The Strategic Issues Entering Into European Markets Commerce Essay

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The proposed management report is focused on the strategic issues of the company entering into European market. The company is seeking to make entry in an international market in order to make the product development. The company is trying to capture the global market for the expansion of the product and is therefore advised to make an entry in the United Kingdom in order to make the thorough perspective research on the product development. For ensuring the stability of the cross cultural business initiative, training is imperative and should be given to all employees in the business organisation. Employee knowledge about the international values, beliefs, trends, training & development, language and customs is necessary to match the trends in United Kingdom & make optimum utilisation of the international exposure towards the product development as well as the market development. Corporate strategy of the business is to be formed in accordance with the functional structure of an organisation to maintain an effective channel of the business activity in an international market. From this standpoint, all the important & requisite strategic issues of the business are focused in this report. The company is suggested to take their entry in the European market for the expansion & development of their product, as well as, market. In this activity, whatever necessities are required to fulfil in terms of organisational structure & control strategies in the business are pre-screened in a simple & rational way helpful to the business management & control.

Introduction

Jiangsu Jiuchuan Clay Technology Development Co.Ltd. is located in Xuyi country Jiangsu Province which is known as the capital of attapulgite clay. It was established by Shu Guang proprietary group along with its strategic investment partners. They have invested 50 million Yuan covering about 33 acre in China Attapulgite Clay science & technology zone and is the biggest high tech enterprise covering research & development, production, application & sales of stick crystalline inorganic Nano materials and Nano attapulgite. The company is having the capacity to produce 30,000 tonnes attapulgite & 10,000 tonnes nano composite plastics. Their advanced nano materials have been applied in the top products in the field of petroleum, rubber, chemical, pharmacy and environmental protection. The company has reached the leading level in the world about GE engineering plastics. At present the company have constructed a long time close co-operation with the Chinese Academy of Sciences, East China University of Science & Technology and Huaiyin Institute of Technology. With the technical support of these institutions, the company has established the first attapulgite technology clay test centre, Jiangsu key lab for the utilisation of attapulgite clay resources & the attapulgite clay research & development associated lab. The products of the company are Nano Attapulgite, Nano Polymer nucleating, Nano composite plastic, Nano enhancer, Nano organic materials, Nano composites, Super nano inorganic high viscosity and the three dimensional network of adsorbent act; thus helping to carve a road of application of nonmaterial's. Recently, the company has a strategy to enter into the European market for the purpose of developing its capabilities in the Research & Development and the product development; they have aspiration to become a technology leader in the industry. The imperative plan of the company is to use the technological knowledge, gained from investments in Europe, to develop products & the production processes in the home base. With the help of that they can expand their products to Europe and the USA.

Advice on the selection of the country

The strategic focus of the company is on the research & development activity of the product. The company is eager to bring an innovative product to the market in order to capture the segment market orientation. In order to have a strategic direction, it is advisable to the company to make its development in the United Kingdom. The Penrosean approach of bio-technology is applied in the UK in order to explore the interplay of internal & external dynamics in the development of the new businesses. The very concreteness of bio-tech ventures facilitates the common development processes in all of the new businesses in UK; these types of businesses are creating outstanding values, which are attracting investors perceptually on a longer term basis than in the other sectors.

Recently in Russia, world's largest nanotechnology funding programme was approved with $3.95 billion set aside until 2015. In Europe, Germany leads the nanotechnology programme as the Government has endorsed nanotechnology since 1980s. Germany is also ranked among the top 4 locations worldwide for nanotechnology and is also home to global players in nanotechnology such as Bayer, Siemens, Evonik and Carl Zeiss. Table xx below shows that Japan is a world leader in per capita funding on nanotechnology while in Europe, Germany leads the pack.

Country

Funding levels per capita

(in billions)

UK

$3.43 B

USA

$10.92 B

Germany

$9.71 B

Japan

$11.65 B

Taiwan

$10.01 B

UK government has also spent approximately £600 million in the last 10 years to support research in nanotechnology. The total funding has easily exceeded £1 billion mark if the investments by UK government are coupled with corporate funding based on 50:50 criteria. In the UK, there are over 600 micro and nanotechnology companies each developing commercial applications from nanotechnologies (Source: NanoKTN, 2009). Major firms operating in nanotechnology in UK include Oxonica, Elan, Hitachi and Nanoco.

