Read the following case scenario and answer the following questions:
Question 1. What types of exit strategies would be most appropriate for your global venture, an Athletic Footwear business? Some strategies to consider include divestiture of assets, handing over to a joint venture partner, diversification, shutting down operation, and contingencies for your global venture.
Question 2. Make final recommendations about the feasibility of this global venture an Athletic Footwear business. Would you recommend proceeding with this global venture? Explain why or why not.
Organize the solution in terms of an introduction, body, and summary/conclusion
Case Scenario:
Country Risk and Strategic Planning Analysis for an Athletic Footwear business
Competitive Risk Assessment:
Even though a need exists for a low-cost athletic shoe in Central Africa, many competitive risks are involved that may make this region flawed for product placement. The physical environment in Africa has risks that make conducting business very difficult because of a severely underdeveloped infrastructure. The continent has a generally inadequate road and rail network, its transport services operate at a low level of efficiency, many routes are subject to official and unofficial roadblocks, and Africa has slow and cumbersome border-crossing procedures. Transport costs in many African countries have been recorded as the highest in the world, and many of the factors are attributable to unnecessary delays and corruption (Economic Report on Africa, 2004). The environmental factors that exist in Africa are risks, but could also give a company the competitive edge if the transition is successful.
The African continent has a good availability of human resources and labor at economical rates. Infrastructural Development is the main agenda for the African economy. The American company has many business prospects because of the demand and the untapped market. But at the same time, the availability of resources such as water and energy are scarce, and this can prove to be a hurdle in the expansion plan (Elliott, 2009). The lack of resources in this area may prove to be one of the biggest risks the company has to start any business venture.
Because poverty rules in Africa, a company must produce products according to the purchasing power of the African customers.
Market Risks:
When analyzing if a business venture has the possibility of becoming a success, the potential risks of marketing must also be addressed. One strategy that is used for this procedure is analyzing the marketing mix. The marketing mix consists of product, price, place, and promotion. The decisions on the product, athletic shoes, involve what will be functionality, style, and quality. The decisions on the price include the suggested retail price and how flexible this price can be. The decisions on the place will include how the shoes be distributed, what will be the process by which they will be ordered, and how to store the product. The promotion decisions will be based on brainstorming to determine how best to advertise to the masses within the African region.
Distribution/Supply Chain Risks:
The distribution and supply chain risks involved in a global business venture revolve around transportation costs, the geography of the country and any other disruptions in the process. In this particular case, the geographical area of Central Africa is very diverse with the rainforest an obstacle in distribution. Some risks may stem from natural disasters, causing devastation to buildings and operations. The threat of terrorists in the region also poses a threat from thefts on delivery and warehouse storage, which to company cannot afford a loss, especially in the early stages.
Contingency Plan:
Because the strategy for this project included monitoring and control, it becomes necessary to establish a contingency plan. The contingency plan will include goals, timelines, processes, regulation updates, and the markers for success. A company must establish a contingency plan to ensure the project continues to be worth the investment. In this case the plan will be to establish standards for risk assessment, follow through and management evaluations. The company will clearly define goals and start small to manage costs compared to profits.
Control/Evaluation:
A sound internal control policy will be critical to ensuring maximum productivity and efficiency and adherence to various rules and regulations. Regular audits of data such as balance sheets, income statements, inventory records, and payroll reports conducted by an internal auditing department or third party vendor such as an accounting firm are examples of this. Another example would be the implementation of a detailed list of procedures. Procedures will help ensure consistency among workers and take out a large amount of uncertainty during certain decision-making situations.
In any case when a business decides to go global several factors must be assessed before entry into the selected country. Each country has its own culture and objectives that will determine the risks involved that a business must consider before making the transition. Some products or services may need to be adjusted to make the right fit, so this assessment is significant to the research needed to be successful. We will analyze the possible risks associated with selling a low-cost athletic shoe in Africa.
We will describe how the risks could be managed and the strategic planning process that may be used to minimize the risk factors found.
In conclusion, we hope to have evaluated the risks factors to determine how successful selling athletic shoe in Africa may be. We realize this may be a daunting task because of the fact that this region is so underdeveloped. We pointed out many risks factors including, political, exchange of funds, competition, taxation, marketing, distribution, environment, social challenges, culture, and technology. We used this risk assessment to determine how to manage and apply a strategic planning process. This detailed assessment will further help the research to determine if selling athletic shoes will prove to be a success in Africa.