Assignment: International Marketing
The aim of report is to discuss the nature of international marketing through follows the PESTEL analysis. However, Tata Group is selected for understanding the challenges and opportunities of the international market (TATA, 2018). There are various motivation factors that helps the Tata Group to go to the internationally. It can help the company to grab new market opportunities just like Tata wants to expand its entire business operations in Indonesia. The reason behind is that Tata group find large opportunity for Tata vehicles in Indonesia due to feasible operating condition and high customer needs which is quite similar to India consumers. The needs include the demand of particular products and services in another area. At the same time, Indonesia market allows the company to occupy the maximum market share due to the absence of competition level and existences of large favour of product.
Additionally, there is an opportunity related to risk diversification exist which encourage the Tata for mitigating the negative occurrences. By doing this, company could become stronger for taking risk in future and affected less from the external factors. Besides that, resources seeking, over-production, high sales and high market share are the motivational factors that allow the company to go to international market. But at the same time, Tata may face various challenges while goes international market. Cultural differences are the key challenge for the company to address. However, Consumer influenced to purchase the product with message deliver through the media and right message helps to achieve maximum attention of consumers. At the same time, external factors like government policy, unfavourable economic condition are the areas that could restrict the company to enter into the international market. Other than that, there are various advantages present with the international market and it proves to be beneficial for the company growth. Firstly, it helps the company to increase its customer base
Secondly, it assists the company to tap the uncovered areas
Thirdly, it helps to generate more profits
Lastly, company can able to build the specialization
Therefore, the international strategy assists the Tata to enter into the Indonesia vehicle market.
For this research topic, a proper discussion is conducted with the tutor and classmates is very useful as it helped in determining and understanding the nature of international marketing with the help of PESTEL analysis. The research method used for this research study is secondary data collection in order to collect data related to international market of Indonesia. In secondary data collection method, data was collected from different data sources i.e., through online websites and library and that helped in completing this assignment (Sekaran and Bougie, 2016). In concern to this, different data sources were selected by researcher such as Google Scholar, Wiley online library, science direct and from library of university. These all sources found to be effective to search a required data or facts which are available offline and online.
With the help of these databases, some key words related to business environment in Indonesia, internationalization and entry modes were also search by researcher considering some specific period. However, most of the books and articles were searched from certain period i.e., year 2011 to year 2018. In addition, all the data collected from secondary data sources have been used already by the other researcher in past (Robinson, 2014). This secondary data collection method enables the researcher to get valid and relevant information about international market in Tata and its business environment by analyzing the political, social, legal, economic, environmental and technological factors.
Moreover, different data sources like journal, articles and books which were published offline and online as well as they are used to develop the theoretical knowledge and understanding on the business environment and also related facts or data in concern to Indonesia. On the other side, some online websites such as trading economics, statistics, etc are used by researcher in order to collect quantitative data related to economic condition of the country (Gentles, et al. 2015). At the same time, annual report and company website is also browsed by the researcher and this also helped in completing this research study by providing the accurate and relevant information about the company. Online websites also assisted researcher in developing knowledge about the business environment of Indonesia and also helped in determining the business challenges and opportunities for Tata group
Therefore, all these secondary data collection sources helped researcher in developing large database information in context of business environment of Indonesia and also helped in determining the possible business opportunities for Tata Group.
For successfully enter into the Indonesia market, the Indonesia needs to adopt the right market entry mode. Likewise, there are various international market entry strategy exists such as exports, imports, licensing and franchising and joint venture. These are the strategies that companies largely pursue as this practice considers as a quite cost effective and reliable. In context Tata motors, the feasible entry more strategy might be the direct exports (Berthon et al., 2012). This practice will be done through sale representative, distributor which allows the entity to sell the product or services to another country. This mode contributes towards the high feasibility in the form of low cost. But, this mode is more suitable for the small quantity products and Tata group wants to expand its vehicle section in the Indonesia segment. So in that case, it might not provide that much profit to the company as heavy vehicles demand for the high expenses in transportation. Thus, it is stated that exporting strategy allows to achieving the reliability but not efficiency.