Year

Estimated Amount (in million)

2009-10

£83.20

2008-09

£77.60

2007-08

£73.50

2006-07

£66.27

2005-06

£66.00

2004-05

£65.76

2003-04

£60.80

2002-03

£40.58

2001-02

£50.00

2000-01

£35.50

Total

£619.21

Estimated UK Government support for nanotechnology

Historically, research in UK has been successful and is also considered as a leading powerhouse of innovation & commercialisation. The reputation of UK in nanotechnology research is underpinned by a strong academic sector where numerous research scientists are focusing on the evolution of nanotechnology. Semiconductor industry in UK is operating within nanoscale for many years while the catalyst industry has shown inclination towards nanoscaled structures as the increase in surface area provided by nanoscale is giving rise to increased activity. Increased surface area and changes in the optical, magnetic & electrical properties are the novel properties exhibited by nanoscaled structures. These particles are becoming growingly understood, thus enabling the exploitation of nanoscale features to improve the range of existing products & potential to add new products in the market over a wide range of sectors. The Technology Strategy Board in the UK are connecting and catalysing their reactive & proactive approach in terms of the knowledge management [Parek, 2010, p16]. Volume of the work has been in spreading knowledge, understanding policy, spotting opportunities and bringing people to solve problems while making advances in the technology developments. UK government initiated a nanotechnology programme of work in the year 1986; a national initiative on nanotechnology which was led by the national physical laboratory in UK and was later followed by another nano technology programme in the years 1988 to 1996 and 1998 to 2006. The last nano technology programme has been conducted in the year 2009 when the former Department of Trade & Industry has led to examine the potential impact of nano technology & nano science on industry in UK [Zambia, 2010, p39]. There are various key obstacles to the successful exploitation of the nanotechnology; however, an exclusive research report is available to overcome these obstacles which identify number of different opportunities in relation to nano science & nano technology industry. Various documents are published by the UK universities and research labs as per the British standards on the nanotechnology terminology to address & guide in dealing with the health & safety issues which arises due to the use of nanotechnology. As UK has a key strategic partnership with China compared to other European countries and very strong ties exists on both sides at all levels of the government and wide range of stakeholders, setting up business by Jiangsu Jiuchuan in UK is more appropriate even when UK compared to Germany is at second place in the technological leadership in nanotechnology. It is certain that an extensive business support network and significant market will stimulate more growth of nanotechnology development in future in UK with the continued support of the government.

Advice on the dealing with institutional & cultural differences

According to the World Bank report, CEO's of more than 85% companies that failed to mark a success in their business venture outside China attributed difficulties in managing differences in managerial styles, corporate culture and mindsets. In UK, there are a number of people from different countries with different religion, beliefs, culture and attitudes. The company has to respect the cultural diversities and develop a tolerant way of integrating the new minorities. Training and education is must for employees to help them better manage and understand multiculturalism at work. Culture differs from one society to another; there is a classic distinction between active & passive societies. Active societies are seeking opportunities in their environment in order to improve their conditions with displaying the desire for attainment and to be in charge. Passive societies are seeking to maintain their status and display a tendency to be under the control of natural processes of the social waves & developments [Etzioni,1968,p72].

Source: Data from http://geert-hofstede.international-business-center.com/

Above graph is based on well known Hofstede framework of assessing cultural dimensions and compares the cultures of China and UK. Although his work was criticized for assuming each nation has a uniform culture, it is still considered as a useful tool to the companies willing to establish on the foreign land. Figure xx clearly depicts vast differences in the culture of two countries; hence, negotiations between British & Chinese firms could result in potential cultural misunderstandings and it is recommended that careful and explicit attention must be paid to the cultural factors before entering into such negotiations.

