Thesis on "Global Business Strategy for a Fictional United"

Thesis 12 pages (3537 words) Sources: 10 Style: APA

[EXCERPT] . . . .

global business strategy for a fictional United States-Based firm desiring to expand into Europe and Asia

Global Business Strategy

The Situation

The forces of globalization are generally credited with the major role played in increasing the access of organizations to countless resources. Due to market liberalization for instance, large corporations are able to import cheap resources from various global regions and as such patronize the market through price leadership strategies. Nevertheless, another crucial characteristic of globalization is that it allows economic agents an incremental access to larger customer markets. This virtually means that manufacturers get to sell their products to numerous global regions and exponentially increase their revenues.

Miana Fashion is one of the companies currently looking to expand its business outside the United States and as such benefit from the advantages offered by globalization. The company has been present within the American industry for just over ten years. Throughout this period, it has succeeded in forming a loyal customer base, satisfied with the high quality of the products and the competitive prices, as well as by the reputable polite sales staff that meet customers in each of the company's five stores. Today, the organization's sales levels have decreased as a result of the economic crisis, which has reduced customers' purchasing power. Nevertheless, the organization possesses sufficient financial resources and considers this slow period as the most beneficial one to engage in growth strategies.

The managerial team at Miana Fashion has identified two desirable locations onto which to expand the business -- China and France. Each of these prospective locations is characterized by unique features which could determine either the success or the failure of Miana's international growth endeavors. The aim of this report then is that of conducting an analysis of the European and Asian countries in order to identify their compatibility with Miana's desires.

2. Necessary Business Structure

In order for Miana's penetration of the two foreign markets to stand increased chances of success, it is required that the two foreign locations reveal as few barriers as possible. For instance, it is desirable for them to implement legislations that do not impede the efficient operational activities of foreign investors. Examples in this sense include a lack of financial barriers in the meaning that foreign investors are not obliged to pay excessive import duties when entering items within the destination country; it would also be desirable for any restrictions on commercial transactions to be lifted.

Secondly, a general state of stability is required and this refers primarily to the economic and political climate. A favorable economic climate translates in an enhanced ability for the citizens to purchase various products, including those sold by Miana Fashion. Third, it is of the utmost importance for the destination countries to reveal strong and reliable infrastructures. This necessity is understood in terms of road ways, airports, waterways and other transportation facilities which allow the American company to transport its merchandise from one location to the other. It is also important for the countries to reveal strong technological infrastructures, which allow the Miana leaders to efficiently communicate.

While the list of business necessities could go on for pages, the last element to be hereby presented is that of the existence for a real demand of Miana's products. Otherwise put, China and France need to possess customer markets interested and able to purchase the company's items. It is imperative for both conditions to be met -- interested individuals revealing no ability to purchase the items are not viable prospective customers, nor are the ones who reveal a financial ability to buy the items, but have no real interest to do so.

3. The External Environment

China and France are both strong international players, whose environments have been constructed on hundreds of years of struggle. The result was the creation of two economically powerful states, characterized by a multitude of elements. From an economic standpoint for instance, China is the third largest economy of the globe, with a gross domestic product of nearly $8 trillion; France is the ninth largest economy, with a total national output of $2.1 trillion. Both countries revealed a maintained growth trend. What is however interesting is that despite being located on a position inferior to that of China, the French individuals live well above the standards of the Chinese people. To exemplify, while the income per capita of French is of $33,000, the income per capita in China is of only $6,000; the income per capita at a global level is of $10,000, meaning that the Chinese make less money not only in comparison to France, but to most of the world. This is best explained by the massive population in China.

The Asian country hosts a total of 1.33 billion individuals, being the largest state in terms of populations; the Chinese people follow numerous traditions and live within imposed restrictions. France is on the other hand only inhabited by 64 million people, who are more liberal and modern; France is the 21st largest country in terms of population. The French remain however better educated than the Chinese, revealing a literacy rate of 99 per cent; the literacy rate in China is of 90.9 per cent. Additionally, the number of years spent in school by the average French individual is of 16, whereas the average number of years spent in school by a Chinese is of 11.

In terms of religion, the most popular one in France is Roman Catholicism, to which over 80 per cent of the population subscribes. The rest of the people subscribe to Protestant, Jewish or Muslim beliefs; 4 per cent of the population is either atheist or has not officially embraced any of the religions. In China, the most popular religions are Daoism and Buddhism, with the remaining 6 per cents being attributed to Christianity and Islam.

Despite the rather clear and cut situation of religious appurtenance, the matter of the languages spoken in China is more complex, the challenge being raised by the existence of numerous dialects, such as Yue, Wu, Minbei, Minnan, Xiang, Gan or Hakka; the most common language is however the standard Chinese, generically known as Mandarin. The situation is somewhat similar in France, where numerous dialects exist. Some of them include Alsatian, Breton or Catalan. Here however, a decline in the popularity of the dialects is observable. Overall however, both China as well as France are using their native languages to communicate.

In terms of legislative branches, the French one is composed from the bicameral parliament, formed from the Senate and the National Assembly. The European country regulates its operations in accordance to a civil law system, adjusted to numerous aboriginal ideas. It must also be stated that the constitution at the basis of the French legislation has often been amended, unlike the Chinese constitution, which has only been amended twice since its promulgation in 1982 (most recent); the Chinese constitution nevertheless remains ambiguous, and one could argue that this feature can be traced back to the fact that it is derived from the principles of the Union of Socialist Soviet Republics. The legislative branch in the Asian country is ensured by the unicameral National People's Congress and the legal system is constructed on the premises of the civil law.

China and France once again reveal resemblance in terms of technological infrastructure, in the meaning that they are both highly developed, and well over the global average. China is for instance the largest country in terms of main telephone lines in use and mobile telephones; France is the eighth, the 18th respectively (Central Intelligence Agency, 2009). As of January 1999, the European country's currency is the euro (EUR), or the official currency of the European Union; the currency of the Asian country is the Renminbi, or the Chinese Yuan (CNY). A euro is being currently traded at a value of 1.4767 American dollars; the Chinese Yuan is currently worth 0.1464 (Currency Converter at Yahoo Finance, 2009).

4. Entry Strategies

There are numerous ways in which the American Miana Fashion could go about penetrating the European and Asian markets. Three of the most relevant ones include exporting to the regions, franchising or operating wholly-owned plants. The characteristics of each of these alternatives are briefly presented below:

4.1. Exporting

Both China and France are focused on economically reviving their own industries, meaning as such that imports and often frowned upon. While not legally banned however, certain barriers to import exist in both states. The increased levels of custom duties are the most common financial barriers imposed by the authorities at Beijing. Here, a problem relies in the fact that China is no longer pegging the value of the Yuan to that of the American dollar, meaning as such that they can influence trade operations in the detriment of the American exporter (Dickson, 2009). Nevertheless, since its accession to the World Trade Organization, China has intensified its efforts to remove the barriers to trade with the United States as well as other… READ MORE

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