Challenges of HolyCow Pty Limited - Case Study Example

Title: Pre-feasibility Report Customer Inserts His/her Name Customer Inserts Name of Tutor Customer Inserts Grade/Course (Date) Contents Contents 2 Report background 3 Report objectives 3 Report Results 4 Factors to be borne in mind to tackle the markets 5 Recommendations to the problems hindering globalization of HolyCow Pty Limited 7 Conclusion and proposal 9 References 10 Pre-feasibility Report Report background The medium sized Australian winery HolyCow Pty Limited has announced its plan to expand and become a global company. Globalization is the increasing of connectivity and interdependence of a company on different aspects. These are mainly the social, economic and technological aspects. The Indian, Vietnam and Southern China markets will provide a convenient a suitable base to allow the company to expand and also to improve its sales on their product. This will also improve and develop the economic and social potential of the regions. The pre-feasibility test will be required before the expansion project commences in order to identify all possible problems that may arise and ensure that solutions are realized in order to overcome these problems. This will also ensure that the correct procedures are realized and followed. Report objectives This pre-feasibility report will provide the managing director of HolyCow Pty Limited with any information that will justify the acceptance or the rejection of the proposed globalization. The managing director will also be able to decide on what would be the best move to make when the report is complete. This will advise the managing director on what to consider when globalizing the company. Report Results There are many advantages and benefits to globalizing HolyCow Pty Limited. Globalizing improves the economic, social and technological aspects of a company and a nation at large. When the company is globalized, the greatest advantage will be the improved efficiency. Due to the economies of scale, the company will be able to buy raw materials in large quantities and in bulk in order to sustain the high levels of production. This will save the company a lot of money which would have been used in transportation of small amounts of raw materials. Renee O’Farell, (2009 p. 12) suggested that it would be useful for a company to go global because it would be able to make sells of their products which are outdated and not in demand in the current market. In this case, the winery may have wine brands which are outdated and not in high demand. This may be as a result of the company introducing new products which are in more demand as compared to the previous products. The company can take this product to other markets which have reduced competition and make sales from it. This is called the life cycle strategy. If HolyCow Pty Limited is to go global, they will experience diversity in the workplace which will benefit the company. The opening of doors to different types of individuals and staff will bring in new ideas which will better the products of the company and even help in reduce production costs. If the company wants to compete and be successful in the current world, it will have to get as many ideas as possible. This will also bring a different perspective to the company’s projects. When the company goes global and opens new branches in India, Vietnam or Southern China, most chances are that it will employ workers from the foreign country. This will bring in new talent from the new employees. This will bring into perspective a variety of new, unique and creative ideas in the company. This will provide a new approach which will be beneficial to the company when it comes to competing in the market and will also lead to increased sales. Globalization will bring into the company improved technology. Due to the expansion of the company, employment of new workers must be a part of the expansion. When employees are increased, the level of technology used will be increased. Bloom, (1993 p.58) said that, companies with many employees, learnt from other firms on their technologies and even marketing channels.This will allow the company to reach other areas and extend the capabilities of HolyCow Pty Limited. This will lead to exposure of the company’s brand to new customers and clients which will increase sales in the long-run. There are however many problems and challenges which come with globalizing a company. The company will be exposing itself to many global risks which may affect production and also the financial base of the company. If the company sets up shop in Vietnam and there happens to be a war which breaks out, this may lead to major loses being incurred. Also, there is the possibility of laws of production and employment changing in the country. This may make it difficult for the company to meet its obligations and goals. Factors to be borne in mind to tackle the markets Globalization will greatly add to company costs and expenses. They will increase the company’s expenses greatly. This is because new offices and manufacturing plants will have to be set up. The company must be prepared to spend large sums of money in order to fund the process of globalization. There are also many expenses which include the training of the new employees, hiring new and more marketing staff in order to market their product. Another factor is the language barrier. When HolyCow Pty Limited goes global, the new staff members will have to be recruited from the countries where they have set up shop. This will mean that the company will have to look for translators and maybe people to teach the workers on how to talk in English in order to facilitate communication and production. Neil Kokomuller, (2011) pointed out that many employees and countries have different views when it comes to ethics. In some areas and countries like India, it is common to see instances of under-the-table money if one needs any help. This mixed ethics in the business world may pose a major problem when the managing director is considering the location where to set up the company. Ruud, (2002) stated that another major factor to consider is the high competition in the global market. This is because the competition is not from a combination of both national and international competitors. This makes it difficult for companies which decide to go global to survive in the market. If the company is ready to go global, it must be ready to fight off any competition which they will experience. In the case of HolyCow Pty Limited, when they are producing wine from the new countries, they will need to use the grapes in the new country and if anything happens to the supply of these grapes, production