TAKIMAKI - Internationalisation strategy

EXECUTIVE SUMMARY
With the development of today's global economy, companies of all sizes intend to internationalize
their businesses in order to expand their business scope or gain greater market share outside the
country of residence. Taking your brand overseas can be appealing, and many entrepreneurs
would jump at the chance. However, the path of international expansion may be dangerous,
accompanied by huge risks and difficulties, which is why companies need to have sufficient and
effective reasons to consider this major strategic move. In view of the importance of
internationalization, TAKIMAKI is going to enter foreign market in order to extend its business.
The external factors of the country obtained through PESTLE analysis make TAKIMAKI choose
a country that expands internationally. Analysis shows that UK economy has favorable external
factors, which will allow the company to expand abroad.

Table of Content

EXECUTIVE SUMMARY...............................................................................................................................1

1. INTRODUCTION................................................................................................................................................2

2. INTERNATIONALIZATION STRATEGY.....................................................................................................2

3. FACTORS THAT TAKIMAKI SHOULD COLLECT INFORMATION.....................................................3

4. APPLICABLE ANALYTICAL FRAMEWORK.............................................................................................4

4.1. COMPANY ANALYSIS...................................................................................................................................4

SWOT ANALYSIS............................................................................................................................................4

4.2. COUNTRY ANALYSIS....................................................................................................................................4

SELECTED COUNTRY...................................................................................................................................5

PESTLE ANALYSIS.........................................................................................................................................5

5. CONCLUSION.....................................................................................................................................................9

REFERENCES..............................................................................................................................................................10

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1. INTRODUCTION

Internationalization has become thrilling viewpoint for various industries from all walks of life to
achieve business expansion, sustainability, profitability and increased revenue (Tjosvold and
Leung 2003). These overseas expansion policies push a business beyond yesterday’s limits
without forgoing national actions or objectives, set the stage for a successful today and tomorrow.
TAKIMAKI is a Japanese company headquartered in Tokyo, engaged in electronic products
business, started its operations in 1990. Over the years TAKIMAKI has developed and reached the
point where now they have 100 plus workers that are working with the company. However, over
the last two years, revenues have not been able to improve, so competition has become
increasingly difficult and growth has stalled. Therefore, in order to solve this problem and achieve
faster growth, the company decided to internationalize its business to these three specific
countries, UK, BRAZIL and CHINA were selected.

According to the "Global Electronic Components Market 2020 Research Report," The
international electronics industry is expected to see about 4.8% cent CAGR over 2020-2025. Due
to the shift in the production of cheap goods from China, the rise of new electronic hubs, and
countries’ incentives to increase the manufacture of electronic components. Countries like China,
Brazil, and the UK are emerging markets for the electronic industry and they also have growing
economic markets.

The purpose of this study is to investigate and analyze TAKIMAKI's business environment and
determine the factors of its internationalization strategy in order to expand its business to
appropriate countries.

2. INTERNATIONALIZATION STRATEGY

Mintzberg and Waters (1985) described internationalization as the logic of formulating an

international development plan process that fits the company’s overall strategy. Businesses should
propose their international goals through their main development routes, such as the level of
commitment to internationalization and their geographic and regional priorities. However, in
addition to this, various internal and external data will be considered. These data not only help us
understand the company better, but also provide more knowledge about the dynamic market
environment (Andersen, 2004). In terms of internationalization, the importance of strategy
formulation is useful for collecting and synthesizing all these data to gradually exploit and process
the formulation of strategy. Thus, formulating strategies is very important to achieve
organizational goals and successfully conduct business transactions. When a company reaches a

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certain level of international business expansion, it is necessary to consider formulating a
structured international business plan, using the sample from existing multinational companies.

Businesses need to carefully consider the entry method, timing, scope and pace of their
international activities (Onkelinx and Sleuwaegen, 2010). Identification of the nature of the
market and analysis of competition in the new market can provide incredible understandings into
how to grow into that marketplace. Businesses will have valued data about the types of products
and services that are already available in that market. The analysis will provide the types of
innovations compulsory to compete successfully in the new marketplace. It will also provide a
hold of the local culture and its sales implications as well as on the availability and ability of the
native talent. The market analysis will provide business financial strength and confidence to enter
and challenge the competition in the new market[ CITATION LiJ10 \l 16393 ]. There are precise
instructions and guidelines in every sector and they vary with political limitations, they always
have common aspects. Companies must have a first-hand understanding and experience of how
the business operates in a new country. However, there are a few elements that need to consider
before entering into an international expansion program.