Licensing is another way that can be used by the Tata to enter into the international market. Basically, licensing is considered as an arrangement which helps the licensor to award the rights of intangible products to another business and it is for particular period of time. This practice can provide numerous benefits to the Tata group in regards to less investment in particular country and low government regulations. The contribution of strategy is making use of available use of licensor with the exchanging of patents, loyalties, trademark rights and license fees etc (Griffith, 2010). On the other hand, it allows to managing tariffs or legal areas but it is considered less fruitful when it comes on profit generation as share of less Host Company is more as compare to entrant. In such condition, Tata motor couldn’t generate large cash inflows into the business.
Franchising is well established strategy that helps in rapid market expansion. This strategy could provide more benefit in the legal relationship. It is quite relatable to licensing but franchising includes long-term commitments. As per this strategy, the franchisor grants the rights to franchisee to use its intangible assets such as trademark. At the same time, there are certain restriction and legal regulation that imposed on the franchisee company. Franchisor also assists the franchisee company in terms to provide the customer needs, resources capability, personal involvement and capital assistances etc (Eichler et al., 2012). Thus, through this manner, franchise supports the company when it decides to enter into international market. The franchising method proves to be effective in the areas of creating awareness or develop high quality but it lacks in the risk reduction and cost control. High risk tends to contribute inefficiency for the company.
Joint Venture is particular form of partnership which creates the third independent managed company. In this, two companies agree to work together in particular market or geographic region with the aim to expansion of its business. Risk and profits are shared equally is the best part of the strategy. This is because high risk is always present in the international market so to address such area is considered as a high achievement (Dant et al., 2011).
Hence, the above mention entry mode can help the Tata motor to easily enter into the market of Indonesia. On the basis of above strategy, licensing could prove more reliable for the Tata motor in regards to capture the Indonesia vehicle market segment.
In the views of Jovicic et al., (2013), there are numerous challenges that Tata group face while going international market. However, foreign laws and regulation considers as one of the area that give rise to the difficulties of operating the business in host country. Sometimes, companies find problem in adhering the foreign laws due to differences in business structure. Thus, this limits the company capability to earn high profits in the foreign market. The identification of local customer needs and understand the market patterns tend to be difficult to understand. It means that catering each social needs and full such desired is quite tedious part of international market. In a broader term, the external factors such as political, economical, social, technology based and legal etc are the areas that give rise to the challenges and issues (Terpstra et al., 2012). In this, political concerns occur with the high tariffs, tax policy, and trade agreement. Economic factor indicates the limitation with the recession, fluctuation in currency rate etc. Technology indicates the obsolete of expertise which cause to delay in work. This way it affects the new entrants in the host country.
Other than that, there are few common problems that always present with the expansion of business. These are the availability of resources, cultural management, differ communication style, distance & time, development supply chain and logistics management. Such problem might also occur with the Tata motor when it enters into the Indonesia vehicle segment (Okazaki and Taylor, 2013). It affects the business operation in the form of high investment in technology, growing customer taste and preference and increasing competition in business (Polidoro et al., 2011). On the basis of such factors, it is stated that Tata should perform extensive market research before take decision to enter into the vehicle segment of Indonesia.
Apart from this, the cultural diversity may create the problem for the Tata group in regards to communicate the messages or provide facts about the product or services. However, it is quite difficult to address each culture with product offering because every individual has different desire & need. These needs are developed within the society in which they live. At the same time, inappropriate environment and economic downturn can also challenge the Tata to run its business operation in Indonesia. It can occur with the unavailability of upgraded technology that’s does not support the company in terms to bring the sustainability in functions. It becomes challenging for the Tata if advance technology does not support as it focuses heavily on the advanced system and expertise areas for the creation of product. Furthermore, the accessibility of finance is one of the problems which commonly arise when going to international market. The new entrant company requires the funds to operate its functions at the global market. If there is no proper financial availability exists by the side of foreign banks and financial institution, then it may challenge the Tata in terms to make an appropriate investment. Thus, these are the general challenge that restricts the companies to go international market successfully.
