report about international business
Tuleenhb
IB2.docxRunning Head: INTERNATIONAL OPPORTUNITY PLANNING REPORT 1
INTERNATIONAL OPPORTUNITY PLANNING REPORT 2
International Opportunity Planning Report
Student’s Name:
Course Number:
Course Title:
Professor’s Name:
Date:
Write Table of content
Executive Summary
This report will focus on the opportunity Subaru-producing company has in the international car market. Subaru, a Japanese automobile manufacturing firm, has experienced significant success in terms of increased car sales over the last decade. The company has a huge opportunity to achieve more success in the competitive automobile industry through establishment of various appropriate strategies that will ultimately lead to increased revenues and profits for the company. In particular, although the company has been exporting its cars to United States, the company has not achieved significant grip in the United States market. This report will therefore focus on the current status quo of Subaru in the United States automobile market, and what the company can do better in order to realize its desired success.
International Opportunity Planning Report
Company Background
The first Subaru car was produced in 1950 by the Fuji Heavy Industries Company. Subaru operates under the Japanese transportation conglomerate Subaru Corporation as an automobile manufacturing division. In 2012, Subaru was ranked the twenty-second largest automaker in the industry production worldwide. In the western markets, the Subaru brand has received significant popularity among a number of dedicated core customers. In particular, the company has specialized in producing cars with drive train engine, rough-road capabilities, as well as affordable sports cars. Over the years, the Subaru Company has established numerous ways of advertising and marketing its cars, an aspect that has attracted many customers especially the young individuals. Despite the significant success achieved, there is still great potential whereby the company can increase its returns – through going international, particularly in the United States (Zah, Hischier, Leão & Braun, 2007).
Target Country PEST Analysis
As pointed out earlier, United States proves to be a good target market for many companies who would like to internationalize their operations die to its high per capita income and more established economic status. The country has a large geographic regions and high population, which is a good opportunity for the Subaru-producing company to make enormous sales. Currently in United States, Subaru has introduced only seven car and crossover models. The company’s share in the market is a mere 2.3 percent of the total United States auto sales. The low market share has witnessed Toyota, which is also a Japanese automobile company; outsell Subaru’s sales through the sale of only Toyota Camry model alone (Sturgeon, Van Biesebroeck & Gereffi, 2008). This is a great challenge for Subaru to roll up their sleeves and storm the market for better revenue outcomes.
For the last four decades decade, Subaru has been largely a regional brand in United States, with its sales being vibrant in the Northeast and Northwest, and leaving its brand unknown in the other areas of the country. Other automobile competitor companies such as Hyundai and Kia have established broader product lines despite having arrived in the market two decades later than Subaru. However, in the small market that Subaru has established considerable grip, the company has raked up tremendous endorsements for its high quality and safe products than their competitors. This is indeed a good selling opportunity that the company needs to be fully conscious of and take full advantage of the same.
Political/Legal Analysis
United States arguably possesses the strongest democratic setup and an effective rule of law. In this regard, the country experiences tremendous economic and political influence in terms of making both national and global policies. The political status experienced in the United States has a direct effect on the profitability that any automobile firm makes from operating in the country’s land. As a matter of fact, the country favors imports of low emission vehicles due to their low fuel consumption rates. Since most of the Subaru cars are small-sized and thus consume less fuel, the company can take advantage of the opportunity that the government has no issue with cars that cause less environmental emissions (Shaheen & Cohen, 2013). As a matter of fact, the country provides government subsidy for the vehicles that emit less, and also the companies that produce such vehicles receive government support due to their low environmental impact.
It should be noted that the government has established strict rules and regulations that have influenced the revenues earned by many vehicle brands. Therefore, Subaru should be more proactive in embracing technologies that leads to fuel efficiency as this would enhance penetration into the United States automobile market. The import tax levies have varied overtime due to change in government regimes and regulations. However, the tax levies on luxurious vehicles has been set at the apex in United States. Therefore, Subaru should focus on the “normal” vehicles that would attract low tax levies (Shaheen & Cohen, 2013).
Economic Analysis
With a GDP exceeding $16.76 trillion, the United States is ranked as the largest economy in the globe. The economic system of the country is well established and many businesses have thrived in such favorable economic environment. The market for automobiles in United States has not been smooth. Recently, there have been numerous crises, notably the 2009 recession having the greatest impact in the industry. In such times of economic downfalls in the country, the sales of the automobiles have adversely decreased, and vice versa. The government has also imposed high tax levies on the highly priced cars, in addition to the decreased sales of the vehicles during bad economic times (Shaheen & Cohen, 2013).
However, with the developed markets in the United States, the country remains an ideal destination for the Subaru cars. The high population and the general economic stability experienced in the country would lead to significant revenues to the Subaru Company from operating in the country. Therefore, the large size of the United States economy would have a great impact on the profitability of Subaru Company in the market. With a high purchasing power from the customers in United States, Subaru will obviously make remarkable sales.
