BUS 4150 The Yushan Bicycles Case Study PDF

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1 Yushan Bicycles Case 2 1. Current Company Stances (Seneyda) a. What is the company’s current mode of entry into the international markets/countries they are currently serving? Currently the company is Exporting its goods to Europe, Pacifica, and their biggest market Asia. b. What is the company’s ...

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Yushan Bicycles Case

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1.

Current Company Stances (Seneyda)

a. What is the company’s current mode of entry into the international markets/countries they are currently serving? Currently the company is Exporting its goods to Europe, Pacifica, and their biggest market Asia. b. What is the company’s current global strategy and structure? That is, how is the company organized to deal with their international operations? (International, Multidomestic, Global, Transnational) International. c. What and where is the company given its current philosophy for going global on a global product continuum where one end represents thinking and acting local and the other end; thinking and acting globally? The company’s current philosophy of thinking is going global. Due to the fact of the firm’s competitive position in another country, this will affect its position every other country they have entered. Coming into Colombia, Yushan Bicycles will be highly involved to make sure sales forecasts are met as projected. You can say that Yushan Bicycles is thinking and acting globally. d. What stance have they taken regarding their ability to enter into the market? i.e. have they done a global cost leadership, a global cost differentiation, global segmentation, national responsiveness, a protected market, other strategies. For Colombia, a global segmentation would work best. Bogota, Colombia is huge on bicycle riding. Since 1999 they have invested in creating bike lanes so that their roads are shared between motorists and cyclists similar to the US. Also, they close over 60 miles of streets every sunday so riders can enjoy the roads without any motor vehicles. The roads are closed for cyclist only for 7 hours around the city. This is called Ciclovia, which means “bike way”. e. What is the current management's view on the structure of their international operations and their views regarding embracing change as it relates to their current organizational international structure? They don't seem to take change well. They want to grow fast, but they don't take consideration the changes that headquarters must do to improve productivity or availability of the product offered to different markets. They should allowed each region or country deal with the best way possible then report.

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The Company's Mode of Entry

a. Should the company consider entering your country? Provide justification for why they should or should not enter. You need to refer back to some of the marketing and economics data you have collected regarding your country as well as other information you consider important/relevant to help formulate the bases for your recommendation to enter or not enter your country. You must give concert reasons backed up with numbers!! (Remember to cite where you got your information!) Yushan Bicycles should enter Colombia. According to El Espectador newspaper people between the age of 25-44 years of age use bicycles, which means that 6% of the population in Bogota relies on bicycle use which is about 458,083 males and 153,389 females. People from Colombia are starting to become sustainable consumers and conscious for the environment. Statistics promise that bike usage will continuously grown in a couple of years. Colombian people are trying to avoid traffic and even using their bikes while they are working. Some people sell bread while they are biking on the streets to move faster and arrive to different destinations. It is clear that bicycles are even used by small time entrepreneurs for in Colombia. Falabella is an online retailer located in Bogota where people shop from many different products including bicycles either online or in person. According to Falabella.com, the cheapest e-bikes listed are in $1,699,990 Colombian pesos and the most expensive one about $3,120,900 pesos. Those prices converted into New Taiwan Dollars are 17079.03 for the lowest reported price and 20595.32 for the highest reported price on Falabella. Compared to Yushan’s e-bike which starts at 46273.55 New Taiwan Dollar to the highest price of 69410.33 New Taiwan Dollar this converted to Colombian pesos according to the converter are valued at 4605793.01 for the cheapest E-bike offered by Yushan and 6908690.02 for their highest priced. Furthermore, according to our group economic paper, we found that Colombia has a free trade agreement that was made in 2007 and enacted in 2012, this can allow more companies to flow in without any high tariffs. In addition, Colombia is the only country in South America with access to both the Atlantic and Pacific Ocean. Yushan Bicycles should take advantage for trade freedom in Colombia and export their standardized product and keeping their prices to catch the attention of Colombian shoppers to obtain new bikes for lower price than local markets. In addition, Colombians make up a larger portion of the middle class and producing a product that will benefit the people now that bicycles are becoming a trend to Colombia will even add up to a reason why they should definitely enter to the country. b. What is the best mode of entry into your country? How does this fit with the company’s current stance regarding market entry? You need to discuss all four mode of entry strategies identifying the pros and cons of each. The best mode of entry into Colombia in regards to Yushan’s current mode of entry is a joint venture or an alliance. An agent or representative in Colombia will be the best bet for a company and this requires meeting the right people to partner with and make sure they can follow the Colombian

