The following report aims at determining the suitability of Papua New Guinea (PNG) as a target market for introducing our product – environmental measuring equipment for monitoring and logging the quality of water in waterways around the country. The study is conducted by reviewing credible official web sources and reputable scholarly publications. After examining the market conditions in PNG and comparing the results to the setting desirable for the product introduction, we are able to make the following key findings:
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The economic conditions in Papua New Guinea are uneven. On the one hand, both the present and planned business practices are consistent with the functionality offered by our product. The dynamics of economic development confirm the suggestion that even if the services are not required now, the demand for them will most likely emerge in the nearest future. The rapidly developing agricultural business and the inevitable resulting growth of the social sector are the two most notable sources of demand for water content and quality.
On the other hand, however, economic growth is fragmented and has many shortcomings, some of which are government-based. The most notable of these include the underdeveloped and slowly improving infrastructure, both physical and communicational, the inefficient government policies and regulations which hamper business practices and often serve as reasons for economic disasters, and the poor technological proficiency as well as an educational basis.
These factors not only slow down the economic progress of the country but disrupt the success of our market entry. Thus, a specific approach is suggested, which includes direct export entry techniques relying on price skimming strategies, maritime-based logistics, and individualized marketing techniques that acknowledge the wantok principle and rely upon the personal nature of business in the country.
This report aims at assessing Papua New Guinea as a possible market for introducing our product, environmental measurement equipment capable of monitoring and submitting data on the quality of water. Papua New Guinea currently experiences stable economic growth and is likely to be in demand for the functionality offered by our products. First, the agricultural sector presents several requirements for water content monitoring. Second, the rising standards of quality of life may create demand for sanitary applications of our equipment. The investigation centers around the existing literature and statistical data on the topic to determine the attractiveness of the market, outline the market entry, penetration, expansion, and pricing strategies, and locate possible risks as well as ways to mitigate them.
Brief Product Description
Our company offers a range of environmental equipment. Its primary function is measuring, monitoring, and logging the quality of water in the waterways. Our chief product is a data buoy which is equipped with sensors and transmitters for gathering and transferring the collected information. Other products include supporting equipment, data storage servers, processing, and on-the-spot visualizing tools, and data loggers. The main target audience for our product includes environmental organizations and companies, both for-profit and non-profit, obliged to conduct and submit measurements as part of external regulations.
- High accuracy.
- Niche orientation.
- Requires technical proficiency.
- Heavily relies on external support.
- Highly specialized – uses proprietary hardware.
- Aligns with current economic growth.
- Consistent with environmental requirements.
- Lack of competition in PNG.
- Presence of external funding (Australian Government).
- Unreliable economic situation prone to downfalls.
- No government support.
- No previous experience among the target audience.
- High price.
Cost of Doing Business
Papua New Guinea demonstrates a relatively unfavorable environment for starting a business. An analysis by world Banking Group ranks the conditions of the country as 145th in East Asia and the Pacific Region, which is a four-point fall compared to the previous year (World Bank Group 2016). For instance, the total expenses of starting a business are 800 PGK and require a minimum of 20 days (138th position among the countries of the region) (World Bank Group 2016).
However, one particular issue must be considered – a presence of the Direct Aid Program – an Australian grant scheme which is aimed at supporting new business entities and support their profitability. Importantly, the Direct Aid Program lists the sustainability of the physical environment as one of its priorities (Australian Government 2015). Since this goal is consistent with the use of our products, we can significantly decrease the costs of starting our business by applying for the grant.
Future Economic Perspectives
Papua New Guinea is has demonstrated stable economic growth over recent decades. Two indicative tendencies for this are the growing employment capability and a robust progression of government expenditures and revenues. These tendencies are expected to be observed in the nearest future, with the short-term analysis predicting growth in GDP from 2.2 to 3 percent and an account balance growth of 7.9 to 9 percent of GDP into the year 2017 (Asian Development Bank 2016).
The most likely sectors of prominent economic development are infrastructure (the intention to improve existing and build new infrastructure is visible in the majority of government documents and published strategies), health and education (which means both direct and indirect enhancement of the social sector and, by extension, growing demand for a higher quality of living standards), mining (exhibiting indications of intensive growth and expansion of scope), and agriculture. The latter is especially relevant for our business for two reasons. First, the contents of water influence many agricultural practices. Second, in some cases, monitoring of the impact of these activities on water quality is required by regulations once the social standards go up.
