Singapore as Foreign Market to Enter for Nerada Tea, Australia
This challenging assessment provides you with real-world experience through an applied and innovative task. Firstly, you need to choose one of the following companies that have recently hired you:
- Nerada Tea (https://www.neradatea.com.au/) OR
- Byron Bay Cookie Company (https://cookie.com.au/)
The CEO of your chosen company has decided to investigate market opportunities for the potential international promotion and sale of their products to one of the following countries:
- China
- Japan
- Singapore
- Canada
Secondly, you need to select one of the above countries and write a report evaluating the potential opportunities and threats that may influence market entry into that country. This requires you to conduct a strategic analysis of the environmental factors, including economic and financial; political and legal; social and cultural; and technological of the chosen country.
It is recommended that students read various academic materials before writing this report. You will be expected to have consulted both academic and grey literature, including books; academic journal articles; conference proceedings; theses and dissertations; and relevant government, industry, and market reports, to support your arguments with theories and market figures.
Executive Summary
Expansion and growth of a company guarantee success and a sustainable future. A company which becomes successful and a large player in the domestic market of a large country should evaluate opportunities to expand in foreign countries. In this context, Nerada Tea, the largest player of the Australian market has been chosen to enter into Singaporean market. However, this strategic decision requires detailed analysis of different factors of Singaporean market. For this purpose, varied factors of Singaporean environment have been analyzed and reflected to implement in the case of Nerada Tea. These factors include economic, financial, political, legal, social, cultural, and technological ones which shape the Singaporean market and Nerada Tea should consider these factors. Upon analysis of these factors, it has been noted that the company can take the decision to enter the Singaporean market because it is growing and offers promising growth in future. Conclusion and recommendations have been drawn suggesting the company take this viable strategic decision.
1.0 Introduction:
1.1 Basic Introduction:
Nerada Tea is the largest tea brand in Australia, and it has achieved lots of success in the Australian market (7News, 2019). It has full potential to enter any foreign market to exploit opportunities because its taste has won a loyal customer base in its home country. This report recommends a country for the company to choose for foreign market entry.
The purpose of the report is to study the tea market in Singapore in terms of different market factors and then based on the analysis of the environment and business; the report would offer how Nerada Tea can enter the Singaporean market and can be a successful market player there. The purpose is to have strategic analysis of the tea market of Singapore in the context of Nerada Tea of Australia.
The report has been divided into various parts so that it can analyze the tea industry of Singapore and can pave the way for Nerada Tea to enter the market. The first part of the report is the introduction which details the background and basic information about the chosen country and the company. Then, there is the main analysis part which consists of four subparts. These parts include economic and financial environment analysis, political and legal environment analysis, social and cultural environment analysis, and technological environment analysis. Each part also contains reflection based on the analysis. The last parts of the report are conclusions and recommendations.
1.2 Company Overview:
Porter’s value chain is a comprehensive form of the value chain which turns raw material into a finished product. Nerada is special and exclusive in its business because it owns farms at the top of table lands, and it gets tea from those farms. The company owns the whole process and when the final product stage comes then the product goes to Brisbane factory for packing and dispatching. The company is also in green tea business, but its strength is black tea (Tippayawong, Teeratidyangkul, & Ramingwong, 2017). The company is exclusively in the business of tea and its firm infrastructure, human resource management, technology development, and procurement all revolves around the tea business. The company has an active role in the value chain, and it would help the company when it would enter into any country (Neradatea, 2019).
1.3 Product of Choice: Rationale of Choice
The product which has been chosen for market entry is tea, and the chosen company is Nerada Tea which is the largest tea brand in Australia. Chosen country to which the company should enter is Singapore. Tea is the only product, and it may be black tea or green tea. The tea industry in Singapore has many competitors, but there is a rise in demand for tea brands and the result, Nerada Team can capitalize on opportunities there.
1.4 Country of Choice
In terms of Porter’s diamond, Singapore has excellent demand conditions, supportive government, and structure, already existing market with demand, which is met by competitors, and suitable factor conditions make Singapore a suitable country to enter as a foreign market (Chung, 2016).
2.0 Economic and Financial Environmental Analysis:
2.1 Economic Variables
Nerada Tea is the largest tea brand in Australia, and it can capitalize on favorable economic and financial, environmental factors so that it can be successful. First, three chosen economic factors are going to be discussed which are inflation, recession rate, and interest rate. The inflation rate is an important determinant of economic factors, and monthly inflation rate of Singapore has been from 0.4 percent to 0.9 percent. On average, it is 0.63 percent (Lim C. , 2019). However, in the second quarter the country has seen a recession as economic activity has declined. It is reported that this wealthy city-state has been hurt by US-China trade war. It is expected that the Singaporean economy can shrink as it has been during financial crisis of 2009.
