Challenges that Ezzy Bakery Will Face When It Opens Its Subsidiaries in Europe and the US - Case Study Example

Topic: International Business Management Project Name: Registration Number: Institution: Tutor Date Executive Summary This paper provides a report on strategies that can be used by an internationally operating company to achieve its objectives while overcoming institutional and cultural challenges experienced during its operations. The report provided in this paper presents the institutional and cultural challenges experienced by an Asian based bakery company when it opens its subsidiary in Europe and the US. This report provides the challenges that Ezzy Bakery will face when it opens its subsidiaries in Europe and the US. The reason for entry into Europe and the US is that the company hopes to improve its business output when it operates in the region. Therefore, it is necessary to develop means of countering challenges that it is likely to face when it operates in the region. This is because; there exist a number of cultural and institutional differences between Asia and regions where it intends to operate such as Europe and the US that can have an impact on the level of its profitability in the international operations (Tihanyi, Devinney and Pedersen, 2012). By identifying these challenges, it is possible to develop solutions to them and advice the company on the strategies that need to be used to achieve its international objectives. In order to achieve this, there are a number of institutional and cultural challenges that Ezzy Bakery is likely to encounter. These challenges have been explained and a solution on the best mode of entry into America has been suggested. Table of Contents Executive Summary 2 1.Introduction 3 2.Analysis of issues faced by the company 4 2.1.Institutional differences that will be faced by the company 4 2.2.How to deal with institutional differences faced by the company 6 2.3.Cultural differences that will be faced by the company 8 2.4.How to deal with cultural differences faced by the company 9 2.5.Entry mode that the company will use to operate in America and Europe 10 3.Organizational structures that will assist the company achieve its objectives 10 4.Conclusion of the arguments of the issues 11 5.Reference 12 6.Appendix 13 1. Introduction Ezzy Bakery is an Asian bakery company that has operated since 1995. This has made the company popular enough in its county of origin; Saudi Arabia. The company has produced high quality bakery products that have been used within Saudi Arabia and the neighboring countries. In order to expand its operations, the company entered into a joint venture with a German MNC in the bakery industry. This enabled the company get sufficient intellectual capabilities that enabled improvement of its output in the bakery industry (Sinha & Sinha, 2008). Due dissatisfaction of the German MNC with the nature in which the joint venture operated, the venture could not continue and Ezzy bakery has faced a number of cultural and institutional challenges in its efforts to operate internationally. Currently, the company intends to operate in Europe and the US. There are a number of institutional and cultural challenges that it is likely to experience. The goal of the company is that it intends to enter the US and Europe and develop its capabilities in the areas of R&D in addition to product development to become one of the technological leaders in this industry (Rugman, 2009). The company hopes that when it invests in the US, there are much technological information that will be useful in developing its products and processes in Asia. However, the company does not intend to export products from its subsidiaries in Europe and the US. This paper identifies these challenges so that when the company starts operating internationally, it is possible to develop solutions to the challenges it is likely to counter. In addition, this paper suggests the entry mode that the company can use when it starts operating in Europe and the US. 2. Analysis of issues faced by the company 2.1. Institutional differences that will be faced by the company During its entrance into operation in the US and Europe, Ezzy Bakery will be faced by a number of institutional differences that will require high level of flexibility in their activities to make their venture successful (Roffey & Morkel, 2001). For instance, there will be stiff competition from other producers of similar products in Europe and it will be necessary to change the business model to make the operations of the business successful. In addition, there are a number of unique challenges that exist in the bakery industry, mostly resulting from the fact that there are a number of factors beyond the control of the owners. An example of such a challenge will be the need to change operation strategies on constant basis (McDonald & Burton, 2002). Due to the fact that the company will not be well-established in America and Europe, there will be constant fluctuations in guest counts and seating changes will be experienced as a result of weather delays. This challenge is not common in Saudi Arabia because the country is closer to the tropics and high fluctuations in temperature are not experienced. Another institutional challenge that is likely to be faced by the company is that it will be