Question:
Discuss about the Children and Families in Social Environment.
Encom Motorcycles, a manufacturer of motorcycle based in Japan who designs a chargeable electric motorcycle which is a battery powered one. They have successfully launched their product in Japan and now bearing in mind the exporting of product to United States. In this regard the report is being made to advice Encom Motorcycles the pertinent opportunities and threats in a political based environment, the important opportunities and threats which relates to demographics, socio-cultural differences in United States, the technological issues or developments that may affect the venture. The relative research has been made in accordance and analyse the mentioned opportunities and threats involved in exporting the product in US, various threats which may affect the venture to make sure the proposed idea of venture is prove to be beneficial for the company or not. The methods and models involve while forecasting for the venture are discussed in the report with the help of given lectures with the assignment (Jang et al., 2014). Lastly conclusion has been drawn whether the idea of exportation in United States is of relevance or not.
The political factor involve in an industry setup plays an important role as it decides the future aspects of an industry in that country. There is different political system which exists in every country and they change frequently by the time. Their political setup has effective rules of law which seems to be fair, flexible and transparent. So it makes it easier for the foreign industries to give a thought about exportation in United States. The policies made are influenced by its massive political factor and economic factor; these factors can range from corruption to various uncertainties in regard to tax, legislation, terrorism etc. Due to such factors it attracts criticism from international industries as these affects the global policymaking by dominant factors which directly relates to war. Such circumstance increases the threat of terrorism and sours the foreign relations which ultimately create misunderstanding between countries (Booth, 2015).
The opportunities in the political regulatory environment that may affect Encom Motorcycles exportation is that United States political policies are much fair and transparent that it doesn’t create any ruckus to foreign investors even to give a second thought about investing in the country. The transparency gives a clear thought of what can affect elements of industries in various areas also the measures can be professed regarding corruption which helps in drawing out surveys where areas of corruption can be spotted and market policies can be interpreted depending upon the legal system as a whole (Grant, 2016).
Threats and risks present in political regulatory that can interfere with the business operations of Encom Motorcycles in United States. These risks hard to quantify and carry unpredictable probabilities and are categorized into capital controls, government intervention, terrorism, tax and civil disturbances. These political risks will then evaluated on the basis of their level of intensity that how much they affect business. These risks are categorized below:
These are different elements of political risk which includes tax discrimination as it affects a company’s return on investment, few unfavourable policies which affect marketing strategies. The policies may affect the daily operational activities and the business’s start-up costs, taxes, standards, employment law and contract enforcement.
The tax implications on Encom Motorcycles in US are a safe haven. US tax laws are encouraging for foreign manufacturers as at times they provide tax free interest to foreign manufacturers. The capital gains from their investment might be tax free or can subject to 15% rates of tax. But on the other hand these laws can be prove to be a tax trap for those manufactures who are not well advised in tax forms. There is graph which denotes the tax implications for a manufacturer in United States it defines how taxes would have an impact on cost of the goods, its effect on production, taxes effect the pricing of products in the country, it enables the manufacturers to forecasts their money to be raised while commencing the business and its overall welfare effects. US tax laws are lenient towards foreign investors in manufacturing industries as they allow them liberal tax policies and treaties to avoid double taxation but they need to be dealt in a professional manner in order to avoid traps and complexities which cannot be understood by casual personnel but take advantage of the policies which offers tax benefits to manufacturers.
Basically the need to understand a market’s nature and how the social combinations change by the time being in. The demographic statistics taken of an average person in terms of income, sex, age, religion etc. these variables decides the potential markets for foreign companies that where to target and position their product (McFarlin, 2014). Markets are not same between and within countries so the assumptions made in the context won’t be of any help. There is a need to study properly the demographics and prepare sample data which covers all the variables affecting market, the study gives a clear idea that what product should be offered to each class of people and the target market (Garbarino, 2017).
