Decision-Making Case Study-Toy Company

            This report covers various steps that are necessary for decision making within the company, which aims at expanding and entering into a new market. The report provides an in-depth discussion of the various steps required for effective decision-making and a well-justified decision from amongst the alternatives offered based on the application of the model. The model necessary for making an effective decision making is based on the analysis of the company’s sales ratios and an evaluation of the new market that the company intends to enter.

The analysis of the company sales ratios is an essential aspect since it used as a yardstick of determining the success journey of the company and an excellent tool for analyzing the company’s growth and expansion level or rate. From the previous company’s sales analysis, it is evidenced that the company has been very successful and experienced a remarkable degree of growth. Based on such a growth success journey, as a business owner, I feel this would be the best movement to make an entry to a new market. It based on this premise that I review my decision to see whether it is the best move as per the business requirements and the demands of the market.

Some of the factors that the company dramatically focuses on before making a move include an understanding of the existing market, an understanding of the customers’ needs or wants as well as how best such needs or wants can be satisfied by the company products and services. The goals of this decision making cases is to identify potential points of entry and to minimize initial investment while maximizing future revenues. Besides, it is vital to identify or weigh the pros and cons of each and then make an informed decision. Therefore, the final choice should also ideally allow for future growth possibilities, both inside the new market as well as into adjoining ones. The senior management team has already compiled the list of crucial possible entrance points/ alternatives that stakeholders will use to make their informed decision regarding such an investment decision into the new market.

Apart from determining the entry point’s alternatives to the new market, it is essential to decide on how other employees will perceive or view the move by the company. The focus of the decision is to take the initiative of moving to the new market while at the same time, keeping all employees more united to the company’s mission and vision. Based on such considerations in mind, this report highlights an in-depth discussion of the various steps required for effective decision-making.

The various steps required for effective decision-making on venturing into the new markets start with a critical analysis of the factors which necessitate such a move. Such factors include the cultural factors, economic factors, political or legal factors, among other social and environmental factors (Abner, 2015). Some of the cultural factors that should be considered include the language barrier in the new market, the taste, and preference of the customers regarding the company products (toys) and services. Besides, the new markets might have some environmental values that should be considered before the company can venture into such a demand (Forever Mogul Team, 2018). Other cultural issues to take into account include the consumers’ habits, age, as well as the demographic factors since the company majorly targets the children and kids (Anastasia, 2015).

On the other hand, it is essential to consider the economic factors which determine the customers’ ability to buy the company products. Also, it is vital to analyze the likelihood that the economy will support the growth and development if the toy company. Some of the economic considered that must be considered include the capita income, the class structure, the supply and demand within the economy as well as the banking and other financial institutions which will aid in the process of exchange of products and services.

The political factors put into consideration include law, licenses and permits, government taxes, other legal fees, currency risks in the new market, tariffs as well as political restrictions such as operations, quotas, discriminatory as well as investment restrictions. Besides, it is essential to find out the level of political stability in the new market before the move into the new market can be affected by the company. The political instability can be in the form of war as well as political unrest. Other intangible factors of much value are the intangible determinant, which includes the environment where the business will be located, and the regional partnerships that exist or might exist in such a market. Besides, it is essential to consider whether the customers in the new market will adopt the products or whether it will take them quite a good time to adapt to the company’s products. Other issues to worry about in the new market include competition as well as other threats that occur from time to time.

Potential Points of Entry to the New Market

Entering the new market requires a commitment to identify the potential customers to whom the company will be selling its products and services. The goal of the company is to occupy a larger market share into the new market; hence, it is essential to find out the potential; customers prior before making then entry.

1. The following steps are vital for marking points of entry to the new market.
2. Defining the market; it is essential to determine who your clients will be in the new market. It is vital an attempt to assess their needs and then striving so hard to fulfill their needs. In this case, determine their preferences, tastes, locations, demographic factors, as well as their interests.
3. Perform market analysis; performing market analysis assists in determining the factors that influence the trading activities within a given market. Such factors or determinants may include competitors, level of growth rate, potential restrictions to entry as well as the projected demands of the company products, among others.

