International Business Strategy

Management and Structure 6

Stakeholder Analysis 7

Products and Services 7

Company External PEST-C Analysis 8

Cultural 9

Technological 9

Economic 10

Geographic 10

Legal 10

Industry Analysis 11

Porter’s Five Forces Model Analysis 12

Porter’s Five Generic Building Blocks Analysis 12

Company Internal Environment 12

Strengths 13

Weaknesses 13

Competitor Analysis 13

Business Strategy 15

Financial Analysis 15

Marketing Analysis 16

Marketing Mix Analysis 16

Human Resources Issues 17

Operational Issues 18

Information Technology Issues 18

Exit Plan 18

Recommendation 19

Conclusion 19

Appendix A 26

Appendix B 27

Appendix C 28

Appendix D 29

Business Plan for an ERP Services Provider

Introduction

This paper analyzes an information technology international business venture in Canada, a business which provides ERP products and services to small businesses, using various tools. The secondary research conducted is comprised of both, quantitative data and qualitative information, synthesized to create knowledge about the industry and business environment, and to formulate a strategy for market entry. The claims made in this paper have been backed by evidence cited from credible sources such as academic articles, government websites, and mainstream media news, which have been duly referenced. A set of appendices towards at the end of the paper demonstrate the detailed use of various tools.

Organization Description

Icon Web Solutions (IWS) is a global software services company based in India which provides website design, web and business application development, mobile apps, and ERP cloud applications to global businesses. Apart from domestic clientele, IWS customers are spread around the globe but primarily in countries such as the United States, Canada, Australia, New Zealand, Germany, and the United Kingdom. The company is privately owned and was established in 2009, headquartered in Mumbai, the financial capital of India. The company described its corporate values as perfect assemblage of people, passion, and purpose. The company’s mission is to serve its patrons with high quality, reliable, and low-cost software solutions, and its vision and goal is to become a preferred global software solutions and services company.

Management and Structure

IWS is a privately held, family-owned enterprise with the organization’s governance structure controlled by members of an extended business family which operates and has interests in other businesses ranging from oil refining to retail. The organizational structure represents a strong matrix in which most of the power and authority is held by the project managers (“Point Park Admin,” 2018). The CEO of the company as well as the board of directors were chosen from the same extended family. The key employees of the company include the CTO and the project managers of the nine software teams, on a total count of about 100 employees. Each team comprises of software developers, testers, and a database administrator who reported to one project manager. The project teams follow the Agile development methodology which provides an iterative and rapid software development environment (Rouse, 2018, paras. 1-2).

Stakeholder Analysis

A stakeholder analysis was conducted with the help of the stakeholder matrix that comprised of four types of stakeholders (see Appendix A). The Type 1 or supportive stakeholder, who have a high potential to cooperate and low potential to threaten the organization (Power, 2008a, p. 37) are its investors. The Type 2 or non-supportive stakeholder who have a low potential to cooperate and high potential to threaten the organization (Power, 2008a, p. 38) are its competitors, other software companies who provided global services. The Type 3 or marginal stakeholder, who have a low potential to cooperate as well as threaten the organization (Power, 2008a, p. 38) are the Government and its various agencies. Finally, the Type 4 or mixed blessing stakeholder, who have a high potential to cooperate as well as threaten the organization (Power, 2008a, p. 38) are its customers and employees.

Products and Services

IWS offers a range of software services to its customers including website design and development, application development, e-commerce and e-business solutions, etc. The company’s flagship product is an ERP software product which is offered as a SaaS (software as a service) offering on cloud infrastructure. This allowed customers use the ERP product as a service accessible over the internet without having to install it on their own computing or server infrastructure. The ERP software product was developed on the Java Enterprise Edition (JEE) computing platform which is one of the most reliable and secure programming platforms (Rouse, 2017). The product is improved on a regular basis with updates applied every month, on an average, which is possible due to the DevOps deployment practices which are conducive to Agile rapid development (Brodie, n.d.). The competitive or comparative advantages of the ERP service provided by IWS include its availability on the cloud, multi-language and multi-currency support, number of varied, extensible modules and integrability with the core offering, and high scalability. The ERP solution is comprised of a broad feature set which makes it useful for companies in several industries such as manufacturing, hospitality, sales and marketing, finance, supply chain, etc. The company’s intellectual property (IP) strategy focusses on employing open source technologies in its products instead of using proprietary IP which helps keep costs low.

