International Business - Aussiebum - Case Study Example

Running Header: International Business Student’s Name: Instructor’s Name: Course Name & Code: Date of Submission: Table of Contents Table of Contents 2 Introduction 3 International Business Analysis 4 PESTEL analysis 4 Modes of Market Entry 7 Products 8 Sales prospects 10 Recommendations 10 Conclusion 11 References 12 International Business Introduction International business is used to describe all commercial transactions like investments or sales that takes place between various countries. The main objective is to expand sales, minimize risks as well as resource acquisition. They are various means or modes of international business that include exporting and importing, franchising, subsidiary, licensing, direct investment, and management contracts. However, they are various factors that affect the expansion of a company’s business to international markets. They include political, economic, social, technological, legal, and environmental factors of a country (Papers4you.com, 2009). Aussiebum as a menswear company is planning on how to expand its business in Japan. This is through the analysis of Japan’s PESTLE factors and other factors that determine the success of international business. Japan is a country that is involved in international business with various countries including Australia. It has good business environment for men’s wears from our company. This is mainly due to various activities like sporting, swimming, surfing, and other holiday activities that are associated with our product. Some of the products from our company include underwear, swimwear, surf wear, leisure wear, sportswear, loungewear, and other accessories like belts, towels and beanies. Aussiebum Company is expected to enter into Japanese market through exporting and adopting an agency agreement as production will remain in Australia. International Business Analysis PESTEL analysis Aussiebum Company will utilize PESTEL analysis in order to establish the extent to which the menswear will be able to penetrate and gain a significant market share within Japan. PESTEL as a strategic planning technique will assist greatly in the analysis of environmental pressures that will influence Aussiebum Company’s marketing of menswear in Japan. PESTEL involves political, economic, social, technological, environmental, and legal factors (Papers4you.com, 2009). Political factors include legal and other regulatory aspects within Japan. Japan is a politically stable country hence any business within will not be affected by any political instability. Some Japanese economic sectors like the retailer sector have not been restricted to international competition. This will be a major boost to our products to penetrate easily with no competition regulation policies by Japanese government. The inter-relationship between Japan and Australia in terms of trade is good hence this will not affect our company’s business. In 2006, Australia was the fifth country to import goods into Japan with a percentage share of 4.82 percent. The woven apparel had 2.12 percent of those imports with a value of 13.65. Japan is a country that is not affected by terrorism, war and other factors that might affect business. This gives its population a good time of enjoying and even participating in various types of sports and holiday activities. This directly exposes our products to higher number of users in Japan. Clothing or wears imported into Japan are not taxed heavily as compared to other imports like machineries hence this will not be a great challenge to our products. Political relationship with other countries internationally especially European Union plays a major towards trade and international business promotion in Japan. This provides an increased business potential of Aussiebum Company’s products within Japanese market. Economic section deals with change of economy in Japan with relation to analysis of macro-economic issues. Economic factors also affect the business involving imported goods into various countries. Economic growth has been significance in Japan for years. There has been a positive growth and improvement of economy in Japan. Japan has quite high amount of goods imported and exported. In 2005, the imports and exports represented 6.2 and 7.91percent respectively. There have been a number of reforms in financial sector which is encouraging foreign investment in Japanese trade. However, there is still low investment of foreign investors in Japan which is around 2 percent of GDP especially; this will not deter our initiative. This is also an indication of reduced competition from other foreign competitors. In 2008, menswear generated total revenue of $11.6 billion representing an annual rate of change of 2.2 percent from 2004 to 2008. This provides a significant higher market that is promising for our menswear products within Japan. The production levels of menswear are quite low in Japan hence there will be no stiff competition for our products. Therefore, this will not affect our company’s international business to Japan. Japan’s consumer Confidence Index rose by 1.1 point in March to 40.9 (Index Mundi, 2010). The overall livelihood is 41.2 with an increase rate of 0.5. The income growth is at 39.5 with a growth rate of 0.7. The willingness to buy durable goods such as menswear is 46.8(+1.4). All those positive increments are providing a good chance of our menswear to get a good market share in Japan. This will provide an increasing business for our menswear products even in future. The inflation rate is currently at -0.7 percent, this is not constant and keeps changing with time hence may not be used to determine