Evaluation Of Potential Investment Opportunities And Risks For Morrisons In Japan

The British supermarket chain MORRISONS has appointed you as a consultant. The company is considering investing overseas as global expansion is perceived at this time to be a potentially important element of the company’s long-term strategic goals. In particular Morrisons have been looking closely for some time at a number of diverse markets including Australia and Japan. In order to help with their decision making, management at Morrisons have requested that you compile a report regarding the attractiveness of ONE of these locations based on potential return on investment.

For your coursework you must evaluate the opportunities and risks presented by the given location of your choice. Based on your analysis, what would you recommend i.e. to invest or look for other options? Please ensure that you give reasons for your recommendation. Analysis of political, economic,cultural, legal and ethical risks in the country selected Identification and evaluation of business opportunities Use of appropriate examples of companies to support arguments Based on decision to invest or not,entry strategy proposed, with overall findings based on the foregoing
analysis.

Background of Morrisons

The report helps in the overall analysis of the different kinds of political, economic, cultural and ethical risks which can be faced by Morrison which is one of the British Supermarket chains. The different kinds of identification along with the evaluation of the business opportunities are required to be addressed with the analysis of the different examples which will be beneficial for the overall success of the firm in an appropriate manner. Finally, the recommendations are required to be provided which plays a major role in expanding the business operations of Morrison in Japan.

Morrison Supermarkets plc is the fourth largest chain of the supermarkets in the United Kingdom wherein it is headquartered in Bradford, England. The company was founded in the year 1899 by William Morrison who started their business as the bread and egg butter stall in Rawson market (Groceries.morrisons.com., 2018).

The market share of Morrison till August 2017 was 10.14% which has proved that the company is ahead of Aldi which has the score of 7%. The number of locations wherein Morrison is located is 498 stores and the products which are being sold by Morrison supermarket are clothing, food, and drinks, magazines along with DVDs. The number of employees working in the organization is 132,000 till the year 2017.

Presently, this has been noticed that Morrison is trying to expand their business operations in Japan which is situated in Asia. As the guidance of the consulting agency, the potential investments are required to be analyzed in such a manner which will be beneficial for their success in Japan. The mission of the entire report is to review the different kinds of the attractiveness of Japan which will be beneficial for Morrison to expand in the respective country regarding the return on investment which is potential in nature (Ahmadjian, 2016).

 The entire report will be discussing the overview of the country Japan wherein the major investigation of the different kinds of risks which are associated with the economy of Japan. Furthermore, there will be a discussion of the different opportunities for Morrison to enter into Japan market. Furthermore, the last part will be dealing with proper discussing the overall balance of the different opportunities over the different risks along with providing recommendations of the strategy related to the market entry strategy and techniques for the respective company in Japan.

Japan is one of the island countries which is situated in East Asia located in the Pacific Ocean which is 350 kilometers from China. Japan is one of the stratovolcanic archipelago which consists of more than 6850 islands and the entire country is subdivided into more than 48 prefectures within eight regions. The population of more than 129 million in Japan is the tenth largest aspect and Japanese makes more than 98%of the total population of Japan as well (Alden & Nariswari, 2017). The capital of Japan is Tokyo wherein there are more than 13.8 million individuals staying and the entire country is benefitted from the highly skilled kind of workforce and this is one of the most highly educated countries in the entire world as well.

Overview of Japan

The color of the flag of Japan helps in representing that the rectangular white banner bearing the crimson-red disc at the center wherein the flag is officially known as Nissh?ki (Burt, Johansson & Dawson, 2015). The sun plays a major role in the mythology of Japan as this has been seen and analyzed that the emperor of Japan is the direct descendant of the goddess sun in the Shinto religion. The following report will be discussing the detailed analysis of the country Japan along with the analysis of the attractiveness of Japan in order to allow the British retailer to enter into the respective market as well.

