Global Business Opportunities and Strategies

Question: Discuss about the Global Business Opportunities and Strategies. Answer: Introduction This report involves an Australian Pharmaceutical Company who is considering South Africa and China for expanding its business and entering the global marketplace for the first time. The report will focus on the risks and opportunities of each of these countries and will recommend the best destination. The evaluation of the chosen country potential will be carried out through an analysis of risks and opportunities. It will identify the best market strategy based on the business type and business environment of the host country, in which the economic integration between the home and the host country together with the legal environment of the host country. In addition, recommendations will be given for entering in the business of market of the selected country. Background of the company Alphapharm private limited is a pharmaceutical company located in Australia and is a commercially driven company. It is one of the largest pharmaceutical companies in the world which produces more than 1400 different pharmaceutical products. It has a partnership with the other companies and is one of the largest pharmaceutical companies in Australia. It has around 2000 employees and a turnover around US$5 billion. They have a high quality standard and product on offer. It recruits those salespersons that possess a strong customer relationship and are trusted by the doctors. It is evident that this company has a large turnover as well as work force (Mylan.com.au 2016). Hence, it has the capacity to commit more resources towards the expansion in comparison to the smaller company having fewer proficiencies as well as limited resources. Assessing the potential of the countries through an analysis of risk and opportunities For any company, expanding internationally could be an immense shift as looking for business opportunities. However, it is necessary to spend time for developing a thorough understanding regarding the risks and opportunities before establishing a business. It should always be kept in mind that before entering an overseas market, the entrepreneurs should obtain a basic understanding of the market in which they want to enter. It is necessary to identify the best market strategy depending on the business type one needs to expand. Country risk and opportunity: China has the second largest economy of the world. It is still growing at a higher rate in comparison to the other developed countries. This country possesses rapidly emerging segments of market. It is considered too be a major emerging market for growth strategy by a large number of multinational companies. Within this country, rapidly altering demographics enhanced spending of consumers, increasing incomes, and open environment of business across different industries. Due to its economy, it is an attractive market for the entrepreneurs who want to expand their business (Jen and Yilmaz 2013). Considering Chinas pharmaceutical market, pharmaceutical companies will have great opportunities due to its development of health care reform plan. They are planning to strengthen the basic health system by making drugs and medical service affordable. They are trying to promote purchasing of medicines and restructure the drug distribution mechanism. The Australian pharmaceutical company can successfully expand its business here if they work in accordance with Chinas health care reform between 2011-2020. This is great opportunity to boost their demand in Chinas market. China is planning to enhance existing drug policy to improve medicine consumption and drug producers like Australias pharmaceutical company can increasingly benefit from it (Huang 2012). However, it will be a challenge for the company to make medicine affordable and improve distribution system as proposed by the health care reform. South Africas pharmaceutical market is rapidly increasing On analysis of pharmaceutical market of South Africa, it can be said that exceptionally high growth in this sector can be achieved by pharmaceutical companies who want to establish their company in the country. In 2013, the value of South Africas pharmaceutical market was 20.8 billion dollar and it is predicted that by 2020, the market will be worth 60 to 65 billion dollar (McKinsey Company 2015).This trend is a useful opportunity for multinational and Australias pharmaceutical company. The main motive of Australias pharmaceutical company is to prevent their market from stagnation by seeking to expand their business in new region. Therefore the Australian companys executive need to understand what factors will lead to growth in the content. They challenge is to identify hurdle in the system and collaboratively work to establish pharmecutical business in South Africa. Figure 1: Growth of South Africas Pharmaceutical market Source: (McKinsey Company 2015). Commercial risk and opportunity: Chinas economy is growing and the Chinese government main motive is to shift from investment associated growth to consumption associated growth. Their focus is on innovation and services that suits the demands of the consumers. However some facts is not good for Australian pharmaceutical company. This is because Chinas economy is not an open economy. While local companies get greater political protection, many foreign countries are restricted from operating in many areas of the country. With the increase in number of foreign enterprise trying to enter Chinese market, the number of commercial dispute in the country has also increased (Tan 2013). Hence the CEO of Australias pharmaceutical company will have to learn ways to settles this commercial dispute, entry restrictions and