Annex products are one of the leading innovative small business organizations in Australia. Their innovative products including the mounting system for iphone is much popular and is available in more than 100 countries. This report will discuss about the international business strategy for entering in the Indian market. Discussion of international business strategy will include the economic drivers, market entry strategy and recommendation of a new business model.
In the recent time, it is becoming more important for the business organizations to become innovative and align their products with the daily lifestyle of the customers. Annex products are one of such innovative organizations that are effectively offering products in line of the current requirements of the customers. It is founded in 2012 by Chris Peters and Rob Ward. The major two products of them are iphone case that also acts as bottle opener and iphone mounting system that mounts the iphone in the time of cycling, running and driving (annexproducts.com, 2018). Both these products are much important in the current daily life of the urban customers. Currently, they are catering to the customers in the Tier I cities where the trend of cycling and running is evident along with large number of iphone users. The major competencies for Annex products are alternate uses for their products such as the iphone mounting system that can be used to mount the devices in different situations. Thus, the customer convenience is given the major focus. In addition, another major competency for them is meeting the current lifestyle of customers that helps them to cater to the customer needs effectively.
The business model of Annex products first started on the crowd sourcing platform Kickstarter. This was mainly due to the reason that Annex products are a startup and was not having the access to the fund needed for operating in the market (Kuppuswamy & Bayus, 2018). However, with the following success of their both products, they have gained financial sustainability. Currently, they are operating in small scales in Australia and already following the export strategy to export their products to different regions around the world. As of now, they are manufacturing in Australia and selling their products in premium to the urban customers. This business model is successful for Annex products due to the reason that it helped them in gaining more funds along with the branding of premium product (Casadesus-Masanell & Zhu, 2013).
However, in the case of entering in the foreign markets, Annex products should change their existing business model to some extent. One of the major changes will be access to finance due to the reason that crowd sourcing strategy will not be applicable in doing global business and it is important for Annex products to have more access to other sources of funding (Drahokoupil, 2014). It is also important for them to have adaptive policies of promotion and marketing in their global business. Annex products also cannot operate in the global with their current strength of human resources; rather they have to go for geocentric staffing.
The major theories that should be considered in advising the prospective international business are PESTLE theories, Ansoff matrix, product life cycle, comparative advantage and porter five forces. All these theories will help in determining the potentiality of the target market prior to entry. PESTLE analysis will help in determining the external business factors that will be faced by Annex products in entering in a foreign country. These factors will be both negative and positive. Thus it will help the organization to design their strategies accordingly before entering in the foreign markets (Ho, 2014). Furthermore, ansoff matrix will help Annex products to determine the business expansion strategy that will be applicable and effective in entering in the foreign country. This is important due to the reason that Annex products should first decide if they are willing to enter the foreign market with their existing products or with new products or if they are willing to further penetrate and increase their market share in the existing market (Hussain et al., 2013).
Product life cycle theory will help to identify the stages where the products of Annex products are currently standing. In accordance to that, they can design their international business strategy (Bakker et al., 2014). For instance, if the products of Annex products are in the maturity stage in the Australian market, then offering the same products in a new country may help them to start from the growth stage. Comparative advantage refers to the advantages that may be gained by Annex products from their host country. These factors should also be determined in order to have the understanding about the competitive advantages to be gained from entering in particular country. Porter five forces will help to determine the industry competitiveness in the country where Annex products are going to enter. This is also important in identifying the challenges that Annex products are going to face in the host market (E. Dobbs, 2014).
One of the major economic theories is the absolute advantage theory by Adam Smith. This theory states that in the international business, some of the countries are having absolute advantage of others in producing particular goods. This is mainly due to the reason that some countries are having more access to strategic resources over others (Noussair, Plott & Riezman, 2013). Thus, it is important for Annex products to select a foreign country in order to gain absolute advantage in producing their products.
Another economic theory is the country similarity theory by Steffan Linder. This states that countries with having similar market trend and pattern often pose more market opportunities for the organizations (Zhuang, Wu & Wen, 2013). Thus, in order to gain further market share and revenue from their similar products, Annex products should target a potential country where they will have markets for their existing products.
