International Business Analysis Report

On

Mazda, Japan

Prepared for the CEO of the CompanyTakashi Yamanouchi

Prepared by: XXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXX XXXXXXX

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TABLE OF CONTENTS

Executive Summary

I. Introduction

1.1 Country Background

1.2 Company Background, Brand

1.3 Main Products

1.4 Target Customers

1.5 Key Markets

1.6 Organizational Structure

1.7 Revenue and Growth rate

II. Internationalization Reasons

II.1 Intensive competition in the global market

II.2Opportunities in the host country

III. Potential Environmental Forces

III.1 Economic

III.2 Political

III.3 Social

IV. Entering Strategies IV.1Entry Modes

IV.2International Marketing Strategy

IV.3Marketing Mix

IV.4Branding and Brand name

IV.5Cross Cultural difference

V. Conclusion

VI. References

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Executive Summary

In the era of globalization majority of the business organizations in the world started expanding. However, there are many forces that disturb and prevent the companies doing so. Not a long time ago most of the companies started launching their new entities in different countries and brought their products to different markets. The business organizations with strong international marketing strategy and flexible marketing mix managed to survive in the global market and succeeded. Nevertheless, some of them couldn’t handle the international market.This report scrutinizes all potential problems that new entering business entities may face in foreign markets and provide clear and precise recommendations.

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I. Introduction

This report will identify and discuss all imperative factors that influence companies to expand in the global market and provide necessary advice on business expansion techniques. Mazda Motors Company has been chosen to launch its new business entity in Uzbekistan, Central Asia.

I.1 Country Background

Japan is an island in Pacific Ocean and situated in East Asia. China, the North Korea, South Korea and Russia are the neighboring countries to Japan. The capital city of Japan is Tokyo, one of the biggest metropolitan cities in the world. The total area of the country is 377,944 km2 and the population is estimated to reach 127, 960, 000 million people by the end of 2011. The government of Japan is unitary parliamentary democracy and constitutional monarchy and the country governed by the Emperor and Prime minister. There are four most spread ethnic groups in Japan: 98.5% Japanese, 0.5% Korean, 0.4% Chinese and 0.6% others. Japan is one of the leading countries in technology, manufacturing and research. Particularly, in automobile industries Japan is considered one of the leading countries in the world. There are 8 major automobile manufactures in Japan, including: Tayota, Mazda, Mitsubishi, Subaru, Nissan, Honda, Suzuki and Daihatsu. Japan has the third largest economy, after China and the United States of America. The total GDP of the country estimated to be 5,855 trillion in 2011. (Encarta Encyclopedia, 2010)

I.2 Company Background

Mazda Motor Corporation is one of the world’s largest automotive manufacturers based in Fuchu, Japan. The company founded by Jujiro Matsuda on June 16, 1920, and was first named Toyo Cork Kogyo Co. Today, Mazda is partially owned by the Ford Motor Company which took a 33.4% controlling interest in the company in March, 1999. There has been a cross-promotion of certain Ford and Mazda models ever since. The brand symbol explains company’s dedication to infinite growth and improvement. The symbolic development of Mazda “M” illustrates the company stretching its wings to a successful future. The company name Mazda derives from Ahura Mazda, a god of wisdom, intelligence and harmony of the earliest civilians in western Asia. The company has 398 sales companies and about 38987 employees worldwide. The headquarters of the Mazda Motor Company situated in Hiroshima, Japan. (Encarta, 2008), (Mazda Motor Company, 2010a)

I.3 Main Products

Mazda Motor Company manufactures different types of passenger transportations, sports and commercial vehicles. The company produces passenger cars, micro-mini vehicles, buses, trucks,

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sports cars, pickup trucks and special needs vehicles. Car production is the major industry of Mazda Company. However, the company is one of 10 in Race, heavily involved in manufacturing car engines in formula one and rally. (Luke Scott, 2006) (Mazda Motor, 2010b)

