Entry Method to Europe
Appendix B shows the comparison of foreign market entry modes
There are many choices available for Phillip when entering into European market, making a judicious decision is the foundation of future success in the target market (Ekeledo and Sivakumar, 2004). There coexist proactive and reactive factors that motivate Phillip to expand its business outside domestic market. On one hand, Hardeep Software is specialised in serving small business, the niche market position would bring more money and have less competitors. On the other hand, the pressure of SAGE forces Phillip to seek opportunities to make up the declining domestic sales. Since that Phillip is lack of overseas marketing experiences, he really concerns about the risk in the early stage, the piggybacking provides him a good option to entry Europe market with lower risks than direct exporting.
The characteristic of piggybacking is much alike Export Management Companies (EMC); the merit of piggybacking lies in that Hardeep Software will benefit from its carrier who spends more attention on products supplied by Hardeep Software, as the EMC has more number of merchandises than the carrier of piggybacking procedure (Terpstra and Chwo-Ming, 1989). Generally, the products of rider (Hardeep Software) is not the competitive but have a compensative effect for the carrier’s product. Therefore, the carrier will do his work to find a right niche market for Hardeep Software, who will achieve more efficient market development and sales returns with the support of carrier.
Finding a good carrier, who will promote products and absorb most of the expense; this will release the Hardeep Software’s marketing cost pressure. In addition, Hardeep Software will have an opportunity to utilize its carrier’s advantages in distribution channels and brand influence to search for the potential customers (Jonas and Tommy, 2003). Maintaining a friendly partnership with the carrier will contribute to the improvement of management level of Hardeep Software and products in the international market. Upholding the principle of long-term cooperation and win-win development will be valuable, as the rider can benefit from working experience through the piggybacking process (Terpstra and Chwo-Ming, 1989).
Evaluating the Strategy of Developing Wireless Card System
There is so much potential in the development of wireless systems for hotels. At present, an increasing number of guests are becoming more dependent on the wireless devices in the travel. Hotels with a wireless system have the capability to improve the operational efficiency by reducing employees’ response time. The basic determinant of achieving sustainable competitive advantage is creating added value to address customers’ requirement. The wireless system simplifies the arrangement of room reserving for customers, which can upgrade the service level and ultimately fulfill high customer satisfaction (Smith, 2005).
Developing wireless card system allow Hardeep Software maintain the market competitiveness, as well as improve the adaptive ability to the dynamic market environment. In addition, the wireless card system stretches the product line that can weaken threats to the single Funds Master (Werther, 1995). The approximate technical features to the Funds Master save the R&D cost. However it requires David to conduct a review of all resources for the project requirement to allow the efficient strategy implementation. It seeks to save the sales and marketing cost wherever possible (Wu, 2007).
The wireless business has a better financial performance than Funds Master; the net profit of wireless card division has an 8% growth in 2007 compared with a 42% decrease in the net profit of Funds Master. In addition, it costs less to establish a wireless system than the Funds Master work and provides more profit space and comparative cost advantage. According to the concept of product life cycle, the wireless business is in the early development stage with little growth and limited margin, but sales will be increased rapidly in later stage (Dawn, 2005). It is expected that the wireless business will replace the Funds Master as the primary sources of sales revenue.
Expanding Business in China
The Chinese software service industry made extraordinary progress over recent five years. Social stability and the healthy development of economy provide a reliable business environment for multinational companies. As the perfection of information infrastructure, there is a great potential in the chinese software service industry (Zhao, 2008).
Key Factors in Software Service Industry
Large Future Development
China is in the transition from a command to a market economy, the software service in china is growing rapidly in these years. The increasing rate of Chinese software service in first quarter of 2008 was 9.9%, with 1% higher than the same period of last year (Wang, 2008). Graph one represents that the Chinese software market worth ₤4bn in 2007, software service takes the leadership over 54% of total market share (₤2.16bn) because software service rarely face the harm of privacy (LIVE-PR, 2008).
Graph One: Chinese Software Market
Government support
The Chinese government issues the 11th five-year development plan with the aim of creating a harmonious environment for overseas investors; the introduction of preferential policies is to encourage foreign software service companies to establish business in the form of joint venture and commit resources allocation to the fair competition (Kang, 2006). Since China's entrance into the WTO, Chinese government abolishes all software tariffs, foreign investors are admitted to have more flexible trading environment and maintain a good momentum of technical corporation with chinese enterprises (Wang, 2004).
Labour Costs Advantage
The salary of workers in Chinese software service industry is much lower than foreign level; statistic showed in graph two indicates that the average wage for Chinese software service employees is one fourth of their counterparts in UK (Zhang, 2007). Following three cities represent the regional salary standard in China, Beijing (North) ₤5500, Shanghai (South) ₤4500, Xian (West) ₤2500. There were approximately 60000 graduates of software program in 2007; the ratio of bachelor degree holders to mater degree holders was 7:3. Most of them have the aspiration of working in a foreign firm because of good training and better pay.
Graph Two: Annual Salary for Chinese Software Service Employees
Market Competitors
The software service industry in china is still in the early development stage. There are around 9000 software service companies in China, more than three-quarters are small scale with less than 50 employees, and few of them are professional software provider and hard to achieve the scale efficiency or core competencies. Under the pressure of financial and technical resources constraints, their products are regular in pool quality and their sales are heavily depended on price (Chinabgao.com, 2008). Hardeep software has the superiority in technology, particular in the innovation of software function. In addition, wide operational experience and international brand image will also be served as the source of relative competitive advantage (Ali, 2005).
The competition not only comes from the Chinese local enterprises but moreover from international corporations, which including IBM, SAP, Oracle and so on. They have captured more than half of market share due to their advanced technology and established reputation.
