Mr Cohen is an approved Executive Consultant at Appleton Greene and he has experience in globalization, management and production. He has achieved a Masters of Business Administration and a Bachelor Degree in Political Science. He has industry experience within the following sectors: Manufacturing; Consumer Goods; Logistics; Education and Retail. He has had commercial experience within the following countries: United States of America; Mexico; Brazil; People’s Republic of China and Bulgaria, or more specifically within the following cities: Phoenix AZ; Nogales; Americana; Guangdong Province and Sofia. His personal achievements include: craft first-stage internationalization program; assess internationalization of operations strategy; develop & evaluate international marketing program; determine financing for internationalization program and monitor evolution of internationalization program. His service skills incorporate: strategy development; operations evaluation; marketing implementation; organizational change and project management.
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I have more than 10 years’ experience in helping small to medium-sized firms develop, implement, manage, and evaluate entry strategies for market penetration, market development, and product expansion purposes. Intensive experience building new products, conquering intractable strategic issues and driving revenue growth for start-up, small and medium-sized firms. I am a pioneer in the integration of strategic thinking with functional areas within the firm that have generated increased sales and market penetration through the re-segmentation of markets and the repositioning of existing product families for my clients. I am experienced in the presentation and communication of strategic objectives, and the building of and control over functional, procedural programs and policies to achieve sustainable foreign-market penetration. I am a past contributor to forward-thinking organizations ranging from manufacturing start-ups to companies in multiple sectors.
There are two (2) sorts of internationalization programs: the continuing internationalization program and the first-stage internationalization program. The continuing internationalization program can be described any firm that has at least two functional activities operating across at least one national border. For instance, a United States’ based ball bearing manufacturer producing his ball bearings in one of the free trade areas of Northern Mexico, seeks to add sourcing of the primary raw material (steel) from Canada. The ball bearing manufacturer had to take that “first-step” and move (part of) its productive capacity to Northern Mexico in the first place. The “second step” or ‘continuing step’ would be to source steel from outside the United States.
A “first-stage” internationalization program is any firm that, besides its sales activities, has none of its functional activities outside of the original market. That is, other than periodic sales to foreign markets, it doesn’t source materials from outside its original market, doesn’t do any promotions outside its original market, nor does it formalize its strategic direction to take into account foreign markets. It is this type of internationalization I most specialize in. First stage internationalization programs require a strategic perspective. Considering that small to medium-sized firms have no formalized strategy in place, this is the first set of activities performed. Use of formalized strategic methodologies permit the firm to understand how they ‘fit’ into their industry, external environment, plus provide the small to medium-sized enterprise a firm ‘grounding’ in thinking in terms of formal processes and policies. Thinking in such planned terms (rather than emergent terms) provide the internationalizing organization with a required knowledge to create, implement, and evaluate the entry mode decision framework (the strategic purpose of the first-stage internationalization program.)
The internationalization program needs an holistic approach to its development from the strategic direction of the firm down to the functional activities that comprise daily operations. Progressing form the start-up phase to the mature phase, each industry naturally diffuses barriers to entry into multiple markets. What I do is help small- to medium-sized manufacturing and service-oriented businesses take that first or second internationalizing step. I understand that every business is different. That is why I approach the internationalization process in an unique way for each and every client I help. The way I approach the internationalization process can be characterized by four (4) broad categories of projects: Marketing & Advertising, Strategy Formation, Operations/Supply Chain, and the rest of the business-related activities that first-stage internationalizing firms must do. I call this crafting the internationalization decision framework. The internationalization decision framework is comprised of five (5) fundamental questions that seek to holistically relate all relevant business activities necessary to sustain the firm, over the long-term, as it internationalizes.
The internationalization decision framework encompasses: Why is the firm internationalizing now (in essence, what has changed in the client’s environment that is forcing their company to internationalize?) Which is the most appropriate internationalizing strategy to use right now for the firm (in essence, how should the client internationalize?) What level of criterion should the client’s firm use to craft the internationalization decision framework? Where should the firm internationalize to? Lastly, I ask of my clients: What resources does the firm have to put to this internationalization program? Some further questions I ask to help clients crystallize the international decision framework development process are: What impact does the choice of distribution channels have on the entry strategy? What changes should the business make to its marketing strategy as the firm enters a new market? How should the firm advertise to its new customers? Should the firm outsource any one of its business functions? Does the firm have enough resources for the chosen entry mode?
These questions are geared to help me formulate the client’s entry mode decision framework, especially if that client is creating a first-stage internationalization program. In the event that the client already has an internationalization program, then these questions help me to evaluate the client’s continuing internationalization program. The differences between my version of the client’s continuing internationalization program (as reversed engineered through these questions) and senior management’s own [internal] understanding of the client’s continuing internationalization program will provide additional avenues of market or product growth, and may provide the client’s firm additional opportunities to gain either scale or scope economies.
Companies can elect whether they just require Appleton Greene for advice and support with the Bronze Client Service, for research and performance analysis with the Silver Client Service, for facilitating departmental workshops with the Gold Client Service, or for complete process planning, development, implementation, management and review, with the Platinum Client Service. Ultimately, there is a service to suit every situation and every budget and clients can elect to either upgrade or downgrade from one service to another as and when required, providing complete flexibility in order to ensure that the right level of support is available over a sustainable period of time, enabling the organization to compensate for any prescriptive or emergent changes relating to: Customer Service; E-business; Finance; Globalization; Human Resources; Information Technology; Legal; Management; Marketing; or Production.
Internationalization made transparent is my credo. The client firm can internationalize for two primary reasons: short-term gain in a globalized environment or long-term viability in a hypercompetitive marketplace. The more structured the first-stage or continuing internationalization program is for the client, the more comfortable the client will be in performing functional activities with an international component. The long-term goals of any internationalization program is to make the firm a global, not merely local, competitor.