I.4 Target Customers

Mazda Motor Company is one of the most reliable car manufacturers in the world. Mazda manufactures affordable cars and providing the best for the less is one of the mottos of the company. The company has very distinguishable design and Mazda produces cars with extremely unique interior and exterior designs. Majority of Mazda cars are affordable for middle class people and they constitute the major part of the total customers. Furthermore, all the individuals who stay young, passionate, have a good capability to express themselves and always self-confident in every choice they make are the target customers of Mazda Motor Corporation. (www.mazda.com) (Mazda Motor Company, 2008)

I.5 Key Markets

There are four key markets of the Mazda Motor Company: Central, the North and the South America, Europe, Africa and Asia-Oceania. Mazda Asia and Mazda Europe comprise the primary part of Mazda Motor market. (Mazda Motor Company, 2009c) (www.mazda.com)

I.6 Organizational Structure

The Ford Motor Company governed by the CEO, the representative director and as well as chairmen of the board of the business organization, Takashi Yamanouchi. Executive vice- president, Masaharu Yamaki is the assistant of the president and oversight of R&D, production, purchasing and quality. CFO of the company Kiyoshi Ozaki is oversight of corporate planning, product profit control and in charge of financial services and cost innovation. Thomas A. H. Pixton is an assistant to president and oversight of Ford relationship. Masazumi Wakayama is oversight of global marketing, global sales and customer services of the company (Mazda Motor Company, 2009d)

I.7 Revenue and Growth Rate

Mazda Motor Company is one of the world’s leading manufacturers of cars and trucks with products sold over 120 markets worldwide. (Cisco Systems, Inc., 2000) The company had a great boom in its growth rate: net sales, operating and net income of Mazda Motor in 2008. Net sales of the company made up to 3475.8 billion yen and operating income was at its peak with 162.1 along with 91.8 billion yen net income. The annual revenue of Mazda Motor Company reached 60, 04 billion dollars, however; the growth rate has slightly decreased as earthquake hits Japan in the beginning of 2011. (Mazda Motor Company, 2011)

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II. Factors influencing Internationalization

Competition in Global market to be the first in automotive industry has affected many companies such as Ford Motors, General Motors, Tayota, and Honda. As the rivalry in global market increases, many car manufacturers started adopting the strategy for internationalization. Thereby, there are various factors that can be very influential for Mazda Motor Company to go international. Those factors include: intensive competition in the global market and opportunities in the host country.

II.1 Intensive competition in the global market

Competition always has been the primary effect on business organizations for internationalization. Mazda Motor Company has been competitors with Honda, Nissan and Suzuki for the second place in Japanese market for almost a century and it is really important to become one of the powerful car manufacturers in global market. These business rivals are doing their best to win the intensive competition. In 2011 the revenue and profit growth and as well as global sales has been increasing and they already have 7 percent increase compared to a previous year. It is the best for the company to launch a business in central Asia, as long as there is only one car manufacturer, GM-Uzbekistan. As long as Mazda Motors is one of the world’s most relievable automotive manufacturer, they most likely to succeed in Central Asian market. It will be easier for Mazda Motors to enter Central Asian market, specifically, Uzbekistan as it values integrity, customer focus, creativity, and efficient and nimble actions. Moreover, company has an immense respect to highly motivated people and team spirit along with a support of environmental matters, safety and society.

II.2 Opportunities in the host country

Given opportunities in the host country has always been an imperative influence of internationalization. Central Asian countries and especially, Uzbekistan provides a great environment with full opportunities for a new coming business. Uzbekistan has currently been accommodating all the needs of foreign investors as well as it is the only country that manufactures various kinds of automobiles. It would be a great opportunity to launch a new business entity in Uzbekistan which will satisfy the need for durable, affordable and comfortable automobiles, pick-up trucks, commercial vehicles and also special vehicles in Central Asian market. Additionally, the Uzbek government has been applying the two year government tax- free law on all new entering businesses. The country has one of the biggest resources of natural gas, metal, labor force and different type of auto industry useful raw materials. Even though, the host country, Uzbekistan offers immense opportunities for foreign companies, survival of new entering companies will not be easy. However, Uzbekistan would be optimum choice for the reason that, it has the highest rate of population in Central Asia and more buying power. (NfFL law firm, 2008)

