IBM ukraine feasibility research

Metricum

International Business Management

International Business Management Table of Contents

TABLE OF CONTENTS

CHAPTER 1.....................................................................................................................3

INTRODUCTION............................................................................................................3

1.1. Objective of the Research:.....................................................................................3

1.2. Introduction to Material Handling Industry:..........................................................3

1.3. Metricum – Company Overview:..........................................................................4

1.3.1. Mission and Vision statement:........................................................................4

1.4. Industry Analysis using Porter’s Five Forces Framework....................................4

CHAPTER 2.....................................................................................................................7

MARKET ANALYSIS.....................................................................................................7

2.1. Market Analysis.....................................................................................................7

2.1. Overview of Ukraine:............................................................................................9

2.2. Key Facts about Ukraine: (source:BBC)...............................................................9

2.3. Strategic Analysis of Ukraine Markets................................................................10

2.3.1. Business Environment:.................................................................................10

2.3.2. PESTEL Framework analysis:......................................................................10

2.4. Investing in Ukraine Market....................................................................................13

2.4.1. Advantages in Investing:..............................................................................14

2.4.2. Disadvantages (Risk factors) in Investing:...................................................16

CHAPTER 3...................................................................................................................17

METRICUM”S MARKET ENTRY STRATEGY.........................................................17

3.1. Metricum’s Market Entry Strategy Development...............................................17

3.2. Entry Mode..........................................................................................................17

3.3. Timing of Entry...................................................................................................19

3.4. Romania as a route of entry.................................................................................19

3.5. China as an alternate route of entry.....................................................................20

CHAPTER 4...................................................................................................................21

SKILLS AND KNOWLEDGE DEVELOPMENT........................................................21

CHAPTER 5...................................................................................................................22

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International Business Management Table of Contents

METRICUM”S GLOBAL STRATEGY........................................................................22

CHAPTER 6...................................................................................................................23

RECOMMENDATIONS................................................................................................23

CHAPTER 7...................................................................................................................26

CONCLUSION...............................................................................................................26

REFERENCES AND BIBLIOGRAPHY.......................................................................27

APPENDIX.....................................................................................................................29

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International Business Management Introduction

CHAPTER 1

INTRODUCTION

1.1. Objective of the Research:

Metricum is a well-established small medium enterprise (SME) that manufactures

materials handling equipment and intelligent handling solutions. Their international

activities are complex with manufacturing bases in Sweden and China and a wholly

owned subsidiary in Romania from which they source many of their raw materials. As

the process of re-structuring their Romanian operation, they would like to explore

market opportunities in some of the less developed former Eastern Bloc countries such

as Belarus, Moldova, Russia and Ukraine, which are now collectively called as

Commonwealth of Independent States (CIS). In this report we will discuss how to

assess the market potential, the competition and the best route to enter into the

unfamiliar market. Also we will check on how to improve the identifiable and

recognised skill gaps in assessing the market opportunities. And Finally we will discuss

on how to build a single global strategy for this company.

1.2. Introduction to Material Handling Industry:

Material handling industry is mainly dealing with the equipments for storage &

handling, controlling of goods and materials in the process of manufacturing,

construction, consumption and disposing. Some of the material handling equipments

are: Cranes, Hoists, Rail fastening systems, access work platform, Warehouse trucks,

Docking equipments, Industrial lifts and Power electrification systems etc. Some of the

industries using these equipments are Aerospace, Construction, automotive, building

maintenance, Chemical plants, Electrical and electronics etc. It is one of the main

industries, which is the must for other industries. This process involves a broad array of

equipment and systems that aid in forecasting, resource allocation, production planning,

flow and process management, inventory management, customer delivery, after-sales

support and service, and a host of other activities and processes basic to business.

Solutions include sophisticated techniques that expedite information flow, including

RFID and satellite tracking systems, and the electronic transmission of order and

shipping information. These innovations along with traditional material handling and

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logistics equipment and systems are the solutions that make manufacturing,

warehousing, distribution and the supply chain work (MHIA,2011).

1.3. Metricum – Company Overview:

Metricum manufacture materials handling equipment and intelligent handling solutions

and now is a well-established small medium enterprise (SME). It was founded about 28

years ago and based in the east of England. They are exporting to over 40 countries and

their first overseas manufacturing unit was opened in Sweden and later in China, which

gives 25% of production as of today. In Romania, they have a subsidiary firm to supply

parts. Today Metricum’s turnover is shared approximately 25% in each of the four

areas: United Kingdom, Sweden, China and Romania. China produces the standard

products; UK and Sweden produce the innovative products. Currently the Romanian

firm is running just a 20% of its capacity, so efforts are being made for a great deal to

build linkages between the design teams in UK and Romania where they high potential

for innovation. At present, they are thinking to enter into less developed former eastern

bloc markets using Romania as a route.

