Bespoke Bikes' International Business Strategy: Analysis And Plan For Expansion Into China (Essay).

Rationale for the Choice of the Company

The following report is going to illustrate the international business strategy of different companies that have studied in the gaming session.  The gaming was about the understanding on the business report of Bespoke bikes.  After detailing of the balance sheet on the investment of the company for the financial Year 2008 and 2007, it has been decided to analyse the financial as well as the business report of the company. the business report includes different aspects of the organisations such as different kinds of financial assets, cash flow, income statement, inventory management, country wise profit contribution, sales outliners according to the countries.

The report further explains the resources of the information and validates those resources with the help of the references and appendices.

International Business concept constitutes importing and exporting activities, trade and balance of payments, effective values of global currencies. These are in, fact the determining factors for a successful international business concept.  Bespoke cycling is an international company that involves its business in bike and cycle fitting. It deals with international clients especially the clients in the European countries with the help of standard European currency.    

The choice of the company has been its international advantage in dealing with global clients across the world. Bespoke bike emulates the business process and client dealing of Bespoke cycle that is located in the United Kingdom. Though the chosen company is a virtual one it has the same business component as the real company i.e. Bespoke Cycle. I think, it has been chosen to extend its business in four new countries. Though the countries under European Union that are considered to have the most suitable labour market. The chosen country for the project is China. Though the company has its manufacturing base in the United Kingdom it finds that China has potential labour market that is cheap as well as effectively production friendly. Bespoke bike is going to have its production outsourcing branch as well as manufacturing branch through the subsidiaries in Chinese market.

According the survey report of China Briefing, a well esteemed newspaper of the country, the labour market in China is extremely potential and it helps the manufacture gain advantage in the utilisation of the labour competence in the country. Moreover, the labour cost in the chosen country is much lower than the other discussed countries like Belgium, Denmark, the Netherlands, the United Kingdom, Australia and Germany where we had first proposed to found the subsidiary. However, there are some discrepancies in the Chinese market in regards to the utilisation of labour and disbursement of the finished products in the international market. Moreover, while choosing china, we have taken into consideration the trend of electronic bicycle. China has no doubt multiple numbers of bike manufacturing companies as it has huge demand for these types of products.

Validation of the Chosen Country

It has been determined that the new manufacturing factory and the brand stores in China are going to enjoy business autonomy. There are certain characteristics of effective business autonomy. Business autonomy is a degree of freedom that is given to business franchises or the employees in order to put greater innovative in effect. The local employees or the managers are going to enjoy complete freedom in case of understanding the local market and its demand. The expected market demand shall be analysed by the local business. Most of the international businesses are based on franchising or subsidiaries.  However, the business method in the international arena needs to provide needful freedom to the newly opened business wings. Since, Bespoke bikes has the ability to exploit the resources and invest those in terms of high production facility; it has rightly chosen the Chinese funancila and business condition.

The decision to manage the organisation will be shouldered upon to different sets of managers. The entire marketing department shall be shouldered upon a local manager as he or she might be knowing the market movement in the country better than an expatriate would do. Therefore it does nto take long while to understand the exact marketing details. The local managers would be able to analyse the market trends, target the market audience and set the marketing mix according to his her knowledge of Chinese market. On the other hand, the core operations will be shouldered upon an expatriate who will consider the actual working method of the company. One positive side of this ensemble is that the cohesive decision and understanding of both the managers will bring success with strategic combination of operations and sales.

There is also a business purpose behind working with the local managers and that is low cost of labour. Local employees are comparatively cheaper than the hired ones outside the countries. This is how it will work as an advantage in lessening down the labour cost.  The remainder can be utilised in other operational and production task.

