Discuss about the Report On Global Business for International Market Strategies.
Global business strategies are set of skill in order to expand in international market. It defines how the local companies are functioning in the global atmosphere, and how they make decision for successful growth. Global business focuses on managing global organizations, providing them with a basic understanding of cultural forces. It defines the role meant to be applied while focusing on the global expansion. The necessity of blue print and a set of skills while taking a business on international platform (Adekola and Sergi, 2012). For example: Red bull has one of the successful business strategy, it looks like a global product due to its interesting marketing strategies and consistent business plan (Gitman and McDaniel, 2007). We would be discussing the global expansion strategies of Natural Organic Pharmacy which is planning to enter China and South Africa.
Natural Organic Pharmacy has developed its product on homeopathic principles and pharmaceutical grade herbal products. It was launched in Melbourne Australia in the year 1999 with a mission to provide high quality, affordable, effective organic herbal solution. It was launched after realizing the difference in the market for attractive and high efficacy organic herbal products. The brand has maintained a strong positioning in the market due to its environment sustainability. The product is been certified 100 % carbon free, cruelty free and is vegan for many years.
Today Natural Organic Pharmacy is selling more than 80 organic herbal products. It is been recognized all over Australia for selling the range of best herbal products. The product are sold through medium like physical distribution channels, online selling. They are operating mini stores all over Australia. The company started its online distribution in year 2007. The quality of the product and its patent technology make it one of the recognized brands in Australia. It is only due to the expert team and dedicated staff Natural Organic Pharmacy has become one of the trusted brand. It has a workforce of 500 people in Australia .The annual turnover in 2015 was $45 million. Its patent herbal technology is distinguishing it from other available products. This has created an upsurge in the international market
China has a great market. It is known for establishing business retail outlet by the people from different part of the world. They work with different distribution channel in order to achieve the target result. It has around 25 distinct group of market /city with different market preference, tradition law (Zakkour, 2014).china market is in between the transformation to create new opportunity. The forces which are causing the change are firstly the upper middle class and rich households as the force of expenditure secondly a new age of freer-spending, urbane consumers; and lastly the role played by the e-commerce (Parlabene, 2012).
There is good news for all Australian exporters who are dealing in the consumer goods. Chinese market is opening new avenue for the international exporters. Due to its large population .China is opening for Australian natural skincare products; ocean products, wine, fashion, milk products (Export to China, 2016).it is believed that the brand is more important than the price of the product. Shanghai and Beijing each has a population of over 20 million which is more than the Australia’s population, Australian exporters need to focus on one target market in order to procure the result. It is important to focus on one target market and to create the required result by focusing on one (Cheng, 2014).
There is different mode to enter into the international market. The Natural Organic Pharmacy solution has already created a brand name in its local market. China provides a huge market to organic pharmaceutical products (Cheng, 2014). It is very important to choose the entry mode while framing global strategies. Various modes to enter into the international market are licensing, franchising, joint venture, export/import and strategic alliance. The choice to enter in a global market completely depends on the company’s global expansion strategies with respect to the host country. The Natural Organic Pharmacy can enter through joint venture strategy with the local partner. Partnership is an important mode to enter in Asian market. Firstly local partner understand the market need and culture secondly he can easily communicate with the local distributors. Inter partner compatibility is important. There are four broad areas in which Inter partner compatibility is divided which are culture, strategy , organizational capabilities and financial traits. The compatibility in these key areas provide with the key foundation for a successful international joint venture (Sharpe, 2001).
Commercial risk
The commercial risk is the risk caused due to financial instability. It is the loss caused due to partners in the market. It occurs due to trading partner willingness to pay. Firstly the most state commercial law and regulations are constituted to serve state owned enterprises entered on economic reform; the non-state enterprise is unequally scrutinizing the ongoing company law. It depicts the ongoing discrimination against non state owned enterprises (Li, 2007).
It is the risk which is caused due to the threat in term of foreign currencies which are operating in china. The capital market in china is little immature which makes it difficult for the foreign market. The market is subject to fluctuation which causes a great uncertainty in the mind of the foreign investors (Earnshaw, 2005).
It is the risk associated with investing in foreign land. There are multiple risks which are political, exchange, economic, sovereign and transfer risk. High volatility in the stock market is one of the factors which may cause instability in the functioning of the organization. Like any other country china doesn’t want to be told what is to be done or not. It prefers playing by its own choice. China has a communist economy which makes it difficult for the foreign companies to establish well.
It is very difficult to develop relationship with Chinese suppliers. Language is a barrier while doing business in China. In order to secure good business it is essential to know a person who knows the language. A local person can assist in fulfilling customary practices. China has a different culture than other countries. This may act as a barrier while expanding business.
Other problems
The social tensions linked in the country regarding inequality is hampering the growth of international trade secondly there is an overcapacities in certain set of industries and a high level of debt which is making difficult for the foreign companies to invest thirdly the fragile Chinese banks and ambiguous government policies make the investment more difficult for the international investors.
China has the fastest growing economy. It is believed that the country will make a remarkable change in the coming years. It is densely populated and has opened doors for the importers in the field organic pharmaceutical products (Cheng, 2014). China has a population of over1 .371 billion, which is highest in the world (China, 2016).
China has the largest growing economy which provides a platform to the outsides in order to make an investment. Chinese economy is growing at a faster rate. It has the fastest growing economy with the high rate of remarkable contribution made by the government efforts towards the growth. Australian exporters need to pace up as the Chinese market is much more faster than the rest of the world.. Chinese market appreciates new trends, innovative ideas and pioneers creative thinking. Innovative ideas would help in creating a good market, which will help in establishing the name very early. It is rightly said about china that, the investor needs to double its overall budget. Dedicated business would overall bring a remarkable change. The Chinese market is believed to increase about the market 9% annually. It is believed that the china economy would be second largest after US (King, 2016).