expensive to hire and retain staffs. For instance, it will be necessary to ensure good kitchen helps and service staffs (Marschan-Piekkari & Welch, 2011). The staffs employed in subsidiaries in Europe will need to be familiar with the types of foods required by most customers in these regions. In addition, it will be important to ensure that the staffs are bale to provide quality services to customers. Thus the operators of the company will have to invest in training based on geographical regions in which these subsidiaries are located. In addition, the company will need to set aside huge amounts of investments for payment of wages to these staffs while it will require seasonal hiring of staffs due to variation of influx of customers not the subsidiaries (Li, 2009). In Europe and America, there are a large number of people seeking technical jobs, thus there will be an influx of people seeking jobs in the catering industry. Furthermore, Ezzy Bakers will experience other challenges such as the need to be flexible and manage a number of details around the company. While it will be possible to control the factors to the best capacity of the company management, it will not be possible to prevent all accidents from happening. For instance, there may be cases of accidents and loss of property and equipment. The other challenge that will be experienced is that it will be challenging to keep food safe and maintain it at the right temperatures. Caterers in these subsidiaries will also be faced with the challenge of ensuring sanitation is maintained and waste materials are disposed (Ghauri, 2005). In other cases, caterers will be faced with the challenge of having to serve a large number of customers in a short period of time in hot outdoor areas. As a result, there is the possibility of generation of high quantity of refuse and it will be necessary to ensure that these refuse are kept away from consumable goods that are also perishable. Finally, the company will be faced with a number of event logistics such as the need to anticipate the flow of guests due to its unfamiliarity with the influx of guest in the regions. During events, it will be necessary to ensure food is estimated for a particular group of people sine there is the possibility of difference in clubs. 2.2. How to deal with institutional differences faced by the company There are a number of processes that can be used to counteract fluctuation in seating and weather conditions. One approach involves getting experience on the daily challenges experienced by the company as it operates and observing the right solutions that should be used to counteract these challenges (Devinney, Pedersen & Tihanyi, 2010). When similar problems are encountered in the future, similar methods should be used to solve them. This results into saving in time and results avoidance of losses that would have been incurred if these challenges are not counteracted. The problem of obtaining qualified staffs can be solved by looking for staffs from different places based on geographical locations. For instance, to obtain staffs for subsidiaries in Europe, the company needs to hire employees from countries where these subsidiaries have been located (De, 2011). This ensures, the company is able t benefit from their staffs understanding of customer influx periods and off-peak periods so that investments into the foodstuffs is done based on the expected customer demands of the regions of operations. The company can seek the services of aspiring young actors, singers, dancers and seek the services of casual workers who are willing to work on shifts to pay bills. In order to get these workers, the company can place ads and put notices at places of performances such as in schools, organizations and community centers (Aswathappa, 2008). The recruitment process should be flexible and inclusive of any elderly member of the community willing to add to the team. Thus retired fifty or sixty year old individuals who have the spirit to work may be added to the team of employees. Another that can provide a source of staffs is to obtain student interns. This can be done by calling employment offices in high schools, cooking schools and colleges and informing them that the company needs interns. The challenge of keeping food safe can be overcome by constantly maintaining food safe and training staffs and supervisors to ensure the food is kept safe. Maintaining food safety begins when ingredients are received. The ingredients can be kept safe by placing them in a refrigerator when they are received (Tihanyi, Devinney & Pedersen, 2012). The process should be continued when foods are defrosted and cooking should begin by using refrigerated ingredients. It is also important to cool hot foods quickly and store them properly in case they are not being consumed immediately. Cooling process can be achieved by pouring the contents onto a frozen sheet pan, thus enabling the spread into larger surface areas. When the room temperature for the foods has been reached, the foods can be packed and the refrigerated. Foods should not be placed in the freezer until they have been in the refrigerator for at least a day. Staffs can be trained to follow food-handling procedures by setting a good example (Sinha & Sinha, 2008). When a chef enters a kitchen, she is required to go to the sink and wash her hands thoroughly with soap and water and ensure she dries them on a clean towel. The problem of sanitation can be solved by using on-site refrigerated rooms that assist in storage of garbage. Staffs in the subsidiaries can also be asked to locate garbage bins in guest rooms so that any disposed materials can be dumped into these bins and collected for disposal. 