This requires a holistic analysis of the firm as a single entity, rather than a set of discrete functional activities. All introductory stage business organizations start with a significant lack of financial, personnel, and skills resources. In essence, entrepreneurs start with an idea, and they build an institution around that idea. Over time, that “idea” grows in content. Policies, processes and procedures are put in place in order to manage certain activities. Functional activities are created then expanded to fulfill productive roles within the organization. Such growth occurs on an ad-hoc, emergent basis until the firm’s micro-environment (its selling environment) forces it to either remain small or to “go big.” This is the point at which the firm needs to consciously, systematically, and structurally differentiate the activities it performs on a daily from a long-term basis.
This is the way in which I approach the crafting of the client firm’s first-stage internationalization or continuing internationalization program. My approach permits the firm to structurally ‘think’ about its environment (macro-environmentally through country-level and industry-level characteristics, and micro-environmentally through corporate to functional factors) by strategically analyzing the client firm’s macro- and micro-environments for those factors that will aid and/or inhibit the client’s operations in the short-term, medium-term, and long-term. Only through a clearly articulated strategically structured analysis of the client firm’s environment can the firm develop and sustain its competitive ‘edge’ in a globally ordered marketplace defined by its hypercompetitive nature.
The following list represents the Key Service Objectives (KSO) for the Appleton Greene Internationalization Program service.
- Strategic Management
When a client is new to what I do, I will initially perform an in-depth 5-Forces Analysis that provides an institutional basis for comparing the performance of the client’s company with their industry. Next, a Product Frontier Analysis is executed to determine the position of client’s products along the product frontier, in relation to competitive, complimentary, and substitutive products. Depending upon what purpose senior management of the client’s company has for the analysis, I can go in one of several directions: Core Competency/ Strategic Intent Matrix (CC/SI) Analysis, Profit Pool Analysis, Hypercompetition Analysis, Diamond Analysis, or straight financial investigation, such as activity-based costing, or return on equity, investment, or assets. If I have helped the client’s company craft strategy before, an informal 5-Forces Analysis is undertaken, to determine the variance in the industry between when the analysis was first accomplished and the present analysis. The variance provides a representation at what stage the industry is currently. Has the industry progressed from adolescent or introductory to growth, from growth to maturity, from maturity to old age? The variance determines the relative position the industry inhibits in the life cycle. Once I have determined the “relative position” of the firm in the life cycle, I will begin to craft the first level of the SWOT Analysis, which is the external environmental components Opportunities and Threats. Only after performing some sort of business-level analyses (my “go-to” methodology is value chain analysis, pioneered by Dr. Michael Porter from Harvard,) I determine what strengths and weaknesses the company has engendered since the previous contract, and then ascertain that the opportunities that might still exist in the industry or that new threats have manifested (that have to be overcome) since the previous contract. What happens next is either to focus on the marketing activities since the previous contract or take a more in-depth look at the resources that the client currently has put towards its continuing internationalization program. If I have not helped fashion the client’s internationalization program or if the client has a current internationalization program that may not be working as efficiently as possible, I will perform some sort of macro-level analysis. Generally, this means that I will perform a country-level analysis; the two methodologies that I use on a consistent basis are Dr. Michael Porter’s Diamond Analysis for National Competitive Advantage or a STEP (social/cultural, technological, financial/economic, and political/legal) analysis. Country-level factors like the host-country’s society’s attitude towards foreign ownership, legal or political factors (that can inhibit a firm from using a transfer-related or FDI-related entry mode,) or even the availability of “steady” energy production or modern telecommunications can hamper the client’s ability to operate in that foreign market. The country-level analysis is designed to determine just which country-level factors will most influence the choice of entry mode and affect the internationalization program. I specifically design the international program to either enhance or suppress these macro-level factors.
- Marketing Enhancement
Based on some sort of environmental analysis (generally, a SWOT analysis) that I perform (either as a formal part of the project, or informally as a “starter” to the development of a marketing campaign,) there are strategies that can be implemented to allow strengths to offset threats, and opportunities exploited that can offset weaknesses. Through analysis of the relative strength of the client’s resources, through evaluation of the existent internationalization program, and through discussion with the client, I develop one of the marketing strategies contained within the SWOT analysis. Operationalizing the marketing strategy requires the use of project management fundamentals. The plan is first broken down into its component parts. Once these parts are identified, they are further broken down into work packets. Each work packet is surveyed for further narrowing into sub-packets. At each step, a survey is run to determine the range of type necessary to do each part, each packet, sub-packet, and step in the campaign’s process. The timeline is put into a Gantt Chart for dissemination to all parties involved in the decision. The marketing strategy chosen always contains a measure of pricing, promotions, and placement for the firm’s products or services. One of the ways in which I can enhance the implementation phase of the marketing campaign is through enhancing the brand cycle by integrating non-traditional promotional activities with the commercialization aspects of the client’s new product development program. In essence, increasing the client’s ability to extend their product or service into other markets. Another way that I enhance the implementation phase of the marketing campaign aspects of the internationalization program is to do the managerial labor of overseeing the roll-out of the marketing campaign. In that circumstance, further negotiation will occur to rationalize the timeline for the campaign. Once finalized, ad agencies are contacted, storyboards are created, the media mix is determined by market research, re-segmentation, retargeting, and repositioning takes place (if necessary) in preparation for initial roll-out of advertising. During the retargeting/ repositioning phase of the campaign, media outlets are contacted, contracts are signed, and scheduling commences to roll-out the advertising portion of the marketing campaign. Once advertising is developed from idea generation to storyboarding, “buy-in” by the client is achieved. Per the above, advertising goes to media outlets and advertising is released per the advertising campaign. After 2-4 weeks of the marketing campaign, market research can be enacted as a feedback mechanism on the marketing campaign. If necessary, the marketing plan portion of the internationalization program can be modified; that is, advertising will be redesigned to bring it more in line with metrics created to evaluate the efficacy of the marketing strategy.