Macro-environment analysis using pestle
The macro analysis helps the company to identify the challenges and opportunities that exist with the external forces. However, macro analysis uses the PESTEL framework to study the external forces. The PESTEL analysis would support the Tata to identify the external environment of Indonesia so that it prepares itself properly. It also contributes to analyse the affects of external factors over the company internal operations. This framework could assist the company in regards how to develop the company policy or create the product as per the customer requirements (McFarlin and Sweeney, 2014). Such practice allows to sustaining at longer duration in the target market. Based on such study, Tata group can easily understand the external market forces & its impact and as per that certain decision will takes place. This study clearly indicates that there is high requirement to undertaken the analysis of external environment with the aim to evaluate the effect of such factor on the business functions.
The PESTEL Analyses for the Tata Group are as follows:-
The political environment of the country has high influences over the local companies. This is because political environment includes government interventions, tax policy, foreign trade policy, environmental laws and trade restriction. In regards to this, company face problems while performing any trade. The above listed political factors often have an impact on organization and way of doing the business. Moreover, political environment is driven by the ideologies of political leaders and nature of bureaucratic and this give rise to stability or instability of political environment. In context to Tata, it is must to have a full knowledge about the political environment of Indonesia so that right decisions could be taken.
The political environment of Indonesia is quite flexible as country is democratic and declared as republic. The rules and regulations are developed as per the roman-Dutch law. The country is still struggling hard to get the financial stability and approx. 22% population is spending their lives under the poverty line. This can affects the operations of Tata motor as company gain less liquidity and without capital adequacy company can’t survive for a longer duration. The best part of Indonesia political system is the flexibility and republican policy which can help the company to easily establish its business (Ramamurti, 2012). Moreover, high population rate would also contribute towards increasing the customer base.
The economic factor plays a significant role in regards to analyse the economic stability of particular country. The factor includes the economic growth, interest rate, exchange rate, inflation, disposable income of consumers and businesses. These affect the organisation way of doing the business and its ability to earn profits. For an organisation, the economic stability is quite important as if there is economic growth then the demand of product is generating (Zhou et al., 2012). Furthermore, the economic factor can affect the Tata business with its economic system, policies, factor of production and socio-infrastructure.
This graph indicates that country is growing every year and it has strong economic which supports the Tata to successfully operate its functions.
Basically, Indonesia is developing country and it is taking various steps to increase the GDP. For this, government is spending approx. 23.5% on GDP and in return they earn $ 92.62 billion and their expenses about $98.99 billion. It has good flow of FDI with $ 67.3billion (Sarasvathy et al., 2014). It indicates the strength of economic sector. Therefore, Indonesia economic growth is strong. This could provide advantage to Tata in terms fulfil the different needs of customer.
The country which has strong economy then it means that particular country has high demand for a product or service. It also shows the high purchasing power of consumers. So the strong economy can provide numerous benefits to Tata. Besides that, it would also give opportunity for increasing the customer base. Since Indonesia achieves good flow of FDIs then Tata also get a chance to make a liberal investment in other segments also.
Apart from this, the country falls under the poverty then the recession chances is more which can affects the Tata operations more as recession reduce the capacity of individual to spent high on particular product. The poor economic condition also affects the company production and supply chain. Tata focuses more on the production and supply chain for bringing quality in its product line (Czinkota and Ronkainen, 2013). However, the market of Indonesia for the Tata groups is profitable if it goes on tie-up or strategic alliances strategy otherwise, it becomes quite difficult to operate the business operation in the Indonesia.
