Key points
Company: Unilever
Emerging markets recommended for entry: China
Mode of entry: acquisition
SEE: Some useful discussion from client
Unilever can adopt the entry mode of acquisition to push its products into the Chinese market. Unilever has not only better experience but also better control in the face of the ever-changing consumer goods audience. Unilever can not only reduce the investment cost of brand innovation, but also quickly improve the brand portfolio and consolidate the position of the industry.
For Unilever, optimizing and adjusting its brand portfolio is an important way to promote performance growth and adapt to new market trends, and Unilever has a lot of experience and resources in supply chain, marketing and other aspects that can help the entry of new brands reach more consumers.
The disadvantages brought by the acquisition will make it difficult for both sides to share and complement each other's resources, which will lead to the expansion of production scale, but the degree of profit is not as large as that of scale expansion.
There may also be economic losses caused by overestimating the value of the acquiree.
At this time, enterprises need to have a clear strategic goal of acquisition and be able to make a long-term development plan before the acquisition.
Establish a good image of the enterprise and its brand, and strengthen the cooperation consciousness of the enterprise.
At the same time, it is necessary to effectively avoid the risks that the acquisition may bring.
You are expected to write a management report following the board of directors business
meeting simulation covering these six questions:
strictly follow this guidance (But some of them are clues, not all applied to because its only 2000words):
Introduction
Guidance:
importance of the report and its rationale
a brief about the company FDI
aim or objective/purpose of the report
how the report is to be structured or organised in line with the assignment requirements
1) What strategies would the company use to increase its profitability in the new market?
(e.g. you will have to consider reducing cost or adding value to the existing market). Use relevant theories and empirical examples to support your answers.
Guidance:
1. Porter generic strategy
2. value chain
Competitive advantage can be analysed in any of these activities.
A generic description of activities – understanding how the discrete activities (or clusters of linked activities) contribute to consumer benefifit
Identifying activities where the organisation has particular strengths or weaknesses
Analysing the competitive position of the organisation using the VRIO criteria – thus identifying sources of sustainable advantage
Looking for ways to enhance value or decrease cost in value activities (e.g. outsourcing)
2) What are the company’s global production considerations, and how can its supply chain management be improved to lower the cost of value creation for better servicing customers’ needs?
Guidance:
Value Creation activities production supply chain management purchasing logistics
Where to produce
Country Factors
- Political and economic systems, culture, and relative factor costs differ from country to country.
- Location economies
- Formal and informal trade barriers
- Transportation costs
5.Exchange rates
Technological factors 1.Fixed costs 2.Minimum efficient scale 3. Flexibility of the technology
Production Factors
- Product features
2.Value-to-weight ratio influences transportation costs
3. Universal needs
4.Locating production facilities
5.Centralized
6.Decentralized
Reasons to position value chain activities favorably
- Lower wage rates
- Higher worker productivity
- Lower energy costs
- Fewer environmental regulations
5.Lower tax rates
6.Lower inflation rates
7.Proximity to suppliers and technologically related industries
8.Proximity to customers
9.Lower distribution costs
10.Available or unique natural resources
3) What strategies could the company use to avoid foreign exchange risk considering that exchange rates have become much more volatile and less predictable in the international monetary system?
Guidance:
Types of Foreign Exchange Risk:
Transaction exposure - the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values.
Translation exposure - the impact of currency exchange rate changes on the reported financial statements of a company.
Economic exposure - the extent to which a firm’s future international earning power is affected by changes in exchange rates.
Reducing Translation and Transaction Exposure
Forward exchange rate contracts - execute a deal at some specific date in the future
Buying swaps - the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. It help companies hedge against interest rate exposure by reducing the uncertainty of future cash flows.
Lead strategy - Collecting foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate.
Lag strategy - Delaying the collection of foreign currency receivables if that currency is expected to appreciate and delaying payables if that currency is expected to depreciate
Reducing Economic Exposure
Various Locations
Distribute the firm’s productive assets to various locations so the firm’s long-term financial wellbeing is not severely affected by adverse changes in exchange rates
Business strategy
Companies should pursue strategies that will increase their strategic flexibility in the face of unpredictable exchange rate movements
Currency hedging
is a method used by companies to eliminate their foreign exchange risk resulting from transactions in foreign currencies. - entering into a financial contract in order to protect against unexpected, expected or anticipated changes in currency exchange rates or... using insurance policy that limits the impact of foreign exchange risk.
Other step for managing foreign exchange risk
1. Central control of exposure is needed to protect resources efficiently and ensure that each subunit adopts the correct mix of tactics and strategies.
2. Firms should distinguish between, on one hand, transaction and translation exposure and, on the other, economic exposure.
3. The need to forecast future exchange rate movements cannot be overstated.
4. Firms need to establish good reporting systems so the central finance function (or in-house foreign exchange center) can regularly monitor the firm’s exposure positions.
5. The firm should produce monthly foreign exchange exposure reports.
4) What international staffing policy would you recommend for the company that is consistent with its strategy, and how will this improve its performance and
competitiveness?
Guidance:
validate understanding of the staffing policy of MNEs (the different approaches) that is consistent with the firm’s strategy and how performance/ competitiveness could be improved. the strategic role of human resource management (HRM) for multinational companies competitiveness.
these activities include human resource strategy, staffing, performance evaluation, management development, compensation, and labour relations.
firm success requires that HRM policies are consistent with strategy and with formal and informal structure and controls.
there are advantages and disadvantages of different approaches to staffing policy in international business.
types of staffing policies:
ethnocentric staffing policy- all key management positions are filled by parent-country nationals.
polycentric staffing policy requires host-country nationals to be recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters.
geocentric staffing policy seeks the best people for key jobs throughout the organization,
regardless of nationality.
Building a diverse global work force Reasons
1.Diverse talents bring insights into the needs of a diverse customer base.
2.An enterprise with a homogenous employee base is under utilising the talent to be found among women and minorities.
3.Customers may appreciate interacting with an enterprise whose employees look like them, and therefore, have a better understanding of their needs, tastes, and preference.
4.May improve the brand image of an enterprise
5.Increases employee satisfaction
5) Considering how your company could configure its marketing mix, what are its initial international marketing entry decisions? Recommend a 2-year post-entry marketing strategy.
Guidance:
establish cognizance of what the company should take into considering during international marketing such as marketing mix, globalisation of products, adaptation or standardisation, market segmentation, pricing, promotion and distribution strategies, and systems.
Marketing mix is the choices about product attributes, distribution strategy, promotion strategy, and pricing strategy that a firm offers to its targeted markets.
1.Factors that may make marketing mix to vary
2. Understand how to configure the marketing mix globally
3. why it might make sense to vary marketing mix (standardises its marketing mix or customize to adapt it to the local market)
4. Theodore Levitt’s HBR article
5. Market segmentation - identifying distinct groups of consumers that products are design for Marketing mix may vary according to:
Local differences in culture
Economic conditions
Competitive conditions
Product and technical standards
Distribution systems
Government regulations
6) Critically analyse decisions taken in the meeting and reflect on what could have been done differently by making final recommendations for the company’s foreign market entry plan?
You must use relevant business theories/models to support your answers.
Guidance:
Major recommendations:
Very well derived recommendations that are discussed previously (you should have shown how you arrived at your recommendations for the company)
you are expected to highlight all major recommendations for the company
mention what the company should do in your recommendations etc.
No discussion is expected at this stage
A conclusion should be a competent summary of the assignment written in past tense.
Order to get the answer to this
