An individual pre market entry report. Japan - Assignment Example

? An individual pre market entry report Contents Executive Summary 4 Introduction 4 Scope of the research 5 Aims & Objectives 5 Limitations 5 Methodology 6 Secondary Research 6 Case Study Based Research 7 Findings and Analysis 7 Economic Environment 7 Political Environment 8 Technological Environment 8 Cultural Environment 9 Potential risks 9 Anticipated Changes 10 SWOT Analysis 10 Strength 10 Weakness 11 Opportunity 11 Threat 12 Company’s prospects and market positioning for the destination under consideration 13 Conclusions 13 References 15 Bibliography 17 Executive Summary The project will analyze the political, technological and some other aspects that is necessary to enter into a market of foreign country. An SWOT analysis of the company are also been discussed just to take note the strengths the company as well as the awaited opportunities for the same in the new market venture (Doole and Lowe, 2008, p. 7). The customer type that is targeted is the middle class Japanese consumers. Introduction The country selected for the discussion in the project is Japan. The company selected for the assignment is Highland Herbs. It was established in 1990 by a couple (Highland Herbs, 2012). The vision of the company is to offer all natural ingredients to the community and enjoys a healthy turnover. It is assumed that the company is recently on the plan to make its mark on the Japanese market. The company needs to have knowledge regarding the opportunities the market offers, a sustainable and consistent strategy that will drive the entrant. It is easier to taste success in the market of Japan if the assumptions are not made on false grounds. It is of utmost necessity to analyze the strategies of the already existing competitors effectively. The process of sales and the revenue model should be in line with the Japanese culture and the market. In order to make successful entry into the Japanese market the potential entrants will have to cut out a clear budget control policies and a diversified growth strategy for at least for half a decade. Some brands achieved great success just by making little changes in brand identity and applying some marketing techniques. The consumers of the country likes detailing and so detailed printed materials are essential while setting up the business in the country (UK Trade and Investment. 2012). Therefore analysis of brand equity and setting up a corporate image is important to enter the Japanese market as well. Scope of the research The research mainly centres on the parameter of internationalization of Small and Medium Sized enterprises like the Highland Herbs. In evaluating the ability of the firm to gain an international stand in the global market the project tends to focus on a specific country like Japan. Considerable amount of research is rendered in understanding the Japanese market for the products of Highland Herbs through the incorporation of strategic tools like PESTEL and SWOT. Use of such strategic tools helps in enriching the scope of researching whether the Japanese region would amount to become a profitable and revenue generating market for the concern. Aims & Objectives The aim of the research is to identify whether entry into a new foreign market would be viable for a SME. If viable, what conditions will lay down the way towards successful entry and if not then what the constraints are. Limitations The project only considers the company under consideration. In order to enter into a new market and avail the opportunities of the market regime it is necessary to analyze the strategies of the competitors. It is certain that the existing competitors enjoy a certain proportion of market share. Therefore to make an entry successful it is necessary to divert the customers towards the new shop. The project does not make any analysis on the competitor’s strategy and this can be a limitation. Methodology Secondary Research The research project in endeavouring to understand the potential of the Japanese region in being an effective market for the Herbal Products produced by Highland Herbs takes resort of large volumes of data pertaining to secondary research sources like books, articles and other company information from sites pertaining to the company. Secondary Research relates to the gaining of data from different literary sources both at the online and at the physical level. With the development of internet the scope of secondary research has gained further enhancement that helps the researcher inn saving both time and money in gaining access to large volumes of authentic data sources from a variety of different sources. Previously the researcher had to depend on conducting library research at the physical level for requiring gaining hold of relevant data sources that in turn required the researcher to expend time, money and energy. Further the researcher herein also does not require incorporation of assistance pertaining to other external agents in retrieving market related information which can be readily available in the internet. Secondary research in addition to helping the researcher save in on time and money also helps to serve as a potential background for further research activities. Large amount of