Another major economic theory is the global strategic rivalry theory. According to this theory, it is important for the business organizations to enter in the global market for gaining competitive advantages (Cui, Meyer & Hu, 2014). According to this theory, the more countries can be covered, the more will be the probability of gaining competitive advantages by means of economies of scale and more access to finance. Thus, Annex products should enter in the foreign markets to gain more brand value, identity and reduced cost of production, which cannot be done in doing business only in the Australian market.
Another major economic theory is the Porter’s national competitive advantage theory. This theory refers to the competitiveness of the home market that further encourages the firms in entering in the foreign market (Zhang & London, 2013). For instance, if the competitiveness in the local market is increasing along with decrease in the demand in the market, then it is more obvious for the organizations to look out for new markets. Thus, the limited market opportunities for Annex products in doing business within the national boundary of Australia is further contributing them in entering in a new market.
The chosen country is India due to the reason that India is the second largest country in the world in terms of population. Thus the market opportunities for Annex products will be more. In addition, it is reported that by 2018, India is set to cross 10 millions of iphone users in the country (economictimes.indiatimes.com, 2018). Thus the market potentiality of the iphone specific products of Annex products in the Indian market will be more. Another major reason of selecting India is their favorable business environment with having stable political and economical factors. In the recent time, government of India has initiated the “Make in India” initiative, which will further offer benefits and incentives to the foreign companies in manufacturing in India (Pathak, Swami & Nigam, 2016). The chosen product will be the quad lock iphone mounting system. This is due to the reason that with the favorable economic growth of India, urbanization is the increasing at a rapid pace. This urban population is having the need for mounting system for their iphone during cycling and running. Number of alternate uses of this product will further help Annex products to have more market potentiality in doing business in India.
One of the major market entry strategies available for Annex products is direct exporting. This strategy refers to the process of exporting the products to the target country on the basis of the demand. In this case, the manufacturing process will be in Australia and the final products should be transported. One of the major advantages that Annex products will gain from direct exporting strategy is having less responsibility (Gubik & Karajz, 2014). In the case of the direct exporting, Annex products will have less responsibility and risks in operating in the global market. They do not need to invest huge in this case and can cater to the target market according to the demand. However, on the other hand, it should also be noted that initiation of the direct exporting strategy will also have some disadvantages for Annex products. One of the major disadvantages will be increase in cost (Ito, 2013). Exporting the products will involve trade tariffs that will further increase the cost. In the market like India, price sensitivity is a major determining factor and increase in the price will reduce the market potentiality. Furthermore, with direct exporting strategy, Annex products will not be able to cater the target country entirely (Almodovar, Saiz-Briones & Silverman, 2014). This is due to the reason that exporting will be done only one the basis of the demand. It is also not a viable option to export a single iphone mounting system.
Another major market entry strategy available for Annex products in the Indian market is licensing. This strategy involves granting license to a domestic firm in the host country to produce the items. Instead the licensee firm will pay royalty to Annex products and will have the rights to manufacture and market the products in the Indian market (Laufs & Schwens, 2014). One of the major advantages to be gained by Annex products from this strategy is having physical presence in the host market without having to take major risk and requirement investments in the country. On the other hand, Annex products will also gain the advantage of changing their product strategy in accordance to the local market trend and requirement (Eriksson et al., 2015). However, this strategy will also have some major disadvantages for Annex products. They will have to transfer their technology and other competitiveness to the licensee in this case. Thus, the risk of publicizing the core competitiveness is high in this case. In addition, Annex products will not have the direct control over the operation in the host country. This may cause challenges in maintaining the same product quality and standard along with having the same business approaches.
The last market entry strategy available for Annex products is the direct investments. This strategy involves investing in setting up facilities in the host country and driving the business by own. In this case, the operation in the host country will be directly controlled by Annex products (Blonigen & Piger, 2014). The major advantages that will be gained by directly investing in the Indian market is controlling the host country operation by own and thus the standards can be maintained. With investing directly in the Indian market, Annex products will be able to gain the advantages under the ‘make in India” initiative. In addition, this strategy will also help Annex products to control their product strategy and change the approach in accordance to the trend in the local market (Holmes et al., 2013). The products can also be offered in more affordable and competitive costs if they are manufactured in the country. On the other hand, Annex products will face the issue of increased risks due to the fact that they have to invest heavily in the country for their facilities. In addition, directly investing in the country will cause Annex products to face challenges in doing business in India.
