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Delifrance in Japan
Globalization is among the best strategies to enhance a higher level of growth and development. Profit maximization being the primary aim of every business, companies tends to utilize every available opportunity to make more sales as they can. Instead of relying on the domestic market, the company can extend its business operations in other countries where they get to obtain more customers, a higher competitive advantage hence a higher level of success. Délifrance is among the leading businesses in the United Kingdom. The company has been offering bakery solutions to retailers, bakers, and food service providers. Currently, the company operates in about 20 countries across the world. They are known as the leading providers of bakery solutions (Roy, 2013, pg. 26). However, in attempt to improve business success and development, the company intends to expand its business operations in Japan. They have found Japan as a better market for Foreign Direct Investments and they are extending their business operations to this new country.
Analysis of the business environment using PESTEL analysis
Politically, Japan is among the leading countries in the world. Since the world war 11 Japan has experienced seasons of political stability with very minimal political challenges. This makes the land a conducive environment for business operations. The higher level of political stability reflects a higher degree of safety and security. Corruption is also minimal in the country. The government has managed to bring people together (Marmol, Feys & Probert, 2015, pg. 167). As a result, companies can work with individuals from various parts of the country in unity and oneness. Due to the higher political stability in the country, Delifrance stands a higher chance to succeed in their business operations and thus a better place for foreign direct investments.
Unemployment has been reducing in Japan. According to Joyce 2010, unemployment rates have highly reduced in 2017, standing at 2.8%. Further research reveals that the huge reduction of unemployment rate is as a result of the increasing in foreign direct investments as well as the increases in investments in general. At the same time, the education system has highly supported the economy due to the increased level of creativity and innovation. As unemployment keeps on reducing, the consumers’ levels of income is increasing and thus increasing their demand for goods and services (Kirk, 2014, pg. 34). Therefore, it is most likely that Delifrance will have a higher demand for the bakery services in the country and thus a better market for the business. Other economic factors such as inflation rate and the value of domestic currency are also improving which makes the market more attractive.
As compared to other countries like America, Japanese are more formal in their social behavior and character. They are easy to accept foreigners in their circles as long as they show humility. This means that it will be easy for Delifrance to start the business in the new country. People are likely to welcome them who include other competing companies and customers. The rest of the society is also likely to grant them a good welcome as they start their business in the foreign land. As a result, it will be easier for the business to succeed (Gagliardi, 2016, pg. 105). However, it is important to understand that Japanese value appreciations as part of the culture. They believe that an individual should always show appreciations upon given any service or help. Failure to do this ay result to loss of customers and thus a challenge for the business to succeed.
Technologically, Japan is among the leading countries in the world. They are well known for the electronic products, contributing a large share in the world’s market. Due to these reason, Japanese are leading in using technology. According to Joyce 2010, almost 90% of the population own computers and Smart-phones. It is also found that about 80% of the population are active members of social media networks and mostly face book and twitter. The higher level of technology serves as an opportunity to the business. Among the benefits the company is likely to enjoy in Japan is easy and cheap marketing and advertisement. It will not take long for the consumers to know about the new business in the country (Dransfield, 2014, pg. 154). A single advertisement through face book will spread in the country and within a short time. If they make good use of technology, the business will succeed in the new country and thus a higher level of growth and development.
The physical environment
Generally, the weather in Japan is temperate which four main seasons. Winters are from December to February and they are always accompanied with sunny and dry weather. Springs occurring from March to May are always accompanied with little rain with a hot weather. Summer starts in June to August with which is ever hot and humid with the temperatures going high in August. Autumn starts from September to November where the weather is normally characterized with cooler temperatures and breezes. Understanding the various seasons is important for the company to succeed in Japan (Doke, Hatton & Smortfitt, 2014, pg. 127).According these explanations, there is likely to be a higher demand for the offered products during springs which are from March to May. With such understanding, the company should invest in enough stock as well as enough personnel and space to ensure that they can accommodate the increasing demand at this time and thus a higher level of growth.
As in any other country, Japan also has its rules and regulations. For instance, it is illegal to operate a business without a license in the country. At the same time, all businesses either domestic or international are bound to pay taxes failure of which they are subjected to fines and penalties. This another thing Delifrance should understand as they extend the business to Japan. It is important to comply with the country’s rules and regulation for the company to freely conduct their business operations in the country (Brott, 2013, pg. 89). For instance, failure to obtain a license will make it hard or impossible for the company to freely sell their products and services. At the same time, failure to comply with the rule and regulations will destroy the company’s reputation not only in Japan but in the other 20 countries and thus a challenge for the business to succeed.
Analysis of the business environment using Five forces model
There are any other bakery companies in Japan. Among the leading companies in the bakery business include; Dominique Ansel Bakery Omotesando, Bake Cheese Tart Shinjuku Shinjuku, and Puff Factory Setagaya, and Centre The Bakery . Each of these companies has already dominated the market and thus the level of competition is high in the industry (Michaux, SCadiat & Probert, 2015, pg. 56). This is an indication that Delifrance should develop enough and appropriate strategies that will help them gain a higher level of competitive advantage for the business to succeed in the new land. However, Delifrance is known for its higher level of creativity and innovation and, therefore there is a higher possibility that the business will succeed in the foreign land.
On to the side of suppliers, many service and resource providers have been trying their best to sell their resource to Delifrance. The company always pays their suppliers on time as well as in good measures. Due to this reason, Delifrance has never experienced problems in terms of stock and other resources and thus among the reasons for the higher level of business growth and development. Suppliers will still have a similar characteristic eve in the new land. As the business is working towards maximizing profits, producers and suppliers are also working towards maximizing their wealth through the resources they produce (Kirk, 2014, pg. 96). Therefore, Delifrance should keep on with the same strategy of behaving socially responsible to suppliers for them to have low powers on the company and thus, an opportunity for growth.