South Africa has one of the most stable governments in the African continent and is recognized as one of the emerging markets to invest in compared to the economies of western world (Mail & Guardian, 2011).South Africa is considered to be the getaway into Africa due to its comparatively best infrastructure, telecom and highly developed financial and banking system. Setting up of new company law, has simplified the incorporation documents. The banking structure of South African is more illustrative and has developed in recent times. International brand should focus on capturing consumers and consolidating marketplaces (Export markets – South Africa, 2016).Its new growth route must be sustainable – Asia-style. This is what many corporate are now facing when entering the African region: seeking to strategically position their businesses in uncertain markets. (Export markets – South Africa, 2016). South Africa is one of the most sophisticated, diverse and promising emerging markets in the world.
South Africa has an easy accessibility which distinguishes it from the rest. South Africa provides a good investment opportunity to inside and outside traders. The reasons to invest in South Africa are due to sound economic policies, it is due to fiscal framework and domestic competiveness, a favorable business and legal environment, there is an easy accessibility to the market moreover the trade policies and strategic alliance Trade agreement helps in accelerating the overall growth in the continent.. The Economic Development Division of the Department of Trade and Industry is responsible for negotiating in the behalf of the country (South Africa: open for business, 2016).
The mode of entry for Natural Organic Pharmacy product is through the strategic alliance .firstly the company needs to ally with a local South African company in order to distribute the resources. Firstly local partner understand the market need and culture secondly he can easily communicate with the local distributors. Setting up of distribution channels in different cities would be economical for the company due to availability of cheap labor. The South African economy is growing at a fast pace which would enable company to grow. The product can be made available through the distribution channels which are essentially through the local market. It is necessary to partnering with the local as they understand the market needs. Survey shows that the ease of doing business is greater in South Africa as compare to Nigeria, Brazil, India and China (The ease of doing business in South Africa, 2016)
Commercial risk
South Africa is a growing economy. It is believed to have huge market investments. The era marked as the growth of the Asian countries but South Africa has an ability to adopt the changes in the field of pharmaceuticals. The company cannot rely on the locals for bearing the cost. No matter the country has the best policies but it is still on a developing stage. In order to minimize the commercial risk the company needs to make a clever investment.
It is the risk which is caused due to the market fluctuations and change in the currency rates. South Africa should focus on the currency unification, pooling of reserves and should be facilitated sooner in order to comply with the change in the market segment (Maasdorp, 2016).
The risk associated with investing in foreign country. There are multiple risks which are political, exchange, economic, sovereign and transfer risk. High volatility in the stock market is one of the factors which may cause instability in the functioning of the organization The Company may face initial problem while serving the needs of the local people. It needs to make changes according to the requirement of the local people.
South Africa is a land of multiple cultures. It is a land of multiple languages. The business environment is informal. Although South Africa has a transactional culture, understanding local background would help in expanding business (South Africa.2016).
Like any other economy South Africa is seeing a tremendous growth in its culture. Due to its growth and status it is made important to choose the African economy as the fastest growing economy. Firstly there will be a tremendous growth in the field of pharmaceutical industry as expected recently. It is due to its diversified market and culture which is enabling the growth.. The distinguished market and its need would surely help in serving the needs of the upcoming company. It can ally with any of the local company in order to serve the needs. By keeping the nominal price which is essential while entering in any of the local South African market
The value of South African industry is rising at a high speed. It is predicted that the pharmaceutical industry would do better in the coming years (Holt.et.al, 2015)
Urbanization: African population is moving towards urbanization. It is predicted that the country will witness change in coming years. Africa’s population is showing a massive change in the coming time (Holt.et.al, 2015).
Healthcare capacity: There will be a change in the health care facilities in the coming years. It is seen that the country will see a tremendous growth in the health care facilities.
When the whole world is at a stagnant point South Africa is showing a fast growth. The key to success is only through good market strategies. The international strategist can only make a remarkable change by adopting the correct market policies .South Africa will grow for the foreseeable future. It will be seen that the market will make good change in the coming years through its policies.
Growing economy china
China has made a tremendous change in the market segment in terms of pharmaceutical industries. China has the fastest growing economy. It is believed that the country will make a remarkable change in the coming years. It is densely populated and has opened doors for the importers in the field organic pharmaceutical products (Cheng, 2014). It seems to be all good news for Australian exporters, especially consumer goods exporters. Chinese market is opening new avenue for the international exporters. Due to its large population .China is opening door for Australian natural skincare products; seafood, wine, milk powder and fashion products (Export to China, 2016) The Natural Organic Pharmacy can enter through joint venture strategy with the local partner. Partnership is an important mode to enter in Asian market. Firstly local partner understand the market need and culture secondly one can easily communicate with the local distributors. Inter partner compatibility is important. China is now providing perfect atmosphere to the importers for building good strategic alliances.
Conclusion:
China is considered to be the high paced economy due to its current market trends. It depicts that the Chinese economy will show tremendous changes in the coming year through its strong policies and structure. The country is known for its best infrastructure, telecommunication which would provide a platform to the outside investor. The natural organic is entering in an international business partnering with the local company. This would help in the company in long run. As the local trader understands the market needs. This would help in creating better opportunities as compared to South Africa.
References:
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Cheng, S. (2014). China – A Gold Mine for Consumer Goods Exporters? https://www.australianbusiness.com.au/international-trade/export-markets/china/china—a-gold-mine-for-consumer-goods-exporters-
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