Strategic Report For Harvey Norman’s Market Entry In Europe And Asia

Overview of company

The aim of the report is to prepare the strategic report to the management that reflects the analysis of the macro-environmental factors, geopolitical risks and opportunities along with the overall market attractiveness of the entry of selected company in the European and the Asian market. The macro-environmental factors can be explained with the help of the PESTLE analysis framework which evaluates the external factors that can affect the working of the company. All these elements will be discussed in the report which will help the company to select the appropriate country for the entry in the market. The company that has been selected for the analysis is Harvey Norman, an Australian based company.

Harvey Norman is a multi-national retailer who deals in furniture bedding, computers, communication and the consumer electrical products. The company first store got open in Gerry Harvey and Ian Norman in the year 1962 (Harvey Norman, 2018). Harvey Norman is operating 57 franchised complexes in New South Wales, 1 in the Australia capital territory, 37 in Queensland, 38 in Victoria, 10 in South Africa, 2 in Northern Territory and 6 in Tasmania (Harvey Norman, 2018). This is found that company is operating their business operations in Australia, New Zealand, Europe and South-East Asia.

The two countries which are selected by the company for the evaluation and expansion include India as one of the Asian countries and England as one of the European countries. The reason behind the selection of India is that the country is a developing a country which shows that there is an opportunity for the business to achieve growth. Along with this, India is the second most populous country due to which the demand for the furniture is expected to increase which contributes to the high revenue for the company.

On the other hand, England has been selected because this has been found that there is a rise in the industry of furniture in the UK. In addition, the retails sales of the furniture in England are increasing and expected to increase further. This is the reason due to which the England and India have been selected for the expansion of the business. Harvey Norman needs to analyse the market which will help in understanding that which market will be appropriate for the company.

The macro-environmental forces include the major external factors that affect the working of the company. The analysis has been done with the help of the PESTLE analysis of both the countries (Kotler, 2015).

The political factors that can affect the working of the company include the taxation, stability in the political aspect, changes in policy (Hollensen, 2015).

• India is more or less a stable in the political situation which is a benefit for the company as they don’t have to face the changes in the political rules and regulations.
• In Indian, this has been found that the company might face the threat of bureaucracy and corruption. Harvey Norman decision might get affected due to these issues.

• England business doesn’t get affected due to the frequent changes in the rules and regulations by the government as there is the presence of the political stability.  
• The country includes the high amount of the tax rates which the firm needs to pay. The tax reduces the profit of the business and in England, the company needs to pay 30% tax which reduces the profit.

The economic factors include the GDP, inflation rates, the purchasing power of the customers and many others. These factors reflect the position of the country in economic terms which shows that business can earn a profit or not.

• The country is known as the sixth-largest economy by nominal GDP. GDP per capita of the country is $2,134 (nominal: 2018 est). Along with this, the GDP growth has been captured which is 7.7%. This shows that the purchasing power of people is high which is true but the customers of the country are price sensitive which is one of the drawbacks for the company (India Brand Equity Foundation, 2018).
• In India, Harvey Norman might face the issue due to the weak currency of India because the company deals in dollars or euro which has high value than Indian rupees. This might lead to the big loss for the company in terms of profit.

• The economy of the country is the largest economy out of the four countries of the UK. GDP of the UK is $44,177 (nominal; 2018) and it is expected to increase more which means that the purchasing power of the customers is high (Index of Economic Freedom, 2018).
• In England, the Harvey Norman company might face the increase in the inflation rate can bring the change in the consumer’s behaviour and also leads to the shortage of the resources. This might affect the profit of company in the market of England.

The social factors include the consumer behaviour and preference towards the products and service that is offered by the company.

• The preference of the customers in the Indian market changes with the change in trends. Harvey Norman Company needs to offer the products with different types of design. Along with this, this has been found that the people are more conscious towards the status and symbol in the market which makes them purchase the branded or imported products (Indian Mirror, 2018). This leads to the opportunity for the Harvey Norman.
• In India, there is the availability of the small size homes which leads to difficulty to visualise more than one piece of the furniture. Along with this, due to the small size homes, some of the people don’t buy furniture or make the purchase from the local carpenter. This is one of the challenges which might be faced by the company.

• Harvey Norman will find that most of the customers are willing to purchase the furniture which is one of the reason due to which there is rapid growth in the industry of the retail furniture.
• The change in the customer preference might take place due to the change in fashion trends, cultural factors, the behaviour of the customers. Along with this, the presence of the competitors in the market can also affect the working of the company.  

The technological factors mainly include the change and up-gradation in the technology that can affect the working of the company (Frynas and Mellahi, 2015).

• The technology in the Indian market is growing faster but somewhere it lacks when comparing it with the developed countries.
• India is lacking in terms of the infrastructure and logistical support which might lead to the challenges for the company in operating the functions effectively.  

• In England, the advance of technology takes place on a frequent basis due to which the Harvey Norman can get the opportunity of selling the products at bulk. Along with this, the technological improvement includes online payments, mobile payment and member cards. These technological factors help in improving the experience of the company with the customers.  
• The technology is improving the reach of the customers towards the product and service provider which leads to the competition for the Harvey Norman Company.

Selection of the two countries

The legal factors include the laws and regulation that the company is obliged to follow while operating the business (David, 2011).

• The company need to follow the set rules and regulation while entering the market. Moreover, this has been found that the ruling and opposition party have the different views for the FDI which might affect the future of the company.
• Harvey Norman Company needs to follow the laws related to the sourcing of the products as the company can source the raw material from local markets or from the overseas market.

• Harvey Norman needs to follow the legal obligation if they are willing to operate their business in England as they need to follow the trade tariffs.

The environmental factors include the impact on the atmosphere and the surroundings of the country.