- Operations Development
After various business-level analyses are performed, data is compiled on both the external opportunities and threats impacting the company, and the internal weaknesses within the functional activities that the firm will need to modify in order to implement the internationalization strategy . Once completed, a value chain analysis is undertaken to render an integration matrix for the company. This is to determine how “efficient” the value chain is; it will help determine if there are opportunities for vertical and/or horizontal integration along the value chain. In manufacturing environments the operations analysis covers the productive capacity of the firm. I perform constraint theory analysis on the production function to determine its “bottlenecks.” Continuing, I extend the constraint theory analysis to include the materials planning and distribution functions (traditional manufacturing resourcing planning areas.) Once the bottlenecks are determined, an operations plan is created, in conjunction with senior management’s input, to determine the optimal pathway from materials planning through production to outbound logistics. For manufacturing organizations, a first-stage internationalization program may require that I formalize for the client an enterprise resource plan, or ERP. The ERP could include revamping the client’s inventory control procedures, organizing its inbound and logistics functions to be more efficient, and/or increase its production efficiencies through higher degrees of flexibility and/or higher speed to lower costs and increase quality. ERP requires that I, in conjunction with the client, impose some sort of quality control process to operate concurrently with the existing production activities. The ERP that I create for the client will also take into consideration how best to exceed industry best practices through analysis of each step of the production workflow. For service-oriented firms, a first-stage internationalization program requires that I analyze the firms productive workflow by using a standard ‘4-V approach.” That is, through the ‘lens’ of volume of work performed in a discrete amount of time, the variety of that work performed in that discrete amount of time, the visibility of work performed in that timeframe, and, ultimately, the opportunity to vary productive activities within a given productive workflow helps the client to achieve economies (of scale or scope) in its operations.
- Resource Control
One of the more important aspects of either the first-stage internationalization program or the continuing internationalization program is determining just what resources the client has, which resources will be necessary to successfully implement the first-stage internationalization program, and how to bridge the chasm that is foundational to a small-to-medium-sized enterprise. This is how resource control influences the internationalization program. To understand resource control, entrepreneurial studies has created a methodology called VRIO- value, rarity, imitability, and organization. I have modified this methodology to better analyze the resources the client currently has, what they will need immediately to implement the internationalization program, and what they need long-term to sustain the internationalization program. The value of any resource is not just its financial cost on the balance sheet; it is the strategic value the resource brings to the internationalization program based on how important it is for the client’s firm to perform that set of activities rather than hire an outside agency. How “rare” or “imitateable” that resource is depends on how well the firm uses that resource in its daily operations. The “deeper” the firm has that resource, the easier it will be for the client to perform the needed activities as the internationalization program is implemented. Lastly, the organization will, eventually, have to “make” or “buy” the required resources. Which it does depends on how well it performs those activities contained in the internationalization program. In a first-stage internationalization program, where the client has little personnel, financial, or even organizational resources to exploit, the internationalization program is (generally) formed to enhance a single (limited) set of resources. Usually, these resources are personnel-driven, as the personnel resource is the “easiest” to exploit using a trade-related entry mode (export/import, sub-contracting, or countertrade) for manufacturers, and using an “early” transfer-related entry mode (leasing or international licensing format.) Using my modified VRIO strategic methodology, this part of the first-stage internationalization requires that the personnel resource show definite, concrete, opportunistic value. The “best” way to do this is to achieve a measure of economies of scope through cross-training. So, throughout the initial implementation of the internationalization program I draft a training program that runs “in parallel” with normal operational activities; to help the client become comfortable thinking strategically, rather than just operationally. In a continuing internationalization program, the firm has a number of resources (including its policies and procedures) that it uses on an operational basis. My modified-VRIO methodology would evaluate the client’s current resources, comparing them with those resources needed to mode to the “next step” in the internationalization program, focusing on the “make” or “buy” decision as a measure of how efficient the client is in utilizing its resources in pursuit of market penetration and/or market growth.
- Program Evaluation
For the downstream value chain, a business-level or functional-level analysis may show several near market segments that the client had never done business within. This would naturally lead to enhancement of the client’s product family offerings or engage the newly structured new product development program. This enhancement to the client’s product or service offerings requires me to re-evaluate the internationalization program on a strategic basis. The first stage in any program review is either to “find” the benchmarks that make it possible to evaluate the client’s continuing internationalization program, or to develop the metrics that will permit a structured assessment of the client’s first-stage internationalization program. Any reconfiguration of the internationalization program (continual or first-stager) will require comparing the new firm metrics with industry benchmarks (again, if they exist.) The purpose of this comparison is to help the client understand “how far” the international program has progressed and “how much more” the client has to progress to reach successful, sustainable internationally-based operations. For a continuation of an existing internationalization program, program review means a thorough analysis of the existing resources, functional activities, and corporate strategy that led the client to its current internationalization program. For a first-stage internationalization program, the review is just to determine how well the client firm is using its resources in pursuit of the purpose of the first-stage internationalization program (remembering that one of the primary questions of entry mode decision framework is why (strategically vs. tactically) the client firm is internationalizing in the first place.) In this latter case, I will perform a value chain analysis (pioneered by Dr. Michael Porter,) to determine just which of the client firm’s functional areas “needs work”, going ‘forward’ with the first-stage internationalizing program.