1.3.1. Mission and Vision statement:

To be a market leader in the material-handling field globally by providing the highest

quality equipments that consistently meets or exceeds our customer expectation.

1.4. Industry Analysis using Porter’s Five Forces Framework

The intensity of the competition and the level of industry profit can be determined by

the structural features of an organisation. Using Porter’s five forces let us analyse the

competitive advantage of this Material Handling Industry in Ukraine.

a. Competitive Rivalry:

The number of competitors for material handling industry is very low, There are only

few firms involved in this industry. Switching costs are very high so the customers will

not easily move on to other competitors. Even the cost of leaving the market is very

high. Overall, though the competitors are low but the competition is very intense.

Demand for this industry is high in the developing countries like china, India and

Brazil.

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b. Threat of New Entrants:

In this industry, the threat of new entrants is very low as the cost of entering into new

market is very high. Also the time consuming to enter is long. In this industry the cost

of investment is very high thus it becomes a barrier to enter for a new entrant.

c. Bargaining Power of Buyers:

There is more pressure in this industry as the power of buyers is depend on product

quality, price and delivery. As the orders will be in bulk the important is lead-time will

become threat for the firm and it will affect the cost and investment. Customers are very

demanding on the price. But in this industry the switching cost is very high.

d. Bargaining power of Suppliers:

There are only few suppliers for this industry as the main raw material is iron and steel.

Thus it makes buyers weak and dependent. Power of suppliers is very high in this

industry. Also the switching cost from one supplier to another is also very high. Since the

suppliers have very strong power they tend to raise the price and capture all the potential

profits owned by the buyer.

e. Threat of Substitutes:

As for this material handling industry is concerned, there are not much substitutes

introduced. So, the threat of substitutes is very low. Steel and Iron are the main raw

materials for this industry. As of now, there is no other substitutes is there to replace

these raw materials in this industry.

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Figure1: Michael Porter’s Five Forces Framework (source: www.mindtools.com)

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http://www.mindtools.com/

International Business Management Market Analysis

CHAPTER 2

MARKET ANALYSIS

2.1. Market Analysis

Based on GDP growth rate%, FDI net flow and Population Ukraine shows more market

opportunities other than Belarus and Moldova in former Eastern Bloc countries. If we

compare we can see that Foreign Direct Investment in Ukraine is more than other

countries, so, we will research on the opportunities in Ukrainian market. As Ukraine is

hosting 2012-EURO football championship it is building its infrastructure now, this

will give us a grand opportunity for our material handling equipment industry to enter.

A. GDP Growth Rate (Annual %): (source: worldbank.org)

CountriesYear

2008 2009 2010Belarus 11.3 0.2 7.6Moldova 7.8 -6.0 6.9Ukraine 2.1 -14.8 4.2

Figure 2: GDP growth rate comparison chart (source: World Bank, World Development

Indicators)

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B. Foreign Direct Investment, net flows (BoP, Current US$): (source: worldbank.org)

CountriesYear

2008 2009 2010Belarus 2.181 bn 1.884 bn 1.403 bnMoldova 712.77 mn 127.84 mn 194.32 mnUkraine 10.913 bn 4.816 bn 6.495 bn

Figure 3: FDI net flows (BoP, Current US$) (source: World bank)

C. Population Total (in Million): (source: worldbank.org)

Countries Year 2010

Belarus 9.491 mMoldova 3.562 mUkraine 45.871 m

Figure 4: Population (source: World bank, World Development Indicators)

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2.1. Overview of Ukraine:

According to country profile (BBC, 2011) Ukraine is the Europe’s second largest

country. It obtained independence after the collapse of the Soviet Union in 1991 and

formed Commonwealth of Independent States (CIS) along with Belarus and Russia. It

is a land of wide, fertile agricultural plains, with large pockets of heavy industry in the

east. Since 2008, it is a member of World Trade Organisation (WTO). Recently, in

October 2011 Ukraine signed the free trade zone treaty with some other CIS states. On

February 16, 2012, the European Commission informed the European Community of

the progress made toward the Deep and Comprehensive Agreement on Free Trade

(DCFTA) between the EU and Ukraine, which is part of a future Association

Agreement for which the Cooperation Council adopted an agenda in November of

2009.

