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Running head: FINAL PROJECT

Final Project: International Expansion Proposal Winston Crutchfield Indiana Wesleyan University ADM549 Intercultural and Global Issues GBO1304D WS6 Facilitator: Bonnie J. Straight, Ph.D May 13, 2013

FINAL PROJECT Abstract Acme Publishing group has decided to expand into the international market by locating a subsidiary publishing house in Australia. The cultural similarity, presence of an existing market, and access to local markets will allow Acme to establish an immediately competitive business using local resources. The Australian market encourages foreign direct investment and allows Acme to localize operations while still maintaining a high level of control that will enable the company to maintain a consistent brand identity and product quality. The similarity of the Australian culture to the home culture will ease the transition of expatriate managers. Expatriate managers will be selected with a strong preference for managers who are actively interested in the assignment and test well for overseas adaptability. Existing competitors in this market space

are using similar strategic operations, and the opportunity exists for Acme to enter this market as a leader. The interest of the Australian government in bring foreign direct investment to their shores and the intention of Acme to use predominantly local resources means that Acme will enjoy the protection and resources of the local government while interacting with local businesses and Near East export opportunities.

FINAL PROJECT Final Project: International Expansion Proposal Market analysis and decision to expand Acme Consolidated Book Publishing Group has experienced steady growth in the domestic market over the previous ten years. Each of our publishing imprints has shown consistent sales and garnered a measurable market share; our strongest imprint is the BlowedUp line of action-adventure novels, followed by our Angst young adult line, and the Fair Maiden fantasy romance line. Our sales volume and the size of our staff allow us to compete in the

middle market, comparable to the market share enjoyed by Harlequin, Baen, and Hyperion in the same market space. Our core competency lies in growing a dedicated customer base through consistent development of author recognition and IP participation. The decision to expand into Australia with a local printing and distribution hub has grown out of the volume of ebook sales to that country, and the escalation of interest in physical copies of our products. Australian publishing trends in recent years have shown a preference for genre fiction characterized by an increase of 10 to 20 percent during the 1990s and 2000s (Bode, 2010). The purpose of the expansion is to provide a local printing and distribution hub that can supply physical copies of our products to local retailers at a lower cost than importing products printed elsewhere. Local production will enable us to distribute to the Australian mass market and reach a larger consumer base. We have chosen to expand into Australian markets based on the consumption of our ebook titles in that demographic, and based on the reduction of activity in that country by large publishers such as Random House and HarperCollins (Matthews, 2005). Environmental factors The Australian Trade Commission describes the country as a safe destination for investment. The country's political and regulatory environment is stable, open and progressive,


providing investors with a high degree of confidence and certainty (Democratic and Politically Stable, 2013, p. 1). The legal system and technological infrastructure of Australia resembles the common law structure of other developed Western nations (Democratic and Politically Stable, 2013). The economic structure of Australia has been ranked second only to the United States, promotes strong growth opportunities, and possesses a banking system that has not required direct financial support (Strong Economic Credentials, 2013). Cultural norms in Australia are similar to other developed Western cultures. Acme will conduct business overseas using the same value system we have developed for our domestic office, with sensitivity to changes in cultural preferences. Acme values communication that is timely and clearly understood, transparency of business practices, production of high-quality content, and a commitment to support the fiction series within our imprints. Consumer reaction to our core values has been largely positive, and continues to drive demand for our products. The work of Arjoon & Rambocas (2011) suggests that positive consumer reaction to our reliable and interactive online presence will translate into a perception of ethical reliability and trust. This perception should ease transition into the local market and provide us with a solid foundation for local marketing. Singh, Iglesias, & Batista-Foguet (2012) draw a positive correlation between perceived ethicality, consumer trust, and brand success. With the success of Acme as a publishing house tied closely to the success of our branded imprints, a successful transition into the Australian market will likely depend heavily on our ability to maintain our current level of customer trust. Cultural profile Australians enjoy a structure society with many rules governing business conduct and formal rules dealing with unpredictable situations (Singh, Svensson, Wood, & Callaghan, 2011).
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FINAL PROJECT Australians are a highly individualistic society with low tolerance for power distance and autocratic governance (Singh et al., 2011). Australias masculinity index is relatively high compared to other countries that share its ethnic origins and language, suggesting prescriptive codes of ethics and formal rules dominate the business environments (Singh et al., 2011). This culture is similar to other business cultures in developed Western nations, and should ease potential conflicts associated with establishing a printing and distribution hub. Worker profile

