INT. BUSINESS ENVIRONMENT PAPER

Expansion to New Markets

Name

Professor’s name

University Affiliation

Date

Description of company and industry

The business that will be discussed is Alamo which engages in the business of renting cars. The car leasing industry has been developing at a fast rate as revenues had increased significantly from $23 billion in 2013 to about $35 in 2015. The United States of America represent half of the total revenues from the industry whereas Europe follows in the second position. Alamo Company has expanded its leasing business through the buying of the brand new cars and later on selling them to the public as second-hand vehicles. Alamo recently entered the daily rental enterprise as well as the truck rental businesses and now has several business units which are differentiated to do business (Johanson and Mattsson, 2015).

I would like Alamo to expand to the country China and specifically the city of Hong Kong. This is because the country has been growing internationally as a crucial business hub to the world in innovativeness in business and technology. The car industry is highly integrated with the help of banks who may help buy the cars and later sell them. The need for rental services is high in this China because fewer people buy cars due to the high cost of fuel and parking spaces. Universities will boost the rental business making it easy to execute the business plans, and strategic plans and hence the invested capital will trickle in no time (Johanson and Mattsson, 2015).

Vital institutional constraints that must be considered

Environmental concerns and political uncertainties are the two critical institutional constraints that should be discussed. Political risks in the government come up when the democratic stability of a country is divided. Also, the government can also impose strict regulations on businesses that operate in China or even invest in Chinese markets. Lack of interaction between Alamo and the government will bring in unhealthy relations causing the company not to run smoothly. By following all the regulations of the state and paying taxes on time, the government will be put at ease (Bendato et al., 2015).

In the business operation section, China is full of corrupt officials who take advantage of their positions to loot money from innocent business owners. The Chinese government has to incorporate a modern culture which looks after the welfare of the car leasing industry. Localization of business can be avoided through mergers with abroad companies or through acquisition. Through this, every organization that is interested in the Chinese market will have a fighting chance for it (Bendato et al., 2015).

VRIO (Value, Rarity, Imitability, Organization) analysis The proposed value of Alamo’s model will incorporate a catchy and advertising tagline that will be used to attract customers. The slogan can, for example, be "why worry while you have us." Considering China's Hong Kong does not have an established car leasing services, the value will be created in the domain of offering services (Johanson and Mattsson, 2015). The value will be proposed and generated around university apartments and airports where parking spaces are not required. Rarity comes up in the loyalty programs that Alamo will include in its strategic plan. For example, through an online booking and reservation system, customers will be able to choose the vehicles that they prefer. This saves a lot of client time. Through having a wide range of cars, customers will be able to choose their comfort, color, and space to go with (Bendato et al., 2015). The level of imitability is low because technology is always changing and different ways to approach customers are introduced. Hong Kong being a technology will provide technicians to Alamo to help it become the top of the market in efficiency, reliability, and secure payments. By using a matrix system of coordination, all the departments involved in the leasing business will have a clear set of goals that will have to be achieved.

Cultural and political aspects of the international business environment

Chinese culture is made up of different groups of people from all over the world. In Hong Kong marginally, the Chinese population interacts with Asian and European individuals who are essential in knowing how businesses operate from around the world. The vehicle is a sign of status and not a necessity as the public system of transport is well developed. To be a top performer in the market, Alamo should executively treat its clients. Local people can be utilized as employees because they can easily understand the Chinese language without trouble. Since China is a sensitive country with different cultures, the Alamo should ensure that there is no discrimination against people regarding their beliefs (Ng, 2014).

The political aspect of the international business environment has little effect on the performance of a new car leasing business. This is because China has its business laws and rules that have to be accepted by any individual or organization operating in the country. The only problem that may arise is when the Chinese government decides to be harsh on external firms that are operating in their market. Making policies for example to restrict entry of new companies into the market or to be against the funding of leasing enterprises by outer banks (Johanson and Mattsson, 2015).