2.3. Cultural differences that will be faced by the company There are a number of cultural inclinations that will have an impact on the nature of bakery products distributed by Ezzy Bakery in the United States and Europe. This is because the culture of people in these regions is not similar to the culture of people in Saudi Arabia (Rugman, 2009). For instance, the nature of bakery products demanded by consumers in America include mainly fast foods such as crisps and bread while in Saudi Arabia, bakery products such as cakes are mostly demanded. Furthermore, in Saudi Arabia, there is the tendency of locating bakery houses close to guest houses (Roffey & Morkel, 2001). This is not the case in America and Europe where bakery houses are located far from guest houses. Customers in America and Europe expect that products will be produced and distributed to them by middlemen. In addition there is the tendency of Americans and Europeans to eat bakery products based on weather conditions and season of the year. This is because these countries are polar and exposed to highly fluctuating weather conditions such as winter and summer. These e temperature conditions have an impact on their eating habits for bakery products such as cakes. For example, there is the possibility that customers will be consuming few bakery products in summer due to high temperature. This is not the case in Saudi Arabia where the impacts of acute weather changes are not experienced and customers can purchase bakery products at any time of the year. The other cultural challenge that will have an impact on the operations of subsidiaries in America and Europe is that these countries have difference religious inclinations from Saudi Arabia (McDonald & Burton, 2002). In Saudi Arabia, the dominant religion is Islam and most customers are Muslims. This implies that their eating habits are affected by their religious beliefs. Thus their consumption of bakery products such as cakes is based on their beliefs towards the consumption of these products. On the other hand, America and Europe is dominated by Christians. Thus, only Christian beliefs are regarded factors that affect the consumption of bakery products such as cakes and bread. 2.4. How to deal with cultural differences faced by the company The problem of different types of foods consumed by Americans and European countries will be solved b studying the eating habits for bakery products. This will result into the need to study eating habits of Americans to determine the types of bakery products they prefer (Marschan-Piekkari & Welch, 2011). Production of bakery products will then be channeled towards accomplishing the demands of residents in subsidiary countries. The problem of location of bakery houses next to guest houses will be solved by employing distributers who will assist in supplying the bakery products to retailers who will sell the bakery products to consumers. The impacts of changes in weather conditions due to summer and winter conditions can be solved by observing weather patterns in these countries (Li, 2009). The influx of customers to purchase bakery products in these countries should be studied to determine the season when there is an influx of customers. Production rates should then be redesigned in such a way that production is increased during times of the year when there are many customers and reduced in the season when there are few customers. This will ensure customers are satisfied while the company does not incur losses as a result of high amounts of products and low demand for them (Ghauri, 2005). The impacts of religious affiliations in America and Europe will be studied and areas where these affiliations are in favor of consumption of bakery products will be supplied with these products while areas whose religious affiliations do not support the consumption of these products will be avoided. This will ensure only areas where there are target customers for the bakery products of the company are accessed. 2.5. Entry mode that the company will use to operate in America and Europe The company intends to operate in a region where it is still not well established. Thus it will be faced with the challenge of having to adapt to operating conditions in these regions. In order to adapt properly and get the right understanding of strategies that it can use to ensure continuous profitability during its operation in these regions, it will be important if the company engaged in a joint venture with bakery companies in Europe and America. By engaging in these ventures, it will be possible for the company’s management learn a number of operation strategies that are used by the already established bakery companies in these countries (Devinney, Pedersen, & Tihanyi, 2010). This will be followed by implementing the same strategies to market and distribute its products to consumers in these regions. In addition, the companies will benefit from the goodwill from the existing companies and it will be possible to sell its bakery products even during its initial periods of operation. The joint ventures will also be useful in ensuring the company learns about the right organizational structure that should be used to ensure success of a bakery company in these countries. In addition, it will be possible to observe the management challenges experienced by these companies and observing the methods used to counteract these challenges. These strategies can then be used to solve operational problems experienced by the subsidiaries of Ezzy Bakery. 