Multicultural Managers In Global Teams

Multicultural Managers In Global Teams LOreal is an intriguing company: Very French in culture and image, and yet very global in products, brands and activities. It is poised to reach the next billion consumers mostly among the budding middle class of emerging economies. In this article we explore one facet of L Oreals success: Its very clever use of managers with bi-cultural backgrounds in the most critical process for the success of the company; new product development. Of course we all now recognize that cultural diversity is a good thing, and we value executives with expatriate assignments in their backgrounds, who claim themselves to have become cosmopolitan. LOreal goes one big step further: Rather than just diversity among executives it seeks diversity within each executive [2. Yves: Brannen Thomas, 2010: p.6 p.13: cultural diversity that exists within individuals and MYB Lee, forthcoming, p.23: diversity within a single person] Yves, i.e., it hires develops and uses strategically individual who usually by way of a multicultural early childhood-have gained the ability to understand and behave according to the cultural meanings and norms of two or more cultures. [3. Yves: This definition of multiculturalism. MYB can not argue to own the definition as hers. Previously other researchers define biculturalism such as Hong et al., 2000 in their phenomenal article, Multicultural minds] Not only can they be precious bridges between their cultures of origins, they can also be sensitive alert scouts in new cultures, with an ability to grasp them much greater than individuals from a single cultural origin. [4. Yves: This is about multiculturals cognitive complexity (BMV et al., 2006 and Tadmor et al., 2006/9. I think this sentence is more common sense. I heard a lot from those who participated in Bicultural thought leadership conference in Green Gulch and Abu Dhabi] Not every global company needs bi-cultural executives but many can greatly benefit and learn from them, thus instilling in their international executives -whose vast majority are from a single cultural origin-some of the critical cross-cultural skills that help make them effective. [5. Yves: Is this can be a common sense?, I dont find exactly same words or phrase in MYBs]In this article we draw a few lessons from examining LOreals decade long experience in using bi-cultural executives selectively. But first, what is the challenge bi-culturals allow to address successfully? [6. Yves: I dont know why she highlighted here] THE CHALLENGE: IT IS NOT EASY TO BE LOCAL AND GLOBAL Global competitors face an age-old tension: Serving regional or national markets requires adaptation to local conditions, and calls for differentiation in their products, services, and business models, but achieving economies of scale and scope across markets calls for uniformity and integration of activities. Local responsiveness and global integration are hard to combine. Some products are clearly global, such as TV sets, except for regulatory and language differences, and simple technical differences such as voltage. Others, such as restaurants, are intrinsically local, although global formulas and brands may succeed, such as Starbucks or Benihana. Many products, and to a lesser extent services, call both for responsiveness to local differences and for some form of global integration, of brands, marketing and advertising, manufacturing, product development, and research. They are affected by the global-local duality of knowledge differentiation and integration in innovation proces ses. Perhaps at the forefront are companies striving to develop global products in culture-sensitive and ethnically differentiated markets, such as cosmetics and skin or hair care. LOrà ©al very much faces this challenge: Its main product categories, skin care, hair care, hair color and beauty categories are sensitive to global economies of scale and scope, and they also need to be highly responsive to local market differences. Furthermore, not all of LOrà ©als product categories face the same mix of demands: Hair care may be very regional and dependent on ethnic differences, lipstick and most fragrances much more universal. Luxury brands are more global than mass market ones, which are often local. Figure 1: The complexity of product portfolio: Responsiveness and Integration Differences The global integration-local responsiveness issue is further complicated when the knowledge required to develop and market products is complex. Yet, such complex knowledge (tacit and collective, only revealed in action and interaction) now lies at the heart of innovation and global competitive advantage, not just for LOrà ©al but also for most global competitors. Other forms of arbitrage, for products, costs, or materialsà ¢Ã¢â€š ¬Ã‚ ¦ are easily imitated, and have been. Complex knowledge is hard to identify and observe, let alone imitate. It has become the main source of sustainable competitive advantage for global competitors. It drives hard to imitate innovations. LOrà ©al as a leading French multinational company in skin care and beauty products provides a remarkable example of relying on complex knowledge for innovation: Its products are not just chemicals, much more importantly, they depend on fashion, style, seduction, they convey national image of French womens sophisticationà ¢Ã¢â€š ¬Ã‚ ¦ they elicit the idealized self-image of its customers and their value is conveyed through complex, often subliminal advertising and multiple distribution channels. Of course, some highly culture- and context-dependent products, with a strong national identity happen to find readily a global market. They are widely adopted worldwide with little or no adaptation (French perfumes, U.S. action movies, German classical music and high-end cars, Japanese Mangas, Korean K-Pop, Bollywood movie and TV productions or U.S. fast food). But these are exceptions more than the rule. In fact, a common language, high cultural and institutional homogeneity, greater density of interpersonal networks and friendships, and less not-invented-here resistance mean complex knowledge generally diffuses more rapidly within single countries than across national boundaries. So, in industries where complex knowledge drives innovative advantage success depends on face-to-face (or rather shoulder to shoulder) participation in local and national networks where new complex knowledge first arises. [7. Yves: Isnt this argument yours?] MNCs should build, manage, and globally integra te their local/global capabilities and dispersed inputs. Yet the quality of local knowledge access, being embedded in local cultures and networks, often makes global sharing more difficult, as local participants in global innovation processes are culturally very different and closely identify with their origins. [8. Yves: Isnt this yours as well? MYB doesnt do much about knowledge and global innovation, does she?] For many companies, such as LOrà ©al, this challenge is further complicated by an additional contradiction: While they want to be global, they do not want to relinquish the advantages associated with their country of origin. LOrà ©al does not just sell cosmetics, it mainly sells French-ness to women around the world. In other words, its identity, and its founders cultural inheritance need to be protected, and remain part and parcel of its global offerings. The company has maintained its founders spirit of entrepreneurship, and remains largely family-controlled, with a very strong shared culture. Over its 73 years, it has had only four CEOs (including the founder), all with very long tenures, and it promotes only from within. One becomes part of senior management over the years, as one weaves a dense network of relationships with colleagues and builds trust over time. In France, the company has a reputation for being the consumer marketing school, and many of its alumni have become successful entrepreneurs and business builders, such as LOccitane en Provence, a highly successful fast growing skin and body care company. Its third CEO, Welshman (and INSEAD graduate) Lindsey Owen Jones is widely credited for having transformed the company from a regional European challenger to a global leader, but the company still remains quite remarkably French. Traditional approaches to the internationalization of senior management would not work well for LOrà ©al, or might only work very slowly since a rapid infusion of international executives in the top ranks might compromise the tightly knit and informal French community of senior managers, operating as a global network. Furthermore at LOrà ©al, complex knowledge about products, cultures, and how to work together is progressively learned and internalized by individuals