3. FACTORS THAT TAKIMAKI SHOULD COLLECT INFORMATION

Participation in the internationalization process is not only understood as an opportunity to obtain
greater profits and competitive advantages, but also the potential risks associated with the process
must be considered, because participation in the internationalization process may bring many
different specific risks to the company. Moreover, the reasons for the success or failure of the
internationalization process can be summarized from both internal and external factors.

Companies such as TAKIMAKI who are preparing for foreign expansion must conduct external
business analysis to become familiar with the factors that affect the market (Stonehouse and
Campbell 2004). It has been found that the external business environment, including economic,
legal, social, technological, political, and environmental factors, has become an important part of
external business factors that directly affects business in any country (Murphy 2005). By
analyzing these factors, any firm planning to expand internationally can understand the external or
country conditions in which it operates. In this regard, the political factors that affect business are
often very important because political conflicts constitute obstacles to the daily business
operations of the business sector. (Wang, Chen, Li, 2012). Political insecurity reduces foreign
direct investment, because given the turmoil in the political environment, foreign investors will
not participate in internationalization. (Sheng, Zhou and Li, 2011). On the other hand, information
technology is one of the important means to promote national development and economic growth
(Dunning, 2013). It is also important for global business because it can bring users a competitive
advantage. In addition, social and cultural factors are the main external obstacles to the

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internationalization of business organizations. This shows that the company must analyze all
external factors related to the country and tend to expand. In order for TAKIMAKI to understand
all external environments, it is necessary to conduct a country analysis of the UK, Brazil and
China. TAKIMAKI will select a country for internationalization based on the analysis results.

4. APPLICABLE ANALYTICAL FRAMEWORK

4.1. COMPANY ANALYSIS
Company analysis includes evaluating the company's current competitive position by identifying
the company's strengths and weaknesses and the opportunities and threats (SWOT) offered by the
target market. Research and accurate data are essential to identify main issues in an organization's
environment. SWOT evaluation allows the business to understand both the environments (Sharpe
Jr, 2015). According to the case study, TAKIMAKI is a company that produces electronic
products in the local Japanese market. SWOT analysis to analyze the internal and external
functions of TAKIMAKI, which helps to understand its internal environment:

SWOT ANALYSIS

Pic. 1: TAKIMAKI's SWOT Analysis

Based on the SWOT analysis, it is concluded that TAKIMAKI is in a modest condition. Despite
the fierce competition, it requires innovative plans to withstand business growth. This SWOT
examination specifies that TAKIMAKI has the core skills for catching a bigger marketplace
portion, increase sales revenue and increase technical business operations. However, its
weaknesses are obstacles and tests that need calculated solutions. This analysis also highlights the
weakness of TAKIMAKI's lack of competitiveness. It is recommended that the business should

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use companies or grow its platform to target convinced services that could open up new
opportunities for expanding its trade. In addition, the SWOT analysis reflects the company's
ability to enter the global market, because of the wide variety of products, the availability of local
suppliers which can also provide materials at a cost-effective price. Hence, it is possible to make
more profits here.

4.2. COUNTRY ANALYSIS

Before doing business a foreign country, it is best to analyze the environment of the country
concerned. Of course, detailed market research is required before placing products on foreign
markets, but the deeper the understanding of a country’s political, economy, cultural and
environment, the greater the likelihood of product success and the company’s profitability and
reputational risk the smaller. The degree of risk may also influence the choice of entry strategies
for specific country.

SELECTED COUNTRY
UK: The United Kingdom is a country composed of historic countries such as England,
Wales and Scotland, and Northern Ireland. It is hailed as the home of modern
parliamentary democracy and industrial revolution. London is a cultural and financial
center and the largest city in the world. English is the official language of the country,
while Irish and Scottish Gaelic are also widely spoken.

Brazil: is officially known as the Federal Republic of Brazil in terms of population and
area, ranking fifth in the world and the largest country in Latin America and South
America. Brazil has a population of more than 200 million, ranking seventh in the list of
the world’s largest economies, and has a variety of natural resources, natural environments
and wildlife.

China: is the fourth largest country in the world with a large land area and a strong nation,
while the one-party political system has made great contributions to the stability of the
country. China is among the most attractive locations in the world. It has also grown to
become one of the strongest powers. This rise boosted international business. The legal
system too has been improved.