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Like many other developed countries, Australia relies on a highly diverse, relatively lowskilled workforce for most of its manufacturing and labor-intensive occupations (Scott-Ladd, Travaglione, Perryer, & Pick, 2010). This has led to increased social diversity and workforce migration resulting in language problems, communication barriers, lack of community support, and a potential increase in workforce discrimination (Scott-Ladd et al., 2010). Australias core workforce of skilled and educated labor is supplemented and supported by a casual and transient workforce that makes up fully 27% of its labor market (Scott-Ladd et al., 2010). Cultural conflict and stress associated with the work place account for a large number of job complaints by the workforce, and creates an environment with low worker confidence and job security (Scott-Ladd et al., 2010). Foreign development initiatives Australian attitudes to foreign direct investment have undergone a paradigm shift in recent years, as Australian corporations seek out Asian and European funds for use in-country instead of focusing on growing the local economy as a source of generating Gross Domestic Product (Australia FDI, 2012). Firms within the Australian market tend to focus on supplying local demand rather than exporting to the Asian market, and have little experience with foreign
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FINAL PROJECT markets (Massingham, 2013). The government is attempting to attract more foreign investment and manage local anxiety over foreign capital replacing domestic capital (Australia FDI, 2012). The government desires to present a legally stable environment with a competitive structure, but local resistance to market evolution is sending mixed signals (Australia FDI, 2012). Cultural summary and communication barriers Australian culture shares much in common with other developed Western nations, and particularly to the English-speaking countries. Both the U.S. and Australia value individualism

and communicate within a low-context environment where explicit information exchange is seen as normal and desirable. Both developed nations share similar workforce structures composed of a low-skilled workforce that tends toward career migration. One critical difference is the influx into Australia of a migratory workforce from a predominantly Asian background. Managers transitioning into the international Australian market will need to be flexible in their human resources management with a high tolerance for cultural ambiguity. Many critical workforce values are common between the Australian and U.S. markets, and managers transitioning to the new production and distribution facility will find common ground regarding attitudes toward individual achievement and power structures. One critical difference is the greater emphasis that Australians place on rules of conduct regarding business practices and the low tolerance for autocratic governance. Decision to go international The decision to expand into the international market in Australia started as a reaction to customer demand for our product. The Australian market for printed fiction is not restrictive, and companies face no market pressure to localize production of printed material, but may achieve
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FINAL PROJECT economies of scale and significant shipping savings by localizing production. The major influence in the decision to globalize is a proactive attempt to realize cost savings through utilization of local resources. The production of printed publications uses no proprietary technology and requires no specialized resources. With local production facilities servicing the Australian market and the English-speaking near-East market such as Shanghai, Taiwan, and

Singapore, an overseas production facility presents significant growth opportunities in an exportonly strategy. Global objectives In developing an international production facility and developing the companys imprints in the overseas market, Acme desires to grow a loyal customer base within the international market and set precedent for the protection of our intellectual properties within the international legal environment. Growing a loyal customer base in the Asian and near-Asian markets such as Australia means building a degree of trust between the company and the market. A customercentric approach manages this relationship by focusing on the benefit to the customer, along with shared values (Chang & Lewis, 2009). Over time, this relationship fosters an increasing degree of customer loyalty which serves as the basis for mutually beneficial transactions that contribute to a successful business (Chang & Lewis, 2009). Developing countries harbor an enormous creative potential for translating intellectual properties into other cultures, attaining a high rate of success while preserving the essential elements of the property (Pager, 2013). Developed countries see a high degree of risk in exporting their properties to developing nations, while the targeted nations chafe at restrictions imposed by the country of origin, seeing them as nationalistic (Pager, 2013).

