International business

The author has evaluated the possible products and has selected plastic furniture as the most appropriate line of products for international business strategies.. Also the barriers Phoen

LONDON SCHOOL OF COMMERCE COLOMBO CAMPUS SRI LANKA

MBA FOR EXECUTIVES

MODULE ASSIGNMENT:

International Business

EXECUTIVE SUMMARY

The foundation of this report was to assess the product portfolio of Phoenix and closely evaluate the adequacy

of the chosen product line for an internationalization project The author has evaluated the possible products and has selected plastic furniture as the most appropriate line of products for international business strategies The host country evaluation was also completed considering the availability of raw materials and labor component where the State of Qatar was the preferred choice

The report evaluated the market analysis of the host country where all internal factors were analyzed for conditional and competitiveness The information received was used to determine the possible market entry strategy Also the barriers Phoenix may encounter both in home and host countries which might create barriers were analyzed for possible counter strategies to be formulated

Culture is another important factor for international business and this area was also analyzed using known culture theories for both countries as this could be important for a smooth operation also knowledge in this area will be beneficial for strategizing against possible culture related impacts

The main section of this report is the final business strategies where business entry process is at the pinnacle Considering all revealed information, the Joint Venture was selected as the entry mode of choice supported by business strategies concerning internationalization, location, staffing and marketing which clearly defines do’s and don’ts of international business plans for Project Qatar

International Business is a fascinating subject with many interesting factors to be considered before even finalizing the business strategies Therefore completing this consultant’s report successfully has given the author key learning points where he has enjoyed thoroughly while using all the knowledge gained to churn out

a very successful report with valid points to be considered

TABLE OF CONTENTS Number & Title Page Executive Summary……… ……… 02

Table of Contents……… ……… 03

List of Tables……… ……… 06

List of Figures……… ……… 07

List of Abbreviations……… ……… 08

1.0 Introduction……… 09

1.1 Plastic Industry Overview ……… 09

1.2 Background of “Phoenix” ……… 09

1.2.1 Company Vision ……… 09

1.2.2 Company Values ……… 10

1.2.3 Range of Operation ……… 10

1.2.4 Products from Phoenix ……… 11

1.2.5 Company Core Competencies ……… 12

1.3 Scope of Report ……… 12

1.4 Objectives ……… 12

1.5 Methodology ……… 13

2.0 Products for Internationalization ……… 13

2.1 Project Qatar – Preferred Products ……… 13

2.2 Product Performance ……… 14

3.0 Target Market Analysis ……… 14

3.1 Host Country Analysis ……… 14

3.2 Qatar – PESTLE Factors ……… 16

3.3 Qatar - National Competitive Analysis ……… 17

4.0 Barriers for Internationalization ……… 18

4.1 Domestic Barriers ……… 18

4.1.1 Limited Access to Finance ……… 18

4.1.2 Regulatory Barriers ……… 18

4.2 Host Country Barriers ……… 18

4.2.1 Difficulty Sourcing Local Partners ……… 19

4.2.2 Acquiring Property ……… 19

4.2.3 Work Time Practices ……… 19

4.2.4 Labor Practices ……… 19

4.2.5 Documentation Issues ……… 19

4.2.6 Driving License Requirements ……… 19

4.2.7 HR Management Issues ……… 20

5.0 Analysis of Cultural Differences ……… 20

5.1 Hofstede Cultural Analysis Model ……… 20

5.2 Impacts of Cultural Difference ……… 21

5.2.1 Mediation and Settlements ……… 21

5.2.2 Personal Style ……… 22

5.2.3 Communication ……… 22

5.2.4 Decision Making ……… 22

5.2.5 Compassion towards Time ……… 22

5.2.6 Risk Assessment ……… 23

5.2.7 Emotionalism ……… 23

6.0 Business Entry Strategy ……… 23

6.1 Justifications for Business Entry Strategy ……… 24

6.1.1 Access to Resources ……… 24

6.1.2 Ease of Access ……… 24

6.1.3 Sharing Risks, Costs & Control ……… 24

6.2 International Business Strategy ……… 24

6.2.1 Competitive Advantage ……… 25

6.2.2 De-Centralized Operation ……… 25

6.2.3 Independence ……… 25

6.2.4 Local Sourcing ……… 25

6.2.5 Innovation ……… 26

6.2.6 Management Style ……… 26

6.3 Location Strategy ……… 26

6.3.1 Facilities ……… 26

6.3.2 Labor ……… 26

6.3.3 Business Logistics ……… 27

6.3.4 Infrastructure ……… 27

6.3.5 Target Consumers ……… 28

6.3.6 Suppliers ……… 28

6.4 Staffing Strategies ……… 28

6.4.1 Employment Procedure ……… 28

6.5 Marketing Strategy ……… 29

Conclusion…… ……….…… 31

References……….… 32

Bibliography……… 34

LIST OF TABLES Number& Title Page 1.1: Phoenix Management Team ……… 10

1.2: Core Competencies of Phoenix ……… 13

3.1: Furniture Imports by Qatar ……… 15

3.2: Qatar – PESTLE Factors ……… 16

3.3: Qatar – National Competitive Analysis ……… 17

5.1: Cultural Analysis – Sri Lanka vs Qatar ……… 21

6.1: Project Qatar – Marketing Strategies ……… 29

LIST OF FIGURES Number & Title Page 1.1: World Plastic Demand Distribution by polymer ……… 09