as their career develops, which makes a rapid internationalization of senior management through hiring from outside largely impossible. French managers are often assigned to international operations, and learn about the plurality of cultural and institutional contexts, as well as about differen t consumer priorities, but few foreigners become senior executives. The most promising international executives might be reluctant to join LOrà ©al anyway fearing the risk of a glass ceiling. Successful senior executives often identify themselves as partly French, for instance French and German, of French, Moroccan, and German. And even executives that identify themselves as foreigners take great pain to explain they have lived in France and worked for LOrà ©al for a long time and pride themselves on speaking perfect French. The main language of the company has remained French. [9. Yves: This is my observation and your informal discussion when you lead workshop with LOreal RD top management a while ago] STRUCTURAL SOLUTIONS DO NOT WORK: For LOrà ©al, and for many multinational companies, to successfully address the global-local innovation duality, simple structural solutions such as regional units or global product divisions wont work, for at least two reasons. First, the product range puts both intensely global and intensely local demands on the way the company is run. No either-or organizational solution will work, the company needs both global and local priorities effectively taken into consideration in decision-making. Take perfumes (or fragrances as they are known in the industry). World products and famous world brands (think of Chanel No 5) are the name of the game, but the underlying knowledge needed to develop a perfume resides mainly in France, for historical reasons. Second, companies such as LOrà ©al need a wide range of products to maintain their strength in distribution: fragrances, cosmetics, skin care products, and hair products. Any simple structural approach such as local subsidiaries and regional entities or global business units would fit a few of their products but not all, given the diversity of demands for local responsiveness and global integration shown on Figure 1. Some are more global, such as perfumes or cosmeti cs, others are more regional or local, such as hair care or skin care. As the company considers increasingly the next billion customers (as the CEO stresses) in emerging economies, both the advantages of global scale and the need for local differentiation will increase even further. For some products, like fragrances, most relevant market and technical knowledge can be found in one place, for most though, like hair care, relevant knowledge is distributed around the world and will become even more so with the growing importance of emerging economies. Furthermore, speed is often of the essence: Knowledge-driven FMCG (Fast Moving Consumer Goods, such as beauty and skin care products) industries call for a continuous stream of innovations across a wide product portfolio facing both local responsiveness demands and global integration advantages, but in varying degree among products. In new areas, such as anti-aging, competition is intense and fast, as well as technology based, in mature areas it is slower and marketing driven. Yet, any technological advantages are short-lived. Yet speed needs to be tempered by continuity. Even with constant innovation, markets quickly reduce the most advanced products to the condition of feature-less commodities unless brand equity has been built very quickly. Underlying ingredients are relatively stable and long-lived, but new products are frequent. Brands cover families of products (Lancà ´me, Biothermà ¢Ã¢â€š ¬Ã‚ ¦) to provide continuity and lasting brand strength but leave room for fast and fre quent product renewals. Continuity of brands, and of channels, and renewal of products have to be carefully integrated. No organizational structure, global business units or country organizations will be up to the task. Structure is too blunt a tool. Of course, some multinationals resort to matrix organizations, but adopting a matrix organization is a cop out: It just acknowledges that, as we just outlined, complex, varied and rapid trade offs between local responsiveness and global integration need to be made constantly on very specific issues: product packaging, marketing campaigns, specific chemical ingredients, etc. So rather than risk getting mired in the negotiations that end up being so characteristic on matrix organizations, many companies, LOreal included, go one step further: Global teams. GLOBAL TEAMS: PROMISE AND PITFALLS Faced with such challenges to achieve worldwide innovation, combine global knowledge integration and local knowledge differentiation, and be fast, global companies increasingly resort to global, and often virtual, teams. These teams hold the promise of effective knowledge creation, knowledge sharing, as well as flexibility, responsiveness, and speed. Yet, in practice in many companies these global teams are no panacea: they suffer from misunderstandings, conflicts and often fall prey to a Babel Syndrome: their members talk past each other, not together, and teamwork breaks down. The results of their work are often disappointing, particularly when complex knowledge is essential, like the proverbial camel designed by a (multi-cultural) committee. Actually, it is often difficult to transmit even explicit knowledge across cultural boundaries and it seems impossible to transmit tacit knowledge, where physical distance also gets in the way. Even seemingly universal and very precisely expli cit knowledge, such as mathematics, is liable to different perspectives and interpretations in different cultures. Tacit knowledge cannot be transmitted over distance because it is revealed only in action and cannot be meaningfully explained. It has to be learned through (co)-practice. [10. Yves: The difficulty to transfer tacit knowledge is common sense and not only MYB (2004) and much earlier, other researchers (Szulanski, 1996; Zander Kogut, 1995) already argued.] BI-CULTURAL MANAGERS AND GLOBAL TEAMS AT LORÉAL To avoid the pitfalls typical of global teams LOrà ©al makes extensive use of bi-cultural managers and professionals in its product development process (i.e., individuals, usually of mixed cultural backgrounds, who can switch their frame of reference, both in what they understand and in how they behave, between two or more cultures). Although bi- and multi-culturals only account for a very small proportion of LOrà ©als employees (a few dozens out of 69 000 employees in 130 subsidiaries) they play a key role in the most critical activity of the company: new product development, headquartered in Paris. No less than forty percent of about 160 product development project managers (among whom 40% come from foreign subsidiaries and 60% were recruited in France) are multicultural. LOrà ©al has maintained this recruitment balance in new product development leaders for over ten years. The task: New product development teams, each composed of a few people, some multicultural (the smaller circles on Figure 2), work closely with other groups such as research and development, the international marketing team, and local subsidiaries in a highly interactive process. It involves functional groups within HQ and across regional offices. Newly created product concepts also have to be coherent with existing product lines (e.g., hair care products that use only natural plants) and their reputation (e.g., environment-friendly and people-tested). So considerable inputs from the various subsidiaries are needed. Finally, the product has to be feasible for manufacturing without any risks. Developing a new product concept takes from six months to a year depending on the products level of novelty. In developing a new product concept, multicultural project managers have to present their work to top management on a regular basis, both formally and informally. Once they obtain approval for their new product concept, they present their project at the la journà ©e mondiale, LOrà ©als largest and most important yearly event at HQ. This event attracts all regional directors from all around the globe who come to evaluate future products (i.e., those that would hit the market in one or two years). If feedback from the regional directors attending this event is positive the multicultural project managers move from articulating product concepts to actually designing the products. In the design phase, multicultural project managers select and combine ingredients, choose product colors, and design packaging for the product with the packaging team (often outsourced) and manufacturing team (called the Factory). They interface intensely both with