Table of Contents

2.1 Analytical Framework 1

2.2 Internal Analysis 2

2.3 External Analysis 3

3.1 Internationalization Options Evaluation 12

3.2 Expansion Strategy Justification 13

Reference 15

 

 

  1. Introduction

As a startup in 1990, Elecdyne is a Japanese small-to-medium-size technology company that is specialized in digital products ranging from televisions to MP3 players. Currently it has only 100 employees and struggling against the stiff domestic competition although some of its products use technology licenses from a few foreign countries with prominent price advantages compared with other counterparts in the industry. At this moment, Elecdyne is considering expanding their business internationally to retain profit stability and further growth momentum as well.

 

This report aims to figure out where Elecdyne is ought to internationalize to and the feasible way of expanding internationally. Based on a thoroughly combined SWOT and PESTL analysis, I will recommend how to choose a country for Elecdyne to internationalize to among China, UK and Mexico by using Japan as a control subject. To begin with, an analytical framework consisted of internal and external analysis will be conducted to tap into the overall environmental scanning of Elecdyne. Secondly, international strategy will be formulated and justified based on the country that is singled out. Among other factors, Elecdyne’s urgent task is to tackle cost minimization that is closely related to internationalizing. The second most crucial factor is technological access as well as accessing technological advance within a specific country. In the meantime, Elecdyne needs to consider the size of the markets that will be targeted. In addition, economic political and risk factors should be mulled over as the company cannot take high risks given the situation. As a supplementary part, I will evaluate the culture-fit factor that plays a big role in determining if the organizational conflict will occur due to differences between the Japanese culture and the host culture by resorting to Hofestede’s cultural dimensions. A weighted analysis will be applied according to the importance of these criteria. Lastly, a brief conclusion will be provided in the report.

 

 

  1. Overall Environmental Scanning

2.1 Analytical Framework

The framework that I will use is a combination of the SWOT and PESTL analysis. First and foremost, the SWOT analysis aims to evaluate Elecdyne’s the strengths, weaknesses, opportunities and threats on its way of internationalization. The internal strengths and weaknesses scanning will be conducted. Secondly, the PESTEL framework that aim to analyze opportunities and threats will cover sections such as political factors, economic factors, social/cultural factors, technological access and legal factors. Thirdly I will come up with the key various Internationalization criteria, break down these factors respectively and assign various weightings based on their importance to Elecdyne’s international expansion needs over the next five years.

 

In determining the criteria of selecting a foreign country to enter, I will compare optional countries with Japan as a control subject. When conducting SWOT, if data reflecting certain internationalization factors is superior to the same ones from the Japanese market, it will be rated from one to three star (*) symbols and if it is inferior to the same data that features the current Japanese market, it will be rated one to three cross (x) symbols. If the data from a candidate country is equivalent to the data from the host country, not a single symbol will be rated. In short, the star symbols represent an opportunity and the cross symbols indicate a threat. In the summary table, all positive or negative symbols will be multiplied by the given weight of the factor and added up in an attempt to single out the most viable country that represents the best entry opportunity for Elecdyne. As a final quantitative presentation, the scores will also be averaged within each internationalization factor.

 

2.2 Internal Analysis

In light with the case study, Elecdyne’s strengths and weakness are as follows.

 

Strengths

Weaknesses

  • Advantages in retail price due to cost-effectiveness 
  • Proven resiliency arising from the fact that Elecdyne has so far survivedthe competitive market.
  • Good awareness in technologyinnovation.
  • The Management team is proficient in English, paving a good way for business internationalization
  • The company has only 100 employees and cannot afford too many risks in overseas expansion.
  • Pressure for the need to pay for the licenses.
  • High wage rates in Japan relative to developing countries.
  • Low possibilityof hiring fresh research talents due to the size and vision of the company.
  • Low product differentiationand immature brand branding.
  • Rising employee turnover rate.
 

 

 

Weighted internationalization criteria are listed as below.

