The Objectives of Penfolds - Coursework Example

The Objectives of Penfolds Name: Course: Tutor: Institution: City and State: Date: II. Focused Business Activities Profit maximization and growth of the business forms the basis for the business existence hence becomes the fundamental business activity. Increasing the company’s profitability and rate of growth increases the value of the company. Penfolds currently operates in the Australian market where it enjoys the presence of a huge loyal clientele base. Translating this into the New Zealand market requires careful strategizing to ensure proper actions occur at the appropriate time. Profitability occurs through the lowering of production costs while charging reasonable prices to ensure a large profit margin. The free trade agreement (FTA) has ensured the elimination of tariffs charged for products exchange across the involved countries’ borders. This automatically lowers the cost of goods flowing into the New Zealand market from Australia. The company could therefore maintain its usual pricing structure with minimal adjustments to cover the transportation costs. This ensures that the company can rely on a constant profit margin even after venturing into a new market (Bhagwati 2000 p.11). Profit growth occurs through the maintenance of the same amount or higher amount of sales volume in the current market. The entry into the new market automatically offers the company an opportunity to grow its profit level. Total revenue/cost total revenue Total cost1 Total cost2 The figure illustrates how the company can increase its profit margin by reducing the total cost without having to increase their revenue significantly. The product development will facilitate the penetration into the new market through ensuring the standardization of the commodities. This occurs through maintaining high quality standards throughout the production of all the products. Uniformity promotes confidence to customers in the new market that the products are similar to those offered in Australia. Quality is a strong selling point for any company hence standardization forms part of the major strategies of the business. Quality involves the production of commodities that meet the customers’ requirement. The market in new Zealand differs from that in Australia and therefore the company requires to make some adjustments to the product to make it suitable for the new Zealand’s’ market. An intensive research on the local tastes and preferences places the company at a favorable position in achieving customer satisfaction (Bhagwati 2000 p.22). Other products exist in the target market and therefore the company has to differentiate its commodities to make them stand out from the rest. This ensures simple identification of the products due to their uniqueness. Differentiation involves attractive packaging that relates to the target customers. Promotion activities such as the use of sales persons, billboards, adverts, and brochures among other marketing avenues will the awareness of the product in the new market. People only buy familiar product that they trust which starts with vigilant dissemination of information concerning the product. Product promotion informs the potential buyers of the existence of the product before its introduction. It then convinces them to purchase the product after its introduction. The customers therefore need information on which of their needs the product addresses hence the reason to purchase it (Bhagwati 2000 p.37). Finance acquisition ventures will create an enabling environment for the expansion of the company’s activities. The current financiers require assurance of the continuous observation of the fulfillment of their interests. They require information on the amount of dilution of their control through introduction of new investors. A workable business plan for the New Zealand market concentration would convince the current investors to maintain their support while attracting new investors. The funds would facilitate the employment of additional employees, increased production and the marketing of the products. The company could invite New Zealand’s investors to purchase its shares or to finance the company through debentures (Dlabay & Scott 2010 p.45). Creation of competitive advantage for the company sets it apart from other companies. A business acquires this status through the production of high quality products, a strong management team, and a pool of qualified personnel, strong branding, and sufficient capital among others. The success of the company in the new market highly depends on the competitive advantage of the company. The New Zealand market already has players in the wine business and Penfolds requires an excellent strategy to penetrate and succeed in the market (Dlabay & Scott 2010 p.52). Penfolds long experience in the industry offers it an advantage since it already owns profitable wineries, possesses successful brands and sufficient capital to finance its operations. The FTA offers an advantage for Penfolds since it minimizes the exportation costs. The experienced staff is an important asset for the company since they are familiar with the industry and the overall running of the business. Planning for the growth process eliminates the probability of business failure. Growing the business should begin with the crucial processes for the business’ operations. These include the financial assets, physical assets, the employees, and the production department (Dlabay & Scott 2010 p.64). Planning begins after the identification of the crucial aspects of the business. The extent of growth is determined to avoid excess growth that the company cannot handle. The company’s departments must grow simultaneously to avoid lack of coordination. This commences with the acquisition of finances to fund the expansion project. Additional capital will enable acquisition of additional employees, increase in production and