Export of Auspace Limited - Case Study Example

EXPORT REPORT Auspace limited Course: International Business G-6241 Lecture: Cameron Gordon Date: 28/09/2012   Student Name: ……………………………………………………………………… Student NO.: ……………………………………………………………………… Signature: Introduction Auspace is an Australian company that trades in communication equipment and systems. It serves the needs of the defence, commercial and science communities in satellite communications. It does this by solving business and technical problems that arise by providing innovative, independent and cost effective solutions. It joined the Nova group of companies in 2007 (Auspace). The markets being analyzed are the three markets that were already chosen; which are South Africa, Brazil and India. These markets were chosen after doing a thorough market research, which showed their viability strength over the other considered markets. Several factors were taken into consideration while undertaking the research including but not limited to economic, infrastructural, political, bureaucratic, ease of doing business and environmental factors. In-depth market analysis and selection of the target market The company is currently operating regionally but can expand its business to new markets with the aim of making significant growth through the expansion. Brazil, South Africa and India are some of the countries with the highest potential for the growth of the company. The three countries are highly populated which means they are significant potential markets for any organization looking to expand or to spread out of its own country. According to July 2012 estimates, Brazil has a population of 205,716,890 people (indexmundi). The target population of the company, which is the people between the ages of 15–64 years, is 67%, which are 137,830,316 people (indexmundi). This age group has a high uptake of communication and technological equipments. They move with technological advancement and have the financial ability to afford the products on offer. The urban populations, which are likely to be the customers of the company, comprise 87% of the population. The literacy level in Brazil is also high with 88.6% of the population literate. This will make the entry of the company into the market relatively easy (indexmundi). According to the World Bank, the GDP of Brazil as at 2011 is $ 2.477 trillion with a GNI per capita of $ 10,720 (World Bank). GDP growth rate is 2.7%. This is a good and conducive environment to venture into since both the GDP and per capita income are high and this means a high potential market for Auspace. The World Bank as an upper middle-income level country categorizes Brazil, and this shows its potential as a market for any serious international company. Brazil is ranked in position 126 in the world on the ease of doing business scale (IFC and World Bank, 2011). Brazil allocates 1.7% of its GDP, which is roughly 42 billion US dollars, to its military (CIA). The military is a significant potential client for Auspace, and the Brazil military has a large financial capacity. Brazil has an unemployment rate of 6% as per the 2011 estimates (indexmundi). India has a population of 2.22 billion people as of 2012 (indiaonlinepages). Literacy is a proper indicator of economic development in a country, and India’s literacy level is 74.04% in 2011 being an improvement from 65.38% in 2001. This is a tremendous improvement, which raises marketability of India to foreign investors including Auspace (indianonlinepages). The population between the ages of 14-64, which will constitute the bulk of the potential market for Auspace, is 64.9% (771,476,710 people). The 2011 GDP estimates of India show that it has a GDP of US $ 1.779 trillion with a growth rate of 7.2% per annum. The per capita income of India in the year 2010 was estimated to be US $ 1,455 (Global Finance). The services sector, which Auspace would be interested in, contributed 55.6% to the GDP according to the year 2011 estimates (Global Finance). This portrays an economically viable investor environment with the large population with high per capita income providing ready market for international companies like Auspace. India allocates 2.5% of its GDP to its military annually, which is around US $ 44.475 billion (CIA). This would offer a substantial market for Auspace in India. India is ranked in position 132 worldwide on the scale of ease of doing business, and this shows that there exist some bureaucratic hurdles for businesses as they enter the market to establish businesses. India has an unemployment rate of 9.8% as per the estimates of the year 2011 (indexmundi). South Africa is the biggest economy in Africa whose population is estimated to be 48,810,427 people as at July 2012 (indexmundi). The population between the ages of 15-64 years is 65.8% of the total population, which will constitute a large percentage of the target market of Auspace, numbering 32,259,360 people. According to the World Bank group, the GDP of South Africa in the year 2011 was estimated to be US $ 408.2 billion (World Bank) with a growth rate of 3.1% of GDP in the same year (Statistics South Africa). The World Bank considers South Africa as an upper middle-income country, which shows that a large number of people have considerable disposable income thus forming a large potential market for Auspace. The GNI per capita income estimates for 2011 shows that South Africa has a per capita income of US $ 6,960 (World Bank). The literacy levels in South Africa are estimated to be 86.4% of the total population, and this offers not only a ready market for Auspace limited but also skilled labor, which might be required by the company (indexmundi). South Africa is ranked in position 35 on the issue of the ease of doing business in the country according to the International Finance Cooperation and the World Bank Group. This indicates that it is comparatively easy to begin and operate a business in this country (IFC and World Bank). South Africa has an employment rate of 24.9% as per the 2011 estimates (indexmundi). South Africa allocates 1.7% of its GDP to its military, which amounts to, around 7 billion US dollars (CIA). All the three countries have the well-developed infrastructure and are politically stable with competitive, open economies. The population of India provides a huge market for the products of Auspace as compared to the other two countries. The population of India between the ages of 15-64 more than triples the combined population of the other two countries of the same age group. This shows that the target market of Auspace, which is between these ages, is comparatively too large in India. India also has a higher growth rate when compared to Brazil and South Africa, and this gives it a better standing in terms of investments. This indicates that India is a fast growing economy, and Auspace will also be able to flourish with the economy because a rapidly growing economy creates an appetite for different goods and services from diverse sectors of the economy. Although India’s economy is a bit smaller than Brazil’s, the growth rate compensates for that since the growth rate of Brazil is considerably lower (2.7%). With a GDP of 1.779 trillion US dollars, India is a lucrative market to invest in for any multinational company. The number of literate people in India, who are capable to consume the products, is high standing at 74.04% of the total population. This provides a ready market who can easily and readily embrace the company’s products thus reducing their entry, advertisements and marketing costs. The unemployment rate in India, standing at 9.8%, is low, and this means that a large percentage of the population has disposable income, and the rate of dependence