Country Research Project: Business operations risks involved
The project will illustrate the opportunities and associated risks involved in the development of a company providing cloud-based software to small and medium business in Germany. The research will primarily focus on the innovation and technology market of medium-sized companies in Germany which have been left out by the giant providers due to low profitability in the investments. The level of technology within the country has grown significantly due to the existing trends and innovations around the world with a market gap among the small and medium-sized companies. Primarily this is because the cost of installation and maintenance provided by the existing company is slightly higher making it difficult for these organization to adapt. Besides, over the past years, the association between the United States and the German government has disrupted the operations making these large organizations to stop their activities within the region. As a result, this will be an opportunity to venture given the fact that there will be an opportunity to capitalize before the political and economic stability between the United States of America and Germany. Therefore, it is crucial to understand the essential needs which the small and medium-sized companies in Germany will benefit from through the provision of the software which brings together internal communications, projects; clients work in one location.
Every country in the world has its investment opportunities which often attracts different companies to operate. Further, the potential opportunities which are available in Germany are essential but also attracts the economic risks to the interested businesses. These risks are mainly entailing the macroeconomic conditions of the foreign country. There are various economic risks which will affect the operation of this company in Germany. Government regulations can be one of the economic risks which the company may experience because there are laws which can be imposed to affect the business operations (Boddewyn 90). These may consist of increased taxation of the foreign companies which may in turn influence the activity of the business negatively.
Notably, the existing misunderstandings of the European Union and the United States over the past years can cause sanction or higher taxation of the company operations within their country. The other economic risk possibility of exchange rates between the nations. The currency rate of Germany will automatically affect the business operations due to the valuation of money which would require proper management to complete a transaction. An increase in the exchange rate in favor of the business might lead to more value of the business operations. The decrease, on the other hand, can result in the loss of the business value of the activities. For instance, in case the company wants to borrow money from the united states of America then the amount to be repaid may accumulate more interest than expected (Quadrini 22). In general, the economic risks are considered as one of the reasons for the investment to carry higher risk as compared to the local operation of business activities. The management is put into the risk to deal with exposed transactions of the business activities. Additionally, these economic risks can also be useful when the management of the business critically evaluate them to outweigh the challenges.
There are various restrictions in doing business activity in Germany due to the existing cultural practices. For instance, the typical business culture meetings in Germany often starts slowly where the decisions are not usually made until the end. There is a large gap which exists between the executive level and the rest of the company because the process of decision making is considered to be made by an individual or board of directors. One of the cultural risks associated with doing in Germany is the relationship ties of people which can impact the operations of the business needs to meet its objectives. Therefore, there are various cultural aspects which need to be put into consideration before developing business in Germany.
The understanding of personal space can be different from other people. Primarily this is because Germany has a warm and welcoming belief of acceptance which exists especially after doing businesses with them. Further, they also have a strict perception of time given the fact that they often tend to arrive early for meetings more than the Americans. As a result, it would be essential to understand and comply with such changes to operating the business effectively in Germany (Boddewyn 98). The fundamental principle in the cultural risks to conduct business in Germany should be managed to realize the cultural differences which may affect the business operations. Primarily the business such as providing software for business requires much attention and need to embrace cultural aspects to minimize failure and capitalize on opportunities.
The uncertainties of business risks are not limited to the political factors which have multiple needs to be understood. Most of the countries experience these risks due to the instability of the government. The concern is made on the aspect of the stability or effectiveness of the government with the aims of protecting the business interests. Lack of proper foreign trade policies can cause the business operations to lose the value and profitability in the long run. The political risks can be divided into macro and microelements(Boddewyn 102). The macro risks impact consists of events such as civil war major international confrontations between government. For instance, the political risk which is facing Germany is the confrontation with the United States over the business ties and conflicts due to the disagreement of partnerships, primarily through their companies.
Notably, there are different types of political risks which consist of expropriation where the government can seize or confiscate the investment of the company. The other risk is the transfer and conversion where the foreign government can decide to impose prohibitions and restrictions on the conversations of local currency. This can prevent their money from leaving the country and in turn hinder the business operations. Therefore, the business should be ready to prepare ways in which it can protect itself from these potential political risks. The primary measure to consider is the political risk insurance which is crucial to protect the investment from unforeseen events. The emerging trends of political risks are often predictable in emerging markets within the contemporary world. The need to initiate these potential risks need proper planning and mitigation strategies to put in place for preventing the possibility of such occurrence in business operations.
The financial risk is the possibility in which the management and other shareholders of a business can lose money through investment in companies which have debts or prove to have inadequate cash to meet the financial obligations. The focus is to develop the ability to manage the finance and debt leverage to cover and generate sufficient revenue for operational expenses (Quadrini 20). The investment in foreign nations is advised to be looked into to increase the total return of the business portfolio by diversifying the benefits to achieve additional low correlation assets of the targeted market. Therefore, various risks in which a company is providing software can experience in the long run. These consist of higher transaction costs that can be the likely barrier to invest in the international markets.
