Towards Internationalization forElecdyneModule Code: ER3S72Lecturer Name: M J Davidson Student ID: 10005838 Words: 2293

University of South Wales 10005838

1. Introduction

The Elecdyne is a SME for electronic products in Japan

that has been created in 1990. Due to many external and

internal reasons, the sales of Elecdyne have not

increased over the past two years. Such as low market

share (only Japanese), high salary and cost of licences.

Limited market share limits the development of Elecdyne.

The employee benefits is at an entirely disadvantage and

thus lose talented staff with other Japanese

multinationals. On the other hand, there is no new

technical support that is only pay high licences fee to

maintain production. Therefore, the executives of

Elecdyne prepare to set up an international strategy, in

order to solve the current predicament. The objectives of

strategy include reducing cost of wages, to occupy more

market share and technology innovation that around three

different potential countries are the USA, China and

France. This report shows that briefly explain and

justify analytical actual situation of Elecdyne and the

trends of international environment could impacted for

the company. SWOT and PESTEL are necessary to use.

2. International environment

In 2008, the economy of world is facing severe

challenges, in which the economic slowdown has been an

indisputable fact (BBC 2009). The international financial

crisis has caused great harm on economic of the USA and

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other developed. It is able to gradually spread to many

emerging economies. Affected by the financial crisis, it

decreased demand of consumer in the USA and the EU

countries. Furthermore, it has negative affected the

electronic products and the consumer spending has dropped

significantly (Steve 2002, 172). Even if the global

economy is continues to recover. However, the electronics

products are increasingly important in daily life (Ashish

2006). The STEEP table will be used to analyze and

predict the impact of global trends for Elecdyne in next

five years.

Social

In order to reduction labor costs shift

production to lower cost countries, which

means fewer people employed in Japan.

Modern society is very dependent on

electronics. But also it has a negative

impact on society. For example, the mobile

phone makes it easier to communicate, but

if people improper use of the phone

(calling while driving) may increase the

risk of accidents.

Computing and other electronics products

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are significantly for consumers spending

(Ashish 2006).

Social media occupied increasingly

investment for the ad spending. Such as,

Facebook and Twitter (eMarketer 2013).

Electronic product design and engineering

is a significant subject of majority famous

universities in Japan. The students also

aspire to become an outstanding electronics

information engineer (Pradymna 2010).

Technologi

cal

Technology advances led to greater

development of electronic products

industry.

There is a solid infrastructure advantage

of Japanese electronics industry (Office of

Technology Assessment 1985).

Economic

According to IMF forecasts (Massimiliano et

al 2008) that the world’s economic growth

rate will drop to 3.7% in 2008 and decline

further to 2.2% in 2009.

Consumer Electronics Association expects

(2009) that global sales of consumer

electronics will reach 2.5 billion units in

2009.

The costs of wages annual growth in Japan.Environmen

tal

The electronic materials contain harmful

substances and elements. That even using

the correct solution which pollution of the

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environment is an unalterable fact. Such

as, recycling, incineration and landfill

(Menad et al 1998).Political The Japanese government issued favorable

policy for electronic industry (Peter &

Luke 1999).Table 1 STEEP analysis

3. Trends

The known fact was proposed that there is a financial

crisis of globalization occurrence 2008. This crisis

caused a profound impact of each industry. However,

simultaneously, it also brings opportunities and

challenges for businesses. In accordance with the concept

of “creative destruction” by Joseph (2010) suggested that

the transition process accompanied by a radical of

innovation. By supporting information technology makes

communication more widely around the world that cause as

the emerging markets have leaps and bounds rising. Thus

diversified globalization business and partnerships

become possible. Therefore, opening global market is

beneficial for SMEs. On the other hand, the rise of

female entrepreneurs let more challenging for market

competition. Moreover, the SMEs occupy 99.7% of all

enterprises that similar data in majority of the

developed countries (European Commission 2012). It means

SMEs play an important role in economic and innovation.

4. Analysis

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Two aspects of decision of Elecdyne will analyze in

this part that include internal and external analysis.

This will also directly affect the selected country by

Elecdyne. China, France and the U.S. as three potential

markets are primary consideration. Compare and contrast

the three countries detailed data depend on PEST

strategic analysis in which is key factor in order to

further analysis of external factors. There is a score

from -10 to 10 to review the level of each factor to

compare to Japan that potential market will choice. The

evaluation criterion is from a negative -10 to positive

10. Moreover, the significantly strategic SWOT framework

methods will be used in the assessment and analysis

Elecdyne. This is internal analysis for Elecdyne where

include strengths and weaknesses. Due to the

opportunities and threats for Elecdyne could only come

from outside, these both are external analysis.