data sets are generated from authentic sources like books, articles and journals written by eminent authors that all add to enhancing the value of the research conducted and thereby serves for future ends (Armstrong, n.d., 30-31; Wrenn, Sherwood and Ruddick, 2005, p.96-97). Herein thus the researcher in requiring to gain effective information pertaining to the Japanese market gains resort to secondary data sources that help in generating large volumes of potential, relevant and current information to serve the research objectives. Case Study Based Research In addition to the Secondary Research method incorporated for gaining potential information pertaining to the research query another significant research methodology known as the Case Study based research is also vehemently incorporated in the paper. Case Study based research gains significance herein owing to the focus on the internationalization activities of the United Kingdom based Herbal Company, Highland Herbs and also pertaining to focusing on one specific international market like Japan. Case Study based research like the Secondary Research helps the researcher in saving both time and money in being able to gain large amount of relevant and current information from internet sources related to the region and the company. Further incorporation of Case Study based research also helps the researcher conduct the research solely thereby not requiring the use of third party agents to retrieve external information from the market. Case Study based research also contributes in conducting the research activity from different angles thereby helping the researcher in gaining potential inferences to key issues and events related to the topic. Thus owing to the above facts incorporation of Case Study based research contributes in rightly enhancing the scope of the research activity taken herein (Jackson, 2008, p.85). Findings and Analysis Economic Environment The agriculture sector is protected and subsidized. But the yielding of crops is among the top of the world. In terms of Purchasing Power Parity the country was placed in third in 2010 after China. The financial sector of the country was not exposed to the subprime crisis but the sharp decline in investment pushed the country into deep recession. The stimulus spending from the part of the government contributed in driving the economy into the phase of recovery. The agricultural as well as the service sector have been opened up to foreign competition and free trade agreements boosted up the exports. The expanding amounts of public debt and the shrinking population pose some challenges to the economy (Global Trade.net, 2012). Political Environment The press enjoys freedom in the country and the freedom is respected as well. The independent courts are responsible to ensure protection to the journalists. The elected officials do not have a major part to play and the strong central bureaucrats guide the country. Before being operational, the companies need to have the license from the concerned authorities. The legislative power is under the House of Representatives and the House of Councillors. There are independent decision making processes for the judges and judicial power rests on the Supreme Court and few inferior courts (Tsuru, 2000, p. 4). Technological Environment The country of Japan is well known for its industries in automobile and electronics. The electronics products from Japan enjoy a lump sum share of the market. The country is an advanced in the field of scientific research as well as in medical research. Every year a huge sum of money is sanctioned in the budget for the ongoing researches in various fields. Another point to note is that the country received highest number of Nobel Prizes in the continent of Asia. Some of famous electronics companies have head quarters in the country (Bucknall, 2005). Japan is the leader in robotics and more than half of the total robots are manufactured in the country. The world’s top fifteen automobile manufacturers as well as seven out of top twenty semi conductors selling companies are located in Japan. The country has achieved great success in transport facilities with the most advanced trains facilitating the transport facilities. Cultural Environment Japanese is the sixth most spoken language in the world. Ethnic diversity in Japan is proportionate to its language diversity. Language is one of the important pillars of the culture of the nation. Though dialects are used in regional areas like Osaka and Kyoto but standard Japanese are popular in Tokyo and is used in different official communication mediums like TV, news paper etc (Alston and Takei, 2005, p. 3). Harmony is one of the key values of Japanese society. Time is the most focused factor in Japanese business culture. Businessman and managers are recognized for the meeting of deadlines for assignments and deals. Opposed to this mangers and businessman are very much slow in decision making. This means that they always concern about detailed analysis behind any professional or business decisions. Japanese are comfortable to settle their disagreements in an informal manner and they think that lawyers decrease the social harmony. This is why business conflicts are mediated among the parties rather than