Social Analysis ( write here Hofstede’s and Trompenaar dimensions with a graph)
The United States automobile market is also influenced by social and cultural forces. This aspect has to do with the alterations in the trends and preferences among the people. Subaru-manufacturing company need to realize this fact and establish appropriate management strategies. In order to remain relevant in the market, the company should be more proactive in introducing new car models in the market thus keeping the people’s preferences in mind (Cheah, Evans, Bandivadekar & Heywood, 2008). Therefore, Subaru need to undertake a comprehensive social analysis so as to gain a true picture of the customer’s preferences. The idea is that with the high purchasing power of most of the target customers in United States, the responsibility is with the automobile company to produce the best cars that would attract masses in the market since the product meets much of the customer’s preferences.
Technological Analysis
Innovation and technology are most crucial factors determining the market share in the automobile industry. United States has been a real powerhouse in terms of innovations and technological advancements. The rule of the thump has it that the more innovative a form is, the higher the market-share the company gains (Fuentes, George & Holman, 2009). With a number of firms that engage in automobile business, the implication is that there are too many innovations in terms of producing cars that are fuel efficient and improved features that improve performance and ultimately customers’ experience. Having this fact in mind, Subaru should be ready to invest hugely in research and development so as to come up with competitive cars in the market. Much investment should be geared towards producing cars that are environmental friendly due to their low emissions (Cheah, Evans, Bandivadekar & Heywood, 2008).
Target Market Analysis ( write market size and structure, porter’s 5 forces, and competitive analysis)
In 2017, the sales of passenger cars hit record 77.7 million. With high economic growth levels, United States provides the largest market of the automobile industry not only in production but also in sales. In 2016 alone, the country sold over 6.9 million passenger cars and over 4 million cars were produced in the same year. United States has many automobile producing and selling companies such as Ford, Toyota, General Motors, and Volkswagen, indicating a huge challenge for Subaru (Shaheen & Cohen, 2013). However, with the appropriate marketing strategies, innovations, and management in place, the company will experience remarkable success.
Entry Mode
Exporting cars from Japan to United States, the means of transport is basically through water transport by using containers. The process is a long one, with a wide range of workers in the port, government agencies, customs employees, sailors, a number of official documents, and customs employees. The cost of shipping a car from Japan to United States would range from $1000 to $2000. (write the cost of shipping a car from United States to Japan ) (Sturgeon, Van Biesebroeck & Gereffi, 2008).
Risk Factors
Despite the potential success Subaru is presented with through internationalizing, there are numerous risks that the company has to take through making such a decision. These risks are majorly related to the political, economic, social, and technological aspects of the market. With the government establishing extremely strict rules and regulations, and high tax levies against foreign entrant products into the market, Subaru may experience a challenge to sustainably lead successful operations in the market (Zah, Hischier, Leão & Braun, 2007). Economically, the risk would be the stiff competition that is posed by the many companies that are operating in the market. With many and more developed companies operating in the market, Subaru may fail to out-compete the existing companies and thus sinking into losses.
` Subaru’s products may also fail to attract the desired preference among the customers due to the many automobiles existing in the market. The customers’ attitudes towards Subaru cars may also be negative owing to the fact that Subaru is a foreign country and thus the customers may be more focused on purchasing locally-produced cars. In terms of technology, the risk would be the ability of the competing companies with more resources to acquire the best technologies and innovators thus making Subaru less competitive in the market. However, this does not mean that the company has zero chances of prospering in such a competitive environment. Much focus on quality would go a long way in realizing the success of the company (Sturgeon, Van Biesebroeck & Gereffi, 2008).
From this report, it can be concluded that United States is an amazing destination for Subaru car sales to thrive. Although there are quite a number of Subaru cars in the country, the variety is limited and the spread of the cars is poor in the entire country. Therefore, the company should invest largely in the entire country so as to enhance popularity of the cars across board. In addition, there is need to focus on cars that are environmental friendly through their low emissions since their entry is less restricted by the government. In addition, the company needs to produce cars of both high and low-income customers so as to realize more sales and consequently profits. Although highly-priced cars attract more tax levies, their profit margins are higher and thus should never be overlooked.
References
Cheah, L., Evans, C., Bandivadekar, A., & Heywood, J. (2008). Factor of two: Halving the fuel consumption of new US automobiles by 2035. In Reducing Climate Impacts in the Transportation Sector (pp. 49-71). Springer, Dordrecht.
Fuentes, C. I., George, M. R., & Holman, M. J. (2009). A Subaru pencil-beam search for mR∼ 27 trans-Neptunian bodies. The Astrophysical Journal, 696(1), 91.
Shaheen, S. A., & Cohen, A. P. (2013). Carsharing and personal vehicle services: worldwide market developments and emerging trends. International Journal of Sustainable Transportation, 7(1), 5-34.
Sturgeon, T., Van Biesebroeck, J., & Gereffi, G. (2008). Value chains, networks and clusters: reframing the global automotive industry. Journal of economic geography, 8(3), 297-321.
Zah, R., Hischier, R., Leão, A. L., & Braun, I. (2007). Curauá fibers in the automobile industry–a sustainability assessment. Journal of Cleaner Production, 15(11), 1032-1040.
