Introduction
The project pre-report investigates the global pet goods market and addresses significant components of Japan’s and Venezuela’s international business environments. Japan, for instance, is shown as one of the most successful markets for pet product producers. On the contrary, Venezuela is a highly challenging environment for U.S. and worldwide businesses due to its economic and political crisis.
Industry Analysis
The great majority of pet owners regard their pets to be family members. According to Fortune Business Insights (2021), pet care products are becoming more popular as people get more information about animal welfare and well-being. The key global industry players are Mars Incorporated and Spectrum Brands Inc from the U.S., Unicharm Corporation from Japan, and Neste S.A. from Switzerland (Fortune Business Insights, 2021). The market’s leading players focus on expansion, mergers and acquisitions, and new product development (Grand View Research, n.d.). Pet care items are classified into several categories: food, hygiene, toys, and others. Global market size is expected to increase from 222.93 billion in 2021 to 325.74 billion dollars in 2028 (Fortune Business Insights, 2021). Based on industry data, the most recent trend is changing dietary food products to boost the market (Fortune Business Insights, 2021). For instance, pet dogs are afflicted by obesity issues in many countries worldwide.
Consequently, the need for dietary food items to keep pets healthy will rise. Another critical trend is the increased desire for plant-based and healthful food items (Fortune Business Insights, 2021). The popularity of subscription-based dog and cat toy services is projected to fuel the need for animal toy items (Fortune Business Insights, 2021). Finally, increased demand for high-quality animal hygiene products is projected to drive market growth.
The crucial factors for a company’s success within the global pet products industry include following trends, such as dry natural and organic pet food, canned food, hygiene products, and a wide variety of toys. The convenience features of dry organic and natural pet food are expected to promote product demand (Grand View Research, n.d.). Unlike most traditional pet feeds, organic and natural pet foods are widely utilized. Canned food is more appealing to dogs and cats since it contains proteins, lipids, and a few carbs (Grand View Research, n.d.). Additionally, wet pet food is easier to digest, which keeps backyard cleanup to a minimum.
Significantly, the companies may focus heavily on the dog pet type category. Based on Research and Markets (2022), this sector is predicted to account for most of the industry share between 2022 and 2030. Healthy freeze-dried dog food to lengthen shelf life is one of the fastest-growing specialty food categories (Research and Markets, 2022). Thus, non-traditional pet food formats are expanding quicker than standard pet food options. On-demand video content about pet care and hygiene is also expected to promote market development (Fortune Business Insights, 2021). Product differentiation is crucial in growing pet food sales (Grand View Research, n.d.). Hence, companies competing in the industry should focus on developing premium quality unique products to expand their current portfolios.
Components of International Business Environment
Japan and Venezuela have been selected as the target markets to be investigated compared to the U.S. domestic market. For instance, Japan is the second largest market for U.S. pet food exports, accounting for 16.4 percent of the market, thanks to a growing pet population and four years of pet food sales increase (Tyler, 2021). Venezuela’s protracted economic and political crisis has badly harmed the local pet food industry in many ways, and it is critical to investigate strategies to better expand into this market (Franco, 2019). Each country’s relevant components of the international business environment, such as trade barriers, labor, legal and political systems, and cultural preferences, should be addressed.
Japan
Japan is one of the most successful ymarkets for pet product companies. For instance, according to Diep (2022), as animal companions become more incorporated into the modern home structure and valued as family members, pet costs are no longer driven by cost-effectiveness. Instead, owners lavish attention on their pets, with childless households perceiving pets as a substitute for having a kid (Diep, 2022). Furthermore, in an aging culture confronted with the problems of declining fertility, the number of cats and dogs in private houses has long outnumbered the number of children.
Trade Restrictions
Notably, trade agreements exist between Japan and the United States. The United States-Japan Trade Agreement and the United States-Japan Digital Trade Agreement are examples (International Trade Administration, 2022). While tariffs are typically low, Japan does have various non-tariff obstacles that may impede or delay the entry of foreign commodities into Japan (International Trade Administration, 2022). For instance, some sectors or projects may require corporations to establish past expertise in Japan, thus excluding new entrants into the market.
Labor
Labor is less expensive in Japan than in the United States. According to Nation Master (n.d.), the hourly minimum wage in Japan is $5.64. There is also a minimal probability of strikes, as Japanese employees are concerned with laws and processes (Nation Master, n.d.). Nonetheless, the language barrier might be an issue for the company.
Legal and Political System
Japan is an essential member of international trade with a stable political system. The market upholds the rule of law and offers robust intellectual and property rights protection (International Trade Administration, 2022). One of the barriers to setting up a business is that official regulations promote domestically produced goods while opposing international goods (International Trade Administration, 2022). Moreover, cross-holding and connectivity of commercial interests among Japanese firms disadvantage suppliers from outside Japan.
Cultural Preferences
The United States was compared to Japan via the Hofstede Cultural Insights tool. For instance, American society is individualistic, but Japanese society is collectivistic (Japan and United States, n.d.). Additionally, Japan is hierarchical, and each management level must approve all corporate choices.