enhancement of the marketing structure. The company must also consider factors that affect its operations such as the political, environmental, social, technological, economic, and legal factors. Localization activities offer a strategic incentive for the company in entering a foreign market with a different social structure from that in Australia. The response to the product in the new market may therefore differ from the usual response in Australia. Attracting customers in New Zealand requires identification with their culture and lifestyle to demonstrate to them how the products blend into their daily lives. The identification with the local community enables them to identify with the products and make them part of their daily lives. (Mcgovern 2014 p. 56). Establishment of comprehensive distribution channels ensure the products reach the customers on demand. Proper product distribution ensures availability of products at various selling points and ensures no shortages. The channels should reach customers in every location of the country without only concentrating in major cities. The distribution channels also involve information channels that promote communication between the company’s branches. It sells the company as reliable and well-established (Mcgovern 2014 p.43). This attracts the loyalty of customers since they can access the products of their choice at their own convenience. Resource Development The human resource facilitates the growth of the company, which forms the basis of the success in all the strategic activities. Therefore, the development of the human resource is a sure way to achieve the company’s objectives. This begins with the hiring of qualified personnel with an interest in personal growth as well as the company’s growth. The company should employ training and development programs in which the employees gain more knowledge and skills to enable them perform their jobs more efficiently. The programs may include seminars, workshops and lectures among others (Jackson 2010 p.58). Experts act as the trainers in various fields of expertise. Promotions and pay rise for individuals who undergo further studies encourage employees. After the penetration into the New Zealand market, the company’s workers could benefit from exchange programs. Job rotation occurs where the workers in Australia transfer to the workstations in New Zealand and vice versa. This ensures consistency in business operations throughout the company regardless of the location. The expansion of the market necessitates the increase in production capacity in order to achieve the profit maximisation and profit growth strategies. The various levels of production should employ the latest technology in the field to enable efficient production. This saves on time and reduces wastage on raw materials (Jackson 2010 p.53). Eventually more units of production emerge from the same amount of raw materials used initially. Capital-intensive modes of production however require huge investments for acquisition as well as maintenance. The advantage of employing these methods is the reduction in the number of employees required to operate the machines while the disadvantage includes the high costs. Labour intensive methods on the other hand require more workers and less capital. They benefit a company operating in a location with availability of cheap labour. In this scenario, Penfolds requires a mode of production that combines both labour and capital intensive technologies. Opening of additional production plants may benefit the company in its aim of increasing the production capacity. Property development will enable Penfolds acquire buildings in strategic locations and turn them into their workstations. This promotes the promotion and distribution strategies as well as promoting the corporate image. Strategic location will enable the company operate in areas easily accessible by customers as well as the distributors of the wine. Positioning saves on rental costs as well as transportation costs (Jackson 2010 p.62). Accessible areas enable the customers to conveniently shop for the commodities of their choice. The buildings identified as workstations require modification by branding them with the company’s logo and trademark. The main feature that identifies franchises is their uniformity through branding. This makes identification of the franchises easy and promotes the corporate image. They also promote standardisation in the company’s commodities as well as the retail outlets. The employees in these retail outlets could also wear uniforms containing the company’s logo to promote the corporate image in their operations. Corporate social responsibility will enable the company achieve its localization strategy. This is due to the involvement of local community leaders, local companies and the local people in general. The social responsibility may be in form of promoting the local’s educational sector through offering scholarships or through environmental conservation. Adoption of local languages and slangs in advertising the products or by using locally celebrated personalities further strengthens the strategy. Celebrities for instance perfectly fit this role since they possess great influence on their fans. Association with the local’s lifestyle will help in gaining the customers’ loyalty (Jackson 2010 p.22). Establishment of a local head office as the backbone of the overall business framework in New Zealand by ensuring ensures a coordinated distribution channel (Mcgovern 2014 p. 77). The head office acts as the reporting office where local distributors obtain information concerning the company and its products. The office ensures the products reach the outlets on time and in good condition. It also addresses any grievances concerning the business operations and submits feedback to the Australian offices. Franchising also enables the expansion of a company’s market through enhancing the flow of goods