”Initially, we hired Mr. Cohen to complete our business plan and craft the business model that we have used to become the #1 provider of paint for model railroading. Through Mr. Cohen’s strategy understanding, we have expanded our product [families] to enter the plastic model car market. When we received our first foreign (non-North American) paint order, Mr. Cohen came in and organized the shipping and receiving area and taught our people about the regulations appropriate to the foreign markets we were shipping to. After shipping to several countries, we brought Mr. Cohen back to develop our international strategy. Mr. Cohen has developed many of the [functional] policies that we use today to perform the work needed to creating the #1 model paint brand. When we need to create a new marketing campaign for a new paint line, Mr. Cohen comes in and engineers an integrated marketing campaign, from the advertising on up.”
North Valley Trains
” Mr. Cohen is currently engaged in crafting my business plan- we are currently working on the internet strategy portion of the business plan. That consists of creating the website, determining services provided and to what levels I can provide those services, and pricing. Part of the internet strategy is a social media strategy- how to use it, when to use it, and what I should do to maintain a Facebook site. This is keeping in mind how to use social media as a branding and sales tool. Once the website is live, we will work on the immediate operations portion of the business plan. He has already helped me set-up partnerships with various railroad equipment manufacturers and showed me how to organize inventory and purchasing to lower my costs.”
Premier Plus Decals
”When we were in business, Mr. Cohen designed the marketing, production, and market development systems to transition the firm from the initialization phase of the product life cycle to a more growth-oriented, planned firm. Mr. Cohen helped us operationally by developing the inventory control and quality control systems that allowed us to grow exponentially. We hired him to construct the marketing plan: from the branding campaign, all the way through advertising to the initial promotions campaign. Because we were moving into the growth cycle, he created and trained the staff in the use of marketing peripherals, and the product development cycle. When we were looking for strategic partners, Mr. Cohen developed the Partnership Plan that we used (until the business was shuttered due to the poor economic environment.)”
Before Roundhouse was acquired, I developed the strategic operations plan for a medium-sized domestic toy manufacturer after evolving the competitive analysis function. SWOT, 5-forces, CC/SI, and ROCA analysis were utilized to erect the foundations of the client’s long-term forecasting needs. After surveying the client’s product frontier, repositioned the products into the higher-end of the product frontier, to capture economies of scope. Furthermore, performed a Hypercompetition analysis that expanded into a branding campaign. Secondly, performed a Diamond Analysis that resulted in an export strategy for the client, assisted the client in negotiating financial resources to undertake the export strategy. Additionally, arranged for letters of credit, warehousing space, distribution channels, and aided in negotiating access to the downstream value chain in the host country.
Before the client was acquired by a Fortune 500 firm: After surveying the marketing efforts of a small software developer, in consultation with the client, I decided to re-brand the client with a new online presence. I created an online branding campaign, which included an e-mail campaign, and a new vertical marketing presence. Furthermore, I structured the client’s strategic marketing activities, to include greater reach in the firm’s brand awareness and familiarity phases, and greater frequency in its and brand trial phase. I did this by restructuring the client’s marketing research function, updating both of the client’s marketing research documents and marketing control documents processes, and realigned the client’s product development processes to bring them more in line with industry benchmarks.
More detailed achievements, references and testimonials are confidentially available to clients upon request.
This service is primarily available to the following industry sectors:
The industry definition I will be using for this industry competitive analysis is the Plastic Model Hobby Industry. The various plastic model segments encapsulate aircraft, automobile, military, and ship static models. It also includes more dynamic models such as radio-controlled cars, planes, and boats, and railroad-based models. The Plastic Model Hobby Industry also includes ancillary or tangential items such as scale figures, buildings, building models for layouts and/or dioramas, and electronic gear such as motors, modulators, power packs, and radio controls. I begin the industry analysis with a discussion of the supplier power within the industry. There is low to moderate leverage by suppliers throughout the various products segments. Although there is no credible threat of forward integration by plastics suppliers into producing any product in this industry, this not-very-credible threat of forward integration is offset by the leverage inherent in the fact that Plastic Model Hobby Industry would not exist without suitable and adequate access to the various plastics that are manufactured on a regional basis. There are little switching costs, but within each product segment is a highly differentiated product frontier, with multiple products at each price-quality point.
As for buyer power, there are characteristics that increase the leverage of buyers, while there are offsetting characteristics that are lowering said buyer leverage. What is decreasing buyer power in this industry are: the “average” firm in each product segment has a high degree of “purchasing power” versus the seller’s sales, as reflected in a high degree of reputation effects. There is a high degree of differentiated product within each product segment. What increases the buyer’s power in this industry is that the buyer faces few switching costs. Moreover, the buyer requires a high level of quality in the “average” product in each product segment. So, overall, the buyer power is moderate. The attractiveness of the market, as measured by the rivalry and reaction within the industry, is also moderate. While the industry as a whole is nearly perfectly competitive, industry growth is relatively poor. While there are moderate levels of fixed costs, there are above-average storage costs for inventory (which has to be kept at a higher level than other consumer goods segments.) While capacity isn’t augmented in large increments, and there is a high degree of diversification across product segments, these two are offset by buyers lacking switching costs and the dearth of exit barriers, other than the presence of strategic interrelationships. As for existing barriers to entry, there are a number of barriers that the industry has built against the threat of entry; namely, low industry growth, high reputation effects, excess manufacturing capacity, pioneering brand advantages, excess to favorable distribution, and experience curve affects. These are offset by the lack of economies of scale need to produce in this industry, high degree of product differentiation, low capital requirements at start-up, lack of cost disadvantages independent of scale, non-existence of buyer switching costs and exit barriers, and lack of overarching government regulation that influences operations in this industry.