FINAL PROJECT To be sure, production of copyrighted content as a global commodity remains skewed in favor of developed countries. Yet developing countries increasingly figure not just as consumers of imported media (whether authorized or not) but also as producers and exporters. The creative industries they harbor have become important drivers of economic growth (Pager, 2013, p. 242). Establishment of local production facilities not only provides the intellectual properties with legal protection based in the local judicial system, but affords an authorized outlet for tapping local creativity that can add value to the brand. Environmental assessment Scanning the projected business environment identifies global, regional, and national factors that will affect the interests of the company (Deresky, 2011). Other companies in this market space have already performed intensive analysis of the business environment, and Acme can reduce its own risk by taking the role of follower and limiting our own investigation (Deresky, 2011). The Australian government is a stable political environment with a growing economy that is attracting foreign investors (Democratic, 2013). The publishing industry is an unlikely target for nationalization of either facilities or technology, as it is not a vital industry. The current market focuses on small publication runs consisting mainly of magazines and trade publications; multinational players in this field are Houghton-Mifflin and MacMillan, who both

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focus on academic publications in this market. Competition in the genre fiction market is limited to a few publishing houses, all of which are currently using an export-only strategy to compete in this market. Entry strategy

FINAL PROJECT Because Acme wishes to establish itself as a local player within the Australian market, it has opted for an aggressive entry strategy requiring a large investment and affording a high degree of control. Acquiring an existing publication facility will afford Acme easy access to distribution networks and provide an immediate level of acceptability while allowing rapid market entry with our established imprints (Deresky, 2011). The high control of management afforded by establishing a fully owned subsidiary will allow Acme to ensure quality control, intellectual property support, and to realize the largest profits from its investment (Dyhr-Ulrich, Boyd, & Hollensen, 2012).

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Establishing a subsidiary grants instant credibility to Acme and affords immediate access to local markets utilizing local resources and labor. Having a local publishing house will give Acme a competitive edge compared to other companies in this market space by affording access to an extended exporting network. The high degree of control this strategy provides allows Acme to establish consistent brand identity and improve the value and recognition of the label. Organizational structure and reasoning Acme Publishing is ready to move from a simple export model to establishing a local production facility in Australia. The limited scope of this move means that the company will be reorganizing into a domestic structure plus foreign subsidiary (Figure 1.0). This structure will enable the parent company to retain control over the intellectual properties and ensure a consistent level of quality in both development and production. Heading financial, production, and human resources issues under a centralized vertical structure will enable the home office to enact and enforce uniform policies in both the domestic and foreign offices, providing consumers with uninterrupted service and no perceptible change in quality. The key deciding factor in favor

FINAL PROJECT of this structure is the brand messaging power of a single marketing program executed consistently in both foreign and domestic markets. Control of global brand identity Multiple foreign markets and global branding has traditionally been dealt with in a decentralized manner that spread managerial decision making across their respective domestic markets (Egelhoff, 1988). Egelhoff says, the increasing growth in global interdependency can best be exploited by global strategies, where the appropriate unit of analysis for strategic planning and management is the global market for a product instead of multiple domestic


markets (p. 2). In the past, this situation has been dealt with using a matrix structure, which was expected to become a dominant multinational structural strategy, a trend which has failed to emerge in favor of structures with a more dynamic ability to respond to environmental fluctuation at the national level (Egelhoff, 1988). Control of production Herbert (1984) states that the decision to engage in international business hinges on operational issues such as production, financing, and selling that have already been decided within the organizational structure of the business. With the impact of foreign sales and product diversity already having been accounted for by the design structure of the company, Acme will be free to deal with the interorganizational differences and system boundaries that are the natural result of doing business over great distances (Herbert, 1984). Using a subsidiary to deal with local logistical issues allows the company to operate at the local level while bringing to bear the0 greater resources of the parent company to deal with additional foreign market opportunities and challenges (Herbert, 1984). Case study: Carrefour

