KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT (KUSOM)

CASE ANALYSIS OF AUDIOTEKA

(International Business Management)

Submitted by:

Pratikchya Basnet (19303)

Shaibya Gautam(19310)

Safal KC (19312)

Nivida Pandey (19323)

Ronjent Thapa (19337)

Shreya Adhikari (19338)

Submitted to:

Asst. Prof Binayak Malla

MBA Spring-2019
21/11/2019
1. If Audioteka decides to enter Indian market, will it be able to achieve success? What
according to you could be the key success factor or reason for failure of the
company? Based on SWOT analysis of the company present your point of view?

As provided in the case study, with the decline of readership in books and magazines in the
recent times certainly Audioteka could be a successful solution to many people as rather than
reading the book they can listen to it. Its number of users and downloaded number of audio
books also has been increasing and it also has been able to expand to different countries
successfully such as Poland, Czech Republic, France, Spain, Germany, Sweden, UK and so
on. India with the large market potential could be bigger than whole Europe for Audioteka
and if they decide to enter Indian market they might be able to achieve success however they
should be able to cope up with the culture, market, politics and economic condition of the
country which can be a major setback if not looked after.

The key success factors that could lead the company towards success in the Indian market
are; the competitive advantage of the company and the huge market potential in the Indian
market. Audioteka digitized the reading materials such as books, magazines and newspaper
in audio format that set a new market for these products with the advancement of technology
and reduction of book readers. Furthermore it also cooperated with well-known global
corporations such as Amazon, Nokia, Apple, and Samsung and so on for marketing,
distribution and promotions. India has population over 1.3 billion and population growth rate
of 1.3% per year with more of urban population which were the major part of success so far
for Audioteka. Apart from the huge market potential, the publishing industry in India also
was growing at an impressive rate. Moreover from a study conducted by Professor Philip M.
Parker showed a good amount of demand for audio books throughout the major cities of the
country. According to the report if only the country would be able to meet the latent demand
of two major cities in India the company could be able to make 24.75 million dollars.

However the major setback for the company could be created due to the cultural differences,
low HDI ranking of the country, poor implementations of the patent law and appreciating
Indian currency. Companies like “Barbie dolls” failed in India due to the difference in the
value system of the Indian society. According to the Hofstede’s’ five dimensions model for
understanding the value system of the society India had high power distance, masculinity and
 pragmatic culture. By considering these dimensions Audioteka can understand the behavior
of Indian consumers, determine the international strategies and without intervening their
value system succeed in capturing the large market potential of the country.

Hence to conclude, favorable economic growth supported by liberalized government policies

and well set democratic norms, higher percentage of young people who are very supportive
of technological products, higher urbanization rate with increasing trend of accepting western
culture, growth in publication industry, high latent demand for audio book in urban cities are
few of many factors that made the country very attractive market for Audioteka and the
major challenge of cultural aspects also considered they can succeed in the Indian market.

STRENGTHS WEAKNESSES
 New and innovative product offering
 Insufficient information of the business
 Technical expertise as the
environment of India regarding audio
competitive advantage
books
 Successful product/ value proposition in
the other markets

OPPORTUNITIES THREATS

 Favorable economic growth  Sill a developing country

and liberalized government
policies
 Growth in publication industry
 Demand potential for audio book
 Population supportive for new technology 
 Poor implementation of patent law
 Appreciating Indian currency which is
threat for foreign company
 Complexities in terms of political environment
Difficult to understand cultural
dimensions, values and social systems.
 2. What according to you should be the internationalization strategy for technology-based
company like Audioteka to enter Indian market, reflect your answer based on mode of
entry and ease of doing business?

In order to sell any products by the company outside of their national boundaries, they follow
various different strategy mainly referred to as an internationalization strategy. Similar is in the
case of Audioteka. This company is aiming to go international basically to Indian market due to
the perceived potential business opportunities. Despite of this, increased market size, greater
return on investments, greater economies of scale, competitive advantage and growth ambitions
are also other reasons. As per my opinion, the best internationalization strategy for technology-
based company like Audioteka to enter Indian market would be:

TRANSNATIONAL STRATEGY

HIGH

Transnational
C Strategy
o
st
Pr
es

LOW HIGH

Local Responsiveness
When Audioteka uses transnational strategies, it will help them to balance their desire for
efficiency along with the need to adjust to local preferences of India where they want to
internationalize on.

