Introduction
Scientific invention and innovation in transport and communication has facilitated growth of international trade. International trade is an element of globalisation that has necessitated the movement of factors of production across borders. Asian countries are experiencing rapid economic growth; they are offering an increased market to businesses with a capacity to trade internationally.
Recognising the benefits of the market, Eastvaco has decided to diversify its services to the Asian market particularly in China and Indonesia where the plant will be established.
The only hindrance that the company is likely to face is financing the foreign plant. For a successful business, adequate finances are required, thus before the venture, the company will undertake a comprehensive research about the market and tape appropriate measures (Wu, 2006). This report discusses external and internal forces that are likely to affect the company.
External factors in Asian
For an international venture, the expanding company need to undertake a P.E.S.T.L.E. analysis of the country and probably concentrate most on the areas that are likely to affect the company directly:
Political environment
The Asian countries are embarking on measures to become politically neutral; this is necessitated by its role in international trade. The political environment is likely to benefit the company in that it will have access to national and international countries trading with the Asian countries.
Economical environment
The Asian countries are undergoing rapid economic development facilitated with international trade; the economic situation will offer good market to the company’s products. When a country is expanding, a number of companies producing goods and services who will require the products of the company; this will result to an increase in demand of the countries products.
The growth rate of the economy of Asian countries particularly China and Indonesia have for the last three decades, remained on a positive note. There have even been some rates recorded as high as 12% this is an element to show the strength of the economy as well as it gives us the hope of continuity in the market. The rate of growth is another indicator of a stable political environment that encourages local and international investors to invest.
Asian countries have well developed financial sector with the privatized and government participation in the sector. The banks are stable enough to sustain the growing economy. On the other hand, although this may not have a direct impact on our business there is the emergence of micro finance institutions in the country, the institutions are giving a lot of support to the small-scale trader evident in the country; the growth of small traders will benefit the company, as they are source of market.
Thinking of the economy from that angle, it means that the manufacturing businesses will eventually benefit. Insurance companies are also a backbone of investment sector of an economy the insurance companies are stable enough and can handle big losses without going. At the same time, there are reinvestment insurance companies that help in maintaining stability even further. The banking sector has enabled firms to get loans at favourable rates.
China and Indonesia have highly modern developed infrastructures; these are both of transport and those of communication. The systems are advanced so well that access to the country from any corner of the world is highly enhanced; the airports, the seaport, and internal transport are well managed and accessible. The efficient transport will help in transportation of both raw material and finished carpets to and from various markets (Mitlez, 2004).
Ecological
Asian countries have recognized the need for an environmental friendly production; the demands by the countries are likely to affect the company negative since it aims to produce non-green products.
Technological
The Asian countries are among the countries that have the most advanced technology. Mitlez, 2004 in his book Technology and Culture notes that the countries that is doing well in the technological innovation. It is developing its own technology as well embracing imported technologies. High technology assist in reduction of cost of production; this means that a business in China is more likely to produce quality and quantity at a very low price compared to other places in the world.
Legal
The country has well framed business laws that Eastvaco has no option other than abide; this offers no threat since the country has measures to encourage foreign investments (Peter, 2006).
Strength and weaknesses of Eastvaco
Strengths
Eastvaco strengths are ventured in the company’s strong brand name that is internationally recognized. There is a wide recognition of these products in all parts of the world. The strength of the company is undoubtedly be engineered by its internal managerial mechanisms.
In order to have a competitive edge in selling its product and services, it will be advisable for the company to take advantage of its ability to compete favourably with equal players in the market. A strategic marketing plan is the only way out. The company has the financial strength to expand internationally; it will also benefit from a pool of knowledge that it has from experienced human resource team.
Weaknesses
Eastvaco has two major weaknesses when venturing the market: the choice of products and managerial understanding of Asian market dynamics. The company has chosen non-green products; this is discouraged by Asian countries environmental policies, it thus will have to incur extra costs in the form of environmental damage taxes. The management have limited knowledge about Asian market dynamics thus; they are likely to make inferior decisions compared to its competitors, this will lead to loss of competitiveness (Paley, 1999).
Conclusion and recommendations
Eastvaco has the potential to diversify its activities and tap the fast growing Asian market. It has the financial capabilities. Asian countries strong financial institutions will offer the company adequate finances for its expansions. Eastvaco management should develop appropriate foreign market entry strategies and have an international marketing strategy so that it can compete effectively with other players in the market.
References
Mitlez, S. (2004). Technology and culture. Michigan: Dearborn.
Paley, N.(1999). The manager’s guide to competitive marketing strategies. London: CRC Press.
Peter, D. (2006). Marketing Management and Strategy. London: Post & Telecom Press
Wu, Y., (2006). Economic growth, transition, and globalization in China. New York: Edward Elgar publishing.