Metricum International Business Management

International Business Management TABLE OF CONTENTS

Table of Contents

CHAPTER 1 .................................................................................................................... 4 INTRODUCTION ........................................................................................................... 4 1.1. Objective of the Research: .................................................................................... 4 1.2. Introduction to Material Handling Industry: ......................................................... 4 1.3. Metricum Company Overview: ......................................................................... 5 1.3.1. Mission and Vision statement: ....................................................................... 5 1.4. Industry Analysis using Porters Five Forces Framework .................................... 5

CHAPTER 2 .................................................................................................................... 8 MARKET ANALYSIS .................................................................................................... 8 2.1. Market Analysis .................................................................................................... 8 2.1. Overview of Ukraine: ......................................................................................... 10 2.2. Key Facts about Ukraine: (source:BBC) ............................................................ 10 2.3. Strategic Analysis of Ukraine Markets ............................................................... 11 2.3.1. Business Environment: ................................................................................ 11 2.3.2. PESTEL Framework analysis: ..................................................................... 11 2.4. Investing in Ukraine Market ................................................................................... 14 2.4.1. Advantages in Investing:.............................................................................. 14 2.4.2. Disadvantages (Risk factors) in Investing: .................................................. 17

CHAPTER 3 .................................................................................................................. 18 METRICUMS MARKET ENTRY STRATEGY ........................................................ 18 3.1. Metricums Market Entry Strategy Development............................................... 18 3.2. Entry Mode ......................................................................................................... 18 3.3. Timing of Entry................................................................................................... 20 3.4. Romania as a route of entry ................................................................................ 20 3.5. China as an alternate route of entry .................................................................... 21

CHAPTER 4 .................................................................................................................. 22 SKILLS AND KNOWLEDGE DEVELOPMENT ....................................................... 22

CHAPTER 5 .................................................................................................................. 23
2

International Business Management

Table of Contents

METRICUMS GLOBAL STRATEGY ....................................................................... 23

CHAPTER 6 .................................................................................................................. 24 RECOMMENDATIONS ............................................................................................... 24

CHAPTER 7 .................................................................................................................. 26 CONCLUSION .............................................................................................................. 26

REFERENCES AND BIBLIOGRAPHY ...................................................................... 27

APPENDIX .................................................................................................................... 29

International Business Management CHAPTER 1 INTRODUCTION

Introduction

1.1. Objective of the Research: Metricum is a well-established small medium enterprise (SME) that manufactures materials handling equipment and intelligent handling solutions. Their international activities are complex with manufacturing bases in Sweden and China and a wholly owned subsidiary in Romania from which they source many of their raw materials. As the process of re-structuring their Romanian operation, they would like to explore market opportunities in some of the less developed former Eastern Bloc countries such as Belarus, Moldova, Russia and Ukraine, which are now collectively called as Commonwealth of Independent States (CIS). In this report we will discuss how to assess the market potential, the competition and the best route to enter into the unfamiliar market. Also we will check on how to improve the identifiable and recognised skill gaps in assessing the market opportunities. And Finally we will discuss on how to build a single global strategy for this company.

1.2. Introduction to Material Handling Industry: Material handling industry is mainly dealing with the equipments for storage & handling, controlling of goods and materials in the process of manufacturing, construction, consumption and disposing. Some of the material handling equipments are: Cranes, Hoists, Rail fastening systems, access work platform, Warehouse trucks, Docking equipments, Industrial lifts and Power electrification systems etc. Some of the industries using these equipments are Aerospace, Construction, automotive, building maintenance, Chemical plants, Electrical and electronics etc. It is one of the main industries, which is the must for other industries. This process involves a broad array of equipment and systems that aid in forecasting, resource allocation, production planning, flow and process management, inventory management, customer delivery, after-sales support and service, and a host of other activities and processes basic to business. Solutions include sophisticated techniques that expedite information flow, including RFID and satellite tracking systems, and the electronic transmission of order and shipping information. These innovations along with traditional material handling and

