International Business Strategy Assignment Sample

Introduction - Key Tactics for Implementing International Business Strategies

This research is going to explores Brickworks Ltd.'s (BKW) entry strategy into China's growing market. Built in Australia and registered on the ASX, BKW is a firm that specializes in producing building goods for the construction sector. A well-known Australian business in the construction sector, Brickworks Limited (BKW) specialises in producing building materials such pavers, roof tiles and bricks. BKW, which places a significant emphasis on sustainability, resilience, and safety, has established a solid reputation for producing high-calibre, creative goods in the local market. The company's strategic alliances with Earthworks contractors and dedication to research and development—particularly in the field of passive solar thermal design—have given it a competitive advantage (Brickworks, 2023). With 94.3 million shares in WHSP, Brickworks holds a 26.1% interest in the company. In 2023, it earned $89 million in total dividend income, compared to 46% in 2022. It has a $709 million EBIT. The company is recognised for its high-quality, environmentally friendly, and technologically advanced products. Due to competition from both domestic and foreign firms in the Australian industry, including Boral Limited and CSR Limited, BKW is investigating new avenues for growth in developing nations like as China(Brickworks Ltd Overview,2023).

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China, the selected rising market, offers BKW a strong chance to increase its market share through foreign direct investment (FDI). China is a desirable location for international investors due to its fast industrialization, massive population, and strong economic growth. BKW's strategy for entering the Chinese market will be based on using a particular theory, the Comparative Advantage Theory. This idea will make it clearer how BKW may take use of its special assets and skills to obtain an edge over competitors in the Chinese market (Zou et al., 2007). Moreover, BKW's strategic decisions on entrance mode, time, scale, and location will all be supported by Comparative Advantage Theory (Zou et al., 2007).

The desirability of the Chinese market for BKW's products will be examined in this research, along with strategies for overcoming obstacles brought on by the disparities in institutional frameworks, infrastructure, and market dynamics between Australia and China. BKW can get a firm footing in the Chinese market by efficiently utilising the possibilities that have been discovered and strategically matching its resources with market demands. The report's next parts, which follow the Comparative Advantage theory, will offer a thorough analysis and suggestions about BKW's entry plan into China (GROENERT & ZISSIMOS, 2013).

Main body

Country and Product Market Attractiveness Assessment

China, the second-biggest economy in the world, has had exceptional development, as evidenced by its GDP, which will reach $15.66 trillion in 2022. With a growth rate of 8.5% in 2022, the construction sector in this country has been developing quickly and is expected to do so at a substantial rate going forward. The pace of urbanisation in the nation has been rising gradually, which has increased demand for premium construction materials—especially those that are sustainable from an environmental standpoint. Furthermore, China has made significant investments in infrastructure development, emphasising green building and sustainable urbanisation. This has created a favourable market for environmentally friendly building materials (United States, 2019).

When looking at the economic aspects, China's strong GDP growth rate of 8.4% in 2021 highlights the sizeable market potential for items associated to building in the nation. Its robust industrial production and rising per capita income point to a larger customer base with more money to spend on high-quality building supplies. In addition, China's status as a worldwide centre of manufacturing gives it access to trained labour and reasonably priced production resources, which improves BKW's chances of effectively producing and distributing its products in the Chinese market. China is a desirable location for BKW's growth due to its stable political climate, efforts to entice international investment through beneficial policies, and regulatory improvements (THOMPSON, 2020). BKW's dedication to sustainability is reflected in the Chinese government's emphasis on infrastructure development and sustainable urbanisation, which allows the firm to contribute to the nation's building landscape while adhering to local standards. China's efforts to expedite regulatory procedures and encourage foreign investment in important industries, such as construction, strengthen the country's attractiveness as a favourable market for BKW's sustainable building solutions (Li & Liu, 2001). In terms of the cultural dimension, Chinese culture places a premium on teamwork, developing solid bonds with others, and having a long-term outlook. It also highlights how crucial it is to establish trust in commercial dealings. By utilising its community-focused strategy and inclusive business culture, BKW can create significant relationships with local suppliers, consumers, and stakeholders. BKW can efficiently traverse the complexities of the Chinese market and establish long-lasting partnerships based on mutual trust and respect by placing a high priority on cultural tolerance and understanding. Furthermore, BKW's comparative advantage in manufacturing superior and environmentally friendly building goods is well aligned with China's expanding construction sector and the growing need for sustainable building materials (CHINA,2003). BKW is well-positioned to take advantage of China's expanding market by utilising its proficiency in sustainable construction solutions, together with its strong focus on sustainable manufacturing and technical innovation. The theory's emphasis on focusing on producing items in which a business has a comparative advantage in terms of efficiency or cost draws attention to the strategic alignment between BKW's product line and the needs of the Chinese construction industry. BKW can obtain a competitive edge in the Chinese market by highlighting its natural capabilities in cost-effectiveness and sustainable manufacturing. This will secure its position in the market and help China achieve its aims for sustainable urban development (Wang & Peach, 2019).

