IB (ICA3) - IB ICA 3 PDF

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IB ICA 3
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School of Business Management BM0180 INTERNATIONAL BUSINESS

Foreign Market Entry Research

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Introduction ● Mission……………………………………………………………………………..3 ● Selected City —  Dublin, Ireland…………………………………………………...3 ● Proposed business for Dublin, Ireland……………………………………………..3 PESTE ● Political Factor…………………………………………………………………….4-5 ● Economic Factor…………………………………………………………………..5-7 ● Socio-cultural Factor……………………………………………………………...7-8 ● Technological Factor……………………………………………………………...9 ● Environmental Factor……………………………………………………………..9-10 Michael Porter’s Model ● Intensity of rivalry within the industry…………………………………………...10-11 ● Threat of new entrants…………………………………………………………....12-14 ● Bargaining power of suppliers…………………………………………………...14-16 ● Bargaining power of buyers……………………………………………………...16-17 ● Threat of substitutes……………………………………………………………...17 Conclusion ● Invest or not to invest…………………………………………………………….17-18 Recommendations ● Company’s Capability…………………………………………………………….18-19 ● Industry Attractiveness…………………………………………………………...19-20 ● Country’s risk……………………………………………………………………..20-21 ● Assessing Cube Model (Level)...............................................................................21 Selected mode of entry……………………………………………………………....22 Reference……………………………………………………………………………....23-24 Appendices…………………………………………………………………………....25-29

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Introduction Delcie’s desserts and cakes is a health conscious dessert store that is founded in Singapore in 2008. We provide great variety of desserts and cakes —  birthday cakes, cupcakes, cookies, macarons, muffins and even gift sets for our customers! To make purchasing a pleasant experience, we allow walk-in, online orders and even provide delivery at affordable prices!

Mission: As the younger generations are getting more health conscious and also different customers have their own special diet —  egg allergy, dairy intolerance, diabetic condition or vegetarian. All these restrict them from eating cakes due to the crucial ingredients needed to bake. To distinguish us from the rest of our direct competitors, our company is confident to cater to the needs of these group of consumers as we are able to come out with special recipes that replace those ingredients and change their perceptions that cakes can be healthy as well. Additionally, we have been awarded by Singapore Health Promotion Board with the Healthier Choice Certification, which shows that customers’ health is our priority. Selected City — Dublin, Ireland: Dublin is the capital city of Ireland with a population of more than 1.7 million and home to more than 100 different nationalities. It is one of the most popular city break destination in Europe and one of the most friendly capital cities in the world. Being one of the oldest city in Europe, Dublin have grand architecture, fine museums and ancient churches. Lastly, Dublin has its unique culture and passion for drama, literature, traditional sports and music. Proposed business for Dublin, Ireland: We decide to set-up Delcie’s desserts and cakes cafe in Dublin as a retail industry that follow the business model of Business-to-Customers. The reason for setting up a bakery themed cafe is because firstly, there will be an increase in growth in value term from the year 2015- 2020 for bakery market in Ireland. Secondly, health concern is the main trend that affect the overall sales of baked goods as Irish are moving towards a healthier lifestyles by avoid eating high-fat and high-carb baked goods and they also become more conscious of weight gain. Lastly, Irish consumers prefer food that can be easily consume “on-the-go”. We believe we meet the needs of the Irish consumers as we use healthier alternatives for ingredients and our cakes are low in calories, cholesterol, sugar, sodium and high in fiber. Additionally, we have cookies, cupcakes and even muffins that can be easily consume “on-the-go” !