International Business Management

Introduction

logistics equipment and systems are the solutions that make manufacturing, warehousing, distribution and the supply chain work (MHIA,2011). 1.3. Metricum Company Overview: Metricum manufacture materials handling equipment and intelligent handling solutions and now is a well-established small medium enterprise (SME). It was founded about 28 years ago and based in the east of England. They are exporting to over 40 countries and their first overseas manufacturing unit was opened in Sweden and later in China, which gives 25% of production as of today. In Romania, they have a subsidiary firm to supply parts. Today Metricums turnover is shared approximately 25% in each of the four areas: United Kingdom, Sweden, China and Romania. China produces the standard products; UK and Sweden produce the innovative products. Currently the Romanian firm is running just a 20% of its capacity, so efforts are being made for a great deal to build linkages between the design teams in UK and Romania where they high potential for innovation. At present, they are thinking to enter into less developed former eastern bloc markets using Romania as a route. 1.3.1. Mission and Vision statement: To be a market leader in the material-handling field globally by providing the highest quality equipments that consistently meets or exceeds our customer expectation. 1.4. Industry Analysis using Porters Five Forces Framework The intensity of the competition and the level of industry profit can be determined by the structural features of an organisation. Using Porters five forces let us analyse the competitive advantage of this Material Handling Industry in Ukraine.

a. Competitive Rivalry: The number of competitors for material handling industry is very low, There are only few firms involved in this industry. Switching costs are very high so the customers will not easily move on to other competitors. Even the cost of leaving the market is very high. Overall, though the competitors are low but the competition is very intense. Demand for this industry is high in the developing countries like china, India and Brazil.

International Business Management

Introduction

b. Threat of New Entrants: In this industry, the threat of new entrants is very low as the cost of entering into new market is very high. Also the time consuming to enter is long. In this industry the cost of investment is very high thus it becomes a barrier to enter for a new entrant.

c. Bargaining Power of Buyers: There is more pressure in this industry as the power of buyers is depend on product quality, price and delivery. As the orders will be in bulk the important is lead-time will become threat for the firm and it will affect the cost and investment. Customers are very demanding on the price. But in this industry the switching cost is very high.

d. Bargaining power of Suppliers: There are only few suppliers for this industry as the main raw material is iron and steel. Thus it makes buyers weak and dependent. Power of suppliers is very high in this industry. Also the switching cost from one supplier to another is also very high. Since the suppliers have very strong power they tend to raise the price and capture all the potential profits owned by the buyer.

e. Threat of Substitutes: As for this material handling industry is concerned, there are not much substitutes introduced. So, the threat of substitutes is very low. Steel and Iron are the main raw materials for this industry. As of now, there is no other substitutes is there to replace these raw materials in this industry.

International Business Management

Introduction

Figure1: Michael Porters Five Forces Framework (source: www.mindtools.com)

International Business Management CHAPTER 2 MARKET ANALYSIS 2.1. Market Analysis

Market Analysis

Based on GDP growth rate%, FDI net flow and Population Ukraine shows more market opportunities other than Belarus and Moldova in former Eastern Bloc countries. If we compare we can see that Foreign Direct Investment in Ukraine is more than other countries, so, we will research on the opportunities in Ukrainian market. As Ukraine is hosting 2012-EURO football championship it is building its infrastructure now, this will give us a grand opportunity for our material handling equipment industry to enter.

A. GDP Growth Rate (Annual %): (source: worldbank.org)

Countries Belarus Moldova Ukraine 2008 11.3 7.8 2.1 2009 0.2 -6.0 -14.8

Year 2010 7.6 6.9 4.2

Figure 2: GDP growth rate comparison chart (source: World Bank, World Development Indicators)

International Business Management

Market Analysis

B. Foreign Direct Investment, net flows (BoP, Current US$): (source: worldbank.org) Countries Belarus Moldova Ukraine 2008 2.181 bn 712.77 mn 10.913 bn Year 2009 1.884 bn 127.84 mn 4.816 bn 2010 1.403 bn 194.32 mn 6.495 bn

Figure 3: FDI net flows (BoP, Current US$) (source: World bank)

C. Population Total (in Million): (source: worldbank.org) Countries Belarus Moldova Ukraine Year 2010 9.491 m 3.562 m 45.871 m

Figure 4: Population (source: World bank, World Development Indicators)

International Business Management 2.1. Overview of Ukraine:

Market Analysis

According to country profile (BBC, 2011) Ukraine is the Europes second largest country. It obtained independence after the collapse of the Soviet Union in 1991 and formed Commonwealth of Independent States (CIS) along with Belarus and Russia. It is a land of wide, fertile agricultural plains, with large pockets of heavy industry in the east. Since 2008, it is a member of World Trade Organisation (WTO). Recently, in October 2011 Ukraine signed the free trade zone treaty with some other CIS states. On February 16, 2012, the European Commission informed the European Community of the progress made toward the Deep and Comprehensive Agreement on Free Trade (DCFTA) between the EU and Ukraine, which is part of a future Association Agreement for which the Cooperation Council adopted an agenda in November of 2009.

