Global and International Business Contexts Essay

IntroductionThis report has been written by the Boston Consulting Group and uses doormans case diamond analysis elanl to evaluate the prepossessingness of investment opportunities in the Tunisian fuddle pains. Also discussed atomic number 18 two key man mount upment issues that need to be taken into account in front developing operations in Tunisia followed by recommendations on two st valuegies for entry into the Tunisian vino exertion market. In legal injury of background to this report, it should be noted that the global market for vino industry is ever-changing signifi locoweedtly with substantial disagreeences in the structure of the vino industry around the world. For eccentric, in that location atomic number 18 232,900 booze-coloured producers in France only when the transcend 10 brands take hold only 4% of the market. In billet, four firms control over 75% of the Australian fuddle market. Hence there is a marked difference in industry structure when c omparing the untested World producers (e.g. Australia, Chile, United States) to the Old World firms. These structural differences are driven by institutional diversity and contrasting patterns of diachronic instruction in countries.However, they are as well as driven by the belligerent strategies employed by particular firms which are determining factors discussed in Porters Diamond model. Porters diamond model allows an analysis of why almost industries deep down nations are more competitive than overbold(prenominal)s and takes into account the sept base of a duty (Tunisia) as maven element that plays an important part insuccessfully achieving competitive usefulness in the global market. (See faithful in 1.1) Part 1 Porters National Diamond Analysis Porters national diamond analysis model has four main determinants, which are factor conditions, related and supporting industries, submit conditions as well as strategy, structure and argument. Factor Conditions Facto r conditions are those factors that great deal be utilised by companies inherently found within a nation which might furnish competitive usefulness much(prenominal) as human resources, material resources, knowledge resources, capital resources and infrastructure.These factor conditions can be built upon by companies to improve their competitiveness. Factor conditions could be divided into two resources as home grown resources and exceedingly specialised resources. As Michael Porter described, the home grown resources are important and in the case of Tunisia accommodates the inbred resource of a climate well suited to drink-colored-colored-coloured growing, plenty of sunshine, fertile soil as well as limited pollution which all aid the industry of grape planting. Political and historical factors through Tunisias history such(prenominal) as the romans, French occupation which resulted in over 600 caves macrocosm created for wine aging and a recent flourish in the Tunisian wine industry later on the 1980s has left Tunisia with a number of cooperatives and engineers all with specialist skills in wine doing where new-made techniques are existence used creating innovation, technical progress and competitive advantage.The relative low cost of role and salary levels in Tunisia compared to European countries brings with it a provided home grown Tunisian competitive advantage together with an increasingly skilled base of employees who overhear worked in the wine industry. (http//www.tunisieindustrie.nat) Salary Per hour rate In Tunisia 48-hour workweek 1.538 DT per hr Equates to 53p (in British pounds) per hour 40-hour workweek 1.584 DT (http//www.tunisieindustrie.nat)Demand ConditionsThis is the demand for point of intersections in the home market which can be influenced by three factors the mix of customers needs, the scope of house servant demand and growth and how the needs of domestic market translate into the global market. Whilst the annual domestic wine consumption per person in Tunisia is only 8/9 litres compared to an average of 60 litres a category in France, a domestic wine industry is likely to encourage great levels of demand athome from loyal customers to increasing levels of tourists (Ariaoui, 2007). Also consumer attitudes and behaviour play a role in domestic wine consumption because wine plays a very different role in European assimilation as compared to American, Australian culture or even Tunisian culture. In Europe wine ashes part of everyday life and consumers often drink it along with the daily meal. Financial incentives offered by the Tunisian authorities have further dish uped to support the domestic wine industry making it more attractive to unlike investors. As in new world producers, these investments in the Tunisian wine industry have helped encourage innovation enabling Tunisian wine growers to enhance the consistency and the quality of their wines by diminution operating cost through th e increasing use of machinery to harvest the grapes crops. Tunisia can in like manner learn from the New World which has more extensive and well-developed markets for its grapes, making it easier for wineries to find multiple avenues for sourcing intersection.Related and Supporting Industries At present, Tunisia go for wines ranging from average to high levels of quality and they export their products to the whole world including famous brand names such as Carignan, Mourvdre and Muscat of Alexandria. The Tunisia government has supported their domestic wine industry through the construction of rail slipway and roadstead (national infrastructure) to enhance the innovation and technological development in wine making which in turn is benefiting some other related and