Global Business

Global Business Assignment Elecdyne Student ID: 11071850 Name: Qingyuan Lin Submission Date: 09/01/2013 Word account: 2585 Contents 1. 0 Introduction3 1. 1 Background3 1. 2 Objective3 2. 0 STEEP table analysis4 3. 0 Country Analysis6 3. 1 country select and compare6 3. 2 Porter’s Diamond Theory7 3. 3 SWOT analysis8 3. 5 Summary of data13 3. 6Discussion13 4. 0 Type of method to internationalize13 5. 0 Conclusion15 1. 0 Introduction 1. 1 Background Elecdyne is a Tokyo corporation founded in 1990, which dedicated themselves to markets a series of televisions, CD Players, DVD players, MP3 players to their wide range of domestic customers.In recent years, with the deepening of domestic electronics market competition, the company's profit declined in the last two years, and now it is facing the uncertain outlook. Moreover, the company has to confront the chief designer leaving, growth of technological licenses fees and loss of product price advantage. It is evident that Elecdyne doe s not have the capacity to afford the license fees and recruit new R;D graduates. In order to relieve the internal and external crisis of the Elecdyne, the board of Elecdyne has decided to go international. As the European Commission (2010) views that a immediate elation between internationalisation and increased SME performance: international activities strengthen development, improve competitiveness and sustain the long-term sustainable development of companies. With regard to Elecdyne, the management team focuses on the production cost reduction, license for patent technology and market access; and cultural diversity and uncertain risk will be also considered. Though the company has never touched with overseas markets, all of the top management teams have learnt foreign language, and some of them held the oversea university diploma.But what is certain is that the Elecdyne will get the chance to redevelop its business in the globalization. 1. 2 Objective The objective of this repo rt is to analyse the global environment for the electronics industry by using the STEEP and SWOT theory for the three potential countries. The three considerable countries compared in this report are China, Thailand and the United States respectively. The report based on data comparison and pragmatic theoretical analysis, to determine the most suitable country and the optimal way to enter new markets. . 0 STEEP table analysis In order to analyse the environment of Elecdyne more thoroughly, the STEEP table will be utilized. As Venture Navigator (2008) mentioned, The STEEP model is a tool to help the user think about the broader issues that have an influence on the industry or service field as a holistic study, including five main factors: Socio-cultural factors, Technological environment, Economic environment, Ecological environment and Political factors. The following diagram illustrates a comprehensive business environment of the Elecdyne.Socio-cultural factors| 1. As Weil (2008) e xplains that after 2008, electronic products are consisting in our lives ubiquitously. People who likely to choose the electronic products to acquire external information from their Mobile phones or television. 2. Favourable population structure, rising discretionary incomes of consumer, and developing more relevant lifestyles is expected to facilitate the global consumer electronics industry. (Lucintel, 2012) 3. With the proliferation of broadband, accessing the media has become easy and rewarding for consumers.And suppliers of the electronics are constantly updating their technology innovation to keep up with consumer requirements. (ALTERA, 2012)| Technological environment| 1. With regard to electronic, technological innovation has become indispensable to adapt new marketplace competitions and cater to consumer preferences. (Accenture, 2010) 2. According to Accenture (2012) reported Smartphones and tablet PC are the â€Å"star† in electronics products market, and consumers use the virtual network to access a great deal of information. 3.With the striction in the electronics industry, producers are under enormous pressure to create new products. Since product development cycles shorten, the electronics industry is still pumping out better products. | Economic environment| 1. As Weil (2008) views the electronics industry has weathered the most recent economic recession with relatively effortless, especially when compared to other industries. 