• Assess the internal capabilities; some of the internal capability decisions include the willing to build, buy, or partner with other players in the market. It is essential to consider some of the competencies based on the employees and the management of the company that are needed to boost the performance of the company in the new market and to facilitate its growth (Stark & Stewart, 2013).

1. Developing an entry option; there are various entry options which the company can choose. The options include making an organic entre, joint-venture, partnering, buying an existing company, licensing, franchising, direct exporting, piggybacking, turnkey projects as well as Greenfield investments.
2. Entry Options

The goal of identifying such entry options is to minimize the investment costs while optimizing the future expected revenues from the new market. The options available to choose from, their pros and cons, are therefore discussed below.

• Direct exporting

In direct exporting, the company will sell directly to the market of choice without having to use other intermediaries in the distribution or supply chain network. However, the company needs to have its agents or distributors in the new market since they will facilitate the selling of the products or services to the final consumers. The agents or distributors must, therefore, work hand in hand with the company while aiming to fulfill the interest and objective of the company. In this entry mode, there is a higher possibility of risks as well as high returns, which response to higher risks (Långbacka, 2018).

The direct export has the advantage of making direct contact with potential clients. They, therefore, have higher chances of meeting the company staff selling the toys as well as having a wider variety to choose from. However, it more comfortable to conduct a direct export to the market than an indirect export. Besides, the model does not require a substantial investment of costs, and also the products are easily distributed in the market. The entry system has fewer brokers, and the company is not mandated to follow the wills of the brokers.

Besides, there is a higher level of transparency, especially in business transactions. The company will have a direct relationship with its customers, which assists in building the customers’ loyalty and promoting the brand of the company. In case of any problematic issues in the market or the company, it can be squared more easily. There is continuous safety of the company’s intangible assets, such as logos, patents, and copyrights, among others. Lastly, the company will have a direct influence on the kinds of strategies it uses for exportation (Roy, 2017).

On the contrary, it has some disadvantages, including difficulty in controlling the dealers marketing strategies. The company may have less chance of understanding their customers. On the other hand, it limits the growth and expansion of the company’s brand. It might consume many resources when the new market is in a distant geographical location. The company is mandated to follow the business procedures and policies strictly. Sometimes, there are scenarios when the customers and the potential clients may fail to reach the company but land on the agents and dealers.

• Licensing

This is a strategy of entering into a new market by giving a company that already exists in the market, the license to trade with the rights of the parent company. The licenses strategy is used to protect the intellectual properties of the company. This strategy is advantageous since it allows the company to enter the new market while being exposed to fewer risks. It is less sophisticated. However, it has some disadvantages, including less control of the licensee and less say on the profits made by the licensee. Besides, the licensee can turn to be very fierce competitors to the company in the long-run.

• Franchising

This entry is applicable best with companies with repeatable business models majorly the eateries. Some of the advantages of franchising include a high rate of growth and expansion in the new market. It allows easier management of the businesses, and it also provides some sense of ownership to the companies in the new market. Hence they are likely to work harder in deriving the agenda of the company. Besides, it is easier to carry out advertising using the local currency as well as the dollar in the new markets. Franchising allows the customers to access large volumes of products at relatively lower prices, and in the long run, such a move increases the company’s sales volume and revenues. Besides, there is a higher ability to maintain consistency in the market. Moreover, in case of some limits in the market, some restrictions can be adjusted and allotted to the final consumers as well.

Some of the disadvantages of franchising include reduced net receipts because the good is offered to the customers at relatively lower costs hence limiting the possibility of making huge profits. There is no direct management of the employees, thereby increasing the independence of the franchisee. Besides, the franchises at the time might possess better management or business skills than the company owners; hence, this acts as a threat to the company in the long-run. Besides, the process of franchising can incur relatively higher costs, which are inconsistent with the goals of the company of minimizing the initial interments costs while maximizing future revenues (Grossmann, 2017).