headquarter functions and local subsidiaries around the world. Through all phases, project managers work with their colleagues in teams within and across departments at HQ and local subsidiaries. Multicultural project managers work with others on three levels. First, they work in their own team (called the unit team), where they managed informal relationships with other product managers. One product development team is composed of two or three project managers who are responsible for developing different products for the same region in the same product category (e.g., hair products). For example, for Latin America, one multi-cultural manager (Lebanese-Spanish-American) was in charge of womens hair color, while another (French-Irish-Cambodian) was in charge of womens hair care (hair damage). They shared physical space so that they could exchange ideas, information, and feedback (the larger central circle on Figure 2). Second, they interact with their boss and the leaders of other functional departments in Paris. Although more than 40% of the project managers in the new product development division are multi-cultural, the majority of their direct bosses are mono-cultural, very French. Project managers meet their direct boss quite freely any time they needed or vice versa. Regular divisional team meetings with top management are held with other unit teams (for the same product line, such as hair care Asia and hair care international), other functional departments, and teams in local subsidiaries. Informal meetings with other functional departments (e.g., RD, supply chain, advertising, and packaging) are held based on the phase of the product development process. Third, project managers work with local subsidiaries, via email, phone calls, and videoconferences. They also visit local offices regularly. It is the project managers direct bosses, however, who visit local subsidiaries more frequently-at least once a month-as they are in charge of developing several products at the same time. In addition, because project managers are operating within a tight schedule and budget, they accompany their direct boss only when the visit is urgent and important. In the final development phase project managers involve employees who executed promotional campaigns through television, the Internet, and other advertising activities. They set up all visual images of products, articulate the products selling points, and choose the best way to promote the products they developed. Team leaders with more experience lead the promotion campaign directly. More specifically, experienced team leaders travel to local subsidiaries and direct all processes of promotion. Product promotion also involves various new tasks often outsourced to new groups. For example, to promote a make-up product for Chinese women, the promotion team hired a famous local movie star, local make-up and uniform team, local stage setting team, and a professional camera crew (which was a French team). Television commercials are typically expensive and take months to complete. The people: Beginning with their recruitment, multicultural project managers at LOrà ©al gained credibility for new product development by being labeled international talent by the Human Resource department, a prestigious title in a company trying to combine strong French roots with global reach. Most had at least five years of working experience in sales and marketing in local subsidiaries, or for those recruited in France, who were graduates of top business schools, twelve months of intensive training in product development and marketing department at HQ. At LOrà ©al, they were called the stars or crà ¨me de la crà ¨me (meaning the best of the best). LOrà ©al designated an HR manager who managed the performance and career development of these employees who were anticipated to be top performers. Figure 2: Team composition and its work within and across units at LOrà ©al !!!Yves: From this part till conclusion in p.19, all parts are from the 2nd chapter of my dissertation. Multiculturals in global teams: Multi-cultural individuals that have internalized more than a single cultural schema (i.e., the values, norms of behavior and beliefs of a given culture), [11. Yves: this is the definition of multiculturalism. See #3] bring unusual skills to solve challenges in knowledge transfer across international borders for global innovation. Not only do they bring the obvious knowledge of their own cultures, and the ability to translate and transfer complex knowledge between them, but also the latent skills to understand new third country knowledge in context, and being effective bridges to combine knowledge from these other countries.[12. Yves: understanding third culture knowledge is related to David Thomas metacognition (2008). I describe similar argument in my IJCCM paper as culture-general knowledge (Hong 2010: p. 96-97, I cited Thomas et al., 2008 Cultural Intelligence] LOrà ©al also recognizes multi-culturals creativity in new product development and thei r innovative ways to combine/ bridge knowledge in global teams. But more specifically, these bridging, translating and sense-making skills are key to the effectiveness [13. Yves: this is the 2nd chapter of my dissertation]of LOrà ©als global product development teams. Bi-culturals are uniquely able to play specific roles: Role 1: Managing Knowledge Processes in Teams In creating new products, multicultural project managers manage two kinds of knowledge: product- and market-related knowledge and organizational/practical knowledge. The multicultural project managers challenge is to integrate the creative options to be pursued, while transforming local market knowledge into global product knowledge for higher quality products and innovative concepts. To bring a creative product to fruition, their contribution to knowledge sharing processes in the team focused on three areas: (1) bringing new local product and market knowledge, (2) translating cultural nuances, (3) connecting geographically diverse knowledge and skills. [14.Yves: this is from my dissertation] Bringing new local product and market knowledge: Multicultural project managers were expected not only to know what evolving market attributes were but, more importantly, identify new market trends and generate market insights. In addition, to secure the new product concept, they worked with other members (e.g., team leaders, regional directors, RD, and local subsidiaries) by reviewing differing perspectives on the commercial viability of new product concepts. In response to these challenges, multicultural project managers brought both new product ideas and market understanding: Our team tries to find some natural ingredients for new hair care product. J (Hong Kong-Canadian-Singaporean) knows all the Chinese medicine that has no translation either in English or in French because its so authentic. J does not only explain these ingredients but also suggest some ways we (team) can use for our new products. (French Director) and bringing local market knowledge: The Polish-French project manager was raised in Poland until age 20. She described her life under the communist regime and after in terms of how she evaluates and appreciates make-up products. As our target consumers are about her age, everything she shared with other members is valuable for developing products and markets. She is actually educating us to get a better understanding of consumers in the region. (American-French regional director talking about Polish-French project manager) Translating cultural nuances: Even if a common syntax or language is present, as in mathematics or chemistry formulaes, interpretations are often difficult not in processing the information, but in learning about the sources of semantic differences across cultural boundaries.