Unit 4 - Course 2

International Business Strategies :

Internationalisation of Carbon
Engineering
05.12.2022

Radhakanth Kodukula
Table of Contents

Executive Summary 1

Introduction 1

A. International business opportunities to pursue 2

1. The appropriate international strategy chosen 2

a. Internal Environment 2
b. External Environment 3
i. Micro Environment 3
ii. Macro Environment 3

2. Entry Mode 5

3. The International Organisation Design chosen 6

4. The International Marketing Strategy chosen 6

5. The international human resource strategy chosen 7

6. Global Marketing, Production, and Logistics Management 8

B. Recommendations for Carbon Engineering 8

References 10

APPENDICES 11
Executive Summary

Globalization continues influencing world economies as capital mobility, better communications, and

reduced tariffs have enabled firms to link with global financial markets and leverage the opportunities

available to expand their businesses. Expanding into foreign markets is often deemed as challenging and

needs a multinational firm to understand the challenges and impediments that they will face. In addition,

expanding into new foreign markets needs firms to embrace international business strategies that meet their

capabilities and needs. Carbon Engineering finds itself in a precarious position regarding the best

international business strategies that it can deploy as it seeks to expand its services into the lucrative

Australian market. This analysis provides a detailed analysis of its internal environment, the external and

macro environment, proposes the suitable entry mode, recommends the viable international organisation

design, selects the suitable marketing strategy, identifies the global HR strategy, and makes specific

recommendations on what it needs to do to be successful. A number of strategies are available for the

organization, but the most suitable ones are considered in the analysis to ensure that Carbon Engineering

makes the most informed decision. With these strategies in place, the company will be able to continue

contributing to climate change mitigation and provide sustainable carbon capture solutions to its clients.
Introduction

Carbon Engineering seeks to expand into the Australian market in order to leverage on available

opportunities and make more profits. However, in doing so, it has to consider the various international

business strategies that it needs to deploy to become successful in this lucrative market. In this regard, this

report seeks to conduct a SWOT analysis and PESTEL analysis of the internal and external market, the

suitable entry mode, the international organisation design, marketing strategy, the global human resource

strategy, marketing and positioning, and make specific recommendations on what needs to be done for this

to become successful.

A. International business opportunities to pursue

1. The appropriate international strategy chosen

a. Internal Environment

Internal Environment (VRIO framework)

The VRIO framework was first coined by Jay B Barney for evaluating the relative significance of resources

to the organization. VRIO represents value of the resource, rareness of the resource, Imitation Risk, and

Organizational Competence (Gong, 2013). Leaders at Carbon Engineering can use VRIO for creating

sustainable competitive advantage by better understanding the role played by resources in the firm’s overall

business model.

Value: The firm’s critical resources are human resources, operations management, financial resources, and

operations management.

Rare: Carbon Engineering should determine whether the valuable resources are rare or expensive to attain.

In case they are not rare, then both current competitors and new entrants will easily access them and gain

entry into the competitive landscape. The Australian competitors include Marli Tech, CO2 Group, Cool

Energy Australia, and Alter Eco.

Imitation Risk: Currently, many industries are grappling with rising disruption threats. According to the

Carbon Engineering case study data, it appears that the core differentiation of its model is difficult and

costly to imitate. On a wider scale, imitation of its products can occur in two major ways: duplication of the

company’s products, and rivals innovating substitute products that upset the current industry structure.
Organizational Competence: It is a measure of how much the firm can harness the rare, valuable, and hard

to imitate resources within the marketplace. Notably, the exploitation level analysis for Carbon Engineering

can be done from two angles: can the firm fully leverage on the potential of the resource, or does it still have

many upside? Often, the level of exploitation is highly premised on the firm’s execution team and strategy.

Thus, the exploitation level is a good measure for assessing the quality of HR within the firm. Capabilities

usually arise or expand over time as an organization takes actions that develop on its strategic resources.

b. External Environment

i. Micro Environment – (PORTER’s 5 Forces)

The five forces determining the industry structure of organization are:

Threat of substitute products and services: The threat of substitute is moderate, but Carbon Engineering

would have to continue investing into research and development or risk losing out to disruptors within the

industry.

Threat of new entrants: The potential of new entrants is high due to rising inefficiencies and reducing

costs. Both local and international competitors can take advantage of the low cost of reaching consumers

through social media and e-commerce. Thus, Carbon Engineering may have to devise a strategy for entering

into this highly competitive industry.