2.2. Key Facts about Ukraine: (source:BBC) Population: 45.87 million (UN, 2010) Capital: Kiev (Kiev) Area: 603,700 sq km (233,090 sq miles) Major languages: Ukrainian (official), Russian Major religion: Christianity Life expectancy: 64 years (men), 74 years (women) (UN) Monetary unit: 1 Hryvnia = 100 kopiykas Main exports: Military equipment, metals, pipes, machinery, petroleum products, textiles, and agricultural products GNI per capita: US $3,000 (World Bank, 2010)

10

International Business Management

Market Analysis

Figure 5: Map of Ukraine (source: www.ukrainetravelmate.com) 2.3. Strategic Analysis of Ukraine Markets Entering into the market of Ukraine is not so easy and sure it will have its own entry barriers in many ways. Before entering into a new market, we need to strategically analyse the environment of the Ukraine markets and its opportunities. 2.3.1. Business Environment: Despite a poor government management record, still it offers more interesting investment opportunities to those with a higher level of risk acceptance. The key advantages are its inexpensive labour force, access to natural resources and low operational costs. Ukraine depends on Russia for its gas supplies and forms an important part of the pipeline transit route for Russian gas exports to Europe. Ukraine therefore presents incomparable benefits to investors in certain cases and should always be considered, particularly if we wish to expand further into Russia or the Black Sea basin. Ukraine is rich in natural resources such as iron ore, coal, manganese, natural gas, oil, salt, sulphur, graphite, titanium, magnesium, and kaolin, nickel, mercury, timber and arable land. Machinery assembly, the car industry, consumer electronics, ICT, agriculture and food processing, the aerospace industry, alternative energy sources, and tourism and hotel infrastructure are the fields where we can see more opportunities. (PMR, 2011) 2.3.2. PESTEL Framework analysis: PESTEL is an acronym of Political, Economic, Social, Technological, Environmental and Legal factors. We will analyse how these macro-environmental factors, which may
11 have an effect on Metricums business strategies and to assess how different these

factors may pressurise performance of business now and in the future.

International Business Management a. Political/ Legal:

Market Analysis

Ukraine is a democracy operating under a semi-presidential system, with separate executive, legislative and judicial branches. In 2010 Ukraine held its Presidential elections and Victor Yanukovych, pro-Russia candidate elected as new President. This situation could slow down the development of the countrys relationship with the European Union. Ukraine now depends on Russia for most of its energy supplies, and natural gas in particular. The present government has guaranteed to reduce the number of government agencies, make more efficient the regulatory process, create a legal environment to support entrepreneurs and carry out a broad overhaul of the tax system. Progress in the more politically sensitive areas of structural reform and land privatisation is still slow. Ukraines local currency is unstable, social problems persist, and high taxes keep an important part of the economy in the shadows. (Invest in Ukraine, 2011) Based on news released by (Press office of President, 2011) Viktor Yanukovych, President of Ukraine considers that the work of Government to simplify the conditions in Ukraine for doing business is insufficiently effective. He also mentioned that businessmen are seeing only very little of the deregulation declared by the Government. The Government has not developed the legislation, which establishing controlling agencies officials responsibility for failing to comply with control procedures and causing Environment: c. Socialdamages to business entity. He further said that only proper resolution of these issues would substantially improve business and operations climate in may face major Organisations, which are trying to establish their investment in Ukraine,the country. b. Economical: problems with socio-cultural environment. Language might be a problem to some Based on an article (blackseagrain, Russian and Ukranian. Simchi-Levi et to 90% extent for doing business as knowing2011) Ukraines refinance rate reached al (2003,on November 22nd 2011. It the country that affect and create reached when also. p.205) social culture of clearly shows may the Euro crisis has problems Ukraine the Inflation remains as an unsolved problem. Austrian Central Bank may not found. In technically and managerially competent and trustworthy workersinstructed to its fellow banks that are subsidiary philosophy, economic philosophy, education, border loans general, religion, politicalof Unicredit, that they cannot provide any crosslanguage and to their structure in considered last it is required that the banks have lowered socialoperationsare Ukraine. Atas determinants of culture (Hill, 2004, p.101). the lending in Ukraine from 150% of deposits to 110% through its subsidiaries. These overviews that companies have to a demographic crisis because of for operating and investing funds. Ukraine is sufferinglook to Ukraines financial sector its low birth rate and high death Ukraines banks are still birth recovered births/1,000 people crisis, and now as the rate. At present, Ukrainiannot yetrate is 9.62 fully from the 2008(2010), and the death major 15.74 deaths/1,000 people (2010). The limiting credits, it will become of rate is investors in Ukraines financial sector ishigh mortality rate among males more difficult to caused by in Ukraine. Corruption in licensing, taxation, customs and the working age get moneyalcohol poisoning and smoking has become the major reason for government sector has become a serious economic problem. According to a Global corruption survey, Ukraine has the highest level of corruption among the Commonwealth of Independent States. (Kyiv Post, 2011)
12