Criteria/Factors

Weights

Cost reduction

8

Access to technology

10

Market size

5

Local risks (political/legal)

1

Cultural-fit

2

 

2.3 External Analysis

Country overview of Japan

According to CIA factbook (2011), after its defeat in World War II, “Japan recovered to become an economic power and an ally of the US.” During the next three decades that followed, Japan has experienced a major economic slowdown in the 1990s whereas still keep the economic powers in Asia. In 2010, the purchasing power parity in Japan was $4,141 trillion, ranked the fourth followed by EU, USA, and China. GDP in Japan was $32,600, ranked 40th in the world. Average GDP fluctuations in 2008 and 2009 in Japan were -4.23% and -1.13% respectively (Foster, 2010). Before worldwide financial crisis, Consumer Confidence was around 48 in Japan, and was 40 in February 2010. The fact that Japan has very high purchasing power but fair per capita indicates that the Japanese consumers are more willing to spend more money. Japan came as the third-largest economy in the world in 2010, surpassing China in 2001. Moreover, government stimulus played a big role in boosting the economy recovery in the first half of 2010 (Greenberg, 1993)

 

From the standpoint of cultural dimension values, Japan ranked 50 in the Power Distance Index; the world’s average was 55. In high power distance cultures there were strong dependency relationships between different people such as bosses and subordinates. To Japanese, behavior that recognizes hierarchy is as natural as breathing. Japan ranked 43 in the Individualism. Therefore, Japan was recognized as a collective culture while the world’s average was 40. In collective cultures, identity was based on the social network to which one belongs. Regarding Masculinity Index, Japan ranked 91, compared with a world’s average of 48. As one of most masculine countries in the world, achievement and success was very important in Japan. Higher ranking in the Uncertainty Avoidance Dimensions meant that people did not like uncertainty or ambiguity and tried to cope with it by making rules and sticking to prescribed behavior. Lastly, Japan ranked 78 in long-term orientation (Gillis et al, 2010). Consequence of long-term orientation is that there is perseverance and thrift in the society. Relatively high Power Distance Index, high Masculine Index, and high Long-Term Orientation indicate that Japan is a competitive society and people work very hard and fellows want to be recognized as successful ones with good social status.

 

Country overview of UK

Abiding by the common law system, the United Kingdom follows” nonbinding judicial review of Acts of Parliament under the Human Rights Act of 1998” (CIA factbook, 2011). It is well known that the UK’s strength depleted during two world wars and the 1930s witnessed the Great Britain in reforming itself into a modern and prosperous nation. As a leading trading power, the United Kingdom is dubbed as the third largest economy in Europe. Nowadays, statistics have proven that UK sales market an ideal wet bed to buy up residential and commercial properties as a good investment strategy. In the meantime, although there was a reduction in mortgages counts that are approved, the 2011 leading figure remains healthy partly because of “large amount of re-mortgaging facilities now being approved.” (Michael, 2008)

 

From the standpoint of Cultural dimension values, Britons sit in the lower rankings of power distance, which means the society believes that “inequalities amongst people should be minimized.” Therefore, it is fair to say that doing business in UK will enjoy a sense of fair play that is driven by the belief that employees should be treated equally. In Individualist societies, people are supposed to look after themselves. And UK is such a good example country that is among the high of individualistic scores. For instance, kids are taught to think for themselves at an early age, paving the way for the rise of “a rampant consumerism and a strengthening of the ‘ME’ culture.” (grett-hofstede.com) Britain is a masculine society indicated by the index of 66 in the masculinity dimension. Moreover, low index of Uncertainty avoidance shows that British feel comfortable working in ambiguous situations. Last but not least, UK is apparently a short-term oriented society indicated by the index of 25. Therefore, Britons don’t have money saving habits and focus on quality future results in the way that they tend to quick purchase decisions in digital products (Keough, 2002).

 

Country overview of Mexico

According to CIA factbook (2011), “Mexico came under Spanish rule for three centuries before independence early in the 19th century.” The elections in 2000 symbolized the first time the Mexican Revolution defeated its opposing party in government, that is, the Institutional Revolutionary Party. Fortunately, the Spanish-speaking country is operated under a free market economy, which contains a assort of modern and old-time industry and agriculture. It is worth noting that the 2008 energy reform passed by the government effectively pushed Mexico’s exports. Faced with the global economic downturn, the country has to deal with many economic challenges, such as “improving the public education system, upgrading infrastructure, modernizing labor laws, and fostering private investment in the energy sector.” (CIA factbook, 2011)

 

When it comes to cultural dimension values, Mexico is a hierarchical society in which people easily accept a hierarchical order and everybody has a place to fill. Interestingly, Mexico can be seen as a collectivistic society manifested by the close long-term commitment to group in the form of a family or extended relationships. This indicates the crowd effects in buying decision making. In countries such as Mexico, people “live in order to work”, managers are expected to be assertive and attractive (CIA factbook, 2011). Meanwhile, Mexicans tend to have a high preference for avoiding uncertainty. In these cultures an emotional need for rules is needed and showed by the concept that time is money and hard-working people.