FINAL PROJECT In the macro scale, Carrefour is a global retailer that has successfully penetrated the Asian market by adapting its methodology to the local environment while presenting a strong global brand identity (Chinomona and Sibanda, 2013). Carrefours case study is relevant to the


Acme expansion project because of the environmental similarity of circumstance except for the difference in scale between the retailer and Acme. Entering the Asian market, Carrefour faced intense competition from local retailers, government regulations that limited available business opportunities, and an entry strategy that relied on an alliance with access to extensive distribution networks (Chinomona and Sibanda 2013). Carrefour leveraged their existing economies of scale and brand recognition against these challenges to create a profitable business venture. Carrefours glocal strategy pertained to the idea of approaching each market differently, understanding and responding to local needs, which include the needs of final and intermediate customers, competitors and the macro environment (Chinomona and Sibanda, 2013, p. 52). Determining need for international management Acme is facing a limited need for international management to oversee operations in the Australia facility. When the need for managers with international competencies is limited in scope or volume, the position is best filled by personnel who have expressed an interest in intercultural management and can be trained in the necessary technical skills (Harvey, Novicevic, and Speier, 2000). Corporations with global operations embedded into their organizational processes and overall strategy have a greater need for managers with intercultural experience and competencies (Harvey et al.). Companies with a predominantly domestic focus to their operations have a small domestic focus that is suited to ethnocentric human resource management practices (Harvey et al.). Filling management positions with personnel that are
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actively engaged with host-country culture will provide country-specific contextual adaptations along the necessary business paradigms (Harvey et al.). Management selection process Potential managers will be specifically evaluated with a variety of techniques designed to test suitability for international management. Assessment prediction techniques have been shown to be reliable as indicators of future success in international management when correctly applied (Moses, 1973). The assessment process can be intensive and expensive, and limits the candidate pool due to the logistical problems of applying the screening; a screening process is most suited to small companies drawing from a limited pool of potential managers with a highly specialized degree of required knowledge (Moses). Early application studies suggest that a limited screening process provides a significant indicator of the effectiveness of further training procedures pertaining to selection of international management (Moses). Companies that use tests to determine the suitability for conducting business abroad are undecided on the specific qualities that make up the key indicators for the test, but once key indicators are chosen, candidates who score high do well with their international assignments (Multinational, 1971). Some parameters for the testing include the candidates personality, intelligence, aptitude, interest, and ach ievements (Multinational). Companies that have used testing in the past give the results varying degrees of weight in determining candidate suitability, and sometimes do not follow up with scientific validation of the results (Multinational). Selection criteria for international management Acme intends to use standardized testing procedures to evaluate suitability of candidates for international management positions. We will test the ability of candidates to adapt to foreign cultural norms, the technical ability and knowledge of the candidates, and the familiarity of the

FINAL PROJECT candidates with the policies and procedures of the company. Only candidates that show an intense interest in operating as international managers will be considered for the position. The


expatriate compensation package will include a 15% increase in compensation benefits designed to allow the manager to maintain a consistent standard of living with his peers and deal with the additional expense of living and working overseas. The company will pay foreign income taxes for the expatriate employee, and the employee will accrue benefits as if employed in the home country. A standard allowance will be given to expatriates to pay for family expenses related to relocating as if the expatriate were married with two children. The assignment will be for an undetermined period of time until local management can be found and trained, and time served overseas will be equated to time served at home for purposes of advancement and seniority. The purpose of the compensation package is to ensure that expatriate employees have access to the same level of resources as they have at home. It the companys positi on that time served overseas will not only fill a necessary function but increase the employees skill set and value to the company. Conclusion Acme has identified multiple overseas markets in which the company could be extremely competitive or establish a leading market share. These markets require the investment of additional capital and the establishing of an international market presence. The use of a subsidiary has been identified as the most efficient and competitive means of market entry. Australia has been selected as the host country because of its significant presence in our market and the similarity of the culture. Expatriate employees will be used for the initial establishment of the business in order to ensure consistency of product with the home company. Acme believes these actions will lead to a viable presence in the overseas publishing market.