WHY??

1) High competition in reducing price of the product

In transnational strategy, there is high competition for reducing the price of the product. Similar
is for the case of Indian customers. They are price sensitive and are not ready to buy expensive
EBooks. Therefore, Audioteka needs to price their product in an acceptable way to the local
customers and compete high in terms of price with the existing book publishers.

2) Local responsiveness in high

Another reason to choose transnational strategy is that the local responsiveness for Audioteka is
also high when it comes to India. India being a multi-cultural and multi-lingual land where
people have faith on the religion they follow. Therefore, Audioteka has to modify its current
practice of offering normal sort of books to religious books since more than 80% of the Indian
population belong to Hindu Community. This will help Audioteka in managing the needs and
preference of the local community for grabbing the market opportunity.

Audioteka being a technology based company, they need to focus on various different
dimensions in order to cope up with the challenges and opportunities that may arise in
International market such as:

 Culture of the people living in a host country

 Technological trends in a market
 Willingness of people to accept western trend
 Trend of urbanization in the host country, etc.

In order to pursue transnational strategy into Indian market, Audioteka needs to choose such
mode of entry that gives them an edge of competitive advantage over other traditional book
publishers. As technology based company have limited time resource because disruptive
technologies, it can displace the established market of audio books. Therefore, for Audioteka, it
would be better for them to choose entry mode characterized by low cost i.e. non-equity based
mode of entry.

MODE OF ENTRY: Non-equity based mode of entry

Through the non-equity based mode of entry, Audioteka entering into a strategic alliance with
existing book publication company i.e. Hachette India, one of the largest publishers and
distributors of books in India, will increase the awareness of Audioteka regarding the market of
India for books. It is also fruitful for the company to tie up with them because they are the one
who have the ownership and copyright of books. Furthermore, forming a strategic alliance
provides an opportunity to Audioteka to access new customer base as well. This is actually what
Marcin Beme is searching for making Audioteka a global company. Since the company has a bit
limited finance, opening a joint venture in host country is not that much profitable for Audioteka
so strategic alliances will be a better option.

In order to create favorable brand image of any product which is entirely new in the market is
both costly and time consuming. It also might create risks and operational hurdles to adjust in the
market. Therefore with the little financing, it will support in creation of strategic arrangement
with the established publishers who have already created their image in the market. This could be
the major reason why Audioteka needs to choose strategic alliance over other modes of entry.

 Geo-political risk can be minimized

As local publishers have the understanding of rules and regulations of host country, regarding the
taste and preference of customers, reading habits, cultural climate etc., this will help Audioteka
to minimize geo-political risk by entering into strategic alliance. This type of partnership also
saves huge amount of time and cost spent on Research and Development of Audioteka.

 Economies of scale can be achieved

Through the alliance, and by the means of cost reduction, economies of scale can be achieved.
This will allow the company to gain access to wider marketing channels without spending much.
Since two firms cooperate to derive mutual benefits, in this case, publishers will as well get
benefitted. Local publisher can enhance their image in public by letting them know that they not
just publish hard copies but also works in coalition with audio books. This in turn, might lead to
increase in revenue of the publishers as well.

Despite of liberal policies of Indian Government, Audioteka entering Indian market and being
established there is not an easy job. This fact is also reinforced by the World Bank and IFC's
report which states that ‘India has ranked 132 out of 185 on the dimension of "Ease of doing
business". In this regard, strategic alliance would be the best option for Audioteka as the local
publisher can provide the knowledge of markets, customer preferences, distribution networks
and local rules and legislations. Therefore, with the help of strategic alliance, Audioteka can
maintain the power of control to them as well.

3. What could possibly be the most challenging factor for Audioteka while
entering Indian market a) Business environment or b) Cultural environment?

Audioteka has been successful in European market, and is now considering entering the Indian
market. For any company to become successful over borders, they need to understand both the
Business environment and Cultural environment of the country they wish to enter by investing
time and resources. Similarly for Audioteka as well, there are a number of factors that need to be
considered while entering the Indian market. So, first of all we have to know about these
challenges in more detail.