3. Organizational structures that will assist the company achieve its objectives Azzy Bakery will need to develop an organizational structure that ensures all sectors of operations are managed properly and activities are conducted to highest level of satisfaction of customers (De, 2011). In addition, the developed organizational structure will be designed in such a way that all challenges faced by the company are solved and objectives of the company are achieved while costs of operation are maintained to a minimal level. Such an organizational structure will be composed of administrators, managers, supervisors, human resource personnel, communication experts and staffs in production subsidiaries. In this organizational structure, administrators will perform the roles of formulating policies that assist in management of the company, managers will be people in charge of subsidiaries and will be able to report to the head office regarding activities at the subsidiaries, supervisors will ensure activities of staffs in the bakery areas are done effectively and any requirements are communicated to the manager for replacements of required materials and equipment (Aswathappa, 2008). In addition, human resource personnel will serve the function of recruitment of employees into the company and preparation of remuneration for exiting employees. Communication experts will assist in installing communication equipment within the organization to enable exchange of information among staffs during activities of the organization. 4. Conclusion of the arguments of the issues This paper shows that the bakery company in the case study is likely to encounter a number of challenges in its operations internationally. The challenges will mainly be institutional, logistical and cultural challenges. In order for the company to conduct its venture in Europe and America, a number of suggestions have been suggested that can be implemented to ensure these challenges are overcome. By applying these proposals, it is expected that the company will be able to operate competitively with the existing players in the same line of production. Furthermore, the company will need to develop an entry plan into the new subsidiaries in Europe and America. A weighing process has been conducted among entry plans that exist and it has been suggested that the best entry method would be through joint-venture with existing companies in Europe and America. By engaging into joint ventures, it is expected that the company will learn operation tricks that will result into its survival in the new locations. Finally, this paper presents an organizational structure that should be used by the company in managing its activities in the subsidiaries. The suggested organizational structure is composed of management and staffs for every department within the company. This structure will ensure there is the right level of coordination and success in management of business activities for the company. If the company in the case study applies the suggested solutions and organization structure to its management, there is a high possibility that business operations will be successful and profitability will remain stable during its operations. 5. Reference Aswathappa, K. (2008). International business. New Delhi: Tata McGraw Hill Education. De, T. A. F. (2011). International operations management: Lessons in global business. Farnham: Gower. Devinney, T. M., Pedersen, T., & Tihanyi, L. (2010). The past, present and future of international business & management. Bingley: Emerald. Ghauri, P. N. (2005). International business negotiations. Amsterdam [u.a.: Pergamon. Li, S. (2009). Managing international business in relation-based versus rule-based countries. New York, N.Y: Business Expert Press. Marschan-Piekkari, R., & Welch, C. (2011). Rethinking the Case Study in International Business and Management Research. Cheltenham: Edward Elgar Pub. McDonald, F., & Burton, F. (2002). International business. London [u.a.: Thomson Learning. Roffey, B., & Morkel, A. (2001). International business management. Darwin, N.T: Northern Territory University Press. Rugman, A. M. (2009). The Oxford Handbook of International Business. Oxford: OUP Oxford. Sinha, P. K., & Sinha, S. (2008). International business management: A global perspective. New Delhi: Excel Books. Tihanyi, L., Devinney, T. M., & Pedersen, T. (2012). Institutional theory in international business and management. Bingley, UK: Emerald. 6. Appendix A table of sales recommended sales increases for Ezzy bakers in five years from 2013 Year Sales increase in each subsidiary Sales increase in the Entire Company 2013 14% 10% 2014 16% 13% 2015 17% 13.5% 2016 19% 15.2% 2017 23% 17.1% Table 1. Recommended sales targets that should be set by Ezzy Bakery Read More