Company External PEST-C Analysis

The SMART model comparison of the five countries in assignment two, using scores for GDP, Education Index, Ease of Doing Business, Global Innovation Index, and Inclusive Internet Index evaluated the United States (US) as the best country with a weighted score of 755, with Canada a close second at 710. The uncertainty in immigration policies of the US under the Trump presidency has made it difficult for businesses to employ foreign workers (Schwartz & Lohr, 2018, paras. 1-3). As a foreign entity, IWS will require executives to migrate from India to US to work towards a market entry strategy in the country. Therefore, due to the high risk involved in doing business in the US, it will be prudent for IWS to instead enter Canada. Hence, the PEST-C analysis is of Canada.

Political

Politically, Canada is one of the most stables countries with a ranking of twenty in the political stability rankings of the World Bank in 2017, much higher than the US which is ranked at seventy-five (“PSI,” n.d.). The country is part of the British Commonwealth and follows a democratic political system (“Canada Government,” 2018). Canada also boasts of a centrist to liberal policy on immigration with one of the highest per capita rates of immigration among all developed countries (Randstad, n.d., para. 3).

Cultural

Canada is one of the most multicultural countries in the world and Toronto with more than fifty percent of its population identifying itself as a minority is referred to as the most multicultural city in the world (Randstad, n.d., para. 4). With an inclusive and diverse cultural underpinning, Canada is poised to benefit from its open policies by attracting highly skilled global talent (Momani & Stirk, 2017, para. 1). According to Hofstede’s study on cultural dimensions, Canada’s national culture is like the US except for slightly lower individualism and slightly higher long-term orientation (“Hofstede Canada,” n.d.).

Technological

As one of the global technology leaders and rising immigration and trade uncertainty in the business climate of the US, global tech giants have been gradually shifting their base to Toronto and Waterloo over Silicon Valley (Randstad Technology, n.d., paras. 2-3). The technology sector is the fastest growing in the country with high investments from, both, domestic and foreign investors, and strong Government support through grants to tech startups (Randstad, n.d., para. 9). According to a Government study, only 19 percent of Canadian SMEs were found to be “digitally advanced” which indicates the large opportunity for ERP adoption by these businesses (Cleroux, 2019, para. 22).

Economic

The Canadian economy is the tenth largest global economy despite having only the thirty-eighth largest global population (Randstad, n.d., para. 7). The country also boasts of robust economic indices, a positive economic outlook, and well positioned to take advantage of global growth opportunities (Celroux, 2019). In the World Economic Forum’s Global Competitiveness Survey Canadian banks were rated as the safest in the world following sound borrowing principles and stable lending rates, which are useful factors for business success (Martin, 2017, para. 23). Most significantly, 97.9 percent of businesses in Canada are categorized as small businesses employing less than 100 people (“ISED Canada,” 2019, p. 9).

Geographic

Starting in Canada allows businesses to reap the benefits of access to the North American market due to the USMCA free-trade agreement with the US and Mexico, a trade bloc that collectively adds up to a GDP of USD 20 trillion (Kaelble, 2017, para. 2). Similarly, access to the European continent on the east coast through the CETA agreement, and the Asia-Pacific countries on the west coast through the CPTPP, makes Canada a highly lucrative base for operations (Blatchford, 2019). Canada’s geographic location puts it in the same time-zone as the US and with cloud services accessible across geographies, a business setup in Canada provides a backdoor entry into the US market (Sweeney, 2012).

Legal

The legal frameworks that regulate electronic data privacy and protection compliances for private companies in Canada are the PIPEDA act and the Digital Privacy Act (ULaw, 2018, para. 3). The country has a Digital Charter of ten principles which promises heavy and serious fines on private businesses when they fail to comply with protection of data privacy and integrity (Solomon, 2019, paras. 1-2). PIPEDA laws apply to data stored on cloud server infrastructure within Canada and the owner organization is responsible for the protection of the data held on its servers, ensuring that the data held is by consent of an individual (Vlajin, 2018, para. 19). Canada’s data privacy and protection has been found to be better for the end-users compared to the US, indicating the strong foundation set by Canadian federal and provincial laws (Vlajin, 2018, paras. 37-38).