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PESTE FACTORS Political Factor: Stability of government: The government type of Ireland is a republic and parliamentary democracy where the people vote for representative to parliament and the government is formed by party with most representation in the parliament and hence the leader from winning party become the prime minister. Social Stability: Ireland ranked 13th on the Cooperation in labor-employer relations report with a score of 5.4, with 1 being generally confrontational and 7 being generally cooperative. This shows that fights and riots break out in Ireland but it doesn’t happen often. Hence it is still favorable to set up business in Ireland. Relationship between governments: Ireland has many relationships with other governments such as America, Asia, Europe. T  he foreign relations of Ireland are strongly influenced by its membership of the European Union, although bilateral relations with United States and United Kingdom are also important to Ireland. It is one of the group of smaller nations in the European Union which has historically tended towards independence in foreign military policy, thus it is not a member of the North Atlantic Treaty O  rganisation and has a longstanding policy of military neutrality. This policy has been moderated in recent years and the country is an important staging-post for US troops in Western Europe. In our case, Singapore also having good relationship with Ireland since 1974. With the help of Irish teacher to educate our young citizens, this show us that the links between both of our country and Ireland are long and deep. Next, there are also some of the Singaporean go to Ireland to study. In many cases, for those Singaporean who study in Ireland, it will form lifelong links with the country and after graduated, they can join the Irish Graduates Association of Singapore which can close links between Ireland and Singapore. Participation in International Organisations: Ireland is a member of two trade blocs —  The European Union (EU) and World Trade Organisation (WTO). Being part of trade blocs provide opportunities for more cooperation and positive relation between member countries, leading to economic growth for Ireland. Being part of the EU, it benefits Ireland greatly as it helps to remove trade barriers between members countries and protect Ireland market from non-member countries. Similarly, WTO help Ireland to build new trade agreement with other countries, making Ireland an attractive host country as it have good relations with countries around the world.

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Legal environment Ireland’s International Property Rights Index (IPRI) score increased by 0.2 to 7.6 placing it 11th in Western Europe and 18th in the world. Ireland has slipped one place on the Corruption Perceptions Index (CPI) for 2016. The findings show a fall in Ireland’s ranking in the index since 2015 from 18 to 19 out of 176 countries.

Economic factor: Ireland’s potential as a market In terms of market size, Ireland has a population of approximately 4.7 million people, and ranks slightly above average in terms of its population size when compared to other countries. This is due to Irish citizens having a decent level of spending power making Ireland a viable choice for a business venture. For spending power, the average Irish citizen earns about 46,000 USD, which ranked 11th out of 30 according to OECD statistics. Ireland has a GNI per capita of $46,680 and ranks 17th highest in the world. In terms of household net wealth, a study performed by Credit Suisse showed that Ireland had a Household Net Wealth level of £170,513, ranking 7th place out of 13 nations on average and and 5th place on a median basis. Thus, this shows that citizens of Ireland on average have sufficient spending power to purchase goods and services that they require and thus possess a satisfactory quality of life level. This means that the average Irish citizen is very likely to have enough purchasing power necessary to be able to purchase goods or services offered by a business venture. Ireland has an open market that does not have many trade barriers on average. Primarily it has CET, a common external tariff imposed on all non-EU members. However, there are restrictions on non-EU member goods and import quotas on several item such as textiles, steel, footwear and toys. Thus, it will be easier for EU members to start a business venture in Ireland, but non-EU members will not find it impossible. Potential as a production base Ireland has a labor force participation rate of approximately 60%, and labor force size of approximately 2,800,000 people. Thus, with more than half of the population either already possessing a job or actively searching, and adequate reception and exposure of the product or service is likely. Ireland has a GDP per capita of approximately 290 billion USD, scoring far above the world’s average GDP. In terms of GDP per capita it’s the same story. Ireland scores well above global average and it can be inferred that Ireland has an increasing level of production and that citizens in Ireland have adequate purchasing power. This falls in line with the trend of Ireland's current levels of economic growth.

