International Strategy for Fonterra to Enter Japan

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Executive Summary

This report examines provides a comprehensive summary of the threats and opportunities for Fonterra to expand its operations into a new market within Japan.

Japan has a relatively stable political and legal environment which reduces the risks associated with entering the foreign market. The political system is a democratic system, with a Westminster form of government similar to Australia, which is favourable for western cultures when conducting international business. The legal environment on the other hand, is built on the foundations of the European Civil Law system with an English-American influence. Therefore Australian businesses must understand the differences when conducting business to ensure the different legal systems do not have a negative impact on the business.

Japans economy is the third largest in the world, and is relatively stable. During 2011 Japan experienced a decline in economic growth as a result of the Tsunami in March, however has made a positive recovery. The PPP has been used to measure the living standard within Japan and the ability to afford Fonterra’s products. The ease of doing business in Japan ranked closely behind Australia indicating that the governments have created a regulatory environment supportive to operating a business which provides a great opportunity for Fonterra.

There are various cultural differences between Australia and Japan, which must be taken into consideration. Japan is a highly masculine society as opposed to Australia this will benefit Fonterra with their determination to strive for success.

The macro analysis highlighted important factors for Fonterra to consider when entering a new market. Therefore based on the macro analysis it is recommended throughout the report that Fonterra use a Greenfield venture to enter the Japan market, this will help avoid the high transportation costs and tariffs associated with exporting fresh milk into Japan. This method allows Fonterra to create maintain a consistent corporate culture within the entire organisation. A transnational strategy will be used the target consumers and value add products to meet differentiated consumers’ needs and wants, to simultaneously achieve low costs through location economies.

Finally, a geocentric staffing approach provides the most benefits to Fonterra when implementing a transnational strategy. It involves hiring the best person for the job regardless of their nationality, allowing Fonterra to develop a pool of highly trained executives to ensure the successful operations of Fonterra in Japan.

Based on the report, Japan offer many potential benefits for Fonterra to expand into the foreign market. The increasing importance of health and nutrition provides a strong target market and opportunities for Fonterra to achieve.

Table of Contents
Executive Summary1
Introduction3
Macro Issues4
Political System5
Economic System5
Legal System6
Culture6
Entry Mode7
International Strategy9
HR Recommendations11
Ethical Issues14
Recommendations16
Conclusion17
References18

Introduction

Fonterra is a NZ owned company which is the world’s largest dairy exporter (Australian and New Zealand Business Case Studies Pty Ltd [ANZBCS], 2010). For the purpose of this case study one will assume it is an Australian based company looking to expand into Japan. In 2001 Fonterra formed a co-operative with its farmers, now with over 11,000 shareholders, thus the farmers are the owners and suppliers of the company. Not only do they receive payment for the supply of milk, but also value added returns (ANZBCS, 2010).

Fonterra exports dairy to more than 140 countries throughout the world, contributing to 20% of New Zealand’s total exports. Which have a large impact on the New...
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