Industry Analysis

The ERP providers industry is a highly competitive one with multiple players ranging from global technology giants such as Oracle Corporation to smaller companies such as Epicor, as covered in assignment one. The Porter’s Five Forces Model can be used to analyze the industry forces and the Porter’s five generic building blocks of competitive advantage can be used to analyze industry trends and market conditions (Power, 2008a, p. 34).

Porter’s Five Forces Model Analysis

The five forces in Porter’s Model include threat to new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, and industry rivalry (Power, 2008a, p. 35). The threat to new entrants for incumbent players in the ERP providers industry is low because the players are deeply entrenched with their well-established partner networks and developer ecosystem, as established in assignment one. The suppliers in the industry are the software engineers who administer the ERP software; their bargaining power is high because of shortage of such worker talent in Canada (Parkinson, 2019, para. 21). The buyers of the ERP services are businesses, primarily small and medium businesses, and their bargaining power is high due to a multitude of options available at different price points, as established in assignment one. The threat of substitutes is low because ERP is a specialized software and has to custom implemented through partner companies or consultants (Evertowski, 2017). Industry rivalry between the ERP players is high due to multiple companies vying for a piece of the same pie (Needleman, 2019).

Porter’s Five Generic Building Blocks Analysis

Porter’s five generic building blocks of competitive advantage are superior quality, superior efficiency, superior customer responsiveness, superior innovation, and strategic competitive advantage (Power, 2008a, p. 36). In assignment one, we established that Oracle NetSuite OneWorld has superior quality, superior efficiency, superior customer responsiveness, and superior innovation, giving it a strategic competitive advantage over other ERP providers. Oracle is a global technology giant with deep pockets and if customers must be provided a strong rationale to choose another provider over its NetSuite OneWorld ERP product. The strategic opportunity which exists in the industry, therefore, is to provide innovative features at a lower cost compared to rival companies. This is especially true for the small and medium business market segment which has been found to be under-equipped in use of software to augment business productivity (Cleroux, 2019, para. 22). The barriers to entry for a new ERP service provider in Canada are low because of the ease to penetrate new markets through cloud computing (NGC Group, 2019, para. 3).

Company Internal Environment

The company’s internal environment can be analyzed by examining its strengths and weaknesses, which are the controllable factors in a SWOT analysis (Power, 2008a, p. 21).

Strengths

IWS is an established firm in India with a satisfied customer base and a tried-and-tested ERP product and service in its domestic market. The company has access to finances and financial support through existing investors who are keen that the company expand internationally. The company has access to India’s large supply of skilled knowledge workers (Korn Ferry, 2018) who can be hired by the company as the business scales up due to the international foray in Canada. While the front-end operations will need Canadian hires, back-end work such as technical support, accounting, email support, etc., can be outsourced to the home country, India. The company can also leverage the low wages of these skilled workers (Mohan, 2018, para. 1) to offer superior services at a lower cost.

Weaknesses

The ERP product offering by IWS is built on publicly available open-source codebase and is low on innovative features. The company does not have any experience of running operations in a developed country, is unfamiliar with regulations, and will need to rely on external consultants. The company does not possess brand-name power and the home country, India, does not have a reputation for innovation (Hellman, 2017, para. 8).

Competitor Analysis

The ERP services which IWS proposes to provide in Canada will cater primarily to small businesses and include secondarily, medium businesses. The three main competitors of IWS who target small and medium businesses are the primary competitor Sage Group, the secondary competitor Oracle NetSuite, and the tertiary competitor Epicor Software Corporation, as identified in assignment one. Among the three, NetSuite’s ERP offering called OneWorld stands out as the best ERP package ranked at number by as assessed by PC Magazine (Needleman, 2019). The offerings by Epicor and Sage called Epicor ERP and Sage 300 respectively were ranked at eighth and ninth respectively (Needleman, 2019). According to a 2017 IDC MarketScape vendor assessment report on global cloud-enabled ERP software for small and medium business, OneWorld was named in the “leader” category above Sage 300 and Epicor ERP which were ranked beneath in the “major players” and “contenders” category (Rizza, Permenter, Boggs, Jewell, Newmark, 2017, p. 1).