litigations issues. The most appropriate solution to this can be consulting a lawyer who has knowledge about the political laws of China. Obtaining commercial company chop is also essential in China which means the company has got commercial seal and it is legally registered in China. Foreign companies are at risk if no regular check is carried out and someone else uses this official document to take control of the company (Carr and Harris 2015). Hence it is essential that preventive measures are taken to prevent this risk. Commercially, South Africas pharmaceutical company is growing in all departments of drug such as prescription drug, generic drug, over-the counter medicine and medical devices. In South Africa, the increased opportunity in pharmaceutical market is driven by many factors. Firstly urbanization has contributed to massive growth in market. South Africas population is increasing and by 2025, the GDP of the country will be more than 20 billion dollar. The purchasing power of the country will increase and with this new foreign country like Australias pharmaceutical company will be at a advantage. This is because there will be more demand for health care services and medical drugs and better adaptability to modern medicines. Secondly, health care capacity in the country is constantly expanding. This trend is triggered by initiatives like shift to specialist anaesthetist nurse and training nurse for antiretroviral drug therapy. Hence, Australian company can play a role to improve capacity and delivery of necessary medications. The third factor is that government has introduced several steps to consolidate the pharmacy industry and promote vertical and horizontal integration of business. The manufacture of drugs is expanding by different kinds of acquisition and joint ventures (Kookana et al. 2014). However, one drawback is that South Africas government main focus is on domestic drug manufactures and they have imposed import restriction to support growth of domestic market. With strict laws on import, country specific-labelling, it will be difficult for Australian pharmaceutical company to expand their pharmacy in the country (Terpstra et al. 2012). Financial risk and opportunity- Despite economic slowdown in powerful countries like United States and Europe, Chinas economy is constantly growing at a high rate. It is also in a good position to overtake US to become the largest global economy by 2020. Hence with the prospective to remain as symbol of global growth, foreign companies have a challenge in understanding the complex market and seize opportunities to expand their business. With changing demographic and better business environment, Chinese market has become attractive for many foreign industries. They have created financial openness by schemes like calibrated opening of capital accounts. The pattern of export of financial capital in China has shifted due to rise in foreign investors by Chinese investors (Arnoldi et al. 2014). However, the unique challenge that Australias pharmaceutical company can face in expanding the pharmaceutical industry in China are due its large population size and large area. Lack of local unders tanding of the market can stall their growth. Besides this, great risk is involved because Chinas market is not homogenous and huge variation is seen in different locations of China in terms of literacy rate, per capita GDP, consumer expenditure and many others. Therefore, Australian company will have to think about best location to target pharmaceutical market of the region. For example Shanghai and Shangdong is best for pharmacy according to industrial orientation data. Another challenge is that understanding government policy and regulation will be critical because China restricts foreign companys entry in many sectors. Even if they will to enter Chinese market, they will have to follow conform to industry specific regulation for expanding their business. It will be a critical task for Australian company to interpret complex laws and regulation (Yip et al. 2012). The financial growth in South Africa is very slow due to various domestic problem and loss of European demand. There is also a sharp drop in demand from foreign market. Therefore considering this trend, Australian pharmaceutical company will have to think twice before entry into this region. It is evident that public spending is poor in this area, so even they establish their company, the success of the venture will depend only on keeping the cost of medicine extremely low. Any financial crisis in the country directly affects the pharmaceutical industry. Thus on analysis of risk and opportunity in the region, one can say that Australian company has to tackle with greater risk than opportunity in South Africa. Fragmented nature of health care sector, lack of market information, ethical issues and lack of transparency can act as a major barrier in investing in pharmaceutical industry in South Africa (McKee et al. 2013). Cross-cultural risk and opportunities- The nature of business and its success is dependent on cross-cultural different in target areas. Chinas culture is very different from that of Australia. This may pose a great risk for establishment of pharmaceutical industry. Understanding of cultural difference will only help in making cooperative strategies and conflict management. The social values, political system, laws, economic value and lifestyle of both Australia and China differ a lot. According to Hofstedes four cultural dimension of power distance, masculinity/feminity, uncertainty avoidance and individualism and collectivism, the two countries differs. Australia has supportive culture, masculine society, and individualistic culture, intermediate level in uncertainty