International Marketing - Assessing Your Business Opportunities - Assignment Example

International Marketing In this assignment we are going to consider the three countries and one product and analyze the whole scenario by considering micro and macro economic factors. Here we Define the concepts related to the whole process, link them to the three countries, then rate those countries based on the opportunities identified and then conclude with regards to the implications this analysis has on your offer. Our first step in doing the whole process is to do an analysis of PEST Factors. Our assessment of whole issue is based on the following product: Sony Play station 3 console and the three countries which are in the discussion are Hong Kong, Japan and South Korea. PEST FACTORS Political The main political factors which we need to consider are Political state scenario in these countries, sovereignty, taxes on the product, and law governing scenario and corruption levels if present. Political Scenario If we consider the backdrop of political scenario in the countries of Hong Kong, Japan and South Korea, the following issues are highlighted. Japan has a constitutional monarchy and where the emperor powers are limited. Power mainly holds with Prime Minister. Hong Kong is a Special Administrative Region of People's Republic of China and it maintains a high degree of autonomy in all matters relating to government and politics except foreign and defense affairs. It is regarded as separate entity though maintained as dependency on certain issues on china. In South Korea the government structure is determined by constitution of republic of Korea. The country has always had a presidential system with a relatively independent chief executive. Law system in these countries Law systems in these countries are distinctly different from each other. Japanese law and judicial system is influenced by civil law of Europe and has also the roots of Chinese whereas Hong Kong though now a part of China and have its own autonomy still follows the common law which was established under British colonial law. So if we consider our product of Play station it won't have a big effect if any problems crop up as these countries law system is quite streamlined enough to make its own impact towards the issues. Taxes in these countries In South Korea taxes are imposed on both national and local level. Taxes like property tax, license tax fall under local tax levels whereas custom duties tax and international tax come under national level. Taxes are imposed both on companies which are global or foreign and national companies. The difference however ranges from the slab rate which is offered to each of them. The following figure shows the corporate Income tax rate for general corporations Corporate Income Tax Rate for General Corporations Previous Revised Tax base Tax rate Tax base Tax rate 80 million 20% (24%) 100 million won or less 20% over 80 million won * Unlisted Large-scale Corp.:33% (39.6-41.25) * Non-Profit Corp.: 27% (32.4-33.5%) * Corp., other than the above: 30% (36-37.5%) over 100 million won 20 million won + 34% of an amount in excess of 100 million won Source: http://www.asiatradehub.com/s.korea/tax1.asp If we look at the Hong Kong economy and business prospects one thing we can gather information from it is that tax system followed. It can be said as most business friendly tax system in the world. The best part is that there are no values added taxes (VAT) or sales tax. Taxes are usually levied on profits, salaries and property. The tax rate when profit tax is considered is 17.5 % for corporations and 16% for other business environments. Similarly property taxes are 16% on the annual rent. If we consider Japan, we can say taxes form two categories. They are National Tax and Local Tax. Under these categories lots of subcategories are present which deal with every type of tax which is imposed in the country. Taxes on all issues like bathing tax, consumer goods tax, and gasoline tax are imposed. The consumption tax rate is 5%.Income tax is applied to foreigner which is way too complicated than we can imagine. One additional point to note is that in Japan there is something called resident tax. They are called Shinminzei. Other issues related to Politics The main advantage that the product of play station has in these Asian countries is that political situation is stable and thriving in confidence with no hiccups to the present government. Also the foreign affairs with other countries have been on decent standards when compared to relations few years back. Another advantage which is obtained to Sony Play station is that basic components involved in the product deal with digital electronics and semi conductors which fortunately in countries like South Korea, Japan have been produced