2. With the Consumer Electronics Association reports global spending on technology facilities will exceed $1 trillion in 2012, increasing by 5% over 2011’s figure of $993 billion. CEA, 2012) 3. According to Weil (2008) mentioned, Jim Feldhan said enterprises see tremendous value in electronics, and the electronic products become an extremely popular consumption product. | Ecological environment| 1. There are thousands of scrap electronic products are dumped in landfills or burned in smelters, and these discar ded electronic products have potentially serious damage to adjacent resident. (GREENPEACE, 2012) 2. Through regulation, enterprises will be required to get more used electronics back, which will improve the recovery ratio and reuse more devices. SCRC, 2012)| Political factors| 1. According to European Commission (2012) mentioned, the investment policy of European Union (EU) is emphasized to providing entire investments with legal certainty and a reliable, predictable, impartial and proper regulated environment in which to conduct their business. 2. With Foreign Direct Investment (FDI) flows have increased dramatically, the investors look at stable, predictable macro economic policy, an effective and honest government and intellectual property protection. 3.As International Trade Administration (2012) views Free Trade Agreements (FTAs) have proved to be one of the best ways to enter into foreign markets for American exporters. Trade Agreements reduce trade barriers to U. S. exports, and protect U. S. interests. | 3. 0 Country Analysis 3. 1 country select and compare 3. 11 China As BBC News (2012) reported China's Economic expansion accelerated remarkably in the 1990s due to mass privatization, reforming and the opening up of the country to overseas investment. A large number of multinational corporations crowded into this world factory to take advantage of its cheap labour force.To this day, the government of China has claimed that it welcomes foreign investment. Especially China gives incentive to investors to invest in higher value-added industry, including high-tech research and development, advanced manufacturing, and select modern services sectors. (State, 2011) 3. 12 France As the big EU member states, the French possess remarkable technology, broad market and good infrastructure, and central location in Europe. The French government affirms foreign investment is a positive method to create employment opportunities and stimulate growth.Investment regulati ons are unconstrained, and a large number of financial encouragement are available to foreign investors. In addition, the French government also utilizes fiscal subsidies and tax concessions to attract the attention of investor to France's underdeveloped regions. Preferential policies are available equally to French and foreign investors and eligibility requirements are the same. (State, 2012) 3. 13 The United States (US) The US owned the largest and most technologically powerful economy in the world. Not only do foreign investors have the freedom to make economic decisions within the U.S. economy, but also enjoy relatively low levels of regulation and taxation. Moreover, the US provides a foreseeable and transparent legal system, excellent infrastructure, and the most profitable consumer market. (AmCham, 2012) To compare with Japan, China own cheap labour power and attractive investment incentive; France has an investment preferential policy as well as remarkable technology; in add ition to above, the US offers an impeccable legal system, excellent infrastructure and the most profitable consumption market. 3. 2 Porter’s Diamond TheoryPorter's diamond model, which offers a comprehensive way to realize the competitive position of a nation in the global competition scale. And business leaders may use this model to assess in which counties to invest, and to assess which countries are most likely to be able to continue growth and development. Porter's model includes 4 determinants of national advantage, which are shortly described below: Factor Conditions For the company, the Highly skilled workforce is the key success factors. Since it will affect the development of the company.The sufficient linguistic abilities of the staff could make the operation become more effective. Cheap labour and minimum wages can greatly reduce the cost of production. Demand conditions The per capita disposable income will directly affect the demand of market. Whether the product s cater to customer requirements, it will impact the company’s performance. Related and Supporting Industries The existence or non-existence of internationally competitive supplying industries and supporting industries. Firm Strategy, Structure, and RivalryIn different nations, management structures, working attitude, or interactions between companies are shaped diversely. This will offer advantages and disadvantages for special industries. 