Globalization has transformed the operations of businesses(Kobayashi-Hillary, 2013). Today, a business must engage with the players in its external environment. For example, firms in the United States are outsourcing some of their operations to other markets. Asia is one of the markets that American companies have expanded into. Low labor costs and friendlier government policies are primarily responsible for the outsourcing (Kobayashi-Hillary, 2013). The expansion that many firms are undertaking has presented a wide range of benefits. These benefits include access to a wider market and the ability to exploit the talents and skills of a more diverse pool of employees. PPQ Parts desires to set up bases in other markets as part of its expansion initiative. If the company is to achieve its growth targets, it must critically examine the markets that it wishes to venture into.
Environmental scanning of current conditions
It is assumed that PPQ Parts wishes to set up base in India. For the most part, the current conditions in this market are encouraging as they enhance the operations of businesses. India’s population stands at 1.34 billion (“By 2013,World”, 2017). The high population means that there is a large market for products. As it enters this market, PPQ Parts can hope to obtain a share of this market. Demand for vehicles in the Indian market has been on the rise and the size of the middle class continues to grow. It is projected that by 2024, India’s population will stand at 1.44 billion(“By 2013, World”, 2017). This is good news for PPQ as it will have an even larger market for its products. This company wishes to increase its market share to 9% in four years. If it moves to India, it will be able to achieve this goal with ease since the Indian market is ripe for investment. The high population will also provide PPQ Parts with a diverse labor force from which to obtain employees. The firm should be able to achieve its desiredemployee turnover rate of 17%.
Delegate your assignment to our experts and they will do the rest.
The demographic dynamic of India is not the only issue that PPQ Parts needs to consider before establishing operations in this market. The company must also examine the economic performance and the government policy. India is among the fastest growing economies in the globe. In 2016, the country’s GDP grew by 7% (“About Indian Economy”, 2017). Another indicator that the Indian economy is stable is the increase in the tax revenue that the government collected. The International Monetary Fund predicts that the growth in India’s GDP will be sustained. The Indian government has been investing in key areas as it seeks to attract foreign investment(“About Indian Economy”, 2017). Education and infrastructure are just some of the sectors that have been the focus of government spending. India is indeed promising. The strong economy coupled with the positive government policy should convince PPQ Parts to set up base here.
The discussion above has shed light on the factors that will enhance the operations of PPQ Parts when it moves to India. As it moves to this market, the company needs to understand that there is intense competition. More and more Western firms are training their eyes on this market (Mundy, 2016). Car makers have particularly focused their efforts on capturing the Indian market. The market is yet to become saturated but as more companies move here, the supply will exceed demand. This means that PPQ Parts must move with caution and ensures that it captures the hearts of the Indian people. The company needs to build strong brand recognition if it is to gain the loyalty of the Indian people. This will allow the company to withstand the competition. PPQ Parts will be relieved to know that India is fairly stable politically. The BJP Party led by the current Prime Minister Narendra Modi is committed to preserving stability and attracting investment (“India’s Economy Expected”, 2016). While India remains peaceful and stable, it has suffered isolated cases of insurgency and violence. For example, the country has been embroiled in a conflict with Pakistan over Kashmir. Despite this conflict, India remains peaceful and is therefore a wise choice for investment.
Internal resource analysis
It is true that the external environment shapes the operations and growth of an organization to a great extent. However, the internal environment also plays a vital role. How well an organization exploits its resources determine if it achieves growth. PPQ has various internal resources at its disposal. Effective management and employee effort are among the resources that the company has. That the company has laid out measurable and attainable objectives indicates that its management is effective. The ability to create visions and develop strategies is one of the hallmarks of effective management (Satia, Kumar & Liow, 2014). The solid financial performance is another resource that PPQ Parts can exploit. Over the last three years, the firm’s profit margin has stood at 6%. This figure matches the industry average. It suggests that the company has been able to operate at par with other players. PPQ Parts wishes to increase the profit margin to 13%. The solid performance that the firm has reported will allow it to achieve this objective. Another resource that the company should exploit is its strong engagement with the community. It is mentioned that the company invests 0.5% of its profits in community initiatives. PPQ Parts is clearly committed to enhancing the welfare of the community. This is an asset that the firm should use to build loyalty and to obtain support. Corporate social responsibility is a key driver of business growth (Kotler & Lee, 2011).
The discussion above has focused on some of the strengths that PPQ Parts can exploit for growth. A number of weaknesses in the company’s internal environment could derail its quest to achieve success. The high employee turnover is among these weaknesses. PPQ Parts seems unable to retain its employees. If this continues, the company will lose the key talent that it needs to attain the objectives that it has laid out. Any company that desires growth must invest in retention programs (Allen &Bryant, 2012). These programs include offering better remuneration and creating conditions that allow employees to be more productive.