Bargaining power of buyers: Buyers have moderate bargaining power, thus meaning that prices are not

often driven down. It means that the firm has the potential to earn sustainable profits.

Bargaining power of suppliers: There is intense competition, meaning that Carbon Engineering should

create a strategy that can provide it with a significant market share for garnering profits.

From the analyses, the firm’s strengths, weaknesses, opportunities, and threats are identified in Appendix 1.

ii. Macro Environment (PESTEL)

Political Factors: Australia has a transparent political system consisting of a liberal democracy and

constitutional monarchy, thus making people trust it. The political system provides stability and

predictability. Secondly, Australia has strong ties with the United States and is a member of the UN. Despite

the close ties, her neighbour New Zealand and the UN, have fiercely criticized it for the poor treatment of

refugees, lack of empathy for indigenous people, violation of human rights, and deportation laws. The

country’s strong and stable political climate has been an enabling factor for attracting investors since
stability instils trust in them. Regarding the country’s policies, its recent political and economic reforms

have made it to be among the best countries within the region.

The stable political system means that Carbon Engineering can design viable strategies. Also, it can build

bridges with the vibrant civil society community and seek for areas of mutual cooperation.

Economic Factors: The country’s strong per capita and high nominal gross domestic product makes it

economically strong and resilient. It means that Australia is characterized by less crime, lower

unemployment, and a happy population. Mentally satisfied and happier people perform better, thus

increasing the country’s overall productivity. Carbon Engineering can leverage workforce productivity to

employ a skilled labour force at competitive salaries.

The higher disposable incomes of Australians means that Carbon Engineering can leverage this trend for

expanding the market beyond the traditional customers by deploying a differentiated marketing strategy.

The strong economic performance and stability makes it the best choice for investors. The only challenge is

that despite being a lucrative opportunity for investors such as Carbon Engineering, much of its resources

are found in real estate. Also, many companies are shifting and relocating their headquarters to Australia

since it is cheaper compared to other western states.

The country’s taxation rules and policy rely on income. In case the income is higher and more than 25

million dollars, the standard 30% tax rate would become applicable. In case it is not more than 25 million

dollars, the tax rate would be 27.5%. Some of the prominent exports that directly or indirectly relate to

Carbon Engineering’s activities are oil, gas, coal, and gold. Contrarily, the important imports relating to the

firm are fuel, mineral oils, vehicles, plastic, machinery, and electrical equipment.

Social Factors: Australia is the most multi-ethnic and multicultural society in the world, thus making it

conscious about immigrants and refugees since they have faced such issues in the past. Its society is made

up of three parts: working class, middle class, and upper class. The middle and upper classes acquire large

houses, luxury cars, and expensive clothes. Contrarily, the working class is often in debt trying to maintain

the same luxurious lifestyle that the upper class has set.

Technological Factors: Local businesses and firms invest and adapt the latest technology, showing the

country’s interest in technological innovation as it has spent a significant proportion of the budget on
technology. The government also passed a law eliminating encryption of private and personal messages for

security purposes.

Environmental Factors: Australia is a party to the Paris Climate Agreement. However, Australia is the 14th

highest emitter of carbon in the world, contributing slightly more than 1%. The National Waste Policy offers

a national framework for resource and waste recovery, outlining the roles and responsibilities of all

stakeholders: individuals, communities, governments, and businesses. Environmental standards enforcement

agencies play a pertinent role in safeguarding the existing norms. Under the Australian Government’s

Powering Australian plan, the country continues to boost renewable energy as it seeks to minimize its

emissions to less than 43% by 2030 and achieve its net zero target by 2050.

2. Entry Mode

Due to the stable political and economic environment, a subsidiary is the entry mode selected for enabling

Carbon Engineering to get into the Australian technology market. Firms often establish subsidiaries for

various reasons, including ability to expand operations into profitable new markets, raise revenue, and

diversify holdings in order to ably manage risk (Verbeke, 2007). By Carbon Engineering establishing a

subsidiary in Australia, it can provide valuable lessons on investment trends. One of the reasons for setting

up a subsidiary in Australia is the recognition of the brand. Keeping separate brand entities can ensure that

Carbon Engineering organizes its culture and uniquely positions itself. Owning a subsidiary company can

also enable it to offer shares for their proportion of the firm and enhance investments. The other benefit of

the subsidiary model is that the parent Carbon Engineering company can write off losses they incur using

their total income. More importantly, a subsidiary can enable the parent company to significantly bring

down tax liability through deductions that Australia allows. Since a subsidiary is a unique and separate legal

entity, it can mitigate the risks by ensuring that losses are not transferred to the parent company.