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III. Potential Environmental Forces

Mazda Motors will have to take into account several factors which might affect its business transactions if it wishes to sell outside its home country. Company will have to scrutinize and study economies of Central Asian countries. Political, economical and social factors are the key factors that drive the foreign company in the host country. (Anbari, 2009)

III.1 Political forces

It is crucial for any company in the country where it is planning to do business to know its political system. Political systems are the rules and regulations set by the government. It is the central authorities who impose the laws upon firms to allow them to conduct business activities and it is these laws which can significantly influence multinational enterprises especially. A political system varies between countries. Political systems can be evaluated in terms of two dimensions. The first refers to the extent which signifies collectivism as opposed to individualism and the second states whether they are democratic or totalitarian. Collectivism emphasizes on the society “as a whole”. The aims and goals are achieved by the government for the benefit of the entire nation rather than for an individual. There is no private ownership and resources are owned by the state. Moreover, this means individual freedom and liberty to express one’s opinions and views is restricted. Individualism, on the other hand, allows individuals to have freedom of choice and actions and not be controlled by the government. The government plays a minor role and there is more competition between private firms who are not prohibited from using their resources in any way they find economic and profitable. Democracy means the people make decisions and govern the state. In contrast to it, totalitarianism implies on one person who maintains complete power over individuals and there is no freedom to speak out. The people are forced to abide by the laws of one person or political party. (Oppapers, 2009) (Anbari, 2009)

III.2 Economic forces

When entering a foreign market, there are several trade barriers; risks and costs needed to be taken into serious consideration. They comprise of tariffs, import quotas, change in exchange rate currency, embargos, and type of market system within the country. Tariffs are taxes on imported goods. Quota is a physical limit on the number of goods being imported. Embargo is a ban on a particular good. There are three types of market systems: command, free market and mixed. A command or planned economy is one in which all the resources are state-owned. The government decides what to produce, how much to produce and to whom to distribute. Necessity goods are basically produced to sustain the population which is not provided with diverse products and wide variety of choice. The prices are fixed. There is no competition as the government is the only supplier of all the products and services.

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In a free market or laissez-faire economy land, labor and capital is owned and controlled by the private sector. Individual entrepreneurs utilize the resources according to the needs and wants of consumers, producing various kinds of goods at different price levels. Competition is very present, encouraging diversity amongst products and consumers are offered with a huge variety of choice and low prices. The government only plays a political role in the economy. A mixed economy consists of both the planned and free market economies, whereas, some proportion of resources are owned by the government and private businessmen provide other goods and services to consumers. International businesses should also be aware of how economically successful the country is where it wishes to operate. It would be more auspicious for companies to open up factories in favourable markets with political stability, low inflation rate and private sector debt. (A. Pushparaj, 2010)

III.3 Social forces

A third factor which a company also has to study before launching its product into another country is social factor. It has to learn and understand the customs and beliefs to know how the consumers might react to its goods and services. Culture is a standard of values and norms commonly shared in a group of people. Religions, folkways, taboos, beliefs, traditions all come under culture. Therefore, it is necessary for an international enterprise to know a nation’s culture to avoid misunderstandings and show accommodation in the market. Almost all societies have their own social class structure. Social class refers to the status carried by a person. Knowing to which social class he or she belongs shapes his perceptions and mental outlook on life and builds relationships with other people. The kind of social class helps to determine the interest, characteristic of consumers and their brand preferences. A consumer is influenced by a few social factors which are groups, family, social roles and position. Family poses the most significant influence upon a consumer, since he or she was taught from birth in a certain manner to act in a particular way. Groups share common beliefs and attitudes amongst its members and can affect a consumer’s buying decision. People have different roles according to their gender, lifestyles and status. (Pooja Googia, 2010)

IV. Entering Strategies

Business entities should choose an entry strategy before going a different market. Most of the companies determine the following elements before they choose entry strategies: which market to enter, suitable time to enter, modes and scale of entry and other. As long as Mazda Motors entering Central Asian, specifically Uzbek market, the company has to scrutinize the current growth rate of the economy, stability of politics and laws, size of the market, purchasing power of the market and perspectives of the market. Moreover, it is also very crucial to analyze the small and large scale of entry risks and benefits before entering the new market.

