Issues Faced By Small and Medium Enterprises In A Global Business Environment

Table of Content

List of Abbreviations

List of Diagrams

List of Tables

1. Introduction
1.1 Problem and Objective
1.2 Analytical Structure

2. Current and Future Business Environment: STEEP-Table

3. Internationalisation Strategy
3.1 Country Selection
3.2 SWOT-Analysis
3.3 PEST-Analysis
3.3.1 Weighting System
3.3.2 Data Analysis
3.3.3 Location Decision
3.4 Choice of Method

4. Conclusion and Recommendations

5. Appendices

6. References

List of Abbreviations

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List of Diagrams

Diagram 1: Selected Countries 5

List of Tables

Table 1: STEEP-Analysis

Table 2: SWOT-Analysis

Table 3: Weighting-System

Table 4: PEST-Analysis

Table 5: Decision-Table

Table 6: Choice-of-Method

Table 7: Chosen-Countries

1. Introduction

1.1 Problem and Objective

Elecdyne, founded in 1990 (Tokyo), is a Japanese SME operating in the electronic segment. Employing 100 people of staff and purely supplied by local companies around Tokyo, the entity offers electronic products, e.g. CD- / DVD-/ MP3-Players and hi-fi equipment, to the Japanese market. Although being competitive on price in the beginning, Elecdyne failed to increase its sales in the last two years.

Primarily the company is affected by the obligation to pay for licences, the high wages compared to e.g. China and the difficulty to hire highly qualified research staff. As a result, the company’s profits have been reduced significantly and losses are forecasted for the next FYE. Thus, there is a high need for restructuring Elecdyne in order to bring it back to a profitable situation and moreover the need for working out an adequate internationalisation strategy to prepare the company for the global business environment (Carrier et al., 2000; USW, 2015).

The following chapters aim to analyse the current situation of Elecdyne and moreover to work out an adequate internationalisation strategy considering the following three key objectives:

1. Reduce labour costs by shifting the production- centre to a low-income country.
2. Enter new markets in countries with a low level of market satisfaction.
3. Enlarge the range and variety of products through a highly educated R&D-Team.

After evaluating the business environment, three potential target countries for the internationalisation process are assessed. In a next step the strengths, weaknesses, opportunities and threats are lined out. Moreover a PEST-analysis is conducted to prepare for the location decision. Finally, the most adequate method is selected and a brief conclusion and recommendation are given.

1.2 Analytical Structure

In order to provide an adequate base for Elecdyne’s internationalisation strategy, three popular analytical structures: STEEP-, SWAT- and PEST-analysis are combined. As a result limitations of certain methods (Burt et al., 2006, p. 50-57) can be prevented or at least reduced by linking the focus of macroeconomic topics with current companies strengths and weaknesses as well as strategic issues to prevent rather unforeseen scenarios (von der Gracht, H. A. and Darkow, 2010, p.49-59).

Whereas the STEEP analysis focuses on the macroeconomic environment of the company, the SWOT analysis builds up on this and is a useful method to summarise the current situation (e.g. by listing competitive advantages) of a company (Lynch, 2015, p. 98) and helps to avoid threats by knowing weaknesses (Panagiotou, 2003, p.8-10). As there is an overlap between SWOT- and PEST-analysis, the opportunities and threats of the more specific PEST analysis are considered (Abdullah and Shamsher, 2011, p. 1447).

As demonstrated by Koumparoulis (2013) the PEST analysis is an adequate tool in the framework of the strategic planning of a company more in detail (Koumparoulis, 2013, p. 31-36). Since it is important to include the direct (Syazwan Ab Talib et al., 2014, p. 121) as well as the indirect impact of political, economic, socio-cultural and technological factors on Elecdyne in the framework of the required internationalisation, the PEST analysis has a high weight for the decision making process in this work (Ward and Rivani, p. 11 ; Zainal Abidin Mohamed et al., 2010 ; Pulaj and Kume, 2013, p. 296-297).

2. Current and Future Business Environment: STEEP-Table

In order to analyse and present the current and future business environment of Elecdyne the following STEEP-analysis is conducted.

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Table 1: STEEP-Analysis-(Group-illustration-Marvin-Müller-Daniil-Timofeev)

As a result it could be said that Elecdyne is affected by various factors. Not only social, but also technological, economic, environmental and political trends have impact on the company. There is a high need for Elecdyne to work out an adequate strategy in order to establish a stabile business position. Therefore the next chapter focuses on the development of an internationalisation strategy.

3. Internationalisation Strategy

3.1 Country Selection

In order to pursuit the key objectives set by Elcedyne, the three countries presented below have been chosen. In the authors view they could help to improve the company’s situation significantly

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Diagram 1: Selected-Countries-(Own-illustration)

Besides the key aspects shown in the diagram, various different ownership, location and internationalisation factors have been involved in the decision-making process. The countries show numerous potentials for Elecdyne which are shown in table 7 (appendices).

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