Table 2 shows that the internal factors part of SWOT

methods are strengths and weaknesses of Elecdyne.

However, opportunities and threats factors will show in

external analysis with PEST framework.

Strengths Weaknesses Low cost of production

Brand image in home

location

Management experiences

Poor R&D

Low market share

Years of losses

No technical support

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Foundation of multilingual

Diversified product range

Obsolete products

Poor decision making

No experiences for

internationalTable 2 Strengths and Weaknesses of Elecdyne

Table 3 illustrates that base on PEST framework

analyze the most reliable potential investment direction

to compare and contrast China, France, the U. S. and

Japan. Simultaneously, Elecdyne will face the

opportunities and threats. There are external factors.Category of

factors

Factors Japan China France U. S.

Political

War risk 2 3 (-1) 1 (1) 1 (1)Political risk

short term

1 1 (0) 1 (0) 1 (0)

Political risk

medium/long term

1 2 (-1) 1 (0) 1 (0)

Risk of

expropriation

and government

action

1 4 (-4) 1 (0) 1 (0)

Corporation Tax

rate (%)

25.5 25 (1) 33.33 (-3) 35 (-4)

Power distance 54 80 (-4) 68 (-2) 40 (2)

Economic

GDP growth rate

in 2011 (%)

-0.7 9.2 (10) 1.7 (2) 1.7 (2)

Industrial

production

growth rate (%)

2011

-3.5 13.9 (10) 4.1 (4) 4.1 (4)

Unemployment

rates (%) in

2011

4.6 6.5 (-4) 9.3 (-10) 9 (-9)

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Inflation rate

in 2014 (%)

1.5 2.5 (-6) 0.7 (5) 1. 2 (2)

Min Cost of

Labor (USD) per

hour

8.32 1.19 (10) 12.22 (-5) 7.25 (1)

Investment (%)

2011

20.9% 54.2% (10) 19.8% (1) 12.4% (-4)

Special

Transactions

1 1 (0) 1 (0) 1 (0)

GDP purchasing

power Billion

USD in 2011

4,497 11,440 (9) 2,246 (-5) 15,290

(10)

Commercial Risk

(A to C)

B C (-5) B (0) A (5)

Social

Adult prevalence

rate -

HIV/AIDS (%)

0.1 0.1 (0) 0.4 (-3) 0.6 (-5)

Population

growth (%)

-0.08 0.48 (5) 0.5 (5) 0.9 (9)

Literacy rate

(%) in 2008

99 92.2 (-1) 99 (0) 99 (0)

Age distribution

0-14 years rate

(%) 2009

13.5 12 (-1) 18.7 (3) 20.6 (5)

15-64 years rate

(%)

64.3 81 (3) 63.4 (0) 67 (1)

65 years and

over rate (%)

22.2 7 (7) 17.9 (2) 12.4 (4)

Individualism 46 20 (-6) 71 (5) 91 (9)

Uncertainty

avoidance

92 30 (7) 86 (1) 46 (5)

Technological

Internet users

in 2009

99,182,000 389,000,000

(10)

44,625,000

(-2)

245,000,00

0 (6)R&D as % of GDP

(2009)

3.36 1.98 (-4) 2.08 (-3) 2.67 (-2)

Table 3 PEST framework for potential market

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According to table 3’s data, the scores of each

country will be presented obviously. There is a valid

data in which total score will affect the choice of a

potential market. Each factor is consisting of a standard

evaluation below.

Category

of factors

Japan China France U. S.

Political 0 -9 -4 -1Economic 0 34 -8 11Social 0 14 13 28

Technologi

cal

0 6 -5 4

Total

score

0 45 -4 42

Table 4 summary of total score

Overall, the PEST framework has identified the

assessment of external factors that apparently selection

of Elecdyne of the best potential new market is China.

