Order 818901: Qualitative research evaluation
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HOMEFURNITUREINC..pptxHome Furniture INC.
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Company overview
Home Furniture Inc. is a US furniture company that focuses in a wide range of well-designed and ready to assemble furniture. The company has been in operation for the last 30 years. It is headquartered in Washington DC. Home Furniture Inc. has utilized its effective management and innovation to excel in the local company. Management feel that the company should now take advantage of globalization to increase its market share and profitability.
Home Furniture Inc. has more than 70 wholly owned stores in the US. It also operates 3 franchisee under international brands.
Home Furniture Inc. has focused on the local market since it was incorporate. The company started by selling small home accessories and trinket products in the US. However, in the last 15 years, the company has been able to design its own high quality furniture products.
Company overview
This has enabled the company to increase its business operations and revenues. In fact, it has become one of the most recognized brand names in the US. In January 2018, management committee decided that it is the right time for the company go international. After a critical evaluation of the furniture industry, Home Furniture Inc. decided to venture into Indian market(White, Hemphill, Joplin & Marsh, 2014).
Most of Home Furniture stores are wholly owned. The company has employed this strategy over the last 20 years to expand its operations in all the states across the US. This strategy has proved successful which explains why the firm intend to enter the Indian market as a wholly owned subsidiary.
Home Furniture has eyed the Indian market over the last five years but failed to go international due to lack of proper market research and lack of adequate capital. Since the company has done proper research and there is enough capital to venture into Indian market, management have agreed to invest 600 million to create a wholly owned subsidiary.
Rational for entering Indian market
India was the most appropriate country to enter since most countries in fast growing economies have well established furniture companies. Most importantly, this countries import their furniture from china. The mistrust between china and India has made it almost impossible for Indians to imports goods from china. This has left the Indian market with few local players who lack the technology and technical knowhow to manufacture high quality furniture.
Home Furniture has been decided to go international in order to intensify its business operations. Management noted that the slowing market demand in the US can only be reduced by going international. This strategy will also increase revenues and diversify risk in multiple ways.
Since the local companies have a low production cost, Home Furniture will focus on its ability to achieve economy of scale. This strategic capability together with its high tech knowledge in furniture manufacturing will enable the firm to succeed in India.
Market entry strategy: wholly owned subsidiary
The most effective market entry strategy is wholly owned subsidiary.
Home Furniture will enter the Indian market as a wholly owned subsidiary. Home Furniture has established Zuari a local furniture company which will be acquired 100 percent of its stock in order to promote its products.
The main reason why wholly owned subsidiary has been considered as the most effective strategy is because it allows for operational control and smooth entry into the new market (Meschi, Phan & Wassmer, 2016).
It will make it easier for Home Furniture to penetrate the market since the local company has already established itself in the market.
According to Meyer and Su (2015) a wholly owned subsidiary ensures the parent company has maintained control over its core competences. This will allow Home Furniture to have control over its operations practice such as decision making, marketing strategy and logistics. Finally, Home Furniture will enjoy full profit for its hard work and will enjoy control over every operation.
Environment of operation
India has a well established furniture market. However, the market is largely controlled by local players.
This players lacks the innovation and technology required to manufacture high end furniture.
The key success factor that will ensure Home Furniture has effectively penetrated the Indian market is ability to achieve economy of scale. This is because local players have low administration and production cost (Tasavori Ghauri & Zaefarian, 2016).
In order to reduce its operational cost, the best strategy is to focus on achieving economy of scale. Secondly, Home Furniture will also focus on differentiating its brand name. This will be achieved by manufacturing high quality furniture for the low, medium and upper class. The main objective is to target all customers irrespective of their social class.
Cultural profile
Understanding the cultural profile of Indian is one of the key determinant of whether Home Furniture will succeed in the Indian market. The Indian culture is different from western culture because they prefer traditional home decorations.
This means that consumers are more likely to reject western designed furniture since they are used to traditional designed that suite their culture. Since Home Furniture will enter through a joint venture, its success rate is high since the local company understands the cultural designs that suit is customers.
Since Home Furniture will enter the Indian market as a wholly owned subsidiary, management expect the local community to support and buy its products.
Moreover, the ability of the firm to manufacture furniture for all social class will make it acceptable to everyone. However, local distributors will view the entry as a way of increasing competition. Therefore, Home Furniture expects local distributors and firm to increase competition by reducing prices.
Organizational chart
This simple organizational chart was the most appropriate because this is the first wholly owned subsidiary in a foreign nation. The main objective is to make ensure everyone in the organization understand its operation.
