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  • Published on: 14th September 2019
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6. Geographical Scope

6.1 Market attractiveness: BRICS Factor

The developed countries markets are reaching a point of saturation and slow growth. Trade globally was dominated by countries such as United States of America, Japan, United Kingdom and Germany, now the focus has shifted to emerging markets. The BRICS countries (Brazil, Russia, India, China and South Africa) are showing signs of growth economically. These countries are in a position to economically produce commodities which were previously produced in developed countries [6].

Maxwell [4] suggests that, from 1996 to 2010, the economies of emerging market nations grew at double the rate of developed nations.

There is an expectant growth in Asia-Pacific and South America regions due to rapid industrialization over the forecasted period up to 2020 and beyond. The entrance of pharmaceutical companies in the Asia-Pacific region to meet the region's export and import demands is also a major driver for the air filtration market growth [7].

The CNBC report submits that, the Chinese air pollution is becoming a huge problem. It is reported that air pollution kills 4000 people daily. However, this is becoming a business opportunity for air filtration enterprises [9] .

Due to the vastness of China and its cement market growth, six out of top ten global cement companies are from China. According to official statistics China consumes 55% of the global cement produced, which is 25 times of what the USA consumes. China, India and Brazil are in the top 10 of cement producing countries, with China at position one and India occupying the second position [10]

Due to the abovementioned factors, air filtration industry players are moving their manufacturing plants to emerging economies such as China due to low-cost labour and availability of material resources [7].

Jeffrey's Industrial Air Filters has made a decision to take advantage of the boom in the Asia Pacific and Latin American Regions with China, Brazil and India as the countries of interest. We also plan to leverage on the existing BRICS trade agreements. The plan is to expand our business regionally from the three base countries.

6.2 Multi D Matrix

There are a number of factors to consider when venturing into a new market. With hundreds of countries to choose from, companies need to carefully analyse on which countries to focus at. Here are some of the factors to consider [11] [6] [3];

• Market choice: Growth potential of each market is the key driver, the market desire for the products and services on offer; and the organizations' expansion strategy.

• Venture Finance: A well structured financing model is critical to succeed in foreign markets.

• Products and services: There is a need for a gap analysis; an assessment of whether the expansion is worth the try. Market attractiveness versus the cost of adapting products to local markets should be assessed.

• Operating model: International venture may alter a company's structure and how it's managed. The distribution and supply chain elements are critical in most industries.

• Sales and marketing: Organizations will need to decide how their products are sold in international markets.

• People: A specialist skilled and unskilled staffing requirements and availability thereof should be one of the considerations when venturing into foreign markets. The correct mix of local and expatriate staff is vital.

• Tax and Legislation: The foreign country's legal system may also be a thorny issue. Businesses will want to know how robust are local intellectual property laws?

• Future expansions: More often than not, companies venture into a new territory, somewhat for a single country market. This market may work best as a doorway to further regional expansions.

It's from these factors that a multi-dimensional matrix is formulated. The matrix below shows China as a preferred country for our international expansion.

FACTORS: Market Choice Product Finance Operating model Sales and marketing People Tax and regulation Future expansion Total

WEIGHTS: 20 10 15 10 15 10 10 10 100

China 15 8 14 8 10 10 7 10 82

India 10 7 10 7 12 8 8 8 70

Brazil 10 6 10 8 12 7 8 8 69

Table 1: Multi-D-Matrix

6.3 Mode of market entry

What makes a company enter a market depends on the countries regulations, economic environment, the available resources, appetite for risk and expertise within the organization. A decision the company needs to make is to whether they “Build”, “Buy” or “Buy” [11] [3].

The three options have advantages and disadvantages

Build ― this option requires a substantial cash injection. The advantage is that the company retains control of the business. This many not work in countries where a local partner is required [2] [11] [3].

Buy ― this option gives a company access to an existing business brand. However, mergers and acquisitions are very difficult, requiring far-reaching due diligence is required and organizational integration required a strong management involvement [11] [6] [3].

Partner – this allows the business to share risk with an established local partner. The advantage is the access to a local player's infrastructure and a low capital injection is also required. The decision making process can be difficult in this arrangement [1] [11] [3].  

Based on the above our organisation has decided on a two pronged international business expansion approach. Firstly, to go into an equity joint venture with Camair Group which is China's largest designer and manufacturer of air filters for power plants with 10 production facilities around the world; and research and development centres in Brazil, India, China. Camair Group has a representation in 35 countries and in all continents. The air filtration manufacturing will be done in China, utilising the existing Camair Group production infrastructure and skilled human resources. There is an added advantage that Camair Group's has established distribution channels in China, India, Brazil and other 32 countries.   

Secondly, Jeffrey's Industrial Air Filters is already a supplier of air filtration systems and components to locally based pharmaceutical companies AstraZeneca, Norvatis, Johnson & Johnson, GlaxoSmithKline and Pfizer, and to the following cement producing companies, Lafarge, Afrisam and Holcim. All these companies are establishing production plants in China, India and Brazil due to the current boom in those regions.

7. The environmental analysis

7.1 PESTLE analysis

The vital difference between domestic and international markets is the complex environment a company may operate in. An organization needs to be aware and know the complexities and the effects they have on international marketing [1].

The Chinese market as our main target is attracting direct foreign investments due it its vast size and the potential in the market. The most critical factor is market entry barriers. When venturing internationally companies are encountering a number of challenging factors such political, economic, social/cultural, technological, legal and environmental (PESTLE) in Figure 4 [1] [6] .

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