Venezuela
A few pet brands were sold in Venezuelan supermarkets for a long time. Purina products like Dog Chow, Perranina, and K-Nina are the most regularly encountered (Franco, 2019). Super Can and Dogourmet, made by Empresas Polar, are other brands occasionally seen (Franco, 2019). Hence, local pet owners are increasingly using food scraps, chicken feet, kidneys, or, in some cases, pig chow for pet food.
Trade Restrictions
For more than fifteen years, the United States has implemented sanctions in reaction to Venezuelan government actions. Nevertheless, sanctions do not prohibit U.S. citizens from exporting or reexporting goods to Venezuela as long as the transactions do not include sanctioned individuals or businesses or specified banned activities (U.S. Department of the Treasure, 2019). Additionally, The U.S. and the interim administration led by Interim President Guaido work closely together to restore democracy and relationships peacefully.
Labor
The labor is cheaper in Venezuela compared to the United States. Venezuela’s minimum wages have been changed from March 15, 2022 (WageIndicator, 2022). The new minimum wage is 130 Venezuelan bolivars per month, which equates to $12.7. Although Venezuela has cheap labor, it is not easy to start a business there. There are 17 processes to be performed, compared to the OECD average of five and the Latin and Caribbean average of nine (Top 10 challenges, n.d.). In Venezuela, starting a business takes an average of 144 days.
Legal and Political System
Venezuela’s extended economic and political crisis has harmed the local pet food sector in several ways. Along with hyperinflation, there is a generalized scarcity of raw materials for pet food production, making it difficult for local enterprises to stay in business (Franco, 2019). Most significantly, some people can no longer afford to pay for pet products. Venezuela is an exceedingly challenging environment for U.S. and global enterprises. The reasons are governmental interference in the economy, including expropriations, macroeconomic distortions, physical insecurity, corruption, abuses of worker rights, and a fluctuating regulatory framework (Bureau of Western Hemisphere Affairs, 2022). Therefore, numerous American and international corporations decreased or ceased their Venezuelan operations.
Cultural Preferences
The Hofstede Cultural Insights tool was used to compare Venezuela to the United States. For instance, whereas American society is individualistic, Venezuela has one of the lowest Individualist ratings (Venezuela and United States, n.d.). Venezuela is also the most performance-oriented country in Latin America.
Strategic Management Project Report
The project report discusses strategic choices and alternatives for two specific markets, Venezuela and Japan. Because it provides for the balance of global and local viewpoints, the transnational approach was selected as the best international strategy. Furthermore, because Venezuela poses several challenges, the corporation is advised to concentrate its efforts exclusively on the Japanese market. Nonetheless, direct export was offered as a means of entering Venezuela. Furthermore, an alliance with the Japanese partner should be considered to develop a team of managers with the necessary abilities and understanding to implement the transnational approach.
Strategic Options and Alternatives
Essentially, the transnational strategy is the selected international strategy among the three approaches, namely global, transnational, and multi-domestic. This strategy-making approach combines components of both a globalized and a localized perspective, namely, think global, but act local (Thompson et al., 2022). When there are relatively significant demands for local responsiveness and considerable benefits to be derived from standardization, this sort of middle-ground method is required. For instance, it has already been discovered that consumers favor local items over foreign products in Japan. As a result of the global approach, my organization will be able to accommodate local preferences in a practical, semi-standardized manner that will benefit all parties (Thompson et al., 2022). For instance, the firm may abandon its traditional single-brand approach in favor of a multi-brand strategy focused on serving multiple market sectors to double its market share and revenue in Japan.
The three strategic options are alliance and joint ventures, foreign subsidiaries, and direct export. Strategic alliances, joint ventures, and other cooperation arrangements with foreign corporations are common ways for companies to access global markets (Thompson et al., 2022). A corporation can significantly benefit from a foreign partner’s expertise with local government rules and its knowledge of customer purchasing habits and product preferences. One motivation for implementing a collaborative approach is sharing distribution facilities and dealer networks, enhancing each partner’s customer access to benefit shareholders, employees, and suppliers (Thompson et al., 2022). Another advantage is the knowledge and experience gained through collaborative research, exchanging technical know-how, analyzing one another’s production practices, and knowing how to match sales and marketing tactics to local cultures and customs.
Companies that compete abroad frequently wish to have direct control over all functional elements in a foreign market. An internal startup or a greenfield enterprise is a subsidiary firm developed internally from the ground up (Thompson et al., 2022). Acquiring a local firm is the fastest, least hazardous, and most cost-effective way to overcome entrance hurdles. It allows access to local distribution channels, forging supplier ties, and establishing working relationships with government officials (Thompson et al., 2022). When a firm currently works in several countries and has expertise in creating new subsidiaries and monitoring their operations, entering a new foreign territory via a greenfield venture makes sense.
A direct export is a safe method for testing overseas markets. Using home factories as a manufacturing base for exporting items to overseas markets is a great way to get started with international sales (Thompson et al., 2022). Furthermore, the benefits for stakeholders and suppliers include that the amount of capital required to begin exporting is frequently modest; current manufacturing capacity may be adequate to produce items for export.