There is very little to pick out on "masculinity" and "uncertainty avoidance" between the two countries but all the other three dimensions have substantial differences. On Power Distance, China has a high score representing existence of inequalities of power and wealth compared to UK where there is more social equality. A large power distance culture as followed in most Chinese firms is hierarchical, authoritarian and dominating; while smaller power distance cultures demonstrate flat organisation, value participation and more democratic. Jiangsu Jiuchuan should pay careful attention to the organisational hierarchy. Individualism represents the degree to which a culture reinforces individual's importance compared to a group and it is no surprise that UK scores high on this value. It has been discovered that with an increase in the national wealth, a culture moves in the direction of individualism end of the spectrum. China's culture is viewed as collectivist culture on this spectrum. Jiangsu Jiuchuan negotiators should appreciate people in United Kingdom are sensitive to individualism and cultivate a culture to support this feeling. Masculinity highlights degree of gender differentiation, i.e. the traditional role of males vs. females. Masculine cultures are also considered as cultures which value competitiveness, assertiveness and wealth accumulation compared to feminine culture which values relationship & quality of life. Both China and United Kingdom are at the same level on masculinity. Both countries also score nearly equal on "Uncertainty Avoidance" which deals the tolerance level for uncertainty and ambiguity within a culture. However, one dimension that stands out where there is a huge difference in the scores is "long term orientation" dimension. Literally, this suggests that Chinese firms enter partnership with a farsighted vision & emphasise long term goals, whereas British firms looks forward to have short term pay-offs. This displays the role of guanxi in business relationships between Chinese and British firms. Of the several Chinese cultural concepts that have been investigated for their significance in business relationships - mianzi ('face'), renqing (reciprocity), xinyong (trust) and guanxi (personal connections) - it is guanxi that is probably the aspect of Chinese culture that is best known to Westerners (Wilson, 2005).

Source: www.1000ventures.com

Figure xx above compares and highlight more cultural dimensions between UK and China. For the purpose of the report, dimensions on the above figure are not discussed in detail as analysis based on Hofstede framework is already studied in the previous section.

Advice on the organisational structure & the control strategies

Organisation structure is a hierarchical concept of the subordination of entities that collaborate and contribute to serve a common aim. Organisation is a group of the clustered entities which can be structured in many different ways & styles depending on the objectives and the available potentials. In the past organisation structures were considered as least important and formed according to the business owner's intellect but recent researches have shown that incorrect organisational structure can have damaging effects on company's strategic direction and may even lead to failure in meeting the business objectives. Organisation structures will determine how the performance is going to be made & how the operational activities are to be managed. Organisational structure & controlling strategies in business can be planned in relation to achieve the objectives of business. Object oriented methodology is required in planning of structure of the organisation & the chain of order. Jay Galbraith is his book "Designing the Global Corporation" rightly said: "Today, it is hard to find a company that does not claim to be global; it is equally hard to find a company that has mastered the ability to organize and do business globally." As the prime objective of company Jiangsu Jiuchuan is to become technological leader in the industry by gaining knowledge from the investments in research and development instead of positioning European subsidiary as a major export hub, international division or worldwide area organisational structure will not suit Jiangsu Jiuchuan. International division approach is suitable to those companies which have a standardised product and aim for geographical expansion in various countries. Although, there will be duplication of efforts in various functional department in order to control international subsidiary but the experience of the parent company would be helpful in successfully establishing the business unit. However, as R&D and product developments are the areas where Jiangsu Jiuchuan needs European expertise, worldwide product area structure is seen as a better fit compared to all other organisational structure. This would allow company to focus on the region as a dedicated R&D centre. All other functional departments such as finance, manufacturing, sales and personal will be centrally controlled from the home country, China. All the functions of the business will be under the control of Chief Executive Officer while functions in an area of business activity are departmentalised & the departmental manager will have the authority & responsibility to handle the department activities. Company should decentralise decision making to its UK subsidiary while ensuring appropriate direction and control is in place to achieve consistency with the overall corporate strategy. It makes it suitable for the organisation to accomplish its goals in time. Control systems are the necessary governance tools in the hands of senior management to ascertain individual sub-units are performing well regardless of the type of organisational structure. Based on the objectives of UK subsidiary, it is recommended to Jiangsu Jiuchuan to have "output control system" which consists of setting challenging goals, ambitious performance standards & appropriate operating budget for the business unit to accomplish. Care must be taken while setting the control systems as they shouldn't be too harsh and should motivate the employees to work towards attaining corporate objectives and keeping the organisation on track. Regular reviews should be held to follow up on the advancements inside and outside of the organisation; and if conditions change, it is appropriate to revise the objectives and communicate. It is advisable to the company to use the organisation structure in the business under the control of the Chief Executive Officer of the company which maintains the centralisation of management in the business with decentralisation of the functions for creativity of product. The company deserves an optimum level of proficiency in business with the spirit of improved product mechanism & the business research.