2.2. Key Facts about Ukraine: (source:BBC)

Population: 45.87 million (UN, 2010)

Capital: Kiev (Kiev)

Area: 603,700 sq km (233,090 sq miles)

Major languages: Ukrainian (official), Russian

Major religion: Christianity

Life expectancy: 64 years (men), 74 years (women) (UN)

Monetary unit: 1 Hryvnia = 100 kopiykas

Main exports: Military equipment, metals, pipes, machinery, petroleum products,

textiles, and agricultural products

GNI per capita: US $3,000 (World Bank, 2010)

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Figure 5: Map of Ukraine (source: www.ukrainetravelmate.com)

2.3. Strategic Analysis of Ukraine Markets

Entering into the market of Ukraine is not so easy and sure it will have its own entry

barriers in many ways. Before entering into a new market, we need to strategically

analyse the environment of the Ukraine markets and its opportunities.

2.3.1. Business Environment:

Despite a poor government management record, still it offers more interesting

investment opportunities to those with a higher level of risk acceptance. The key

advantages are its inexpensive labour force, access to natural resources and low

operational costs. Ukraine depends on Russia for its gas supplies and forms an

important part of the pipeline transit route for Russian gas exports to Europe. Ukraine

therefore presents incomparable benefits to investors in certain cases and should always

be considered, particularly if we wish to expand further into Russia or the Black Sea

basin. Ukraine is rich in natural resources such as iron ore, coal, manganese, natural

gas, oil, salt, sulphur, graphite, titanium, magnesium, and kaolin, nickel, mercury,

timber and arable land. Machinery assembly, the car industry, consumer electronics,

ICT, agriculture and food processing, the aerospace industry, alternative energy

sources, and tourism and hotel infrastructure are the fields where we can see more

opportunities. (PMR, 2011)

2.3.2. PESTEL Framework analysis:

PESTEL is an acronym of Political, Economic, Social, Technological, Environmental

and Legal factors. We will analyse how these macro-environmental factors, which may

have an effect on Metricum’s business strategies and to assess how different these

factors may pressurise performance of business now and in the future.

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http://www.ukrainetravelmate.com/


c. Social Environment:

Organisations, which are trying to establish their operations in Ukraine, may face major

problems with socio-cultural environment. Language might be a problem to some

extent for doing business as knowing Russian and Ukranian. Simchi-Levi et al (2003,

p.205) social culture of the country may affect and create problems when the

technically and managerially competent and trustworthy workers may not found. In

general, religion, political philosophy, economic philosophy, education, language and

social structure are considered as determinants of culture (Hill, 2004, p.101).

Ukraine is suffering a demographic crisis because of its low birth rate and high death

rate. At present, Ukrainian birth rate is 9.62 births/1,000 people (2010), and the death

rate is 15.74 deaths/1,000 people (2010). The high mortality rate among males of

working age caused by alcohol poisoning and smoking has become the major reason for

a. Political/ Legal:

Ukraine is a democracy operating under a semi-presidential system, with separate

executive, legislative and judicial branches. In 2010 Ukraine held its Presidential

elections and Victor Yanukovych, pro-Russia candidate elected as new President. This

situation could slow down the development of the country’s relationship with the

European Union. Ukraine now depends on Russia for most of its energy supplies, and

natural gas in particular. The present government has guaranteed to reduce the number of

government agencies, make more efficient the regulatory process, create a legal

environment to support entrepreneurs and carry out a broad overhaul of the tax system.

Progress in the more politically sensitive areas of structural reform and land privatisation

is still slow. Ukraine’s local currency is unstable, social problems persist, and high taxes

keep an important part of the economy in the shadows. (Invest in Ukraine, 2011)

Based on news released by (Press office of President, 2011) Viktor Yanukovych,

President of Ukraine considers that the work of Government to simplify the conditions in

Ukraine for doing business is insufficiently effective. He also mentioned that

businessmen are seeing only very little of the deregulation declared by the Government.

The Government has not developed the legislation, which establishing controlling

agencies officials’ responsibility for failing to comply with control procedures and

causing damages to business entity. He further said that only proper resolution of these

issues would substantially improve business and investment climate in the country.

b. Economical:

Based on an article (blackseagrain, 2011) Ukraine’s refinance rate reached to 90% on

November 22nd 2011. It clearly shows that the Euro crisis has reached Ukraine also.