The proposed structure of the company is going to be a large scale one. Looking at the total amount of the assets it can be said that the company is going to perform medium to large scale manufacturing. The proposed amount of manufacturing is going to be more than 150,000 cycles that include commuters’ cycle, delivery cycle and racing cycle.  the organisational structure of the company is going to be employee friendly as it plans to perform and adopt motivational working culture inside it.  From task allocation to production and marketing strategising, Bespoke Bikes is going to be one of the finest companies to work with.

Degree of Autonomy

Sustainability framework and its investment towards sustainable and responsible business is one of the business level strategies of a company. Bespoke Bikes is not an exception. A proportion of investment will be implied to the maintenance of sustainability.  In order to minimise carbon emission and CFC emission the company will seek help from technologies. Technological assistance needs investment of more than one million euro.  For instance, if the total investment for the production and marketing needs 4 million euro, one fourth of the investment will go the sustainable development plan. The company also looks forward to its CSR on the Chinese as well as the global society. This is how the basic investment plan has two fold attitudes toward the business. This business investment planning needs to be gelled with the corporate responsibility with the society in order to ensure the effectiveness of larger business practices, the company would look forward to the adoption of better strategies. It would range from the suppliers of the raw materials, the parts to packaging system. China has been one of the worst affected places in terms of air pollution. Therefore, sustainability shall be a major concern for the company.

Since research and development plan is strictly oriented with the development in the mode of production and quality of the product, Bespoke decides to examine the consumer behaviour and consumer trend in the market. Research and development in the market includes survey method, personal interview and secondary research methods. Bespoke Bikes will deploy an R&D and marketing team that would examine the entire market situation in order to decide the mode of production according the market demand

China is the highest populated country in the world and fastest growing civilisation. The whole country has more than 41% Urbanisation thus giving ample scope to the huge market arena. In terms of bicycle industry, China has one of the largest productions in the world. The main manufactured bicycle is the commuter’s bicycle that is followed by racing bicycle and the delivery bicycle. The total production cost for bicycle in China is more than 70,000,00 Yuan that is more than 9 million Euro. Such huge market and production opportunity in China has been analysed as the advantage for the bike producers.

The proposed production cost in the company has been planned to be more than the basic Chinese one. According to the balance sheet, the total amount of fixed assets in the company has been 11,805,729 euro.  This is the sum amount of the property assets and the machinery assets.  In the second half of 2007 the total amount of asset has been 104, 075, 052 euro.  According to the gaming report of the cash flow, the sales revenue is projected to be more than 143, 906, 611 euro. This projection has been fixed for the FY 2008. It has been found in the table of comparison that the production cost for 150, 000 bicycles in China is more than 9 million euro whereas the production cost for 170,000 bicycles in the Netherlands is more than 24 million euro. A detailed analysis of the production cost has suggested that Chinese economy for production is much friendlier to the manufacturing economy. 

Use of Expatriate

The autonomy given to the subsidiary companies need to be considered as control of the new structural planning as discussed in this report.

Few of the management people need to be chosen for the expansion and control over China. For this purpose, the quality control, high rate production and the higher demand generation are three objectives and hence it is expected to place the best managers of each field for the success of the expansion perfect.

The strategy has lied to start a new factory in a preferable country. The country chosen for the new factory set up is the China since it has more productivity rate in the past years along with the less production cost for the racing bicycles. The strategy has taken as the structural development of the company need a cost of around 2 million. The decision is following to stick with the strategy since the development of the company structure includes some expansion of the first factory.

The company should acquire sustainability strategy as by focusing the effective pricing strategy and the production management and the effective marketing campaigns within the budget. As per the theory of Ansoff matrix, the company is in the Market Development state and hence requires the sustainability strategy mainly focusing on the production costs and the sales prices of the bikes (Ansoffmatrix.com 2017).

As for the R&D strategy, the 5% of the expected sales revenue is assigned since the required development in the products will lead not more than the amount (Ibisworld.com 2017).