2.2 Financial Variables
The financial environment is also linked with the economic environment of the city-state which is forecasted to be from 0 percent to 1 percent in 2019. It is to be noted that this forecast was between 1.5 percent and 2.5 percent earlier (He, 2019). It shows that the economy is going towards recession. The exports-oriented economy of the city-state has been hurt by China’s slow economic growth rate. Although, the city-state is facing declining GDP growth rate, but it still is wealthiest nation with $323.9 billion GDP. However, the country offers investment-friendly monetary policy as it has averaged 1.66 percent interest rate from 1988 to 2019 (Tradingeconomics, 2019). Fewer than 2 percent interest rate is suitable for businesses. Nerada Tea of Australia can benefit from these mixed economic signs because tea is popular and increasingly popular drink in this city-state. Other foreign players like French brand Kusmi Tea and UK brand Newby Teas have entered the market because of growth-oriented tea industry of Singapore (LOI, 2017).
Reflection:
Economic and financial environmental analysis is very important to consider when Nerada Tea is going to plan to invest and enter the market. These factors are the most important because a country cannot be an ideal or viable market entry if that country is not offering a good economic environment. The financial and economic environment should be welcoming. However, these factors are mixed. Inflation is under control, but GDP and economic growth show that the country is heading towards a recession. It may affect a foreign company entering into the country, but there is difference of a country economic growth and the tea industry growth rate (Garcia, 2019). The tea sector is expected to grow, and green tea is even faster to grow. The company manufactures different forms of green and health-oriented tea brands (Marx, Isenring, & Lohning, 2017). It shows that there are many opportunities for Nerada Tea along with challenges, and these challenges should be embraced and turned into opportunities.
3.0 Political and Legal Environment Analysis:
3.1 Political Variables
Nerada Tea has to consider political and legal environmental analysis as well because the economic and financial environment is highly dependent on these environmental factors. Singapore is a developed country and has well established political system which guarantees continuity of policies. The country knows the value of political stability and in the words of trade and industry minister Chan Chun Sing; investors can only come to the country if they know what is going to happen in the county in next five to fifteen years (Lim A., 2019). However, in terms of political stability index, the city-state has 1.22 points on average from 1996 to 2017 where -2.5 are weak, and 2.5 are strong (The World Bank, 2017). The country is also renowned for its environmentally friendly infrastructure, where it is a great challenge. The country has a small land area so that green rooftops and buildings is an option (Ong, 2017). The country is also known for green construction projects (Hwang, Zhu, & Ming, 2016). Singapore is a republic where Prime Minister and his or her cabinet forms and develops government functions. President is an overseeing designation which is largely ceremonial. There are few instances of political violence, and this aspect is favorable for any foreign company aimed at entering the country. Singapore has got very open economy and market regime where it welcomes businesses and investors to invest in the country. Thus, the legal environment of the country is favorable (Wonglimpiyarat, 2018).
3.2 Legal Variables
There are very low tariff rates in the economy where more than 99 percent of imported items and goods are not charged any duty or rate. There are also not any export and import restrictions, and favorable economic and investment opportunities in the country have made it one of the easiest countries to do business in (Austrade, 2019). Nerada Tea does not have to be concerned about tariffs or import and export restrictions because the country only has high excise taxes on products like distilled spirits, wine, motor vehicles, tobacco, and petroleum products (Export, 2019). The country has employment law detailing all types of concerns regarding employment. Any foreign company also has a clear path to follow regarding these rules and laws. The country’s employment act is applied to the relationship between employer and employee (Tan, 2016).
Reflection:
Political and legal environment analysis has noted that Singapore is a stable country in terms of the legal and political system. A business can make policies about the future because there is continuity of policies. The rank of the country in light of stability index is 1.22 which puts the country at moderate level. However, one thing that should be considered here is that the country is a highly open and market-oriented economic system because it is a continuous and persistent policy of any government. Therefore, Nerada Tea can invest and enter into the market because of future certainty. A certain future guarantees success for the company.
4.0 Social and Cultural Environment Analysis:
4.1 Social Variables
The literacy level of the country is high at 95.45 percent, and it stands in 46th place in this ranking list. The country is the second densest state in the world after Monaco. The country is multicultural and diverse where 76.2 percent of the population is Chinese, and 15 percent are Malays. 7.4 percent of the population is Indian by ethnicity. Eurasians are also an ethnic segment in the country, but a small population of the country makes the country volatile and dynamic for any change as happens in the trend of emigration of Eurasian ethnic group (Lowe, 2018). There are almost 48 percent males, and 52 percent are females in the country. The country is small in terms of population as its population is under 6 million (Singstat, 2019).