Strategic goals
The success of PPQ Parts’ plans to expand its operations will hinge on the implementation of various strategic short and long term objectives. It is advised that the company should focus on the short term objectives that it has already developed. These objectives include increasing its market share to 9%, doubling its workforce from 5,000 and raising its stock price to $22 from $10 in four years. The company should also remain committed to meeting its goal of increasing its profit margin to 13%, reducing the employee turnover rate to 17% and increasing its spending in community programs to 5%. As it pursues these goals, the firm should also set its eyes on long-term objectives. It is recommended that the firm should have the long-term objectives as follows:
Increase market share to 18%
Increase workforce to 50,000
Increase profit margin to 23%
Maintain the spending on community programs at 5%
Lower employee turnover rate further to 3%
Increase stock price to $60.
All the objectives listed above should be achieved in 20 years. Setting up operations in the Indian market holds the key to achieving all these objectives. The objectives above are realistic and attainable. They make considerations for the challenges that the firm will face. For example, the goal of the market share is conservative (18%) because it is projected that other auto companies will enter the Indian market. This will hold PPQ Parts back from capturing more of the Indian market.
Benefits and limitations of expansion
Expansion will undoubtedly present PPQ Parts with many benefits. One of these benefits is that it will enable the company to access a wider market. As already stated, India is home to hundreds of millions of people. All these people are potential clients for PPQ Parts. Access to a more diverse pool of labor is another benefit. As it enters this market, PPQ Parts should rest assured that it will be able to acquire talented employees. India continues to invest in its labor force in an effort to make it more competitive (Ho, 2017). Insulation from shocks in the domestic market is another benefit of expansion. When a firm diversifies its markets, the losses that it suffers in one market are offset by the gains that it makes in a different market.
PPQ Parts should ready itself for some challenges as it enters the Indian market. Cultural conflicts and incompatibility are among these challenges. When a firm ventures into a different market, it usually faces difficulties in aligning its operations and policies with the culture of this market (Feldman, 2013). This makes it difficult for the company to gain a foothold in the market. High cost of setting up operations is another limitation of expansion. PPQ Parts should try to keep the cost of moving to India low and ensure that it changes its policies and practices so that they are in line with the cultural beliefs and practices of the Indian people. This will go a long way in making sure that the company transitions smoothly.
In conclusion, PPQ Parts represents the thousands of firms that wish to improve their fortunes. These firms understand that expansion holds the key to sustainable growth. India has been identified as the perfect market for PPQ Parts to set up base. The high population of this country coupled with the positive economic climate should aid PPQ Parts in achieving its goals. PPQ Parts should remember to modify its practices and culture to suit the situation in India. As it implements the strategies outlined above, PPQ Parts will set itself on a path that leads to growth.
References
Allen, D. & Bryant, P. (2012). Managing Employee Turnover: Dispelling Myths and Fostering Evidence-Based Retention Strategies. New York: Business Expert Press. About Indian Economy Growth Rate & Statistics. (2017). Retrieved 23 rd June 2017 from
https://www.ibef.org/economy/indian-economy-overview
By 2030, World Will have 8.6 Billion People, 1.5 Billion of them in India. (2017). Retrieved 23 rd June 2017 from http://timesofindia.indiatimes.com/india/by-2030-world-will-have-8-6-billion-people-1-5-billion-of-them-in-india/articleshow/59277566.cms
Feldman, S. P. (2013). Trouble in the Middle: American-Chinese Business Relations, Culture, Conflict and Ethics. London: Routledge.
Ho, T. (2017). The 5 Biggest Reasons to Invest in India Right Now. Retrieved 3 rd June 2017 From https://www.forbes.com/sites/trangho/2017/04/17/the-5-biggest-reasons-to-invest-in-india-now/#44231bc21f33
India’s Economy Expected to Grow Five Fold by 2040: PM Narendra Modi. Retrieved 23 rd June 2017 from http://economictimes.indiatimes.com/news/economy/indias-economy-expected-to-grow-five-folds-by-2040-pm-narendra-modi/articleshow/55804645.cms
Kobayashi-Hillary, M. (2013). Outsourcing to India: The Offshore Advantage. New York: Springer.
Kotler, P. & Lee, N. (2011). Corporate Social Responsibility: Doing the Most Good for your Company and your Cause. Hoboken, NJ: John Wiley & Sons.
Mundy, S. (2016). Apple Sets Sights on Bigger Target in India. Retrieved 23 rd June 2017 from https://www.ft.com/content/d1ce54c8-222e-11e6-9d4d-c11776a5124d?mhq5j=e2
Satia, J., Kumar, A. & Liow, M. L. (2014). Visionary Leadership in Health: Delivering Superior Value. Thousand Oaks: SAGE.