The industry definition I will be using for this analysis is the Small, Focused or Niche Retailing Industry. Segmenting the retail sector into “big-box,” general merchandise, niche or focused, and localized or community portions, I will attempt to analyze the smaller retail-based segments; namely the localized or community-based retail segments. For definitional purposes, the big-box retail segment is comprised of firms like Wal-Mart®, Target®, or Tesco®. I consider companies like Old Navy, Kroger, or Verizon to be competitors within niche or focused segments. That leaves your local hobby store, the farmer’s market, or a local handyman to be local or community-based retail operations. I begin this analysis with a discussion of supplier power. Generally, there is a low to moderate amount of supplier power, as the supplier market is not concentrated to any degree, substitute “raw materials” exist in abundance, and these retail segments have a high degree of importance to the manufacturing markets. However, this is offset by the highly credible threat of forward integration by not only the distribution portion of the supply chain, but by manufacturers and even by suppliers. Moreover, there are switching costs imposed by the supply chain (for these retail segments) that increases the supplier power. The retail segments have imposed slotting fees or shelving allotments to counter the supplier power.
Moving on to buyer power, we see a moderate amount of leverage imposed by buyers, While concentrated purchasing power, products are highly differentiated, and quality of products to pricing ratio is moderate, buyers still face few (if any at all) switching costs, and there is an highly credible threat of forward integration into various retail segments that make buyer power higher. Fortunately, such buyer power is offset by the “average” purchase being an insignificant portion of the seller’s purchasing power, and there is an insignificant amount of buyer pressure to lower prices. This is moderately attractive. Although market conditions for these product segments are generally perfectly competitive, industry growth is only moderate. Fixed costs are high, while storage costs are similarly higher than average. Although products in this industry have a high degree of differentiation, buyers lack switching costs. While capacity is not normally augmented in large increments, this is offset by existing normative behaviors. There is a moderate amount of resource specific allocation of assets, strategic interrelationships do exist in the industry, and there are emotional barriers by buyers in this industry. There are few barriers that the industry has erected to impede the new entrants. Reputation and experience curve effects are the two more important barriers that the industry has erected. Slow industry growth, favorable locations, and favorable access to distribution are some of the other barriers that have impeded new entrants. However, these distinctive factors are more than offset by the lack of economies of scale, capital requirements needed to enter this industry, first-mover advantages, and government policy shape the fact that there is a large threat for external actors to enter this industry (especially from downstream value chain members.)
Currently, the for-profit segments of the education sector have come under increased regulatory scrutiny by educational-oriented governmental organizations in the United States, the European Union, and Canada. Five (5) years ago, in the United States, this regulatory scrutiny focused on how such for-profit institutions got its customers, high default rates, and poor graduation figures. Unfortunately for these regulatory commissions, these issues were not solely the province of the for-profit segment of the industry. In the non-profit portion of the educational industry, customers are hired through standardized testing and generic regulatory standards as “door-keeper” hurdles to get into the institution. The non-profit education segment is characterized by high unemployment, high default rate, and a lackluster completion rating. As such, the for-profit segment is “industry average” in all but the method in which the industry benchmarks its “door-keeper” best practices. Currently, the United States’ regulatory environment has “moved” towards ‘increasing’ the viability of a college education by mandating post-graduation employment. That is, the US federal government has mandated that the industry insure that college graduates have jobs within six (6) moths of graduating that institution. The law puts the onus of finding employment on the educational institution, rather than the individual student. The “stick and carrot” of the regulation is based on the amount of financial aid the institution receives from the federal government. Any institution with a ‘below-average rating’ in its ability to find employment for its students will have its federal financial aid reduced to a proportionate amount to how far below average that institution is. Similarly, the regulation states that an educational institution can lose its financial aid “privileges” by being below the government-mandated industry employment average for a “long-time.” (The time frame for improving the educational institution’s job-clearing performance is not clearly delineated in the regulation.)>/p>
The ramification of this regulatory control on the for-profit segment of the educational industry is negligible. The greatest impact of this law will be ‘felt’ on the non-profit segments, which already contain the highest percentage of non-working students in the educational industry. As for supplier power, there is not a great deal of leverage that suppliers can bring to influence the collegiate education industry, except for the fact that this industry is a very important customer to the supplier market. The is more than offset by having a lack of switching costs by members of this industry, highly differentiated supplier market, lack of concentration in the supplier market, and no credible threat of forward integration by any member in the downstream value chain. As for buyer power, there is a great deal of leverage that buyers have over the standard operation of the “average” member in this industry. There exists a high degree of pressure for the average member to lower service costs, the quality is of an high degree of importance to the buyer, the buyer faces a significant lack in switching costs, and the service represents a significant fraction of the purchaser’s purchasing power.
Consumer electronics that require a high degree of economies of scale, or industries that require a large knowledge base, such as pharmaceuticals,) medium manufacturing (consumer goods that do NOT require a high degree of sale economies, furniture producers, or haute-couture clothing,) and light manufacturing (any start-up or growth-stage manufacturer.) Performing a 5-forces analysis on the light manufacturing industries holistically yields: Supplier power is of moderate strength, with the only factor that undermines the leverage of suppliers is that there is very little credibility of forward integration by suppliers. Given that supplier markets are (generally) shaped by few large competitors, if there should be forward integration these competitors would automatically attain a measure of economies of scale, which would put them at the medium- or even large-scale manufacturing industries, thereby by-passing these industries. Similarly, buyer leverage is lacking, excepting that buyers face few switching costs (due to the limited nature of the production function within the light manufacturing industry.) Like supplier power, is little credible threat of backward integration by downstream value chain partners.
