ENTRY INTO FOREIGN MARKET
As a specialist you have been requested to prepare a report on the pros and cons of market entry into Myanmar, the best means to venture, and potential hitches if the company goes into the market.
Institutional and risk factors that must be considered and whether they support entry or not.
This can be best done by SWOT Analysis:
Strengths- These are internal factors that the company has that are beneficial to their operations. CIC has various strengths such as having a competitive advantage and staff competence. CIC is also a financial giant and so expanding to other markets cannot be very difficult.
Weaknesses-These are internal factors that affect the operations of a company negatively or areas that require improvement. CIC has a weakness of over relying on American markets only.
Opportunities- These are external factors having effects on the firm. CIC has various business opportunities such as expanding into other markets such as the African and European markets.
Threats- Are also external factors that the company faces. CIC has many external threats such as the insecurity in Myanmar and also corruption. Competition in the Myanmar market is also a potential threat.
The matrix below summarizes the SWOT Analysis;
VRIO analysis to find whether entrance is supported
VRIO analysis determines a firm’s unique qualities and therefore knows what leads to a firm’s varying performances.
A firm’s ability to convert their input into useful output for consumers then that brings about their value in the market. In order for a firm to add value then it must have resources to do this and the capability to use and convert the resources.
Cameron International Corporation has good resources in terms of revenue and capital which they can use to easily invest in other countries. Due to their availability in many countries then the firm can easily source for human resources (labor). This ability of Cameron International Corporation to seize opportunities is a good source of value for the firm.
CIC has rare resources such as the ability to invest in research. They researched and manufactured the blowout preventer on the Transocean BP rig that failed. It is also rare for a company to have such a wide presence in many countries this is sufficient enough to conclude that it offers very good products that attract and retain customers from various countries.
There are various limitations to imitability and that is a unique historical background if Cameron International Corporation. Ambiguous linkage to resources that cannot be explained is also one of the reasons of CIC’s products imitability.
The best way of looking at this is the amount of time that will be taken before another firm can copy the same products that you are producing.CIC products can be imitated by the competitors but this will take a considerable amount of time because the kind of equipment they manufacture requires a lot of capital and expertise too. So Cameron International Corporation has a good level of inimitability of its products.
The firm’s financial strength first makes it organized because it can easily use this strength and resource to venture into other markets. The firm’s presence in more than one country then it means their internal structure such as the management structure is well organized. With this the company can easily organize a joint venture with another company and create teams that will contain people from both companies that will work together.
The VRIO analysis of the firm shows a positive potential for the firm to invest in Myanmar.
Examining existing cultural issues to determine how they should be addressed should the company enter the market.
Myanmar is mainly practice Buddhism -monks and nuns. Religious practices such as greeting women should avoid any kind of touching. Employees should put this in mind while getting involved in meetings. Cultural practices in Myanmar also call for the women to ensure that most of their body is covered including hands shoulders and legs.
There is also the effect of activists who demand that companies should be involved in social responsibilities. Protests and campaigns for this are the order so CIC should ensure that they get their right foot set firmly and take responsibility of the society in general.
Myanmar is also marred with various political instabilities that CIC should ensure they get the best political influencers in the country and have good relations with them.
Another cultural issue is the fact that the military regimes may demand a good share of the company profits and so they should only launch operations in the country when there is political stability.
Determining if the company should pursue FDI with potentially more risk and higher returns, or subcontract to provide component parts.
Subcontracting here is the best method of involvement that the company should take in order for them to minimize the magnitude of risks that they may experience. Myanmar has recently done political reforms but it is still not very safe to do direct business there.
Direct investments bring about various risks due to the political instability in the country at the moment.
Even though direct investments mean that there will be more profits it currently is not safe yet to set up a branch there. Since CIC can easily organize for shipping of the parts to the country then this strategy is the best. Subcontracting reduces the number of expenses that CIC will incur.
Recommendations for which joint venture partners the company should approach and for what percentage if the company decides to engage in FDI.
I think one of the best companies that CIC can approach for a joint venture is Vertek Company because it has experience in this field of manufacturing and distributing equipment. This joint venture should ensure that both companies benefit from the partnership. A 60-40% percentage share ratio is quite attractive for both companies.
This kind of percentage share ratio ensures that CIC maintains control and management of the business with Vertek still having a considerable amount of profits and control of the business. Parties from both companies will work together.
The subcontracting strategy could also be one that of manufacturing the products and looking for a marketing company or agency that can effectively sell the products to the company. CIC will be responsible for obtaining monitoring and approving of the general operations plan.
Cameron International Corporation should ensure that they have an officer who will evaluate all the laid out plans and terms and conditions.
The three (3) greatest difficulties that may develop and the strategies the company should pursue to these difficulties, should they arise.
- Corruption-This is a very significant difficulty since the firm could possibly make losses from inefficient operations by the employees. A way of dealing with this is to ensure that the employees who are posted there are professionals with ethical standards as part of their practice.
- Sanctions- A sanction given to a country could easily render international business operating within the country as non-viable or non-profitable. This can be dealt with by having precautionary measures such as investing in other countries that are not prone to sanctions while at the same time investing in Myanmar. This therefore means that the risk of losing business in Myanmar is spread over many countries that the firm does business with.
- Insecurity- Myanmar businesses are controlled by just a few elite people and this therefore brings a possibility that majority of the people in the country are poor. Poverty brings about crimes such as robbery and therefore the firm should ensure that adequate safety measures are put in place so that they don’t suffer potential losses from such insecurity.
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