 

Country overview of China

For centuries China stood as a leading civilization, outpacing the rest of the world in the arts and sciences (CIA factbook, 2011). However, as early as 1990s, China has increased its global expansion as well as cross-international organization collaboration. Scott (2009) pointed out that the status of China’s economy would be a huge interest to many companies around the world. In addition, China has, by leaps and bounds, focused on urbanization, thus converting 45% of its rural population into lifetime city dwellers. From the perspective and technology development and infrastructure construction, China has accomplished a lot, evidenced by the growth of Internet users whose number has increased from 100 million to 400 million.

 

Culturally speaking, China is a society that “believes that inequalities amongst people are acceptable” (CIA factbook, 2011), thus having relatively high power distance index. It is more of a collectivist country than a individualistic one, which means relationship between co-workers is cooperative. In terms of uncertainty avoidance, Chinese people don’t like dealing with ambiguity. Moreover, China has extremely high value of long-term orientation, thus making themselves trust government more than spiritual image such as God (Fu and Richard, 2010)

  • Detailed external analysis dataand summary table are as follows.

Political factors

 

Japan

UK

Mexico

China

Political risks (1X)

* = positive

x = negative

       

Government type

Parliamentary government

Parliamentary democracy

Federal republic
x

Communist socialism   x

Political instability

3.8

3.5   *

6.1   x

3.6   *

Labor freedom

82.4

85   *

61.9  xx

58  xxx

Average

0

0.67

-1.33

-1

 

Economic factors

       

Economic risks (2X)

* = positive

x = negative

       

GDP (PPP)

4.15 X 1012

3.88 X 1012  x

1.46 X 1012  xx

0.72 X 1012  xxx

National competitiveness

4.33

2.29  xx

2.56   x

2.50   x

Flows of FDI

24,418

20,392

21,949

40,324  ***

Government surplus/deficit

-5.6

-4.3  *

-0.1  ***

-0.7  ***

Tariff barriers

3.6

1.1  *

9.2  xxx

13.9  xxx

Average

0

-0.4

-1.2

-0.4

Cost reduction (8X)

* = positive

x = negative

       

Hourly average compensation costs (USD)

$16

$14.5  *

$3.5  ***

$ 2.8  ***

Firing cost (ranking)

4

16  x

52  xx

91   xxx

Flexibility of wage determination

5.8

5.7

4.8  x

5.32

Corporate Tax

40.7%

33%   *

30%   *

35%   *

Average

0

2

2

2

 

Japan

UK

Mexico

China

Market size/potential (5X)

* = positive

x = negative

       

Consumer electronic products growth

-0.5%

2.8%  *

4.6%  **

7.3%  ***

Financial market sophistication

4.9

6.3  ***

4.6

4.0  x

Size of main Trading Union

ASEAN 10 members

EU 27 countries
**

NAFTA 3 countries  xx

ACFTU 38 countries  ***

Average

0

10

1.7

-1.7

 

Social/cultural factors

       
 

Japan

UK

Mexico

China

Cultural-fit by Hofstede’s model (2X)

* = positive

x = negative

       

Power distance

54

35 x

81 ***

80 ***

Individualism

46

89 ***

30 x

20 xx

Masculinity/femininity

95

66 xxx

69 xx

66 xxx

Uncertainty avoidance

92

35 xxx

82 xx

30 xxx

Long-term orientation

80

25 xxx

N/A

118 **

Average

0

-2.8

-0.8

-1.2

 

 

Technological factors

       
 

Japan

UK

Mexico

China

Technology access (10X)

* = positive

x = negative

       

Domestic spending on R&D

3.44

1.97  xx

0.37  xxx

2.35  x

Availability of latest technology

9

12  *

79 ***

18  **

Internet users

72

16  xxx

73

6   xxx

Average

0

-13.3

3.3

-6.7

 

 

Legal factors

       

Legal risk (1X)

* = positive

x = negative

       

Intellectual property protection

5.4

5.3

3.0  xxx

4.0  x

Soundness of banks

5.0

4.1  xx

5.7  **

5.2  *

Legal rights

7

9  **

8  *

6  x

Average

0

0.3

0.3

-0.3

 

  • Summary table

Criteria

Japan

UK

Mexico

China

Cost reduction

0

2

2

2

Access to technology

0

-13.3

3.3

-6.7

Market size/potential

0

10

1.7

-1.7

Political risk

0

0.67

-1.33

-1

Legal risk

0

0.3

0.3

-0.3

Cultural-fit

0

-2.8

-0.8

-1.2

Total

0

-3.13

5.17

-2.9

 

  1. International Strategy

3.1 Internationalization Options Evaluation

Based on the above data, the most viable country to internationalize to is Mexico with a total value of 5.17 after environmental scanning.