4.2 Cultural Variables
These attributes of the country show that the environment of Singapore is favorable and friendly for any business to be entered, including Nerada Tea. However, there is another unique attribute of the country where race and religion are not the main basis of differences, but it is a class which makes a difference. There are class divisions (Ye, 2016). A part of the population lives in private housing, and another one lives in public housing. There is also a difference between elite and non-elite schools. Thus, there is a clear class division in the country, and it is expected to affect the country and its population. Moreover, there is also pointing to ponder for businesses so that they can develop and offer products suitable for all segments of the country.
Reflection:
Social and cultural environment analysis has taken into account some variables, and these variables have indicated that Singapore has high literacy rate and good values and attitudes towards business and corporate performance. The country has a smaller population, but that population is well managed and developed. However, there is a class difference in the country where disparities between different segments of the population exist. Nerada Tea has to learn how to get benefits from these cultural and social factors of Singapore. There is also a growing trend of tea consumption, and health consciousness is also present. Green tea is favored by the population because it is healthier and has dietary benefits. Strategically analyzing social and cultural factors has revealed that the country has a suitable and appropriate culture for the company to enter and exploit opportunities there. The social and cultural environment analysis presents a unifying and one economy, and the company can offer its various products to different segments in the market. Nerada Tea has to focus on different segments in this small island state in terms of income. It is an obvious outcome of growing materialism in countries which give rise to income disparities. In case of Singapore, one thing is comfortable that different ethnicities do not have hostile or violent relations and the society is unified and can be taken one unit by a foreign player. The popularity of green tea is also because of social awareness that it has many health outcomes (Bell, Newnham, & Nel, 2017).
5.0 Technological Environment Analysis:
5.1 Technological Variables
The country is very innovative and ahead of many nations regarding technology and its use. The city-state is a small country, and it is attracting the attention of businesses and corporations as it is going to be considered as the technology hub of Asia. The Miniature Silicon Valley is also called the country. Technology has driven many opportunities in the country because it is easier to be innovative and technology driven as compared to being competitive in any other area (Tong, et al., 2018). In 2017, the country was ranked at six in innovation ranking by Bloomberg. In the global innovation index, the country tops the list in Asia. This innovation and modern IT infrastructure have yielded many other attractions like there is increasing automation and technology-driven processes and operations of companies (Edb, 2018). The country has legislated and enacted laws to let companies and businesses adopt technology in various domains and organizational processes (Yap & Chua, 2019).
Nerada Tea Australia can capitalize on opportunities from technology infrastructure in Singapore as the country has state-of-the-art technology infrastructure. Although, a tea business is not tech-driven business, but it has become very smart and competitive to adopt technology in any business. The company can enter Singapore as a test case to check results of foreign expansion. The technology infrastructure of the country would help the company to be efficient and cost-effective in value chain activities. The company can find ways to be innovative and being in Singapore; the company can learn the art to be innovative tea company. Then, learning outcomes can be applied to other cultures and countries. Technology has a number of applications in production, processing, and distribution of the product to the public and it may affect the whole Porter’s value chain. Thus, technological infrastructure of Singapore can also be a learning platform for Nerada Tea to make it innovative company in this seemingly low technology-intensive company.
6.0 Conclusion:
The report concludes that Nerada Tea is the largest tea brand in Australia, where it is known brand in black tea and green tea category. Given its strong position in this big country of the region, the company should enter into foreign markets in an attempt to be a global company. For this purpose, this report has studied and analyzed the Singaporean environment in terms of economic, financial, political, legal, social, cultural, and technological factors. There are some concerns regarding economic and financial indicators of the country, but it is satisfactory that the tea industry is growing and is expected to grow with more positive signs in the green tea category. The political and legal environment is comfortable and supportive, which ensures a promising future for Nerada Tea if it enters the market. Socially and culturally, the country is one unified unit, and it is a supportive indicator. The country is a technology hub, and Nerada Tea has a lot to learn from it to make the company innovative and creative. Thus, these factors lead to conclude that Nerada Tea should make foreign market entry effort confidently by choosing Singapore.
7.0 Recommendations:
The report recommends that Nerada Tea should look at foreign markets in an attempt to expand and grow. Any country, whether it is small or large presents challenging environment and keeping this fact in view, the company should enter the Singaporean market. The company should take economic and financial factors in view which are related to the tea industry as foreign players are entering the market because the industry is growing. The political regime and economic model favor foreign investment, and social and technological factors are also supportive. Nerada Tea should think to capitalize on these positive and favorable factors of Singapore and should make it part of value chain activities initiated from the Australian market. Specifically related to Singapore, the company should take it a test case to make it more innovative and technology intensive.
References
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