[15. Yves: MYB tends to argue as hers if there are phrases with language semantic. I just typed semantic difference in google scholars. There are so numerous papers talking about semantic difference across cultures from psychologists and linguists.]The problem then shifts to who interprets what. A French manager who planned a test of a new shampoo in a laboratory in Germany explained how his French-German-British multicultural manager who used to work in Germany helped him: If we say dry hair, dry hair on this floor (HQ) doesnt mean as same as German dry hair means. So, it is much safer to check with B who knows two cultures (French and German) and translate exactly what I mean as dry hair. (B is German-British-French multicultural) Connecting geographically diverse knowledge and skills: To generate creative ideas so that they can be implemented, multicultural project managers must be able to access expertise and draw analogies from one cultural group (e.g., local) to other cultural groups (e.g., other regions or globally). They synthesize those ideas from multiple sources-diverse cultural perspectives-for innovative products. [16. Yves: this is from my thesis] For example, a French-Cambodian-Irish project manager used the specificity of Asian womens skin care (reducing winkles) to develop a new product for the French market. He noted: While researching Asian skin-care products, I found that in Asia, some tinted cream (skin colored cream for make-up face) used face lifting effect, in France and Europe, none of tinted creams used face lifting effect. I developed a new tinted cream with face lifting effect for French market. It was a big success! (Team: French-Cambodian-Irish project manager, a Chinese-French and two French). Role 2: Managing Conflicts in Teams Cultural differences in teams increase the risk of conflict. Multicultural project managers manage conflicts in teams by (1) reducing misunderstandings and (2) displaying flexible behavior with people from diverse regions and cultures. [17.Yves: this is from my thesis] Reducing misunderstandings: Product development managers must gain cooperation from their colleagues at HQ and local subsidiaries. Multicultural project managers mitigated the negative effects of cultural distance and group boundaries on developing trust between HQ and local subsidiaries.[18. Yves: this is from my thesis] For example, an Indian-American-French project manager noted: If an Indian local manager said, India might have an issue with this ingredient for a new product because theres no written communication confirming this can be used to please our consumers. What they actually tried to tell me was, No, I wont do what you asked us to do and please lower your expectations. But I didnt make any negative comments on that. Instead I said, Okay, how about I discuss with RD at HQ and find out the way we solve this problem? In this way, I didnt make an uncomfortable situation. Instead, I got respect from them, which as a result had a positive influence on our work progress. (Indian-American-French manager; Team members at HQ: Chinese-French, French; Local teams: India, China, Thailand) This Indian-American-French project manager interpreted Ill try my best (Indian local team) as Its going to be difficult, or No, I am not going to do it. He preempted potential conflict and tried to avoid risky situations where the local team felt pushed by HQ. In this way, he could develop interpersonal trust between these two groups. However, although HQ members may not provide any negative comments immediately, but still hold a negative impression of the Indian. In other words, they prejudged that the Indian local team did not fulfill its responsibilities, and trust in the Indian team was lost. This may not cause a problem right away, but it may be a root for relational conflict that eventually harms the trust between HQ and local teams. This multicultural manager not only preempted potential conflict between two parties but also tried to avoid risky situations where the local team felt pushed by HQ. In this way, he could develop interpersonal trust between these two groups. Displaying flexible behavior to deal with people from diverse regions and cultures: Once conflicts erupt in teams, however, multicultural project managers handled those conflicts with tolerance. In other words, they were more accepting of different cultural values, less disturbed by them, and accordingly better at handling conflicts due to valuing cultural differences among members. [19. Yves: this is from my thesis] For example, a Hong Kong-British-Canadian-French multicultural director whose team members were Dutch-Chinese, Taiwanese-French, and Korean-British and whose boss was French noted how members handled a process conflict (e.g., time management), which was created by different work values regarding meetings: In terms of meeting time, we all seem to have different principles. For example, my French boss never starts meetings on time and quite often postpones or cancels them. H (Dutch-Chinese) is very strict on time and deadline (meeting is time for checking-up on each others work process). I and K (Taiwanese-French) we are a bit flexible regarding meeting time. So, whenever we have meeting with my French boss, or ourselves, we face frustrating moments. But, what is important for us is how to handle this frustrating moment. As we are conscious about each others differences, we come to compromise when such moments occur. For example, with my French boss, I need to be really flexible with time. With my team members, if I am behind my meeting schedule with my team members, I make sure to tell them in advance why I am behind and ask them next availabilities. Conflicts may still exist in my team. But we handle them at a much more tolerant level. (Hong Kong-British-Canadian-French director, Team : Dutch-Chinese, Taiwanese-French, Korean-British and French boss) LOrà ©als product development team members have cultural diversity within themselves. They are bi- or multi-cultural and play two critical roles in team innovation: (1) bridging between cultural contexts and combining knowledge across cultural/national boundaries; and(2) resolving cross-cultural conflicts. [20. Yves: this is from my thesis] WHAT WE CAN LEARN FROM LORÉAL To a greater or lesser extent, most global companies face the four challenges, or dualities, we identified as so characteristic of LOrà ©al: Global-local, dispersed complex knowledge to be integrated, national image of the home base but glo

Free Essays - An Analysis of Catch 22 :: Catch-22

An Analysis of Catch 22      Ã‚  Ã‚  Ã‚  Ã‚   Catch 22, by Joseph Heller, is a critique of the society that we live in. Whoever is proud of what we have advanced to, and is unwilling to look at it in a negative light, would find this book very subversive. It threatens and criticizes the way of living of most who pride themselves in living a modern life. Heller shows through the ridiculousness of war how misguided much of modern society has become, in spite of all our so called civilized advancement. Some will find this interesting, thought provoking and enjoy this book. Others will take it as a direct threat and insult to all the work they have done.      Ã‚  Ã‚  Ã‚  Ã‚   From the very beginning, Heller shows some of the most popular ideas and values of the day in a negative, questioning light. In particular, he shows the negative consequences of conformity and highlights individuality as a way to survive.   He wants us to recognize how one is controlled and stifled by society.      Ã‚  Ã‚  Ã‚  Ã‚   The leading character in this novel, addressing what has gone wrong with society, is Yossarian. He is the only one who recognizes the full craziness of what everyone is living for: wealth, false happiness, society's approval, etc. He is one of the few who tries to fight the power and elitism that have become so sought after in America. Throughout the novel, he tries to find a way to live a fuller life as a real human individual. He looks to many of the other characters in the book for help but only finds unsatisfactory answers.      Ã‚  Ã‚  Ã‚  Ã‚   Each of the characters in Yossarian's life at the base shows the reader one more example of how bad society has become. Clavinger tries to live life by reasoning. He looks for a reason in everything. In constantly looking for a reason why, he never enjoys life to it fullest. As further proof that this life leads nowhere, he is shot down and killed, certainly not an event with a rational explanation. Major Major is the person who obeys everyone, always trying to be perfect. He does everything that anyone asks of him, but takes it to an extreme. By being so naively obedient, instead of being helped by his comrades, he is shunned.

Asia Pacific Breweries