• Joint venture

A joint venture is a situation where the toy company will join together with other companies in the new market to trade its products. The method provides short-term means of getting or accessing the new market; however, it might be redundant in the long-run. It has the limitation of incorporating many companies to work as per the goals of the new company willing to enter the modern market.

From the analysis of the entry options above, the most favorable mode of entry into the new market would be direct exporting. Direct exporting is in line with the goals of the company. That is, it has less initial investment costs while maintaining higher revenue in the future business of the company. It, therefore, acts as the best alternative decision and the most effective decision for entering the new market. Besides, direct exporting is growth-oriented. It means that it can offer enormous growth to the company as well as other companies willing to join the market. Moreover, when the company desires to quit the market, it has better exit strategies for the company, and therefore it remains to be the most effective decision for entering the new market. Consequently, it would be in line with developing a whole branch of toys focused on sustainable designs and green production.

According to the company’s feature and the nature of business in the new market, there is a high probability of success because the entry option is in line with the goals of the firm. That is, minimization of initial investment costs and to raise higher revenues on a long-term basis. Operating new branches in the new market will increase the market reach to the final consumers, and designing of the toys to the green products will be a tool against the competitors who might have been in the new market. There is a higher probability of success and growth with this kind of alternative.

The expected time to reach the point of entry is from the medium-term to longer-term basis. This is because the entry options require a market-wide research regarding the possibility of success and growth. It takes ma a longer time to plan and the budget and the actual launch of the program. Before the implementation of the entry option, it also requires a dynamic market analysis to determine the customers’ needs and the firm’s ability to meet such requirements and to increase the customers’ levels of satisfaction while maintaining the goals of attaining higher profits in the future.

Because the management of the company has conducted a market analysis and the potentials for investing in the new market, the financial implications will below. The alternative has been evaluated to be the best alternative, among other options for entry options in the modern market. The choice chosen appears to be the most effective alternative and very adequate in terms of cost minimization while increasing the profit or revenue margin both in the short-run and on a longer-term basis. There is a low probability of an unacceptable financial impact if the strategy fails.

The strategy has been reviewed by a team of experts, and its success factors and key performance indicators are much higher than its likelihood to fail after the entry into the new market. Which such unacceptable financial implications in mind, a lot of monitoring and evaluation will be done frequently. The alternative is considered to be accurate compared to other available options of entry points into the company. There is a ninety percent confidence interval or significant level that the option will success and attain higher growth and expansions missions. There are higher accuracy levels hence making this alternative to be the best alternative in the market. Besides, it will assist the company in expanding its market share

References

Abner, B., 2015. Four considerations before taking your business international. [Online]
Available at: https://www.bizjournals.com/bizjournals/how-to/growth-        strategies/2015/02/considerations-for-taking-your-business-global.html

Anastasia, 2015. Factors to Consider For International Marketing. [Online]
Available at: https://www.cleverism.com/factors-to-consider-for-international-marketing/

Forever Mogul Team, F., 2018. 8 Things To Consider Before Going Global. [Online]
Available at: https://forevermogul.com/mogul-business/8-things-to-consider-before-           going-global.php

Grossmann, R., 2017. The Pros and Cons of Franchising Your Business. [Online]
Available at: https://www.entrepreneur.com/article/289095

Långbacka, A., 2018. Pros and cons of different market entry modes. International Business         Management, pp. 1-68.

Roy, E., 2017. Trade Ready. [Online] Available at: ttp://www.tradeready.ca/2017/topics/market-  entry-strategies/direct-indirect-exporting-best-fit-business/

Stark, K. & Stewart, B., 2013. 5-Step Primer to Entering New Markets. [Online]
Available at: https://www.inc.com/karl-and-bill/5-step-primer-to-entering-new-       markets.html