1.2: Core Values of Phoenix ……… 10

1.3: Countries that products from Phoenix are exported to ……… 11

1.4: Products from Phoenix ……… 11

2.1: Phoenix furniture product mix ……… 13

2.2: Market Share of Plastic Furniture – Sri Lanka ……… 14

5.1: Hofstede Model Cultural Analysis – Sri Lanka vs Qatar ……… 20

6.1: Popular Operating Models for Market Entry ……… 23

6.2: Internationalization Strategies ……… 25

6.3: The Marketing Mix ……… 30

LIST OF ABBREVIATIONS

BOD - Board of Directors

CAPEX - Capital Expenditure

CEO - Chief Executive Officer

FIFA - Fédération Internationale de Football Association

GCC - Gulf Corporation Countries

MSA&L - Ministry of Social Affairs and Labor

OPEC - Organization of Petroleum Exporting Countries

OPEX - Operating Expenditure

PET - Polyethylene Terephthalate (thermoplastic polymer resin)

Phoenix - Phoenix Industries Limited

SWOT - Strengths, Weaknesses, Opportunities & Threats analysis

UNIDO - United Nations Industrial Development Organization

1.0 INTRODUCTION

1.1 PLASTIC INDUSTRY OVERVIEW

Global demand for plastics has shown a significant growth and in 2013, the global production reached nearly 300 Million metric tons with China being one of the main producers

Plastics are being used in different products and can replace glass, metal and wood and can be used in thousands of different industries

Figure 1.1: World Plastic Demand Distribution by polymer

(Source: ICIS Consulting)

Sri Lankan plastic industry currently is 50 years old and technologically sophisticated As per research done by UNIDO, annual Sri Lankan consumption of plastics is 180,000 metric tons with an annual growth of 10-12% with 900+ industries, making it one of the most competitive industries

1.2 BACKGROUND OF “PHOENIX”

Founded in 1976, Phoenix Industries Ltd (herein known as Phoenix) was the pioneer organization in Sri Lanka and South East Asian region for plastic injection molding Company, the foremost and biggest plastic producer in Sri Lanka with a modern manufacturing plant with machinery for injection

& blow molding and mechanized PET product line with products ranging from household plastic wear, furniture, bottles, plastic packaging etc (Phoenix, 2015)

1.2.1 COMPANY VISION

“Name for Plastic” depicts that Phoenix’s objective is to be the primary brand for plastic products

in Sri Lanka

Phoenix has experience in international markets their products having success internationally already with many being exported to foreign countries Phoenix strategy in attaining international success is by assuring international expectations by offering high quality products

Figure 1.4: Countries that Products from Phoenix are exported to

(Source: Phoenix, 2015)

1.2.4 PRODUCTS FROM PHOENIX

Phoenix has introduced several products during 2013/14 in consumer and household sector Furniture and Household sectors have shown significant growth of 60% during this period when company growth was 48% which was very encouraging Below illustration highlight the range of products currently representing Phoenix

Figure 1.3: Products from Phoenix

(Source: Phoenix, 2015)

1.2.5 COMPANY CORE COMPETENCIES

Phoenix holds an array of core competencies where the competitive market requirements are met to exceed all customer expectations

Table 1.2: Core Competencies of Phoenix

(Source: Phoenix, 2015)

1.3 SCOPE OF REPORT

 Evaluate selected products to successfully enter international business arena

 Assess Qatar marketing conditions and Phoenix’s ability to compete in such conditions

 Strategies to be adopted by Phoenix enabling growth, brand value, revenue and profitability

1.4 OBJECTIVES

 To review the adequacy of the product and host country analysis to evaluate the efficacy

 Recommendations to attain business objectives and effectiveness in international markets

 Offer Phoenix with internationalization strategies in preparation for international entry

1.5 METHODOLOGY

 Analysis of Product, Company and Management in local context

 Evaluate host country market conditions and PESTLE factors

 Recommending proven business strategies

 Use market best practices and marketing theories

2.0 PRODUCTS FOR INTERNATIONALIZATION

2.1 PROJECT QATAR - PREFERRED PRODUCTS

The product line recommended for “Project Qatar” is Phoenix Furniture line which has a wide range of products comprising of chairs, tables, outdoor and kiddie’s ranges which can be positioned differently

in respective segments The complete furniture product portfolio is illustrated below:

Figure 2.1: Phoenix furniture product mix

(Source: Phoenix, 2015)

(Source: Market Statistics)

It is evident that Phoenix is the undisputed leader in Sri Lankan plastic furniture market with annual consumption of approx 86,500 metric tons with estimated YoY growth rate of 40%, making Phoenix a worthy candidate for internationalization

3.0 TARGET MARKET ANALYSIS

3.1 HOST COUNTRY ANALYSIS

The host country this consultancy report is recommending is the State of Qatar, an Emirate in Persian Gulf Region with an indigenous population of <1,000,000

Furniture industry in Qatar is booming with the government’s investment for infrastructure and motivation triggered by hosting of 2022 FIFA World Cup and related development

The market in Qatar comprises of the following segments which could be targeted by Phoenix for its furniture range

 New Constructions

- Apartments, Villas, Bungalows, Office Buildings, Hotels, Restaurants and Recreational, Stadiums, Sports Centers, Gymnasiums and Athlete Villages

 Renovation Projects

 Kiddies / Baby Range

Analysis of furniture import Statistics reveal that the trend for plastic furniture imports is declining and more industries are looking to manufacture furniture in Qatar with abundance of raw materials and the availability of low-cost labor from South and South-East Asian countries Qatari furniture import statistics from 2009 – 2012 are noted below (JFEMA, 2013)

Table 3.1: Furniture Imports by Qatar

(Source: UN Comtrade)

3.2 QATAR – PESTLE FACTORS

Summary of Qatar PESTLE factors associated with furniture industry is listed below

Table 3.2: Qatar – PESTLE Factors

(Source: United Nations, 2002)

3.3 QATAR – NATIONAL COMPETITIVENESS ANALYSIS

This report used Porter’s Diamond Analysis to highlight competitive benefits by Qatar attracting business Summary of National Competitiveness Analysis is noted below

Table 3.3: Qatar – National Competitiveness Analysis

(Source: United Nations, 2002)

4.1.1 LIMITED ACCESS TO FINANCE

This is one of domestic barriers Phoenix will face includes trade finance and working capital Trade Finance is needed to finance sales to international buyers which create a distinct advantage over competition Therefore Phoenix will require to source adequate finances or a financier (with terms and conditions discussed) prior to commencement of Project Qatar

Having limited Working Capital is another domestic barrier for Phoenix as this could create difficulties to fund their international business Since Phoenix will initially utilize their own finances to fund ‘Project Qatar’, Working Capital could create barriers

Sri Lankan Foreign Employment Bureau is currently governed by a statute initiated in 1985 and not many changes had been made since then This is a barrier to Phoenix as many of current employee activities would affect by this ageing regulation needing immediate amendments

Sri Lankan Labor Act insists on bilateral agreements between the company and host country on migrant workers which would create difficulties for Phoenix in attracting skilled labor from Sri Lanka for Project Qatar (ILO, 2008)

4.2 HOST COUNTRY BARRIERS

Phoenix will also need to be concerned about the barriers already exist in Qatar preventing successful execution of Project Qatar

4.2.1 DIFFICULTY SOURCING LOCAL PARTNERS

Qatar Investment policies specifies any foreign company seeking to initiate business would require

a local partner where 51% of the stake to be by Qatari partner and Phoenix having only 49% However, this does not apply for Joint Ventures where stakes and profit margins are determined by the JV agreement between the businesses (Latham & Walkins, 2013)

4.2.2 ACQURING PROPERTY

Qatari law doesn’t allow any foreign companies to own land in Qatar but may lease property long term up to 50 years However, established companies mightn’t advocate this ruling as it creates uncertainty in business where it offers more power to the local partner

4.2.3 WORK TIME PRACTICES

Qatar is an Islamic Country where work times are determined by religious beliefs which is different

to Sri Lanka A working week in Qatar is from Saturday till Wednesday with Thursday and Friday being weekends where Sri Lankan working week is similar to the west

This may create difficulties with times to liaise with international market restricted to only three (3) days a week (Monday to Wednesday) which is an adjustment when exporting to west

4.2.4 LABOR PRACTICES

Local labor law has made hiring of Qatar Nationals to high positions of companies a mandatory requirement This is applicable regardless of competencies and significantly higher wages are to be paid which may create efficiency and motivational barriers

4.2.5 DOCUMENTATION ISSUES

As per regulations, all foreign import and export transactional documents require attestation by local embassies creating an extra phase of a complicated logistics process and since these authorities work as per Qatar timelines creating delays for Phoenix resulting in loss of revenue

4.2.6 DRIVING LICENSE REQUIREMENTS

Expatriate workers require a driving license obtained from Qatar except for Caucasians where they can convert their licenses Therefore all other staff needs to undergo a rigorous driving examination which is costly and time consuming Also, all driving staff should already have a valid local license Therefore this will create efficiency issues in transferring their Sri Lankan staff to Qatar