Analysis of Political, Economic, Ethical and Cultural Risks 

Political Risks

In Japan, this can be noticed and identified that the emperor who is the head of the entire state has minimal kind of power in making the different kinds of decisions. After the Second World War, this has been noticed that the United States and Great Britain has directed political change to a constitutional monarchy with the parliamentary government in 1947 (Cavusgil & Knight, 2015).

However, on the other hand, the political condition is stable in the economy of Japan wherein this can be seen that the entire political freedom is classed as 1 from 1 to 7. On the other hand, this has been noticed that Japan is politically contentious and this can hugely impact on trade along with the foreign direct investment as well (CNBC., 2018).

Furthermore, this has been noticed that there is a huge risk of the different wars in Japan in comparison to China and this kind of tension can affect the overall credit rating in the financial and stock market in a negative manner as well (Coe & Wrigley, 2017). Additionally, this has been noticed that there is lack of the protection of the different policies in Japan wherein internet is the major aspect wherein there is huge corruption and this affects the overall political stability in a negative manner.

Economic Risks 

After the Second World War, this was being seen that the economy of Japan has ruined which has played a vital role in introducing the different kinds of economic risks in the entire economy of Japan. There are huge issues related to poverty and this has been identified from the survey that the total population which is below the poverty line is 13.5% which has been caused due to the unemployment in the country (Deresky, 2017). The unemployment rate is 5.7% which can affect the overall stability and growth of the different companies in a negative manner. Contributing to them, the lifetime employment custom along with seniority order wage system is collapsing which can affect the international business in a negative manner (Tradingeconomics.com., 2018).

 The different international retailers such as Morrison, Woolworths, and Walmart cannot expand their business operations in a successful manner in Japan as the working condition is unstable in nature which will be reducing the overall market share of the company in a negative manner as well (Gaur & Delios, 2015). From the graph, this can be analyzed that the GDP of Japan is lower in nature in comparison to Singapore and the other countries which have resulted in huge unemployment in the community of Japan as well. This has been noticed that the different females in Japan are not at all work-oriented in nature which resulted in the low rate of gross domestic product and the working conditions are not up to the mark as well (Hennart & Slangen, 2015).  

Analysis of Political, Economic, Ethical and Cultural Risks

Cultural Risks 

As per the socio-cultural aspects, this can be seen that there are few formal restrictions such as on foreign direct investment. Furthermore, this has been noticed that Japan is at high risk of the different natural disasters such as earthquakes and tsunamis which can affect the overall effectiveness of expansion of the international business in Japan (Hennart & Slangen, 2015). There can be the inclusion of the language barriers which can affect the overall efficiency of the expansion of Morrison in Japan as in England and in Japan, there will be differences in culture along with the tastes of the customers which can prove to be a dangerous aspect of the organization in becoming more inefficient in nature (Hitt, Li & Xu, 2016).

Moreover, in Japan, this has been noticed that the employees in the organization do not work for the organizations, rather than they work for themselves to be praised from their superiors who will be beneficial for their morale (Holzapfel & Schneider, 2015). However, this kind of approach is reducing in the Japanese community and there has been an increase in the commercialization along with materialism which can affect the overall culture of Japan in a negative manner.

Ethical Risks 

Lastly, there are ethical risks which are being involved in the business environment of Japan which can cause huge differences for the growth of the firm and the expansion of the same in the Japan market (Hoppner & Griffith, 2015). There are different kinds of environmental rules and regulations which are being maintained in Japan and this can be difficult for expansion. Moreover, this has been noticed that Japanese strictly follow their cultural norms and they are deeply rooted in the history and culture which is not present in British culture.

Moreover, this has been noticed that there is a huge difference in greeting one another as in British there is no such culture of different offerings as this is present in Japan (Johanson & Mattsson, 2015). Due to the respective aspect of offerings, there is an inclusion of corruption and there are differences in the work-related aspects which can affect the expansion program of Morrison in Japan. Furthermore, while entering into the Japanese market wherein there are few business ethics which are considered to be illegal in British culture can be one of the major issues which will be affecting the overall aspects of international growth of Morrison(Lasserre, 2017).