3. 3 SWOT analysis Previous suggested by Albert S Humphrey in the 1960s, SWOT analysis is an effectively useful instrument for all sorts of situations in business and organizations to understand and make decisions. The management team could use the SWOT analysis in order to fully use the advantage and opportunities as well as weaken the threat.The detailed strengths and weakness of factor is formulated in following table. (Businessballs, 2004) Strength| Weakness| * The brand of Elecdyn has 20 years experience in producing electronics * Exp erienced employee (could speak English), some of them have a broad education background * Producing a range of electronic products * Low cost production * Elecdyne owns abundant experience competing in a large and strongly competitive market, which proves the competitive capacity ofElecdyn| * Lack of key innovation * 5% cut down on price * No growth in the last two years, and lead to key employees leaving * Increasing expenses of technological licenses * Unable to recruit R;D graduates * Lake of experiences to manage an overseas business * Elecdyne is currently at a loss . This means that the limited financial resources. | 3. 4 Weighting table – Opportunities and threats Factor weighting| Japan| Other countries| 1 to10| 0| -10 to 10| Ps: 1 = not important, 10 = very important 10 = worse than Japan, +10 = better than Japan PEST table Political| Japan| China| France| The US| Source| Corporation tax % 6| 40. 69(0)| 25. 005*6=30| 33. 333*6=18| 40. 001*6=6| Nationmaster| Political | Japan| China| France| The US| Source| Tariffs % 7| 0(0)| 10-10*7=-70| 6-6*7=-42| 5-5*7=-35| WTO| Political risk medium/long term 5| 1(0)| 2-2*5=-10| 10 *5=0| 10*5=0| ONDDA| Political stability 7| 86. 42(0)| 46. 83-6*7=-42| 82. 22-1*7=-7| 72. 84-2*7=-14| ONDDA| Regulatory quality 6| 76. 62(0)| 45. 88-6*6=-36| 85. 702*6=12| 87. 42*6=12| Global innovation index| Total| | -128/5=-25. 6| -19/5=-3. 8| -31/5=6. 2| | Economic| Japan| China| France| The US| Source| GDP growth rate % 4| -0. 80(0)| 9. 28*4=32| 1. 71*4=4| 1. 81*4=4| CIA| GDP per capita(USD) 5| 39578. 07(0)| 2634. 71-10*5=-50| 23016. 85-4*5=-20| 37691. 00-1*5=-5| CIA| Minimum Hourly Wage ($) 10| 11(0)| 2. 256*10=60| 17-4*10=-40| 15-3*10=-30| Minimum- wage| Working hours(per week) 6| 40 hours(0)| 40 hours0*6=0| 38. 4 hours-1*6=-6| 40 hours0*6=0| Prospects| Economic| Japan| China| France| The US| Source|UnemploymentRate % 6 | 4. 6(0)| 6. 52*6=12| 9. 24*6=24| 94*6=24| CIA| Interest rate 8| 0. 00(0)| 6. 00-6*8=-48| 0. 75-1*8=-8| 0 . 25-1*8=-8| Tradingeconomics| Market size Ranking 8| 4(0)| 22*8=16| 7-4*8=-32| 14*8=32| Global innovation index| Disposable income $ 8| 23,458(0)| 3,384-10*8=-80| 27,7893*8=24| 37,7089*8=72| OECD| Inflation Rate% 4| -0. 30(0)| 5. 50-5*4=-20| 2. 30-2*4=-8| 3. 10-3*4=-12| CIA| Total| | -78/9=-8. 66| -62/9=-6. 88| 77/9=15. 4| | Social| Japan| China| France| The US| Source| Population in (million) 8| 127. 6(0)| 1343. 2310*8=80| 65. 63-1*8=-8| 313. 843*8=24| CIA| Individualism 4| 46(0)| 205*4=20| 71-5*4=-20| 91-7*4=-28| Geert-hofstede| Power distance (culture) 4| 54(0)| 804*4=16| 682*4=8| 40-1*4=-4| Geert-hofstede| Social| Japan| China| France| The US| Source| Expenditure on education 8| 27. 22(0)| 11. 15-2*8=-16| 48. 792*8=16| 45. 922*8=16| Global innovation index| Uncertainty Avoidance 6| 92(0)| 306*6=36| 862*6=12| 465*6=30| Geert-hofstede| Total | | 136/5=27. 2| 8/5=1. 6| 38/5=7. 6| | Technological| Japan| China| France| The US| Source|R;D expenditure 8| 80. 53(0)| 34. 07-6*8= œ48| 51. 88-4*8=-32| 65. 00-2*8=-16| Global innovation index| University/industry research collaboration (Rank) 6| 15(0)| 28-6*6=-36| 34-8*6=-48| 36*6=36| Global innovation index| Global Innovation Index 7| 51. 7(0)| 45. 4-1*7=-7| 51. 80*7=0| 57. 71*7=7| Global innovation index| Quality of scienti? c research institutions 6| 75. 75(0)| 55. 20-4*6=-24| 72. 470*6=0| 80. 451*6=6| Global innovation index| Total| | -115/4=-28. 75| -80/4=-20| 33/4=8. 25| | 3. 5 Summary of data Japan| China| France| The US| Political| 0| -25. 6| -3. 8| 6. 2| Economic| 0| -8. 66| -6. 88| 15. 4| Social| 0| 27. 2| 1. 6| 7. 6| Technological | 0| -28. 75| -20| 8. 