Inflation remains as an unsolved problem. Austrian Central Bank instructed to its fellow

banks that are subsidiary of Unicredit, that they cannot provide any cross border loans to

their operations in Ukraine. At last it is required that the banks have lowered the lending

in Ukraine from 150% of deposits to 110% through its subsidiaries. These overviews that

companies have to look to Ukraine’s financial sector for operating and investing funds.

Ukraine’s banks are still not yet recovered fully from the 2008 crisis, and now as the

major investors in Ukraine’s financial sector is limiting credits, it will become more

difficult to get money in Ukraine. Corruption in licensing, taxation, customs and the

government sector has become a serious economic problem. According to a Global

corruption survey, Ukraine has the highest level of corruption among the Commonwealth

of Independent States. (Kyiv Post, 2011)

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this issue. In 2010 the country’s population was diminishing at the seventh most rapid

rate in the world. As people search for better work options emigration, particularly to

the neighbouring European Union countries, is another challenge for Ukraine.(CIS

STAT,2011)

d. Infrastructure and Technological:

In the world economy today, technology plays a vital role. The capacity to sustain a

technological lead and an innovation in technology are essential to success in the

competitive environment, for both countries and companies. Morrison (2002,p.301)

states that technology transfer is to attain the technologies from other countries and it

has been vital for the growth of industry and the global integration.

According to PWC consulting (2011) the Ukrainian road system is outdated and

because of the EURO 2012 football championship the Ukrainian government has,

consequently, promised to build about 4,500 km of motorways. There is 169,435 km of

paved roads in the country in total. Rail transport in Ukraine plays the very vital role of

connecting all key urban areas, port facilities and industrial centres with neighbouring

countries. The total length of rail tracks in Ukraine is 21,658 km, and 9,250 km of these

are electrified.

Ports play an important role in the Ukrainian economy and it has 18 sea ports with

developed infrastructure. The recent expansion of Odesa, Pivdeniy and Illichivsk ports

have greatly improved these potentials. Ukraine also consumes more energy than most

European countries and has the largest nuclear power station in Europe, which is its

major source of energy. The country uses almost double the amount of energy

consumed in Germany, calculated per unit of GDP (Worldwide News Ukraine, 2011).

e. Environmental:

Ukraine is rich in natural resources. It is rich in natural resources such as iron ore, coal,

manganese, natural gas, oil, salt, sulphur, graphite, titanium, magnesium, kaolin, nickel,

mercury, timber and arable land. Ukraine government established very liberal

environmental protection laws comparing to highly developed countries, which has

positive influence on production (BBC, 2011).

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Figure 6: PESTEL Model. (Source: www.businessmate.org)

2.4. Investing in Ukraine Market

Ukraine is one of the most attractive direct and portfolio investment destinations among

the Eastern Europe countries. Let us see the advantages and disadvantages of investing

in Ukrainian market.

2.4.1. Advantages in Investing:

Based on the article issued by Marketplace (2011), Ukraine is one of the world’s

competitive & emerging markets. Experts believe that in near future its economy will

be among the stronger in the whole CIS and Eastern Europe region. Ukrainian has well

developed free-market economy, with great prospective to attract foreign investment. It

also has a major ferrous and non-ferrous metal industry, producing cast iron, steel and

pipes. Many companies from abroad have chosen to invest in Ukraine in a wide range

of sectors (mainly textiles and clothing, food-processing, agric-business, engineering,

information and communication technologies, pharmaceuticals and medical devices).

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New high-tech industries and services are slowly rising and there are prospects for

overseas investors in high tech R&D. As Ukraine is the member of WTO, the trade

policy of the country is based on the free trade principles of promoting exports while

minimizing barriers on imports. Ukraine government provides law for various forms of

incentives to support economic investment in Ukraine.

Figure 7: Ukraine’s Annual GDP growth rate chart (Source: worldbank.org)

The main investors are Cyprus, the Netherlands, Germany, Switzerland, the United

States and Japan (Marketplace, 2011). Ukraine has a potential market of 45 million

people and it has lot of industrial traditions, which is a most important opportunity for

us to establish our business over there. It is a gateway for Russia and European Union

that would be very much helpful for us to get into other markets as well. Ukraine’s

GDP has also increased from last year. Ukraine’s Foreign direct investment too

increased in 2010 and showed a upper level in 2011.

Importantly, since 2011 a Free Trade Agreement (FTA) shall link the European Union and

Ukraine, under which all custom duties are removed. This makes Ukraine even more

striking target for trade and investments in near future. Foreign direct investment (FDI)

inflow into Ukraine has considerably risen.Ukraine is the second most attractive country

next to Russia among the CIS region’s largest FDI recipient in terms of FDI per capita

after Russia.