the success of our company’s products. The employment rate is rising with time from November2009 which is likely to affect the intended sale of our products especially among younger men. Although the overall economic growth of Japan is extremely slow, there are still hopes that our products may have a good market share. In 2006, the woven apparel had 2.12 percent of those imports with a value of 13.65 (International & Intergovernmental Affairs Directorate, 2008; Central Intelligence Agency, 2010; Japan Economy News & Blog, 2010). Social factors involve various lifestyles and attitudes within the society. Social factors are mainly determined by gender, race, and age among others (Oxford University Press, 2007). Lifestyle changes, education, immigration/emigration, living standards, fashion, and leisure activities among others are changing rapidly within the society. This is providing a better chance for menswear as men prefer shorts, training tops, and other leisure wears like hoodlum. Changing lifestyles in Japan has greatly affected the type of wear being adopted by men in various holiday activities. Fashion change in the world has greatly influenced the fashion in Japan as well. Increased leisure activities within Japan have enabled an increased demand of sporting and leisure wears especially for men in Japan. The young generation of men is increasing the demand of our products in Japan. Technological factors such as innovations, rate of obsolescence, internet and new discoveries among others (Oxford University Press, 2007). Japan industrial sector has highest rate of new discoveries and innovations. Therefore, this may affect our menswear products business in Japan. People are always looking for new inventions and designs especially clothing wears. However, as our menswear products have special design and outlook which are attractive to the users, this may increase our company’s business capability in Japan. The influencing design and fashion of our product will compete effectively with other available products within the Japanese markets. The increased internet technology will play a great role in ensuring the increased marketability of the men wears. Environmental factors such as climate and weather changes. Changes in climate such as global warming are likely to be a contributing factor towards effective business of menswear in Japan especially around coastal areas. Japan has largest coastline where most young generation of men spend their relaxing time and other leisure activities. This increases the demand for leisure clothing due to high temperatures around the coastal regions of Japan that include cities like Sendai, Nagoya, Yokohama, Akita and Osaka. Legal factors are the law aspects within the Japanese market. Competition laws for imported products like machinery are very strict unlike for retailer goods like clothing and wears. Therefore, this is not likely to affect our Company’s imports into Japan. Japan does not restrict international business from operating in their territories. Japan does not limit the clothing styles like in case of some Arabic countries hence this will not affect in any way towards the sell of our product. The religion and countries policy does not restrict the type of wear when men are in their recreational or sporting activities. Modes of Market Entry They are various modes of market entry which include exporting through an agency agreement or establishment of a subsidiary to manufacture or even distribute. Others include licensing such as franchise agreement, joint venture or foreign direct investment. The option chosen usually depends on control, risk, speed, and level of investment as well as market knowledge. They play a significance role towards success of a firm in foreign markets. Our company will utilize indirect export of the products through an agency agreement as there are no plans to manufacture the products elsewhere apart from Australia. The management will ensure the exporting agencies selected are capable and effective in the sales and distribution of the mensware. Although using indirect export does not yield higher returns, it is effective for our company as we are entering new markets. It will assist in saving time as well as money for initial establishment. Agents selected to sell and promote Aussiebum’s menswear will get a commission after selling the products. Indirect exporters in Japan will assist Aussiebum Company in ensuring it succeeds in sale of menswear (Shaoming, Daekwan and Tamer, 2009). Products The main menswear expected to be exported and sold in Japan include underwear, swimwear, surf wear, leisurewear, sportswear, loungewear, among other accessories. Some of the underwear include silver bullet, hunk, cotton-soft, and lightning among others. Swimwear clothing include league, inspire wonder-lock, loose 1.5, and booster-jock loose 1.5 among others. Surf-wares include 60 shorts, scent boardies long leg, body screens and surf shorts among others. Leisurewear include hoodlum, super-fit, classic tee, and territory among others. Sports wear include rugby shorts, footy, training tops, and singlet among others. Other accessories include beanies, towels, and belts. These products can be viewed in our company’s website (www.aussiebum.com.au) that is available in all types of language including Japanese (Aussiebum Company, 2010). Men shorts and vests from Aussiebum Company (Aussiebum Company, 2010) Existing Barriers to trade Despite all the efforts by Aussiebum Company to sell analyze and utilize various business aspects to make its business successful, they are still some barriers on the way that will create some challenges for it to succeed. Some of the major