on large scale. We can say that electronic and gaming industry in these two countries is one of the most lucrative markets and hence there wont ay problems with respect to offensive/ banned ingredients of the products. So products get benefited due to such positive cooperation from industry and thus even governments will not create any restrictions or problems. And as far as Bribery and corruption is concerned we can say that Japan and Hong Kong are among the world's least corrupted areas in the world. And South Korea when compared to other countries of the world is not bad either. It's just a relative scale when we compare these 3 countries and South Korea would be third. Now let's look at the political risk rating Political Risk Rating Japan South Korea Hong Kong 1. Bureaucratic delays Very Less Less Very less 2. Number of Expropriations Low Low Low 3.Riots and assassination Less Less Less 4.Soldier /Civilian Ratio Quite decent High Low Economic Economic Systems Economically all the three countries are booming and hence are part of the Asian Tigers. If we look at South Korean economy we can say that it is held as major internal economic powerhouse. It has the eleventh largest economy in the world and third in Asia behind Japan and China. It has achieved rapid economic growth through export of manufactured goods. The South Korean model of encouraging the growth of large, internationally competitive companies through easy financing and tax incentives led to the dominance of the family-controlled conglomerates. Companies like Hyundai and Samsung have became Global Corporations and in 2004 Korea joined in the mega trillion economy club which contains economic super powers of the world.. To describe the economy of country we can say that it is known as country with moderate to low inflation rate, low unemployment rate and decent distribution of income. On the other hand Japan has a free market economy making it's the third largest economy in terms of purchasing power parity in the world. We can say that the economy is highly competitive and efficient in areas like trade and manufacturing. The main reason of its economic success is its close interaction and cooperation between Government and Industry. Apart from that it has well educated industrial work force which has strong work ethics making Japan an economic super power. The distinct characteristics of Japanese economy are the cooperation among suppliers, manufacturers and bankers, good relations with the government. Finally Hong Kong also considered one of major powerhouses of Asian Business World. It maintains capitalist economy which is based on the idea of free market, low taxation and government non intervention. The very fact that it has been rated as the world's freest economy in the world for the last thirteen years speaks the enormous potential about Hong Kong. Freedom Index: As per the yearly worldwide index of freedom, Hong Kong is the world's freest economy in the world. Japan is ranked 27th in the world and South Korea 45th in the world. So Hong Kong could be major choice for company like Sony to open a service center for its Play Station console. Per Capita Income & Purchasing Power Parity: Japan has per capita income of 34 188$ while its PPP is 3910728 m$ similarly South Korea has per capita income of 18392$ while its PPP is 994 399m$ and Hong Kong with per capita income of 27446 $ and PPP of 233 374m$. G8 and OECD Only Japan is part of G8 group while others are not, similarly South Korea and Japan are part of OECD group. Balance of payments We now give figures relating to Balance of payments of South Korea Current Account 8,617 Balance on goods 13,392 Balance on services -3,527 Balance on income -886 Current transfers -363 Capital Account -443 Financial Account 2,543 Direct investment abroad -2,600 Direct investment in South Korea 3,198 Portfolio investment assets -5,499 Portfolio investment liabilities 11,856 Other investment assets 7,458 Other investment liabilities -11,764 Net Errors and Omissions -2,698 Reserves and Related Items -13,416 The following is Japan's Balance of Payment Now we show the balance of payment of Hong Kong HKD 100 million) Standard Components 2000 2001 2002 2003@ 2004@ Current Account 544.95 763.15 968.00 1282.40 1274.01 Goods -638.32 -649.70 -394.06 -449.70 -725.14 Services 1102.70 1152.04 1356.86 1533.69 1850.39 Income 210.69 399.59 153.07 341.42 303.06 Current Transfers -130.13 -138.78 -147.87 -143.01 -154.29 Capital and Financial Account -578.63 -973.59 -1511.79 -1790.86 -1363.38 Capital Transfers -120.44 -91.55 -156.86 -82.92 -21.45 Direct Investment 199.76 969.48 -606.85 633.72 -444.06 Portfolio Investment 1907.82 -3220.45 -3024.84 -2646.19 -2513.46 Financial Derivatives 16.61 396.40 515.63 782.88 488.27 Other Investment -1799.17 1337.83 1575.73 -402.47 1382.18 