avoidance, normative culture and indulgent culture (Bakir et al. 2015). In case of China, it has higher gap in power distance, collectivist culture, success-oriented society, low score in uncertainty avoidance and restr ained society. Therefore Australian company will have to analyse this different in cultural factor to successful take strategies for establishment of business in the country (Gupta et al. 14). Due to South Africas multi-cultural environment, Australian Pharmacy Company may face great challenge in penetrating the market. One of the major concerns in South Africa is the availability of electricity. Despite this factor, starting any business in the country is a lengthy procedure due many laws and regulation for foreign based company. Cultural factors affect styles of communication in different countries and cultural awareness will be a key challenge for Australian company. South Africa has a culture of normative behaviour, indulgence, individualistic and masculine society. There are also socioeconomic challenges that foreign companies need to overcome (Moran et al. 2014). Recommendation on entry strategy After the evaluation of risk and opportunities in expanding pharmaceutical industry in China and South Africa, one can interpret that both countries offer their own unique challenges to foreign company. However on calculation of overall risk in business, China can offer better profits and success to Australian Company. This is because South African government main focus is on domestic growth of market and they have strict regulation for entry of foreign based countries. Besides this there are many more challenges to overcome such as that of slow economy, internal issues, resource problem and many other factors. China also has strict regulation for foreign entry into their market, however their aim is to become a global market hub. So they will mostly welcome promising foreign investor in their homeland. Hence, if Australian market is aware of the barriers in entry into the market and how to overcome it, then they can easily expand their business in the country. The factors that are responsible for China as a favourite destination for pharmaceutical industry are cost savings due to low cost of labour and laboratory set-up, great talent availability in pharmaceutics, larger demand of health service due to increasing population size, saving on resource and high rate of economic development. Therefore the best entry level strategies that Australian Company can take are as follows: The first step is identifying the best location for establishing pharmaceutical industry. This choice may depend on higher population, income level and demand for drugs in particular areas. Shanghai is tier 1 city of China with mature markets in terms of attracting customers. Due to restriction on foreign company involvement in China, it is necessary to thoroughly understand government policy and regulation. One can refer to Chinese foreign investment catalogue to determine what is encouraged and what is restricted in the country. To unravel complex laws in pharmacy industry in China, Australian company can take help from specialised lawyer who have knowledge in this area. They can also help to recommend key authorities who can be contacted to for effective implementation of pharmacy industry. Any disputes can be solved by arbitration (Wei et al. 2014). Since China may spend more time in approval of any medical product, it will be necessary for Australian company to spend more time on research and understanding approval process to swiftly enter the market and save time too. Legal consultants can offer useful advice on how to interpret Chinas law and politics (Holtbrgge and Baron 2013). Entry will also depend on scope, geographical size and industrial landscape of China. Thus, Australian company will have to consider this factor and overall cost to succeed in their venture. Another smart move is starting a joint venture with local Chinese company to minimize the overall risk in entry (Chung and Tung 2013). The next step is to study shelf report on how to enter pharmaceutical company. There are varieties of global consultancies who can offer advice on key areas. It helps in determining the nature of market and well-executed marketing research will help in taking better strategic decision (Holtbrgge and Baron 2013). Most important availability of quality of staff is most crucial for pharmaceutical company. As a China is hub for pharmaceutical company, Australian company will face no problem in spotting talent and recruiting them. Chinese staff will also help in smooth running of the business. Finally, they should try to get their company legally registered in China by developing international property rights strategy (Peng 2012). The report on comparative study on risk and opportunities in establishing pharmaceutical industries in China and South Africa provided brief insight into financial, commercial and cross-cultural risk present in both countries. This information will be useful for Australian pharmaceutical company to determine which country can be the best destination to expand its business. This report also gives justification on why China can be a better choice than South Africa for successful establishment of pharmaceutical industry. Finally based on that justification, the key entry market strategy for entry into Chinese market will guide Australian company to effectively enter the market by conforming to all rules and regulation of the place. Reference Arnoldi, J., Bernhardt, P.P. and Liang, Y., 2014. Challenges, Opportunities and Strategies for Foreign Pharmaceutical MNCs in China. Bakir, A., Blodgett, J.G., Vitell, S.J. and Rose, G.M., 2015. 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