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Figure 8: Ukraine GDP Chart (Source: worldbank.org)

Figure 9: Ukraine’s Foreign Direct Investment, Net inflows (BoP, current US$)

(source: World Bank, World Development indicators)

Key advantages are its inexpensive labour force, easy access to its natural resources and

very low utility and operational cost. Most of its energy is produced by the atomic

power stations. Main mode of transport is Railways and it is well developed. EURO

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2012 football championship is main attraction as of today and Ukraine is preparing to

host this along with Poland. Because of this tournament Ukraine planned to rebuild its

infrastructure and it will speed up changes and increase the investment opportunities.

Since Ukraine has plenty of natural resources obviously the raw materials such as iron,

steel, aluminium can available cheaper (Marketplace, 2011).

2.4.2. Disadvantages (Risk factors) in Investing:

A study of Ukragroconsult (2011) shows Ukraine is highly dependent on Russia for the

supply of natural gas (it imports 90% of oil and its natural gas) and this has a significant

impact on its Economic and foreign policy. Though there are many investment

opportunities in Ukraine, it is still developing the legal and constitutional frameworks

required to fully support the international business. Investor’s confidence was shook by

the economic and financial crisis that unfolded in the year 2008 and delayed the inflow

of capital. It was stayed in recession throughout 2009, and as the situations globally

improved it somehow recovered in the year 2010. But yet again, it facing one more

trauma, Euro crisis, again trembled the economic condition of Ukraine. According to

CNBC.com report Ukraine takes the 2nd position in top 10 countries, which are difficult

to do business in (Yahoofinance, 2011)

Ukraine’s rule for custom valuation is mainly based on WTO rules. All the goods that

are imported to Ukraine are subjected to VAT (value added tax), customs duties and

excise tax (if applicable). Many administrative practices remain unchanged and this

will be a major problem when we intend to do export business in Ukraine.

17

International Business Management Market Entry Strategy

CHAPTER 3

METRICUM”S MARKET ENTRY STRATEGY

3.1. Metricum’s Market Entry Strategy Development

Based on the experiences of firms in developed countries, firms in developing countries

can learn. Decisions are associated with the different levels of risks and rewards. There

are no right decisions with foreign market entry. According to Hill (2008,p.399) a firm

expanding internationally must decide:

a. Which markets to enter?

b. How to enter? – Entry Mode

c. When to enter? – Timing of Entry

3.2. Entry Mode

As we already chose to enter into the Ukrainian market, we need to consider only the

other two options and analyse it. First let us discuss on the entry modes of the materials

handling industry into Ukraine market. The various modes of entry into a market are:

a. Exporting

b. Licensing

c. Franchising

d. Joint Ventures

f. Wholly owned subsidiaries

Currently, to open up a branch for a foreign legal entity is not possible in Ukraine, as

the legal framework explicitly does not recognise it. For a 100% investment, it is

cheaper to establish a limited liability company than to establish a joint venture

company, as the minimum capital is lesser for limited liability of the company than for

Joint Venture Company. Because of the anti-money laundering legislation it has

become more complex to establish a limited liability company.

The Ukrainian tax system is a developing system. With effect from 1 st January 2011,

significant changes to an existing legislation were implemented by a new

comprehensive tax code. Based on a study done by World Bank (2011) shows that

among the 183 countries surveyed Ukraine was one of the most difficult countries in

18


which the taxes to pay. Corporate taxes are subject to 23% tax and VAT rate is 20%.

Failing to deduct and remit withholding tax is subject to penalty of 75%.

Figure 10: Ukraine Imports Data (source: TradingEconomics.com; the national bank of

Ukraine)

Considering the above facts and analysis of political, economical situation, FDI data, I

would suggest that if we choose to enter into the Ukrainian market then Export would

be the correct mode of entry. As this only involves low risk when compared to other

modes and also there are two ways to export: selling the product or service directly to

an international company or customer, or indirectly by using an export intermediary.

These include commissioned agents, distributors and export management or trading

companies. We can always choose between these two.

Issuance of export licenses subjects to enterprise activity which are registered in

territory of Ukraine, irrespective of patterns of ownership, is carried out by the Ministry

of Economy of Ukraine or, within the powers given to it, the Autonomous republic

Crimea Ministry of Economy, corresponding division of regional, Kiev and Sevastopol

city state administrations. Ukraine’s Industrial production has been reduced since 2008

economic crisis and it is slowly rising at present. So, investing in the production will

not be as beneficial as of now.