25| Totals| 0| -35. 81| -29. 08| 37. 45| 4. 6 Discussion Based upon the results of data analysis, the best choice for Elecdyne is the US, which having the highest mark in the result. The scores of China and France are significantly lower than America, even if they emerge slightly advantage in some items. As for China, though it had highest GDP real gro wth rate 9. % in 2011, due to the large population, the per capita GDP is dramatically lower than America. That means Chinese citizens are having not enough disposable income to consume. The French government although utilizes preferential to attract investment, the Minimum Hourly Wage is the highest than China and the US. It will be greatly increased the cost of production. On the contrary, not only the US government provides favourable policy and huge consumer market, but also the appropriate R&D expenditure and reasonable scienti? research institutions. To sum up, the US market has greater potential than the other two countries. 4. 0 Type of method to internationalize With regard to internationalize, the Elecdyne could choose the most compatible method to enter a new market. The advantage and disadvantage of the way to internationalize should be analysed rigorously by the management team on the basis of established expansion strategy. The proper methods are joint ventures, Greenf ield sites, mergers or acquisitions respectively. Joint VentureThe Joint Venture means that the cooperation of two or more individuals or businesses in which each approve to share profit, loss and control in a specific company. (Investopedia, 2012) Greenfield Sites An area of agricultural or forest land, or some other undeveloped site earmarked for commercial development or project engineering. (Businessdictionary, 2012) Mergers and Acquisitions A merger is incorporated between two similarly sized companies, which is combined to shape a new company. An acquisition occurs when one company lawfully purchases another and becomes the new owner. Investinganswers, 2012) The following table indicates analyse the advantage and disadvantage of these three methods. Type of method | Strengths| Weaknesses| Joint Venture | * The opportunity to gain new capacity and expertise * Sharing of risks with a venture partner * Access to greater resources, including specialized staff and technology| * The objectives of the venture may not fully clear and executed to each participant. * Different cultures concepts and management styles may affect integration and cooperation. Imbalance in levels of expertise| Greenfield Sites| * The environment changed from rural to urban use * Good policies of local government * Wholly owned and fully control| * More expensive housing * Demand excessive cash * Undertake full risk * High initial investment| Mergers and Acquisitions| * A merger does not require cash * A merger may be achieved tax-free. * The merger allows the acquirer to avoid many of the costly and time-consuming aspects of asset purchases * Form a scale of production and reduce production cost * Increase product awareness, enhance corporate image. * Diseconomies of scale, which may give rise to higher unit costs. * Conflict of culture between different businesses, may reduce the effectiveness of the integration. * Make a part of workers unnecessary, this may have a bad effect on moti vation. | According to the situation and background of the Elecdyne, the best option is incorporated with other electronics. In short, it will be changeover current plight, increasing profit and lower the risks. In the long run, it will be good for the company to gain prestige and more agile development space. 5. 0 ConclusionThe findings indicate that the Elecdyne confront the challenge and opportunity according to STEEP analysis. And the report also analyses the external and internal environment of Elecdyne based on the SWOT and Porter’s Diamond Theory. Through the PEST analysis, makes a compare between three countries, and finally concluded the US was the best choice for the Elecdyne to exploit the overseas market. This paper has finally advised Elecdyne to mergers or acquisitions with other countries. Reference Accenture (2010) Growth through Innovation in the Electronics and High Tech Industry.Available online at: http://www. accenture. com/us-en/Pages/insight-growth-inno vation-electronics-high-tech. aspx (Accessed: 02 Jan 2013) Accenture (2012) The 2012 Accenture Consumer Electronics Trends Study. 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