International Business Management

Market Analysis

this issue. In 2010 the countrys population was diminishing at the seventh most rapid rate in the world. As people search for better work options emigration, particularly to the neighbouring European Union countries, is another challenge for Ukraine.(CIS STAT,2011)

d. Infrastructure and Technological: In the world economy today, technology plays a vital role. The capacity to sustain a technological lead and an innovation in technology are essential to success in the competitive environment, for both countries and companies. Morrison (2002,p.301) states that technology transfer is to attain the technologies from other countries and it has been vital for the growth of industry and the global integration.

According to PWC consulting (2011) the Ukrainian road system is outdated and because of the EURO 2012 football championship the Ukrainian government has, consequently, promised to build about 4,500 km of motorways. There is 169,435 km of paved roads in the country in total. Rail transport in Ukraine plays the very vital role of connecting all key urban areas, port facilities and industrial centres with neighbouring countries. The total length of rail tracks in Ukraine is 21,658 km, and 9,250 km of these are electrified.

Ports play an important role in the Ukrainian economy and it has 18 sea ports with developed infrastructure. The recent expansion of Odesa, Pivdeniy and Illichivsk ports have greatly improved these potentials. Ukraine also consumes more energy than most European countries and has the largest nuclear power station in Europe, which is its major source of energy. The country uses almost double the amount of energy consumed in Germany, calculated per unit of GDP (Worldwide News Ukraine, 2011).

e. Environmental: Ukraine is rich in natural resources. It is rich in natural resources such as iron ore, coal, manganese, natural gas, oil, salt, sulphur, graphite, titanium, magnesium, kaolin, nickel, mercury, timber and arable land. Ukraine government established very liberal environmental protection laws comparing to highly developed countries, which has positive influence on production (BBC, 2011).
13

International Business Management

Market Analysis

Figure 6: PESTEL Model. (Source: www.businessmate.org)

2.4. Investing in Ukraine Market Ukraine is one of the most attractive direct and portfolio investment destinations among the Eastern Europe countries. Let us see the advantages and disadvantages of investing in Ukrainian market.

2.4.1. Advantages in Investing: Based on the article issued by Marketplace (2011), Ukraine is one of the worlds competitive & emerging markets. Experts believe that in near future its economy will be among the stronger in the whole CIS and Eastern Europe region. Ukrainian has well developed free-market economy, with great prospective to attract foreign investment. It also has a major ferrous and non-ferrous metal industry, producing cast iron, steel and pipes. Many companies from abroad have chosen to invest in Ukraine in a wide range of sectors (mainly textiles and clothing, food-processing, agric-business, engineering, information and communication technologies, pharmaceuticals and medical devices).
14

International Business Management

Market Analysis

New high-tech industries and services are slowly rising and there are prospects for overseas investors in high tech R&D. As Ukraine is the member of WTO, the trade policy of the country is based on the free trade principles of promoting exports while minimizing barriers on imports. Ukraine government provides law for various forms of incentives to support economic investment in Ukraine.

Figure 7: Ukraines Annual GDP growth rate chart (Source: worldbank.org)

Importantly, since 2011 a Free Trade Agreement (FTA) shall link the European Union and Ukraine, under which all custom duties are removed. This makes Ukraine even more striking target for trade and investments in near future. Foreign direct investment (FDI) inflow into Ukraine has considerably risen.Ukraine is the second most attractive country next to Russia among the CIS regions largest FDI recipient in terms of FDI per capita after Russia.