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IV.1 Entry Modes

There are 6 entry modes in international business:1: Exporting: Companies use this mode of entry usually when they expand their business globally for the first time and they use EMC - Export Management Companies to handle their business when they

export. Advantages: company can avoid the often substantial costs of establishing manufacturing operations in the host country and less risk of operating overseas. Other than that a company will be able to "learn" overseas markets before investing.Disadvantages: high transport costs, tariff barriers of host countries can make exporting uneconomical. Moreover, a company must delegate, authorize its marketing, sales and services in the country where it does business to another company and it might cause the loss of control over those activities.2: Turnkey Projects:In this method clients pay contractors to design, establish, operate new facilities and train personnel. It is the way for a foreign business organization to bring its process and technology to host countries by building a plant. Turnkey projects normally used by industrial companies that specialize in complex production technologies. Advantages: this method is less risky than FDI and it is used when the know-how of assembling, operating the technology is too complicated. Other than that it will provide an opportunity for a company to establish a plant and earn profits in host countries even though the host country is economically and politically unstable or FDI is restricted. Disadvantages: turnkey project doesn’t provide long terms interest in the foreign countries and it may create competitors if the host country takes over the plant. Potential competitors (host countries) may turn into actual competitors once they gain selling competitive advantage.3: Licensing:Licensing is an arrangement whereby a licensor grants the rights to intangible property to another entity (the licensee) for a specified period of time, and in return, the licensor receives a royalty fee from the licensee. In this case intangible property refers to: patents, invention, formulas, design, copy right and trade mark. Advantages: in this method, a licensor doesn’t have to bear the development costs and risks associated with opening a foreign market. Licensing is very attractive for firms lacking the capital to develop operations overseas and it can be used when a firm wishes to participate in a foreign market but is prohibited from doing so by barriers to investments. Also, this method can be frequently used when a firm possesses some intangible property that might have business applications, but it does not want to develop those applications itself.Disadvantages: (3 serious drawbacks) this method doesn’t give a firm the tight control over manufacturing, marketing and strategy at overseas and it also has the risk of losing control of

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know-how to foreign companies. It will also limit the ability of a licensor to coordinate strategic moves across countries by using profits earn in one country to support competitive attacks in another to compete in a global market.

4: Franchising:It is similar mode of entry to licensing but the franchiser not only sells the intangible property (normally a trade mark) to the franchisee, but also insists the franchisee to abide by strict rules as to how it does the business. In this method the franchiser can also assist the franchisee to run the business on an ongoing basis as well. Usually, this mode of entry is applied by services firms while licensing is used by manufacturing firms. Advantages: advantages of franchising are similar to licensing. Disadvantages: there are also similar disadvantages between licensing and franchising but the most significant disadvantage of franchising is quality control, so a firm should set up a wholly owned subsidiaries or a joint venture to avoid that disadvantage.5. Joint Venture:It is a popular mode of entry to a new market. Joint Venture is a firm that is jointly owned by two or more otherwise independent firms.Advantages: local partner’s knowledge of the host country’s competitive conditions, culture, languages, political systems and business systems will be beneficial for foreign companies. Additionally, development costs and risks of opening a business in a foreign market with a local partner are shared and a company will have a low risk of being subject to nationalization or other forms of adverse government interference. Disadvantages: there is a higher risk of giving control of technology to a host partner and it doesn’t give a tight control over subsidiaries that need to realize experience curve or location economies. As well, it is not easy to coordinate global attacks against its rivals.6: WOS (Wholly Owned Subsidiaries)In wholly owned subsidiaries mode a firm owns 100% of the stock and WOS is usually applied by high-tech firms. WOS has two types and expanding companies can choose either one of them depending on situations.

1. A green-field venture (100% FDI Co.) is an establishment of a new wholly owned subsidiary and usually potentially costly. In WOS new entering business companies are required to analyze and expertise the exiting market through third parties.

2. Acquisition or merging with local companies is one of the most used entering modes because it offers the fastest and largest international expansion. Besides, expanding companies will gain a market power faster than green-field ventures.