Graph Three: Top Ten Software Service Companies in China
Entry Method of Joint Venture
It is not easy for Hardeep Software to run its busniness in the Chinese marketplace. The real phenomenon is that expansive area and the gap in regional culture cause the difference in the emphasis of customer requirement. Looking for new customers is a costly issue faced by Phillip starting his business in China. Commonly, Chinese partner should have its own customers, sales and marketing, it makes a better place for Hardeep Software to boost sales which has been achieved so far. Hardeep Software does not need to spend much on the training expenditure as most of staff are qualified and have working experiences in software service industry (Xu, 2008).
The china market is far more complicated than British market. All sorts of big deals can not be made until the government gives the green light. Hardeep Software may take several months to get government’s permission. While Chinese partner provides a foothold which enables Hardeep Software to save countless hours of learning how to communicate with Chinese government officers (William, 2004).
Marketing Mix
Product
Today, what customer needs is not product itself but also the relative service in terms of installation, operating, updating and so on. The quality of service is becoming critical on customers’ buying decision. While there is a server problem in Chins that Chinese buyers may have troubles in using software during the training process, as most of their knowledge regarding to the software usage is inadequate. Therefore, trainers with high professional level are not always better; whereas making customers comprehensive that is the key for the company (Zeng and Du, 2008).
Pricing
The first choice of customers in china is the product with reasonable price and high quality. The quoted price in the software service industry is not volatile, rarely adapting discount to improve sales, due to the reason that the demand of high-technology service is relative small elastic and with little seasonal effects (Feng, 2008). Pursuing the high service quality and good oral traditions will allow Hardeep Software to deserve high price and maintain the customer loyalty.
Promotions Relationship Marketing
There exists a number of defects in the social and economic system, it frequently causes problems and is hard to find an appropriate solution. Companies with pool relationship will get bogged down in this condition. It is critical to maintain a strong firm relationship with government institutions in order to obtain an advantageous position in the contract (Yang, 2005). This is revealed in the aspect of social interaction, referring to the time spending on the meeting, dinning, making friends and establishing trust.
Government recommendation is recognised as a guarantee of product quality. For example, “the national attaching quality and defending the prestige public satisfaction unit" issued by Information Ministry of China will effectively promote products in the public.
Business Location
Graph Four: Regional Software Service Sales
As can be seen from the graph four, 80% of total software service revenue is generated from three urbanized regions which are formed along China's coast the Pearl River Delta, the Yangtze River Delta and the Beijing-Tianjin-Hebei region. It is worth to notice that Beijing accounts for 16% of total companies generating 35% of revenue. Chinese government provides a large injection of human, material and financial resources into the IT infrastructure construction as Beijing is the political centre of China. While, Shanghai plays a role as the window in south economy, attracting 34% of total companies in Shanghai, but generate 20% of revenue (Saxenian, 2003).
Locating in above three areas will not only bring along considerable income but also facilitate operational activities (Anjian, 2005). Advanced transportation systems enhance the convenience of business by ensuring the easy access to the centre, key areas and the traffic hubs of the city. Outstanding hardware facilities and highly secured e-business platforms create a comfortable working environment for employees. In addition, a good location will contribute significantly to elevating corporate image.
Conclusion
This essay investigates the financial position of Haedeep Software as well as three strategies, one of strategies to developing the wireless card system is appropriate for the current business. At the last past of this essay, the entrance of Chinese software service market is recommended as the fourth strategy.
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Appendix
Appendix A
Profit and Loss Account
Balance Sheet
Appendix B
Foreign Market Entry Strategies
Source from:
Appendix C
Market Analysis
Market analysis is used to determine how attractive a market is and to understand possible opportunities and threats a company has compared to its own strength and weaknesses. When conducting a market analysis it should be considered these ideas as important dimensions to the research; market size, market growth rate, market profitability, industry cost structure, distribution channels, market trends and key success factors.
Market Size
This can be determined by current sales and potential sales of product are expanded or weakening in the future. It is not always possible find all existing market size data but there are a variety of sources available including; government data, trade associations, customer surveys and financial data from current player serving the market.
Market Growth
One way to examine or predict market growth is to study past data. This will give you a starting point or a frame of reference that you can the use to compare to other growth drivers both present and future. Growth drivers such as demographic information and sales growth of competing products can give you a wider perspective then just simply using past data. Another tool is too study the past adoption rate of a competing product. Eventually the product will reach the maturity or decline phase. Some of ways of indicating this decline phase are price pressure caused by competition, a decrease in brand loyalty, the entrance of substitute products, market saturation and a lack of future growth drivers.
Industry Cost Structure
This will be valuable in finding key success factors and help to determine where value might be added to give your product or service the needed cost advantage to compete in the market place. Cost advantage can create both value added activities in the value change or by differentiating the product in line with your core competencies better than the competition does.
Distribution Channels
There a few aspects in distribution system that can be related to market research. The existing distribution channels can be a link to how direct they are to the customers. Emerging trends and channels can be developed or used. This can give a company a competitive advantage. The channel power is also an important aspect to consider because it may have a direct impact on capturing better cost margins.
Market Trends
Having a understanding of possible changes in the market can give an insight to both new opportunities and possible threats. There are some trends in the industry dependent some of them include changes in price sensitivity, demand for variety and the need for support or service with product.
Key Success Factors
There are the elements needed by firms to reach its marketing objectives. These factors can change over time during the product life cycle stages. Some common examples are access to important resources, achieving economies of scale, access to distribution channels and technology process.
Sources from: Market Research for New Product Development (Weichert, 2008)