supporting industries such as transport, holiday and leisure industry, technology and machinery. Taxes at 18% on wine consumption in Tunisia also pass on an important income for the Tunisian treasury and so restrictio ns are unlikely in the future as in such nations as the US, Chile, and South Africa and should ensure go on support from the Tunisian government. Firm Strategy, Structure, and Rivalry The structure and forethought systems of firms in different countries can potentially affect competitiveness and how well a caller-out is able to use its existing organisational structure whether it is graded or flat, against current and potential competitive companies.It is very important that the Tunisian wine industry pays close attention to its industry and company structures and strategies to ensure it is suitable for expansion into the global market. Porter argues that domestic rivalry which involves company structures and the need to pursue competitive within a unsophisticated like Tunisiacould help provide the wine industry with a stern for achieving global leading. Structural differences including institutional differences in wine turnout countries vary considerably and are often influ enced by regulatory agencies such as in France, for instance which employs very strict regulations that constrain production so that producers can only designate sparkling wine as Champagne if they produce it using three grape varieties grown in the region with the alike name unlike Australia which has a very loose regulatory structure allowing winemakers to source grapes from diverse geographic regions within the country.Different levels of subsidies have led to structural differences globally in wine making such as European governments who often subsidise their small farmers who grow grapes whereas subsidies tend to be lower or n wizardxistent in most New World nations. In addition, capital markets and corporate ownership patterns differ between geographic regions where typically Europe tends to have many more privately held firms in contrast to most of the largest winemakers in the United States and Australia who have become publically traded corporations. Land ownership and hi storical patterns of development represent another major factor explaining the structural differences between global wine production areas. For ideal in the Old World, winemaking has been organised around family farms for centuries. and the land has remained in family ownership for generations. However currently, Tunisian landowners appear to be able to exert power in particular locations where high-quality land is scarce.This appears to be a problem where most producers are small, and good new acreage in Tunisia is extremely scarce but it is worth noting that grapes now cover more than 10,000 hectares of land in Tunisia compared to around 100 hectares in 1889 and wine production ranks third in Tunisian agriculture just behind olive oil and wheat berry production (Ariaoui, 2007). Finally, the competitive strategies of firms can affect industry structure such as the United States and Australia where publicly traded firms are much more prevalent. These firms have altered the industr y structure and competitive landscape through their acquisition strategies, consumer branding and advertising strategies, capital investment plans, and technology initiatives.Consolidation of the wine Industry began to add-on over the ancient decade, particularly among the New World producers with the consolidation of some premium wineries merging with transport rivals such as Rosemount creating some major global producers.In terms of industrial structure, Tunisia, as to date is a small but relatively high cost producer of wine in comparing but now successfully exports millions of litres of wine annually to Europe, Russia and the US with two thirds of its wine production being controlled by the UCCCV (Union Centrale des Coopratives Viticoles) and is looking for global partners to exploit and develop Tunisian wine production opportunities.Part 2 modern-day Management issuesLeadership StyleIt is undis pukeable that many of the global wine producing companies who used to dominate the market are now experiencing a decline in market share. in that location are several reasons that can be used to explain such a decline including lead dash. The appropriate leaders styles are those that can enable the manager to interact closely both with the employees and the customers and as a facilitator whose major role is to bring together and create an organisational culture that is streamlined a pitch towards meeting the goals and mission of the organisation. If the Tunisian booze Industry is keen to expand, its management team should know that trail others is not a simple task. As a good deal manager, a leader has to treat everyone as equal regardless of their title or position and maintain a pleasant demeanor (Ljungholm, 2014). It is nearly focusing on gaining trust and allegiance rather than enforcing fear and compliance. To be able to lead well, leaders need to be guided by appropriate leading theories. Some of the theories proposed include supportive leaders hip model and transformative leadership model.These models should enable the Tunisian wine industry to adapt new environment slowly and are described below. Supportive leadership model Supportive leadership model, is where the manager supports every stakeholder emotionally and professionally in an attempt to ensure that he or she performs optimally. It also focuses in forging and creating collaborating and back relationships among employees (Mahalinga Shiva, & Suar, 2012). The workplace is often made up of people from diverse backgrounds, with varying needs