The aim of this report is to discuss about the market potentiality of Japan and Thailand for Alba edible oil of Australia.
PEST analysis is being done for both the countries and it is identified that Thailand will be more ideal country for Alba edible oil.
In addition, this report also briefed about the company profile of Alba edible oil and how they are currently operating. Lastly, this report concluded that joint venture strategy will be most effective entry mode strategy for Alba in doing business in Thailand.
It is expected that initiation of the joint venture strategy will help Alba in having favorable market positions in Thailand.
International business is an integral part of the contemporary business organizations due to the reason that it determines the potentiality of the business in the long term. International business refers to the process of operating across different countries and catering to global customers. In the current time, business organizations opting for the international business in order to cater to larger section of customers and increase the sales revenue (Clarke, Tamaschke and Liesch 2013). However, it is also important for the business organization to effectively identify the different business factors in the target country prior to entering. This is due to the fact that it will help to identify the opportunities and challenges to be faced in the target country.
This report will discuss about the market potentiality in Japan and Singapore for Alba Edible Oils. They are one of the leading edible oil manufacturers in Australia. In addition, one country will be selected for them along with discussion about the probable entry mode strategy for Alba Edible Oils.
Alba Edible Oils is one of the leading names in the edible oil industry in Australia with having more than 40 years of experience. They are based in Western Australia and is catering to the entire Australian market. The company aims to become the leader in the edible oil industry globally and accordingly they are coming up with different variants of edible oil such as olive oil and canola oil (Albaoil.com.au 2018). This is helping them to increase the target customer segments. In the last few years, they have invested in developing their manufacturing facilities and drastically reduced the energy consumption and wastage from their facilities. This is also increasing their profitability. They are currently offering different variants of edible oil both in liquid and solid format. This includes canola oil and cooking oil. In the recent time, their canola oil is performing good due to its source of Omega 3. They are having different external partners, which are distributing their products in different regions such as Interflour is the distributor of Alba Edible Oils in the Southeast Asian region. It should also be noted that Alba Edible Oils is the subsidiary of Alba Australia group and thus they are having enough resources to tap new foreign markets.
It is important for Alba Edible Oils to look out for newer markets for enhancing their business potentiality and with the increase in competition in the domestic market; it is becoming more urgent for them (Regner and Edman 2014). Japan and Singapore are selected as the potential country due to the fact that both these countries are developing faster with having favorable business environment. PEST analysis will be done to understand the external factors in these countries.
Political risk in Japan is low
Japan is having more control on corruption (TheGlobalEconomy.com, 2018)
Japan is having better rule of law in the country
Japan is more politically stable country
Political risk in Thailand is high
Thailand is having less control on corruption (TheGlobalEconomy.com, 2018)
Thailand is having weaker rule of law in the country
Thailand is less politically stable country
GDP growth rate if Japan is 1.7 percent as of 2017
Rate of FDI in Japan is slowing down (TheGlobalEconomy.com, 2018)
Japan is having the rank of 4 in terms of domestic market size
GDP growth rate of Thailand is 3 percent as of 2017
Thailand is attracting more FDI in the recent time (TheGlobalEconomy.com, 2018)
Thailand is having the ranking of 24 in terms of domestic market size
Japan is more globalized and thus acceptance for foreign goods is more
Japan is ranked at 2 in terms of life expectancy (weforum.org 2018)
Japan is having number of cultural gaps with Australia
Acceptance for foreign goods is less in Thailand compared to Japan
Thailand is ranked at 72 in terms of life expectancy (weforum.org 2018)
Thailand is also having a number of cultural gap with Australia
Japan is having higher ranking in innovation index
Japan is ranked at 11 in terms of availability of new technologies (weforum.org 2018)
Thailand is having lower ranking in innovation index
Thailand is ranked at 56 in terms of availability of new technologies (weforum.org 2018)
Thus from the above analysis, there are number of differences being identified between the two countries. In the recent time, Thailand is having more economic growth rate than Japan but Japan is more developed country than Thailand (Li and Giles 2015). In addition, Japan is more exposed to foreign markets and thus products of Alba edible oils will find maturity stage in the product lifecycle. On the other hand, Thailand is still developing and products of Alba will be at growth stage and thus will have more opportunities. Thailand is ranked at 43 in terms of local competition while Japan is having the ranking of 1 (weforum.org 2018). Thus, Alba will find more competition in the Japanese market than in Thailand. In terms of product distribution, both the countries are having enough access to third party distributors and it will help Alba to maintain their existing form of distribution (Cui and Mallucci 2016). Both the countries are having high penetration of retail stores and departmental shops and thus products of Alba can be sold from these stores.
Evaluation of host country market
As discussed earlier, intensity of the market competition is higher in the Japanese market over Thailand. Moreover, in terms of the edible oil industry, competitors are more in Japan than in Thailand. Majority of the edible oil companies in Thailand and Japan are local and domestic firms (Chen and Miller 2015). Thus, they have the better idea in meeting the local taste and preference patterns. In Thailand, the majorly used edible oils are soya oil and sunflower oil. On the other hand, rapeseed oil is more popular in the Japanese market. Majority of these competitors in both the country are having the mechanism of local sourcing of raw materials. However, product differentiation should be the major unique selling proposition for Alba compared to these local players due to the reason that canola oil will be the prime offering for them. This may also acts as strength for Alba due to the fact that canola oil is slowing getting popularity mainly in Japan and Alba will have the entire market untapped without having direct competitors (Pacheco and Dean 2015). In addition, the tons of experience in the edible oil industry for Alba will help them to get adjusted with the local market preferences and offer products accordingly.
The target consumers for Alba will be the customers with having health consciousness and willing to have cooking oil with low fat content. Thus, the age group for the target customers will be vast and wide (Fetscherin and Heinrich 2015). Target segmentation strategies will include product differentiation and cost leadership. Offering distinctive products with affordable cost will help to cater to maximum number of customers.
From the above analysis, it is identified that Thailand will be most potential country for Alba bovver Japan. This is due to the reason that Japan is already a developed country and their market is already in saturated position. On the other hand, Thailand is a developing country and thus the business opportunity in Thailand is more (Thuraisamy, Sharma and Ahmed 2013). This is also proved by the higher economic growth rate of Thailand over Japan. However, Thailand is trailing behind Japan in terms of political factors and legal factors. This may pose challenge for Alba but short term planning will enable them to push the business operation in Thailand after reviewing the condition in the initial stage. Thailand is also having lower intensity of market competition and thus, Alba will face fewer competitors in the market than in Japan and it will help in enhancing the profitability of them. Thus, Thailand is selected as the chosen country of operation for Alba.
Joint venture strategy will be the most effective and ideal entry strategy for Alba in Thailand. This is due to the reason that joint venture strategy will enable Alba to partner with a local firm and thus capital investment as well as associated risk will be less (Brouthers 2013). In addition, the partnership with the local firm will further help in determining the local market effectively as the local firm will have more idea about the domestic market trend.
This report concluded that Thailand will be the most potential country for Alba over Japan. In this report, PEST analysis is being done on both the country to identify the external business factors. Both the countries are having their own sets of shortcomings and strengths. It is identified that Thailand will provide more business opportunities to Alba compared to Japan. It is also identified that Alba will face less competition in the market of Thailand. This report concluded that joint venture strategy will be the ideal entry mode strategy for Alba in Thailand.
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