Fins Tanaka

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…Committed to Quality, Excellence and Building Relationships PRE-NEGOTIATION STRATEGY REPORT
Over the years, Tanaka has become a name synonymous with quality, excellence, and dynamism. With a humble beginning in the city of Tokyo, we have built ourselves as a strong, respectable, and successful electronics corporation in Japan. We are one of the leading manufacturers and exporters of microanalyzers with a world market share of 20%. With the objective of expanding our global reach and maintaining our competitive position, we are building strategies to invest in the emerging markets of the Exotican continent, with the primary focus being on the countries of East Tropicalia, West Tropicalia, and Paradiso. We, the Board of Directors of Tanaka, are proud to present our Pre-Negotiation Strategy Report. Intended End-Game Position

Broadly speaking, our intended end game position is based on the five mutually supporting foundations with respect to the Exotica market. First, we intend to capture a 50% market share of the microanalyzer market in Exotica. Secondly, we will take advantage of our internal efficiencies in microanalyzers production in conjunction with the efficiencies gained by a transnational value chain structure in order to further reduce costs and increase margins. The following crucial factors have been analyzed to provide a basis for our strategy: Microanalyzer Industry and Globalization:

Local Global Driver Global
Third, microanalyzers are a relatively small portion of our overall business (10% of sales), so while anticipated sales growth in this product line is significant, its largest impact is expected to serve as a brand leader for our other product lines. Fourth, we need to acquire expertise in the character of business activities such as production and marketing in the specific emerging markets. Finally, we recognize that our microanalyzer is a value product and as such it is well positioned to compete with the more leading edge but correspondingly lower profit margin products in emerging markets which tend to be more value conscious. More specifically, we are looking to:

�� Establish and operate manufacturing plants of microanalyzers in the emerging markets of Tropicalia and Paradiso through a joint venture with our local distributors. This will allow for an efficient transnationally-structured value chain with local production and distribution along with other activities which can be aligned in a similar fashion; �� These savings along with our existing efficiencies will allow for lower price points while maintaining our existing margins;

�� Lower price points will allow us to aggressively push our microanalyzers into Tropicalia, Paradiso and the Exotica region. Note that our most direct competitor is Eurodata, which has a product technologically on par with ours but with a higher cost structure. Megatronics, on the other hand, has a technological lead but they too suffer from lower margins. This confluence of circumstance gives us a unique opportunity in the Exotican market. By enhancing value while maintaining quality and margins, we can capture market share from both corporations;

�� The expected Exotican market demand for microanalyzers is 180,000 units six years from now, with an aggressive but reasonable projection of a 50% market share yielding 90,000 units annually;

�� Our overall corporate position and brand recognition will be enhanced in the rapidly growing markets of Exotica via the extension of our brands through the joint ventures and contractual agreements. Thus, our regional sales in non-microanalyzer product lines would be expected to grow in conjunction with our increased brand recognition generated by the microanalyzer;

�� Tax incentives and import duty relief have a significant impact upon margins and the ability to achieve a lower price...
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