Free «Expansion Considerations» Essay Paper
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The presented paper aims to analyze the key factors regarding the expansion strategy of the AutoEdge Company, discuss its advantages and disadvantages, and provide the recommendations as to what decision should be made in this situation.
The Factors for Consideration
Having reflected on the current situation of the AutoEdge, one can outline the five important factors that should be considered before the expansion.
First of all, the company has a well-established brand that is known not only in the USA, but also all over the world. It has a community of the followers, which are extremely loyal to the company even during the economic turmoil, among other hardships. They are ready to purchase the products of AutoEdge at price that is more than reasonable. In addition, the company has already established the affiliate in South Korea, and can move from that point further on the Asian part. At the same time, as it is noted, the reputation of the company has been damaged due to the launching of the defected production.
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The third factor, apart from the brand and reputation, refers to the successful pilot extension that has been made in South Korea. Of course, the country reminds the Western world at the moment, and it is rather easy to run a business there. Yet, the majority of the Asian countries are in the process of modernization, and, therefore, the demand for the automobiles and their suppliers is significant. Additionally, due to the fact that the Asian part of the world is becoming more similar to the Western one in terms of technology and infrastructure, it seems to be a heaven to investin, expecting the long-lasting dividends coming in the future. The investing climate in this region has also been proved to be rather favorable at the moment.
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Fourthly, as has been stated, the modernization of Asian region creates a huge demand for the automobiles and automobile suppliers. Of course, in case of expansion the company would have to struggle and compete with the regional leaders, coming mainly from Japan. However, the international importance of Japan is less influential than the one of the USA. Additionally, for some Asian states it would be more ethically and culturally acceptable to deal with the American automobile manufacturer than with the Japanese one due to the historical implications. From the other perspective, the increasing unemployment in the USA forces the companies to go global as the buying ability of the American citizens slowly deteriorates.
Finally, the competition in the USA is as intense as never before, and, therefore, it is high time for the US companies to either outsource or choose the global strategy and concentrate on the developing markets in order to stay afloat. The financial crisis that is nowadays in regression also facilitates such decision-making.
The Advantages of the Extension Strategy
Many surveys state that the exporting companies can achieve significant levels of growth in international markets, which not possible in domestic ones. Thus, the company’s overseas portfolio, carefully managed and implemented, might generate a profit that is vital for the survival and continuation of the business. Moreover, the business case studies show that overseas trade positively affects the financial performance of the company and augments the returns of investments made. The international markets offer the platform for selling even those goods that have become unpopular in the domestic markets.
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Furthermore, the expansion strategy might protect the company from the global challenges such as the earthquakes, financial meltdown, civil unrests, etc. In case they occur in one country where the company has located all its affiliates, the reputation of such company and the price of its stakes would deteriorate due to the external factors. In case there are many affiliates all over the world, the company is in fact protected against the disruptions that may happen in one particular country.
The new market might also offer new insights for the business owners that could also be then attracted. The new customers in the new region set new standards and trends. It forces the business owner to reconsider the product line or marketing strategy. All in all, there are many benefits of the international trade.
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The Cons and Risks of the Extension Strategy
The risks and disadvantages associated with the global strategy should also be considered in case of AutoEdge. If the company chooses to expand its activities to the Asian region, the key risk here is the possibility of political unrests. The region has not stabilized yet, and there are many huge countries that might dissolve it in the future and impose certain challenges for the company. Secondly, the exchange rate might also impose a potential risk for the companies that choose the emerging markets for expansion. The exchange rates in these countries are not always able to forecast. Such a disadvantage might lead to the situation when the business would become less competitive overnight. The risks associated with the credit and non-payment should be considered as well. The cultural risks and possible resistance, as well as conflicts, might also either facilitate or impede the capture of the overseas markets.
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Considering all of the above-mentioned, it should be stressed that despite the risks and disadvantages associated with the expansion, the company obviously has no other way out. The American automobile market is in stagnation, and the buying ability of the American citizens has fallen due to the high unemployment rates and crisis.