Social factor is one of the essential factors which have a high influence or impact on the business environment due to some sociological factors such as customs, tradition, lifestyle, language, culture, wealth and value system, etc. These all social factors create a huge impact on the society because the customs, values and beliefs affects directly on the demand of the society for products/ services (Lange, 2010). In Indonesia, the social status and living standards of the people is improving on frequent basis as government providing people with required job and opportunity to achieve their business growth and development. The social environment of Indonesia is quite different because there has a large population by increasing the ratio 1.13%. For Tata group, it is a challenge to meet the customer need and demand on time because the social environment of this country is very complex and for that company need to understand that environment in advance and develop its business strategy accordingly.
The technological factor creates a huge impact on the society as technology changes with the change in the customer’s requirements and needs. In order to meet the customer requirements, there is a high need to develop or adopt new technology in the organization in order to provide timely products and service delivery to the customers. In today’s 21st century, the technological factor creates a positive impact on the business expansion and growth because this factor help in improving or developing the supply chain practices, logistics and most important customer engagement (Al Ghabid, et al. 2015).
In Indonesia, the government and companies are developing their production and operation processes by using the innovative technology such as by developing an effective communication system. In concern to this, it can be stated clearly that Indonesia is also leading in adoption and implementation of new technology for the economic development. For company TATA group, technological factor will provide the huge support to the company in establishing business successfully by adopting an effective and innovative technology. The Tata group can easily sustain in this country as this country welcomes the new technology openly and this will lead to business growth and development to a large extent.
Environmental factor is a factor which creates huge impact on the sustainability of the country. The environmental condition of Indonesia is found to be very interesting because the geographical location of this country is different from other countries which this country comprises of many islands and which are located between the Indian and Pacific Ocean. The environment of Indonesia is very hot and humid because this country is surrounded with the water (Nguyen, 2016). In addition to this, it is also identified that in Indonesia, there are more than 600 languages are spoken in this country. In respect to this environmental factor, Tata group might have chances that company can face a problem because environmental factor of that county is not safe as country already faces various negative impact i.e., tsunami, deforestation and massive forest.
There are different legal rules and regulations which creates huge impact on development and expansion of business in an international market i.e., by applying entry barriers rules and regulations. In addition to this, Mulyana & Djajadiningrat (2013) also stated that government introduces the environmental law and municipal noise reduction plan in order to create a noise limit in some residential areas. The legal factor also involve a law for labour which is introduced in the economy by the government in order to protect the interest and right share in the income i.e., to avoid the discrimination and provide fair remuneration to all labour.
While studying, it is determined that in business sector, Indonesia government introduced a tax system reform i.e., tax on 1st amount of 25 million will be 10%, on next second 25 million, it will be 15 % and this tax rate will increase by 30%. Similarly, like country India, this income tax reform is also implemented on individual and companies. In context to it, it can be stated that Tata group is also required to follow and adopt the legal rules and regulations of country Indonesia in order to avoid any future risk and barriers on the way of growth and development of business.
From the above study, it is concluded that Tata Group might face several challenges and opportunities when enters into the international market such as Indonesia. The Tata could face the problem in the form of differ in government policy, regulation, cultural differentiation, political concern and increasing competition tends to be the challenges that limit the company operations when it comes to operate the business in foreign market. In regards to this, the Firm needs to enter into the new market through FDI mode in order to get the better control over the business operations. Other than that, the PESTEL analysis of company defines the external factors of Indonesia that could affects the business of Tata. It is identified that 22% people of Indonesia lives in poverty and the recession is also exist in this country. In this regards, the Tata can get the poor technology and inappropriate climate to manufacture the product. In this concern, it is suggested that Tata should adopt the outsourcing strategy which helps the company in all aspects such as provide proper capital, manage the supply chain and production, incorporate the advanced technology which contributes towards the sustainability. On the basis of this study, it is depicted that Tata group has a favourable opportunity to enter into the Indonesia market.
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