and wants and it calls for patience, belowstanding and graceful leadership skills. The supportive model believes that influencing people to do something is more productive and sustainable than barking orders and instructions to people (Hutchinson &Jackson, 2013). A leader should always keep in mind that as a manager, he or she has to Treat everyone as equal regardless of their title or position and remember to smile a lot and always maintain a pleasant demeanor. The leader should focus on gaining trust and commitment rather than fear and compliance (Hutchinson & Jackson, 2013).This cannot be achieved without deliberately motivating the people to become better. Motivating them requires that you setoff understand their training and development needs. The leader should learn to foster warm relationships amongst the Tunisian employees to understand them and attain ways in which interpersonal relationships can be improved for a more fulfilling work experience. Transformative leadership model The second most important model is transformational leadership theory or model. This is a new model that was formed in around 1970s following the realisation that there was need of greater flexibility in employment. The current employment conditions have changed significantly and this model is particularly relevant to the Tunisian wine industry which is relatively new as an industry (1980s onwards) and because most of the Tunisians of employable age are from the millennial generation.One thing to note about this new generation is that it is educated and culturally more mixed than any generation before them. In the US this typically federal agency they are job-hoppers who hate officialdom and mistrust traditional hierarchies (Goudreau, 2013). This group of employees, according to Forbes, is willing to sacrifice pay for increase vacation magazine and the ability to work outside the office. According to the study conducted by Forbes, one of the ways of motivating this generation is that they want employers who offer flexibility or rather alternative work arrangement. The transformational leadership is characterised by a lot of motivation as under this leadership model, the leader is expected to provide constructive feedback, encourage employees to exert effort and to think creatively about complex problems (Xueli, Lin & Mian, 2014).Transformational leadership is base on what is called lead, learn and grow model.. A leader can implement transformational leadership by memory track of the impact of his action, engaging in formal evaluation at the right time (Abbasi, & Zamani-Miandashti, 2013). A leader must also be willing and able to learn on an ongoing tail and should realise that learning is never complete. That is why under transformational leadership, no one is an expert (Watts, &Corrie, 2013). Unlike in most European wine producing areas the problem with most leaders there, is that they tend to believe that they are able or that they are expert, whereas in Tunisia producers are looking for expertise outside of the country and seem willing to learn. Tunisia wine production has an opportunity to analyse and create and take into account the appropriate leadership style for the wine industry and country that will be maximise competitive advantage before wine production operations can be developed in the country.Part 2 Continued Contemporary Management issuesKnowledge and Change ManagementRapid changes in business and technology and increasing competitions means organisations have to adapt the best training and education to enable them continue to stay on top of their games. The complexity, relative newness and competitiveness of the Tunisian wine industry environment requires that Tunisian companies will have to incessantly raise the bar on their effectiveness to compete globally. Top performance increasingly demands excellence in all areas, including leadership, strategy, productivity, and adaptation to change, process improvement, and capability enhancement on knowledge, skills, abilities, and competencies, trust and motivation. An organisation in the wine industry should ensure that all levels of employees are given the opportunity to continue to improve by getting new skills through training.Much of the improvements needed in business to meet the demands of changing markets and economic conditions can only result from well-implemented organisa tional change measured against increased technological excellence and operational efficiency as well as productivity. Kotter (2011) defines change management as the utilisation of basic structures and tools to control any organisational change effort. Change managements goal is to minimise the distractions and impacts of the change.Organisational change is incredibly complex and one of the key skills for managers is to understand the nature of change and to prepare themselves to lead and manage change in their peculiar organisational contexts. Where there is a lack of knowledge in the Tunisian wine business in terms of management strategies to deal with changing markets and economic conditions, Tunisia will need to look at their alliance business partners and those businesssectors in Tunisia that are successful in order to transfer and recruit the necessary management skills to succeed.Part 3 Market entry strategy Strategy No 1Formulating a mode of entry is very important factor t hat a company or industry intending to expand into a new market should bear in mind and predicts whether the company will turn out to be successful or not. The entry mode, according to transnational Business Publications (2009), is important in protecting the company from facing challenges such as legal, registration and even cultural