Advantages: reduced risk of losing control over the know-how or core competence at overseas and in this mode a foreign firm will have a tight control over operations in different countries. In addition a new entering company can realize location and experience curve economies and help to coordinate in global strategy.Disadvantages: it is the most costly and risky method of entry a new market and different cultures between 2 companies in merger or acquisition may cause different conflicts. (Analyses Mason, 2010) (Foley, James F, 2006)

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IV.2 International Marketing Overall Strategy

It can be defined as the process of finding out the needs of customers in foreign countries and then providing them the required entities at right the place, time and at the right price. In international marketing strategy every business entity follows five step procedures. Those procedures include market assessment, product strategy, price strategy, place strategy and promotion strategy. The last four segments of strategy formulation are called as 4 P’s of marketing and the first, market assessment, is a new factor that is considered when a company formulates an international marketing strategy. A waterfall Strategy where a firm pours all of its available resources into one or a selected few markets A Sprinkler Strategy where a firm spreads its resources in order to gain even small footholds across as many markets as possible. (Philip Kotler, Frances Brassington, 2009) (Thegeminigeek, 2010)

IV.3 Marketing Mix

International marketing managers have to address four issues: how to develop the company’s products; how to price; how to sell; and how to distribute those products to the company’s customers. The elements are collectively known as the marketing mix and are also known as the four P’s of marketing (Product, promotion, price and place) (Branch, 2001). In comparison to their domestic counterparts, international marketing managers come across more tough set of problems and decisions involving marketing mix (Wall and Rees, 2004). There are usually four approaches that are adopted by international marketing managers after deciding to what extent standardize or customize their marketing mix. Standardization vs. CustomizationEthnocentric Strategy - everywhere the same strategy as at home Polycentric Strategy - separate and distinct strategy for each foreign market Regiocentric Strategy - separate and distinct strategy for each region–group of similar countriesGeocentric Strategy - one strategy for all countries worldwide In comparison the price would be the least standardized element of marketing mix, where brand and product appear to be the most. The ethnocentric strategy is easy to use; however it may not be desirable because sales may be lost as a result of failing to consider the needs of foreign customers. The polycentric approach, while costly, may actually increase the company’s revenues because the needs of local customers are satisfied. Finally, the geocentric approach, because it involves the standardization of the marketing mix, it allows a company to sell exactly the same product using exactly the same approach in all of its markets. Furthermore, many companies stay in between standardization and customization. They follow the policy: “think locally, act globally.” Standardization of marketing mix claims to adopt centralized organizational design, while customization implies that a decentralized design should be adopted. Various company and country specific factors are very

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influential when business entities take the decision to standardize or customize the marketing mix. (Elsevier Ltd, 2006) (Philip Kotler, Frances Brassington, 2009) 

IV.4 Branding Brand

A good brand is a vital element of an internationalization strategy. A brand; can be defined as a "name, sign, symbol or design”, or a combination of them. It usually intends to identify the products and services of one producers or group of producers and to differentiate their product and goods from other manufactures. There are several objectives from a good brand name and they include the following:

1. Deliver the message of the product clearly2. Confirm the credibility of the company3. Connect company’s target prospects emotionally4. Motivate the buyer (customer and consumer)5. Tighten a user loyalty

In order to be successful in branding a company must determine and understand the needs and wants of the potential customers and prospects. Brand is a priceless tool as the battle for the customers increasing in the global market. For that reason, it's imperative to spend time on researching, defining, and building the company brand. (Laura Lake, 2009)

IV.5 Cross Cultural Difference

Cultural differences usually cause various problems between a manufacturer and the society. It always has been one of the dimensions that effects international business organizations. Those problems have been grouped and they include: relationship between people, motivational orientation, attitudes towards time, control and other socio cultural dimensions. Often, companies get stuck with the dilemma that in some cultures people prefer individualism while the others prefer collectivism. As long as the relationship matters all business entities should first learn the relationship between people in the country where they want to launch a business. Motivational orientation should be studied well before entering the foreign market. Managers of international companies ought to know that in some cultures long-term and in some of them short-term orientations are preferred. For instance, in some of the developing western countries such as: Nigeria, Philippines, Zimbabwe, and Pakistan managers work to build tight positions in the market under long-term orientation with no expectation of immediate results. Peoples’ attitudes toward the time and the way of control are the factors that affect the operation of the company in the host country. They must be studied and learned then companies should operate by following them. (Andreas Birinik, Cliff Bowman, 2007) (Anbari, 2009) Rozanna Sustar (2006)