Overall, this industry is moderately attractive, with “bright spot” factors being the nature of competition in this industry (nearly perfectly competitive, each competitor “owning” less than 5% of the total market,) and industry growth is normally augmented in double digits (10%+ annually.) Capacity is generally not augmented in large quantities, so capital requirements are lower (hence, capital requirements are not a “big” barrier to entry.) Also, fixed costs aren’t very high, which increases the average firms ability to act upon its environment, rather than reacting to “competitor’s moves.” There is a high degree of diversification in this industry, which undermines any barriers existing competitors may build using a focused, generic strategy. Lastly, there is to a large extent as much building of strategic inter-relationships as each product/geographic segment can support. As for barriers to entry, the structure of the industry does require that the average firm in this industry have a number of strategic inter-relationships to sustain its operations- from suppliers down through wholesalers to retailers. The other sustainable barrier to entry is the existence of proprietary product technology, licensing opportunities, and pioneering brand advantages that support first-mover advantages and bolster incremental innovation within the various product segments. Unfortunately, there are a significant lack of barriers (lack of switching costs for buyers, lack of reputation effects and experience curve expertise, and economies of scale) that make the threat of entry into any product, geographic, and/or consumer segment likely. This is the primary reason that this industry is so attractive to entrants- one can find any sub-section of this industry (niche) to operate within.
I need to separate the management consultancy industry into service-oriented functions. So, for definitional purposes, I am going to break this industry into functional segments; namely, general management, human resources-based, financial and accounting-based, marketing- (including advertising-) based, project management inclined, information systems and technology, business law, and strategy-directed. What I do, internationalization made transparent, falls within the strategy-directed segments of the management consultancy industry. Generally, we are the suppliers of our services, so supplier power has very little power in our industry. The only factor that remotely influences our service provision is that substitute “raw materials” do exist; namely, the client firm will do it themselves. Hence, the leverage of complimentary products is “blown out of proportion” for this industry. On the other hand, buyers provide a significant amount of leverage over the conduct of activities in this industry. Concentrated purchasing power versus seller sales, the service does, in fact, represent a significant portion of the buyer’s purchasing power, buyer faces few switching costs, and the quality of the service provide has to exceed the price-quality value the client imposes on the consultant, are all factors that are “high” in value. These are offset by the fact that there is no credible threat of backward integration by clients, very little pressure is put on the consultant to lower costs, and the service is highly differentiated, even within each product segment as competitors use a focused-based generic strategy as the consultant “stakes-out” a position along the service frontier.
The industry is highly attractive for the very reason that it hasn’t built many barriers to entry. Market conditions are nearly perfectly competitive; growth conditions reflect the general economic environment; there is a large, diverse number of service-providers in each service segment; and, there is a significant lack of exit barriers that makes this industry attractive. There are no governmental or social restrictions on the use of the services provided by this industry, fixed costs are certainly not extravagant, there are no resource-specific allocation of assets, and emotional or cultural barriers do not exist in this industry. However, there is a moderate amount of strategic inter-relationships that do exist in this industry that makes the industry less attractive (one of the only barriers to entry that exists in this industry.) As for barriers to entry, high reputation effects and experience curve affects, lack of buyer switching costs, and some first-mover advantages have erected a modicum of barriers to keep external competitors from entering this attractive industry. However, these barriers are too few to keep external competitors from entering the industry because economies of scale do not exist, capital requirements are low, cost disadvantages independent of scale do not exist, there is no need for favorable access to distribution channels, and there is a noteworthy lack of government policy influencing activities in this industry. Because capacity isn’t augmented in large increments, there isn’t any excess capacity in this industry.
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Using a modified STEP analysis, we look at the technological characteristics of the Bulgarian market to determine its value as a potential new market. Bulgaria is becoming the India of the EU, with cheaper IT labor and a more computer-literate workforce than many EU members. Public investment has increased for basic factor conditions such as electrical-generation, healthcare, sewage, and primary education, because the EU parliament lifted transfers for public works projects at the end of 2014. Conversely, Bulgaria continues to privatize its telecommunications industry, resulting in nearly a 10% increase in internet/cell phone capacity over the next 2 years. Similarly, Bulgaria is using a step-down approach to eliminate subsidies to the state-owned power grid, to fully privatize the power-grid by 2018. Bulgaria’s electrical grid currently remains unstable in rural areas. Bulgaria officially adopted cloud computing as the basis for governmental processes in the first quarter 2015. Bulgaria is becoming the “silicon valley” of the EU, with most of its infrastructure investment coming in digital and software development. Bulgaria has the second fastest broadband infrastructure globally (South Korea has the first.) Software sales forecasted to rise by 3.1% of GDP in 2016. 5 out of 10 ICT companies have their headquarters in Bulgaria, with Sofia having the 2 largest ICT companies globally. The only issue currently plaguing Bulgarian FDI is the systematic corruption prevalent in non-computerized industries. Enforcement of corruption laws remains the lowest in the EU.