In United States the reality of demographics is its youth or being more specific is its future and has a long way to go in terms of diversification. The nation’s changing demography provides foreign manufacturers a greater connectivity in US economy. The fundamental increase in population leads to economic growth and create many opportunities in business terms as demographics taught business to distribute their channels by targeting customer on variable basis for example if Encom Motorcycles target customer on the basis of income then they need to make a survey and consider sets of distribution of income starting from lower level of income to higher level so it makes easier for the manufacturer to understand the factors and make marketing strategies accordingly (Ahorlu, 2015).
Whereas the socio-cultural and demographics in Japan has multi-ethnic background as compare to united states where the population is being judged by racial background and ethnics. The percentage of number of immigrants has been increased over the years. The aging population is also counted as a current issue which attracts foreign labour to add in the workforce of the country. Just like America, the Japanese people also live a high standard of living and most part of the population is considered to be the part of middle class. But there is a drawback in there socio-cultural environment is when studies shows the satisfaction and happiness in life of Japanese is relatively low as compared to other developed countries. There are slight discrimination against the ethnic minorities in Japan. Lastly on the technology part, Japan is one of the top country who has succeeded in the race of providing the best tech products in the industry.
The above graph shows the percentage of the income of households and individual therefore as per the sample data it is to be considered that the youth of the country is growing and gains a larger portion of the income group this concludes, manufacturer should target the said group who has higher average income. The changing demographics also comes as threat in the market it forces people to draw from their savings and liquidate their finances, this whole situation ultimately leaves a picture of bad economy and no future prospects for foreign manufacturers to invest in the country (Blanchard, 2015).
Talking about the socio-cultural system in United States who promises to be rich in social and cultural environment, their aging population, and diversity in workforce, high standard of living, and low rates in infant mortality these are the salient features of socio-cultural environment. The opportunities in American culture would be its individualism and egalitarianism where the concept of individualism basically emphasizes on personal achievement and initiative (Gupta, 2014). This culture is all about independence which is of high value there and it comes as an advantage for foreign manufacturers to settle up their business. An another concept is of equality, despite there are many differences in the society but equality is still maintained in social relationships as their beliefs are in having equal obligations and rights, opportunities. The hierarchy is maintained at all levels which is also an opportunity for business to export in United States (Falkner 2017).
Threats involved in socio-cultural environment in United States are majorly facing problems in aging population which will lead to shortage of labour and in near future rise in tax rates. Increase in illegal immigration and racial prejudice is of serious concern (Kenter, 2015). Americans tend to have communication more often directly and openly, this straight forward nature in business terms come as a rude behaviour for foreign investors because they are unaware of such culture therefore it reduce the chances of investing in such country whose culture are much complex in nature to adjust and fails to position their product into the market (Jacquet, 2014).
In terms of technology and innovation United States have marked their success in the economy. They are leading in adapting updated technology in their business day to day operations and that is why US is facing such strong competition from other economies. The forecasts have been made in this instance that it will continue to position itself in competency with the latest technology and enhance in the areas of development of technologies namely biotechnology, nanotechnology and environmental, resultant it will open up various opportunities for domestic as well as foreign companies to grow higher than expected. There is an intense competition from developing countries like India and China where technological developments are sky rocketing (Christensen, 2013). US is facing this competition and have embarked their success with the time being in. Many theories have been formed regarding innovation in technologies to simplify the process applications namely:
Disruptive innovation: It provides convenience, simplicity in products which could be easily affordable and accessible, simple words they have struggled as a result of disruptive innovation.
Hybrid innovation: It is a combination of new and old technology which represents a nourishing innovation to the old one.
Open innovation: Here when companies face problems in innovation they outsource individuals to provide solutions for the particular problem (Coccia, 2017).
Americans have tapped into more transparent approach of technology to overcome challenges in the economy. The goals are clear as they engage public to use technology effectively in order to promote innovation and welcome the opportunities to grow in the global market. They have enhanced the principle of clean technology in the economy by transforming the consumer’s access to data into electric consumption of power which is of great advantage in this scenario for Encom Motorcycles as their product is electric motorcycles which is proving to align with the objective of empowering consumers to technologic advancements (Mullin, 2014).