Therefore, from the above this can be concluded that there are few risks which are being involved in the international expansion program of Morrison in the Japanese market with the analyzing of the root causes of the different risks which are being involved in the political along with social structure of the Japanese economy wherein Morrison will be expanding their business.

From the diagram, this can be analyzed that there are different kinds of political along with ethical restrictions in Japan which is required to be solved with proper entry mode strategies which will prove to be beneficial in order to become more strategic in their approach in order to become more effective while entering the Japanese market.

Identification and evaluation of business opportunities

There are different kinds of business growth opportunities which can be gained by Morrison in expanding their business operations in Japan. It has been surveyed and known that Japan is one of the most fast-growing developed countries in comparison to Singapore and Hong Kong (Madanoglu, Alon & Shoham, 2017). Due to the fast-growing economy of Japan, this will be providing the various kinds of opportunities for the foreign expansion in an efficient and accurate manner.

Macroeconomics of Japan 

The primitive kind of workforce along with word class education system is one of the main aspects which are required to be taken into consideration as the country is flourishing in the respective aspects (Mohr & Batsakis, 2017). Japan is being known for being innovative in the different approaches as the country is being known for having the actual ability to manage the different complex systems in an efficient and effective manner which helps in making it be the first choice for the different kinds of industries which are coming in Japan for expanding their business.

Secondly, innovative practices in the different technological aspects are the other aspect which is required to be analyzed. The growth of the e-commerce in the market of Japan helps in presenting unique kind of opportunity to the new age entrepreneurs of Japan along with the different others who want to shift or expand their business operations to Japan as well. The highly skilled workforce of Japan is committed to their tasks helps in constantly delivering the different kinds of quality outcomes to the clients who are beneficial for the growth of the Morrison in the Japan market (Oh, Sohl & Rugman, 2015).

The earning power of the Japan market is stable and is being restored in such a manner which will be appropriate for the manufacturing and non-manufacturing organizations (Tradingeconomics.com., 2018). Tokyo is the global hub for business which is inclusive of the international conventions. The stock exchange of Tokyo is a third largest stock exchange in the market which can be beneficial for Morrison to expand their business operations and gain the more competitive advantage in comparison to the other competitors (Roll, 2015).  

The shift in the tastes and preferences of the customers are the other aspect which is required to be taken into consideration. It has been seen that in the present scenario, the young generation mainly prefer the different kinds of high-end brands in order to compete with their friends or colleagues in the workplace (Sternquist & Goldsmith, 2018). In addition to the same, it has been surveyed that Japan is one of the most innovative countries that can be helpful in introducing different kinds of products and services in such a manner which will be beneficial for the overall success of the country.

The research and development aspects in the Japanese economy is reasonable which can be adopted by the different organizations in order to become more innovative in the approaches which will be helpful in making an emotional connection and satisfying the demands of the customers as well (Roll, 2015).

Income of the individuals or the gross domestic product rate is high in nature annually in the present years in comparison to the other countries. There has been an increase of 4.5% in the year 2017 and the international expansion has increased (Swoboda, Elsner & Olejnik, 2015). The purchasing power of the entire Japanese is stable in nature as the inflation rate is stable and the average income of the individuals in Japan is more than 7.5% between the years 2013-2016. Moreover, this has been analyzed that the spending of the individuals is huge in Japan and the individuals feel like spending mainly on the different leisure activities along with shopping as well (Tolstoy, Jonsson & Sharma, 2016).

