The need for globalization of companies has become a modern day trend with there being changes in the way that companies organize themselves and do business. However, this trend has increased international trade, cultural exchange, and foreign direct investment to countries worldwide. It has also increased the number of business opportunities that businesses can take advantage of in new markets in new countries. Large corporations are endorsing the strategy of outsourcing and subsidiaries that provide businesses with ways of expanding and growing to other international markets. But there are numerous risks that businesses must contend with in their search for growth in the international market. It is essential that businesses conduct research for threats and opportunities in the countries that they want to venture into since that would help come up with suitable strategies for growth. The choice of market entry modes and strategies is important for a company to be successful in any host country they venture. For a successful business expansion as a Toy Company, there has to be an increase in market share in foreign countries, evaluation of individual costs, risk of the market entry, assessment of alternative markets, and clear understanding of the new market policies implemented by the government.
As a Toy Company, there has to be a critical review of the comparative advantage and the market efficiency that is currently available in the new market. Comparative advantage has been derived from the list of mutual exchanges that countries particularly in making of goods and provision of services. The efficiencies that are needed for comparative advantage are needed for the benefit of social and economic operations of business. In this case, a Toy Company will have to ensure that it has provisions for emerging markets to meet its demands. In this case, the focus will be on China as the host country for growing the business. China has a large potential for growth rate in the toy industry and also due to the slow growth rate it has experienced since 2015. The market is now favorable for businesses that want to capture new market trends and ideas. To achieve a favorable outcome in business operation and profitability in such as a dominant market, the company would have to increase investment and bring new toy concepts that will reignite the market demand for toys.
The toy market in China is classified in a wide range of products from mechanical, wooden, and electronic toys. With new additions to the traditional offering of toy models, other new innovative toy products are now hitting the market. Licensed toys, high-tech toys, dolls, adult toys and entertainment games are now part of the large-scale industry. This offers foreign companies with an opportunity to introduce their products and offer new market demand choices to the consumers in the Chinese toy market. Emerging economic growth is helped by the capitalistic efforts and the transitional market strategies that move from a communist or socialist ideology to a more capitalistic theory, which presents the business with greater market opportunities. This is the reason that globalization has increased over the years, with more and more people and businesses, spending, and investing money into businesses and foreign markets (Ahlstrom and Bruton 233). Companies now have easier access to resources and capital, and additional investment opportunities due to the availability of negotiable instruments, commercial paper, and advancement in technology. The company needs to align its core business strategy to help increase its visibility in such a slow growth market. Investing in an already existing market possesses a challenge for any business especially if the market already a large competitive advantage over other rival companies. There should be a question of whether to have the foreign manufacture of products or local manufacturing. Foreign manufacturing will mean that the company will have to set up a manufacturing facility in the host country, to meet the local demand for toys or export to other markets. Local manufacturing strategy is the manufacturing done in the home country of the company and then exporting the products to the host country. In China, the best way is to outsource production through OEM orders and sell them to the local market and also export some of the company products. This is because 80% of the worlds toys are manufactured in China and provides an avenue for export to other markets for the company (Young 35).
There is an increased growth in the competition in the across the Chinese toy industry. The market has been dominated by the foreign brand, while the local company products are in the medium to low segments of the market (Amone 39). The strengths of the market seem to be in the retail industry and operations as there is already a well-established channel for distribution that the company can take advantage to increase sales. The local market has made it possible to grow the domestic market and provide increased business opportunities in recent years. There is also a huge gap when it comes to the products prices in the domestic products and foreign products. The domestic products are still dominating the prices and margins favor companies that have local manufacturing facilities, due to a reduction in costs.
The online platform in China offers businesses an opportunity to increase market share and the demand for products (Amone 40). That is one of the greatest opportunities for starting a business in China, especially in the toy industry. The industry is also very well organized when it comes to local business policies where the government supports and endorses foreign investment in the country. China also offers credible agents to facilitate business entry into the country. A business will need to have business affiliates in a host country to guide the business processes and integrate the company strategies to the local market demands. Sales require great attention and hiring of people with great knowledge of the market. The company sales branches should be seen as extensions of the parent company, and operate on the same business objective.
One of the weaknesses of the Chinese market is its currency fluctuations and currency devaluations. The hard currencies in place in the country are usually at the mercy of the market demands and the market rates. The soft currency rates are set and implemented by the government. This would affect the way that business uses its resources and the profitability of the sales. Being a communist country, there is always a political risk. The company has to set up political risk insurance to ensure that the company has a compensation strategy when diving into such a political environment. There can be a loss of investment due to the nationalization of the business assets or the confiscation of resources by the government as they have full control of what happens in the country.
Amone, William. "Global Market Trends." Handbook of Research on Global Business Opportunities (n.d.): 37-58. Web.
Bruton, Garry D., and David Ahlstrom. "An Institutional View of China's Venture Capital Industry." Journal of Business Venturing 18.2 (2003): 233-59. Web.
Russ, Meir. "Knowledge Management Strategies for Business Development." (2010): n. pag. Web.
Young, Michael N., David Ahlstrom, and Garry D. Bruton. "The Globalization of Corporate Governance in East Asia: The Transnational Solution." Management and International Review (2004): 31-50. Web.
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