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Figure 11: Ukraine’s Industrial Production (source: Tradingeconomics.com)

3.3. Timing of Entry

Based on the report by Deutsche Welle (2011), Ukraine’s business climate experienced

a significant growth in 2011. According to the report, EURO 2012 – the football

championship has a great influence on the construction industry, food industry,

agriculture and retail. Investors see great potential in this championship. I would

suggest this would be a right time to invest in Ukraine for the material handling

equipments industry.

3.4. Romania as a route of entry

Ukraine is to establish the closer relationships with European Union especially with

Romania. Romania could be a gateway to enter into the EU market and vice versa.

Romania and Ukraine shares an intercultural and economic cooperation. Development

and involvement of the business sectors between both the countries are good. Both the

countries involved in the joint environmental projects in the Black Sea region as they

share common border with this region. Based on above grounds of their good

relationship, we can use Romania as a route to enter into the Ukrainian market. It will

be more beneficial if Free Trade Agreement is implemented between EU and Ukraine,

as this gives us exemption from customs duties. The entry into Ukrainian market will

provide Metricum’s Romanian firm to utilize full of its 100% capacity as it is now

running only 20% of its capacity.

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3.5. China as an alternate route of entry

In alternative way, we can choose China as a route of entry into Ukraine. Recently in June

2011, China and Ukraine signed an agreement on strategic partnership. The trade turnover

between these two countries has been increased by 80 percent this year. China is already

committed to invest over USD 4 billion in the infrastructure projects of Ukraine. They

also signed the agreements focusing the EURO 2012. Since Metricum has the

manufacturing unit in China, it can focus to export goods from China to Ukraine. China

has become the second largest economy in the world despite of the global economic crisis.

According to a report by Xinhua (2011) despite the European debt crisis, Ukraine has

showed 5 percent growth with a tendency to increase. Ukraine has improved its business

climate by reforming its regulatory system to simplify the procedures and thus creating

favourable choices to do business. Ukraine has a huge technological base in aviation

industry so; China could have a wide opportunity to expand its business.

21

International Business Management Skill & Knowledge Development

CHAPTER 4

SKILLS AND KNOWLEDGE DEVELOPMENT

During these challenging days, marketing has an important role to play in a success or

failure of the company. Metricum has to improve many of its skill set and knowledge

base especially in the field of marketing. Marketing staff need to always monitor the

consumer behaviour changes, identify the new threats and also opportunities, and

provide successful guidance to their business. Dedicated marketing staff is needed to do

so. I would propose Metricum to hire some local expertise in Ukraine with the best

international practices. If we hire a local person who is well versed in their own language

will be helpful to appeal the general public as well as to portray our business in a very

positive way. Marketing training is needed for the new comers and also for the existing

employees. Creativity is another skill needed very much for marketing as well as the

business to become success. Advertisements need creativity as a tool.

Apart from marketing Metricum has to prepare its workers in the manufacturing side

also. They need to be aware of and be prepared for whatever the situation may be. New

marketing campaigns and service trainings to be provided to all the employees.

22

International Business Management Metricum’s Global Strategy

CHAPTER 5

METRICUM”S GLOBAL STRATEGY

Hill (2008,p.7) states that globalisation refers to a shift towards a more integrated global

economic system.Two key facets of globalisation are: Globalisation of market and

globalisation of production. Globalisation of markets refers to the merging of

historically distinct and separate national markets into one huge marketplace.

Globalisation of production refers to the sourcing of goods and services from locations

around the globe to take advantage of national differences in the cost and quality of

factors of production (labour energy, land and capital). Johnson, Scholes, Wittington

(2008, p.3) defines Strategy as the direction and scope of an organisation over the long

term, which achieves advantage in a changing environment through its configuration of

resources and competences with the aim of fulfilling stakeholder expectations.

Global strategy is referred to strategies that enable a firm to reach its goal of global

expansion. Metricum already entered into the global market and having its

manufacturing plants in Sweden and China, and fully owned subsidiary at Romania.

Now, it is also tending to enter into other European markets too. Now, it’s to form

global strategy so that it could bring all the businesses together. Before that Metricum

has to understand that managing a global business is different from managing a

business in local. Companies to vary their practices country by country and they have to

face more complex problems. Experts believe that globalisation can promote prosperity

in the global economy, and it can offer more jobs, and lower prices of goods and

services offered.

Metricum should consider all the above facts before entering into the globalisation zone

and it should create its global strategy in such a way that can tie all its businesses

together efficiently, and that every company will gain. Employees should go around

within the corporate network to develop multiple perspectives. To manage its

international operations Metricum has to develop a separate division at Headquarters.