Analysis of Business Environment of Japan with Porter’s Five Forces Model

As per the Porter’s Five Forces Analysis, this can be analyzed and identified that the degree of the competition is different in nature in Japan. The supermarket industry in Japan is competitive in nature in comparison to the other countries wherein this can be seen that Aeon, Dailei, Life corp, Helwado wherein this can affect the overall productivity of Morrison in Japan market in a negative manner (Tolstoy, Jonsson & Sharma, 2016). This has been noticed that the competition among the rivalry is high and this can be seen that the existing rivalry in Japanese market is highly competitive and there is no such scope of attractiveness in Japanese market.

On the other hand, there is threat of substitutes wherein the power is high in nature in Japan market. This can be seen and analyzed that the threats are subdued and this will be beneficial for the overall efficiency of the firm in a positive manner. Furthermore, this has been analyzed that there are different individual groceries in the market which can be competition for Morrison and this can create negative impact on the company in a negative manner.

Moreover, this has been noticed that the bargaining power of the buyers are moderate there are no such availability of the substitutes in Japan. This can be seen that due to low availability of the various substitutes, it will be beneficial for Morrison to increase their costs of the different products in such a manner that will be helpful for them in gaining profit along with drawing the attention of the customers in the entire market as well (Sternquist & Goldsmith, 2018).

Moreover, there is existing rivalry in the Japan market which are present in Japan as there is very less supermarkets available in Japan market. Morrison needs to improve their position in Japanese market wherein the financial strengths and the cost efficiencies are required to be changed in an appropriate manner.  This will be helpful for Morrison to use the economies of scale to their advantage to subdue to their suppliers in the market which will be effective in nature and this will be helpful for gaining competitive advantage as well (Roll, 2015).

The market of Japan is free in nature in terms of economy which can be beneficial for the overall success of the firm in an appropriate manner. This will be beneficial for Morrison to expand their business operations in the Japan economy as this will be appropriate for them to increase their sales and profitability in an accurate manner (Roll, 2015).

Examples/Instances of Market Entry in Japan 

There are different kinds of failures and success of the organizations which tried to expand their business operations in Japan market. This has been seen that Tesco was of huge failure in the Japanese market wherein this was being noticed that supermarket giant commented that Japan is tough market to trade as there is huge costs and the demands of the customers were not easy to be met in an effective manner as well (The Guardian, 2018).

After continuous eight years of trying to crack one of the toughest retail markets in the entire world, this was being noticed that Tesco had admitted defeat and announced that this is pulling out of Japan as well (Financial times.com.,2018). This was being seen that Tesco was not being successful in nature in meeting the culture of Japan as there were various kinds of differences in the culture of the country in comparison to the others. This was one of the major reasons which led to failure of the company in Japanese market.

The other example or the failure of the business which failed in Japanese market was Walmart as the main reason was the culture of Japan was not suitable in nature in comparison to the other supermarkets (Japantoday.com., 2018). The Japanese did not accept the concept of super retail store as they preferred buying small amount of purchases which was not the forte of Walmart.

With the implementation of the franchising aspect in Japan market, this can be seen that Japanese people love fresh food and they did not like the concept of the frozen foods which was the main issue which was dealt by the company in the entire market as well.

Recommendations 

From the above analysis of the business economy along with the different business opportunities which are available in the Japan market, this can be seen and analysed that there are different kinds of recommendations which can be provided to the Morrison Supermarket while they will be expanding their business operations in Japan. With the implementation of the direct investment strategy like Sony Ericsson, this can be beneficial for Morrison to analyse their culture along with ethics which are being followed by them to become more competitive in nature. With the direct investment with Food & Company, this will be beneficial for Morrison in Japan to expand their business operations in a successful manner and gain more competitiveness in the market as well.

• Firstly, this will be helpful for Morrison to gain knowledge on the local market of Japan which will be beneficial for the overall success of the firm in the respective market
• Secondly, this will be helpful for Morrison in applying specialized kinds of skills which plays a major role in becoming more efficient in their operations in Japan
• This will be creating new opportunities for the local workers as well as this will increase the overall aspects towards the local culture and the political aspects which are mandatory to be done in investing with local company in Japan

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