Industry Competition and New Entrant Threats

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Industry Competition and New Entrant Threats

The threat of new entrants

Economies of scale

A South Korean car-manufacturing company that intends to enter the Australian market should bear in mind that it will have to compete with economies of scale such as Toyota or Ford. The main peculiarity of these companies is that they gain a competitive advantage by reducing the cost of production. Another issue is that they can attract new customers by lowering the prices set for their vehicles. In this way, they can increase their market share. Smaller companies cannot do it because in this case, they will no longer be profitable.

Brand loyalty

Recent research indicates that Australian customers are committed to purchase and repurchase Japanese cars such as Toyota, Mitsubishi, or Nissan (Pappu, Quester, & Cooksey, 2007, p 279). Furthermore, we should speak about strong attachment to such brands like Ford. Thus, one can argue that the level of brand loyalty is relatively high.

Capital requirements

A company, which intends to start its operations in Australia, will have to incur the following expenses:

cost of recruiting and hiring personnel;
purchase of territory for manufacturing facilities;
procurement of equipment;
the fees paid to the government.

At this moment, it is rather difficult to determine the exact amount of money required by the company.

Analysis

The above discussion indicates that the threat of new entrants is relatively low because this market is dominated by economies of scale, and the level of customer loyalty is relatively high. Moreover, one should not disregard the necessity to make a considerable investment to launch operations. The existing entry barriers can prevent other car manufacturing companies from entering Australian markets.

Recommendation

If a Korean car-manufacturing company intends to enter Australian markets, it should adopt the differentiation strategy, which means that the need to provide customers with products that will be superior in terms of performance, design, reliability, and functionality. We should bear in mind that this market is relatively saturated. This enterprise will not be able to gain a competitive advantage through cost leadership or lowering the prices for their products. This is why differentiation seems to be the most appropriate approach.

Cultural Dimensions of Australia and South Korea

At this point, it is necessary to identify the cultural dimensions of Australia and South Korea. Our findings can be presented in table format.

Country	Power distance	Individuality	Uncertainty Avoidance	Collectivism and individualism	Time orientation	Quality vs Quality of life
South Korea	High (more formal relations among colleagues)	Low	Medium	Collectivism (more emphasis on group work)	Past and present	Quantity
Australia	Low (less formal relations)	High	Medium	Individualism (more attention is paid to the individual contribution)	Present and future	Quality

This comparison will be based on Hofstedes model of cultural dimensions since it is very applicable for analyzing the business culture of different countries. We are going to focus on such criteria as power distance, individualism, uncertainty avoidance, and long-term orientation (Hofstede, 2010, unpaged). These distinctions should be taken into consideration by the management of the Korean company, especially if we are speaking about HR management; otherwise, they will find it very difficult to motivate employees. The thing is that those practices which they adopt in Korea may not apply to Australian business culture.

Reference List

Hofstede G. 2010 Academic website. Web.

Hostede G. 2010. Cultural dimensions. Web.

Pappu R. Quester P & Cooksey. R. 2007. Country image and consumer-based brand equity: relationships and implications for international marketing. Journal of International Business Studies, 38, pp 726-745.

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