Relevant theory (s) of foreign market entry strategy

Given that Brickworks Ltd. (BKW) has chosen to use Foreign Direct Investment (FDI) to join the Chinese market, the organization's core strengths and the particular difficulties presented by the Chinese operating environment must be taken into consideration while designing the strategic entrance strategy. BKW should concentrate on establishing wholly-owned subsidiaries in China by utilising the Comparative Advantage Theory and highlighting the business's dedication to quality, technological know-how, and sustainable construction practises (Zheng & Uprasen, 2021).

Wholly-Owned Subsidiaries and FDI

A type of Foreign Direct Investment (FDI) known as Wholly-Owned Subsidiaries occurs when a business creates a subsidiary in another country while keeping all ownership and control over the subsidiary's activities. The Wholly-Owned Subsidiary approach, as it relates to Brickworks Ltd.'s (BKW) introduction into the Chinese market, entails BKW establishing a fully-owned subsidiary in China to maintain complete control over its corporate operations and decision-making procedures. By allowing BKW to leverage its experience with sustainable building materials and efficient manufacturing, this strategy is in line with the Comparative Advantage Theory. It also permits more customisation and adaptability to the particular requirements of the Chinese construction sector. BKW can efficiently match its strategic objectives with the unique requirements of the Chinese market by retaining full ownership, which guarantees a lucrative and sustainable market entrance and expansion plan (China’s Economy,2000).

Justification for Wholly-Owned Subsidiaries:

1. Control and Autonomy: By selecting Wholly-Owned Subsidiaries, BKW is able to maintain total control over its activities in China, facilitating the smooth transfer of its cutting-edge manufacturing technology and environmentally friendly construction methods without sacrificing standards or quality.
2. Transfer of Technology: By keeping complete ownership, BKW is able to capitalise on its competitive advantage in sustainable building solutions by effectively transferring its technological innovations and creative practises to the Chinese market.
3. Brand Integrity and Quality Assurance: BKW can preserve its brand integrity and quality assurance procedures through wholly-owned subsidiaries, fostering customer confidence and trust in the Chinese market.
4. Customization and Adaptation: BKW's complete ownership allows it to tailor its operations to the unique requirements of the Chinese construction sector, thereby adopting to local market preferences and regulatory requirements seamlessly (Bhat et al., 2022).

The United Nations Conference on Trade and Development (UNCTAD) reports that during the past ten years, China has seen a steady increase in cumulative foreign direct investment (FDI) inflows, which is indicative of the Chinese market's rising attraction to global investors. Furthermore, China presents a favourable market for BKW's entry because of its fast urbanisation and infrastructure development projects, which have increased demand for sustainable construction solutions. Furthermore, BKW is positioned as a major player in the global sustainable construction industry by virtue of its proven dedication to sustainability and technological innovation, which is demonstrated by its investments in advanced manufacturing technologies and strategic partnerships with top research institutions. The business's solid financial results, which are highlighted by significant dividend payments and a good EBIT, further demonstrate its capacity to create and maintain wholly-owned subsidiaries in the Chinese market. Additionally, in the report from Assessment 1 it can be seen that BKW organization's preparation to venture into the Chinese market through a psychometric test a lot of facts has been revealed. It demonstrates that BKW has vital abilities, assets, and capacities, scoring somewhere in the range of 83% and 97%, outperforming homegrown adversaries yet confronting contest from worldwide players. The scores for "inspiration for effective financial planning" and "item status" stand at 71% and 60%, separately, proposing that BKW's items are ready to enter and contend in the Chinese market (Yiu & Makino, 2002).

Underpinning Theoretical Perspective:

The ideas of Comparative Advantage Theory Support Brickworks Ltd.'s (BKW) choice to create Wholly-Owned Subsidiaries in China as part of its Foreign Direct Investment (FDI) plan. The aforementioned notion highlights the need of capitalising on an organization's distinct advantages and skills to attain a competitive advantage in overseas markets. BKW integrates the Comparative Advantage Theory into its Wholly-Owned Subsidiary strategy to establish a strong presence in the Chinese construction industry. The company does this by leveraging its technological expertise, dedication to quality, and sustainable building practises (Comparative Advantage, 2009).

Fit with the Organization's Business Model:

The creation of sustainable construction goods and the use of cutting-edge manufacturing technology to guarantee high product quality are at the centre of BKW's business strategy. BKW may reinforce its brand identification and market positioning by creating Wholly-Owned Subsidiaries in China. This will allow the company to effortlessly transfer its sustainable practises, technical advancements, and quality standards. By using this strategy, BKW is able to uphold its dedication to sustainability and strict quality control procedures, which in turn promotes long-term brand loyalty and customer trust in the Chinese market (Akadiri et al., 2012).