Typical Business Practices
The three major categories of business practices in Papua New Guinea are associated with mining, construction, and agriculture. Mining is currently the leading source of income from the country’s export practices, with gold, nickel, and copper being the most abundant and profitable resources. The mining of natural gas is currently in rapid development, with the predicted doubled growth in GDP caused by it in the subsequent years.
Construction is mostly a result of the former, with the greatest activity observed in the industrial sector. However, a clearly observed direction at improved infrastructure also contributes to the demand for the construction workforce and equipment. Its impact is also observable in the international business practices exhibited by the country since the construction equipment is currently among the biggest import market in PNG. Finally, the agricultural sector, together with forestry and fishing practices, is currently in development with support from the Australian Centre for International Agricultural Research (ACIAR, 2015). PNG government also invests in these branches as a part of its 2050 strategy (National Strategic Plan Taskforce n.d.).
It is important to note, however, that all of the industries are burdened with problems. For instance, the agricultural sector, while being dependent on the mining practices for financing reasons, is negatively affected by the scarcity of land caused by the construction of new mining sites and environmental issues resulting from it. Besides, the current state of infrastructure remains insufficient for the successful functioning of the majority of industries in the country even despite its rapid development pace. The state of physical infrastructure (roads and bridges) is the most alarming and has not shown improvement in the last nine years (Institute of National Affairs 2012).
The state of maritime transportation and ports is equally poor. The most commonly named reason for such a setting is the government ownership and patronage of the infrastructure reform (Institute of National Affairs 2012). Another aspect that severely impacts business is the lack of appropriate telecommunications regardless of the reported progress in mobile network coverage. In particular, Internet access remains scarce and costly.
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Again, the sole provider of the Internet is the government, which results in the impossibility of pricing regulations. Unfortunately, the issues are likely to persist in the nearest future, as no external party is currently competitive enough to bring change. The only segment of infrastructure which retains quality and cost is banking, as three independent banking groups operating in the country. Similarly, aviation is the most developed means of international transportation since it is privately owned (Institute of National Affairs 2012).
Another problem associated with faulty government policies is that of issued business regulations. Not only the government policies aimed at businesses are perceived as restraining and inefficient, the frequent retrospective changes in the recent decade severely aggravate the situation. Business owners often identify the majority of such changes as damaging. At the same time, the government does little to ensure the safety of business practices.
The majority of business owners report high crime rates which threaten their practices (Institute of National Affairs 2012). Such a setting not only disrupts business directly but also creates increased expenses associated with a need for additional protection, understaffing resulting from reluctance to work in a high-risk environment, and altered schedules. Finally, the trust in the reliability of law enforcement is low, which coincides with its reported low effectiveness (Institute of National Affairs 2012).
The most notable characteristic of Papua New Guinea which influences its culture is its size. Because of it, every business entity is relatively visible to the others. Such an effect is possible without sophisticated monitoring tools and is achieved on an interpersonal level. Most of the senior managers know each other personally to some extent. For this reason, the influence of personal relationships is visibly important.
Reputation in Papua New Guinea is impacted more by actual output than artificial techniques acceptable on a larger scale. For the same reason, most of the deals and communication are done in person rather than remotely, and every major deal requires a personal touch.
The phenomenon can be condensed to “wantok,” a term that encompasses the personal and close-up nature of business culture. Translated roughly as “one language,” wantok is used to describe the bridge established in the process of communication and mutual respect (Walton 2013). Wantok also necessitates the acceptance of advice from the peers and, in some cases, dictates the obligation to help a partner regardless of the actual benefits for the donor. Comparable to the clan, or community feeling, wantok is often cited as a reason for a failure of “outsider” business when the Westerners ignore its role (Walton 2013).
The most viable entry strategy for the Papua New Guinea market is direct exporting. While posing no serious advantages over other models, it allows bypassing almost all the limitations pertaining to the PNG business environment. For instance, weak logistics and infrastructure discourage indirect exporting models, such as piggybacking. Neither licensing nor joint venture is acceptable because the country currently has an insufficient industrial basis and does not have a required amount of technically proficient staff to maintain the production of our relatively sophisticated equipment on the desired level (Samiee 2013).
The Internet, which under other conditions would serve an excellent tool for distribution of our products, is not an option due to its lack of accessibility. Admittedly, direct exporting makes marketing more challenging since it does not align well with principles of wantok. However, it can be successfully mitigated with relatively cost-effective solutions, unlike most of the factors listed above.