to retail outlets. This begins with licensing of franchises and branding them with the company’s brand and trademark. The local distributors understand the market dynamics hence offer a platform where the new products can reach the end users conveniently. Franchising would also help in promoting the corporate image and ensuring standardization of quality for the products. Penfolds requires additional amount of raw materials to meet the demand for its products hence achieve its growth strategy. It could invite New Zealand’s vineyards farmers to supply it with the raw materials. This serves as an additional supply of raw materials as well as an initiative to involve the locals in the production of the wine. These raw materials would assist in the production of wine for the New Zealand market, which gives the wine a local taste. Involving locals in production also improves on the localisation of the product (Jackson 2010 p.67). The company could source additional raw materials from suppliers in other countries in case of shortages. This prevents the shortage of commodities in the market since this may cost the company loyalty of customers. It may also tarnish the corporate image by making it appear unreliable. The production departments must undertake quality controls on the raw materials acquired to ensure their quality. High quality commodities originate from quality raw materials. The increase in supply of raw materials lowers production cost hence maximizes profits. Price Po Supply 1 supply 2 Q1 Q2 Quantity Managing change prepares the company to adapt to anticipated changes in operation. Research and development facilitates change management. The company requires information on the prevailing environmental conditions in New Zealand, which include the political, economic, social, environmental, and legal factors. These factors may differ from those in Australia hence the company should keenly research on them since they hugely influence the business operations while the business possesses no control on them. The information helps the management plan on the expected changes in order to penetrate the market. This includes the registration process of the company in New Zealand, which should occur prior to the commencement of operations. The social factors may require a substantial amount of modification to the product to suit the customers’ needs (Mcgovern 2014 p. 75). Marketing of the product in advance is a necessity to ensure the product meets a ready market and sales begin instantly. Advertisements through the local media such as television, radio, magazines, and newspapers among others convey information about the product to assist in the product promotion. The internet also offers a platform for businesses to reach potential customers regardless of their location. Bill boards offer sophisticated advertising and reaches customers in major cities. Sales persons offer one-on-one information to the customers in the local residential areas. The sales persons act as intermediaries between the company and its customers since they facilitate the exchange of information between the two. The company could make use of test products that gives the customers an opportunity to try out the product before making purchases. They give the potential consumers a taste of the product before its introduction into the market making them aware of the existence of the product and building the anticipation (Mcgovern 2014 p. 81). Wine tasting ceremonies are famous events in Australia that offer a platform for the showcase of different wine brands. The wine lovers converge to taste the fine wine and identify their favorite brand that they develop loyalty III. Organisational Structure The geographical structure offers the best organisational structure to Penfolds in its attempt to diversify its market base. The worldwide area structure sufficiently describes the organisational structure of Penfolds’ international operations. This is due to the large geographical coverage expected with the expansion of the business. The company will penetrate the New Zealand market hence it will manage its current and new markets to achieve overall success. The company should therefore divide its operations according to geographic location to save on transportation costs, promote efficiency and facilitate the management. The company opens various workstations in different geographical locations. The different locations in New Zealand ensure that the company’s products reach the customers at every part of the country. A geographically structured organisation enables easy management since the franchises and retail outlets in one location fall under similar management (Mcgovern 2014 p. 36). The short span of control also promotes efficiency in decision-making and overall management. It also promotes the coordination of operations in the same location since the retail outlets face similar working conditions. This organisation structure should enable Penfolds in the control of its numerous franchises and retail outlets. Penfolds should set up local headquarters with a head office where regional branches seek consultation. The company must open workstations in New Zealand to facilitate the distribution of its commodities in the new market. It locates the major workstations in major cities and towns where the population of consumers is densely populated. The other towns also have workstations where the products’ delivery occurs ready for distribution. The franchises appear at all locations of the country ensuring the even distribution of the company’s commodities in all areas with demand for the products. The management of this system employs decentralized decision making by delegating authority to the branch managers to make routine decisions (Dutta 2000 p.44). This quickens the decision making process and ensures its efficiency. The branch managers know the prevailing market conditions at the local workstations and