Notwithstanding, if bankruptcy is proven for the parent and subsidiary firm, the parent company may be

held liable. What further makes subsidiary a crucial entry mode is that it can enhance efficiency and

diversification (Nguyen, 2022). Creation of a subsidiary can ensure that Carbon Engineering parent

company becomes more efficient by dividing it into smaller parts. In spite of selecting this entry mode, the

limited control that the parent company has over this subsidiary should be taken heed of since it can affect

its success. For a subsidiary, decision making may be difficult since management control issues could be
evident. The other notable challenge is the legal ramifications of establishing the subsidiary. Supplementary

management and legal paperwork can be a hefty cost and imposes a burden for filing taxes and the

establishment.

3. The International Organisation Design chosen

Functional, multi-divisional, flat, and matrix structures are the main international organisation designs. The

design selected is the matrix structure whereby team members will report to project managers and head of

department (Judge & Li, 2012). Conceptually, a matrix organization is defined as a work structure whereby

reports are issued by team members to multiple leaders. The objective of such a structure is to enable

Carbon Engineering to come up with new services and products without necessarily realigning its teams in

the Australian market. This is done with the realization that projects usually need work from members of a

number of departments including marketing and finance and IT, which is the reason a separate manager

responsible for individual projects becomes necessary. A balanced matrix would be ideal to ensure that the

project manager and the department head have equal authority while team members issue reports to both. It

ensures that communication is open between them in leadership roles, thus allowing for the smooth project

operation (Gos, 2015). While this organizational design is more complex compared to hierarchical

structures, it has a plethora of benefits ranging from efficient resource use, project manager training, clear

project objectives, as well as free-flowing information. Thus, it can ensure that Carbon Engineering has

better clarity on the existing project objectives, efficient resource use since teams include specialists from a

number of departments, free flow of information, more responsibility for the project managers, thus

necessitating them to train cross-functional managers, and ensuring that there is retention of team members.

4. The International Marketing Strategy chosen

This analysis selected the transnational strategy whereby Carbon Engineering will seek to strike a middle

ground between a global and multidomestic strategy. This will involve trying to have a balance between the

quest for efficiency and the need to adapt to local preferences in Australia. On the one hand, this strategy

recognizes that in this era of globalization, failing to use different global marketing strategies can make it

difficult for a business to be constrained within a domestic market (Andrushchenko et al., 2020). Thus, the

firm has to venture into the global marketing strategies to garner significant advantage over rivals and earn
large profits. On the other hand, a transnational strategy recognizes that the services or products offered by

the firm should be customized to meet the Australian consumer needs. This means that the firm can ably

customize its products and services to the Australian market through the choice of staff and physical

business locations. The benefit of this strategy is that it ensures the firm changes the business model to suit

every individual location. More variation in services or products is quite critical for this strategy, thus

allowing the firm to adapt its tastes to appeal to various markets. The prices will also vary based on the

product demand or market demographic in Australia.

5. The international human resource strategy chosen

The International HR strategy selected is the polycentric approach, which is essentially a staffing and hiring

approach where international subsidiaries of a nation find team members from a host country (Australia in

this case) instead of finding them from the location of the parent company. It can enable the subsidiaries to

better comprehend local needs and operate in select communities. What this means is that Carbon

Engineering should use the polycentric approach to hire Australians to staff the subsidiary in Australia. This

is one of the choices that the company can make as it strategizes for global recruitment. The other

approaches are ethnocentric approach (hiring team members from the location of the parent firm) and the

geocentric approach (hiring manager does not factor in nationality during recruitment, and rather

concentrates on recruitment of the best candidate). The polycentric approach is suitable for this case since it

eliminates the need for team members to adjust. It gets rid of the required adjustment period associated with

ethnocentric hiring (Zhu, 2019). Hiring a team member from Australia means that he or she can be prepared

to start work right away. Second, this strategy saves on relocation costs and hiring costs. Hiring candidates

from Australia can have serious cost-saving implications. Thirdly, this can also enhance team member

morale since they may understand local culture and be comfortable with their environment. The polycentric

approach can provide more employment opportunities to those in Australia and make it easy for them to fit

into Carbon Engineering, thus enhancing team member happiness and engagement (Zhu, 2019). Finally, this

approach is suitable since it can enhance local support and knowledge. Potential clients and customers can

be more comfortable engaging with team members from their area, thus enhancing customer interactions. In

addition, hiring through a polycentric approach can enable Carbon Engineering to garner the support of

surrounding agencies and the local government.