TAKIMAKI needs to analyze the business environment of the selected countries, which provide
the company with potential.

PESTLE ANALYSIS
PESTLE is an external factor evaluation matrix, which analyzes six data areas, namely Political,
Economic, Social, technical, Legal and Environmental factors, and helps to understand the
business environment in the target market.

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Political

The UK (United Kingdom): As one of the stable countries, the government continues to take
measures to improve the working conditions of workers across the state. In recent years, the Brexit
movement has created an atmosphere of uncertainty (Read, 2019). However, the businesses may
face certain corruption issues in certain regions. This problem can be easily corrected by effective
regulatory measures.

Brazil: It is ruled by the Workers’ Party and its allies. Democracy is full of vitality; political
stability is effective. On the other hand, Brazil’s judicial system is dysfunctional and corrupt, and
Brazil is one of the biggest corruption scandals in history (Lorenzon, 2017) with overwhelming
gang violence. In addition, heavy tax bills forced the country to have a huge informal economy.

China: the fourth largest country in the world with a large land area and a strong nation, while the
one-party political system has made great contributions to the stability of the country. The
economy has remained vibrant and sustainable, but the recent COVID 19 disease (originating in
southern China) and the protests in Hong Kong remain worrying.

According to the facts, the political conditions of the three selected countries are stable. Here,
TAKIMAKI can be considered as the most suitable for political stability in Britain, China or
Brazil. Compared with Japan, the performance of political stability and governance institutions is
still very low, controversial, and may affect trade and foreign direct investment.

Economic

UK: although the country’s GDP is currently experiencing a certain degree of decline, it is the
world’s fifth largest economy in terms of nominal GDP (World Bank, 2019). The reason for the
success of the British economy is diversity. The UK’s vast market provides equal opportunities for
the growth and prosperity of all businesses, but recently the UK has suffered the impact of Brexit,
which has led to an economic slowdown, forcing many companies to relocate their headquarters to
the EU influences. Another problem is that the government spends a lot of money on immigration
and free services, so it cannot obtain all the allocated funds for business development.

Brazil: as the Covid-19 pandemic has hit the economy hard, GDP is expected to decline this year.
Brazil’s GDP reduced in 2018 compared to 2017 (Dowd, 2019). The country's economy depends
on the traditional markets of the western countries. In addition, the country’s economy seems to be
less susceptible to external economic shocks The distribution of income in the country is uneven
(Haberer 2011).

China: China is the world's largest economy and its growth rate is staggering. Cheap labor market
helps China develop its competitive advantage. Mentioning that China has made amazing progress
in reducing poverty, target to eradicate poverty absolute by 2020 (Brand, 2017). China will

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continue to be the world's largest electronics producer, and by 2025, the country's output value of
electronic products will account for 50% of the world.

Economic analysis of the countries’ shows that the economic situation of each selected country
depends on the country's growth rate. Compared with all three countries, China has strong and
stable growth of economy and cheap labor. Although China has achieved impressive growth in the
past three decades, and in recent years has clouded Japan’s economy in scale, it is easy to forget
that China is still a developing country (Holliday, 2014).

Social

UK: The UK has a large population, ranging from people with high living standards to
marginalized groups to open migration. The arrival of many immigrants in the country makes it
easy for companies to obtain cheap labor. With the support of free public services (such as free
medical services), the standard of living in the UK is higher than anywhere in the world. Although
the education system contains the myth of modern teaching, it has been recognized worldwide, but
the cost of higher education is high and many people cannot afford it (Digitaljournal.com 2018).

Brazil: Brazil's population composition is still very young, so the consumerism aspect is high. The
population is growing, which may be feasible in the future market. Urban immigration is
increasing, and the income gap in the country is still large. However, as the trend shows, the
income of each family has been increasing, so consumer demand may increase (Haberer, 2011).
Brazilian consumerism is high, especially among young people, which may be a good sign for
Japanese companies.

China: The People's Republic of China is a one-party state governed by the Communist Party. The
seat of the government is in the capital Beijing. China is a densely populated country in the world.
In order to cope with China's aging and labor shrinkage, China officially terminated its one-child
policy (Neuman and Schmitz, 2018). China is based on a collective culture, and all cultural figures
of the same level are involved (Fogel, 2010; Digitaljournal.com 2018).

Although the company decided to enter the business sector, the county will not take risks because
the company must have its own expansion strategy. The demographic situation in the UK is more
conducive to new entry because of the high population, high-quality education and interest in
innovative products with a high standard of living.