Given the high competition in Japan due to the existence of many bakery companies, buyers are likely to have high powers. The major aim of a consumer is to maximize utility while minimizing cost at the lowest level possible. This means that price is among the major factors when it comes to making consumption decisions. Other factors such as quality of the products and services are also likely to easily affect demand in Japan. Therefore, Delifrance should invest more in quality to ensure that the customers receive the best from the. Quality should be a priority to fully satisfy the needs of customers and thus increasing demand (Brott, 2013, pg. 84). Another thing, Delifrance can take advantage of large economies of scale where they can perform their business operations in large quantities to minimize costs. This will place the business in a position where they can offer their products at the lowest price possible and thus attracting more demand for their product and services.
Threats of substitutes
There are many substitutes for bakery products in Japan. It is important for the company to convince customers to stay with their products and not what is offered by the other competing companies in the country. A slight change in price or quality results to a huge change in the quantity demanded as consumers go straight to the other related products. This demonstrates a need for Delifrance to stay focused in quality and pricing. It is important to always ensure that customers are fully satisfied by the offered products and services to minimize the substitution effect (Roy, 2013, 79).
Threats of new entrants
The bakery industry is in the form of a perfectly competitive market structure. In this form of a structure, there is free entry and exist where new sellers can join and leave the market at any time. There are minimal restrictions towards starting a business in this form of a market structure. This is among the benefits Delifrance will enjoy in extending the business to the new country. The restrictions to be experienced are very minimal and thus going global in Japan will not be much costly. However, it is important for the company to note that competition is likely to increase in the coming years. As more firms will be joining the market, competition will rise and thus making it hard retain customers? It is, therefore, important for Delifrance to remain focused on quality. At the same time, it is important to continue promoting creativity and innovation to ensure that customers always see the need to buy from them (Dransfield, 2014, pg. 105). The continuous advancements in technology is also an opportunity for growth and thus the company should always stay at pace with the changing technology.
Which strategies can the company employ to enable the business success?
Corporate social responsibility
As much as the business is working towards maximizing profits, it is important to understand that the desired level of profit is determine by various factors from the various stakeholders. These stakeholders are the company employees, customers, suppliers, the government, members of the community and lenders. Each of these stakeholders has a role to play for the business to succeed. It is important for the company to ensure a good relationship with each of the stakeholders as way to motivate them contributes positively towards the business performance (Brott, 2013). For instance, employees are the ones spending much time with the customers. It is important to ensure that employees are well pleased by the offered business environment as well as other things such as salaries and remunerations among other benefits. In this way, every employee will be motivated to work in their level best and thus helping them to offer quality services leading to success of the business.
Another example, customers are the reason for the business existence. It is important to ensure that every customer irrespective of the market segment they are in can receive quality services towards fully satisfaction of their needs. With strategy, the company will be in a position to retain customers as they attract more new ones leading to success of the business (Brott, 2013). A good relationship with all the other business stakeholders will be helpful to ensure smooth run of the business operations and thus a higher level of success.
Making use of large economies of scale
As found in the analysis section, among the opportunities the company will have in expanding the business to the new market is the increased market share which reflects an expansion of the business. In this way, taking advantage of large economies of scale would be a strategy to enable the business succeeds in Japan. Performing the business operations in large quantities will help the business minimize costs in various ways such as the production cost, transportation and other types of costs and expenses. Through this strategy, the company will benefit in two major ways (Doke, Hatton & Smortfitt, 2014). First, the reduction in cost will help them to offer more quality products and services and thus attracting more customers leading to a higher level of success. Another thing, the reduction in cost will enable the company to offer their products and services at favorable prices and that attracting more demand contributing to more profits.
Price discrimination would also be useful strategy for the company to succeed in the foreign land. First, the company would divide their customers in various groups known as segments. With the different segments, the company can offer their products services at different prices depending on the customers’ nature and characteristics in the various segments. For instance those in the upper economic classes should be offered the services at higher process while those belonging to the lower economic classes offered the same products or services as lower prices (Kirk, 2014). In this way, all the consumers will be comfortable with the company offerings. At the same time, every consumer will stand a chance to derive total satisfaction from the offered products or services. As a result, the level of demand will be high and thus a great level of success and growth of the business.
According to the above analysis, Delifrance is most likely to succeed in extending the business in Japan. Through the PESTEL analysis, it is evident that Japan is a better place for the company to perform their business. Japan is politically stable; unemployment is reducing and thus customers’ income levels are increasing which reflects a higher level of demand. Socially, Japanese culture is welcoming which will make it easy for the company to start the business in the new land. It is also found that Japan is among the leading countries in terms of technological advancements which makes advertising and marketing cheap and more effective and thus an opportunity for growth. Under the porters five forces model, competition is high, buyers have higher powers, suppliers have higher powers, the degree of substitution is high as well as there are low threats for new entrants. However, it is found that Delifrance has the potential to overcome all these challenges due to their higher level of creativity and innovation as well as the priority for quality and customer satisfaction. It can, therefore, be concluded that Japan is a better market for foreign direct investments and Delifrance is most likely to perform better in the new market.
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Doke, L., Hatton, E., & Smortfitt, R. (2014). Entrepreneurship. Cape Town, South Africa: Pearson.
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Michaux, S., Cadiat, A.-C., & Probert, C. (2015). Porter’s five forces: Stay ahead of the
competition. Place of publication not identified: 50Minutes.
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