BUSINESS ENVIRONMENT

There are several things to keep in mind regarding the business environment in India before
making any internationalization move. Dimensions like starting a business, dealing with
concentration permits, registering property, paying taxes and reinforcing contracts are very
significant considerations when it comes to legal compliances. So, Audioteka should be flexible
and adaptable in regards to laws in India and other legal rules by having knowledge about the
economic and legal environment..

India has stable political situation supported by strong economic growth rate. India also has been
able to make strong progress and received global recognition in areas such as the telecoms, IT,
and IT-enabled services sectors. Government policy on technology was pro-development, with a
significantly higher allocation for the development of the technological knowledge base and
industries.

India has been a destination for low-cost, outsourced software and support services since the late
1980s when the labor arbitrage model became a cost-effective solution for multinational
companies. Historically, this outsourcing has boosted the country's wealth, while also providing
much-treasured employment and fuelling urbanization. The core digital sectors, due to these
reasons, are expected to jump two fold to USD355-435 billion by 2025. India is one of the
largest and fastest growing markets for digital consumers, with 560 million internet subscribers
in 2018. The usage cost for internet is also decreasing, the data costs have fallen by 95 per cent
since 2013, India will see internet subscribers’ rise by about 40 per cent and number of smart
phones to double by 2023.

The spread of smart phones have also fueled the growth and reach of audio books. People in
India might have an inclination towards audio books due to several reasons mentioned above,
and other economic aspects as well. The easy access of mobile phones and internet is one major
advantage to Audioteka, with proper marketing campaign, it can capture the minds of youths in
no time.

Existing competition is another significant aspect of internationalization and Audioteka has one
giant competitor in India. Amazon launched its Audible store for audio books in India on
October, 2018, making its library of more than 2,00,000 spoken word titles available across the
country at reasonable prices. Thus, in addition to the legal and economic consideration,
Audioteka has to also consider the marketing and advertisement aspect for the company.

Business environment in the country is also affected by unwanted government interference in

various spheres of business and industrial activities. There is lack of single window dealing
(single window dealing is a complex government implementation of a computer system to
facilitate international trade by enabling submission of regulatory documents to a single entity or
single location) and efficient administration in respect of licensing. Thus, businesses may have to
face problems of corruption, harassment, delays in works etc.
Another important feature of business environment in India is the disturbed law and order, in
some particular regions, leading unbalanced growth where smooth operation of business is
interrupted. Thus, business conditions in country like India are subject to diversified features.

With all these information, it is quite apparent that business environment for Audioteka is not
biggest challenge to enter in Indian market, but it does require some serious consideration in a
political sense. Although there is favorable economic growth supported by liberalized
government policies, well set democratic norms, higher urbanization rate, growth in publication
industry, and high latent demand for audio book in urban cities, there are some serious issues that
we discussed earlier which might be hard to tackle for a company coming from European
subcontinent where business environment is not as complex as of India.

CULTURAL ENVIRONMENT

India is diverse with varied and distinct geographical regions each having its own language,
customs and traditions. For a business to establish itself well in any country or region, it should
be able to better understand cultural values and social settings of that place. Many small cultural
factors could play big influential role in success of Audioteka in India. Answers to questions
like, which type of audio book should be launched in India? When would be the right timing for
launching it? Who could possibly be the target customer? How much are they willing to pay for
the product? and such could come from socio-cultural factors. Hence, the cultural aspects are
very crucial in part of India.

Audioteka would have considerable difficulty in entering the Indian market. The drastically
different cultural environment and values of India where Audioteka wishes to enter possesses an
imminent challenge to the company which cannot be ignored. Though Audioteka has flourished
in the Europe, the culture of Indian market contrasts sharply with the European market. This is
the reason while the same business strategy and perspective used in the European market cannot
be applied to the Indian Territory. International business strategy should align with the culture of
the particular country.

