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11 Pages, Grade: A
2.0 About Levana Tea
3.0 Entry Strategy
3.1 Direct Exporting
4.0 Rejected entry mode
5.0 Internal Strengths and Weaknesses
6.0 Overcoming weakness
6.1. Operational Strategy and Theory
6.2 .Organizational Design
6.3. Expansion Scope
6.4. Financial Capital Considerations
6.5. Staffing Policy
6.5.1. Ethnocentric Staffing Policy
6.5.2. Polycentric Staffing Policy
6.5.3. Geocentric Staffing Policy
Founded in the year 2016, Levana Firm has become one of the vastly highly praised firms engaged in manufacturing as well as in wholesaling large variety of Lemon Grass Green Tea, Lemon Grass, Instant Tea and even Lemon Grass Ice Tea. Subtly, these are pure, refreshing, healthy and hygienically processed by this company. Researchers have observed that post manufacturing this entire range is mainly checked on various quality parameters so as to ensure its bona fide quality. Essentially, according to the company’s top management, this entire range is safely packed in an air tight packaging. Moreover, under a strict supervision of the company’s mentor, Mr. Pratik Vyas who is the firm proprietor, the organization has successfully gained huge expertise as well as knowledge of efficiently dealing with the demands of their highly esteemed customers. Consequently, this report will provide an assessment of firm’s market entry strategy, as well as the organizational design, operational strategy, staffing policy, organizational design and structure, an estimated financial requirement that will help to provide an overview of operating in the new market – Shanghai for Famous Amos.
Levana Tea is a company that is based in Singapore. It has a core principle mandate of production and sales of Levana tea. As company based on principles of value, the company prioritizes on the health benefits of the tea. It is the unique feature that attracts most of the company’s revenue. Since the inception of the company close to a calendar ago, the product has made a lot of strides in the country of inauguration. The board has found it necessary for the product to flex its might, and try to penetrate other market in foreign jurisdiction (Eliot, 2016). The company has three main brands that have hit the ground running in terms of revenues. They include: The Imperial Dragon Well Green Tea, The Royal Golden Chrysanthemums Tea as well as the Emperor Seal Pu Er. These are the brands that will use in the expansion program that is being recommended by the board.
An entry strategy is a blueprint that critically analyses how a company will venture into a market or nation, with an agenda of making its product penetrate the new market. Furthermore it is a method of establishing contacts in a new foreign land. A niche market is a confined unit of making sales that a company sees a gap of generating revenue. In Reuvid words, the degree of risk that is attribution with such a project is high but the potential of achieving success is great (2008). There are uniquely two major types of market entry modes: non-equity as well as equity modes. As a planned entry is planned there are legal requirement that ought to be abided to.
Research maintains that there are close to eight well known entry strategies that Levana Tea can choose from. They include; Direct Exporting, Turnkey Projects, Licensing, Piggy backing, Franchising, Buying a pre-existing company, Partnering, and last but not least, Joint ventures. Levana Tea board has authorized three entry modes to be adopted in Taiwan. Thumps up were given to Direct Exporting, Licensing as well as Franchising. These three proved to be the best, and in accordance with the previous environment analysis, PESTEL style of analysis means that those three will yield great results.
Adopting an entry strategy means that a company should have an elaborate penetrative strategy. After gaining access to a market, how well do you penetrate it? Taking a leaf from previous documented ventured that sadly failed, it is important that Levana Tea consider its option and make well calculated moves. Penetration strategies often consider the following; Pricing of a commodity (should be low), Technological innovation, Product adaptation and conformity, as well as Security status at present in the market. Taiwan has proved beyond reasonable doubt the stipulated strategies will fall into place.
This strategy implies that an organization utilizes a beeline route and takes its product directly to its intended destination. Furthermore, it means that the goods or services that are conveyed to the prerequisite market have met all the legal requirements. Factors such logistics, shipment, market research, invoicing, billing and also marketing are done by the company in question. In direct exporting, the element of third parties is eliminated (Kirschenbaum, 2011). Contrary to direct exporting is indirect exporting.
Levana Tea should adopt this entry because it will give clear access to their potential new clients. With the elimination of intermediaries, it means that information received from the customers is not tempered with or pampered. Profits will be highly generated since there is no third-party. Greater success will be achieved with the fact the customer will be in a direct communication line with the company . With the Taiwan government being very lenient in terms of legal requirements when it comes to investors, exporting directly will pose to a very good strategy. Once Levana Tea is set-up within the Taiwanese market, it will enable it to be more flexible in its operations and also other ventures. This strategy is beyond reasonable doubt the best approach that can effectively lead to high performance compared to the following two approaches namely: licensing and franchising.