The China has very good growth rate in last few years in the Bicycle Manufacturing Industry and the annual growth rate is 0.8% which can be estimated as to $11.3 billion (Ibisworld.com 2017). The market has already increasing demand in the urban along with the rural regions. The market competition in China is high; hence need to focus on the competitive marketing strategy. The country is facing higher rated air pollution hence that can be used as the marketing strategy. However, the most of the bicycle companies are using the same strategy as environmental points. Thus, Bespoke need to consider the international branding strategy as the best strategy in the competitive market of China. The social need of the Chinese customers has also been increased for the bicycles, thus the country can give more potential market among the other countries (Daxueconsulting.com 2017).

The production cost of the bicycle industry is quite low in China since the labour cost of China is low. Along with that, there is demand for the racing cycles in the China market. Henceforth, for the production strategy the focus should be given to the higher production of the racing bicycles. However, there is also demand for the electronic bicycles hence the bicycles can be configured according to that. The domestic market of China has also adopted the electronic bicycles more in their trends than the simple pedal cycles. Thus, the electronic bicycle is preferred strategy for Bespoke and it is justified (Daxueconsulting.com 2017).

Company Structure

Apart from that, the average production rate of the Normal bicycles is 180000, Racing bicycle is 150000 and Delivery bicycle is 110000. The strategy is to focus on increase in the racing bicycles and the normal bicycles along with the electric features. As per the demand in the market, the strategy is justified (Edumundo.co.uk 2017).

For the purpose of the new factory set up development and increase in the international business, the country China has been taken as the most preferred country among 6-7 countries such as UK, Denmark, Belgium, Netherlands, Australia, Brazil, Japan and China. For this purpose, the country analysis has been done on such objects like production capacity, working environment, political and environmental situation in the countries, government rules, product demand and the pricing expectation among the target customers.

However, the expansion budgeting strategy need the cost of every of objects in monetary and non-monetary terms. In the research, the pricing of the normal, racing and the delivery bicycle has been given the more focus since the pricing is the major factor which contributes in the sales generation. The pricing trends of China seems to more profitable along with the production cost is lower than the other countries (Daxueconsulting.com 2017). The research found that the profitability is more in the market if China since there is a huge demand of the bicycles. According to a report, the China is a major contributor in the global Air pollution rate (Voanews.com 2017). Many people in China is facing major diseases due to the increasing pollution rate, hence they are converging towards the eco-friendly vehicles such as the electronic bicycles.

Apart from that, the total revenue generation in the market of China is $11 billion which seem to have a major opportunity for the company Bespoke cycles in the country China.

In UK, the production prices are much higher and the prices of the bicycles are comparatively lower to get the expected return on investments (Bikebiz.com 2017). Whereas, the production pries in the Denmark and the Netherlands is quite lesser but the prices of the bicycle is also lesser. Thus, potential cannot be given to these countries. Apart from that, Netherlands can have a distribution center to make the business more profitable than the new factory set up. In the Netherland, the expected sales are around 1110000. Thus, it intend towards the huge amount of loan for the company in their production budget. In bank, the opportunity for capital acquiring is 3.8 million. Apart from that, there is less demand in Netherlands for the racing bicycles and delivery cycles, thus Netherlands is not preferable for this expansion project (Jstor.org 2017).

Investments Towards Sustainability

Along with that, the strategies have been constructed on setting up a bigger factory to enlarge the production rate and also increase the market share of their bicycles. Thus, the structural set up needs a fund of around 2 million along with some miscellaneous costs.

Apart from that, the Belgium uses to make many events concentrating on the road bikes and the cycles and there is expected to have opportunity for the Bespoke. However, in the past years, Bespoke has invested in the business over Belgium but the demand generated was only 25 % of the total production which has laid the investment into loss and this can be considered as the main factor for rejecting the country Belgium (Ecf.com 2017).