6. Global Marketing, Production, and Logistics Management

Carbon Engineering often embeds several components of marketing mix to its marketing strategy, thus

enabling it to compete and develop a unique position within the market. Branding, pricing, merchandising,

promotions, marketing research, physical handling or logistics, packaging, promotions, channels of

distribution, servicing, advertising, and display are the 12 major elements of marketing mix as identified by

Neil Borden (Lahtinen et al., 2020). Product as value to Carbon Engineering’s customers can be delivered in

various ways including pre-purchase education by sales staff, repair services, sale equity point, priming, and

physical product. The four stages that it uses as the marketing process are identification of opportunities

through customer and market research, design and testing, product launch, and product life cycle

management of its products and services. For the price marketing strategy, it can deploy a cost-based pricing

strategy to enable it to figure out the cost it takes to provide its services or products (Thabit, & Raewf,

2018). A more critical strategy is the market penetration pricing strategy which it can utilize for launching a

new service or product in Australia at a loss or low profit margin to gain market share. Also, for certain

brands, the company often increases prices since customers are willing to pay higher prices. Based on this

analysis, the Carbon Engineering brand is well-known and respected, thus implying that it can get a higher

premium over other competitive firms. The product’s advanced features also means that it is innovative.

Having a slight premium price will emphasize the products’ features and stop other players from gaining

entry into the current segment. For logistics management, the two main distribution channels are channel

design and channel management. Carbon Engineering can use a direct, indirect, or hybrid distribution

system as explained in the recommendations section. The three critical elements that can be considered in

channel management are market development requirements, the cost of stocking every unit, and the

willingness of customers to search and travel to buy goods.

B. Recommendations for Carbon Engineering

Based on the evidence gathered, various recommendations should be embraced. Due to high brand

awareness, Carbon Engineering’s brand is well-respected within the market, thus implying that the company

can get a slight premium over other brands in Australia. Due to its advanced features, Carbon Engineering is

considered to be innovative within the current market context. Thus, it is important to embrace a slight

premium price to emphasize the features of its services and products, and ensure that other players do not
get into the current segment. High premium prices can attract new entrants and reduce profitability. The

company also needs to determine whether it needs a distribution system or not. A direct distribution system

entails the firm creating its direct distribution channel and directly reaching customers. This can be attained

through the opening of its stores or the sale of all of its products online. The indirect distribution system

including the use of channel partners like retailers, distributing agents, wholesalers, and logistics companies

need to be embraced in Australia. Furthermore, Carbon Engineering should embrace a hybrid distribution

system where the most important element of the distribution system is managed by carbon capture, while the

secondary functions, including store management, warehousing, and logistics, are handled by several

channel partners (Lim et al., 2018). Promotion Mix is a combination of an array of promotion tools that

Carbon Engineering can use, which are personal selling, direct marketing, advertising, public relations, and

sales promotion. The firm can utilize these communication tools for persuasively communicating to

customers about the product’s existence, places where products can be purchased, prices, how to effectively

use the services, and unique features of the service.

The SWOT analysis revealed that Carbon Engineering can find opportunities in the macro environment and

leverage them to expand into Australia. Due to budgetary concerns, Carbon Engineering is grappling with

limited access to top-notch talent in the market. Expanding into Australia can help the firm to leverage into

the global talent market. Talent identified abroad can also be emulated or adapted locally and expanded into

new areas, including technology, disruptive innovation, management of uncertainty, and sustainability.

Electronic commerce business model can enable the company to link with logistics providers and local

suppliers within the global market. The growth of social media should be leveraged by the company to

minimize the cost associated with entry into new markets and getting to clients at a lower marketing budget.

