The modern world of business has been faced with unprecedented changes, among them Globalization, which has become part and parcel of our lives. It provides firms with remarkable opportunities and daunting challenges. International expansion has become a persistent and prominent strategic response to global economic dynamics for a large array of companies. The changes in consumption and market strategies have seen globalization and technological developments taking an unprecedented twist in the way we operate our businesses. According to Johnson & Turner (2003, pp 324), “the need to balance simultaneously the dynamics between multiple forces (geographic, product, market and technological) has resulted in firms extending their presence all over the globe for multitude of purposes and through a multitude of forms”. Likewise, the expansion of businesses to the level of global scale has led to the increased development strategic approaches. This article will explain an export strategy required for the Solar flare Company to export its solar panels to India.
The first step of export strategy requires that the company define its framework for internationalization including its principles on how to perform business abroad and the appropriate strategic business to be pursued. The company should make a good decision on when and how to export. Gauging the foreign market is very important and there are several ways of doing it (Daft & Marcic 2008, p.184). For example, when a particular product becomes successful in the local market, there are high possibilities of it selling well in a foreign market with similar conditions as the domestic one. The solar company has a 27 percent market share in Australia and this shows that exporting the product to India will be successful.
The availability and excellence of market research is an important factor in the determination of whether to export it or not. If however it is new or unique the company will be forced to spend much money on research (Goldman & Nieuwenhuizen 2008, p. 26). To ensure success of the solar panel export venture, the company must be clear about both the realities of the target international market place and its own marketing capabilities. International expansion will put new demands on the firm due to the shuffling of existing resources or the procurement of entirely new personnel into export related activities (Jansson 2008, p. 66). There is need to match the production with the possibility of increased demands, with close overview of the company’s ability to produce more or less. Increased demands will also likely to be placed on the company’s production capacity and its finance and consideration of how these demands will be met must be made. A thorough internal analysis should be done before a firm explores international market. The company should also examine its management objectives, international experience, product capability and financial capability of the company should also be examined.
Analysis of internal capability
The Solar Flare Company should basically examine its internal capabilities in order to assess its potential to expand its business to India. A prospective exporter must be confident of its own capabilities before it seriously considers exporting (Vance, et al. 2006, p. 107). The company should identify its motive of export its product to the foreign market. It should also decide on whether its intention is to increase sales, to develop broader customer base or whether the decision maker only wants a chance to travel. Before any foreign market is approached, there is need to assess the level of company’s management to such an initiative. It should identify whether the management is willing and able to commit the necessary resources to support international expansion (Luo 2004, p. 129).
In the analysis of the company’s internal capabilities, it is important to know if international expansion will be at the expense of profitable domestic operations and whether the domestic customers will be neglected in the export process (Johnson, & Turner 2003, p. 324).The company should also decide what current in- house external expertise that it has in terms of international sales experience and language experience. The decision on what type of organizational structure will be used to facilitate sales and general operations should be made as early as possible. The company should also arrange for training and development of its staff members to successfully expand internationally (Zou, et al. 2009, p. 126). Determination of the amount of capital to be committed to export and marketing and export operational cost to be incurred is important.
Analyzing external factors
Even if a company decides that it has the internal capacity and capability to expand internationally, it must also research and evaluate external factors before making the decision to export. The first step is to form an alignment between the business strategy and export policy plan is to analyze the competitive environment. Before the company initiates internationalization initiatives it should have a steady base of sales in the existing markets (Daft & Marcic 2008, p.184). A company should analyze the competitive forces which include entry barriers, substitutes, customers, suppliers and industry competition.
By focusing on the entry barriers, the Solar Flare Company should determine how easy it is for new competitors to enter the market, which barriers exist, brand supremacy barriers, economies of scale, access to distribution channels, and customer switching costs. This will assist the company to know how to survive in the market and whether there are threats of new competitors entering in the market. The industrial regulation policies are geared to influence the uses and location of resources within the framework of socialistic pattern of society (Luo 2004, p.126). Apart from reinforcing the import substitution strategy leading to the huge cost and internationally uncompetitive industrial structure, the industrial policies have also been instrumental in making the domestic market structure less competitive by creating artificial barriers to entry and exit.
The company should also recognize the substitute products that exist in the market. The company should determine the product alternatives based on better quality, buyers motivation to substitute, relative price and performance of the alternative product and the switching cost. Since India gets 300 days of sunshine a year, which makes it a very promising place for solar energy utilization, it may thus not be substituted by the traditional fuel. In rural areas firewood crisis is far graver than cause by a rise in the price of oils (Hitt, et al. 2009, p. 218). This thus makes the Solar Flare Company have an opportunity because most of the Indians are shifting to using the solar power and doing away with the traditional fuel.
The Solar Flare Company should analyze the customers in India. This will help the company to understand their bargaining power, how strong their position is in the market and whether they will be ordering large volumes. The company should also determine the concentration of the customers, switching cost and role of quality and service. The company should also analyze the suppliers (Luo 2004, p. 126). The bargaining power of the sellers should be determined, how strong their position is and whether there exists many potential suppliers. By analyzing the suppliers, the company will be in a position to develop strategies which will help it have a competitive edge in the market.
It is also important for the company to scrutinize the level of rivalry that exists in the solar market in India. The company should determine the level of competition between the existing players and the number of players in the market. Elements to think of include the structure of the competition, structure of the industry cost, level of switching cost, and strategic objectives. The Solar Flare Company can have an edge in the market because Australia is the only country that provides competition to India manufactures (Daft, & Marcic 2008, p.184). This is because the production levels maintained are substantially high and the raw materials are available and thus they are able to produce quality solar panels at reasonable low price.