Reserve Assets (Net Change) -783.21 -365.30 185.41 -75.89 -254.86 Net Errors and Omissions 33.68 210.44 543.79 508.46 89.37 Overall Balance of Payments 783.21 365.30 -185.41 75.89 254.86 (in surplus) (in surplus) (in deficit) (in surplus) (in surplus) GDP and Inflation in these countries Country GDP Inflation Hong Kong Growth rate: 7% Per capita PPP: $32900 0.9% Japan Growth rate: 2.4% Per capita PPP :$30000 -0.3% South Korea Growth rate: 5.1% Per capita PPP $24130 2.8% Economic Matrix Ratings Table (with respect to the product Sony Play Station) Economic Ratings Japan South Korea Hong Kong 1.Economy Systems Free market- Very Good Competitive economic growth across decades- Very Good Capitalist Economy- Very Good 2.Freedom Index Good Good Excellent 3.Income Per capita Good Good Good 4. Purchasing Power Parity Excellent Good Good 5. G8 Advantage Yes No No 6. Organizations Tie up strength (OECD, APEC, WTO) Excellent Good Good So the following ratings table gives us an idea about the performance of the product of play station in these countries from economic perspective. We can say that Japan can be excellent location of all the three due to its economic practices in the country and due to its huge international reach within organizations like OECD, APEC, and WTO , it can act as excellent choice for Sony Play Station. Moreover being a home advantage and its powerful economic system, it can provide an ideal base for the product of Play Station to hit the market on successful note. Also among the three we can see that it's difficult to choose one as best market area for the product. All areas could be advantageous for Sony although home advantage and high international reach with strong work culture environment in business corporations might make it an attractive destination for the product to make it a grand entry. Social Culture: All the three countries being close to each other display similar level of cultural understanding so we can say that there could be level of cultural homogeneity. All the three countries showing strong business and work ethics especially Japan. The contemporary culture of South Korea is heavily dominated by technology, including feature-rich cell phones and pervasive online gaming. Hong Kong is frequently described as a place where East meets West, a meeting reflected in its economic infrastructure, education and street culture. Population: Seoul and Tokyo are two of the most populous metropolis in the whole world and Hong Kong has one of the highest densities of population in the world. Tokyo metropolitan area is the most populous in the world and both Tokyo and Seoul has high degree of density. So we can say that there are few similarities between these three countries when it comes to population and population density. Literacy Levels: Of the three countries Japan has the highest literacy rate of 99.9% followed by South Korea at 97.9% and Hong Kong at 93.5% All these are interesting and important because education will help you know the value of each product and can make you to understand so that better decisions can be made. Population, Literacy and Cultural aspects in these countries Country Population Literacy Culture Hong Kong 6,864,000 93.5% Eastern culture mixed with modern Western Ideas. Modern Cosmopolitan place Japan 128,085,000 99.9% Uniquely unique perceived to be. Far eastern oriental culture South Korea 49,024,737 97.9% Traditional culture along with North Korea, taken few forms from China. Technological One thing to be known is that all the three countries are technologically very advanced countries with most of hi-tech gadgets and electronic instruments coming from Japan & South Korea. Gaming Industry in Japan and South Korea is booming industry as both these countries are virtual rulers of electronic and software development market in the whole world. Japan leads the world in robotics, possessing more than half of the world's industrial robots used for manufacturing. On the other hand South Korea is a major producer of electronics, digital monitors, mobile phones and semi conductors. Both Korea and Japan also lead the pack of highest number of internet users in the world with huge connectivity of broadband internet services. South Korea today has the highest penetration of high-speed internet access to households in the world In the filed of telecommunications also both South Korea and Japan lead the pack with production of hi-tech mobile phones and other gadgets. This is one area where Hong Kong though strong is not comparable to Japan and South Korea. Internet and Landline Users in these countries Country Internet Connection Landline Trends in logistics Japan 69.2 million users 80% of the population Lots of technological impact on net telephony and Voip. South Korea 22 million users 70-75% of the population