The main investors are Cyprus, the Netherlands, Germany, Switzerland, the United States and Japan (Marketplace, 2011). Ukraine has a potential market of 45 million people and it has lot of industrial traditions, which is a most important opportunity for us to establish our business over there. It is a gateway for Russia and European Union that would be very much helpful for us to get into other markets as well. Ukraines GDP has also increased from last year. Ukraines Foreign direct investment too increased in 2010 and showed a upper level in 2011.

15

International Business Management

Market Analysis

Figure 8: Ukraine GDP Chart (Source: worldbank.org)

Figure 9: Ukraines Foreign Direct Investment, Net inflows (BoP, current US$) (source: World Bank, World Development indicators)

Key advantages are its inexpensive labour force, easy access to its natural resources and very low utility and operational cost. Most of its energy is produced by the atomic power stations. Main mode of transport is Railways and it is well developed. EURO

16

International Business Management

Market Analysis

2012 football championship is main attraction as of today and Ukraine is preparing to host this along with Poland. Because of this tournament Ukraine planned to rebuild its infrastructure and it will speed up changes and increase the investment opportunities. Since Ukraine has plenty of natural resources obviously the raw materials such as iron, steel, aluminium can available cheaper (Marketplace, 2011). 2.4.2. Disadvantages (Risk factors) in Investing: A study of Ukragroconsult (2011) shows Ukraine is highly dependent on Russia for the supply of natural gas (it imports 90% of oil and its natural gas) and this has a significant impact on its Economic and foreign policy. Though there are many investment opportunities in Ukraine, it is still developing the legal and constitutional frameworks required to fully support the international business. Investors confidence was shook by the economic and financial crisis that unfolded in the year 2008 and delayed the inflow of capital. It was stayed in recession throughout 2009, and as the situations globally improved it somehow recovered in the year 2010. But yet again, it facing one more trauma, Euro crisis, again trembled the economic condition of Ukraine. According to CNBC.com report Ukraine takes the 2nd position in top 10 countries, which are difficult to do business in (Yahoofinance, 2011) Ukraines rule for custom valuation is mainly based on WTO rules. All the goods that are imported to Ukraine are subjected to VAT (value added tax), customs duties and excise tax (if applicable). Many administrative practices remain unchanged and this will be a major problem when we intend to do export business in Ukraine.

17

International Business Management CHAPTER 3

Market Entry Strategy

METRICUMS MARKET ENTRY STRATEGY 3.1. Metricums Market Entry Strategy Development Based on the experiences of firms in developed countries, firms in developing countries can learn. Decisions are associated with the different levels of risks and rewards. There are no right decisions with foreign market entry. According to Hill (2008,p.399) a firm expanding internationally must decide: a. Which markets to enter? b. How to enter? Entry Mode c. When to enter? Timing of Entry

3.2. Entry Mode As we already chose to enter into the Ukrainian market, we need to consider only the other two options and analyse it. First let us discuss on the entry modes of the materials handling industry into Ukraine market. The various modes of entry into a market are: a. Exporting b. Licensing c. Franchising d. Joint Ventures f. Wholly owned subsidiaries

Currently, to open up a branch for a foreign legal entity is not possible in Ukraine, as the legal framework explicitly does not recognise it. For a 100% investment, it is cheaper to establish a limited liability company than to establish a joint venture company, as the minimum capital is lesser for limited liability of the company than for Joint Venture Company. Because of the anti-money laundering legislation it has become more complex to establish a limited liability company. The Ukrainian tax system is a developing system. With effect from 1st January 2011, significant changes to an existing legislation were implemented by a new comprehensive tax code. Based on a study done by World Bank (2011) shows that among the 183 countries surveyed Ukraine was one of the most difficult countries in

18

International Business Management

Market Entry Strategy

which the taxes to pay. Corporate taxes are subject to 23% tax and VAT rate is 20%. Failing to deduct and remit withholding tax is subject to penalty of 75%.

Figure 10: Ukraine Imports Data (source: TradingEconomics.com; the national bank of Ukraine)

Considering the above facts and analysis of political, economical situation, FDI data, I would suggest that if we choose to enter into the Ukrainian market then Export would be the correct mode of entry. As this only involves low risk when compared to other modes and also there are two ways to export: selling the product or service directly to an international company or customer, or indirectly by using an export intermediary. These include commissioned agents, distributors and export management or trading companies. We can always choose between these two.