International Business Environment Project GROUP PROJECT: ASIA PACIFIC BREWERIES LIMITED (APBL) Prepared by G&T Consultancy (TZ02): Benjamin Jethro Neo Czaraim Suganob Carreon Michelle Oh Hui Ling Ratchadakorn Wongphothiphan Valerie Ng Shi Min Yap Yi Jun Prepared for: Ms. Ng Lay Khim, Linda Date of Submission: 18th July 2012 TABLE OF CONTENTS 1. Company and IndustryOne of the main components of the beverage industry is Alcoholic drink; an example of a company that produces alcoholic beverages, namely Beer and Lager is Asia Pacific Breweries. Listed on the Singapore Exchange, Asia Pacific Breweries Limited (APBL) is one of the key players in the beer industry Asia Pacific Breweries, formerly known as Malayan Breweries Limited (MBL) in 1931 is a joint enterprise between Heineken International & Fraser and Neave. Its present name was given in 1990.As of today, Asia Pacific Breweries also operates a broad global marketing network, which extends across 60 countries and is supporte d by 30 breweries in 14 countries, namely Singapore, Cambodia, China, Indonesia, Laos, Malaysia, Mongolia, New Caledonia, New Zealand, Papua New Guinea, Solomon Islands, Sri Lanka, Thailand and Vietnam. Asia Pacific Breweries also offers their consumers a wide range of brands, be it global, regional or local, which suit the taste of various beer drinkers; boasting a wide range of choices, including Tiger Beer, Heineken, Anchor Beer, Baron’s Strong Brew, ABC Extra Stout and Bintang Beer.Their beers are brewed under the supervision of Heineken technical experts, who can call upon countless years of experience of European brewing excellence. Using only the finest ingredients, maintaining the most stringent brewing standards, and conducting over 200 quality checks during the process. This scrutiny over production of APB beers has reeled in many awards while their breweries are among the forerunners in their respective markets. 2. STRENGTHS AND WEAKNESSES 2. 1 StrengthsTiger beer, the prize brand of APB, was the winner of the UK's Brewing Industry International Awards, the most esteemed award in the brewing industry 1998. The brand won a Gold medal in the International Style Lager category in the 2010 World Beer Cup; and silver medal in 2010 World Beer Championships. Anchor Beer was presented a gold medal in Selection Mondiale in 2010, a gold medal by Australian International Beer Awards in 1998, on top of several other honors. Since beer sales mostly relied on quality and tang, the higher quality standards of APB beer, makes APB standout in the competitive brewery business.APB's Tiger and Heineken brands scores on the point of identity and thus have a strong brand image. A part of one of the few establishments in Singapore, APBL set up the Asia Pacific Breweries Foundation (APB Foundation). This foundation provides financial aid to causes in Creativity Development, achievements in Human Excellence and Humanitarian Awards. APBL plays a significant role in gi ving back to the communities in which they operate. Being socially responsible, each of them renders support to the various educational, social and environmental causes in the respective countries.Through its endless efforts towards community and environment protection, APB continues to build a long-term relationship and good rapport with its customers. 2. 2 Weaknesses Although the US market is mounting at a slower rate compared to certain Eastern European and Asian markets, lack of presence in this market puts the group at a disadvantage as compared to some of the other great players in the industry. Since large beer consuming countries provide possibility for volume and revenue expansion, a modest presence in these markets results in a drawback for APB.The anticipated sale of APBL’s 50% owned Heineken-APB (China) Pte Ltd to China Resources Snow Breweries Limited would not be going through due to an unreachable agreement with CRSB. 3. OPPORTUNITIES AND THREATS 3. 1 Opportuni ties With a rise in disposable income and alcoholic beverages more widely accepted by its people, Asia had its potential as a profitable market. APB operates primarily in Asia Pacific, which grew at a compound annual growth rate of 5%, reaching a figure of $112. 2 billion in 2009. To maximize on their Asian opportunity, APB has ventured into New Caledonia and Indonesia. In FY2010, hey came into possession of Heineken International's 65. 1% interest in PT Multi Bintang, Indonesia and also Heineken’s 87. 3% interest in Grande Brasserie de Nouvelle Caledonie, New Caledonia. The group also received beer brand Bintang and its trademarks rights. The acquisition allowed APB to launch their other popular beer brands easier as it gave them a firm consumer base in Indonesia and New Caledonia. APB is extending its brand portfolio by adding more flavors and varieties. They acquired Bintang and Number One, from Indonesia and New Caledonia in FY2010. The group also introduced some other ne w brands in the same year.Laos has its local beer Namkhong; New Zealand was introduced Monteith's Crushed Pear Cider while Tiger Crystal was presented to Vietnam and, as a limited edition, to Malaysia. APB attracts consumers of distinct tastes by presenting new brands every now and then. 3. 2 Threats Beers belongs to one of the highly taxed commodities globally; especially high in the countries APB operates in. Per liter of beer was imposed an excise duty of S$70 in Singapore, the single largest market of APB. New Zealand also increased excise duty. This caused DB Breweries, the New Zealand division of APB to increase its prices by 3%.Higher prices are a result of higher excise rates. APB, known for being a cheaper option of premium brands, may lose its current consumers if excise rates continue to rise and cause APB to set a higher price for its beer brands. Alcohol companies have received criticism on their advertisements and thus, countries set a legal ban on spirits advertisemen ts on TV and radio; on broadcast advertisements which associate alcohol with children or leisure, or promoting alcohol abuse; as well as on sponsorship of TV and radio programs by companies mainly concerned about alcohol production.These rules would hinder APB’s development, as its awareness in the consumers would decrease. Beer has been linked with negative health issues. Among people, there is a general negative perception about beer having an effect on the body fat and cholesterol. On the other hand, wine is considered a healthier option to other beverages. In matured markets like Western Europe and North America, beer is losing its field to wine, as there is an increase in consumers’ preferences for healthier alternatives. Wide variety of alcohol products available readily and extensive advertising is also bringing a negative impact to beer sales. . KEY CUSTOMER (GROUPS) & COMPETITORS Key customer groups Business to Customers APBL has large consumer base due to its wide variety. Tiger beer, among all the brands is the most famous international brand with largest number of consumers. Tiger Beer targeted the vibrant young Asian adults; Tiger also launched Tiger Crystal Lite, a softer-flavored Tiger Beer to cater consumers especially the Chinese who prefer lighter taste. Likewise, Heineken and Gold Crown targets young Asian adults in Thailand, New Zealand, Vietnam, China, Singapore, and Malaysia.Anchor, which offers consumers with international, affordable quality brew, is more successful in Hainan, Cambodia and Vietnam. Everyday drinkers in Singapore and Malaysia are appealed to Anchor while Cambodians and Singaporeans in their 30s-40s are appealed to stouts including Guinness, Extra Stout and Amber Stout. Baron’s Strong Brew had European as its loyal customer base appealing those who favor strong alcohol taste. Business to Business The company has a strong market share in various countries within the Asia Pacific Region.It also boas ts that in the UK, Tiger Beer can be found in more than 8,000 premium bars, clubs and distribution outlets in major cities. APBL’s products can be found in almost any shop that sells alcoholic beverages in the countries it has expanded to. Competitors Asia Pacific Breweries’ faces many competitors in the industry, namely in Breweries, beverage manufacturing, alcoholic beverage manufacturing, bars and nightclubs and restaurants, bars and food services. APBL’s local and overseas competitors include Carlsberg A/S, whose company perates in Europe and Asia. Asahi Breweries, Ltd, Suntory Group and Kirin Holding Company, Ltd, which primarily operates in Japan. SABMiller, which primarily operates in Americas, Africa, Asia and Europe. The Philippines-based company: San Miguel Corporation and China Resources Enterprise Limited based in Hong Kong. Kirin Brewery Company, Limited is engaged in producing alcoholic beverages, soft drinks, food products and pharmaceuticals thro ugh its subsidiaries. SABMiller is engaged in producing and distributing beer, malts and carbonated soft drinks.Likewise, Suntory Group primarily operates in the non-alcoholic and alcoholic beverages, food products and the food services business segments. Carlsberg, a renowned competitor, is also engaged not only in the production, marketing and sales of beer, but also produces soft drinks, energy drinks and bottled water. San Miguel Corporation, yet another renowned competitor, also engages in the production of beverages and is involved in other business segments such as food and packaging products, power generation and distribution, mining, fuel and oil, infrastructure, telecommunications, management and development of real estate properties. . EXISTING OPERATIONS OF COMPANY 5. 