Executive Summary
This paper was designed to aid Stan, an Australian-based streaming service provider, address some of the significant difficulties they would encounter as they grow their business worldwide. The corporation faces three challenges: deciding whether to extend its operations in the United Kingdom or New Zealand. Stan’s best plan for entering the worldwide market and the optimal entry option for international growth must be carefully considered. The paper addresses all difficulties and concludes that New Zealand should be the country where they expand their business. The international strategy would be the best fit and, if necessary, adopt the global standardization strategy. In conclusion, the market entrance strategy that would be most advantageous for Stan would be to form a strategic alliance with one of its primary rivals.
Introduction
Purpose
Stan is contemplating moving into either New Zealand or the United Kingdom as part of his international growth plans. This report aims to enlighten on some of Stan’s current challenges due to its global expansion. First, the study will suggest which country is most suited for the company’s international expansion. In addition, the findings of this study will provide the best internationalization plan for expanding into the selected market. In conclusion, one of the goals of this study is to determine which method of admission is the most effective way to get into the nation. Research on the target markets and applying applicable theories, models, and ideas will be used to accomplish this goal.
Company Background
Stan is an Australian firm that provides subscription streaming services. Its ever-expanding collection now contains around 2,275 films and almost 600 television programs, which can be seen on various platforms (Milner, 2021). These platforms include most of the leading brands of smart televisions, Apple TV, Chromecast, and Amazon Fire TV Stick, Android and iOS smartphones, and tablets. It is one of the several local streaming services available to Australians for a small monthly cost. Stan has garnered such a large fanbase globally, given the streaming service’s access to such an immense library of films and television programs.
Assumptions
My assumption is that the information was accurate when it was collected. The findings would be significantly invalidated if this assumption is not followed.
Limitation
The lack of access to the company’s data was one of the challenges throughout preparing this report. This limitation is likely to have an impact on the outcomes.
Outline
After completing the introduction, the body section will include information from research into the most suitable target market, the best international strategy, and the best entrance mode. These three aspects are the three most important problems that Stan has to address. The report’s conclusion will summarize the findings and an overall proposal to help Stan handle all three of their primary internationalization challenges.
Body
Target Market
Choosing a target market for business expansion is not easy as a lot of factors need to be considered. According to the Porters five force model, there are five key aspects that one need to consinder before choosing a target market (Mukherjee, 2018). This factors include, the extent of the competition rivalry, consumer bargaining power, supplier bargaingin power, threat of substitution goods or services and threat of new entrants into the market. A consideration of this factors will aid in choosing the best market for expansion as a guide to the market analysis has been provided. New Zealand and the United Kingdom are the available options for Stan’s expansion country. The proximity of New Zealand to Australia is undeniably one of the country’s most vital selling points. New Zealand has a significant edge in online purchasing in today’s globe since fast access and delivery is something clients often want. The United Kingdom, on the other hand, has the edge over New Zealand in that it is now simpler to attract people to work in technical positions.
After Brexit, companies profit from selective immigration criteria as more work permits are issued to workers outside the EU. According to IMF data, New Zealand has 5.16 million people, with a 3.2% unemployment rate in 2022. In contrast, the United Kingdom has 67.84 million people, with a 4.2% unemployment rate. According to these figures, it could be simpler to recruit employees in the United Kingdom, and there might also be an increase in the number of clients. However, New Zealand’s private debt, loans, and debt securities are 174.56 per cent of GDP, whereas the United Kingdom’s is 170.35 per cent (International Monetary Fund, 2022). This statistic demonstrates the ease with which Stan will be able to take out loans and the amount they will be able to borrow to establish themselves in their target market more quickly. As a result of all factors discussed, New Zealand will be the primary market because it allows for faster service delivery times, more customer satisfaction, and the ability to take out more loans easily.
International strategy
Once Stan expands into foreign markets, it will be subject to two distinct kinds of competitive challenges, as determined by an analysis of the competitive forces posed by the global market. First and foremost, Stan will confront challenges for cost reductions due to the competitive nature of the worldwide market, which will force the company to cut its costs of value generation (Menzies et al., 2020). This pressure may be quite severe in sectors that create commodity-type items and are believed to be a universal need. Alternatively, a service satisfies a global need when it can appeal to customers of various nationalities who have the same interests and preferences (Kaleka & Morgan, 2017). There is less of a burden on Stan since they do not offer commodities but instead specialize in high-end services.
Additionally, the pressure might be intense when key rivals are located in low-cost places. Stan’s rivals include Prime Video, HBO Now, Amazon Prime Video, Paramount+, Apple TV+, and HBO Go. Other competitors include Apple TV+ and Paramount+. For example, Amazon’s prime membership countries include Belgium, Brazil, Canada; China; France; Germany; India, Italy, Japan, Netherlands, Singapore, Spain, the United Kingdom, the United States, Australia, and the United States. Therefore, the demand for Stan’s company to reduce its costs is relatively minimal since its rivals are not based in low-cost areas. As a result, it is possible to conclude that Stan will be subject to a low level of pressure to reduce costs.