challenges are competition from cheap sub-standard wears from other countries. The sale and export of second hand clothing from United States and European countries which are cheap forms a great competitive challenge towards breakthrough of our menswear. Large experienced firms within Japan may produce the similar wears at lower costs. Getting a competent and capable agency may become difficult. Use of indirect export agencies may have lower benefits due to the amount of commission that they usually get. Establishment of new markets globally may become extremely difficult for Aussiebum like any other company. Transport and logistic problems may affect the trade in a great extent due to high cost of transportation. The existing Companies in Japan may have cost advantages as they will not incur transport costs like in case of Aussiebum Company. The rising unemployment rates in Japan may directly affect the Aussiebum’s Company sales. This will make most of the unemployed men buy cheap and second hand clothing. Unemployment also tend to reduce various leisure activities hence the targeted youth within Japan may end up not buying the sports and leisure wearing (Anand, Kunal and Rajenndra, 2003). Sales prospects The sales are expected to be low for the first two years with rising number after three years as customers or intended men become aware of the products. The number of sales will become significantly high after extensive promotions within Japan for the first two years. However, with extensive marketing and frees shipping process, the sales within Japan will increase considerably as the sales will become accessible through the internet. Recommendations It is crucial for Aussiebum Company to reduce the cost of manufacturing; this will enable the wears to be sold at a lower overall cost after being exported to Japan. This will enable it to be sold at a better cost as compared to others. This will reduce the probability of cost becoming a barrier within Japan. It is also vital to increase the value for the wears in order for it to become acceptable easily within the markets. The changing lifestyles in Japan especially with men should play a great role towards changing the value and looking of the wears especially t-shirts and shorts. This will ensure the produced wears matches the changing lifestyle of men within Japan. It is crucial for Aussiebum Company to use shipping or sea as means of transport because it is cheaper although it will take longer from Australia to Japan. The menswear are durable goods hence shipping will not affect their quality. It is also important for agencies to be established at various coastal cities within Japan, some of them include Sendai, Nagoya, Yokohama, Akita and Osaka among others. These are the main cities where there is higher level of lifestyle as compared to inland hence higher demand of sports, skiing and leisure wears for men. Conclusion It is vital for Aussiebum Company to utilize the Japanese less strict measures on international business and less regulations/laws to start business within Japan. This will provide a good chance of product development and establishment in Japan as easily as possible. Indirect export will assist greatly towards the achievement of successful sales mainly because it is most successful for any starting business hence to be utilized by Aussiebum Company. PESTEL analysis will play a key role towards the establishment of successful global business by Aussiebum Company within Japan. It is important for Aussiebum Company to try and reduce the manufacturing cost as recommended in order to have better sales prospects within the required time frame due to competition from other types of clothing within and outside Japan. An effective and capable agency will determine the extent to which the product will sell in Japan as well as increasing sales within other years. The rising unemployment rates within Japan will not hinder the establishment of our sales within Japan. However, with increasing economic growth within Japan, there are chances of increased sales for our products are expected to rise as well. References Anand, G. Kunal, S. & Rajenndra, V. (2003). International competitiveness, investment and finance: a case study of India. Sydney: Routledge. Aussiebum Company. (2010). Aussiebum Store. Retrieved August 20, 2010, from http://www.aussiebum.com/en Australian Bureau of Statistics. (2005). Year book, Australia, Issue 87. Sydney: Aust. Bureau of Statistics. Central Intelligence Agency. (2010). The World Fact book. Retrieved August 20, 2010, from https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html Index Mundi. (2010). Japan inflation rate (consumer prices). Retrieved August 20, 2010, from http://www.indexmundi.com/japan/inflation_rate_(consumer_prices).html International & Intergovernmental Affairs Directorate. (2008). Japan Economic Overview. Retrieved August 20, 2010, from http://www.ic.gc.ca/eic/site/ibi-iai.nsf/eng/bi18701.html Japan Economy News & Blog. (2010). Japan’s Consumer confidence up for third consecutive month in March. Retrieved August 20, 2010, from ttp://www.japaneconomynews.com/2010/04/19/japans-consumer-confidence-up-for- third-consecutive-month-in-march/#more-955 Oxford University Press. (2007). PESTEL analysis of the macro-environment. Retrieved August 20, 2010, from http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm Papers4you.com. (2009). What is PEST analysis? Retrieved August 20, 2010, from http://www.coursework4you.co.uk/essays-and-dissertations/pest-analysis.php Shaoming, Z., Daekwan, K. & Tamer, C. (2009). Export Marketing Strategy: Tactics and Skills That Work. Victoria, Australia: David Parker Publishers. Read More