taken to courts for legal harassment (Mente, 2003). Potential risks The banks in the country are not known for honesty. Only few banks are reliable in the country and they are government controlled. The private banks charge a high rate of interest. The money kept in the savings account almost gains no interests and one has to constantly put in money into the account. Since banks play a major role in starting a business in any country it can be treated as the biggest risk in starting a business in the country. Anticipated Changes A successful relationship with Japanese clients and colleagues is necessary. The three major factors that cement the relationship are compatibility, sincerity and trustworthiness. Sincerity measures consistency and interest with the business. Japanese expect proper understanding and compromising in any business deal. Compatibility is developed if the representatives are seen to be concern about personal relationship with the clients and colleagues and also about the well-being of the company not only the financial goals and profits. Japanese expect trustworthiness from the business partners and it is one of the most important corporate cultures in Japanese business. SWOT Analysis SWOT Analysis of Highland Herbs would be conducted on reflecting on the key Strengths, Weakness, Opportunities and Threats of the company relating to its venture of gaining a potential market in Japan. Strengths identified for the company would help in reaping the benefits of Opportunities and countering Threats. Again the company is required to reduce its Weaknesses to gain hold of the right Opportunity and in reducing impacts of Threat. Strength The company initially began with small investments and in less than a decade it earns quite a lump sum turnover. There is small number of competitors in the market which is strength for the company. The company earns a potential strength in producing a plethora of herbal products pertaining to the category of tea, cosmetics and other herbal bath products. Focusing on the Japanese market is considered to help the company gain a more enhanced opportunity in marketing such products. Again the product portfolio of the company also contains of facilities like Gift Vouchers of varying amounts that contributes in attracting potential consumers. With the rendering of facility pertaining to online ordering the company gains the potential in exploiting a larger international market base (Highland Herbs, 2012). Weakness As the company is managed by small number of people it may not have the requisite brains to exploit the opportunities. Moreover there is no opportunity for the company to diversify the business. Though the culture of family owned business is reflected in a profound manner relating to the existence of small and medium sized enterprises in Japan yet the changing scenario of the Japanese business structure calls for a concern. In the modern days owing to global pressure the family owned small Japanese firms are being required to incorporate specialized manpower for different types of technical and administrative functions (Economist Intelligence Unit, 2010, p.12, 14). In this light, the situation of Highland Herbs thus tends to reflect a weak position for having no infrastructural and growth facilities to incorporate the functioning of specialized units. In the long run the enhanced dependency on the family owned structure thus would not help the firm to gain avid opportunity in the Japanese market. Opportunity The new entry into the market provides a level playing field for the company. The Japanese market lacks such type of organizations and so capturing of the market shall be easier. The Japanese market is observed to be a productive market for the herbal product company in that the market reflects high demand for herbal tea, one of the products produced by Highland Herbs. Research made shows that during 2010 the consumption pattern on an average for herbal tea in Japan amounted to around 800 Grams (Herrera M., 2011, p.2). Again Highland Herbs also gains potential opportunity relating to gaining potential market in Japan for its herbal cosmetic products. Research made reflects that during 2010, Japan reflects a growing market share for herbal cosmetic products of around 50 percent thereby highlighting on the growth of potential demand for such (Shah, 2009, p.103). Threat The Japanese economy has shown very little growth since the real estate bubble burst which took place in 1980s. In addition, the market size is stagnant along with the population which is expected to decline in the mid century. There are seemingly cultural threats relating to the Japanese region where the Japanese people do not rely on individuals who rely on aggressive or pushing tactics for selling their products. Thus in considering Japan as their future business abode the business corporation must strongly refrain from being aggressive and argumentative. They also need to pay a clear ear to the queries and grievances of the Japanese consumers in ideally gaining an enhanced consumer market in the region (Nishiyama, 2000, p.76-77). Another impeding threat relates to the increased politicization of the distribution system in Japan that thereby infuses the system of corruption pertaining to