International Business Model Innovation: Expanding Mark And Spencer’s Market In Australia

Rationale

Discuss about the International Business Model Innovation.

First founded in the year of 1884, Mark and Spencer, popularly known as M&S , is a leading multinational brand, that deals with the production and sale of clothing brands, home products and various kinds of luxury and food products. Headquartered in UK, the much esteemed organization, has planned to expand itself beyond the limited confines, for increasing the size of the consumer market. In the current world of globalization, an organization can earn enormous amount of revenue if it chooses to invest in diverse locations, as this will help the company in attaining wider recognition among the masses. Keeping this in mind, Mark and Spencer has decided to invest in a host of countries, especially the West European and the Mid Western countries. However, Mark and Spencer should invest in a country that will help the company in earning quick revenue, with less legal and political complications (Hair et al., 2014).

According to the report submitted by the World Bank, Australia is ranked as the 10^th easiest country for doing business. The reason for choosing Australia is many. Most importantly, the nation provides a business environment with extremely low risk and high growth potentiality, a talented workforce which is available at an extremely affordable rate, and further it supports high class R & D opportunities for the business organizations. Like any other British organization, M & S will find it a very lucrative option to expand its market in Australia, because both the countries will enjoy almost identical custom and culture, language, and legal practices (Productivity commission, 2014). In addition to these factors, Australia also offers an innovative economy, whereby it becomes the favorite spot of destination among the business organizations. One of the biggest advantages of investing in Australia, is that the country has easy and convenient access to the Asia Pacific zone, and as a result a large number of consumers will be drawn to the M & S products. Australia , as a country, excels in diverse kinds of industries, and hence although M & S chiefly revolves around retail trade, in future, if it intends to invest in other forms of industries, Australia can be a favorable place for investment. Australia already is one of the most populated countries of the world, and as such the demand for the basic items of daily life, which M & S deals with, will always be in huge demand among the consumers. However, although M & S has a huge potential for creating a big consumer market in Australia, it must ensure that it adapts its business to the Australian buying habits, cultural traits, religious beliefs, average income group, etc (Ruddick, 2014).

Analysis of Australia for Business

Rationale:

The rationale of the following report is to explore and discuss the factors that can help M & S in successfully operating its business activities in Australia. As a foreign nation, M & S may encounter several difficulties in terms of risk or employee management or selection of the suitable business structure. Hence, the following points should be considered before expanding its market in Australia.

The greatest challenge for any organization to expand itself globally, is to be able to properly meet the challenges of a diverse cultural requirement. However, Australia is a multi cultural nation which implies that the nation is a home to people belonging to diverse cultural and ethnic backgrounds, and this implies that M & S can offer its varied service to a varied group of consumers. Australia can provide the company with greater possibility of innovation as well as experimentation with the products being manufactured. However, before starting a business in Australia, the M & S authority has to ensure that it registers the company, and has sufficient knowledge about the possible legal obligations, which it has to abide by, in Australia. Australia has always been a very familiar place to those who intend to start up a business or those who desire to extend their branches in Australia. However, there are certain legal requirement which M & S will need to abide by. For example, M & S should desirably have a local partner or some sort of local connection before starting up the business. Since M & S has already a company structure of its own, it will encounter less difficulty in entering the business market here. Unlike many other countries, Australia is very strict a nation when it comes to ensure that any sort of money laundering is talking place in the name of the business (Campin et al., 2013). For this reason, M & S has to open a bank account in their country itself. Australia, as a country is not only very strict about financial transactions, but also about the transparency of the employment rules. There are various rules and restrictions imposed on the employers, whereby even M & S will be obliged to recruit its employees very discreetly, ensuring the most diligent and well-qualified ones are being selected. Further, to support the issue of workplace security, M & S will have to follow certain set of regulations. Australia is not only a diverse country in terms of multiculturalism but also in terms of the capital requirement in different regions of the country. Some places are more expensive than others, for example, Sydney is more expensive than Adelaide, and the company has to make sure that it selects a country discreetly before it chooses to invest in a particular region. There is a website of Australia that can assist M & S in selecting the appropriate region in Australia for investment. This will not help M & S in selecting an appropriate region, which will help to understand which region will require less capital, but it will also help the company enjoy the benefit of laborers with low wages. For example, cheaper workforce is easily available at Adelaide, as compared to Sydney. In addition to everything else, if M & S still faces doubts about where to invest or how far their retail business is going to be beneficial in Australia, they can always seek the help of the Australian official page, Doing business in Australia. Although this page was last updated in the year of 2011, the information is quite accurate and can help the company to understand the business environment of Australia successfully (Kent et al., 2014).