Social media can also result in crowd sourcing a number of services as well as consumer-oriented marketing

premised on the purchase behavior and data. Furthermore, Carbon Engineering can use the changing

technology landscape it operates in, by deploying machine learning and A.I, to improve efficiencies,

transform processes, and lower costs. More specifically, it can use AI developments for better prediction of

consumer demand, improve recommendation engines, and serve niche segments. The company can also

leverage on the rising disposable incomes of Australians to come up with a new business model whereby

clients begin paying progressively for the use of its services. This trend can help it to expand to other areas.
Moreover, the company can pursue the cost of leadership, differentiation, or focus competitive strategies. It

can use cost leadership by becoming the low-cost producer within the Australian technology sector. This can

be achieved by assessing various factors, including supplier diversification, pursuing economies of scale,

accessing raw materials on a preferential basis, proprietary technology, and supply chain management

alternatives. The company can also embrace the differentiation strategy according to the industry forces

described in this analysis. It can become unique through the provision of a value proposition that buyers

cherish. It can choose at least one attribute that can distinctly position it within the customers’ eyes for

particular needs. The core objective is to achieve premium price as a result of the offering’s uniqueness and

differentiation. Finally, the company can leverage the focus generic strategy by selecting a segment and

tailoring its strategy to solely serve it. More importantly, the company can narrow down to cost advantage

and differentiate itself within a target segment.

References

Andrushchenko, H., Alkema, V., Hrynko, P., Portna, O., & Koliesnik, T. (2020). Transnational Corporations

as Entities of International Entrepreneurship. Journal of Entrepreneurship Education, 23(1), 1-6.

Gong, Y. (2013). Resource-Based Fundamentals. In Global Operations Strategy (pp. 141-172). Springer,

Berlin, Heidelberg.

Goś, K. (2015). The key advantages and disadvantages of matrix organizational structures. Studia i

Materiały, (2/2015 (19)), 66-83.

Judge, W. Q., & Li, S. (2012). Organization design for foreign subsidiaries of multinational enterprises: A

contingency perspective. International Journal of Business and Management, 7(3).

Lahtinen, V., Dietrich, T., & Rundle-Thiele, S. (2020). Long live the marketing mix. Testing the

effectiveness of the commercial marketing mix in a social marketing context. Journal of Social Marketing.

Lim, S. F. W., Jin, X., & Srai, J. S. (2018). Consumer-driven e-commerce: A literature review, design

framework, and research agenda on last-mile logistics models. International Journal of Physical

Distribution & Logistics Management.

Nguyen, Q. (2022). Export intensity of foreign subsidiaries of multinational enterprises. Management

Decision.

Thabit, T., & Raewf, M. (2018). The evaluation of marketing mix elements: A case study. International

Journal of Social Sciences & Educational Studies, 4(4).

Verbeke, A., Chrisman, J. J., & Yuan, W. (2007). A note on strategic renewal and corporate venturing in the

subsidiaries of multinational enterprises. Entrepreneurship Theory and Practice, 31(4), 585-600.

Zhu, J. S. (2019). Chinese multinationals’ approach to international human resource management: A

longitudinal study. The International Journal of Human Resource Management, 30(14), 2166-2185.
APPENDICES

APPENDIX 1: SWOT Analysis of Carbon Engineering

Strengths Human resources, financial resources, Processes and

activities.
Strong brand awareness and brand equity
High margins due to the premium it charges
compared to rivals
Strong financial statement
First Mover Advantage in various segments
Superior services and products that can enable it to
increase market share
Successful track record of launching new
commodities within the domestic market.
Strong relationship with suppliers and supplier
chains in current markets.

Weaknesses Ease of replicating Carbon Co2 business model even

with the number of copyrights and patents possessed
by the firm.
An unconvincing track record on environmental
issues, and can contribute to consumer backlash.
Low return on invested capital
Inability to harness the potential of technology
within the front-end processes.
Project management overfocuses on internal delivery
instead of considering all external stakeholders’
interests. It can result in customer backlash and poor
public image/relations

Opportunities The changing technology environment/landscape,

e.g. AI and machine learning rapidly transforming
technology landscape.
Use AI developments for better prediction of
consumer demand, catering for niche segments, and
making better recommendation engines.
Access to global talent in international market
Social media and e-commerce-oriented business
models.
Opportunities in adjacent markets
Reducing cost of marketing into global markets.
Threats Squeezing middle class within the developing and
developed countries.
Credit binge in the aftermath of the COVID-19
pandemic and current economic crises
Global geopolitical factors, including the
Ukraine-Russian conflicts, rising oil prices, and US
sanctions.
Threats of new entrants due to reducing costs and
rising inefficiencies.
Rising protectionism that ranges from data storage
and diversification risk
The culture of sticky prices in the technology
industry, which can result in the firm’s inability to
raise prices that its premium prices deserve.