will be affected greatly. Todd Anderson, (2012) pointed out that there is no short-term benefit of entering the global market. The company may invest a lot of money into the project of globalizing but it should not expect the benefits to be rewarded any time soon. It takes time for a company to benefit once it goes global. Todd Anderson, (2012) said that in order for a company to capture the new market and acquire a market share; the company has to learn the likes and dislikes of the people in the new market. When this is done, the company has to modify their products and change their form of packaging in order to suit the likes of the new market. The company executives and directors will also add into the costs incurred by the company. This is because there will be travel expenses to be catered for in order for them to travel and oversee both the construction of the new firms and also the management of the companies. HolyCow Pty Limited will also need to know the tax laws and also government rules regarding the production and consumption of the wine which they will be producing. This will mean for the company to hire professionals who will help with all the legal and financial matters in the foreign countries. There are also many accounting problems which come with globalization. It is usually difficult to formulate and develop balance sheets that are consolidated in order to determine the uniform evaluation of data. This and the idea that there are no internationally accepted accounting principles have caused some problems to companies that are globalizing. Some countries that are not as developed as the super powers lack proper infrastructure. This can become a major setback to transportation of raw materials and even the final products. If the grapes do not reach the manufacturing plants in time, they are no longer fresh and hence most of them go to waste. When there are no roads, transportation becomes expensive and hence increasing the cost of production and reducing profits. Recommendations to the problems hindering globalization of HolyCow Pty Limited In order for HolyCow Pty Limited to overcome the problem of huge money spending during the process of globalization, it can hire professional economists who will budget the spending and also minimize costs while they maximize on productivity. This will ensure that the right amount of money is set aside for the globalization project and none of it is wasted. When it comes to the language barrier, the company can look for local workers in the foreign countries who have learnt English and can talk fluently in order to minimize the cost of hiring translators who will ease with the communication. In the global market, competition is stiff and only the fittest survive. In order to ensure the continuity of the company, they should set up shop in countries which are not competitive and don not produce the product and in this case wine. The managing director should take the consideration the prospects and see the level of competition which the company I bound to face. The company should also produce products which will be of good quality to ensure that they are not removed from the market. This will mean that the company will have to come up with new and improved wine to offer to the market if they are to compete with other companies. Many countries have different people who have different cultures and ethics. Because of this, the company will be faced with the challenge of looking for employees who are ethical and discipline. This will ensure that the company is not sued by consumers due to malpractice or any other professional faults. The company will have to set rules and regulations which will have to be followed by the employees, and failure to which will generate serious consequences one of them being termination of employment immediately. When the wine is being produced in the new countries, huge amounts of raw materials will be required. This will mean that grapes will be needed in large numbers and if the country is not able to supply these tons of grapes it will lead to heavy loses being incurred by the company. The company must buy huge farms of grapes which will be provided for to ensure an unending supply of raw materials to the company. The company can also advice and promote the locals to plant grapes in their farm and the company can buy the grapes from them. HolyCow Pty Limited must also hire researchers who will go and get information on the market in the countries which they wish to start their firms. In different countries, there are different people with different cultures. As a result of this, the different people have different likes and dislikes. In order to learn these likes and dislikes, the company is advised to hire researchers who will survey the market. This will enable the company to change and modify its product in this particular region in order to suit the likes of the people. This will improve on the customer relations and increase in the sales. Because every country has different rules and regulations regarding its drinking policies, the wine company will have to hire professionals like lawyers who will take care of the legal paperwork and ensure that all the licenses to operate are cleared before any production can begin. This will also include financial advisers who will handle the taxes regarding the particular country since every country has different tax regulations. When the problem of infrastructure comes into play, the company has to find solutions to it. This includes joining forces with either local companies or ministries which will help in gaining access of different distribution channels and transportation routes. Conclusion and proposal HolyCow Pty Limited has a great financial base and due to the fact that it crushes almost five thousand tons of grapes per year, it would be advisable for it to go global. But in order for it to be globalized, there are a many factors that will hinder it growth. In order to ensure that there are no hiccups during the globalization process, the factors discussed above must be put into consideration and the possible solutions realized in time. This will ensure that the company has a long lifeline and is financially strong and stable. References BCG, 2011, Globalization, viewed March 2011 Bloom, 1993, Benefits of Globalization for Companies, viewed January 1994 Economics Online, 2006, Globalization: Advantages of Globalizations, viewed 18 July 2006 Neil Kokomuller, 2011, Business & Entrepreneurship: The Disadvantages of Globalization and Diversity, viewed 18 December 2011 Renee O’Farell, 2009, Business Strategies: Advantages and Disadvantages of a Global Strategy, viewed 26 March 2009 Read More