the creation of an effective distribution network. Thus Highland Herbs in order to gain an enhanced space in the consumer market in Japan is thereby required to render active control on the distribution system. Further Highland Herbs would also need to invest considerably in setting up own retail showrooms and company owned units to effectively sell its herbal products or otherwise may fail to gain the right amount of turnovers in the Japanese market for herbal products (Menges, 2005, p.197). Company’s prospects and market positioning for the destination under consideration The market of Japan has evolved over the recent years and the brand “made in Japan” is well known to the globe. There has always been the first mover advantage for the new entrants into the Japanese market. The consumers are usually loyal and excellent quality with reliable service rules the market. The Japanese consumers tend to make a purchase evaluation before actually purchasing the product and since the company under consideration achieved great success it can anticipated that it will taste success soon in the Japanese market as well. The trade policy followed by the nation executes the integrated domestic and external economic policies with the view to maintain and establish world free trade system and lay the foundation for business environment. The economic growth of the country is on the sustainable path and therefore will create high value. The goods imported into the country do not require import licenses and can be imported freely (JETRO, 2006). Therefore it will suitable for the company under consideration to engage itself into some kind of trade possibilities with Japan (Ministry of Foreign Affairs of Japan, 2012). Such kind of actions will open up huge prospects for the company. Japan’s tariff is one of the lowest tariffs globally approximately accounting to 2%. The tariff quota system of the nation is of two folds. The system charges a low rate of duty on some selected goods up to a certain limit of imports. The charge tends to get higher once the limit gets exceeded. So if the company can maintain the level of imports within the limit it is be benefitted with low duty rate. Conclusions The country of Japan shares excellent foreign country relation and since the trade regulations are favourable to the company it can engage itself in trade possibilities. It can be summarized that Japan is potential foreign market with a major cross cultural difference. Japanese business etiquettes are very much unique and high level consideration is required for the foreign businesses when doing business with Japanese. A heightened sense of formality is seen in Japanese interaction. Building professional relationship or rapport is a great contributor regarding acceptance of a business deal or proposal. A business willing to enter into the Japanese market needs to consider the political as well as environmental aspects. A detailed discussion has been provided in the project. Business environment of Japan has been analyzed through PEST analysis. According the market trend and purchasing power, the country is fourth largest market for US goods and services. Many oversees firms are becoming trading partners with the Japanese firms and many expanding their businesses in this potential market. From the overall analysis, it can be conclude that an overseas firm can do business with Japanese by international trade and also starting a new business in the market. It is potential market for both trading and doing business there but foreign business representatives need to highly focus on different cross cultural factors of Japanese. References Alston, J.P. & Takei, I. 2005. “Japanese Business Culture And Practices: A Guide to Twenty first Century Japanese Business”. [online]. iUniverse. Armstrong, J., No date. Undergraduate Dissertation - An Analysis of Quality Assurance in the Food Industry. Jason Armstrong. Bucknall, K.B. 2005. “Japan: Doing Business in a Unique Culture”. [online]. C&M Online Media, Inc. Doole I. and Lowe, R. 2008. “International Marketing: Analysis, Development and Implementation”. [online]. Cengage Learning EMEA. Economic Intelligence Unit, 2010. SMEs in Japan: A new growth driver? The Economist [Pdf]. Available at: http://www.managementthinking.eiu.com/sites/default/files/EIU_Microsoft_JapanSMEs_FINAL-WEB.pdf [Accessed October 26, 2012]. Herrera M., 2011. Chilean Tea and Herbal Tea Market Has Grown 48 Percent. USDA Foreign Agricultural Service [Pdf]. Available at: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Chilean%20Tea%20and%20Herbal%20Tea%20Market%20Has%20Grown%2048%20Percent_Santiago_Chile_7-25-2011.pdf [Accessed October 26, 2012]. Highland Herbs, 2012. “About us”. [online]. Available at: http://highlandherbs.com.au/content/4 about-us. [Accessed: 20th October, 2012]. Index of Economy Freedom. 2012. “Japan. Heritage, 2012”. [online]. Available at: http://www.heritage.org/index/country/japan. [Accessed:19th October, 2012]. HKTDC. 2007. “Trade Regulations of Japan.” [online]. Available at: http://hong-kong economy-research.hktdc.com/business-news/article/Small-Business-Resources/Trade Regulations-of-Japan/sbr/en/1/1X000000/1X006N03.htm. [Accessed:19th October, 2012]. 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