The division product will be headed by a middle level manager who will oversee the overall operations of the firm. He will also report directly to the CEO. Each department will be headed by a departmental head who will report directly to the divisional manager.
Decision making will also be easy since the top managers will communicate their policies and strategy to the divisional managers before passing it to departmental heads.
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Staffing policy
The best staffing policy for top management will be ethnocentric policy. This is a strategy whereby the top level managers are employed from the head office instead of employing local staff.
There are several reasons why the Home Furniture has opted to use this strategy in India. First, it will acquire 100 percent of its subsidiary therefore there is no one to objective this management strategy.
Secondly, ethnocentric policy will allow the head office to transfer its culture and foreign operations smoothly into the subsidiary. It is easier to transfer expatriates and knowledge to the subsidiary without risking loosing critical competitive advantage information.
Lastly, this strategy will ensure effective communication between the head office and subsidiary.
Leadership and motivational system
Home Furniture will employ democratic leadership. In democratic leadership, members of the groups/departments are encouraged to discuss and give their opinion (Certo, 2015).
This strategy will be the most effectively especially in a country with a completely different cultural beliefs. The main reason for employing this strategy is to ensure medium level managers (Indians) give their opinion and experience in the local market.
Since top managers come from head office, they do not understand Indian market situation. However, through participative leadership, they will gain more understanding about the market and customer buying behavior.
Leadership and motivational system
Democratic leadership achieves two goes at the same time. First, it help top managers to understand the Indian market through participation of employees and mid-level managers. Secondly, it motivate employees because they feel that they opinions matter the organization.
In order to motivate employees, employees are given an opportunity to oversee some of their proposals if it is in the best interest of the company. During the first five years, the company will tend to balance between flat and democratic leadership to motivate and understand the new market and its customers.
A flat management style is effective in motivate employees since they feel they are part of the organization and they opinions matters to top level managers. It also give local employees (Indians) a chance to interact with their western counterpart. This interaction is aimed at creating trust which is essential in motivating employees.
Communication problems face by managers
The major communication challenges facing the company include the following:
Direct vs. indirect communication
Accents and fluency
Wrong attitude toward hierarchy and authority
The major challenge that is likely to affect Home Furniture’s subsidiary managers in India is use of direct and indirect communication.
Western managers use direct communication in the workplace which might create confusion in India. This challenge is likely to manifest itself during face to face conversation especially when communication is virtual.
In the western world, employee give a direct answer based on how they understand a situation. However, in India, employees are more likely to response by giving suggesting without stating it directly. Home Furniture know this problem might exist during operations. Consequently, top managers heading the subsidiary will undergo training how to handle communication in the workplace.
Secondly, managers will face challenge when communicating due to difference in accents and fluency. Most western managers can speak English fluently in an American accent.
This is likely to be challenging for Indians who are non-English speakers. If this challenge is not solved, employee will feel unnoticed and unappreciated since they have difficulties expressing what they think and feel. This problem can sometime cause interpersonal conflict and discourage employee engagement. This challenge will be solved by the upper and medium managers who come from India
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Communication problems
Hierarchy and difference in attitude toward authority will affect communication in the subsidiary. Indians treat employees on different ranks differently.
In India, most organizational have a flat hierarchical structure where they work together as a team. However, in the western world, an employee has to present their ideas to middle level managers before reaching to the CEO. This challenge will be solve by diversity training in the workplace especially for western managers.
The major concern of the local community is loss of employment after acquisition. In order to solve this problem, Home Furniture will retain existing employees apart from top executives. Moreover, the firm will also obtain 30% of its raw material from the local community. In fact, 70% of employee will be recruited from within the surrounding communities. The main aim is to increase community support and to build a strong brand image.
references
Certo, S. (2015). Supervision: Concepts and skill-building. McGraw-Hill Higher Education.
Meschi, P. X., Phan, T. T., & Wassmer, U. (2016). Transactional and institutional alignment of entry modes in transition economies. A survival analysis of joint ventures and wholly owned subsidiaries in Vietnam. International Business Review, 25(4), 946-959.
Meyer, K. E., & Su, Y. S. (2015). Integration and responsiveness in subsidiaries in emerging economies. Journal of World Business, 50(1), 149-158.
Tasavori, M., Ghauri, P. N., & Zaefarian, R. (2016). Entering the base of the pyramid market in India: A corporate social entrepreneurship perspective. International Marketing Review, 33(4), 555-579.
White III, G. O., Hemphill, T. A., Joplin, J. R., & Marsh, L. A. (2014). Wholly owned foreign subsidiary relation-based strategies in volatile environments. International Business Review, 23(1), 303-312.
