Introduction
The current era of the business scenario is the heavily depended on globalization. This is due to the reason that, in the current business scenario, majority of the countries are depended on each other in terms of trading and business (Scott et al., 2015). Globalization refers to the phenomenon of compressing the world in one single state, where every aspect will be considered for the entire world. Moreover, with the emergence of intense competition in the domestic market, it is also important for the domestic business organizations to enter in foreign market to increase their market share and presence (Asici, 2013). However, with the initiation of the globalization, there are various challenges that will be faced by Doughnut bakery. Thus, it is important for them to identify the issues to be faced from the globalization and effectively resolve them.
Doughnut bakery is based in Australia and thus in order to tap the opportunities of globalization; they will have to enter in other countries. However, in order to do so, they will have to consider various factors in terms of their internal resources to initiate the process of globalization. This report will discuss about the potential challenges and opportunities to be gained by them through the initiation of the globalization. Moreover, recommendations will also be discussed in this report in accordance to the identified issues.
Benefits of globalization for Doughnut bakery
- One of the key benefits to be gained from the initiation of the globalization for Doughnut bakery is the increase in the market share and customer base. This is due to the reason that, with the initiation of the concept of globalization, Doughnut bakery will enter in the foreign markets, which will in turn reduce their dependency only on the domestic market (Samini & Jenatabadi, 2014). Thus, according to the theory of Ansoff matrix, globalization will enable Doughnut bakery to develop their market further with their existing products. Moreover, they can also initiate the process of diversification by entering in new markets.
- Another advantage to be gained by Doughnut bakery from the initiation of the globalization will be the enhancement of their brand identity. This is due to the reason that, the more foreign markets they will enter, the more will be their brand equity and brand identity (Huang & Sarigollu, 2014). The brand will receive more exposure with entering in the global market. This enhanced brand identity will help them to push the sales of their new products in the market.
- In terms of the external environment, with the initiation of the concept of globalization, Doughnut bakery will gain advancement of technology. This is due to the reason that, operating only in Australia will enable them to tap the technological infrastructure of Australia only (Van Stel, Millan & Roman, 2014). However, on the other hand, entering in the foreign markets will enable them to tap the advanced technologies from the developed markets. Thus, this will in turn help them to enhance their effectiveness in terms of technologies.
- Initiation of globalization also enable Doughnut bakery to operate in different countries with having different economical condition. Thus, it will be an opportunity for them to offer array of products to cater the customers in different customer segments. The product portfolio of Doughnut bakery will get increased and will help them to cover more market areas (Martinsuo, 2013).
- According to the Porter’s five forces theory, with the increase in the industry rivalry, the bargaining power of the buyers and threat of substitute will get increased. Thus, with the help of the globalization, Doughnut bakery will be able to cut off the industry rivalry in a single market by operating in different markets around the world (Dobbs, 2014). They will not be depended on a single market. Thus, the industry rivalry for them will be less for them.
Challenges of globalization for Doughnut bakery
- One of the key challenges to be faced by Doughnut bakery in initiating the concept of globalization is the cost incurred. This is due to the reason that, entering in the foreign market will require huge capital and infrastructure to operate (Handfield et al., 2013). Thus, it will cause extra burden for them. Moreover, this will lead to the premium pricing of the products. With having premium pricing, the target customers will be reduced.
- Another issue to be faced by them regarding the initiation of globalization is regarding the difference in the legal and political scenario in different countries (Lawton, McGuire & Rajwani, 2013). This is due to the reason that, different countries will have different political and legal system regarding business operation and thus it will be difficult for Doughnut bakery to adhere with all of them.
- The social taste and preference pattern will also be different in different countries. Thus, Doughnut bakery will have to offer products according to the local taste and preference, which will be difficult for them to maintain (Amador & Opromolla, 2013).
- In the global market, there are various established players in the business sector of Doughnut bakery. Thus it will be difficult for them to cater to the foreign market and to stay ahead in the competition. Moreover, the rate and approach of the competition will be different in different countries. Thus, it will pose more challenge for them in dealing with more competition in the global market (McKenzie, 2017).
- Pricing will be a key factor for them in the course of globalization. This is due to the reason that, foreign countries will have both developed and under developed economies and it is important for Doughnut bakery to initiate the pricing strategies accordingly (Davcik & Sharma, 2015). However, in this case, they may not have a singular approach of pricing. Initiation of the premium pricing strategy will reduce the target customer segment and on the other hand, mass market pricing strategy will reduce the brand value of them in the developed countries. Thus, it will be a challenge for them to maintain the different pricing strategy in different countries.
Recommendations
- It is being recommended that, Doughnut bakery should enter the foreign countries around Australia such as New Zealand. This will help them to cater the local market effectively due to the reason that, the social culture of Australia and New Zealand is more or less same. Thus, it will be easy to cater the local customers of New Zealand with the same business approach and product portfolio of them.
- Another important step to be followed by them is the selection of an effective market entry strategy. This is due to the reason that, the more effective and efficient will be the market entry mode, the more effectively they can operate in the foreign market. In the case of Doughnut bakery, they should initiate the strategy of joint venture. This will help them to minimize the rate of investment on the foreign country compared to the direct investment. On the other hand, it will have less risk compared to the direct investment. In addition, initiation of the joint venture strategy with any local partner will help Doughnut bakery to effectively determine the market requirement and trend of the foreign market. This is mainly due to the reason that, the local partner in the joint venture will have better knowledge about the domestic market.
- It is also being recommended that, Doughnut bakery should initiate different brands under their name in order to cater to different customer segments across different price segments. Thus, having multiple brands will enable them to have premium pricing for one brand for the higher end customers and another brand with affordable pricing for the mass market. Thus, this strategy will enable them to cover more market in the foreign country.
- For the contemporary business organizations, promotion and marketing plays an important role in enhancing their business operation. Thus, it is being recommended that, Doughnut bakery should have extensive and personalized promotional activities targeted at the local customers of the foreign country. They should design their promotional campaign according to the taste and cultural pattern of the local market. This will help them to effectively target the foreign market.
Conclusion
Therefore, from the above discussion, it can be concluded that, Doughnut bakery will face both challenges and opportunities from the initiation of the concept of globalization. This report has discussed various issues and opportunities for Doughnut bakery from the emergence of globalization. It is being identified that, they will have the huge market opportunity from the initiation of globalization. This is mainly due to the reason that, entering in the global market will automatically enhance the customer base. On the other hand, this report also identified one key challenge to be faced by them, which is operating in different and diverse political and legal environment in the global market. This report concludes that, Doughnut bakery will face the challenge of adhering to different legal and political rules and regulations in different countries. In accordance to the identified issues, there are various recommended steps are also being discussed in this report. It is being expected that, the effective implementation of the recommended steps will help them to improve their business operation.
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