1 Entry modes used for expansion Joint Ventures Asia pacific breweries preferred mode of entry is Joint Ventures. For example, in Singapore, Asian Pacific Breweries started out in Singapore as a Joint Ventu re between Heineken International and Fraser and Neave in 1931 and was known as Malayan Breweries Limited. Asia pacific breweries also used joint venture in Cambodia, China, Laos, Malaysia, Mongolia, Thailand, Vietnam, Indonesia and New Zealand. In Cambodia, Asian Pacific Breweries formed a joint venture with Progress Import and Export, which formed Cambodia Brewery Ltd.In China, Asian Pacific Brewery formed a 50-50 joint venture with its shareholders, Fraser and Neave, Limited and Heineken in China known as Heineken-APB (China). APBL also engaged in a joint venture with Laos: Asian Pacific Breweries opened a brewery in Laos through a joint venture with the Government of Laos and SBK Consultant Ltd. Malaysia’s Guinness Anchor Bhd was a result of the merger of Guinness Malaysia Bhd and Malayan Sdn Bhd whose parent company is the current Asian Pacific Brewery. In Mongolia, Asian Pacific has formed a 55-45 joint venture with MCS Holdings LLC.APBL also entered Thailand, Vietnam, Indonesia and New Zealand via Joint Venture. In Thailand, Asian Pacific Breweries entered Thailand, to form a joint venture with Thai Life Insurance Company Limited and Thai Pure Drinks Company Limited. Similarly, In Vietnam, Vietnam Brewery Ltd. , (VBL) was formed by a joint venture between Saigon Trading Group (SATRA) & APBL. Finally, In Indonesia, APB participates in the Indonesian beer market via PT Multi Bintang Indonesia Tbk (MBI). Acquisitions In 1955, APB entered Papua New Guinea by acquiring a stake in the brewery, which has been the sole beer brewer in Papua New Guinea since 1983.Further expanding their foothold in the South Pacific, APB entered the beer market of Solomon Islands with a majority  stake in Solomon Breweries Limited (SBL). Merger In New Caledonia, APB entered the beer market of New Caledonia via Grande Brasserie de Nouvelle Caledonia (GBNC). GBNC was formed in 1974 as a result of a merger of two breweries in the territory of New Caledonia. Partnership In Sri Lanka, APBL formed a partnership with Sri Lankan-based Anandappa family group and associates and MBL Offshore Limited, a wholly owned subsidiary of Phoenix Beverages Limited, which is a leading beverage group from Mauritius, to form APB Lanka.Please refer to Appendix A for APB’s shareholdings in the various countries 5. 2Types of operating issues or problems encountered Operational issues: When expanding into foreign countries, the scale of investment and exports increases. Large amount of capital is needed for venturing into new markets, resulting in the company having fewer budgets to channelize into other new markets or other development areas like R&D. Additionally; customers in different market have different standards, forcing APBL to consistently adapt the flavor to suit to local’s tongue.The unexpected fluctuating exchange rate incurred loss as seen when â€Å"APB suffered a paper loss of S$37. 9m & S$14. 5m in 2008 & 2009 respectively. â₠¬  APBL experiences currency risks due to contractual cash flow invoice in another currency. There is potential currency mismatch in investing countries like Vietnam and Mongolia. For example, APBL invests in USD but revenue generated comes in VND. High agricultural products price resulting from natural disasters also happens in overseas production subsidiary would increase cost of beer production.There might be political and economic regulatory uncertainties in investing market that delay the business operation or high entry barrier in some country as government restrict foreign investment scale or the sales of beer. Economic problems: Due to increase in prices of agricultural products such as wheat and barley, this increases the cost of beer production as well. APBL had to absorb this increase in cost of production, which will be bound to induce negative effects such as an increase in selling prices of beer to offset the higher cost of production.This might lead to potential loss of customers. Also, the value of the firm may be affected by unanticipated and volatile changes in the exchange rates on home currency. For example, the depreciation of Tugrik led to an exchange loss of $ 5. 9M. Political problems: When venturing into Mongolia, there were various benefits and risks encountered by APBL. Some political risks encountered were that the political system lacks transparency and corruption level is high.When venturing into Indochina, there was similarly a high level of corruption in the government coupled with a high tax regime of 45% which decreases the profit margin of APBL due to the higher expenses incurred from the high tax regime. Legal problems: Asia Pacific Breweries’ financial manager, Chia Teck Leng is currently serving 42 years in prison as a result of swindling S$117 million from a Scandinavian bank, two Japanese banks, and a German bank across a period of four years to make up for his gambling addiction.This is reflected as the lengthie st jail term given for the biggest case in commercial fraud in Singapore to date. Chia was charged with using underhand means to extort foreign banks of about S$117 million, criminal breach of trust of S$53 million, money laundering, and encouraging his girlfriend Li Jin to use a forged passport. He was imprisoned on 2 April 2004 after pleading guilty to 14 charges. 6. FUTURE EXPANSION PLAN 6. 1 Selected countries and reasons for expansion Reasons for venturing into Spain The Spanish culture is known for drinking a lot of beer.If APB ventures into Spain, it can be assured of a big market to introduce its products to. But despite the presence of many other beer companies in Spain, APB is a cheaper alternative compared to other beers, which will thus attract many consumers. Furthermore, it is known that good beer is a sign of a good restaurant. If APB can satisfy its customers’ standard of ‘good beer’, it can definitely boost the reputation of restaurants that cate r APB to its customers. In addition, foreign beers are very rampant in Spain. This shows that the Spanish would welcome foreign beers.Thus, this ensures that APB products will have higher chances of being accepted by the Spanish. Barcelona is also known to be a ‘Drinker’s Paradise’. However, there have been negative feedbacks about the type of beers offered in Barcelona bars, which does not complement the drinking environment in Barcelona. Hence, if APB products can satisfy the Spanish, this will up the profit that bars make from selling beers, which will in turn benefit APB in the long run. From 2009 to 2012, the economy of Spain met with a downturn, and almost a quarter of Spain’s workforce was unemployed.APB can now make use of the unemployed as labor for APB in Spain. Reasons for venturing into Australia The wine industry has expanded rapidly but Australians will always be known as beer drinkers, even rivaling the likes of Germans. Therefore, if APB ve ntures into Australia it will also have a large market of consumers to introduce its products to. Coupled with the fact that APB is a cheaper beer alternative, there is a high chance that many consumers will turn to APB to satisfy their demands. There are also various Beer Festivals held in Australia on a regular basis.Such Beer Festivals include ‘The 7th Annual Australian Beer Festival’ which attracted a large crowd of over 10000 people with 24 Australian brewers and over 100 Aussie beers present during the festival. Such Beer Festivals are definitely a good avenue to increase the reputation of APB at a large and quick scale if APB were to venture into Australia. In addition to Beer Festivals, there is also the presence of beer competition such as the ‘Australian International Beer Awards’. This is yet another platform for breweries to showcase their premium beer and brewing excellence.All these platforms reflects the Australian’s interest in beer d rinking and thus this is definitely a good reason for APB to venture into the Australian market and grab its own customer loyalties and build its reputation in Australia. More importantly, the economy of Australia is one of the most developed, modern market economies in the world. In 2011, the Australian economy was the fastest growing advanced economy in the world, with a GDP of approximately US$1. 6 trillion. This means that the Australians are earning more than the worldwide average.The IMF in April 2012 predicted that Australia would be the best performing economy in the world over the next two years. With such a boosting economy in Australia, APB should venture into Australia. Australia has also entered into many FTAs with ASEAN countries and Australia is also a member of various international organizations such as APEC and WTO. This puts Australia in a very good position to make foreign trading with other countries, granted support from these organizations 6. 