High speed internet growth coupled with technological has helped logistics in paving new heights Hong Kong 4.8 million users Almost 80% of the population Logistics have shown renewed improvement with global majors like dhl, ups having corporate presence in the place SWOT Analysis Strengths 1. Emerging markets for a product like Sony PlayStation 2. Strong techno-friendly consumers and techno target market Weakness 1. Taxes can be complicated in countries like Japan 2. Tough Competition from rivals like Microsoft and Nintendo Opportunities 1. Making an entry in East Asian league thereby giving a head start to Asian Market 2. Making presence felt in Hong Kong which can termed as bridge between and East and West Threats 1. Rival competition from Microsoft and Nintendo 2. Living up to the expectations of the people which might prove costly if the product is not up to the market 3. Sustenance in the market Micro -environment Factors Now that we have mentioned about various macro issues like Social , Economic etc ,we now present the micro environment factors, the factors which relate to the product, the factors which concern the company the most. One of the fastest growing industries at the moment is the Gaming industry. After the advent of home pc and internet, game industry has arrived at international scene with many people looking for video games. Then, the era of computer games, has begun which is now forwarded by play station phenomena. Gaming using game consoles has become a huge success in both developing markets and developed markets. At the present moment there are three major leaders in gaming consoles. They are Sony and their product of Play Station 3, Microsoft and its product Xbox 360 and Nintendo and its product Wii. The major advantage play station has its new added killer feature of wi-fi wireless networking which on the flip side makes it one of the costliest gaming consoles in the market if the comparisons with xbox and wii were to be made. It also has Blu-ray optical device feature which makes it more attractive proposition than others. As per the recent reports which say that the leader of the pack in terms of market size and market share has been Sony for long time. Another thing to be noted is that Microsoft is fast gaining entry in Asian regions which makes it all more important for Sony to consider one among these three countries as favorable option to add some market size to its own bag. As per the initial reports we can say the market size of Sony although started slowly, it has been gaining momentum and has been climbing on the popularity charts. Thus in this we have covered some aspects of micro-environment factors Final Matrix Table Final ratings Japan South Korea Hong Kong 1. Most Appealing 8/10 8.5/10 7.5/10 2 Immediate Entry Scale Rating 8.5/10 8/10 9.5/10 3. Return of Investment 8/10 8.5/10 8/10 So, on the basis of micro and macro environment factors we have decided to choose one of the three countries which considered PEST analysis as the core issue to judge the criteria. And according to ratings and comments, both South Korea and Hong Kong have favorable chance to make an impact in the whole proceedings. Market Enter Strategy for the product One strategy which the product can use to make a tie-up with the local video and computer gaming companies so that it can get an access to the local market easily and it can have sufficient amount of time to make an impression with local consumers. Another thing is the prime goal of Sony should be to promote Play station as the gaming console device rather than promoting as another entertainment hub. Also while making a tie-up with local market it should promote the product as innovative as possible so as to make a favorable impression with consumers. Thus in this way we have given few ways in which the product can enter the local market. References: 1. Philip K. Sherwood (1998) Market Analysis: Assessing Your Business Opportunities. Washington: Haworth Press 2. Helmut Becker (2001) International Marketing Strategy. Geneva: Pergamon Press 3. John J. Shaw (2004) International Marketing: analysis and strategy. Munich: Routledge. 4. Michael John Baker (2002) the Marketing Book. Hong Kong: Elsevier 5. Roger Bennett (2002) International Marketing: Strategy, Planning, Market Entry and Implementation. Bogot: Kogan Page 6. Nathalie D. Frank (2000) Data Sources for Business and Market Analysis. New York: Scarecrow Press 7. Erdener Kaynak (2005) Sociopolitical Aspects of International Marketing. Chicago: Haworth Press 8. Stephan C. M. Henneberg (2000) The Idea of Political Marketing. Geneva: McGraw Hill 9. George F. Seyk (2002) Marketing Across Cultures in Asia. Copenhagen: Copenhagen 10. Tsang-sing Chan (2003) Consumer Behavior in Asia: Issues and Marketing Practice. Beijing: Haworth Press Read More