Market Entry Strategy For Kelly & Windsor: Analysis Of Taiwan's Industry Environment

Analyzing the industry environment for the products/ services- Porter’s 5 Forces analysis

Product/Service Proposal

1)You need to organise yourself in a group of three.  Try to pick people that are looking for similar marks to yourself, or people that you have worked with before, or that live close to you so that you may meet up.  I suggest posting a message to the Cloud Deakin site looking for group members.  You may wish to do ‘selection of group members’ by asking potential group member what marks they usually get, where they live, if they can meet up, how they like to work, and their commitment to their assignment done.

2)Once you have formed a group, then you need to enrol into a group in Cloud Deakin.

3)Then you need to decide in your group on a product or a service that you would like to internationalise.  We will talk about this in class, but it can be anything, agriculture, innovative products, natural resources, financial service, etc, etc. In T2, we will also have an industry speaker in Week 2, so I am happy to approve of students doing his company/products (Kelly and Windsor) for their assessment.

4)You will then need to decide in a group, three countries that your chosen product or service can be internationalised too, and each group member will need to choose a country.  As a rule you are not allowed to choose the country that you have come from. For example, if you were born in China or India, and/or of that nationality you are not allowed to choose that country for this project.  Choose something else that is interesting, and different for exploration.

5)Then you need to in the group develop a 500-word proposal, which details the product or service you are choosing, and then also the three countries that you choosing and whom is doing it, and why you are choosing them for Assignment 1 and 2.

6)Submit this proposal to the Cloud Deakin by the due date of 24th July 2017, for your lecturer’s approval.  

7)You will receive your group’s approval (or otherwise feedback) in 7 days.

1)With your approved product/service and country, each group member needs to go away and do research on their chosen country, and in particular look at factors that might make it attractive/unattractive for internationalising the product/service to.

2)For each country, and with your product/service in mind you will need to investigate:

a.Economic factors

b.Political factors

c.Legal issues

d.The trade and investment environment

e.Foreign exchange issues

f.Financial factors

g.Cultural factors and challenges that it might pose

3)You will need to make a recommendation about your analysed country and whether it is a good place or not for your products/service internationalisation, and why?

4)So what makes a good quality assignment:

a.It’s based on good quality research.

b.You have good quality sources of information (business information sources such as government reports, World Bank, International Trade Organisation, EIU, Datamonitor etc, business databases such as Proquest, Business Source Premier, academic journal articles, textbooks, please don’t use Wikipedia or dubious references, or no name references from strange websites).

c.How well you use these resources support to your arguments.

d.Your information is realistic, relevant, and would be useful for a company/person conducting international business.

e.The information is specific to the product/service chosen.

f.You have adequately referenced, and you have used the Harvard referencing system to acknowledge your sources of information (both in-text and as a reference list at the end).

g.Your final report doesn’t exceed 3000 words (Title page, executive summary, table of contents, tables, graphs, appendices and your reference list are in addition to the 3000-word limit).  

h.It should be in a report format. Your report should be typed, double spaced, 12-point font, and has headings (further information on report format is provided below).

i.You have time series data where relevant, which demonstrates trends over the last 5 years or so, and if possible a forecast into the future.

Analyzing the industry environment for the products/ services- Porter’s 5 Forces analysis

The following report is based on the market entry strategies that are supposed to be applied to the organization Kelly & Windsor. Kelly & Windsor is an Australian manufacturer of bedding accessories and the organization distributes a uniquely made high quality range of luxury bedding accessories. The organization utilizes the latest production methods to the manufacture the highest quality of luxurious products for meeting the needs of customers. However, in the recent time, the organization in the domestic market faces some sales challenges due to the less demands and limited customer base. The organization makes a large investment for the enhancing the quality of products and operation but the return on investment has not been effective compared to the cost of operation.