Implications of Alternatives
Each international strategy alternative has implications for local and global communities. A multi-domestic approach, for example, offers local managers decision-making autonomy and enables them to handle unique market demands and adapt quickly to local changes. It also enables local employment and adheres to local tax systems. As opposed to a multidomestic strategy, a global strategy adopts a standardized, internationally integrated approach to producing, packaging, marketing, and distributing the company’s products and services everywhere.
Companies that use a global strategy offer the same products under the same brand names in all countries, use many of the same distribution channels, and compete based on the same skills and marketing tactics. Achieving the efficiency potential of a global strategy necessitates sharing resources and best practices, integrating value chain operations, and transferring skills from one place to another as they are created (Thompson et al., 2022). Making products aligned with local tastes increases their attractiveness to local purchasers. Nevertheless, because of the diversity of designs and components, shorter production runs, and increased inventory handling and logistics complexity, customizing a company’s products nation by country may increase manufacturing, exploitation of the natural environment, and distribution costs.
On the other hand, greater standardization of a global company’s product offering might result in scale savings and learning-curve effects, lowering per-unit manufacturing costs and adding to low-cost advantage. When employing a transnational or global approach, it is vital to consider that governments may impose measures that make putting facilities within a country’s boundaries less appealing from a commercial standpoint (Thompson et al., 2022). For instance, the nature of a company’s operations may make compliance with a country’s environmental legislation extremely costly.
Proposed Strategy or Recommendations
Essentially, as a firm CEO, I prioritize Japan over Venezuela. Japan is one of the most successful markets for pet product firms, but Venezuela is an extremely hard environment for international business because of its economic state and political instability. Even though the U.S. has imposed sanctions in response to Venezuelan government activities, the sanctions do not prevent U.S. persons from shipping goods to Venezuela. As a result, my company might try to penetrate the market by straight exporting and pricing items low. It should be noted that pet food should be exported to Venezuela rather than pet hygiene, care, and amusement supplies. The best strategy suited is transnational because it adheres to a think-global, act-local approach. Nonetheless, Venezuela is not the ideal place for expanding business; therefore, Japan should receive the most attention.
I also recommend a transnational strategy because it balances global and local perspectives. When competing in nations like Japan, where local demands are substantially distinct, a transnational approach outperforms a global strategy. As an entry mode, I advise alliance and joint ventures. One of the difficulties in entering the Japanese market was discovered to be that official regulations favor domestically produced goods while opposing overseas ones (International Trade Administration, 2022). Furthermore, cross-holding and commercial interest connectedness among Japanese enterprises disadvantage competitors from outside Japan.
Alliances can also be used to assess the worth and sustainability of a cooperative agreement with a foreign partner before making a more permanent commitment. Cross-border allies can focus their competitive energy more on common rivals and less on one another; working together may help them close the gap in leading enterprises (Thompson et al., 2022). Finally, alliances can be particularly effective for reaching a consensus on critical technological standards. A local partner in Japan will assist the company in adapting to local preferences and increasing customer loyalty.
Actions Needed
Regarding operations, the transnational approach delivers the benefits of local responsiveness and global integration, the transfer and sharing of resources and talents across borders, and the benefits of flexible coordination. Furthermore, a transnational strategy usually entails centralizing specific critical tasks while decentralizing others (Day Trading, 2022). For instance, a business may centralize its R&D activity in one country while keeping manufacturing facilities in numerous other countries. This setup is intended to allow the business to benefit from the unique advantages of each location (Day Trading, 2022). The company might obtain economies of scale and scope by centralizing some crucial tasks and sharing resources across borders, which would not be feasible if it operated independently in each market.
The company may better guarantee that products satisfy high standards before they are distributed to the market by centralizing critical operations such as R&D. Japan was identified as the primary target market, with purchasers preferring high-quality pet items. Furthermore, a transnational strategy helps in swiftly adjusting operations to capitalize on new possibilities or respond to emerging threats. When a firm operates in numerous countries, it must be aware that culture may impact everything from business procedures to client preferences (Day Trading, 2022). A company needs to consider cultural variations to avoid misunderstandings and conflict. Thus, the best solution is to formulate an alliance in Japan to overcome cultural difficulties.
The transnational approach improves the technological area by sharing resources and capabilities across borders. The strategy also enhances marketing by better understanding local needs and preferences (Thompson et al., 2022). A successful multinational strategy requires numerous phases (Day Trading, 2022). First, a thorough examination of the worldwide marketplace is necessary to identify potential growth markets. According to the findings, Japan should be prioritized over Venezuela as a target market. The second phase is to design a structure allowing the organization to function efficiently in several countries. The alliance should be formed with the Japanese partner to develop a team of managers with the requisite skills and knowledge to implement the transnational strategy. Finally, it is critical to track the company’s progress and make adjustments as necessary.
References
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Franco, I. (2019). Venezuela’s crisis is worsening pets’ nutrition. Pet Food Industry. Web.
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