Technological

UK: The country has the world's leading R&D institutions, and they are constantly striving to
break through barriers in almost every field. The economy provides great opportunities for
entrepreneurs and has made greater progress in the technological field. The UK has huge and

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innovative talents. People have technical and scientific expertise, which provides more
opportunities for economic growth (Mitropoulou, 2013).

Brazil: Consumers often like Western goods because they show a high degree of technology.
technological progress in the country is gradually making progress. R&D continues to expand,
although it remains ineffective. The country still lacks the technology brought about by innovative
initiatives, and R&D capabilities are still poor.

China: Compared with most Western countries, China seems to be technically backward.
However, it is obvious that the country's technology is growing, and many technologies come
from Western society (Haberer 2011). The B2C industry, China's online payment system is
insecure, which may increase domestic fraud and criminal cases in the context of buyers (Rahman,
2017).

Hence, this reflects China's fierce competition in the technical field, because UK and Brazil still
have higher technological progress than China. On the other hand, Japan is far superior to China in
technology. Just like Japan, Britain has also accelerated innovation and investment in
technological power.

Legal

UK: According to customary law, UK citizens should work more than 40 hours, allowing
employees to work overtime and get paid accordingly. In addition, the working class has the
concepts of minimum wage and various benefits. The 1996 Employment Act protects the rights of
employees and must be observed by businesses operating in the UK. Similarly, the 2010 Equality
Act protects people from any discrimination.

Brazil: Although Brazilian law generally does not require a written employment contract, it is
usually a written employment contract. Brazil generally encourages foreign direct investment
while imposing restrictions on certain sectors. For example, for postal services, investment in
financial institutions is limited to Brazilians or authorized by the Brazilian government (Thomson
Reuters, 2019).

China: Issues related to the legitimacy of trade are constantly changing and are usually prepared to
prohibit the establishment of a neoliberal economy. Another imminent legal issue related to the
Chinese economy is the formation of e-commerce legislation, consumer rights and tax policies.

Thus, this shows that each county has its own rules and regulations, forcing companies to follow
government policies that may affect their business level. Because they must abide by government
policies in order to conduct business smoothly. British law is considered appropriate and
beneficial to foreign businesses because they are favored in terms of employee rights and interests
and employees will have full trust in the company.

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Environmental

UK: The ecology of the United Kingdom is strictly managed, and those who pollute the
environment must pay a high price for it. Economic operations have an environmental impact, and
the country has made considerable progress in increasing its impact. The rare bad weather in the
country provides opportunities to play an important role in the tourism industry.

Brazil: Brazil is one of the most beautiful countries in the world, attracting millions of tourists
every year. However, Brazil faces some serious environmental challenges. For example,
deforestation, illegal wildlife trade, illegal poaching, air pollution, water pollution, land
degradation and severe oil spills are the most challenging aspects.

China: The rapid growth of the Chinese economy has seriously affected the natural environment.
However, the Chinese government has taken many measures to solve these problems by
participating in the protection of natural resources and the environment.

Hence, this shows that environmental factors have a significant impact on economic growth
because most companies emit pollution and harmful elements. This impact will have a negative
impact on the climate and prevent the country from developing new industries that destroy nature.
The UK’s legal measures and the significant progress made by the government in dealing with the
impact have made the UK a leader in attracting foreign companies. The bold measures of the
Japanese government on environmental impact will make TAKIMAKI stand out in the work of
British legal measures.

Table1:summary of pestle

According to the PESTLE analysis carried out, TAKIMAKI can be internationalized in the UK
under certain ideal political, legal, technical, social, economic and environmental factors. In
addition, according to PESTLE's analysis framework, both of these factors will have the same
impact on the company, while ignoring external factors, the company will not be able to survive in
a competitive business environment.

5. CONCLUSION

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According to the report's conclusion, TKAIMAKI has a strong position in the Japanese local
market because it has local suppliers and cost-effective product pricing of products. According to
SWOT and PESTLE analysis, the results show that the UK market is huge and there are many
elderly people. Therefore, innovative and advanced technical products are needed to improve
living standards. In addition to this, the technology growth is slow, and TAKIMAKI will better
conduct business in the UK electronics sector by implementing strategies of growth and
expansion. In addition, through expansion strategies, companies will be able to focus on the
market and manufacture goods accordingly. By analyzing all the factors that TAKIMAKI can
expand its business to the UK market, it can be concluded that all factors in the UK market
support new entry.

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