sociological as well as ecological factors of the chosen countries by means of the table provided below.

Table 4: PEST-Analysis-(Own-illustration)

Footnotes:

1.ONDD(2015).2.WEF(2015a).3.Trasparency(2014).4.TradingEconomics(2015).5.GeertHofstede.com(2015).6.WEF(2015b).7.WTO(2014).8.Länderdaten(2014).9.Statista(2015a).10.Knoema(2015).11.Laenderdaten(2014).12.XRates(2015).13.TheWorldBank(2014a).14.Statista(2015b).15.TheWorldBank(2014b).16.SocialProgressImperative(2015).17.CIA(2015).18.Nielson(2015).19.Handelsblatt(2015).20.Quandl(2015).21.TheWolrdBank(2015c).22.BSA(2014).23.ZVEI(2014).24.Quandl(2015b)

3.3.3 Location Decision

Table 5: Decision-Table-(Own-illustration)

Although Turkey and India can outperform Japan in e.g. sociological factors, the difference in e.g. political and economic factors is significant. As demonstrated in the table, China shows the highest overall score and a high potential in all factors except the political aspects. Since Elecdyne focuses on an economic strategy of cutting costs and entering new markets, those are the decisive factors and China is chosen as target for the internationalisation strategy.

3.4 Choice of Method

Since the country decision for the internationalisation strategy is made, the next step is to make a decision concerning the method of FDI, which undergoes a rapid growth in China (Wei and Liu, 2001, p. 22-30).

Table 6: Choice-of-Method-(Group-illustration-Marvin-Müller-Daniil-Timofeev-based-on-Faulkner-et.-al,-2000,-p.-690-688;-Kim,-2008,-p. 87-101;-Graft-et-al.,-p.-11;- Wei-and-Liu,- 2001)

4. Conclusion and Recommendations

The resolving of the tensed financial situation of Elecdyne in Japan cannot be reckoned in the short future. As demonstrated in the precedent chapters, the current and future business environment affects the company significantly. Thus, there is a high need for Elecdyne to create an adequate internationalisation strategy and to expand.

Therefore, a detailed comparison of the three chosen countries Turkey, China and India has been conducted. China clearly sticks out in economic (cost & market), technological and sociological aspects. Hence, Elecdyne could realise its targets to

1. Reduce labour costsby shifting the production- centre to China,

2. Enter the Chinese marketto get access to new customers,

3. Enlarge the range and variety of productsthrough the new technological input.

In a last step, the different methods of FDI have been compared in order to work out the most reasonable strategy for Elecdyne. In terms of speed, costs and risk it is recommended to Elecdyne to choose to create a joint venture.

Due to the findings of the investigation, Elecdyne could grow sustainably and establish a stable market position by facing the challenge to find the right business partner in China.

5. Appendices

6. References

Books, Academic Journals and Publications

Abdullah, M. N. and Shamsher, R. (2011)‘A Study on the Impact of PEST Analysis on the Pharmaceutical Sector The Bangladesh Context.doc’, Journal of Modern Accounting and Auditing, Vol. 7, No. 12, pp. 1446–1459.

Botkin, J. W. and Matthews, J. B. (1992)Winning combinations: The coming wave of entrepreneurial partnerships between large and small companies, New York, Wiley.

BSA (2015)‘The Compliance Gap: BSA Global Software Survey’, The Software Alliance, p. 4.

Burt, G., Wright, G., Bradfield, R., Cairns, G. and van der Heijden, K. (2006)‘The Role of Scenario Planning in Exploring the Environment in View of the Limitations of PEST and Its Derivatives’, International Studies of Management and Organization, vol. 36, no. 3, pp. 50–76.

Carrier, C., Cossette, P. and Verstraete, T. (2000)‘EXPERIMENTAL IMPLEMENTATION OF A NEW CREATIVE METHOD TO SUPPORT FUTUROLOGY BY SMALL BUSINESSES IN A STRATEGIC MANAGEMENT PERSPECTIVE’, Journal of Enterprising Culture, Vol. 8, No. 2, pp. 121–140.

Central Intelligence Agency (CIA) (ed) (2015)The World Factbook[Online]. Available at https://​www.cia.gov​/​library/​publications/​the-world-factbook/​rankorder/​2112rank.html (Accessed 19 December 2015).

Cervini-Plá, M., Ramos, X. and Ignacio Silva, J. (2014)‘Wage effects of non-wage labour costs’, European Economic Review, vol. 72, pp. 113–137.

European Central Bank (2014)‘Understanding the recent decline in oil prices’, Economic and Monetary Developments, Monthly Bulletin November 2014.

Faulkner, D., Teerikangas, S. and Joseph, R. J. (2012)The handbook of mergers and acquisitions, Oxford, Oxford University Press.

Greene, D. L. and Liu, C. (2015)‘U.S. oil dependence 2014: Is energy independence in sight?’, Energy Policy, vol. 85, pp. 126–137.

Hochbau, J. (1967)‘The Changing Socio-Religious Profile Of American Orthodoxy’, Journal of Orthodox Jewis Thought, Vol. 9 No. 1/2, pp. 138–146.