The competitive environment and its outlook are an indication for the company whether internationalization of all or some of the business segments will make sense. For example if the solar panel faces high competition and has lot of substitutes as well, it will be more difficult to go abroad compared to a situation where the company, as a brand leader is having many customers who are willing to buy (Contractor 2002, p. 349)
Developing an export strategy
If the company is comfortable with its internal resources capability and the potential for success in foreign markets, the next step is to construct an export strategy. Streeten (1999, p.117) states, “formulating an export strategy based on good information and proper assessment increases the chances that the best option will be chosen, that resources will be used effectively and that efforts will consequently be carried through to completion”. The company should formulate an export strategy that will help to set forth goals for operations, marketing, human resource, and control. The goal of the strategic plan will be to organize the company’s export effort efficiently in order to maximize its chances of success in the foreign market while minimizing disruption of quality in the day to day domestic business.
The firm can decide to use an indirect export strategy that will involve selling the company’s solar panel through intermediaries. The different types of agents a company can use include export management companies, trading houses, foreign purchasing agents and brokers. An export management company through foreign networks will identify customers for Solar Flare Company (Johnson, & Turner, 2003, pp 324). A trading house can be used to provide marketing and promotional services. A foreign purchasing agent can purchase the solar panels in Solar Flare Company on behalf of clients in India. A broker who is an independent middleman can be used to expedite the import-export process (Goldman, & Nieuwenhuizen 2008, p. 26).
The company can also use the direct export strategy. If this method is chosen, plans must be made for extensive time and resource commitments to establish a presence in the foreign market. Managers will have to research market conditions, identifying how best to meet the consumer needs (Zou, et al. 2009, p. 126). Distribution channels also will have to be identified and key person to person relationships established within the channel. DirecTV export will help the management to keep control over how the solar panel is placed in the market and it will create a direct access to the purchasers and other end users. Direct access to customers and users is an important feature of direct exporting because the composure gives manager first hand knowledge which can be used to adapt the product for the new market. Direct export also may give the company’s trade marks and patents better protection. It will also help the personnel to develop the international expertise to exploit other foreign markets (Jansson 2008, p. 66).
The other strategy that the company can use to export the solar panels to India is through joint venture. The company can sign a partnership agreement to limit its exposure to risks when entering the Indian market. The local partner can be beneficial to the new company as it will learn more about customs, people’s tastes and preferences, and acquire important contacts that will be important in the overall business operations. Hitt, et al. (2009, p. 218) adds, “having local partners also decrease the foreign status of the firm and may provide some protection against discrimination or expropriation should conditions change”.
The export strategy is likely to build necessary structures that will support the process of implementation, thus setting up a platform for measuring the degree of success or failure. It will describe the export venture in long and short term basis and will enforce the commitment of everyone involved and classify each person’s role (Contractor 2002, p. 348). The development of a good export strategy requires serious consideration on the exporting will play in the overall activities or growth of the firm. The strategy should be aligned with the firm’s strategic plan outlining the operational actions to be executed or implemented.
The management of Solar Flare Company should note that export strategy is an evolving plan which is subject to change in light of market conditions and internal dynamics within the exporting firm (Streeten 1999, p. 117). This means that the export plan must be continually reviewed and refined at periodic interval. The company will be required to constantly monitor and assess the changing market it is operating in and act accordingly. Business, economic, political, cultural and legal intelligence is of critical importance in maintaining and developing a profitable export market. The company will only maintain the Indian market if all the various stakeholders in the firm have ownership of the critical phases of the export process.
The export strategy will help the company to define its growth strategy. The company will define how it is planning to grow the business through product/market combination. The strategy will help the firm to make appropriate strategic decisions which are critical for international firm. This is because; globally operating firms must have greater adaptive capabilities (Goldman & Nieuwenhuizen 2008, p. 26). It must also be in a position to process and sort out a large number of environmental complexities and have the capability to detect shifts in environmental factors that have strategic implications and be capable of responding to the altered environmental state. A critical element of formulating an export strategy is to create the organizational flexibility and incentive that responds to changes in economic parameters between countries.
For effective implementation to kick off there is need to view the plan as a management tool rather than an ordinary static document, thus supporting the culture of success as defined by the organization. For adequate measure of progress, the outcome of implementation process should be analyzed in line with the set objectives. It should be noted that changes occur everyday, therefore the company should be in a position to adjust the plan so as go with the observed changes. The company’s approach in “the exportation of the solar panel will have a significant effect on its export plan and specific marketing strategies” (Vance, et al. 2006, p. 107). Different strategies and methods must be tried and compared to determine the company’s optimal level of involvement in the export process. Vance, et al. (2006, p. 107) further states, “when the company is considering export strategies it should first decide whether to fill orders from domestic buyers who then become the actual exporters, to seek out domestic buyers who represent foreign end users or customers, export indirectly through intermediaries or to export it directly by themselves”. If the company decides to export directly, then a more detailed plan is required because this method require most commitment of management, time and attention. If the company decides to export indirectly then it requires much simpler plans as not so many resources are devoted specifically to export operations (Contractor 2002, p. 348).
It is apparently clear that the Solar Flare Company intends to open business in India. Before doing that however, it is expected that it carries out some feasibility studies to determine the potentiality of the market. It should first analyze it own abilities, strengths, weaknesses and the opportunities (Zou, et al. 2009, p. 126). They should further assess the threats that its competitors have. By doing this, the company will be informed on how best to develop an export strategy that will enable it achieve its laid down goals and objectives. The company will also be in a position to implement the strategies that are profitable and viable to the international market (Streeten 1999, p. 117). The company is supposed to implement the strategies immediately since the current economic times are very dynamic and changes drastically within a short period of time. By so doing, it will be assured of success in its venture of selling the solar panels to India.
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