Due to the total score of PEST are 57 for China. As a

socialist country, Chinese government has a significantly

powerful capacity of macro-control in the market (Gaoli

2013). Compared to France, Japan and the U. S., Chinese

political factor is a disadvantage of SMEs to develop new

market. However, since the opening-up policy, the

favorable policies accordingly are still valid for the

foreign investment (ChinaDaily 2013). This is undoubtedly

a good opportunity for the distress Elecdyne. For

example, the foreign companies were easier to obtain

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cheaper rent or low-interest loans in which is crucial in

the development of early for new business. On the other

hand, what a kind of ‘unfair’ attitude from the

government makes a very unfavorable for local enterprises

(ITC 2007) cause as more fierce competition and more

difficult communicate with local companies. There is a

potential threat to Elecdyne, if the company cannot

properly handle the relationship with local. Secondly, in

the part of economic factors, economic growth is apparent

in China. Whether the rate of GDP growth or purchasing

power both are significant in the world. Moreover, the

low labor costs will make facing financial issues of

Elecdyne solved. However, currency exchange makes

Elecdyne to ushered in new challenges. Due to the impact

of international trade and political issues that

equivalent JPY convert to CNY less than in previous

years. According to X-rate (2014) statistics that 1,000

JPY equivalent of 70 CNY on 10 January 2013 fell down to

1,000 JPY exchange only 57.92 CNY on 7 January 2014.

Definitely, there is a huge threat for Elecdyne who focus

on internationalization. Finally, China is a huge

population base country and rate of population growth. It

means the potential market share will be infinite.

Prospects for the Chinese market is substantial that

compared to the limited market share in Japan for

Elecdyne. Relatively, as a new brand in China, Elecdyne

not only has to face fierce competition with domestic

counterparts, but it also has to re-establish their brand

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loyalty. Luck is the development of increasingly

sophisticated of social media and the huge base of

Internet users in China. If Elecdyne can grasp the

opportunities to utilize, it will make Elecdyne foothold

in the new environment. In addition, base on score on

Hofstede’s model shows that individualism in China is the

lowest between these four countries in which China is a

highly collectivist culture. If company is not handled

properly for internal relationships cause as

comparatively serious threat.

5. Choice Strategy

In summary, in the light of Table 3 and 4, through the

assessment of score on PEST framework has determined

China is to select the best potential market for

Elecdyne. The senior of Elecdyne will be further faced

with a choice for business strategy. Such as, Joint

ventures, Greenfield sites, Acquisitions and import

trade. The following as Table 5 shows that the strengths

and weaknesses for each strategy.

Strategies Strengths Weaknesses

Joint ventures

Share the investment

risk

Weakening the influence

of cultural differences

Favorable policy

Technology and resource

Not necessarily the

same for business

objectives and

concept

Not necessarily

consistent for

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sharing business decisions

and methods of

management

Coordination

difficulties of

interpersonal

relationshipsGreenfield

sites

Cheap local labor

Reduce costs of

transportation

Avoiding high custom

tax

No brand loyalty

Larger funds for

investment

Low research of the

new marketAcquisitions To overcome the

barriers to entry into

new markets

Available to use all

the resources of the

original enterprise

Financial

consequences

High cost

Too much focus

Import trade Very close spacing

Low risk

Differences of

regulatory

Differences of

cultural

Long term cycles and

low return

Custom taxTable 5 the advantage and disadvantage of strategies

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Therefore, Table 5 shows that several different

business strategies were selected by Elecdyne through to

analyze both factors of strengths and weaknesses. The

most appropriate strategy is Joint venture for Elecdyne

in China currently. There are three reasons to

illustrate. Firstly, as SMEs, the employees’ welfare of

Elecdyne system cannot be comparable with other giants in

Japan that it also led directly to the massive loss of

employees. According to previously data on Table 3 shows

that the minimum wage of Japan and China are respectively

8.32 and 1.19 USD per hour. If Elecdyne joint venture

with other Chinese enterprise, which will save a lot of

labor costs. Secondly, obviously, China’s electronics

industry has a full of potential in emerging markets.

Joint venture is not only to let Elecdyne bear the

investment risk with partners, which but it also can more

easily enter new markets. Finally, technology and

resource sharing can ensure the jointly developed

technical to support.

6. Conclusion

In conclusion, this report tried to analyze and

determine the best selection of potential market in three

different countries for Elecdyne, in order to it bail out

currently facing. Towards internationalization of

Elecdyne is significantly necessary. The joint ventures

of strategy selection is the most appropriate to enter

the Chinese market. In addition, the analyzing is divided

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into external and internal analysis respectively to use

the PESTE and SWOT module.

The trends of development SMEs are

internationalization in the future. Intensifying market

competition requires enterprises to conduct a

comprehensive analysis of diversification factors. Making

decision is an increasingly significant.

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