Managers in this division have to closely monitor the relationships between the foreign

suppliers, distributors and customers.

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International Business Management Recommendations

CHAPTER 6

RECOMMENDATIONS

For Metricum, we can do the balanced scorecard as follows:

PerspectivesCritical Success Factor

(CSF)Measures

Financial Return on Investments

i.Financial results (Quarterly,

Yearly)

ii. Capital invested

Customer

i. Improve brand image

ii. New Customer database

ii. Customer satisfaction rate

iii. Quality performance

i.Gaining new customers

confidence

ii. Providing excellent service

iii. Brand awareness.

Internal

i. Improve marketing

ii. Manage increased business

risk

i. New marketing campaign

ii. Manage acuity level of clients.

Innovation and Learning

1. Safety

2. New Concepts

3.Increase employee

knowledge and skills

i. Safety training

ii. Emerging customer needs

iii.Updating technology to

change.

iv. Training for marketing staff

Table 1. Balanced Scorecard for Metricum

Lynch (2006, p. 617) states that the balanced score card uses strategic and financial

measures to assess the outcome of a chosen strategy. It acknowledges the different

expectations of the various stakeholders and it attempts to use a ‘scorecard’ based on

four prime areas of the business activity to measure the results of selected strategy.

The two significant deficiencies are: 1. Measurement gap, 2. Strategic gap between

general plans and managerial actions.

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International Business Management Recommendations

6.1. Proposed Market Entry Strategy:

Considering all the above facts, figures and data I would suggest that if Metricum want

to invest in Ukraine it could enter now. Though it is not the right time to enter because

of the European Debt crisis, apart from that Ukraine shows many new economic

opportunities. Metricum can choose its entry mode as “Export” as it involves lesser risk

than any other mode of entry. Even the consumer confidence for Ukraine market has

been increased. Ukrainian market is complex as well as challenging one to enter.

Metricum can either choose Romania or China as its route of entry into Ukrainian

market. Positively China has more chances than Romania.

6.2. Proposed Global Strategy:

For Metricum, proposed global strategy is that it will provide world’s highest quality

materials handling equipments globally and it will create brand recognition worldwide.

This strategy also includes 100% customer satisfaction provided to the global

customers. Metricum has to decentralise some of its decision making, such as using

local language in advertisements.

25

International Business Management Conclusion

CHAPTER 7

CONCLUSION

7.1. Conclusion:

It has been understood from the above analysis that Ukraine market is a potential

market. Ukraine continues to face economic challenges like many other countries

around the world today. Despite these challenges it has been proved to be an excellent

region for the business investment. Many new legislative improvements done by the

Ukrainian Government will help Ukraine to improve its ratings in the World Bank’s

ease of doing business index and should make it as an attractive investment location for

business market. Metricum can positively enter into this market and can explore its

opportunities. Also this will help Metricum to expand its business keeping Ukraine as

its gateway to enter into other Eastern Europe regions like Russian Federation and also

into Asian market.

We need to use a very practical and hands-on approach to develop the market. Layers

of protections are there on investments as Ukraine accessed to WTO. Further more

opportunities will be increased when the anticipated FTA with EU will be signed.

Overall, there are more positive steps are ahead if we decided to enter into the

Ukrainian market. Direct investment may provide high risk so FDI can be avoided for

some time until it recovers from the Euro crisis. Metricum has to develop its skill set in

marketing and other technical areas. Following strong global strategy can lead to its

success and it can achieve its goal/mission as soon as possible.

26

International Business Management References & Bibliography

REFERENCES AND BIBLIOGRAPHY

BBC News. 2011. Ukraine country profile. [ONLINE] Available at: http://news.bbc.co.uk/2/hi/europe/country_profiles/1102303.stm. [Accessed 7 November 11].

Business Monitor International. 2011. Ukraine Business Forecast Report Q4 2011. [ONLINE] Abstract only. Available at: http://www.marketresearch.com/Business-Monitor-International-v304/Ukraine-Business-Forecast-Q4-6611148/. [Accessed 01 December 11].

CIS STAT. 2011. Ukraine. [ONLINE] Available at: http://www.cisstat.com/eng/frame_about.htm. [Accessed 16 November 2011].

Hill, Charles W.L. 2008. Global Business Today. 5th edition. New York, McGraw-Hill.

Invest in Ukraine. 2011. About Ukraine. [ONLINE]. Available at: http://www.investukraine.net/about/. [Accessed 01 December 11].