 

Currently, the company is faced with the decision of internationalizing to Mexcio and three ways such as joint ventures, mergers and acquisitions and Greenfield site, which will be evaluated accordingly and specifically in compliance with Elecdyne’s strategy.

 

Joint Venture

Merger and Acquisition 

Greenfield Site

Cost reduction (8X)

Evenly cost sharing

*

Potentially high cost due to foreign country adaptation

x

Potentially high cost due to foreign country adaptation

x

Access to technology (10X)

Risks of partner’s stealing core technology

xx

Strong potential

*

No technology will be accessed

x

Market potential (5X)

Good ability to access new markets

*

Good ability to access new markets

*

Good ability to access new markets

*

Local risks (1X)

Low

**

Bigger local risks

x

The biggest risks among 3 options

xx

Cultural-fit (2X)

Possible conflicts

x

Possible conflicts

x

Lower conflicts

*

Total

-7

4

-13

 

3.2 Expansion Strategy Justification

Based on the above analysis, Elecdyne should expand into Mexican market by applying Merge and Acquisition strategy with local counterparts for the following reasons. First, the company will stand a better chance to entering Mexican local emerging markets. Secondly, there’s a strong potential technological availabilities in Mexico. And lastly, there will be likely fewer conflicts arising from cultural difference between the two countries.

 

  1. Conclusion

In a nutshell, to improve the status quo, Elecdyne is recommended to internationalize to Mexico via merging and acquiring with local companies based on a thorough analytical framework featured by SWOT and PESTL analysis

 

Reference

Anonymous, 2011, China, Geert Hofstede accessed from http://geert-hofstede.com/china.html, Dec, 2011

 

Anonymous, 2011, Mexico, Geert Hofstede accessed from http://geert-hofstede.com/mexcio.html, Dec, 2011

 

Anonymous, 2011, United-Kingdom, Geert Hofstede accessed from http://geert-hofstede.com/ united-kingdom.html, Dec, 2011

 

Country Overview of Japan, 2011, CIA factbook, accessed from https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html, December 29, 2011

 

Foster, J.. 2010. There’s No One Way To Pay Technical Staff. Agency Sales, December 1, 10-14.  http://www.proquest.com.proxy.emerson.edu/ (accessed Dec 31, 2011)

 

Fu, F., K. Richards, D. Hughes, and E. Jones. 2010. Motivating employees in international settings: The Relative Influence of Attitudes, Subjective Norms, and Self-Efficacy. Journal of Marketing 74, no. 6, (November 1): 61.  http://www.proquest.com.proxy.emerson.edu/ (accessed December 30, 2011).

 

Greenberg, Herb.  1993. Understanding what motivates people. Agency Sales, November 1, 7.  http://www.proquest.com.proxy.emerson.edu/ (accessed December 30, 2011).

 

Gillis, Marge, and Katherine Beauchemin. 2000. “The Ideal Rep.” Pharmaceutical Executive 20, no. 12: 52. Business Source Complete, EBSCOhost (accessed December 30, 2011).

 

Klaus Schwab, 2009, The World Competitiveness Report, World Economic Forum, Switzerland  from https://members.weforum.org/pdf/GCR09/GCR20092010fullreport.pdf (accessed December 31, 2011)

 

Keough, John J. 2002. Here’s what makes entry strategy stand out. Industrial Distribution, April 1, 7.  http://www.proquest.com.proxy.emerson.edu/ (accessed December 29, 2011).

 

Michelle Scott, 2007, Economic factors in China, Travel.com, accessed from http://www.travels.com/destinations/asia/economic-factors-china, December 30, 2011.

 

Michael, K.. 2008. Conquering the Fear of expansion. The American Salesman, August 1, 7-12.  http://www.proquest.com.proxy.emerson.edu/ (accessed December 31, 2011).

原文链接:Global business