This strategy implies that a company should either lease or rent an asset (tangible, fixed or current). It involves a contractual agreement between two international companies, with one seeding marketing or distribution privileges to another with the view of establishing the brand in question into a market (Doyle, 2013). A license is a written authorization that grants privileges to the conduct business after complying with the laid down statutory requirements. Having acquired a license mean that intellectual properties are granted and secured with the jurisdiction of residence. Elements such as a company’s trade mark are well secured.
According to Eliot (2016) such a strategy will work because the companies will one hand on the control of its product in the country. An agreement can be reached if issues pertaining to the licensing and protection of intellectual property are sorted out. The trademark and patenting will be protected under the Taiwanese laws. This means that the company’s variety will be given protection against unscrupulous individual or cartels. Levana Tea will have minimal capital requirements that may hinder its operations. The potential of return on investment will be very high. This backed up with the fact that the company has a variety of brand on offer. Granting licensee privileges means that areas in the country that are not accessible, will be reached out to swiftly.
This is concept that encompasses the granting rights of a company to a third party, thereby leasing out the intellectual property, procedures, rights to market and sell the product, as well as adoption of the parent company’s business model. The third party is known as a franchisee. The details of the agreement are encrypted in a Franchise Agreement. At the end of the day, there is a fee that is attached to this agreement. These payments include initial start-ups as well as annual licensing fees. The percentage of the payment received by a franchisor is known as a royalty.
There are different aspects as to why direct exporting is far much better compared to franchising and licensing. For instance, franchising has been deemed to comprise of several disadvantages including: per-unit contribution whereby as a franchisor, Levana company will not from every dollar going to the firm’s bottom line, an aspect that is directly opposite to direct exporting. Another disadvantage is the specter of litigation whereby many of the firm’s customers will be afraid of litigation.
Moreover, it should be noted that the issue of control has significant role in any business. Contrary to direct exporting strategy, in franchising there is no control over the day-t-day operations. In other words, if Levana Tea Company adopts this strategy, it will not be responsible for hiring, disciplining, monitoring, compensating, scheduling and even employees’ termination. Similarly, licensing strategy cannot be chosen over direct exporting as it is also comprised of diverse disadvantages compared to its counterpart. For instance, this strategy has been observed to make the owner have a low level of control just like in the case of franchising. Other disadvantages include: the licensee may become a competitor in the business, one may lose intellectual property, the license is mainly limited and there is always poor quality management that may damage the brand’s reputation in other license territories.
This combative business analytical tool that evaluates an organization’s Strength, Weakness, Opportunity and Threats. It is also serves as a strategic planning tool that help an organization analyze its internal and external environment (Kamau, 2014). It’s a fundamental apparatus that anatomizes what an organization’s potential in terms of “can do” and “cannot do”, notwithstanding its potential of lurking chances as well as fulmination. The Strengths and Weakness conform to an organizations internal scope; whereas the Opportunities and Threat underlie the external perspective of a company.
Levana Tea is a company that has a vibrant potential for success since its inception. The drive for expansion into a new market is a clear proof of the company’s plight to flex its wings. Venturing into a new requires an organization to have all structure well placed and well-articulated. Having set up splendidly in the Singapore market, the waters of Taiwan should not be a problem. The company ought to galvanize its ultimate strengths and also fully minimizes it weaknesses. Weighing the equation of the two making it balance is what will lead to competitive advantage in a foreign land (Cult of Analytics, 2012).
Levana Tea prides itself in having massive production of tea and subsequent sales of the latter in the Singapore market. One of its major and core might is the ability to produce in large quantities. In the offset of moving into the Taiwanese market, this will be a major boast in the operations of the company while abroad. It should be noted that Levana Tea is one the leading tea brand in the nation of Singapore. Since its inauguration it has had fruitful sales revenues that bloated with the turn of the calendar. It prides itself with loyal customer have a rich drinking (tea) culture. In side foot, the Taiwanese is known for culture of drinking tea. This go along way helping Levana Tea exploit this tea drinking of the Taiwanese people.
Levana Tea has strong business-to-consumer strategy that coincides with the company internal structure. The company has an established communication policy that helps retain its loyal consumers in Singapore. Its marketing department works round the close to relay to the consumers the three primed varieties that are well in place. Communication is key tool especially when a company is on the verge going into a new market. While in the Taiwanese market, Levana Tea ought to set up marketing and communication policies and strategies that will aid its competitive advantage over other Taiwanese tea companies.
Lack of market knowledge in Taiwan tea industry
Even though tea drinking is an entrenched part of the local culture, the demand for tea in Taiwan was negatively affected by increase in the attractiveness of coffee and a younger generation wanting something less traditional. Substantially, Taiwan has witnessed various outrages in past few years with regards to tea quality and safety that involves both local brands and imported tea. Such outrages comprised of merging inferior teas to sell as a higher-priced brand, as well as high pesticide residue levels in some local products. The tea group became increasingly split, with consumers more willing to discover new brands.
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