Internalization of Business - Essay Example

Presently, the company employs 100 staff to deal with its manufacturing of products such as DVD players and MP3 players. Although the company is supplying products to the Japanese market, it has failed to expand its business over the last two years. A number of reasons are attributable to the company’s stunted growth including higher wages it has been paying and lack of research and development staff. Furthermore, the company is struggling to address highly competitive market environment in terms of technology development and innovation.

Hence, it is necessary to critically analyse the present situation of the company and to anticipate the key trends for Elecdyne over the next five years. The 2008 global crisis and recession raised potential challenges to the global economy and it impeded the economic growth worldwide. Many economists are of the view that the global financial crisis 2008-09 is the worst financial crisis since the Great Depression in 1930s. As Soifer (2010) points out, the crisis led to the collapse of a series of large financial institutions, the bailout of major banks by national governments, and downward movements in stock markets around the world (p.163). This crisis might have contributed to the growth decline of the Elecdyne.

In modern days, market competition is very intense and therefore manufactures tend to design innovative models that would effectively dominate the market. Due to this stiff competition, customers get the extensive exposure to choose the best quality and affordable products. Since the Elecdyne lacks an effective R&D team, the company is really striving to develop innovative product models; and this worse condition keeps them away from the main stream of the international market. According to Despont (n.d), innovation and continued R&D is very important for an enterprise to survive the intense market competition because the modern customers always ask for the best products.

However, it seems that the process of urbanisation though networks and partnerships offer ranges of opportunities to organisations. It is observed that Elecdyne is currently near to sources of information and hence it can certainly become stronger by preparing itself to face international competition. Nowadays social networking sites such as facebook and Twitter have attained worldwide popularity and these social channels will enable the Elecdyne to understand customer tastes and specifications and thereby to maintain profitable market segments by realizing potential business territories.

As Gourmelen (2004) points out, EU union expansion has created potential opportunities for organisations. In addition, Eastern European countries like Romania have cheaper salary margins as compared to UK .Hence, the Elecdyne can effectively offshore its manufacturing activities to such countries where favourable business conditions are prevailing. In addition, the company may obtain beneficial market environment in rapidly developing economies like India and China where the Elecdyne would get cheaper business inputs.

The term STEEP is the acronym for Socio-cultural, Technological, Economic, Environmental, and Political Factors. While analysing the socio-cultural factors, it seems that the company possesses a range of potential challenges. To illustrate; Japan, the company’s home country, is one of the world’s most famous countries for its electronics industry. Therefore cheap and close substitutes to Elecdyne’