What would have been an alternative entry strategy for the Japanese market?
There are several ways and possibilities of establishing a successful market through the incorporation of different market entry strategies, writes Druehl (2008). For Honeyland, other than the techniques it applied to tap the current Japanese market, the manager, Sue, could also have tried joint venture as an alternate entry strategy.A joint venture involves the presence of two companies. One is the exporting company, such as Honeyland, while the other is a domestic company in the country that hosts the targeted consumer base, such as a company in Japan. Both Honeyland and the chosen Japanese company could provide the necessary capital and other resources towards the establishment of the joint venture. Consequently, they could also share in management, as well as in profits and losses.
This entry strategy could be an advantage for Honeyland in terms of quicker market penetration in Japan, writes Norris (2011). A joint venture not only widens the market but also gives direct access to the consumers who are the decision makers. Another example is that it helps in building credibility. A joint venture with a bigger and known company would make the reputation of a small company like Honey land to grow. This would result to increase in production scales leading to ecomomies of large scale production in the long-run for Honeyland. Another advantage of a joint venture is that the venture capital could be used for technological expansion. Advancement in production technology also increases the production scales and reduces the production cost, writes Fea (2009). This produces a bigger margin to cover for the exportation logistics.
Should Honeyland expand or diversify?
Business expansion refers to the strategy in which the growth of a business happens through the increase of the number of stores from which consumers can buy the company’s products or receive its services, wrote Nye (2009). In the case of Honeyland, since it operates in export business only, expansion would imply the establishment of other chain stores from which the customers buy the products.
On the other hand, business diversification reflects on a company’s developmental strategies that aim at allowing a company to indulge in additional lines of business that are in a way different from its current products, services and markets, notes Kurach (2012). For Honeyland, this could involve the establishment of more and different honey products to sell in their already established market.
The best strategy for Honeyland is to diversify. This is because in so doing Honeyland will experience no more extra charges in developing new market places and targeting new consumer bases. In addition, diversification will mean the incorporation of more honey products in the same outlets that are currently selling the products from Honeyland. The same logistics will be used thus the principle of parallel importation will apply. The new products move alongside the old products. In diversification, the number of products will be many. Consequently, there will be a relatively bigger number of products to export. As a result, Honeyland will enjoy the economies of scale associated with bulk transportation. Furthermore, since Honeyland already has an export license, diversification of export products will not involve extra expenses in terms of export duties. Lastly, since Honeyland is a small family owned company, the best way for it to expand is by first establishing a wide variety of products that it can sell to its customers once it expands, explains Haque & Hassan (2001). Therefore, the very best alternative at present is diversification, as noted by Clarke (2011).
- Clarke, J. (2011, December 12). Diversity is Key for Business Expansion in Asia. Retrieved May 28, 2013, from Global Telecoms Business: http://www.globaltelecomsbusiness.com/article/2947918/Diversity-is-key-for-business-expansion-in-Asia.html
- Druehl, C. T. (2008). A Strategy for Opening a New Market and Encroaching on the Lower End of the Existing Market. Production and Operations Management , 44-60.
- Fea, C. (2009, February 18). How To Increase Your Wealth Through Joint Venture Partnership Deals. Retrieved May 30, 2013, from CristianFea.com: http://www.christianfea.com/4-powerful-joint-venture-advantages.html
- Haque, M., & Hassan, M. K. (2001). Diversification as a Corporate Strategy for a Family-controlled Business Group in a Frontier Market. The Journal of Social, Political, and Economic Studies , 719-758.
- Kurach, R. (2012). Stocks, Commodities and Business Cycle Fluctuations – Seeking the Diversification Benefits. Equilibrium , 101-116.
- Norris, J. T. (2011). China Foreign Direct Investment: Greenfield, Mergers & Acquisition, Or Joint-Venture. The International Business & Economics Research Journal , 51-61.
- Nye, K. (2009). Yarn Retailer Unravels After Business Expansion. The RMA Journal , 48-52.