ICT generates 10% of Bulgaria’s GDP over the previous 5 years, with small-to-medium-sized enterprises controlling 75% of Bulgaria’s ICT market. Bulgaria officially adopted Europe’s Digital Agenda for Europe (DAE) strategy in 2012, and is expected to “hit” the speed coverage requirement earlier than the 2020 date set in the strategy. Bulgaria focusing on next generation access (NGA) networks as internet backbone with primary urban coverage completed by 2017. There have been a number of policy changes to support the DAE strategy: Privatizing networks to spur competition; simplifying administration hurdles to get ICT licensing; increasing availability of NGA networks in rural areas through hardware partnerships; spurring demand of broadband by guaranteeing privacy rights online; and increasing reliability of existing broadband networks through R&D investment at the public level and providing subsidies for maintenance of existing networks at the private level. Sofia remains the broadband hub of the Eastern EU. 4G continues to drive Bulgarian mobile market expansion, with approximately 9 million mobile subscribers, with Sofia having the majority of those subscribers and the ICT infrastructure. Sofia continued to outpace other EU members in ICT partnerships between educational institutions and leading ICT providers. To date, SP Labs, VMWare, and CSC have engaged in private-public partnerships that have increased their revenues by 41% since their inception in 2012. IS/IT remains a primary major in secondary institutions in Bulgaria, with such institutions graduating an average of 3500 graduates annually (since 2010.) The ICT industries have grown to nearly 6% of the total labor force. The University of Bulgaria at Sofia has the 3rd largest artificial intelligence graduate-level program.
Performing a modified STEP analysis, we can structure the Brazilian market. GDP shrank by 3.7% in 2015, and will continue to fall in 2016 by 2.7%. This will exacerbate a weakened Brazilian economy that is exhibiting inflation (which will increase in 2016 to 10.7%) This is caused by Brazil’s economy contracting by 4%, which spurred the Brazilian central bank to increase interest rates, which depreciated the currency. In turn, this increased the consumer price index to 4.5% above the target set by the central bank in 2014, and spurred unemployment to 9% in 2015; this was approximately 2.9% higher than 2014. Public debt increased to 70% of GDP, brought on by continued deficit spending on social programs. Brazil avoided defaulting on several loans only through IMF restructuring and forcing budgetary constraints on Brazil’s legislature. While Brazil’s middle class is growing, Brazil is still 7th on the income inequality scale. Due to the global manufacturing “slowdown”, Brazil has reimposed several VAT’s that had ended in 2013, included the VAT on private education and public transportation use. Brazil still lacks a comprehensive rural to urban transportation infrastructure. These bottlenecks hinder Brazil’s agricultural exports (coffee, oranges, and soya.) To “get ready” for the 2016 Summer Olympics, Brazil has privatized its airports, but still took minority (49%) interest in the partnerships (forming a state-owned airport management company.) The federal government has granted more highway concessions, to spur investment, by lowering environmental “roadblocks.”
The factor that most affects business operations in Brazil is the spate of corruption cases being investigated and adjudicated by the Brazilian justice system. Over the past 3 years, there have been five (5) high-profile corruption cases, with the latest involving Petrobas, the state-owned oil producer. The current government (president and legislature) has an approval rating of 8%. Congressional investigations continue into manipulation of fiscal activities by the current president and election irregularities by the ruling party; these events occupy the attention of the lower house. So, IMF-mandated budgetary controls go unenforced; which means that infrastructure projects (like clean water) go unfunded. Brasilia is similar to Washington, DC. It is a federal district, separate from any state or province. Most political oversight comes at the federal level rather than the city level. Since the inception of the Public-Private Partnership program in 2012, the district has increased its investment pool to 5% of net “city” revenue. This program is supposed to fund infrastructure projects, like increases in primary education, road building, sewage treatment, and cleaning potable water sources. However, Brasilia has had its spate of corruption cases over the last 3 years in these areas. Brasilia has gone further in increasing its VAT list, including VAT’s on food services, inheritance & gifts, motor-vehicle property, and real estate transfers. Also, the city has created its own version of the small business administration, funding it through increased facilitating payments on technology transfers and manufacturing development within the district. However, construction within the district has decreased, due to corruption in public infrastructure bidding by state-owned enterprises.
Using a modified STEP analysis, we can begin to understand the Chinese market, and determine what opportunities and threats exist for foreign businesses within this market. Real GDP growth in 2016 is forecasted to be 6.4%, down 0.5% from 2015 values. Forecasts of China’s real GDP has it decreasing to 4.7% by 2020. Commensurately, China’s CPI will appreciate to approximately 2% in 2016, but “level-off” at 2.25% by 2020. Its PPI should also equilibrate to 4.4% in the same timeframe. China’s budgetary issues will continue; as the global “downturn” in manufacturing continues to “hit” China’s free trade zones “hard”, deficit spending should continue through 2016 at 3.2% of real GDP. The PRC’s budget deficits should “level-off” at approximately 3.65% of GDP by 2020. Because of these budgetary issues, the Chinese Central Bank will continue to put downward pressure on its currency, the Renminbi. Currently, the Renminbi has been appreciating moderately against the currencies of its three primary trading partners: the US dollar, the EU Euro, and the Japanese Yen. That is about to come to a grinding halt. Over the medium-term, as global manufacturing declines somewhat and investment outflows to the PRC’s neighbors increase, the Renminbi will exhibit above-market-average depreciation. This will have the inverse affect of increasing the prime lender-rate within the Chinese market, which increases the investment potential in the PRC’s banking industry.
Politically, the PRC still maintains a number of regulations set against foreign-direct ownership of business enterprises within the Chinese market. The agreement made at the induction of the PRC to the WTO will now take affect. Over the next 4 years, we should see an “easing” of the regulations pertaining to majority foreign-ownership; by 2020 foreign majority ownership should be wholly allowed. In the province of Guangdong, real GDP was 8.2% (on average, region-wide. This is up from the beginning of the fiscal year (7.2% real GDP growth.) Economically, Guangdong is above average for the Chinese market: has the highest percentage permissible of foreign-ownership of Chinese enterprises (slightly less than 42% total ownership,) increasing disposable incomes by “average” Chinese citizens (nearly a 10% increase annually,) and nominal fixed asset growth totaling 10.4% of property and 14.1% non-property. Much of its economic performance is influenced by its above-average liberalization of many of the PRC’s commercial regulations. The provincial government passed new collective bargaining regulations that expands the role of unions in the free trade zones, makes collective bargaining an annual event, and widens the scope of collective bargaining topics to include salary-differentials, special protections for female and under-aged workers, and insurance. Rules governing profit-taking in service-oriented industries still exist. However, the provincial government has loosened the administrative rules governing transfer pricing in various service sectors. The provincial government has also enacted special rules permitting representative offices within various cities in the region, allowing for up to 4 people in any office, and allowing up to 6 offices in any city. It also has begun to liberalize its secondary education system by investing in vocational educational institutions.
