A NEW MARKET
Summary of case study:
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India's economic success in 2004-07 was due to foreign investment, development in manufacturing, and expansion of trade. Indicators of such financial success were new houses being built, an increased number of cars, and an increase in the wealth of the middle class, which led to higher demand for luxury goods, e.g. wine. In the year 2000, there was nearly no such demand for wine, but after eight years, when three major wine companies had a 90% market size of wine, the wine market expanded. The annual growth in it henceforward was more than 30%, this growth in the market was partially due to decreased duties on wine. The rest, 10% of the wine market, was occupied by all other companies. In addition, some companies imported wine and bottled it under their brand name, which encouraged competition in the wine market. As there is less competition in the wine market of India, Chateau Camargue which is a small winery in France, expanded to Inia in 2007 because the wine market in Europe was saturated the company couldn't meet its expenses while operating in France and expand into India helped the company boost its cash flows and rapidly increase the market share of the company.
Skills:
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From reading this case study, I have gained the skills that if your company cannot manufacture a product in its homeland due to a lack of expertise or the required inventory to make that product, it can import the product from other countries and sell it under its brand name while charging a profit margin over sale per unit. Additionally, I learned that if there is tough completion in the local market and it's hard to maintain profitability, a company can look for expansion into countries or regions where there is a lack of competition, demand for the product, and availability of cheaper labour.
Knowledge:
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​A country's economy can be improved by attracting foreign companies to expand. Similarly, if there is room for expansion in another country or region, a company can occupy the market by expanding in that country. Governments can attract foreign companies' development by reducing trade barriers for international brands, e.g. by lowering tariffs and duties or rather by offering tax amnesties for newly developed expansions or start-ups. If a market is fully saturated, a company should not expand into that market. On the other hand, if a company cannot meet its expenses in the home country and realizes that expansion abroad can be profitable, it's sensible to expand internationally. However, a new market is not always easy to enter because of its specific implications. For example, what if the taxes and duties in that country are too much to bear, or if there is already a saturated market in the host country. It is also noteworthy that if there is a lack of competition and that product is in demand, governments offer some incentives to reduce taxes and duties so that foreign companies are attracted to its markets.
Behavioral Change:
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After learning these skills and knowledge, it's likely in a company's best interest to expand. But there are costs associated with expansion. Expansion into a new market or expanding internationally means that the company will incur high charges by opening a business facility in another location. If it develops locally, it will have to incur capital expenses only. Still, if it expands internationally, the costs can be different than local costs as it's unlikely to pay the same taxes. Its business cannot be successful as per its expectations in a new market where it has lower or no brand recognition. Customers are a crucial part of any business; if there is no demand for its products or services, then no matter how low the expansion costs are, it cannot become profitable as it will be unable to sell its products or services in that region. It is essential to know about the tastes, values, and cultures of the area the company wants to expand into.
Future:
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These skills and knowledge have helped me understand the positive and negative impacts of expansion in the market of another location, country, or region. I have come to realize that development can serve the company's interest if several conditions are met:
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I will be able to analyze costs associated with expansion in the future. For example, high charges are incurred in opening a business facility in another location. Through these skills and knowledge, I can better assess the success probability in a new market depending upon the level of its brand recognition.
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I will give keen importance to customers as one of the most critical factors in business expansion to a new market. For example, suppose there is no demand for the products or services of the company I work for. In that case, I will not recommend development as it is unlikely to impact profitability and business success in that market.
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I have also understood and can make sensible decisions in the company's interest by giving keen importance to the location's cultural values, tastes, and economic conditions for the expansion in question.