Issuance of export licenses subjects to enterprise activity which are registered in territory of Ukraine, irrespective of patterns of ownership, is carried out by the Ministry of Economy of Ukraine or, within the powers given to it, the Autonomous republic Crimea Ministry of Economy, corresponding division of regional, Kiev and Sevastopol city state administrations. Ukraines Industrial production has been reduced since 2008 economic crisis and it is slowly rising at present. So, investing in the production will not be as beneficial as of now.

19

International Business Management

Market Entry Strategy

Figure 11: Ukraines Industrial Production (source: Tradingeconomics.com)

3.3. Timing of Entry Based on the report by Deutsche Welle (2011), Ukraines business climate experienced a significant growth in 2011. According to the report, EURO 2012 the football championship has a great influence on the construction industry, food industry, agriculture and retail. Investors see great potential in this championship. I would suggest this would be a right time to invest in Ukraine for the material handling equipments industry.

3.4. Romania as a route of entry Ukraine is to establish the closer relationships with European Union especially with Romania. Romania could be a gateway to enter into the EU market and vice versa. Romania and Ukraine shares an intercultural and economic cooperation. Development and involvement of the business sectors between both the countries are good. Both the countries involved in the joint environmental projects in the Black Sea region as they share common border with this region. Based on above grounds of their good relationship, we can use Romania as a route to enter into the Ukrainian market. It will be more beneficial if Free Trade Agreement is implemented between EU and Ukraine, as this gives us exemption from customs duties. The entry into Ukrainian market will provide Metricums Romanian firm to utilize full of its 100% capacity as it is now running only 20% of its capacity.

20

International Business Management

Market Entry Strategy

3.5. China as an alternate route of entry In alternative way, we can choose China as a route of entry into Ukraine. Recently in June 2011, China and Ukraine signed an agreement on strategic partnership. The trade turnover between these two countries has been increased by 80 percent this year. China is already committed to invest over USD 4 billion in the infrastructure projects of Ukraine. They also signed the agreements focusing the EURO 2012. Since Metricum has the manufacturing unit in China, it can focus to export goods from China to Ukraine. China has become the second largest economy in the world despite of the global economic crisis. According to a report by Xinhua (2011) despite the European debt crisis, Ukraine has showed 5 percent growth with a tendency to increase. Ukraine has improved its business climate by reforming its regulatory system to simplify the procedures and thus creating favourable choices to do business. Ukraine has a huge technological base in aviation industry so; China could have a wide opportunity to expand its business.

21

International Business Management CHAPTER 4

Skill & Knowledge Development

SKILLS AND KNOWLEDGE DEVELOPMENT During these challenging days, marketing has an important role to play in a success or failure of the company. Metricum has to improve many of its skill set and knowledge base especially in the field of marketing. Marketing staff need to always monitor the consumer behaviour changes, identify the new threats and also opportunities, and provide successful guidance to their business. Dedicated marketing staff is needed to do so. I would propose Metricum to hire some local expertise in Ukraine with the best international practices. If we hire a local person who is well versed in their own language will be helpful to appeal the general public as well as to portray our business in a very positive way. Marketing training is needed for the new comers and also for the existing employees. Creativity is another skill needed very much for marketing as well as the business to become success. Advertisements need creativity as a tool.

Apart from marketing Metricum has to prepare its workers in the manufacturing side also. They need to be aware of and be prepared for whatever the situation may be. New marketing campaigns and service trainings to be provided to all the employees.

22

International Business Management CHAPTER 5

Metricums Global Strategy

METRICUMS GLOBAL STRATEGY

Hill (2008,p.7) states that globalisation refers to a shift towards a more integrated global economic system.Two key facets of globalisation are: Globalisation of market and globalisation of production. Globalisation of markets refers to the merging of historically distinct and separate national markets into one huge marketplace. Globalisation of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labour energy, land and capital). Johnson, Scholes, Wittington (2008, p.3) defines Strategy as the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.

Global strategy is referred to strategies that enable a firm to reach its goal of global expansion. Metricum already entered into the global market and having its manufacturing plants in Sweden and China, and fully owned subsidiary at Romania. Now, it is also tending to enter into other European markets too. Now, its to form global strategy so that it could bring all the businesses together. Before that Metricum has to understand that managing a global business is different from managing a business in local. Companies to vary their practices country by country and they have to face more complex problems. Experts believe that globalisation can promote prosperity in the global economy, and it can offer more jobs, and lower prices of goods and services offered.