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Commercial Codes. This is convenient for the company because if they make alliances and network with people that know how the Colombian market and laws works it will be really easy to become established as one of the most important bicycles companies in Colombia. This company has the most important attributes that a company needs to compete in colombia; they offer good quality product and very competitive prices. Since the company is starving for entering new markets, we think this can be a very good option to expand their company in South America contributing to the bicycle era that is starting in Bogota. Exporting is another mode of entry that could work for Yushan Company because they have the opportunity to export their bicycles without customizing their product having the advantage of standardizing their product. Since Colombia has established a free trade agreement and Taiwan is part of that free trade agreement they should not have many issues exporting their product and tariffs will be low compared to other countries. The cons of having to export is the high corruption in Colombia and level of terrorism which is 5.95. Level confidence in Colombia is -15.9 and Business confidence -1.9 which means that people from Colombia have a negative impact to new markets. They usually feel confident and positive buying home products and brands well known in their country and this might be risky for Yushan bicycles to enter to their country. Franchising is another mode of entry and this actually works perfectly fine for companies that wants international expansion to build a presence in foreign markets. The only issue why Yushan company shouldn’t use a franchise as a mode of entry is because they will not have a complete quality control of the company and sometimes other franchises do not show the same compromise and effort as the main company. This could be risky for Yushan bicycles because they want to rapidly grow globally and sometimes cultures does not stress the same kind of quality concerns. Lastly, foreign subsidiary strategies (wholly owned subsidiary) begin with acquiring a foreign company or by establishing operations from the ground up. This mode of entry helps the company to achieve exceptional alliances and networking with different distribution channels, as well as building relationships with the government and officials plus a direct control of their company. The disadvantage of acquiring a wholly owned subsidiary is the high level of risk because the company requires a lot of companies resources such as large costs of capital. In the case of Colombia they will not be the best country to do so since their level of business confidence is negative and they do not provide legal protection for investors. This type of entry has the largest risk overall. When it comes to establishing a global name, Yushan should not undertake this kind of risk since they are already being spread out thinly between Asia, Europe, and Oceania. c. How willing is the company likely to be to enter into your country given your recommendations. If not willing, how would you go about getting the company to embrace your suggested mode of entry? Depending on whether or not Yushan Bicycles wants to enter the market to sell e-bikes, the low to mid range bikes can easily sell in Colombia. Seeing that Yushan Bicycles also wants to hold the reputation for being one of the world’s most respected bicycle brands, it would make sense for Yushan Bicycle’s to enter multiple countries to create a more globally recognized name. In terms of entering

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being a viable decision, it might make sense to not enter Colombia unless they agree to a joint venture with a local company that knows the consumer trends and economic situations. Bogota is the only major city in Colombia that has shown a trend of bicycles becoming increasingly popular to the point where they close off 60 miles of city streets for 7 hours every Sunday so that cyclists of any level can enjoy riding through the city without the worry of motorists. Joint ventures can make the process of entering Colombia easier. By partnering with an organization of people that are apart of the trends and culture of Colombia, Yushan can quickly establish itself as a strong competitor against locally manufactured bicycles. With a joint venture they can also have part of the risk undertaken since they are partnering up with a local company. As for the case of Yushan Australia, James Hamilton was clashing with upper management. Since Yushan was using a wholly owned subsidiary and exporting into australia as their method of entry, consumers might view the company as an intruder or a disruption to local production with low prices regardless of hiring Australians. This can have the same effect on Colombia. With a low consumer confidence index, Colombians have little faith in the future of the Colombian economy. This can lead to less sales due to the typical response of saving money in order to survive a recession. In addition, since Mr. Hamilton wanted to raise prices after the primary years of his strategy, it would not work in Colombia since a majority of the population is stricken with poverty. Even if the price increase is marginal, this can deter consumers from purchasing such products since they are not necessities. d. Should the decision to enter be based on doing sales only, manufacturing only or both? Justify your stance. Exporting from Taiwan is a very costly expense. With shipping costs and exporting costs, it seems if Yushan really wants to enter Colombia as a seller, they should manufacture as well. Reducing the costs by manufacturing can have positive outcomes for both Colombia and Yushan Bicycles. Even if they do not want to set up a manufacturing site, they can acquire a manufacturing company that can produce the bikes themselves. It can have a positive economic impact on Colombia. If they use the strategy of joint ventures, they can find a manufacturer that can produce their parts and assemble them. This can lead to lower costs since there will be no importing tariffs. After the assembly of the bikes, Yushan can then sell those bikes to consumers or retailers. Using a joint venture, it can give the appearance of Yushan trying to help Colombia’s overall economy. That way skeptics can accept Yushan since they provide jobs and sell their bikes at reasonable prices. Since Yushan has different types of bikes they can also use the manufacturer as an insider that can inform Yushan of consumer trends in terms of bike styles or uses.

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The Company’s Global Structure and Strategy

a. Can the company continue with its current international organizational structure if they decide to enter your country in the mode you are recommending?