Comment [bjs11]: This discussion could be expanded further -- accounting for taxes, currency differential, family issues, time back in the States



FINAL PROJECT References Arjoon, S., & Rambocas, M. (2011). Ethics and customer loyalty: Some insights into online


retailing services. International Journal Oof Business & Social Science, 2(14), 135-142. Australia FDI regime must change for Asia success. (2012). International Financial Law

Comment [bjs12]: In APA format, only the first word of a title or subtitle, plus names and acronyms, are capitalized Check all titles

Review, 31(11), 7. Bode, K. (2010). Publishing and Australian literature: Crisis, decline, or transformation?. Cultural Studies Review, 16(2), 24-48. Retrieved from Chang, J., & Lewis, C. (2009). Loyalty in Media Sharing Websites: The Case of Universal Music Group. Journal of Internet Business, (7), 21-41. Chinomona, R., & Sibanda, D. (2013). When global expansion meets local realities in retailing: Carrefour's glocal strategies in Taiwan. International Journal Of Business & Management, 8(1), 44-59. doi:10.5539/ijbm.v8n1p44 Democratic and Politically Stable. (2013). Australian Trade Commission. Retrieved from Deresky, H. (2011). International management: Managing across borders and cultures (7th ed.). Upper Saddle River, NJ: Prentice Hall. Dyhr-Ulrich, A., Boyd, B., & Hollensen, S. (2012). Financial performance of entry modedecisions: Effects of control in an internationalization context. International Journal of Business & Management, 7(24), 12-28. doi:10.5539/ijbm.v7n24p12 Egelhoff, W. G. (1988). Strategy and structure in multinational corporations: A revision of the Stopford and Wells model. Strategic Management Journal, 9(1), 1-14.
Comment [bjs13]: In APA format, only the first word of a title or subtitle, plus names and acronyms, are capitalized

FINAL PROJECT Harvey, M. G., Novicevic, M. M., & Speier, C. (2000). An innovative global management


staffing system: A competency-based perspective. Human Resource Management, 39(4), 381. Herbert, T. T. (1984). Strategy and Multinational organization structure: An interorganizational relationships perspective. Academy Of Management Review, 9(2), 259-270. doi:10.5465/AMR.1984.4277651 Massingham, P. (2013). Cognitive complexity in global mindsets. International Journal Of Management, 30(2), 232-248. Matthews, S. (2005, January). Trends in books and reading. APPREB. Retrieved from Moses, J. L. (1973). The development of an assessment center for the early identification of supervisory potential. Personnel Psychology, 26(4), 569-580. Multinational management staffing with American expatriates. (1971). International Executive, 13(2), 15-16. Pager, S. A. (2013). Accentuating the positive: Building capacity for creative industries into the development agenda for global intellectual property law. American University International Law Review, 28(1), 223-294. Scott-Ladd, B., Travaglione, A., Perryer, C., & Pick, D. (2010). Attracting and retaining talent: social organisational support as an emergent concept. Research & Practice In Human Resource Management, 18(2), 1-14. Singh, J., Svensson, G., Wood, G., & Callaghan, M. (2011). A longitudinal and cross-cultural study of the contents of codes of ethics of Australian, Canadian and Swedish

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corporations. Business Ethics: A European Review, 20(1), 103-119. doi:10.1111/j.14678608.2010.01612.x Singh, J., Iglesias, O., & Batista-Foguet, J. (2012). Does having an ethical brand matter? The influence of consumer perceived ethicality on trust, affect and loyalty. Journal Oof Business Ethics, 111(4), 541-549. doi:10.1007/s10551-012-1216-7 Strong Economic Credentials. (2013). Australian Trade Commission. Retrieved from