Considering this issue, the organization is intended to expand the business to an international market where this deficiency of profits can be recovered by increasing customer base and maximizing the value of brand.  Working as an international business consultant, the country Taiwan has been suggested for the expansion of Kelly & Windsor’s business.  Taiwan is the appropriate choice for market expansion because Taiwan is one of the emerging nations with growing demands of innovative products. Moreover, economy in Taiwan is stable now; thereby, people are heading towards an enhanced culture and lifestyle. In addition to this, Taiwan has achieved an economic success. Since 1992, Taiwan’s GDP growth has averaged 4.5% and this maximized the per capita income from $9,116 in 1993 to $19,789 in 2014 (Hsu and Cheng 2012). It is also observed that presently Taiwan is at the 28^th position in terms of wealth globally. Therefore, such emerging growth would certainly help the business of Kelly & Windsor. In addition to this, another factor selecting this country as the expansion of business is that the small and medium size organizations have always been the backbone of Taiwan dynamic economic expansion. Thus, at the initial stage, the organization might not be able to start the operation with a large framework in new market; the operation might fall under the category of small and medium size. Therefore, the organization will receive tremendous responses from the market and government. So, the selected country is appropriate for Kelly & Windsor is suitable.

According to Chien, Chen and Hsu (2012), the Taiwan’s private sector has benefitted from a relatively well-developed commercial code and open market policies that facilitate the free flow of goods as well as capital. It is also observed that small and medium size organizations have been strong platform of Taiwan’s changing economic expansion. In addition to this, Zhu, and Chung (2014) mentioned a sound legal framework in place to deliver a strong protection of property rights and uphold the rule of law. It has been identified bedding and home furnishing products suppliers have gained a tremendous momentum due to the availability of technology, which means the organizations in the recent time have relied on e-commerce platform for selling the bedding accessories to the customers. The industry observed a dramatic growth within a decade.

Bargaining power of customers- (Moderate)-It has been observed that as the economic position in Taiwan is stable, the customers tend to prefer high quality of products. The country has many small and medium size organizations selling the same categories of products but the due to the factor of quality, all organizations do not receive the similar attention from the customers (Chiou et al. 2011). Even though, the customers many choices but they look for the quality. Thus, the bargaining power of the customers with respect to bedding accessories is moderate. However, it is expected that bargaining power of customers might increase as the country has the potential to attract the foreign brands.

Bargaining power of suppliers- (High)-The bargaining power of suppliers is high because Taiwan’s home furnishing sector has many players but the small and medium size organizations with quality of product are crowding the market (Pai and Tu 2011). The number of suppliers is less compared to the number of players in the market. In addition, the demands of products are high but the market observed an absence of suppliers. As the result, the bargaining power of suppliers is comparatively high.

Industry rivalry-(Less) Even though, there are many small and medium size organizations in the field of home furnishing products, the rivalry among the large organizations is less. The industry hardly has a large size organization that covers the wide the market. The present dominating organization in the sector is Daddypops Co. Ltd, Protune Wooden Co., Ltd and others (Lee et al. 2011). Due to such poor presence of strong players in the market, the rivalry among the competitors is less. This would certainly provide a significant opportunity for the organization Kelly & Windsor. 

Threats of entrants-(Moderate) The threats of new entrants in the sector is high because the industrial environment in the recent time has been effective for the new businesses and due to economical stability, the nation is largely dependent on the technology. The technology is rapidly developing in the country and this is probably because of government’s interest toward the technological improvement (Chuang and Lin 2013). Due to the stable economy and availability of technology, the multinational organizations are trying to enter the products.

Threats of substitutes products- (High)-As discussed earlier, home-furnishing sector in Taiwan has small and medium size players to meet the requirements of the customers. In addition to this, the retail organizations in Taiwan also provide bedding accessories (Boestel, Francks and Kim 2013). On the other side, due to the technological advancement, the small and medium size enterprises started developing better quality of home and bedding accessories. Nonetheless, the quality always creates a separate space in the mind of the customers. Therefore, Kelly & Windsor has the opportunity for creating a strong brand image in the market.