Fit with the Operating Environment of China:

The growing focus on sustainable building solutions in the Chinese construction sector, together with the country's ambitious urban development efforts, is a perfect match for BKW's eco-friendly construction practises expertise. BKW can directly support China's sustainability objectives while meeting the rising demand for ecologically friendly building supplies and solutions by forming Wholly-Owned Subsidiaries. Moreover, BKW's complete ownership of its subsidiaries enables the firm to independently traverse the complexities of the Chinese market and guarantee the smooth integration of its activities with the regional business and regulatory environments. This strategy gives BKW the ability to modify its business procedures to meet the particular needs of the Chinese construction sector, which promotes a long-lasting and mutually advantageous business environment (Zhou, 2022).

Strategic Implications of the Choice

Resources Required for Implementing the International Business Strategy

Possible Risks:

1. Political instability: Trade conflicts and policy changes can result in regulatory uncertainty and commercial interruptions, making risk management and contingency preparations imperative.
2. Cultural and Linguistic Barriers: To promote successful communication and create enduring corporate partnerships, it is necessary to invest in cross-cultural training programmes and language competency courses.
3. Environmental Compliance Risks: Obtaining eco-friendly raw materials and putting sustainable manufacturing methods into place may come at extra expense in order to ensure compliance with China's ever-changing environmental rules.
4. Competition from Local Businesses: To carve out a place in the cutthroat Chinese construction industry, one must spend in creative product differentiation, market positioning, and competitive pricing tactics. These are the costs associated with competing with well-established local businesses (Fang et al., 2004).

Mitigation Strategies:

By developing a strong organisational culture that emphasises adaptation and flexibility, keeping up a solid financial contingency plan, and putting in place reliable legal and compliance frameworks, BKW can reduce these risks. Developing strategic alliances with nearby businesses and industry players may also aid in navigating challenging business conditions and offer insightful information about market dynamics. Furthermore, funding ongoing staff training and development initiatives may improve intercultural competency and cultivate a varied and welcoming workplace, which promotes productive cooperation and teamwork. Recycled materials may be used in industrial processes, strict sustainability practises can be implemented, and renewable energy can be used to reduce environmental risk (Zou et al., 2007).

Conclusion

An extensive investigation was done to evaluate Brickworks Limited's possible involvement in the Chinese market before putting this assignment together. The basis for the strategic suggestions was the data from the first assignment, which included the company's history, competencies, and prospects and difficulties in the Chinese market. Through the application of many theoretical frameworks, including the Comparative Advantage Theory and the analysis of entrance strategies such as wholly-owned subsidiaries, a thorough knowledge of BKW's potential for success in China was obtained. Although a lot of data and information was used, several topics should have been explored more thoroughly, such the particular consequences for BKW's entrance strategy and a more thorough investigation of cultural subtleties. Building a thorough and reliable evaluation required ensuring the data's validity and dependability by utilising up-to-date, reliable, and varied sources. With the goal of assisting the business in making a profitable transition into the Chinese market, a comprehensive analysis of BKW's capabilities and the dynamics of the developing market informed the formulation of the strategic suggestions and risk mitigation plans.

References

• About | Brickworks. (2023, September 11). Brickworks. https://www.brickworks.com.au/about/
• Akadiri, P. O., Chinyio, E. A., & Olomolaiye, P. O. (2012, May 4). Design of A Sustainable Building: A Conceptual Framework for Implementing Sustainability in the Building Sector. Buildings, 2(2), 126–152. https://doi.org/10.3390/buildings2020126
• An Elementary Theory of Comparative Advantage. (2009). Econometrica, 77(4), 1165–1192. https://doi.org/10.3982/ecta7636
• Bhat, M. N., Ikram, F., Rahman, M. N., & Naeem, M. H. (2022, October 12). Economic freedom of the world: wholly owned subsidiaries and joint ventures as binary response. Transnational Corporations Review, 1–18. https://doi.org/10.1080/19186444.2022.2127610
• Brickworks Ltd Company Profile - Brickworks Ltd Overview. (n.d.). GlobalData. https://www.globaldata.com/company-profile/Brickworks-Ltd/
• China’s Economic Rise: History, Trends, Challenges, and Implications for the United States. (2019, June 25). CRS Reports. https://www.everycrsreport.com/reports/RL33534.html
• COSKUN, A., & MAMMADOVA, G. (2015, May 25). Costs and Benefits of Foreign Direct Investment to Azerbaijan’s Economy: The Case of Oil Sector. Asian Journal of Finance & Accounting, 7(1), 135. https://doi.org/10.5296/ajfa.v7i1.7260
• Enter the Chinese market via CPHI CHINA! (2003, April 28). Chemical & Engineering News Archive, 81(17), 58. https://doi.org/10.1021/cen-v081n017.p058
• Fang, D., Li, M., Fong, P. S. W., & Shen, L. (2004, December). Risks in Chinese Construction Market—Contractors’ Perspective. Journal of Construction