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The mode of entry we have chosen is Joint Venture. The company would need to slightly change it’s international organizational structure. A look at Yushan’s international strategy, Yushan made connections with big distribution channels, all specialty retailers. Their sales in the Asian markets were built steadily. The international organizational structure consists of three regional group managers in Asia, Europe, and Oceania. The three groups are under the Sales Operations Director. Yushan would need to make and appoint a regional group manager in South America. This way it will save the trouble of the YA incident. Yushan would need to look for a regional director that will oversee the joint venture and would need to have experience with the market as Colombia has poor consumer confidence. The director would also need to know about bicycles and sporting goods as this will give him an advantage to the joint venture. He would point out parts that need to happen in the market instead of following what the joint venture partner says. The regional director has to be local and cannot be sent from Taiwan headquarters as they will have more experience in the field. b. How would the company’s international structure need to change, if it needs to change, if they entered your country? Yushan is known to start international headquarters. In the recent case with Australia, they hired someone with a great knowledge of the marketing but could not deliver the numbers set by the Taiwanese headquarters. The problem I saw was they did not hire someone with great sports or bicycle knowledge. Looking above, Yushan would need to add a regional group manager for South America. This will not only relieve stress upon the Sales Operation Director, but give them a good insight of the market they are entering. Together with the joint venture company Yushan will succeed in the market. c. Do you think the company management’s mindset regarding their international organizational structure would change if they decide to enter into your country? No, their mindset regarding international organizational structure should not change. They have successfully entered European countries and Asian countries without a problem using the mindset that they have now. With Australia, I believe it was a management and stock issue. The management had a different mindset than that of the Taiwanese headquarters. The stocks that enter Australia were either late, or not enough. Yushan Taiwan’s mindset is to give stock to their most demanding and most profitable markets, which isn’t wrong because they are covering the losses of other markets. However, if Yushan Colombia wants a chance to survive in their market, they need to provide adequate stock to make an impact on the Colombian market. Colombian’s already have poor consumer confidence, Yushan does not want to give Colombians another reason for not buying bicycles from them.

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Overall assessment of Company’s ability to survive in the Global Marketplace.

a. Can the company continue to use their current philosophy to go global, especially in your country?

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They definitely should because the main purpose of the company is to expand internationally with the intention of upgrading the product mix. Although, after an unsatisfactory experience that occurred in Australia, the company should focus on establishing a company that is not only good at distributing and selling merchandise, but also, they should empower the company to to be established in a different country pursuing success. The company follows a specific management system, in which they prioritized entities where merchandise is fluently rotating. The Colombian system will be easy to have access to, and their market is rapidly growing. In Colombia, the culture is an important factor that must be taken in consideration to reach success. b. What factors will impact their ability to be successful in the global market especially keeping your country in mind as you made your recommendations? According to the Alps&Andes website, an article named, Hecho en Colombia, (Made in Colombia) explains the evolution of the bicycle industry in Colombia. Companies in Colombia used to be able to customize their bicycles according to the person's physical characteristics. TINNO is a domestic bicycle brand, whose founder is not operating as a manufacturer anymore due to the invasion of carbon frames made in China. China has invaded the Colombian market by exporting bicycles frames into Colombia. Nowadays, TINNO a bicycle founder and many other founders are not producing bicycles, but they are turning their manufacturing establishments into bicycle repair shops (A&A 1). Another important factor, that will considerably improve the success of Yushan Bicycles is the establishment of a company in Colombia that will allow consumers to acquire any item directly from them, in lieu of consumers buying them online and having their transactions being rejected due to the risk of the transaction being an attempt of fraud.

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Works Cited Bain, Ahttps://www.elespectador.com/noticias/infografia/cuentas-de-bici-articulo-5457ndrew. “Travel - Reclaiming the streets in Bogota.” BBC, BBC, 20 Sept. 2013, www.bbc.com/travel/story/20130828-reclaiming-the-streets-in-bogata. Dinero. “Al igual que los ciclistas, el mercado nacional de las 'bicis' vive una nueva era dorada.” Al igual que los ciclistas, el mercado nacional de las bicis vive una nueva era dorada, Dinero.com, 9 Aug. 2017, www.dinero.com/empresas/articulo/ venta-de-bicicletas-en-colombia-durante-2017/248414. “Hecho En Colombia.” Alps & Andes, Nov. 2016, www.alpsandes.com/posts/2016/11/2/hecho-en-colombia. Ita. “Doing Business in Colombia.” Export.gov - Colombia Market Overview, 2016.export.gov/colombia/doingbusinessincolombia/marketoverview/index.asp Otis, John. “Cyclists Chase Glory for Colombia, and, Some Say, in Spite of It.” The New York Times, The New York Times, 7 June 2017, www.nytimes.com/2017/06/07/sports/cyclistschase-glory-for-colombia-and-some-say-in-spite-of-it.html. Tellez Oliveros, Veronica. “Las cuentas de la bici”. El Espectador.com. 23 Feb, 2015,

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