In order to enter a particular market, it is necessary for the organization to focus on a particular market. However, Taiwan is a growing market and the choice of people is leaning towards the innovation. Thus, the major focus of Kelly & Windsor should be on the large metro cities- Tier I and Tier II cities such as Taipei, Taichung and Kaohsiung. The people in large cities have the highest per capita income than the sub-urban areas of the country. In addition to this, these regions have the easy options for transportation and people lead a classy nightlife. Thus, Kelly & Windsor should focus on such urban families who can afford the price for such luxurious products. In addition to this, as the economy of the nation is growing, the purchase habit of people switch to average quality of products to supreme quality of products. Therefore, to penetrate in such dynamic market, the organization needs to maintain their unique quality of products.  Hence, Liang et al. (2014) commented that it is mandatory for all organizations that enter a new market, to develop and maintain a unique product portfolio, which helps to differentiate the firm from others in the sector.  When it comes to target market, the organization put the attention to the married women who often prefer to decorate the home with luxurious bedding accessories. In this context, Berthon et al. (2012) commented that luxurious brands often appeal to unique groups. Therefore, while focusing on a particular market, the quality should be the first priority.

SWOT analysis of Kelly & Windsor for entering Taiwan

Table 1: SWOT analysis of Kelly & Windsor

Among different international strategies, the organization Kelly & Windsor could rely on two particular strategies such as global strategy and transactional strategy. Under the global strategy, the organization could standardize its products and services across the national markets. This means Kelly & Windsor has the unique bedding accessories products; thus, to sell the same products, the company could implement the global strategy to compete in all markets in Taiwan. For each market, the organization will have a strong centralized control through franchising. If the sales of the products are high, the organization could locate value added activities if it is able to the lowest cost (Sousa and Filipe Lages 2011). When the business is standardized, the company could open up its R & D network in Taiwan, as the chosen country is technologically developed.

Transactional strategy

This strategy helps to achieve both global efficiency as well as the regional responses.  Hence, the difference that brings competitive edge to the company is, Kelly & Windsor has an unique quality of products; the other home furnishing organizations do not provide such designed and stylish products. With such unique product portfolio, the organization enters the other Asian nations and the company keeps the same quality of products in each market (Hitt, Ireland and Hoskisson 2012). The packaging and labeling of such products could be with the regional languages but the contents and the internal models are same for each market.

Licensing- It is observed that licensing is relatively sophisticated arrangements where an organization transforms the right to use a product or sell the products to another organization (Ahsan and Musteen 2011). It is particularly relevant if the purchaser of the license has a strong and large market share in the market where the licensor wishes to enter the market. Here, the licenses can be for production or marketing. Therefore, to enter the proposed market- Taiwan needs to select a purchaser who has strong market presence and market share. In addition to this, it would be effective if the purchaser sells the similar products.

Franchising- According to Morgan, Katsikeas and Vorhies (2012), Franchising is a typical North American technique for rapid market expansion but it helps to gain traction in other parts of the world. This market entry strategy could work well for the organizations that have a repeatable business model. Kelly & Windsor has a unique product profile as well as a strong brand recognition, which can certainly be used internationally. This strategy is effective for Kelly & Windsor because, it might not be possible for the company to establish a large manufacturing infrastructure at the initial stage of operation. Moreover, as Taiwan is technologically developed, the organization could get its job done by the franchisees. This means Kelly & Windsor open the doors for the franchisees to adopt its business models. In return, the franchisees would return a certain amount of the profits to the organization. This mode of entry is certainly effective for Kelly & Windsor as the initial stage operation, the organization need not to invest a large amount. This strategy will also help to gain the brand recognition from the target market.