Metricum should consider all the above facts before entering into the globalisation zone and it should create its global strategy in such a way that can tie all its businesses together efficiently, and that every company will gain. Employees should go around within the corporate network to develop multiple perspectives. To manage its international operations Metricum has to develop a separate division at Headquarters. Managers in this division have to closely monitor the relationships between the foreign suppliers, distributors and customers.

23

International Business Management CHAPTER 6 RECOMMENDATIONS

Recommendations

Lynch (2006, p. 617) states that the balanced score card uses strategic and financial measures to assess the outcome of a chosen strategy. It acknowledges the different expectations of the various stakeholders and it attempts to use a scorecard based on four prime areas of the business activity to measure the results of selected strategy. The two significant deficiencies are: 1. Measurement gap, 2. Strategic gap between general plans and managerial actions. For Metricum, we can do the balanced scorecard as follows: Critical (CSF) Success Factor

Perspectives

Measures i.Financial results (Quarterly,

Financial

Return on Investments

Yearly) ii. Capital invested

i. Improve brand image Customer ii. New Customer database ii. Customer satisfaction rate iii. Quality performance i. Improve marketing Internal ii. Manage increased business risk 1. Safety Innovation and Learning 2. New Concepts 3.Increase employee knowledge and skills

i.Gaining new customers confidence ii. Providing excellent service iii. Brand awareness. i. New marketing campaign ii. Manage acuity level of clients. i. Safety training ii. Emerging customer needs iii.Updating technology to change. iv. Training for marketing staff

Table 1. Balanced Scorecard for Metricum

24

International Business Management

Recommendations

6.1. Proposed Market Entry Strategy: Considering all the above facts, figures and data I would suggest that if Metricum want to invest in Ukraine it could enter now. Though it is not the right time to enter because of the European Debt crisis, apart from that Ukraine shows many new economic opportunities. Metricum can choose its entry mode as Export as it involves lesser risk than any other mode of entry. Even the consumer confidence for Ukraine market has been increased. Ukrainian market is complex as well as challenging one to enter. Metricum can either choose Romania or China as its route of entry into Ukrainian market. Positively China has more chances than Romania.

6.2. Proposed Global Strategy: For Metricum, proposed global strategy is that it will provide worlds highest quality materials handling equipments globally and it will create brand recognition worldwide. This strategy also includes 100% customer satisfaction provided to the global customers. Metricum has to decentralise some of its decision making, such as using local language in advertisements.

25

International Business Management CHAPTER 7 CONCLUSION

Conclusion

7.1. Conclusion: It has been understood from the above analysis that Ukraine market is a potential market. Ukraine continues to face economic challenges like many other countries around the world today. Despite these challenges it has been proved to be an excellent region for the business investment. Many new legislative improvements done by the Ukrainian Government will help Ukraine to improve its ratings in the World Banks ease of doing business index and should make it as an attractive investment location for business market. Metricum can positively enter into this market and can explore its opportunities. Also this will help Metricum to expand its business keeping Ukraine as its gateway to enter into other Eastern Europe regions like Russian Federation and also into Asian market.

We need to use a very practical and hands-on approach to develop the market. Layers of protections are there on investments as Ukraine accessed to WTO. Further more opportunities will be increased when the anticipated FTA with EU will be signed. Overall, there are more positive steps are ahead if we decided to enter into the Ukrainian market. Direct investment may provide high risk so FDI can be avoided for some time until it recovers from the Euro crisis. Metricum has to develop its skill set in marketing and other technical areas. Following strong global strategy can lead to its success and it can achieve its goal/mission as soon as possible.