The strengths of the Sage 300 product were choice between cloud and in-premise implementation, availability of various modules such as customer relationship management (CRM), human resources (HR), and inventory management (IM), accessibility through a mobile app, and excellent reporting and design tools (Needleman, 2018, paras. 4-12). The weaknesses of the product were unavailability of extensible modules on the cloud and the high price-point of $3065 annual fees per user (Needleman, 2018, para. 15). The strengths of the Epicor ERP were an extra choice of a hybrid implementation between the cloud and in-premises installations, modular architecture of the product, and ability to handle complex implementations with multiple languages and currencies with easy scalability (Needleman, 2017, paras. 15-16). The weakness was the complexity of the product is on the higher side considering its targeting at small businesses and use of non-standardized elements (Needleman, 2017, para. 1). The strengths of NetSuite OneWorld were its complete cloud offering with seamless upgrades, its rich and broad feature set (Needleman & Marvin, 2018, para. 16), and additional modules such as e-commerce over the standard ones (Needleman & Marvin, 2018, para. 32). The weakness of the product was its relatively confusing help tool and the complexity in configuring the system (Needleman & Marvin, paras. 10-11).

Business Strategy

Using Porter’s Model of the five generic competitive strategies (see Appendix B) IWS business strategy centers on targeting a broad cross-section of buyers or customers who are small or medium scale enterprises from multiple industrial sectors such as manufacturing, finance, accounting, supply chain, logistics, information technology, etc. Similarly, the type of competitive strategy at market entry that will be pursued by the company will be an overall low-cost leadership strategy wherein the product and service offerings will be standard without much differentiation at an attractive price-point compared to rivals.

A decision criteria matrix using the SMART model for the three companies compared with IWS was prepared for the five key success factors (KSF) that included cost to the company, time of implementation, ease of customization to the enterprise’s requirements, complexity in configurating the feature sets, and availability choices such as cloud, in-premise, and hybrid options (see Appendix C). The quantitative data used in the table is based on the qualitative information presented in the rest of this paper. The model confirms the differentiation-based leadership position of NetSuite in the Canadian market. Moreover, positioning IWS as a low-cost leader based on its strengths has a potential to yield success for the company.

Financial Analysis

Since IWS will start a new venture in Canada, financial performance ratios are currently irrelevant. IWS strategy of becoming a low-cost leader in the ERP market for the small and medium business segment will use the freemium revenue model which is a highly popular model among software companies (Kumar, 2014, para. 1). In this model, IWS will offer basic ERP features without any cost to business customers and richer functionality and newer features for a subscription fee. The pricing strategy for the subscriptions will also be aggressively done compared to rivals. Hence, the number of paid subscriptions will be expected to be low in the first two years of operation and gradually increase from the third year onwards. The financial feasibility and projections will become clear after at least one year of operating in the Canadian market.

Marketing Analysis

The ERP software market in Canada accounted for one billion USD sales in 2016 and slated to increase to approximately 1.3 billion USD by 2021 (Wunsch, 2019). The target customer segments for ERP include large, medium, and small enterprises. The large and medium enterprises segment for ERP is crowded with global technology companies vying for a piece of the pie (Murphy, 2015). The small enterprise market segment is attractive due to many such firms; 97.9 percent of all enterprises in Canada are small enterprises (“ISED Canada,” 2019, p. 9). Hence, IWS offerings will need to be positioned in this segment of the market in an aggressive way to procure new ERP customers as well as capture customers from the incumbents.

Marketing Mix Analysis

The Marketing Mix or 4P analysis focuses on the four controllable factors of marketing which are product, price, place, and promotion. The details of the product and the services offered by the company were discussed in the Products and Services section above.

Though the small business segment is a large segment, the price willingness to pay in this segment is relatively low (Gianopoulos, 2015, p. 7). Therefore, a freemium pricing model will be pursued as explained in the financial analysis section above. In the first phase of operations, IWS will set up lean sales offices in the cities of Toronto, Vancouver, and Calgary. The technical support operations will run remotely through a call center based in Mumbai, India. A multipronged promotional plan to reach the target segment will be enabled through different channels such as local media, regional media, organic SEM, paid SEM, and social media. Organic SEM will be employed to boost website ranking in organic results for search queries posted on engines such as Google, Bing, and Yandex. The use of paid SEM will be done as a direct marketing tool to display the company’s ERP ads on search engine results pages tuned to the right audience. Finally, customer engagement and interaction through social media management will be sought to deepen consumer-brand relationship, uncover consumer feedback, and persuade consumers to purchase IWS ERP services.