As presented in the article, India is a collectivist society whereas Poland is more individualist,
India is more acceptable to uncertainty than Poland, India has a higher power distance and India
is more long term oriented.
Hofstede’s Cultural dimension India Poland
Power distance 77 68
Individualism 48 60
Masculinity 56 64
Uncertainty avoidance 40 93
Long term orientation 51 28
Indulgence 26 39

These differences in the cultural traits between these two countries need to be analyzed carefully
by Audioteka in developing the international strategies; otherwise this difference might severely
affects the business of the company. An example of this could be: if Audioteka introduces an
audio book of an atheist author, it is deemed not only to fail in India which has high tolerance on
religious beliefs, but also gain harsh comments and public critics. Another example could be if
Audioteka decides to launch an audio book on hyper sexuality or other extreme Western beliefs,
which has not been yet accepted by the Indian norms.

The perceived attitude of the Indians towards audio books is highly influenced by the culture,
value and norms of the country. Small cultural considerations like, Indians have one of the
longest commute times in the world and they use it to listen to audio books, as opposed to
European countries where the transport management much efficient. A recent survey by the
Audio Publishers Association found that the overwhelming majority of audio book users listen in
the car, and more than two-thirds of buyers described audio book as a good way to multitask
while doing chores or exercising. They also spare you eye strain while letting you “read” in bed.

In a nutshell, business success can depend to a large extent on an understanding of the culture,
the people, the land and the business environment that a foreign company and investor would be
expected to operate within. However, India promises great business opportunities and many
organizations have already turned to this vast country but for the country like Audioteka, its
cultural environment may hinder it to operate its business in India. Though there is shift in
culture and people are more likely to adopt western culture, the pervasive conventional cultural
factors possess a major challenge for Audioteka to establish its business in India.
While there are undeniable possibilities of successfully penetrating the Indian market, the
question of whether a foreign company like Audioteka which is totally alien towards the Indian
culture, successfully adapts and absorbs the Indian culture still remains a grave one.

4. Do you think Audioteka has the potential of accomplishing its objective and
becoming a Global company? What is your prediction about its future and what
suggestions would you like to give to Marcin for becoming successful worldwide?

We do think that Audioteka has the potential of becoming a Global company. Firstly, the
company is providing a service which can help people be more productive by listening to
recorded books through portable devices like smart phones. Unlike paper books, audio books
through Audioteka do not require readers to totally concentrate on reading. They could listen to it
while doing other activities such as driving or cooking. Audioteka could also evoke interest in
people who are bored of reading physical books.

We can also observe that the demand for physical books is decreasing throughout the world.
Studies have shown that young people are more intro reading materials on the internet while also
inclining towards video presentations. This has allowed Audioteka to be able to create a new
market which has a high growth potential throughout the world. Audioteka is also a
technological based company so it doesn’t require a high level of investment and the transfer for
rapid expansion would be easy to go global.

Audioteka is also having only one major competitor that is Audible. Audible had been generating
less than 3% of its profit from markets outside of the Americas. This allows Audioteka to tap
into unreached markets with high potential for audio book, such as India. The advancement in
mobile technologies, rising sales of smart phones and a large population in south Asian countries
like India present a huge opportunity for Audioteka to expand to the region. As such, the future
of Audioteka seems to be fruitful.

In spite of so many potentials of becoming a global company, there are certain things of which
Mr. Marcin needs to be careful about while going global. The company is currently planning to
expand through subsidiaries which provides more control and helps in collaborating with
publishers. However, a joint venture is more recommendable in regions like south Asia where
threat from terrorism and corruption still remains. A joint venture would make the company
more resistant in face of threats and even failures if any to happen in the future. The
technological environment is rapidly changing and it doesn’t take too long for other companies
to enter the market, so Audioteka should spend more on R&D programs to come up with new
and innovative processes. We would also recommend Audioteka to translate books in languages
such as Mandarin and Hindi which are the highest speaking languages alongside English. The
market from china and India alone could help reap high profits. Moreover, people from countries
such as India have high religious and cultural sentiments so, audio books on Bhagwat Gita,
Ramayana, Ayurveda and as such could help gain competitive edge.
REFERENCE

https://www.statista.com/statistics/274658/forecast-of-mobile-phone-users-in-india/

https://www.telegraphindia.com/education/books-you-listen-to/cid/1669990

https://www.weforum.org/agenda/2019/10/india-technology-development-silicon-valley/