XYZ BUSINESS STRATEGIES

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XYZ PEST Analysis

From the case study, there are political, economic, social, and Technological factors that play
out when XYZ decides to engage with Chinese manufacturers and suppliers. The PEST analysis
provides tools for the measurement of external macro-environmental factors (Sammut-Bonnici &
Galea, 2015). The political factors at play include mistrust as the top leadership of XYZ feels that the
proprietary information will not be safe with the Chinese supplier. This is the direct opposite of what
it calls a well-established and trustworthy relationship it has with Sajin and their relationship may be
affected if they do business with the Chinese people. In the economic factors, the Chinese have an
abundance of cheap but unreliable digital Cameras with the high-end cameras being expensive to
purchase. The market has a high purchasing power for midrange products and people have a very high
affinity for American Products.

There is a concern that the brand reputation of XYZ will be affected if they engage Chinese
manufacturers and suppliers. There are also two manufacturers with competitive prices better than the
one offered by Sajin but the difference comes to quality. The transport system in Beijing, which
include the Nanyuan Airport provides ease to logistics with the ease to real sea, rail, and road
transport. The social factors include the high population growth rate that is emerging to be the target
market for digital cameras. How they highly value American products has also provided a good
platform for XYZ. The technological aspects in play are the digital SLR innovation that is a result of
the research and development from Sajin. Engaging the manufacturers and suppliers from China
provides good transport technology in the air, road, and sea that have made the logistics to be better.

Key Considerations

To get a better market share in the Chinese market, they should consider their brand quality.
The available digital camera companies in China in the midrange provide cheap but poor-quality
cameras. To ensure their brand name is not tainted, they should consider providing high-quality
products to beat those in the Chinese market. They should also consider formulating a pact with Sajin
manufacturers so that they can outsource raw materials from China which will help the costs of
operation. XYZ can also consider near sourcing by delegating some roles to the Chinese market while
the main manufacturing is being done by Sajin. XYZ should also consider a joint venture with Sajin
XYZ BUSINESS STRATEGIES

to ensure high-quality products but still engage the Chinese suppliers who have a better hand in the
logistics with Beijing. The Company should also consider the risks of losing Sajin as the manufacturer
as this may open them up to be their direct competitors which may eat into its market share.

XYZ Strategies

XYZ is considering a market access strategy. A market access strategy is a pattern that
involves making decisions to get into the market and get its economic value (Smith, 2012). On the
other hand, Sajin is considering a factor input strategy as it looks to get some cheaper raw materials
from the Chinese. The market access strategy being employed by XYZ aims to have a grip on the
market share they are losing in the United States. The Chinese people have high respect for American
products, and they, XYZ produce superior products as compared to what is being offered in the
Chinese market. Business for XYZ in China looks promising as the country has a better and more
economical logistics system that will ensure faster and more efficient delivery of goods and services
at an economical cost. In addition, the two sourcing and manufacturing firms in China are low cost
which means that XYZ can cut its costs to help it enter the Chinese market with ease.

Risk Factors

`A move to China is a risky business operation. The first risk is the emergence of Sajin which
is planning a bold move of expansion and growth. Sajin seeks to seek the option of sourcing materials
from China and setting up a research center in the US to aid in the development of digital SLR
innovation. This move looks like a direct competition between Sajin and XYZ as they lack the
information asymmetry of whether Sajin may be looking to introduce their product lines since they
have the expertise and a well-articulated strategic plan. Another key risk factor they should consider is
the quality of the products manufactured. If they decide to go with the two Chinese firms that have
proven to be cheaper and more efficient, they will have to compromise on the quality that has been
given by Sajin. This will leave Sajin as the quality king while it relegates XYZ to the level of other
Chinese companies that provide cheap products, but of low quality. This will in return lower the
social reputation the American companies have in the Chinese market.
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References

Sammut-Bonnici, T. and Galea, D. (2015) “Pest analysis,” Wiley Encyclopedia of Management, pp.
1–1. Available at: https://doi.org/10.1002/9781118785317.weom120113.

Smith, B.D. (2012) “Excellence in market access strategy: A research-based definition and diagnostic
tool,” Journal of Medical Marketing: Device, Diagnostic and Pharmaceutical Marketing,
12(4), pp. 259–266. Available at: https://doi.org/10.1177/1745790412467641.