Recommendation for Entry Mode

Recommendation for Entry Mode:

While any organization is aiming to enter a new market, in a foreign country, it can be a very risky decision, as it may not earn the company earn sufficient recognition and it may end up in suffering huge and considerable loss in a foreign market. Hence, M & S will have to include in their expansion strategy, the suitable plan as to which entry mode is it going to choose. In other words, there are various ways through which a company can enter a foreign market,- through export or investment, or by contractual means. M & S can adopt the Joint Venture strategy, while investing in the foreign market of Australia. M & S is a very internationally acclaimed brand, it is indisputable that it will be widely popular among the Australian masses as well. However, while opening as a new and fresh brand in the Australian consumer market, M & S can enter into a joint venture with some retail chain store, and it must make sure that the chosen store is a brand in  itself, so that the M & S brand introduction through the store name can become an instant success at once (Parker & Praag, 2012). There are various famous retail chains to be found in Australia, such as Coles Supermarkets Private Limited, Myer Ltd, Big W , Caltex Australia, and many more. M & S should invest in such retail store chains, as this will provide easy and swift access to resource and market , will reduce any sort of political risk, or any form of legal complications that can arise, if M & S has to work independently in a foreign market. Besides, even great international brands such as Gucci , Bulgari and others also have opened up new stores since the year of 2012, by tying up with such famous retail chain stores of Australia which helps the companies to gain competitive advantage in a new market (Laufs et al., 2014). One great advantage of the joint venture strategy will be that, having tied up with a local or a native organization, will help M & S lower down any sort of economic or political risk. Further, this will also enable the company in getting easy public acceptability among the Australian consumers. One of the biggest advantages of the Joint Venture strategy is that it will help the company in getting local workforce, at a much cheaper rate, and further hiring the local workforce will enable the organization to avoid the possibility of any sort of cultural conflict. Further, this strategy will assist the company, in knowledge transfer whereby M & S will get sufficient knowledge as to how to improve the performance in the local market of Australia. This strategy also provides a company the risk sharing benefit, and this is indeed important as M & S is going to make a huge investment, and so it is advisable that it has someone to share its risk and failure possibility with. Plus, as a new and emerging organization in Australia, M & S may find it difficult to have a comprehensive knowledge of the workplace culture, customer requirements and preferences and infrastructure for expansion. Forming a Joint Venture with some local reputed organization, will assist M & S in getting convenient access to the distribution channels as well as the customer bases.  While forming the Joint Venture strategy, the two organizations have to  enter into an agreement, either for a specific period of time or for a long time. Keeping in consideration, the uncertainty of making gain in a foreign country, and especially the recent failure of M & S, in its international trade in India, the company should enter into an agreement for a specific period, and if this yields it enough benefit, it shall continue in future (Choi et al., 2013).  However, there are sufficient risks associated with Joint Venture strategy as well, and it may happen that the strategy is not well-formulated by the two organizations, or due to proper planning, it could not be successfully implemented. Hence, M & S must pay proper attention to the management process of the business. As both the countries merge to work on one goal, they must accept and respect each other’s business perspectives, rather than showing two opposing styles of approaching a problem. In absence of efficient business decision, the whole process of business may slow down, causing a huge failure for M & S (Killing et al., 2012).

Marketing and RND constructions:

Global expansion in business is not altogether a very easy process. It can be lucrative, if it can be implemented properly, otherwise it may land the company in trouble (Menkveld, 2013). Hence, it is always advisable that an organization, before investing an enormous amount in a foreign market, invests much time in researching the possible risks, political obligations, consumer preferences for the product to be sold, and other relevant issues adequately (Lunt et al. 2014). The foremost point that M & S must remember while doing business in Australia, is that it might face competition from local brands, such as Myer or Coles, which have already established themselves as eminent brands all across the globe. In fact, the famous departmental store David Jones, was recently in the news for having shown the best possible growth in sales, by as much as 12.2 %, and in last fifteen years, it has made the biggest profit in Australia (Lages, Mata & Griffith, 2013). However, since M & S is already an international brand, it has high prospect of getting easy recognition among the masses. However, it will have to focus more on innovative and international methods of production, to get easy acceptability among the consumers. Since, M & S is a foreign UK based brand, in the primary stage of its entry into the Australian market, it can make use of Australian logos and favorite symbols that will help it to get adapted to the Australian market (Grant, 2015). For example, Australian people will love to wear Koala bear or Kangaroo imprinted shirts, or casual wears having a sentence written about Australia. Again, since Australia is a multi cultural region, diverse products can be sold in the Australian market, each one satisfying the need of the consumers of each ethnic group (Martens, R., Matthyssens, P., & Vandenbempt, 2012). This offers a chance for a larger and more diverse market for M & S. Further, recent study suggests that there is a larger demand for luxury products among the emerging wealthy section of the Australian society. Hence, appropriate promotion and advertisement strategy can largely benefit the organization. M & S must understand that in starting a new venture in a foreign country, may pose potential risks for the company, and hence it must have a proper team for risk management, for identifying the risks as well as mitigating the potential harm that can be caused by it (Wu et al., 2013). The Australians are although less formal and more casual about their business dealings, they are highly punctual and productive people. The workforce is usually considered to be upright and they get a leave of 20 days only, and this implies that investing in Australia, means getting an access to an efficient and highly professional workforce. Brisbane, Hobert are two of the cheapest places in Australia. Therefore, M & S can start their business in these places, as it will require less capital and will help the company to get cheaper workforce as well (Bertay, Demirgüç-Kunt & Huizinga, 2013). Sydney, Melbourne are two of the most important tourist destinations of Australia, and as it draws a huge number of tourists each year, opening up the stores in these places can prove to be a highly profitable idea. This will imply that a large number of tourists will turn up and consume the M & S products, apart from the Australians. However, M & S must make wisely choose between cheaper cost of production and higher rate of profit, at the beginning (Amit & Zott, 2012). As a new organization in Australia, it may initially opt for cheaper places, and gradually evaluating the annual profit, may think of expanding its business to the more affluent towns of the nation.

Advancement of technology is one of the major ways to increase the productivity for a business organization (Oraiopoulos, Ferguson & Toktay, 2012). M & S is not exceptional to that. As per the current economic scenario, business organization such as M & S gets many opportunities to implement limited workforce at the production department by using business productivity software. With the help of this specific software, the business experts would be able to earn more production in limited time by maintaining a chronological record on it (Slack, 2015). As a result, the workforce manager of this organization can involve the workers in other department to provide effective service to the customers.

In addition, an effective communication should be maintained between the suppliers and the production managers in order to enhance productivity within M & S. If the suppliers fail to supply the product within time to the organization, the rhythmic process of productivity would be hampered definitely (Hillestad & Berkowitz, 2012). . As a result, the customers’ service department would have to face numerous challenges in order to maintain a balance between the demand and supply of the product. In order to overcome this kind of situation, maintaining effective communication between the suppliers and the production managers is highly important.

While working in a foreign country , a company must pay enough heed to the question of cultural diversity. As an UK based firm , M & S will be acquainted with a British workforce, the cultural traits of whom will be highly distinguished from that of the Australian counterpart (Ritala, 2012). As M & S is going to enter a Joint Venture with an Australian native brand, it will have to interact and operate its business activities with Australian mangers, employees and retailers. Keeping this point in mind, the M & S authority must remember that they are highly punctual people and they will always respect punctuality and accuracy in every negotiation and business dealings (Barney, 2012). As M & S is an UK based company, it will have to make itself familiar among the Australian people. Hence, it must hire more Australians in their stores, rather than having only UK employees (Kim & Mauborgne, 2014). Hence, giving the employees short term benefits, rather than the long term ones, can be a fruitful idea (Yoo et al., 2016).

Conclusion:

Australia is one of the most populated countries in the world, and as highly multicultural it is, its business market has high potential in future. However, it must be remembered that much of the success of M & S will depend on the quality of its customer service. If it can offer valuable service to the Australians from various cultural communities, it can enjoy a long term success. However, it must make sure that its production and consumer satisfaction does meet the international standard as promised by the brand. M & S, however, should aim to serve the average group of consumers, and must not make its products overpriced at the beginning (Thomas et al., 2013).

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