Two of the big competitors of Bespoke in China are Gameida Bicycle Co. Ltd. And the Battle Bikes. Here the Battle bikes contribute around the 12-15% of the China’s bicycle market and the company also has global presence similar as the Bespoke Bikes. The company Battle deals with road bikes, folding bikes, city bikes, trekking bikes, electronic bikes and mountain bikes and many other types of cycles. On the other hand, the Gameida Bicycle Co. Ltd. Deals with the suspension bikes, electric bikes, free style, road bike and many more (Gmd-bicycle.com 2017). The strategy applied by the Gameida Bicycle Co. Ltd. is focusing on the eco-friendliness of bicycles, which is very common strategy in China and hence it can be considered as less effective in the market of China. The company Battle bikes has the strategy of creatively crafted bikes which are also fashionable and attractive (Fuji-ta.com 2017). This strategy is comparatively more effective than the Gameida Bicycle for the Chinese bicycle market. Apart from that, the company Gameida Bicycle is under the Fuji-ta group, which has concentrated on the modern frame production all over the world and they have invented around bicycle frame production lines and the main focus is on the frame design which is themed as the techy and the sporty bases.

The report focuses on the discussion of the future prospective of the company Bespoke in China. The company has potential presence in the markets of various countries and they also have good brand image in front of their target customers. The company has enough financial stability for the new expansion and they expect for the better achievements in the market of China with the mention marketing strategies.

The company has higher market share in various countries. Apart from that, the Bespoke bikes has upside growth in the price of their shares in the stoke market. The share price of Bespoke bikes is 26801.58 Euros and they have a growth rate of around 35.4%. Along with that, the company has stable financial position in the past years. However, the country China has heavy market competition for the Bicycle Industry and the company Bespoke focuses on the market share increasing strategy for all sort of expansion. Thus, there is a huge risk in the market of China in acquiring market share. Although, the company has good reputation as a global leader hence it is expected to get success with the new expansion strategies.

Conclusion

Bespoke Bike has decided to invest in the Chinese market and it will utilise the full potential of the entire labour strength as well as the resource scope. The perfect use of the potential depends on the company’s structure and its basic investment planning. Hence every possible strategy needs to be fortified so as to gain business advantage through production and sales.

Reference

Daxueconsulting.com. 2017. Bicycle Market In China: Shifting Gear for Future Growth. [online] Available at: https://daxueconsulting.com/bicycle-market-in-china-shifting-gear-for-future-growth/

Ibisworld.com. 2017. Bicycle Manufacturing in China Market Research | IBISWorld. [online] Available at: https://www.ibisworld.com/industry/china/bicycle-manufacturing.html

Ansoffmatrix.com. 2017. Ansoff Matrix. [online] Available at: https://www.ansoffmatrix.com/

Edumundo.co.uk. 2017. International Business & Management Simulation. [online] Available at: https://www.edumundo.co.uk/products/managementgames/international-business-management-simulation

Jstor.org. 2017. The Demand for Bicycles in the Netherlands on JSTOR. [online] Available at: https://www.jstor.org/stable/1905516?seq=1#page_scan_tab_contents

Bikebiz.com. 2017. UK manufacturing: ten bike firms talk pros and cons. [online] Available at: https://www.bikebiz.com/news/read/uk-manufacturing-ten-bike-firms-talk-pros-and-cons/014783

Voanews.com. 2017. China Battles Worst Air Pollution of the Year. [online] Available at: https://learningenglish.voanews.com/a/china-battles-smog-as-worst-air-pollution-of-the-year-hits-beijing-and-other-cities/3645519.html

Ecf.com. 2017. [online] Available at: https://ecf.com/sites/ecf.com/files/CONEBI%20market%20report%20analysis%202016.pdf

Gmd-bicycle.com. 2017. GAMEIDA BICYCLE CO.,LTD.Professional bicycle manufacturer from China. [online] Available at: https://www.gmd-bicycle.com/

Fuji-ta.com. 2017. Fuji-ta. [online] Available at: https://www.fuji-ta.com/