is low. It indicates that the population has the financial capability to enjoy the company’s products. Auspace’s main clients are the military and India allocates a high percentage of its GDP to the military as compared to South Africa and Brazil. The military allocation of 44.475 US dollars to the military by the Indian government, t gives the military the ability to procure expensive telecommunication equipments, which can be provided by Auspace. The location of India also makes it easily accessible and cost effective for Auspace limited when compared to either South Africa or Brazil. After all the data considered and comparison undertaken, India is found to be a more superior option than both South Africa and Brazil. Entry Strategy Market entry strategy can be defined as, “an initiation of efforts to sell a new or existing product to a group of consumers not previously targeted by that marketer” (AllBusiness). Auspace limited will use direct exports as the market entry strategy. This market entry deals with distributors or agents, as they are involved from the onset. A distributor buys the product and sells it at a profit while an agent sells the product on behalf of the company and earns a commission (pacific business). The company will also use the technical innovation strategy where superior products of a high quality will be introduced in the market (FAO). The company will undertake aggressive exporting to capture a substantial customer base and in the process, a large market shares in the country. This marketing strategy entails direct exports to the target market and this helps to create a quick presence in the foreign market. The advantages associated with strategy include less risk involved since manufacturing is still home-based; it reduces the potential risks that might be involved while operating overseas and it gives the company a feel or a road test of the foreign market before fully investing in it (FAO). The company will engage agents to have a major control of marketing and distribution, and also to check the prices of its goods and services to enhance competitiveness. Auspace products also need a lot of expertise since they are technical in nature, hence the need to use agents as opposed to distributors so that the expertise can be provided as and when necessary. This will permit the company to maintain customer satisfaction and enhance product experience. Distribution Strategy Distribution is the procedure of production of the product or service available to the consumer. A company’s distribution strategy is more often than not defined by decisions on the type and number of customer interfaces (msb). That is where and how orders are placed and where and how customers obtain finished goods. Auspace will offer distribution support to its agents so as to make certain that the product reaches the end user. Auspace will provide funds to the agents so that they will avail the product to all the targeted customers in the country. The distribution channel will not be long since it will only entail the agent, and then the product reaches the final consumer. The only intermediary will be the agent. The company will also engage in direct fulfillment where the final consumer or the customer orders the product direct from the company through e-mail or the web, and the customer is provided with the product either by the agent of the company in India, or the product is shipped directly from Auspace. This will ensure customer satisfaction and will encourage loyalty since the customer can interact directly with the company, and in the process have his/her concerns acted upon promptly (msb). Auspace will engage in exclusive distribution where the agents will only carry the brands of the company in India. Distribution Figure: MANUFACTURER Exchange Rate Strategy Fluctuation in exchange rates represents risks because they can negatively affect a company’s profitability and competitiveness. The company can undertake several hedging strategies, which might include forward contracts, currency options and currency swaps (academia). Forward contract is a strategy of setting the future price of currencies today. Currency option gives holders the right to buy or sell currencies at a predetermined exchange rate in future. Swaps are used to optimize the running of cash flow of numerous currencies. The company will set the prices in the destination country currency so as to reduce the risk of exchange rate fluctuations and also to make the products of the company competitively priced. Marketing Strategy The company will undertake a research to understand buyer behavior and market practices in India before fully a marketing strategy it will use in the country. The communications market segment in India will be carefully evaluated (economic) before a marketing strategy is formulated. The company will rely on the superior quality and value of its products in its marketing strategy in India to counter competition and maximize sales. The company will segment markets in such a way that there will be a corporate segment, individual client segment and a government segment with its agencies, for example, the military. The company will then focus or target on this three segments separately (O.C Ferrell, D. Hartline, 2008). The company will undertake advertisements in the local dailies and television and radio stations to advertise its products and services. It will also undertake the use of the internet since the usage of internet in India is high. The company will also run a reward promotion where they will select winners and offer rewards, for example, a trip for two to an exotic destination. This will not only raise awareness of the company’s goods hence its presence, but it will also shore up its sales and increase its market share. The prices will also be made competitive so as to enable the company penetrate the market quickly and build a sizeable market share in the soonest time possible to maximize returns within a reasonable timeline (Bradley, 2005). Cultural Strategy Indian culture is predominantly Hindu and Muslim (maps of India), and as such, advertisements, that will be undertaken, and promotions carried out will be cognitive of this cultural orientation. Corporate Social Responsibility Strategy According to the world business council, corporate social responsibility is the ongoing commitment by companies to act ethically and contribute to fiscal expansion while improving life quality of the personnel and their families, in addition to, the local society and community. The company will integrate environmental, human rights, social and ethical issues into its business operations and core strategy in collaboration with other stakeholders in the country (EU). The company will offer employment to the natives of the country and offer a generous remuneration package as a corporate social environment to the community. It will also engage in practices that will not degrade the environment but sustain it. The company will also plough back parts of the profits for community benefit. Conclusion In conclusion, India is the most viable market to invest in as compared to the other two countries due to its large population and substantial GDP. Its location is also strategic to Auspace due to its proximity, which leads to reduced cost of doing business. The company will undertake a major market research and analysis before venturing in to the chosen market of India. It will apply best business strategies, to get a quick footing in the market and gain substantial market share and increase sales while engaging in corporate social responsibility. References Angele P., Szczepanski I., Reissinger N. Distribution strategy. 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