2 Identification of sub-factors used for expansion Political-Legal factorsSub-factors used: Country risk ranking, political stability ranking, legal regulatory ranking, corruption index and political transparency index and ease of doing business ranking. Political and legal forces greatly impact the success of a company expanding into a foreign environment. It comprises of three main pillars. They are government regulation; laws that restrict the amount of trade freedom a foreign company has in a host country. The Government bureaucracy provides the foreign company with the legal license to conduct business activity in the country and political stability.Economic factors Sub-factors used: GDP growth rate, GDP Growth Projection, Purchasing power parity, Per Capita Income, Inflation rate, Exchange rate stability and presence of competitors. Economic factors refer to whether the country is favorable in terms of its economy. It is a significant factor considered when expanding, as economic factors will greatly affect the success of the company in that country. Social Cultural factors Sub-factors used: Education level, Language, Religion, Income, Age and Ethnic distribution and attitude towards time. The social culture in every country is different.The language, attitudes towards business, religious beliefs, traditions, and customs varies greatly from country to country. Managers must be aware of the differing cultures and specific taste of each country and tailor their products to suit their individual cultures. By doing so, it raises the level of competiveness and demand for that product in that market. Geographical factors Sub-factors used: Accessibility to raw materials, agricultural products available, natural hazards, climate, percentage unemployed in labor force, minimum gross annual wage rate, land area, lease period of land, cost of land & terrain.Geographic features in every country heavily influence the rate and pace at which a foreign company can expand in the host country. Surface features such as navigable rivers and flat plains aids travel and contact with others, hence accelerating the productivity of the company. However, countries with topographical features like treacherous mountain ranges, deserts and large bodies of water may discourage communication. This affects consumers’ product needs and wants, hence requiring managers to be extra particular about their preference. Technological factorsSub-factors used: Availability of Digital Network Infrastructure, Internet penetration rate, Presence of legal framework for intellectual property and presence of e-banking structure. Technological advancement varies extensively throughout the world. Most firms would expand into a new market only if there is demand for its product or if the technology and infrastructure there can support its existing production operations. A country with the latest technology and infrastructure would mean lower costs for the company that is intending to ente r into that market. 6. 2. Political/Legal Factors Factor| Spain| Australia| Country Risk Ranking| Risk ranking of 61. 83| Risk ranking of 82. 25 ? | Political Stability Risk Ranking| With a Political Instability Index of 5. 5, Spain is ranked 104th in the world. | With a Political Instability Index (PII) of 3. 6, Australia is ranked 154th in the world. ?| Legal Regulatory Risk Ranking| Overall assessment of Spain is B, 30. | Overall assessment of Australia is A, 18. ?| Corruption Index & Political Transparency Index | With a Corruption Perception Index (CPI) of 6. 1, Spain is ranked 30th in the world. With a Corruption Perception Index (CPI) of 8. 7, Australia is ranked 8th in the world. ?| Ease of Doing Business Ranking| Spain achieved a rank of 44. | Australia achieved a rank of 15. ?| In terms of Political-Legal factors, Australia is more favorable as it is better than Spain in terms of Country Risk Ranking, Political Stability Risk Ranking, Legal Regulatory Risk Ranking, Cor ruption Index & Political Transparency Index and Ease of Doing Business Ranking. 6. 2. 2 Economic Factors Factor| Spain| Australia| GDP Growth Rate| 0. 8% (2011 est. )| 1. 8% (2011 est. ) ? | -0. 1% (2010 est. )| 2. 7% (2010 est. )  ? | Purchasing Power Parity| $1,413,468 million (2011)| $914,482 million (2011) | Per Capita Income| $32360 (2010-11)| $65477 (2010-11) | Inflation Rate| 3. 1% (2011 est. ) ? | 3. 4% (2011 est. )| | 2% (2010 est. )  ? | 2. 8% (2010 est. )| Exchange Rate Stability| Euros (EUR) per US dollar – 0. 7107 (2011 est. ) 0. 755 (2010 est. ) 0. 7198 (2009 est. ) 0. 6827 (2008 est. ) 0. 7345 (2007 est. ) > Less stable| Australian dollars (AUD) per US dollar – 0. 9694 (2011 est. ) 1. 0902 (2010) 1. 2822 (2009) 1. 2059 (2008) 1. 137 (2007) > More stable ? | Presence of Competitors| Yes. There are strong competitors but not so many brewery companies ? | Yes. There are strong competitors and various microbreweries companies. Tense competit ion| In terms of Economic factors, Australia is more favorable because it is deemed better in five out seven sub-factors. From the comparison table, we know that Australia’s economy is more stable and more favorable for business as compared to Spain because it has a higher GDP Growth Rate and Projection, a lower Purchasing Power Parity and a higher Per Capita Income.Furthermore its Exchange Rate Stability is also more stable. 6. 2. 3 Social Cultural Factors Factor| Spain| Australia| Education level/ Literacy rate| 98. 5| 99. 98 ? | Language| Castilian Spanish (official) 74%, Catalan 17%, Galician 7%, and Basque 2%  | Majority: English 78. 5%, Chinese 2. 5%, Italian 1. 6%, Greek 1. 3%, Arabic 1. 2%, Vietnamese 1%, other 8. 2%, Unspecified 5. 7%  ? | Income Distribution| * 10% Rich (25. 2% of income) * 80% Middle Class (72% of income) * 10% (2. 8% of the income)| * 10% Rich (25. 4% of income) * 80% Between the two (72. % of the income) * 10% Poor (2% of the income. ?| Attit ude towards time| The Spaniards are typically a laid back group of people, with a relaxed sense of time| It is expected of an individual to be punctual in any occasion ? | Age Distribution| 0-14 years:  15. 1%15-64 years:  67. 7%65 years and over:  17. 1%| 0-14 years:  18. 3% 15-64 years:  67. 7%65 years and over:  14% ? | It is more feasible to expand into Australia because its Social Cultural factors are more promising. It has a higher Education level and Literacy rate, which means the citizens in Australia are more employable.In terms of Language, majority of Australians speak English thus dispelling any language barriers. Australia’s attitude towards time is also more advantageous for the business. 6. 2. 4 Technological-Infrastructure Factors Factor| Spain| Australia| Secure Internet Servers| 285| 2003? | Internet users (per 100 people)| 65. 8| 75. 9? | Presence of Legal framework for Intellectual Property| Copyright Law of SpainSpanish Patent and Trademark Of fice| Australian Property Law ? | Presence of e-Banking Infrastructure | Top 8 country, 46% utilization ? Top 10 country, 44% utilization| It is also more practical to expand into Australia because it is better in terms of the Technological-Infrastructure sub factors. In order for an international business to experience ease in communications between countries, its technological factors must be superlative. By analyzing the various sub-factors, we know that the Internet users (per 100) and Secure Internet Servers in Australia is much higher. 6. 2. 4 Geographical Factors 1 Factor| Spain| Australia| Natural hazards| Periodic droughts, occasional flooding and volcanism ? Cyclones along the coast; severe droughts; forest fires volcanism| Climate| Temperate; clear, hot summers in interior, more moderate and cloudy along coast; cloudy, cold winters in interior,  partly cloudy and cool along coast ? | Generally arid to semiarid (low precipitation); temperate in south and east; tropical i n north| % Unemployed in Labour Force| 20. 065%? | 5. 233% | Minimum Gross Annual Wage Rate (International Dollars)| $11,426. 00 ? | $20,027. 00| Land Area (sq. km)| 505,370| 7,741,220 ? | Terrain| Large, flat to dissected plateaus surrounded by rugged hills ? | Mostly low plateau with eserts, fertile plains in southeast| Upon comparing both countries’ Geographical Factors 1, Spain is more favorable. This is because it is less prone to natural hazards and its climate is more conducive for setting up a plant. They also have a large unemployment rate, which APBL can take advantage of if they chose to expand into Spain. 6. 2. 