The recommended market entry mode for Annex products in the Indian market is direct investing. This is due to the reason that iphone mounting systems in the Indian market are available but the industry is mainly disorganized and there are no known brands available. Thus, directly entering in this market will help Annex products to gain competitive advantage by their branding (Urbancova, 2013). In operating in the Indian market, price factor is important to be considered. Thus, offering affordable and cost effective products will be possible only if the products are locally manufactured. In the future course of business, if the market trend and requirement in the Indian context get changed, then also it will be easier for Annex products to change their product strategy. This is due to the reason that they are having their operating facilities in India and will initiate the change process in less time (Meihami & Meihami, 2014). The business model of Annex products should be designed in such a way that it will be able to offer diverse products to the customers in future. India is one of the largest markets for mobile devices with having the presence of huge number of brands. Thus, having the manufacturing facility in the Indian market will provide Annex products the flexibility to come up with the mounting systems for other models also. This will ensure that the future business potentiality of Annex products will be secured in the Indian market.
Annex products can also make their Indian operation as global export hub due to the reason that average cost of production in India is less to that in Australia. Therefore, with having the manufacturing facility in India, Annex products will be able to manufacture here and export to different countries. This will enhance the profitability of Annex products. The major objective of the business model to be followed in India is to increase the diversity of the product portfolio along with maintaining the price (Schultz, Salomo & Talke, 2013). Currently, the business model of Annex products is applicable and effective for the domestic market of Australia, but it cannot be to cater the global market. On the other hand, the business model to be followed in the Indian market will be effective in initiating global business also. However, it should also be noted that business operation in India will only get succeed if the diversity of the Indian social environment can be maintained. India is having huge diversity in terms of socio-cultural factors along with having different requirement and expectations (McNally, Durmusoglu & Calantone, 2013). Thus, the business operation of in India should have more diverse product portfolio compared to the operation in Australian. Thus, offering diverse products will help Annex products to cater to not only the Indian market but also catering the global demand.
There are number of resources required for implementing the business model by Annex products. One of the major resources required is human resources. The existing human resources are not enough to drive the business in the host country (Gupta, 2013). Thus, Annex products should initiate recruitment process to have news set of employees in the Indian business. However, it is recommended that they should have geocentric approach of the staffing due to the reason that this strategy will enable to have employees from both the home and host countries (Tiwari, 2013). Annex products is having the requirement of employees from the both the countries due to the reason that home country employees will able to maintain the existing organizational approach and host country employees will be able to determine the local trends. However, in this case, the major risk for Annex products will be the cultural miscommunication between the employees from two countries. This may affect the productivity and efficiency of the Indian operation.
Another important resource is marketing capability. In the Australian market, Annex products follows intensive marketing strategy focusing more on generating positive word of mouth. However, in the Indian market, marketing strategy should be made more extensive in order to have maximum reach in the market (Nobre & Silva, 2014). Hence, Annex products are having the need of marketing expertise in order to design the integrated marketing communication strategy for the Indian market. However, in this case also, the major issue that will be faced by them is catering to the diverse set of customers in the Indian market with different marketing mediums. This will increase their cost of marketing along with the increasing the risk of cultural miscommunication by promoting socially unacceptable views.
Setting up manufacturing and operating facilities in the Indian market will involve huge cost and it cannot be sourced by crowd sourcing. Thus, Annex products should have other sustainable source of funding in terms of IPO, loans or external investments. This will help them to have seamless flow of funding for their development and further investment in the Indian market (Staniewski, Szopinski & Awruk, 2016). In addition, the more reliable and sustainable will be the funding sources, the more effective will be the business operation in the Indian market. However, the major risk for them will be emergence of unfavorable market situation in the market. This may lead to business loss and incapability to repay the loans or external investments. In case of the organizational structure and processes, Annex products should have more global approach including selection of the candidates from different countries in the upper level management. This will help in having globalized structure and proper coordination of different cultures. However, the major risk to be faced by them is lack of consensus among the upper level management due to different approaches of the managers.
Information for doing this assignment is collected from different sources including the news articles, journal articles and official website of Annex products. Though there are number of information sourced from these sources but it is still not enough. This is due to the reason that information regarding the existing business and marketing strategy of Annex products is not available. However, the sources used for this assignment are reliable and valid due to the reason that news articles are of renowned news publishing house and journal articles are peer reviewed and are of authentic and renowned authors.
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