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Economic growth and stability Ireland’s economy recorded a robust growth of 4.8% in 2016, with a forecast to a grow a healthy 3.7% in 2017, and is expected to continue to be one of the strongest economies in the EU in the medium term. This implies that consumer spending, government spending, and employment are expected to perform well. In terms of price stability, the inflation forecasts for Ireland from 2016 to 2020 are healthy, being 1.80 % over the next 12 months, and towards 2.10 % in 2010. This is in line with the “ideal” inflation targets that offer the country price stability that would translate into willingness on the part of customers to spend and invest. This would continue to spur demand and drive economic growth. In terms of raising capital, collaterals are needed and one possible avenue is from the bank of Ireland. Another possible avenue is getting a credible company to raise capital from the stock market. In terms of currency stability, as Ireland is part of EU, trading with member countries does not bring on foreign exchange risk. Its other major trading partners are the US and the UK thus the Euro/USD and Euro/GBP will be a crucial factor to its economy. Ireland's unemployment rate is forecasted to be at 5.5% in 12 months and is predicted to fall in 2020, due to the rising growth in industries, the largest being construction, scientific and technical industries. These figures are indicative of an expansionary labor market that is near full employment. This means that businesses can operate and perform well and many people will have the jobs they want and will be earning wages. Thus, in turn, people will have money to spend, which in turn spurs the economy. A looming economic problem for Ireland would be the United Kingdom’s (UK) electoral vote in June 2016 to leave the EU, commonly known as Brexit. Close trade relations between Ireland and the UK mean that trade and economic activities may see a flurry of changes and is feared to have a negative impact on Ireland’s economy. However once Brexit is implemented, Ireland will no longer enjoy member state privileges trading with the UK, meaning that Ireland's businesses that involve food, beverage and agribusiness that traditionally relied heavily in trade with the UK will feel the negative impact of Brexit. Future Economic development potential The average Irish citizen earns approximately 46,000 USD, and have an average lifespan of approximately 81 years. They also have a very decent level of education, as of 2012, 93% of young Irish citizens are expected to graduate from upper secondary. This proves that the quality of life in Ireland is at a stable and comfortable level, as they have a decent purchasing power they can use to purchase goods and services they need, have an above average lifespan, and have rising levels of quality education.

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In terms of economic freedom, Ireland ranks high at 9th place in the world, having an overall score of 76.7%. They stay committed to their open market policies to promote global trade. Thus, Ireland is in a positive position to trade with other countries and has a business freedom of up to 78% which is a very comfortable position for businesses to operate and trade.

Socio-Cultural: Marketing we should understand Dublin status based on products, packaging, publicity and promotional materials. As Ireland is a non halal country, therefore Delcie’s can disburden to start business in Dublin. As Dublin is a Western country, they are particular about well designed of packaging rather than social problem on the packaging. Thus, Delcie’s can take it easy in social problem for packaging design. Lastly, as Singapore is a conservative country, hence this also will not crash Dublin’s social culture. Negotiations & Interaction Communication style differ across cultures. For example, it is important to wait for Irish voice their opinion first and saying “no” to Singaporean is to frowned upon. Thus negotiations and interactions between the two country differ. Delcie’s should have the correct ways to communicate and send the important messages of company to potential customers, suppliers, mass media and government. This can help to improve the confidence of Irish towards Delcie’s brand when we first opening business over there. Most Important Elements of culture in International Business for Ireland Language Using same language is important as it to prevent miscommunication. In Dublin, most of them communicate in English as they realise English is an universal language and is necessary for upward social mobility. Therefore Delcie’s can run business in Ireland as Singapore also converse in English, hence there will not be any miscommunication. Social Structure Different country have different ways to separate their social classes. In Dublin, the richer and powerful you are, the higher social class you are. Owning a business place you top. Middle class consists of small business owners. As Singapore have the similar way to differ their social class, this can help Delcie’s in operating business there and people in Dublin would accept our company. Religion and beliefs Ireland has change to a multicultural society where all religions are respected. Most Ireland’s institutions have suitable prayer rooms for Muslims to practice their faith. Similarly, Singapore is a multicultural and multireligious society and have similar religions and beliefs