26

International Business Management

References & Bibliography

REFERENCES AND BIBLIOGRAPHY BBC News. 2011. Ukraine country profile. [ONLINE] Available at: http://news.bbc.co.uk/2/hi/europe/country_profiles/1102303.stm. [Accessed 7 November 11]. Business Monitor International. 2011. Ukraine Business Forecast Report Q4 2011. [ONLINE] Abstract only. Available at: http://www.marketresearch.com/BusinessMonitor-International-v304/Ukraine-Business-Forecast-Q4-6611148/. [Accessed 01 December 11]. CIS STAT. 2011. Ukraine. [ONLINE] Available at: http://www.cisstat.com/eng/frame_about.htm. [Accessed 16 November 2011]. Hill, Charles W.L. 2008. Global Business Today. 5th edition. New York, McGraw-Hill. Invest in Ukraine. 2011. About Ukraine. [ONLINE]. Available at: http://www.investukraine.net/about/. [Accessed 01 December 11]. Johnson,G., Scholes,K., and Whittington,R. 2008. Exploring Corporate Strategy. 8th Edition. England: Prentice Hall. Kyiv Post. 2011. Global corruption survey: Ukraine has highest level of corruption among Newly Independent States. [ONLINE] Available at: http://www.kyivpost.com/news/nation/detail/42729/. [Accessed 20 November 11]. Lynch, R. 2006. Corporate Strategy, 4th Edition. [E-book] New York: Prentice Hall. Available through: Anglia Ruskin University Library website: <www.libweb.anglia.ac.uk> [Accessed 27th October 2011]. Market Place. 2011. Obtaining licenses and quotas in Ukraine, licensing and quota allocation for import and export of goods in Ukraine. [ONLINE] Available at: http://www.kpl.net.ua/en/Obtaining_licenses_and_quotas_in_Ukraine.html. [Accessed 02 December 11]. Material handling industry of America.2011. About MHIA. [ONLINE] Available at: http://www.mhia.org/about. [Accessed 3rd December 2011]. PMR Consulting. 2011. Ukraine. [ONLINE] Available at: http://www.pmrconsulting.com/static_content/Countries.shtml. [Accessed 7 November 11]. President of Ukraine, official website. 2011. President: Government is insufficiently effective in deregulation. [ONLINE] Available at: http://www.president.gov.ua/en/news/22012.html. [Accessed 16 November 2011].

27

International Business Management

References & Bibliography

PWC. 2011. Doing business and investing in Ukraine 2011. [ONLINE] Available at: http://www.pwc.com/en_UA/ua/publications/assets/Doing_Business_in_Ukraine_2011. pdf. [Accessed 06 December 11]. Trading Economics, (2011), Ukraine Imports Chart [ONLINE]. Available at: http://www.tradingeconomics.com/ukraine/imports [Accessed 10 November 11]. Ukragroconsult. 2011. Ukraine's Coming Financial Crisis. [ONLINE] Available at: http://www.blackseagrain.net/photo/ukraines-coming-financial-crisis. [Accessed 18 November 11]. Ukraine Travelmate. (2011). Map of Ukraine [ONLINE]. Available at: http://www.ukrainetravelmate.com/ukraine-map.htm [Accessed 10 November 11]. Worldwide News Ukraine. 2011. China Reconfirms Ukraine as Its Key Eastern European Partner. [ONLINE] Available at: http://wnuukraine.com/news/politics/?id=399. [Accessed 06 December 11]. Worldwide News Ukraine. 2011. Current investment trends. [ONLINE] Available at: http://wnu-ukraine.com/about-ukraine/how-to-do-business-in-ukraine/currentinvestment-trends/. [Accessed 06 December 11]. Worldwide News Ukraine. 2011. Ukrainian Business Climate Makes it to the Regions Top Three. [ONLINE] Available at: http://wnu-ukraine.com/news/economybusiness/?id=1025. [Accessed 06 December 11]. Xinhua.net. 2011. Ukraine land of opportunity for Chinese business: first deputy premier. [ONLINE] Available at: http://news.xinhuanet.com/english2010/indepth/2011-10/26/c_131213166_2.htm. [Accessed 07 December 11]. Yahoo Finance. 2011. Worlds Worst Countries for Business. [ONLINE] Available at: http://sg.finance.yahoo.com/news/World-Worst-Countries-cnbcwp3990848173.html?x=0. [Accessed 18 November 11].

28

International Business Management APPENDIX

Appendix

Figure1: Michael Porters Five Forces Framework (source: www.mindtools.com) Figure 2. GDP growth rate comparison chart (source: World Bank, World Development Indicators) Figure 3. FDI net flows (BoP, Current US$) (source: World bank) Figure 4. Population (source: World Bank, World Development Indicators) Figure 5. Map of Ukraine (source: www.ukrainetravelmate.com) Figure 6: PESTEL Model. (Source: www.businessmate.org) Figure 7: Ukraines Annual GDP growth rate chart (Source: Tradingeconomics.com) Figure 8: Ukraine GDP Chart (Source: Tradingeconomics.com) Figure 9: Ukraines Foreign Direct Investment, Net inflows (BoP, current US$) (source: World Bank, World Development indicators) Figure 10: Ukraine Imports Data (source: TradingEconomics.com; the national bank of Ukraine) Figure 11: Ukraines Industrial Production (source: Tradingeconomics.com) Table 1. Balanced Scorecard for Metricum

29