There are always pros and cons of taking risks in business operations, here technology also carry a dark side attached with it. Those are cyber security, IP theft and destroying old business models in order to innovate. Being in a foreign country and understanding its complex nature of business operations and prepare marketing strategies accordingly is itself a big task for foreign manufacturers additionally entering into the competition of innovation and adapting technology to mark their position in market successfully. The risk it carries with it is of biggest issue that a company can face and it has adverse effects even in the earlier stage of business. The security and theft issue has major effects on company who is new to the market, it creates difficulty to capture segments of customer who they want to target and their objective is being disillusioned. The risk of huge investments it carries can impose threats to foreign manufacturers (Stevens, 2013).
As per the graph stated the results, the increase in crimes in recent years have reached a level which is unexplained to companies and they are continuously forming strategies to cope up with such issues in adapting technology in their day to day activities of business operations (Zimmerman, 2016). But these strategies are not much of help as cyber-crimes are on high peak and increasing day by day making it difficult to mitigate these risks and left with no option but to face the consequences so the level of difficulty is higher in case of foreign manufacturers as they are unaware of the technological culture in America (Wheelen, 2017).
After conducting PESTEL analysis on United States in lieu with exportation of electric motorcycles with a purpose to decide whether to undertake the venture in United States or not. The opportunities and threats have been analyzed of each factor who would have affected the thought of establishing venture in United States. The reason that why investors choose US to invest in, there business friendly environment and quality of technology, the vast infrastructure and labour force factors. The diversity and open innovation approach attracts foreign investors to seek their place in market. America has known to be a renowned leader in Research and Development and get registered the international patents as compare to other countries. Companies adapt innovation techniques to compete within the country and flourish the economy by growing continuously in a manner. As per the analysis, the results are positive as well as negative. The political factor shows the intensity of politics included in business environment and how flexible and transparent the political regulatory is, which open up ways to establish a venture in market. There are no hard and fast rules or regulations formed for foreign manufacturers to understand and follow up the same, every country has its own complexities in their political regulations and so does America has but on the same hand it has influence over global policymaking with an effective setup of laws and regulations which are considered to be of transparent and fair in nature. The negative aspect in political environment is its criticism faced internationally for its foreign relations on ‘War on Terror’ which gives rise to the threats of terrorism in the country. The demographics and socio-cultural factor has explained how product can be sold in the market and which customer segment is to be targeted. In America where culture is rich and the growing young population is easy to understand and their preferences. As per the study it is known fact that the culture is friendly and flexible in nature but changing fast with the time being that how they focus on their personal achievement by setting their own individual goals. In context with nature consumers of America seems to be of straight forward and can say no when so ever such circumstance arise. The straight forward nature can be of negative prospect for business as it seems to be rude to foreign manufactures who are unaware of this behaviour on consumer part. Lastly, technology factor is studied where it is found out that America is one of the recognized leaders who adapt latest technology in their business operations to compete with other technology driven countries (Hoberg, 2014).
Few other market considerations are accessing the methods and areas of innovation in their product in order to target customer segments based on their taste and preferences. Innovation is the way to capture a bigger share in global economy by competing with other countries and adapt updated technology but only after studying thoroughly the risks associated with such innovation and form mitigation to remove those risk at an earlier stage so that they won’t create any issues further, although it sounds as an impossible task to do, with proper study regarding innovation techniques and how they align with the existing environment in country would make the task much more easier as it seems to be (Hamilton, 2015). The guidelines must be followed to get well versed with the culture, demographics, politics and government intervention which will help in reducing the risk involve in investing in the country. By building relationships in the mean time before setting up business in foreign country will be helpful and doing proper research of the market, customer segments to set up prices and interpret things affecting their marketing strategies. Lastly, the costs and duties involved in exportation of goods in America is to be measured. This factor can decide whether to undertake this venture in United States is of benefit or not.
After considering all the variables in the study it is concluded that exportation by Encom Motorcycles in America can prove to be a beneficial investment so it should go for setting up the venture in United States, if proper guidelines and the updated technical know-how is being followed. The changing demographics and culture gives a positive sign to greater future growth of the company.
References
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