General Issues

A salient and much controversial international issue of technology transfer is of the proprietary nature. Latest technologies are particularly concentrated in relatively few companies in a few industrial countries and MNC's have found to be the primary vehicle of technology transfer from the developed countries to developing countries. During the past few decades much of the technology transfer has been done by the transnational corporations. Recent studies have shown that MNC's are usually more protective of their advance knowledge, technology & competencies embodied in processes, products & management. This is due to the fact these strategic resources & competencies of the MNC are the main sources of its competitive advantage. While realizing that technologies, knowledge, and competencies are the supplier's main source of competitive advantage, the current technology transfer issue in international joint ventures or subsidiaries revolves around the extent of degree of technologies that are transferred by the suppliers to recipient partners in terms of tacit knowledge (new product/service development, managerial systems and practice, process designs and new marketing expertise), and explicit knowledge (manufacturing/service techniques/skills, promotion techniques/skills, distribution know-how, and purchasing know-how) (Madanmohan et al., 2004). Studies have suggested that collective learning encourage alliance partners to share their knowledge and benefit from each other's complementarities thereby providing mutual opportunities and potential synergies which can be extracted by the respective competencies. Collaborative learning creates an access to the partner's knowledge and skills such as product and process technology, organizational skills, and knowledge about new environments (Inkpen, 1995a). In the collaborative learning environment; the transferring partner is usually more open & transparent with respect to sharing & transferring knowledge to the recipient partner as it demands mutual exchange of valuable knowledge. Benefit of the technology advancement can be acquired with the exclusive usage of internet for the purpose of an effective information management in development of the product through global research. National cultural differences mostly reside in values and less in practice, as the importance of the technology transfer is different in the different circumstances. It is required by firms & companies in the globalisation period of business & commerce to collaborate across cultures for effective technology management. The area that is having the scant attention in literature is cross-cultural training of the workers which is essential to realise the advantage of technology sharing and bring success to the subsidiaries of transnational corporations. Jiangsu Jiuchuan has an opportunity to expand business in UK and make use of Research & Development of the international level in development of product for organisation's business activity. Internet & Groupware technologies are the combinations of hardware network architecture and software applications that enable individuals & groups to communicate, share information & collaborate by producing the joint products. Countries that are investing huge sum of money in R&D and giving subsidiaries to the international companies interested in establishing business in UK in the field of nanotechnology are considered to be at loss. These transnational companies on acquiring knowledge from the funding country will float the knowledge to its subsidiaries and strategic partners in various countries; thus enabling those countries in becoming rich in that technology without spending fortunes on R&D. Cultural & national differences are now percolating in transferring of the technology which should be dealt sensitively.

Conclusion

Every management report has been prepared to help the management in some or other way through the analytical review while the ultimate aim is usually assist management in decision making. The report provides imperative sources to the management in order to arrive at the rationality in the business policy making, decision-making & strategy planning. With this report, perspectives are developed in front of management of the company in order to enter into the European Market, for the purpose of taking benefit from technology and research facilities available in the foreign countries to improve the quality of products and developing innovative feature rich products to be used in wide range of industries. United Kingdom is the good pitch for the business in order to expand their business activities as both UK and Jiangsu Jiuchuan share the same objective of becoming world leaders in nanotechnology. Today, as world faces a number of societal challenges which will be addressed by applying the innovations from the nanoscaled structures. UK government is supporting major nanotechnology programmes in the country in developing future capabilities of nanoscaled structures and have invited foreign companies to work together in partnerships with the government; thus becoming an ideal destination for Jiangsu Jiuchuan for its research and product development. Organisation will also gain insights on the European culture that would help to grow business in future in the area and learn business mechanics and skills to achieve higher returns in the home market.

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