can therefore make suitable decisions for the improvement of operations at the stations. However, all the different franchises undertake similar operations, which make their coordination easier. This also facilitates the transfer of workers from one workstation into another due to the easy adjustment process. Penfold seeks to licence franchises to facilitate in the distribution of its commodities. (Dutta 2000 p.84). This promotes the corporate image in the New Zealand market. A head office ensures the coordination of operations in the new market. It monitors the flow of goods from Australia into New Zealand. It receives orders from local franchisers and forwards the orders to the Australian wineries. It receives the deliveries from Australia and ensures timely delivery to the local retail outlets. Any problems encountered during operations by the local franchisers reach the head office, which then forwards the concerns to the management team in Australia. The Asia Pacific should have representation as a region in the board. This ensures the incorporation of the regional market specifications into the production process (Mcgovern 2014 p. 37). It also ensures the representation of the interests of customers throughout the region to prevent the company in adopting a local perspective to business. The country managers should have authority in the product, production and marketing. The managers should enjoy a substantial degree of freedom in their operations and management but must modify their decisions towards achieving the overall goals of the company. The central management team should regulate this authority to ensure coordination of efforts. It also ensures standardisation of the products produced, efficiency in production as well as strong marketing points. The country managers must engage all stakeholders in making major decisions. The suppliers for instance play a major role in the production process of the company (Dutta 2000 p.74). They should therefore contribute in issues that affect the supply levels of the raw materials. The decisions may require an increase or reduction in the supply level. The managers should also involve branch managers in decision making to make informed decisions. Decisions on the product attribute and production should involve the customers through consideration of their feedback. Regional specifications affect the planning, budgeting and performance evaluation systems of a company. The economic conditions will affect the budgeting process since issues such as inflation may lead to devaluation of local currency. This leads to a need for additional funding in the local currency, which raises the expenditure. Aspects such as social, political and technological factors affect planning. Volatile political conditions may interrupt planning where unexpected situations present themselves (Dutta 2000 p.65). The company therefore needs to adopt a flexible business plan that facilitates adjustments in case of unexpected changes. The performance of the company depends on the ability of the products to satisfy the local customers’ needs. These needs change according to the social setting of the customers and therefore differ with the regions. The recruitment of local managers will focus on their ability to work in a team. Team players make good managers and can therefore work under minimal supervision. Experience in management should offer them an added advantage. The knowledge of the local systems will also help them in promoting the company locally as well as establish local networks. This will build a strong management team locally as well as region wise. The franchisers must enter into a legal agreement with the company to ensure they only sell the company’s products and do not use the company’s name for their own benefit (Dutta 2000 p.55). The franchisers must also attend a mandatory training session where they learn the main facts about Penfolds’ commodities. In case of enquiries by customers, the franchisers should answer the questions appropriately and in a situation where the facts are unknown, they should do consultation. The franchisers form an important part in the penetration strategy since they interact directly with the end users. The franchisers also feature local employees who can assist the company in its expansion through familiarisation with the market. The management of expatriate managers should occur according to the company’s goals and objectives. The central management team should evaluate the expatriate managers to ensure their adherence to the central objectives of the company. The local managers operate under their local objectives that they draft according to the prevailing local conditions. These local goals must undergo reconciliation with the overall business objectives. This ensures that all the company’s branches work towards a common goal of achieving the company’s objectives in their own capacities. The other major method of evaluation is according to the profit margin of the branches (Dutta 2000 p.79). The price and cost of production affects profit at the various branches. References Bhagwati J. N. (2000). Trading Blocs: Alternative Approaches. Carliofornia. Emark Press. Dlabay L. & Scott J. (2010). International Business. Washington. Wordpress Publishers. Dutta B. (2000). International Business Management: Text And Cases. Sydney. Freemark Printers. Jackson J.K. (2010). Trade Agreements: Impact On The U.S Economy. Washington. Wordpress Publishers Kawai M., Wignaraja G. (2011). Asia’s Free Trade Agreements: How Is Business Responding? Mumbai. Trademark Printers. Kerr W. A., Gaisfor J. D. (2007). Handbook on International Trade Policy. Sydney. Freemark Printers. Mcgovern E. (2014). International Trade Regulation, Washington. Wordpress Publishers. Paul J. (2008). International Business. Atlanta. Dynamic Press. Schott J. J. (2004). Free Trade Agreements: Us Strategies and Priorities. Atlanta. Dynamic Press. Read More