Determine the option (joint venture) that you believe the company should pursue

The choice of a Joint venture with Avis Company should be continued to enter the Chinese market. The car lease market in Asia provides eight percent of the revenue in comparison to the global revenue. Joint ventures between different entrepreneurs will improve the success levels of the company (Ng, 2014). This will, however, be up to the time Alamo will be able to segment its market and divide it according to professionalism, wealthy class, students, and tourists. By knowing how the market is segmented, they will be able to see its level of market share today and in the future while considering how satisfying and comfortable our cars were. Because Hong Kong is a financial hub and the business leaders often meet here, they can spend for an excellent car service and tell their friends about it. Looking at the tourism reports in China, it is observed that most of the tourists are Americans. To use this to strengthen our joint venture, American tourists will be given a chance to recommend the cars they want to lease (Hilmersson and Jansson, 2013).

By jointly operating Alamo will adopt strategies that have proven successful in the past. For example, employing local talent will make it easy for sales to hit a record high in a few months. This is because they understand the unique character and needs of the Chinese people and hence they will provide plans to build more renting shops across positions that will give a profit.

Determine three significant difficulties that may occur

The three fundamental challenges that may arise if Alamo goes into a joint venture with Avis will be; Cultural disconnect where most of the Chinese companies are out to protect their business from the external influence by enterprises in the US as seen in many of the country's domains. Due to the difference in culture between the two companies, it will be hard to strike an accord and convince each other that profits will be made from the venture. In conducting transactions, Alamo will find it hard to follow up due to the local dialect problem (Johanson and Mattsson, 2015).

Intellectual expertise and technology- The technical gadgets and software’s used by Alamo are hi-tech and hence they are given a competitive edge over their competitors. There are fears of infringement as Avis may use the database management systems, recording system to track feedback, and analyzing relationship management systems without prior knowledge of Alamo leading to cases of mistrust. Infringement of the two company’s resources due to lack of clearly defined rule will be an issue (Hilmersson and Jansson, 2013).

Finally, training in the car leasing industry in Avis has not been structured well to the level that the Chinese demands. This makes Avis company employ substandard employees who in the long run provide inferior services and help to their clients. Alamo, on the other hand, has an advanced system of training its employees hence placing it among the best companies in the United States (Hilmersson and Jansson, 2013). This ensures that quality and first-class services are provided. The inadequate training and expertise by Avis employees will directly impact the performance and reputation of Alamo enterprise. The difference in status will drag Alamo down as it tries to compete with other car leasing companies in the market.

To avoid circumstances of confrontation between the two types of employees, an educative program should be developed to ensure that the two types of employees are at the same level. The relationship between the two companies should be set straight and agreed on. Through setting boundaries concerning proprietary things, confrontations that come from using each other’s sensitive software and property will be gradually reduced. Team working fun activities should be developed to ensure that a bond is created between employees. Through this, American and Chinese people will integrate and help and work together to achieve their objective of becoming the leading car leasing company in Asia and beyond (Hilmersson and Jansson, 2013).

In conclusion, it will be a wise move for Alamo to expand its markets and move to the Chinese market. The Chinese market is vastly growing hence providing opportunities for Alamo to establish itself as a global car rental company. It, however, has to understand how the Chinese market works. This will be achieved by forming joint ventures with Chinese firms.

References

Bendato, I., Cassettari, L., Mosca, M., Mosca, R., & Rolando, F. (2015). New markets forecast and dynamic production redesign through stochastic simulation. International Journal of Simulation Modelling, 14(3), 485-498.

Hilmersson, M., & Jansson, H. (2013, May). Reducing uncertainty in the emerging market entry process: on the relationship between international experiential knowledge, institutional distance, and uncertainty. American Marketing Association.

Johanson, J., & Mattsson, L. G. (2015). Internationalisation in industrial systems—a network approach. In Knowledge, Networks, and Power (pp. 111-132). Palgrave Macmillan UK.

Ng, I. C. (2014). Creating new markets in the digital economy. Cambridge University Press.