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V. Conclusion

This report has analyzed all the possible information about the given topic and optimum recommendations have been provided in terms of expanding the business. All the solutions for potential problems have been provided with the aid of various sources. As the company expands internationally, it should consider all the above stated factors and study the market in the host country. One of the interesting things has been found in this research that environmental forces always there to create problems for new entering business organizations and all those potential problems can be avoided by examining and tackling with strong international marketing strategy and as well as very adaptive marketing mix.

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VI. References

ACEA (2010) ‘FYear 2009 by manufacturer and by vehicle category (Enlarged Europe)’ Available at: http://www.acea.be/images/uploads/files/20100309_08_2009_vo_By_Manufacturer_Enlarged_Europe.ppt

Andreas Birinik, Cliff Bowman (2007) ‘Marketing Mix standardization in multinational corparations’ Available at:http://nus.academia.edu/AndreasBirnik/Papers/90418/Marketing_Mix_Standardization_in_Multinational_Corporations_A_Review_of_the_Evidence

Anbari (2009) ‘Managing Cross Cultural Differences’

A. Pushparaj (2010) ‘Economic factors effecting business environment’ Available at:http://www.publishyourarticles.org/knowledge-hub/business-studies/the-economic-factors-affecting-business-environment.html

Encarta Encyclopedia (2008) ‘Mazda’

Elsevier Ltd (2006) ‘Marketing Mix Standardization’ Available at:http://www.sciencedirect.com/science/article/pii/S0969593104000642 

Foley, James F (2006) ‘Foreign Market Entry Modes’ Available at: http://www.quickmba.com/strategy/global/marketentry/

Laura Lake (2009) ‘What is branding and how important is it to your marketing strategy’Available at: http://marketing.about.com/cs/brandmktg/a/whatisbranding.htm

Mazda Motor Company (2008) ‘Sustainability Report’ Available at: www.mazda.com/doc/2009_sustainibility_report.pdf

Mazda Motor Company (2009) ‘Annual Report’ Available at: www.mazda.com/doc/2009_annual_report.pdf

Mazda Motor Company (2011) ‘Annual Report’ Available at: www.mazda.com/doc/2011_annual_report.pdf

Moffitt, Alastair (2004) ‘Red Bull give Jaguar F1 wings.’ Available at: http://sport.independent.co.uk/motor_racing/article20376.ece.

Media Mazda (2007) ‘Mazda Motor Company 2007 sales’ Available at: http://media.mazda.com/article_download.cfm?article_id=27379

NfFL law firm, (2008) ‘Doing business in Uzbekistan’ Available at:http://www.hg.org/article.asp?id=5368

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Oppapers (2010) ‘Cultural and Political Forces Influence International Marketing Activity’

Available at: http://www.oppapers.com/essays/Cultural-Political-Forces-Influence-International-Marketing/103728

Pooja Googia (2010) ‘Social and Cultural factors affecting international Marketing’ Available at: http://www.businessihub.com/social-and-cultural-factors-affecting-international-marketing/

Philip Kotler, Frances Brassington (2009) ‘The international Marketing Mix’http://www.learnmarketing.net/internationalmarketingmix.htm

Rozanna Sustar (2006) ‘Marketing Standardization to be or not be’Available at: www.hrcak.srce.hr/file/14107

SWOT (2008) ‘Mazda Motor Company SWOT Analysis’ Available at: www.swot.mazda-motor-company-swot-analysis.htm

TheGeminiGeek, (2010) ‘What is International Marketing Strategy’ Available at: http://www.thegeminigeek.com/what-is-international-marketing-strategy/

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