Justifying with the theory - Dunning’s eclectic theory

The electic paradigm is one of the significant theories of in economics and it is also known as the OLI model or OLI framework. This theory is further developed form of the internalization theory. The market entry strategies Licensing and Franchising is appropriate for Kelly & Windsor because the organization could gain ownership advantages, which is the first element of OLI framework. The firm has the unique product portfolio, which is certainly different from the existing firms in Taiwan. Thus, through franchising, Kelly & Windsor could generate the competitive advantages with the unique business model and here, the company does not have to make investment on the direct operation. In addition to this, the organization will also have the opportunity for gaining location advantages because the firm would focus on the crowed metro cities of Taiwan and hence, the company could gain benefits from the modern lifestyle of people. In addition to this, Kelly & Windsor could also organize the creation as well as the exploitation of its core competencies- technology and innovation in product manufacturing.

In order to operate the functions in a foreign market, the organization Kelly & Windsor needs to have centralized organizational design, where the high level of managers of the organization will make the strategic decision as well as pass them over to lower level of management for implementation. This means that the senior management such as the leaders, senior executive will form the strategies and convey them to all levels of the firm. This means under franchising strategy, the strategic control will supervised by the senior level of management.

Organizational control

The managers and executives tend to monitor as well as regulate how efficiently and effectively, the operation is being performed. The managers also take the responsibility of observing how the members are performing the activities required for achieving the organizational goals. However, the organization needs to have to control in three different segments such as market control, bureaucratic control as well as Clan control (Kang et al. 2012).  For market control, the organization could set an external market mechanism to develop internal performance benchmark and standard.  Likewise, for bureaucratic control, Kelly & Windsor could use centralized authority to implement the rules to control the large set of activities. Similarly, for the clan control, the company needs to develop the culture in which shared values among the organizational members can be stored to idealize the preferred behavior.

Vision statement for the new market

The vision of Kelly & Windsor is to create a strong brand presence in the global market providing the unique quality of products and leveraging the unique business models. The organization wants to provide the customers with the highest quality of products that go beyond their expectation.

Specifying strategy

To create a strong organizational position in the market, the organization needs to select global international strategy. After the initial stage in the new market, to further penetrate in the market, the organization needs to deliver the same product with the highest and unique quality (Nielsen and Nielsen 2011). This means by maintaining quality of products, the company could gain attention from their target markets. It is observed that Taiwan has many small and medium size players, which means that there is a level of competition. Thus, to remain different from others in the sector, the organization needs to provide something –innovative design of products that is not provided by others in the sector.  This would also help the organization to promote the brand and gain popularity from the market.

When the organization is entering a new market with its own business model and spreading across the market through franchising, the organization needs to be aware of its human resource policies and terms (Hitt, Ireland and Hoskisson 2012). If the organization prefers to take help from the franchising, it could provide certain guidelines for selection and recruitment to the franchisee. This helps to build and retain the organizational model and culture. The franchisee should be instructed to hire people from the local regions only. Based on the market conditions and industry demands, the recruitment policies should be developed. Throughout the organization, a centralized human resource culture needs to be developed. On the other side, if the organization hires people from the local market, the firm could gain support from government and regulatory bodies and labor union.

It is expected that the organization Kelly & Windsor could achieve almost 10% of market share in Taiwan’s home furnishing sector by selling its products and services through franchising and licensing. However, it is not possible for an organization to achieve break-even point in the first year of operation. Nonetheless, it is expected that after two years of operation, the organization is expected to reach the break-even point. In addition, the organization could achieve its expected market share after third of year of operation. The expected profit and revenue figure has been provide in the following.

At the initial stage of operation, the organization is instructed to depend on franchising and licensing for understanding and having control over the operation. However, after a certain time of operation, the organization might face the challenge from the competitors. Certainly, Taiwan is economically and technologically developed nation, where innovation is the permanent trend. Thus, to deal with such issues, after few years of operation, the company needs to establish its own manufacturing plant and terminate the contracts of franchising. Hence, the cost of operation could be a big challenge for Kelly & Windsor. In addition, the company needs to apply cost leadership strategies, where it could cut down the cost of operation, such as cost of manufacturing and developing the finished products. This means by using the technology, the company could limit the human resource cost and maintain the same quality in the product portfolio.

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