Assignment 3

MASEEI INTERNAL ASSESSMENT

Submitted To
Ms. Deepmala Tuteja Date of Submission 13th March 2013

Submitted By Antil Sethi A01019112312 A-59

Consulting Report for XYZ Ltd.

Company Information:

XYZ Ltd is the manufacturer of white goods mostly including Television, Computers, Mobile phones and Integrated Circuits Chips. The company falls in a medium scale industry sector with a turnover of $ 100 million annually. The company requires to expand its operations in foreign markets, but there are few challenges due to which they are leaning backwards: Few challenges and objectives are stated below:

Particular mode of entering in international market.

XYZ Ltd. desire to diversify in a foreign country, to expand its operations in white goods manufacturing. They want a specific mode of entering in that foreign market, out of different ways i.e. Indirect Exporting, Direct Exporting, Licensing, Franchising, Joint Venture, and Strategic Alliance. They need advise on the suitable mode of entry in the foreign country but keeping in mind few understated problems.

Diversify only in a single country, first. If success, then expand globally.

First and foremost XYZ Ltd. wants to enter only in a single foreign country to test market. They want to experience various risks associated to the costs incurred in the process. As their turnover is below the segment of Large Segment Industry. The risk should be minimal, as they cant invest huge capital.

They have given special emphasis on the risk associated in the process of going global as their turnover is $ 100 million annually. One of the problem involved is that the company cannot invest huge capital as required in the process of Joint Venture Formation.

All the costs associated to manufacturing, logistics & transportation operations

This aspect includes all the costs associated with the manufacturing of white goods, logistics and transportation operations. These all costs should be considered along with the cost of producing in that country.

DIAGNOSIS:

Diversification -

As per the requirements of XYZ Ltd., it will be preferable if the company establishes its operations in a country which acts as an Electronic Hub in the world, i.e. Singapore. There are many advantages that could be encountered in Singapore, few of them are understated:

1. The cost of producing electronics in this country is very despicable as the cost of acquiring labour is cheap. Overall seen, labour force was accounted to be approx. 3.237 million in Singapore. The labour force of Singapore ranks among top 50 countries, under skilled labour segment. The company can use labour-intensive technique for manufacturing its goods. Singapore is very much advanced in producing goods at cheaper rates using labour-intensive as well as capital-intensive technique of manufacturing. 2. Singapore economy is divided among three major segments, i.e. agriculture: 0%; Industry: 26.6%; Services: 73.4%. The Industry segment has been constantly growing in following years. So, XYZ Ltd. can get enough experience to work in the economy where the Industry segment accounts 27% of the GDP. XYZ Ltd. will get various opportunities to form a Joint Venture and can succeed in its operations successfully. 3. Singapores main industries include electronics, chemicals, financial services, oil drilling equipment, petroleum refining, rubber processing and rubber products, processed food and beverages, ship repair, offshore platform construction, life sciences. 4. Whereas it majorly exports machinery and equipment (including electronics and telecommunication), pharmaceuticals products and other chemicals, refined petroleum products as well. XYZ Ltd. can deal also in exporting along with manufacturing in Singapore. 5. The government interference is minimal in assorted operations in Singapore. Singapore ranks number one in the segment of Ease in doing Business across the

world. There are no restrictions involved in case of the laws and regulations to be followed by Giant companies in Singapore compared to any other country.

Keeping in mind various factor of XYZ Ltd. we would suggest the company to expand by forming a Joint Venture in Singapore. The risk in forming a Joint Venture is at utmost but all other factors gets dispersed among the member companies equally.

A Joint Venture will have certain advantages like: o After forming a Joint Venture, XYZ Ltd. will able to form their brand image in Singapore. It can cater the local customers of the country as well. This will be due to the Multi National Enterprise with whom, XYZ Ltd. ill form a Joint Venture. o The risk which should be minimal in case of XYZ Ltd. will get divided among the Companies equally or as per agreement signed between both of them. The risk sharing aspect will allow XYZ Ltd. to form an environment in favor of the company to work proactively and succeed in their operations. o The Joint Venture formed could generate additional working capital by both the companies equally as the operations will be divided. o The combined talent of manufacturing can give XYZ Ltd. an advantage fo producing cheaper products. While there will be greater access to resources for the Joint Venture. o The Joint Venture can gain new capacity and expertise in the field of producing white goods and can form a distinct identity within Singapore only. o Finally, the major advantage which XYZ Ltd. is that due to Joint Venture formation the burden of Market research will get reduced or distributed among members.

Under Joint Venture formation the ownership and control of local operations is shared by the local and foreign companies. A Joint Venture can be explained as per following diagram:

Alternative Solution:

The next possible solution which XYZ Ltd. can follow is to diversify through Direct Exporting around the world in different countries. Direct exports represent the most basic mode of exporting made by a company, capitalizing on economies of scale in production concentrated in the home country and affording better control over distribution. Direct export works the best if the volumes are small, as in the case of XYZ Ltd.

Direct Exporting will give certain advantages to XYZ Ltd., i.e. Control over the selected foreign markets and choice of foreign representative companies. Good information feedback from various target markets. Better protection of goodwill, trademarks, patents and other IPRs. Potentially greater sales as compared to indirect exporting.

Types of Direct Exporting:

Manufacturer Exporter: Manufacturer exporters are those exporters who manufacture the product in their processing unit and then export. Service providers: Provide services, usually IT, ITES, Software & e-business. These could be 100% Export Oriented Units (EOUs). Sales Representatives: SR represent exporter in foreign market for commission. It also provides support services like local advertising/ sales presentations/customs clearance/legal requirements. It is best for manufacturers of highly technical services or products such as production Machinery.

Importing Distributors: ID purchase product in their own right & resell it in local markets to wholesalers, retailers or both. They can act as a good market entry strategy for products that are carried in inventory, or bulk like electronics.

INVOICE

A.S. CONSULTANCY GROUP 2401 Utah Avenue South, S-NV, Connaught Place, New Delhi Phone: +91 9999912345

Bill To: XYZ Ltd. 32-B, North Avenue Street Kundli, Delhi

Invoice No.: S-911312

Invoice Date- 12/3/2013

For implementing the quality management tools - Rs 60,000 The cost of employees to judge their attitude and preference Rs 30,000 For implementing waste reduction methods, an additional of Rs 20,000 For identifying relation in different costs - Rs 40,000 The Cost of dealing with MNC Rs 1,00,000 Consultancy Fees Rs 2,00,000

Total - Rs 4,50,000

Consultant Signature: Prepared by:

Date: Date:

THIS INVOICE HAS BEEN REVIEWED FOR TIME EXPENDED, NATURE OF THE WORK AND RECEIPT OF THE DELIVERABLES AND IS APPROVED FOR PAYMENT.

Signature:________________________________

Date: 12 / 3 /13