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as Ireland, hence preventing the clash in beliefs and easier to foster partnerships, which is favourable for the industry. Hofstede’s 5 Cultural Dimension Power Distance This dimension deals with degree of society of accept inequality. Ireland rank 28, which is lower than Singapore as Singapore rank 74. Thus, Ireland have low acceptance of inequality where managers and employees have informal relationship enabling the frequent sharing of idea informally and participatively. Singapore has high acceptance of inequality. The organisation is hierarchical and employees are guided while relationship between bosses and workers are formal. In customer service, they uphold the policy of “customer is always right”. So, it will become a problem for Delcie’s due to the difference in working style. Individualism versus Collectivism This is the degree of interdependence that a society have among its citizen. With score of 70, Ireland is defined as individualism. The citizens of Ireland have their own freedom to do what they wish. In business, they are able to show initiative and self-reliance. For Singapore, with the score of 20 is defined as collectivism. This shows that they work well as a group. Thus jobs can be completed more effectively as a team rather than as individuals. If Delcie’s decide to operate business over there, we need to consider ways on how to manage the business. Uncertainty Avoidance This is defined as level of tolerance for uncertainty and ambiguity of a country. Ireland scoring at 35 —low rank in uncertainty avoidance. This imply that ideas are very important. Irish always find new and creative ways to approach problems. Singapore only scores 8 on this dimension. Therefore, in Singapore, citizen need to abide with many rules that not for structure but because of the PDI is high. Masculinity versus Femininity This refer to society’s orientation based on traditional male and female values. At the scores of 68, Dublin is a masculinity country which focus on success and are competitive as they strive to be the best they can and to always with no matter what. Singapore scores 48 and is on the Feminine side. This show that Singapore focus on the importance of relationship, less fortunate and quality of life. Thus, it will be a challenge for Delcie’s to run business in Dublin due to the differences in their focus. Cultural context With the scores of 24, Ireland is place under short-term orientation where they focus on achieving quick results instead of long term results. In contrast, Singapore scores 72, which show that Singapore is under long-term orientation such as perseverance, slow results and sustained efforts. Therefore, running business like Delcie’s in Dublin, Singapore must be fast game player also and relationship will not be considered first.

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Technology: According to Logistic Performance Index(LPI), Ireland is ranked 18 with a score of 3.79. The score for Customs is 3.47, 25th in rank, 3.77 for Infrastructure, 22nd in rank. 3.83 for international shipments, 10th in rank, 3.79 for logistics competence, 20th in rank, 3.98 for tracking and tracing, 16th in rank, and lastly for Timeliness, Ireland has obtained a score of 3.94, 29th in rank. The LPI is important as it will determine whether a company is interested to invest in the country. Infrastructure Ireland have an extensive and efficient infrastructure which ensure the effective functioning of economy. Effective modes of transport in Ireland includes high quality roads, railways, ports and air transport. Having solid and extensive telecommunications network allow free flow of information which increase overall economic efficiency by enabling businesses to communicate and disseminate information efficiently. Investors will invest in Ireland as the fast speed of disseminating information will increase productivity hence increasing company’s revenue and improve the economy in long-run, hence favourable for the industry. Information Technology Having high level of information technology allow free flow of information. Information posted online enable top level of management of all the companies to view the details of the country easily. Additionally, it helps companies to view changes in the global economy. Companies can also keep up with the supply and demand. With a high level of informational technology, it help to increase productivity and hence attracting potential investors and businesses. Advanced factor Ireland has high level of education and training to ensure better quality of performance thus increasing and improving production. Increase in production ensure that companies do well, attracting investors and businesses to invest, leading to prosperity in Ireland. Innovation Having high capacity of innovation ensure if business set up in Ireland are able to operate well. If companies are able to perform well, it means that the economy is doing well. Setting up a research and development institution will allow companies to do their research and help to increase the quality of product. A high quality of product will help to increase revenue for a company and hence will attract investment into Ireland as this will help in global ranking of Ireland. A high global ranking means that they are an innovative country, which is a favorable country to set up business at.

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Environmental Factor: There’s a time difference of 7 hours between Singapore and Ireland which is above the 5 hour benchmark. This is unfavorable industry as it will lead to operational difficulties such as difficulties in real-time conversation an...