Using a modified STEP analysis, we will concentrate on the political and legal categories to determine the usefulness of Mexico as a new market opportunity. To support FDI-related activities with its NAFTA partners, Mexico has put more than 50 billion pesos over the past four years to bolster its ports, road system, and water systems in areas bordering the U.S. However, there have been a number of scandals involving these public infrastructure investments. To aid foreign investment, the new Mexican government has extended its tariff regime to the end of 2016. There exists both regional and federal incentives for foreign investment. On the state level, tax and payroll incentives have been renewed through 2020, and the Sonoran state has extended the 1-year exemptions for the transference of real property and vehicles. The state has decreased the administration costs for foreign companies incorporating in the state. The new government has extended the export program for indigenous companies exporting to the US or Canada. The program also eliminates the preferential tax treatment of foreign-based companies, thereby increasing the nominal tax rate from 17.5% to more than 30%. Sonora has eliminated the training compensation program. Sonora has also imposed a 10% pre-tax profit-sharing program for companies with 10 or more employees.
To attract more FDI, the Mexican government has passed a series of new competition-based laws. One of the newest governmental reforms was to the Federal Competition Commission’s mandate to enforce anti-competitive behaviors (price fixing, monopoly power, and transfer pricing.) Theoretically, the new law increases the federal government’s ability to “crackdown” on firms the engage in anti-competitive behavior. A series of laws also extend the power of the Federal Competition Commission to include US and Canadian based companies. In reality, however, the federal government still has little willingness to enforce its own anti-competition laws, due to having one of the more corrupt legal and political systems in the Western hemisphere. The drug cartels still administratively control many state and federal bureaucracies through bribery and other corrupt activities. Over the past 20 years, the various drug cartels have made inroads to the Mexican legal system to the degree that the Mexican legal system is considered by several international NGO’s as being at the bottom 10% in administrative integrity. Several bills over the past 3 years have failed to bolster judicial reform. Consequently, the question of institutional effectiveness for governmental and judicial systems are at an all-time low. In the past year, there have been a number of corruption scandals that have plagued Mexican politics; a new law on anti-corruptive behavior by elected officials was passed in July 2015 to combat such corruptive behavior. Prior to that, Mexican government officials were very rarely tried for corruptive behavior. If we look at the historical record, we find an unwillingness by the political and judicial systems to try public officials at any level for their corruptive behavior. Currently, Mexico ranks in the top 5 environments for corruption and corruptive behaviors in its political and legal systems.
Using a modified Diamond analysis for competitive advantage, we can analyze the Arizonian environment to evaluate its efficacy as a new market for certain industries. Looking first at demand conditions, we notice several things. Fourth quarter 2015 personal income rose 4.9%, with forecasted first quarter 2016 personal income rising by 5.6%. This is because employment rate for Arizona increased in the second quarter 2015 by 2.3% (or 59,000 jobs,) with the metropolitan Phoenix area increasing its employment rate by 3.1% in the second quarter. The largest employment increase came in the IS/IT sectors (5.34%), followed by the construction sectors (5.0%), and professional and business services (4.55%.) Statewide, professional and business services added 19,000 new jobs, with education coming in second at 12,500 new jobs. Manufacturing made small gains (+0.38%) while government services and mining and natural resources lost jobs (-0.02% and 0.13%, respectively.) Residential building permits increased 16% in 2015 (annualized returns.) Fourth quarter retail sales also increased, statewide, by 5.3%, while 2016 retail sales are forecasted to increase by 5.1%. Annual wages for professional and business services increased 3.2% in 2015 to a median value of $51,949. The median wage per worker in Arizona was $46,919 in the same period. The CPI for the metropolitan Phoenix area 2nd quarter, 2015, decreased a modest 0.16%, with energy having the greatest CPI decline (15.13% in the same quarter.) The average CPI for the U.S. during this period was a small gain of 0.32%.
Concerning factor conditions, one notices that there are more issues to a firm’s operations in this milieu. The labor force increased by a modest 1.6% (annualized 2015) to 2,175,140 workers. While employment did increase, many of these new workers went directly into various service industries (an increase of 2.41%, annualized.) Median housing prices increased a modest 4.18%. The primary challenge to any information technology enterprise entering into the Arizona market is its lackluster attention to primary education. Being 49th out of the whole 50 states in the U.S., Arizona spends less than 96% of the other states in the U.S. In 2014, the pupil to teacher ratio (a measure of the size of classes) was 22.80, with the median U.S. value being 16.07. In 2012, Arizona spent 22.8% less than the national average on elementary to high school primary education. Utilizing the 8th grade as a basis, in 2011, Arizona scored 2.3% below the national average in reading, 3.9% below the national average in writing, 1.8% below the national average in math, and 4.8% below the national average in science-related subjects. While characteristics like the labor force, health system, transportation system, and water and sewage systems are all well-above the norm for a desert environment, firms requiring a labor force with the proper level of technical knowledge will need to widen their hiring focus to outside the immediate environment. However, Arizona’s secondary educational institutions do have the requisite technical knowledge, especially in the areas of computer hardware, geology, energy production, and business, to fulfil a firm’s management function.
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