Second, Stan will be put under pressure to be locally responsive. Disparities in consumer preferences, infrastructure, historical customs, routes of supply, and host government requirements will be the primary causes of these problems across different countries. Despite this, many people believe that Australia and New Zealand have a lot of similarities (Menzies et al., 2020). Both nations allow free movement of people. Many Australians reside in New Zealand and vice versa and both countries have got a similar culture. Consequently, local responsiveness is minimal because of the low nationality and cultural differences.
From the above I-R framerork, Stan is at a low-low postion making the international strategy the ideal fit for Stan because of the low demands on cost reductions and local responsiveness that the firm will be facing. There will be no need for local adaptation or global involvement if the international strategy is used. This plan is also known as an exporting strategy because most of the operations along the value chain will be maintained at the headquarters in Australia (Brymer et al., 2020). This means Stan will create their services in their own country and then offer them to their consumers located in other countries. Using this strategy will limit the degree of customizability in both the product offering and the market, even though it is a viable option when there is less pressure on local responsiveness and cost reduction.
It is possible that the international strategy may not be profitable in the long run; hence, Stan will have to switch to either a global standardization strategy or a transnational strategy for the company to continue existing. Changes in strategy must be implemented ahead of the competition if the company wants to maintain its competitive advantage (Rao-Nicholson & Khan, 2017). There should be high-cost reduction requirements but minimal local responsiveness pressures for this approach to work optimally. In order to achieve the most significant possible reduction in expenses, Stan needs will be partnering with an international firm that will provide a globally standardized product. It will be possible for the firm to concentrate on increasing profits via cost reductions brought about by advantages such as economies of scale, learning effects, and location economies if it adopts this new approach (Hill & Hult, 2019). As a result of Stan’s key rivals’ ambitions to grow worldwide, the pressure on Stan to reduce costs will increase from low to high, making this approach necessary.
Entry Mode
The selection of the entrance method determines Stan’s speculative expenditure strategy, prospective risks, market size, and entry mode benefits. Other ways to get into the international market include exporting, licensing, joint ventures, strategic alliances, and owned subsidiaries via foreign direct investment (FDI) (Surdu et al., 2019). There are a variety of circumstances that are appropriate for each entrance mode. Modes vary from one another in three critical ways: the degree to which the company exposes risk, how it manages and commits necessary resources and their desired return on investment.
Stan can establish a wholly-owned subsidiary in New Zealand, in which the company would hold full ownership of the company. This will result in several benefits, one of which is that Stan will be able to control the risk and diversify his investments. Alternatively, suppose one of Stan’s companies fails to perform as expected in New Zealand. In that case, the other businesses may be able to compensate and help the firm remain successful in the long term. However, the company will have to incur the whole expense and risk of starting up abroad and the danger of double taxes (Samiee & Chirapanda, 2019). They will need to make a greenfield investment if Stan decides to establish a wholly-owned subsidiary.” As a result, the business will have a presence in New Zealand for the first time. Stan will be able to construct subsidiaries and reap the benefits of ownership advantages as a result of this arrangement. On the other side, although the corporation may strive to distance itself from its rivals, this action may encourage those rivals likewise to grow overseas.
A greenfield investment is one of the most dangerous forms of foreign direct investment, making this a high-risk option (Harms & Méon, 2017). Setting up a wholly-owned subsidiary and making a greenfield investment are both risky propositions; thus, moving ahead with this proposal is debatable. Stan’s company does not need to pursue the owned subsidiary strategy since the need to reduce costs is low. Stan has the option of creating a strategic partnership with one of its future or present rivals. This includes forming a short-term or long-term partnership with rivals. New Zealand may be a suitable place for Stan to develop since its competitors are primarily located in Australia, where there is less competition. Amazon Prime is the only significant competition that has entered the New Zealand market, and as a result, Stan and Amazon Prime might create an alliance. Since other rivals will be unable to keep up with and eventually surpass the alliance in the new foreign market, this would be an effective entrance strategy.
The benefits of a strategic alliance include fewer obstacles to entry into foreign markets, and fewer resources are needed than if a business were to operate on its own. Additionally, both firms will share the fixed costs and the risks of producing new goods, and both allies will bring in their own set of talents and assets that neither partner could easily create (Ko et al., 2020). However, forming a strategic alliance would result in a loss of control on both ends, one of the most significant drawbacks of this course of action. For example, if Amazon Prime offers unpleasing streaming services, whatever unpleasant experiences the customers have would reflect on Stan as well. It means that the reputations of both companies are merged, regardless of whether the customers use services provided by the alliance partner. In order to deal with these issues, both parties must agree and establish a strong connection. Therefore, a strategic alliance with one of Stan’s key competitors would continue to be the most viable entry strategy to consider.
Conclusion
Several challenges must be dealt with when Stan expands its business worldwide. New Zealand would be the most suited foreign market to develop in the first place. In light of the challenges Stan would face regarding local response and cost savings, it would also be better to adopt the international strategy, but this may eventually change into a worldwide standardized strategy. The strategic alliance would be the best market entry mode for Stan following a thorough analysis. In the new market, Stan may do well by following the suggestions that have been provided above.
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