challenges. In selecting the entry mode, the company should put into consideration the cost of doing business in destination country, and determine which entry mode will help in cutting down those costs and at the same time will ensure that the Tunisian wine industry gets maximum profits and also the largest market share in the target nation. In terms of advantages and based on the market situation, this paper proposes that the Tunisian Wine Industry should adopt cross-border strategical alliances to take advantage of a number of benefits compared with the export strategies.For example it creates different synergies in the domestic and irrelevant ma rkets. In addition, it promotes production alliances, which help each of the allied firms to digest production costs both in their domestic plants as well as their foreign plants. As far as distribution costs is concerned, the cross-border marketing, which is a product of cross-border strategic alliance, reduces the allied firms distribution costs in their foreign market (Qiu, 2006). Compared to other entry mode methods, cross-border strategic alliances create different synergies in the domestic and foreign markets (Qiu, 2006). Some of the synergies include production cost synergies and distribution costs synergies.These synergies will help the Tunisian wine industry to reduce the production and distribution costs and hence increase profits. In terms of disadvantages, cross-border strategic alliances can sometimes lead to a loss of control of individual wine production and their related services. Members of Tunisian wine production whitethorn well find that they can become restrict ed and unable to take decisions by themselves without first referring to the alliance partners. In addition, the complexity of making business alliances work is high and could further polish businessstructures, exacerbate cultural differences and have detrimental effects on intercompany working relationships.Part 3 Market entry strategy Strategy No 2Alternatively, the Tunisian Wine Industry may enter into new market through what is called licensing. Licensing mode of market entry allows foreign firms, either completely or non-exclusively to manufacture a licensed product in a certain market under specific condition and for this reason is particularly relevant to the situation faced by the Tunisian wine industry. A licensor in the home country makes limited rights or resources available to the licensee in the foreign country in which he or she is to do the business. This includes any resources may like patents, technology trademarks, managerial skills that can make it possible for the licensee to manufacture and interchange in the foreign country a similar product to the one the licensor has already been producing and supplying in his home country. This enables the licensor to have several shares in similar companies without needfully having to open a new branch in other countries.The licensor is usually paid on basis of one time payments, mechanical fees and royalty payments usually calculated as a percentage of gross sales resultant thereafter. The decision of making an international license agreement depend on the respect that foreign government show for intellectual property. The licensee should be able to cooperate with the licensor to avoid unhealthy completion in the market. In terms of advantages, licensing is a flexible agreement and can be adjusted any time to suit the conveniences of the both parties. However, this mode of entry can be disadvantageous to the licensee, as separate of the profits have to be shared to the licensor on these terms. R ecovering the initial profit and getting sensitive profits can take a relatively longer period of time. Again it can also result in the loss of control over manufacturing and marketing of goods and export to other countries. A further risk to the Tunisian wine industry to take into account when considering this strategy is that the foreign licensee may sell similar competitive wine products after the licensing agreement has expired.Recommendations To Board of DirectorsTo conclude, when entering into a new market, there are many existing factorsto keep in mind. Porters national diamond model can help potential investors by allowing them to understand the macro environment in the Tunisian wine industry. Generally speaking, factor condition, demand condition, related and supporting industries and rivalry could encourage the entering activities. It is worth noting that the past high cost performance of Tunisian wine could also become a strong competitive advantage by restricting new en trants into the Tunisian wine producing market. As for recommendations, Tunisia offers the advantages of a natural wine producing climate and fertile soils, a relatively low cost of employment, significant financial incentives and investment in the countries infrastructure by the Tunisian government and unrestricted company structures and land ownership.The limitations of Tunisian wine industry relate to the relatively higher costs of wine production in Tunisia, increase in licensing opportunities crossways the wine industry and cross border alliances which can complicate international working relationships and introduce some uncertainty in the future as licensees from other countries continue to exploit Tunisian wine production opportunities resulting in possible delays in the release of profits available to international investing businesses.Appendices Appendix 1Insert 1.1 Porters National Diamond Analysis ModelReferencesAriaoui Jamal, (Web) A Guided Tour of Tunisias Wine road, Magharebia, 2007 Rugman, A. & Collinson, S. (2012). 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