This report deals with the internationalization of a Japanese company called Elecdyne. Elecdyne is located in Tokyo, Japan, and has manufactured electronic consumer goods since 1990. At the moment Elecdyne employs 100 staff to manufacture products such as DVD players, VCR players, mp3 players and hifi equipment.
Currently Elecdyne supplies products to the Japanese market however it has failed to grow its business in the last two years. This is mainly because of the licenses they have to pay, high wages compared to other countries and lack of R&D staff. Furthermore it is facing a highly competitive market in terms of technology change and innovation.
Therefore Elecdyne is keen to internationalize to another country. This country has to provide Elecdyne with:
* Access to technology
* Access to markets
* Minimum labour costs
The countries Elecdyne is taking into consideration to internationalize to are: China, United Kingdom and Mexico. This report analyses the different countries by using appropriate frameworks and data collected from different resources. Based on the analysis one country has been chosen to internationalize to. The method of internationalization and the possible products Elecdyne can produce in this country are also analyzed in this report.
1. Country analysis
A combination of two frameworks is used to analyze the countries Elecdyne can internationalize to. The SWOT framework analyses Elecdyne’s strengths and weaknesses and their opportunities and threats related to the potential countries they can internationalize to. A PESTLE framework is used to describe the elements in the opportunities and threats part. PESTLE is an acronym that describes the following factors:
The strengths and weaknesses of Elecdyne are described in the diagram below.
Strengths| Weaknesses |
* All of Elecdyne’s management staff has learnt English and some of them have studied abroad (USA, Canada and UK). * Efficient cost management system that allows Elecdyne to compete on price. | * Need to pay for licenses to be eligible to manufacture electronic consumer goods. * There is little money available to invest in new R&D staff. * Labour costs are relatively high compared to competitors. * Elecdyne has never had contact with overseas markets before. |
Diagram 1.1: Strengths and weaknesses Elecdyne
Based on the above diagram the following can be concluded. Because there is little money to invest in new R&D investment Elecdyne is looking for a country that has access to technology and R&D staff. Another weakness of Elecdyne is high labour costs. Elecdyne is therefore looking for a country with labour costs that are lower than the current wages, which will allow them to compete on the high competitive technology market. Minimum costs and access to technology will give Elecdyne the opportunity to compete with large multinationals. At last but not least it needs access to markets.
Elecdyne’s strengths will definitely help them when they internationalize to a new country. According to Dunning (1988) as stated in Fernandez and Nieto (2009) a firm must have strategic resources that will provide them with a competitive advantage over other firms. Dunning calls this the eclectic theory. Their English speaking staff and efficient cost management can be strong competitive advantages for Elecdyne.
The next diagram analyses Elecdyne’s opportunities and threats within the different countries they can internationalize to. The factors that describe these opportunities and threats come from a PESTLE framework. A weighting system is used to focus on these elements that are more important for Elecdyne when choosing a country. A number is given to indicate the importance of the factor compared to Japan. A number from -10 to 10 is given to each...