5 Geographical Factors 2 Factor| Spain| Australia| Length of road network| The road network comprises a total of 346,858 km| The road network comprises a total of 913,000 km ? | Number of Airports| 47 Airports | 448 Airports ? | Number of Seaports| 66 Seaports| 214 Seaports ? Preferential Tax Incentives for Foreign Investors| Deductions are readily availabl e for export activities, investment in the environment, R&D, extraordinary profits reinvestment, training, etc. ?| Subjective to the nature and size of the investment project, the relevant Australian State governments may give rebates from payroll, stamp and land taxes on an ad hoc basis and for limited periods. | By analyzing the Geographical factors 2, Australia is much better because it has a longer road network, more airports as well as seaports. This means that it is much more accessible if we expand into Australia. 6. Recommendation, reasons and type of entry mode to use for Australia. Recommendation We chose to enter the Australian market with either a company currently existing in Australia or a company that hasn’t expanded into any other countries, and have similar goals as Asia Pacific Brewery. We have chosen to go with Coopers Brewery Limited, the largest Australian-owned brewery or the largest home brewing equipment producer in the world. Reasons By venturing into Australia with Coopers Brewery Limited, the chances of reducing cost and risk would be higher as compared to attempting to enter the market alone or with external companies.This would be due to the fact that Coopers Brewery Limited has an established name and hence, this allows them to share their experiences with APB, reducing the trouble of setting up their own subsidiary, ultimately reducing the chances of consumer doubt. Therefore, smaller amount of investment is required to put APB’s business into operation. APB need not waste valuable time to set up its own subsidiary or look for ways to enter the Australian market, which it has low international experience or little cultural knowledge of. Knowledge wise, APB would have an advantage when going into joint venture with CoopersBrewery Limited because they possess information and first-hand experience about the local market demand and they know what â€Å"works† in order to satisfy their consumer’s standa rds and preferences. In terms of production capacity, APB would be able to increase its product and sales volume as there might be sharing of staff and production facilities between both brewery companies. They can also share the cost of marketing and advertising their brewery products. APB can now afford to sell its product at cheaper price, thus increasing its competitiveness in the brewery industry within short period of time.Type of Entry Mode to use We chose to enter the Australian market via Joint Venture with Coopers Brewery Limited. Coopers Brewery Limited was established in 1862, by Thomas Cooper at his home in the  Adelaide  suburb of  Norwood, South Australia. Being the utmost powerful beer company in South-Australia, Coopers Brewery Limited would have the largest amount of market shares hence we would be able to penetrate the markets and promote APB’s branding to Australia, as the consumer-producer’s trust is already established.APB can build good rel ations with its new retailers and customers since its joint venture partner already has a reputable brand image, thus this adds on to APB’s credibility without much effort required. Therefore, APB would be able to distribute its product more efficiently through the availability of existing market channels that Coopers Brewery Limited has. 6. 4 Reasons for not selecting Spain. By comparing both countries, and weighing the factors used for expansion, we have unanimously concluded that Spain is not as favorable as compared to Australia.In terms of Political-Legal factors, Spain’s country risk ranking is lower than Australia, which indicates political instability that is unfavorable when setting up a business. Furthermore, Spain’s ranking when it comes to ease of doing business is ranked 44 in the world, a significant inferiority compared to Australia which ranks 15. Economically wise, Spain’s GDP Growth rate is relatively smaller compared to Australiaâ€℠¢s. In terms of Per Capita Income, Spain’s is much lower compared to Australia, which might play a role as to unsatisfactory sales.Furthermore, by comparing 5-year statistics, the exchange rate stability also fluctuates more than Australia, therefore being less stable. By looking at the Social Cultural factors, Spain is less favorable than Australia because of its lower literacy rate and minor percentage of English speaking individuals, Moreover, the Age Distribution in Australia is better than Spain because despite the exact same percentage of people aged 15-64, the youth’s population in Australia is greater than Spain.This means that in the future, Spain’s percentage of 15-64 would be less compared to Australia. This age groups consists of the majority of working individuals, hence, a smaller figure would be deemed as having an adverse effect to the company. Technological Factors also indicates that Spain isn’t on par with Australia. International Busin esses rely heavily on technology for communication. If APBL wants to expand to a country, it would be an advantage if the country’s penetration rate were higher.By comparison from the table above, it is evident that the Internet Users (per 100) in Australia far exceeds Spain’s, which would mean that there are more computer literate individuals in Australia as compared to Spain, which would pave the way for more employment opportunities. Geographically speaking, Spain’s land area is comparatively smaller than Australia. In order to establish a major brewery, a vast land area is required and Australia has more land than Spain, which means that it would be more economical as land isn’t as scarce.The comparison also shows that Spain has lesser Airports, Seaports and a shorter length of road network, which reflects that the accessibility in Spain is inferior to Australia’s. CONCLUSION Our consultant team has found that Australia would be the more promis ing country for Asia Pacific Breweries’ expansion plans. This is conclusive of our results, which were based on a thorough assessment of thirty-six diverse sub-factors, which are instrumental in successful business expansions. Australia was found to be more favorable in twenty-six out of the thirty-six factors.Australia boasts a relatively slight political risk and has low corruption in the country, which provides a conducive and secure environment for Asia Pacific Breweries to conduct its operations in. Furthermore, agricultural produce in Australia is suitable for the brewing of quality beer, thus Asia Pacific Breweries does not need to source for additional raw materials, which would otherwise incur a huge cost. Australia also has a comprehensive web of transport infrastructure, which would greatly increase the efficiency of Asia Pacific Breweries operations, hence cutting costs.The quality of education in Australia is also of a high standard, producing a workforce that is highly literate. A highly educated work force will not only increase work productivity but also the overall competitiveness and capabilities of Asia Pacific Breweries in Australia. The Australian economy shows no sign of slowing down as GDP growth rates are projected to continue increasing through the years. Additionally, the per capita income in Australia is considerably high, which means that the average Australian is comparatively well to do.As beer is a lifestyle product, a strong, robust economy coupled with a high standard of living will be able to better complement and boost the sales of beer. After taking into considerations the abovementioned conclusions, the team here at G&T Consultancy would like to offer a recommendation for Asia Pacific Breweries to expand into the Australian market. APPENDIXES Appendix A: APB’s Shareholdings BIBLIOGRAPHY 1. Asia Pacific Breweries Limited – SWOT Analysis Overview, (2011) Retrieved 20 May 2012, from  http://forum. sh areinvestor. com/forum/showthread. php? 23-Asia-Pacific-Breweries 2.APB: Commences Legal Proceedings Regarding Proposed Sale Of Heineken-APB (China)(2012) Retrieved 20 May 2012, from  http://forum. shareinvestor. com/forum/showthread. php? 23-Asia-Pacific-Breweries 3. Market line, Last updated (2012), Retrieved 22nd May 2012 from: http://360. datamonitor. com. libwww3. np. edu. sg/Product? pid=88B119E4-FAC0-4BA3-B0B8-403ED16218AA&view=SWOTAnalysis 4. Damien Corrigan – Beer in Spain: What to expect in a Spanish Bar (2012) Retrieved 29th May from: http://gospain. about. com/od/fooddrink/qt/beerinspain. htm 5. Beer drinking in Barcelona, Spain, Retrieved 29th May from: http://www. beertutor. om/city_guides/barcelona. shtml 6. Beers of Australia, Retrieved 29th May from: http://www. clickforaustralia. com/BeersofAustralia. htm 7. 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