Human Resources Issues

The cultural dimensions theory of Hofstede can be used to compare the national cultures of the host country, Canada, with the home country, India (see Appendix D). The comparison shows a vast difference in the dimensions of power distance, individualism, and indulgence, while the dimensions of masculinity, uncertainty avoidance, and long-term orientation, are almost similar between the two countries. Canadian powers have a propensity to expect fair distribution of power at the workplace compared to India which indicates that managers in the IWS offices of Canada should be locally hired. Canadian society was also found to be more individualistic compared to India; this aspect has a potential to generate workplace conflict particularly between remote teams working in India and Canada, therefore cultural sensitivity and training will be needed for workers at both locations. The dimension of indulgence had a high difference in scores as well, though its repercussions will be low since teams will transact remotely and there will be no socialization between them.

Operational Issues

With technology, decision makers can access to real-time data about the business and its operations to ensure that the organization is performing according to its strategic and financial objectives. For this purpose, dashboards are used for managing operations and a balanced scorecard is used for managing strategy. A dashboard is a business intelligence tool that can visualize large amounts of data and helps understand how the organization is performing at a point of time (Jackson, n.d.., para. 4). IWS can set up a dashboard to track efficiency rates in terms of customer responsiveness based on the number of customer queries or calls received by email or at the call center. Similarly, a balanced scorecard can be used by the company as a strategic planning and management tool to align the day-to-day operations with the organization’s strategy, prioritize projects and tasks, and measure and monitor progress towards strategic targets.

Information Technology Issues

The information technology issues pertain to the ERP product features and services which succeeded in India, to do so in Canada as well. The cultural aspects and sensitivities of the country must be considered to adhere to the norms, specifically those related to privacy and personal information that is collected about customers or individuals. In a survey conducted by the Office of the Privacy Commissioner of Canada, it was found that nearly two-thirds of Canadian businesses store customer information electronically (“Privacy Survey,” 2017, paras. 3-4). Therefore, as a Canadian registered business, the IWS subsidiary in Canada will need to comply with privacy laws and data security regulation and ensure the sensitive data is collects and possesses is secured from data theft.

Exit Plan

IWS intends to grow gradually in Canada beginning with three cities in the first phase with a small-scale operation with primarily sales personnel hired locally. Since the expansion process will be slow and steady, the company intends to give itself time to learn and succeed in Canada. However, as a contingency plan, operations will not be expanded if they do not yield results of meet objectives in the first phase itself. Similarly, if the expansion fails to take off despite substantial effort and time spent, the exit plan will include wrapping up Canadian operations, and already signed up customers will continue to be supported from the remote team based in the home country.

Recommendation

Based on the global business environment and the opportunities available in Canada, it is recommended for IWS to adopt a Canadian market entry which is either a greenfield investment or through a strategic alliance with a local partner. The advantages of a strategic partnership include access to local partner’s knowledge and cross-cultural cooperation, sharing of costs and risks, and the arrangement is more amenable politically (Power, 2008b, p. 299). However, there are disadvantages which arise from a strategic alliance such as lack of control over quality and delivery, and this cannot become a global strategy for the company (Power, 2008b, p. 299). Therefore, if a global expansion and market entry strategy is needed, a greenfield investment can be made the preferred route.

Conclusion

Today Canada represents the best international business opportunity in the developed world, by not just surviving the global trade battles, but thriving on the economic imperative of a liberal immigration policy. A vast majority of businesses in the country are small entrepreneurs, with immigration further expected to augment economic and entrepreneurial activity. For a new business venture, Canada also provides the added opportunity of becoming the gateway to the rest of the developed world, through the USMCA, CETA, and CPTPP free-trade agreements. The strength of a low-cost competitive strategy through an innovative freemium revenue model, will position IWS with unique advantages to succeed in the politically stable and economically viable Canadian technology ecosystem.