• Harvey Norman performs the business of Furniture which involves the wood that comes from trees. This shows that the company’s working directly affect the environment of the India which is one of the major factors that is required to be taken care of by them.
• The company is obliged to follow the environment and sustainability act which will help them in performing the operations with sustainability.

• The rise in the furniture producing companies will lead to the issues for the environment which makes the consumer awareness for the same. For this, the company should follow the environmental activists that are passed by the UK.
• Most of the furniture company make use of toxic chemicals in the production process which leads to the impact on the environment.

Geopolitical forces that affect the working of the company include the relationship and terms of the company with the other country.

Australia has kept India at the forefront of its international partnerships as both the government accept the fact that there is a probability for the cooperation between the broad ranges of the areas. India is Australia’s seventh largest trading partner and the fifth largest market of export. AIC (Australia-India Council) was formed by the government of Australia in the year 1992 which is essential to broaden and deepened the relationships through contact and exchange of the business as this will promote the understanding between the countries (Australian High Commission, 2018).

The relationship between the Australia and UK is also known as the Anglo-Australian relations which are based on the major and common terms of the UK and Australia which is marked by the cultural, institutional with language ties and trade co-operation. The UK was ranked as the four most important markets with whom Australia is willing to perform the business operations participating in Australia’s International business survey (Australian Government, 2018).

The analysis reflects that the trading between Australia with India and Australia with England is appropriate but this is the fact that with the development of India most of the countries are contacting India for the trade as they can earn a good amount.  

The union cabinet of India allows the 100% foreign direct investment (FDI) in single-brand retail which includes the furniture retail brand Harvey Norman. Though 100% FDI was permitted out of which 49% of the investment can be done by the company and for the above, they need the approval of government (Mishra, 2018). Moreover, the government of India welcome the new companies and investors to invest their amount in India. The government trade policy reflects that they are inviting the company with the latest technologies from different overseas companies.

The government of the UK take the actions to grow the performance of the UK retail sector both internationally and domestically. The trade system of England includes the tax system on the profit of the company. Further, the country includes the free trade policy in which they allow the trading of the different industry in England. This policy helps the country to increase the profit and economy of the nation (Government UK, 2016).

In the policy of India, there are potential opportunities as the company is getting the chances for expanding the business for which they can do the investment directly because there is no as such limit on it. Though on the other hand in England the company can face a set limit which includes the amount they can invest in the country. Therefore, the opportunity is good for the Harvey Norman in the market of India.

The company might face the risk of the success of the business in the Indian market because the social factors of the market might not be able to pay the amount asked by the company. Along with this, the currency factor is one of the issues which might be faced by the company. On the other hand, in England, the company will not face the failure on the customer side and they will get the good return. Though, they need to deal with the tough competitors that are present in the market which mainly includes IKEA.

Conclusion and recommendations

In the end, it can be concluded that the Harvey Norman Company has a vast opportunity to expand the business operations in the market. The market that has been selected for the expansion of business includes India and England. The analysis of both the countries has been done with the help of the PESTLE analysis, geopolitical factors, trade and business policy of the country and potential opportunities for the country. The analysis shows that the company should expand the business in the market of England because this has been found that India might lead to loss or failure for the company.

The market entry that is recommended to the company is licensing in which they should take the license from the England government to expand the business. Licensing will be the best fit for the company because in this market entry the company will be having the rights to make the decision, they will be independent for their operations and profit is not required to be distributed (Laufs and Schwens 2014).

References: 

Australian Government (2018) United Kingdom country brief [Online]. Available from: https://dfat.gov.au/geo/united-kingdom/Pages/united-kingdom-country-brief.aspx [Accessed on 21^st August 2018]

Australian High Commission (2018) Australia- India relationship [Online]. Available from: https://india.embassy.gov.au/ndli/relations.html [Accessed on 21^st August 2018]

David, F.R. (2011) Strategic management: Concepts and cases. India: Pearson/Prentice Hall.

Frynas, J.G. and Mellahi, K. (2015) Global strategic management. USA: Oxford University Press.

Government UK (2016) Government and the retail sector [Online]. Available from: https://www.gov.uk/government/speeches/government-and-the-retail-sector [Accessed on 21^st August 2018]

Harvey Norman (2018) About Harvey Norman Stores [Online]. Available from: https://www.harveynorman.com.au/about-harvey-norman-stores [Accessed on 21^st August 2018]

Harvey Norman (2018) Company Overview [Online]. Available from: https://www.harveynormanholdings.com.au/company  [Accessed on 21^st August 2018]

Hollensen, S. (2015) Marketing management: A relationship approach. India: Pearson Education Limited.

Index of Economic Freedom (2018) United Kingdom [Online]. Available from: https://www.heritage.org/index/country/unitedkingdom [Accessed on 21^st August 2018]

India Brand Equity Foundation (2018) About Indian Economy Growth Rate & Statistics [Online]. Available from: https://www.ibef.org/economy/indian-economy-overview [Accessed on 21^st August 2018]

Indian Mirror (2018) Indian Furniture Industry [Online]. Available from: https://www.indianmirror.com/indian-industries/furniture.html [Accessed on 21^st August 2018]

Kotler, P. (2015) Framework for marketing management. India: Pearson Education.

Laufs, K. and Schwens, C. (2014) Foreign market entry mode choice of small and medium-sized enterprises: A systematic review and future research agenda. International Business Review, 23(6), pp.1109-1126.

Mishra, A. R. (2018) 100% FDI in single-brand retail via automatic route gets cabinet nod [Online]. Available from: https://www.livemint.com/Industry/e1EE0Bn93jqlRnkElATPHI/100-FDI-in-singlebrand-retail-via-automatic-route-gets-cab.html [Accessed on 21^st August 2018]