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In the year 2010, 5 business graduates of Southern Cross University came together to pursue their dream of starting a new business. They conducted a thorough analysis of the Australian market and found a growing demand for craft beers not only from local residents, but also from tourists from other countries. So they decided to start a small brewing company named 'CHEERS' on the Gold Coast with an initial start-up cost of $ 500,000 (each partner contributing $ 100,000) and brew 3 varieties of craft beer. The choice of craft beers was also to avoid competition with and differentiate from beers produced by larger and more established brands in the local market. The product was well received within this Australian niche market, and even with a slightly higher price (when compared to other mainstream beer brands), demand for CHEERS' varieties did not seem to deter.
In the following 6 years, the business experienced significant growth. Turnover increased from $ 2.5 million in the financial year 2010-2011 to $ 30 million in the financial year 2015-2016. Number of employees also increased from 8 to 28 during the same period. However, growth of the business has somehow stalled since end of 2015, and the management team at CHEERS realised that they will need to look for overseas market to maintain the growth momentum. They looked into numerous potential target markets and shortlisted 2 countries – Brazil and India.
You, being a recent recruit as an International Operations Manager at CHEERS, have been asked to prepare a report (2500 words) for the company's executive evaluating the risks and opportunities in each of these two countries and recommend the best destination for the company. As a part of this project, you have been also requested to suggest the most appropriate entry mode for the chosen country.
When completing this assignment you are required to access and use materials beyond your text and readings. As a guide you should include 15 references which may include academic sources, government websites, and reports published by international organisations and consultancies. Please place the word count for this assignment on the cover sheet. 10% more or less than the stated word count is acceptable. Executive summary, table of contents, tables, visuals, references and appendices will not be included in the word count. The marker may, at their discretion, discontinue marking if you go above 10% of the recommended word limit.
Expanding into other geographical markets is a significant growth strategy of an organisation whose business scope is restricted to a local market (Azuayi 2016). Entry into new geographic areas offers opportunities in terms of growth and value creation. The challenge associated with this strategy is related to the risks to be faced in the new market, which hinder business operations. The mode of entry plays a vital role in determining the success of a company in a new country. This report assesses the decision of CHEERS craft beers to internationalise into overseas markets. CHEERS is an Australian start-up founded in 2010 which specialises in the manufacture of craft beers. Employing 28 people and with a revenue of AUD 30 million, it is considered a medium business enterprise. Despite its tremendous growth over the five years between 2010 and 2015, its growth has become stagnant after 2015. The management has planned to expand its market overseas to maintain its performance. It has selected two potential markets, Brazil and India. This report analyses the risk and opportunities of these two countries to determine which is suitable for its expansion plan. One of the two countries is selected based on this assessment, and a suitable entry mode into the country is recommended.
1. Analysis of Risk and Opportunities in Brazilian and Indian Crafts Beer Market
Craft beer sales are expected to grow at a faster rate globally, with a CAGR of 11.04% between 2017 and 2021 (Business Insider 2017), where Brazil and India are emerging markets. This section analyses the risks and opportunities that are prevailing in Brazil and India that play a major role in the operations of craft beers companies. The country risk, cultural risk, financial risk and commercial risk of these countries are discussed in this section.