Johnson,G., Scholes,K., and Whittington,R. 2008. Exploring Corporate Strategy. 8th Edition. England: Prentice Hall.

Kyiv Post. 2011. Global corruption survey: Ukraine has highest level of corruption among Newly Independent States. [ONLINE] Available at: http://www.kyivpost.com/news/nation/detail/42729/. [Accessed 20 November 11].

Lynch, R. 2006. Corporate Strategy, 4th Edition. [E-book] New York: Prentice Hall.Available through: Anglia Ruskin University Library website: <www.libweb.anglia.ac.uk> [Accessed 27th October 2011].

Market Place. 2011. Obtaining licenses and quotas in Ukraine, licensing and quota allocation for import and export of goods in Ukraine. [ONLINE] Available at: http://www.kpl.net.ua/en/Obtaining_licenses_and_quotas_in_Ukraine.html. [Accessed 02 December 11].

Material handling industry of America.2011. About MHIA. [ONLINE] Available at: http://www.mhia.org/about. [Accessed 3rd December 2011].

PMR Consulting. 2011. Ukraine. [ONLINE] Available at: http://www.pmrconsulting.com/static_content/Countries.shtml. [Accessed 7 November 11].

President of Ukraine, official website. 2011. President: Government is insufficiently effective in deregulation. [ONLINE] Available at: http://www.president.gov.ua/en/news/22012.html. [Accessed 16 November 2011].

PWC. 2011. Doing business and investing in Ukraine 2011. [ONLINE] Available at: http://www.pwc.com/en_UA/ua/publications/assets/Doing_Business_in_Ukraine_2011.pdf. [Accessed 06 December 11].

27

International Business Management References & Bibliography

Trading Economics, (2011), Ukraine Imports Chart [ONLINE]. Available at: http://www.tradingeconomics.com/ukraine/imports [Accessed 10 November 11].

Ukragroconsult. 2011. Ukraine's Coming Financial Crisis. [ONLINE] Available at: http://www.blackseagrain.net/photo/ukraines-coming-financial-crisis. [Accessed 18 November 11].

Ukraine Travelmate. (2011). Map of Ukraine [ONLINE]. Available at: http://www.ukrainetravelmate.com/ukraine-map.htm [Accessed 10 November 11].

Worldwide News Ukraine. 2011. China Reconfirms Ukraine as Its Key Eastern European Partner. [ONLINE] Available at: http://wnu-ukraine.com/news/politics/?id=399. [Accessed 06 December 11].

Worldwide News Ukraine. 2011. Current investment trends. [ONLINE] Available at: http://wnu-ukraine.com/about-ukraine/how-to-do-business-in-ukraine/current-investment-trends/. [Accessed 06 December 11].

Worldwide News Ukraine. 2011. Ukrainian Business Climate Makes it to the Region’s Top Three. [ONLINE] Available at: http://wnu-ukraine.com/news/economy-business/?id=1025. [Accessed 06 December 11].

Xinhua.net. 2011. Ukraine land of opportunity for Chinese business: first deputy premier. [ONLINE] Available at: http://news.xinhuanet.com/english2010/indepth/2011-10/26/c_131213166_2.htm. [Accessed 07 December 11].

Yahoo Finance. 2011. World’s Worst Countries for Business. [ONLINE] Available at: http://sg.finance.yahoo.com/news/World-Worst-Countries-cnbcwp-3990848173.html?x=0. [Accessed 18 November 11].

28

International Business Management Appendix

APPENDIX

Figure1: Michael Porter’s Five Forces Framework (source: www.mindtools.com)

Figure 2. GDP growth rate comparison chart (source: World Bank, World Development

Indicators)

Figure 3. FDI net flows (BoP, Current US$) (source: World bank)

Figure 4. Population (source: World Bank, World Development Indicators)

Figure 5. Map of Ukraine (source: www.ukrainetravelmate.com)

Figure 6: PESTEL Model. (Source: www.businessmate.org)

Figure 7: Ukraine’s Annual GDP growth rate chart (Source: Tradingeconomics.com)

Figure 8: Ukraine GDP Chart (Source: Tradingeconomics.com)

Figure 9: Ukraine’s Foreign Direct Investment, Net inflows (BoP, current US$)

(source: World Bank, World Development indicators)

Figure 10: Ukraine Imports Data (source: TradingEconomics.com; the national bank of

Ukraine)

Figure 11: Ukraine’s Industrial Production (source: Tradingeconomics.com)

Table 1. Balanced Scorecard for Metricum

29

Documents

IBM ukraine feasibility research