Market Penetration and Sales
Since no other company currently offers the products with the functionality comparable to ours’, it is possible to assume that initially, our company will be ahead of the competition, at least for some time. Besides, the high interest resulting from the agricultural sector, a developing social structure, and the growing involvement of the non-profit organizations aiming at improved access to quality drinking water, will provide the required market demand (Eckerberg & Nilsson 2013). However, it is important to recognize the possibility of the emergence of new businesses targeting the same segment once its attractiveness becomes apparent. It is thus important to establish a strong reputation early in the process.
The cost of production and maintenance of our products is understandably high. However, the absence of the competition in the current PNG market allows us to account for this effect by choosing a price skimming strategy (Ferrel & Hartline 2010). We can base the prices of the presumably most popular products on the assumed long-term costs. Later in development, if they grow higher than the established threshold (e.g. because of the dysfunctional transportation system), the prices can be adjusted accordingly.
For instance, while the domestic price of our automated samplers is 110 percent higher than its cost, the estimated price for Papua New Guinea would be around 80 percent higher to compensate for the reluctance caused by unfamiliarity with the product. The profit margin is still enough to cover the relatively low cost of shipping. For this reason, logistics need not be based on air transportation. Besides, the involvement in the Direct Aid Program will compensate for the expenses.
Opportunities for Expansion
The two most evident ways of promoting our products are personal promotion techniques and publicity. The former will allow us to overcome the “outsider” reputation implied by the chosen entry strategy and being among the most considerable barriers. It can be achieved by reaching out to the customers and going the extra mile by establishing interpersonal communication connections instead of relying on more traditional media-based and printed materials.
The latter can be effective in the long term. Currently, the scarcity of water for civilian use is a major issue in Papua New Guinea and gradually gains in media attention worldwide (Kweifio-Okai 2016). If the use of our equipment as a part of social initiatives produces successful results, its media coverage must be prioritized to secure later recognition and positive associations.
Risks and Threats
The major drawback of our campaign is the involvement of the PNG government in most of the affairs. Under current conditions, the scarcity of funds at the disposal of our primary target audience is almost guaranteed. Another notable barrier is a low education and technical proficiency level of the majority of the staff capable of operating the equipment. Thus, we need to seek independent organizations, primarily Australian-funded initiatives which usually are better funded.
The lacking knowledge basis can be partially mitigated by organizing workshops and providing skilled support, although, admittedly, it does not resolve the issue completely. Finally, criminal activity can become an issue, especially early in the process, when the environment is unfamiliar and considering the low efficiency of the local law enforcement. This can only be dealt with by allocating more resources to the security measures.
The current picture of Papua New Guinea as a market for our measuring and monitoring equipment is controversial. On the one hand, the setting suggests a high demand for water quality measuring equipment. The agricultural sector is in need of controlling the contents of water and will likely soon be forced to adopt monitoring practices as a part of compliance with environmental regulation. The public sector is also suffering from a scarcity of quality water.
On the other hand, the latter is mostly caused by infrastructural shortcomings. Besides, the economy of the country is riddled with erratic practices, gaps in policies, and security issues. Finally, the necessity of our product is not directly evident for the majority of our target audience. However, this does not imply that successful market entry is impossible. With the proper acknowledgment of the business culture, recognition of wantok principles, and integrative marketing techniques suggested in the report, the successful outcome is almost a certainty.
ACIAR 2015, Papua New Guinea: Country context. Web.
Asian Development Bank 2016, Papua New Guinea: Economy. Web.
Australian Government 2015, Direct aid program (DAP). Web.
Eckerberg, K & Nilsson, M 2013, Environmental policy integration in practice: Shaping institutions for learning, Routledge, London.
Ferrel, O & Hartline, M 2010, Marketing strategy, Cengage Learning, Boston.
Institute of National Affairs 2012, The challenges of doing business in Papua New Guinea. Web.
Kweifio-Okai, C 2016, Papua New Guinea has world’s worst access to clean water, says WaterAid. Web.
National Strategic Plan Taskforce n.d., Papua New Guinea vision 2050. Web.
Samiee, S 2013, ‘International market-entry mode decisions: Cultural distance’s role in classifying partnerships versus sole ownership’, Journal of Business Research, vol. 66, no. 5, pp. 659-661.
Walton, G W 2013, ‘Is all corruption dysfunctional? Perceptions of corruption and its consequences in Papua New Guinea’, Public Administration and Development, vol. 33, no. 3, pp. 175-190.
World Bank Group 2016, Ease of doing business in Papua New Guinea. Web.