The level of globalization often varies and depends on the market targeted for investing. For instance, the charges within the local markets of Germany is affected by various aspects such as corruption in the business market. Bribery and corruption claims are considered one of the significant problems and deemed illegal by the government. Although there are improvements over the past years, it is imperative to understand the need to put into consideration of such factors in achieving the targeted goals (Quadrini 22). The other financial risk which can face the business in Germany is the liquidity risks which is also a coherent experience in foreign markets. The ability to not able to sell the stock or product quickly should be a concern to business management. There are many measures which can be used to evaluate the liquidity of an asset before the purchase. One of the ways is through observing the bid-ask spread when selling the products in the country. The bottom-line aspect which should be put into consideration is to understand the possible financial risk expected in Germany to assist in developing strategies and measures to mitigate them to achieve a business objective.
Market Potential and Entry Strategy
The market entry is always a planned delivery and distribution method in which products and services are made to the target market. Developing a new business venture in providing cloud-based software to small and medium business is a potential opportunity in Germany. The development of this opportunity is signified through the high costs of the services offered by the existing firms within the country. Besides, it is imperative to understand that the current situation of telecommunication reforms and development has significantly improved. The adoption of ICTs access can be described to have grown on the penetration per 100 inhabitants to an average of 70% due to the influence of the wireless creation (Wu et al. 9). Further, this growth has also advanced to represent a GDP of about 7% which are about the development of mobile telephony. In regards to the broadband development, there is an increase in penetration in Germany to a tune of about 87% making it among the highest rate broadband penetration Europe. According to cloud computing monitor, there is an indication that every two out of three companies use cloud computing solutions in Germany (Wu et al. 9). These reports thus indicate the potential growth in the industry of information technology that has a target market for the business venture.
The market entry in such an industry is vital to research with the aim to assist in clarifying the trends of business operations. There are various factors to consider before the business entry to build a winning market entry strategy. Setting clear goals on the specific need to achieve in the new market such as the expectation of sales to obtain should be put into consideration. Primarily this can be achieved through a proper understanding of the market by learning the social, political and cultural climate (Lieberman 532). The other element to consider is the need to study the level of competition. Analysis indicates that the level of competition for the small and medium-sized company is higher but only need the right price of the product to achieve the goals.
Organizational Structure and Business Operations
The organizational structure of the business venture would require a simple hierarchical form which is characterized by the function base as well as the hierarchy. The management would focus on building a functional structure organization in which the operations will undertake the supervision, directions allocation of responsibilities and management accordingly. The management will select the processes and presentations on how to carry the duties. This form of organizational structure will assist the business venture to make entry strategy options to make quick decision-making processes as the members of the group will be able to interconnect effortlessly among each other (Kim and Sungwook 40). Moreover, this form of management of business operations will assist in improving employee performance because it outlines the tasks given to the employees where the manager is responsible for overseeing the employees.
Marketing and Management Focus
Market Targeting segmentation and positioning strategies are some of the measures which can be used by the technology innovation business venture to market its operation within the targeted market. Market segmentation entails the process of dividing the market according to potential customers into groups of various characteristics. The creation of segments is composed of consumers who respond in a similar way in which the marketing strategies supports their interests, needs, and locations. The importance of market segmentation assists the company to target the segmented groups instead of each potential customer individually.
Similarly, it also reduces the possible risk of an unsuccessful or ineffective marketing campaign (Chonko and Shelby 90). Developing a marketing strategy would be essential to impact business activities within the target market. The use of the marketing mix can be a useful strategy to analyze and set controllable and tactical marking tools for the business venture. The management focus, on the other hand, can be designed to meet the leadership ability in the operations of the business venture. One of the ways the management focus can be applied is through cost leadership and differentiation strategies. The cost leadership strategy describes the desire to compete based on the prices by targeting the narrow market. The business venture which applies this strategy is not necessarily charging the lowest price in the industry, but instead, it relatively lowers the prices to compete within the targeted market. The use of differentiation strategy focuses on offering features which fulfill the demands of the narrow market. It also entails the use of low-cost forms by using different channels of sales on their product.
The industry of cloud-based computing services is one of the advanced fields which requires proper strategy management to achieve the goals within different markets. Providers and business ventures often face different challenges within their target markets. There are various useful recommendations which should be put into consideration to mitigate these issues. The service provided by the business venture should be unique in terms of differentiation from other companies in the market. Primarily this can be in regards to cloud management solutions offered to the customers which need to have the leverage of the latest hardware’s, software solutions and virtualization to support the connection of data centers. The other recommendation is the service management where the company should provide a quantified service set with applications that the end user can consume through the provider. This ensures customer loyalty because the clients have been guaranteed of the safety, metering measures billing cycles and resource management systems.
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Chonko, Lawrence B., and Shelby D. Hunt. “Reflections on ethical issues in marketing management: An empirical examination.” Journal of Global Scholars of Marketing Science, vol.28, no.1, 2018, pp.86-95.
Kim, Stephen K., and Sungwook Min. “Business model innovation performance: when does add new business; model benefits an incumbent.” Strategic Entrepreneurship Journal vol. 9, no.1, 2015, 34-57.
Lieberman, Marvin B., Gwendolyn K. Lee, and Timothy B. Folta. “Entry, exit, and the potential for resource redeployment.” Strategic management journal vol.38, no.3, 2017, pp. 526-544.
Quadrini, Vincenzo. “The external risks of financial integration for emerging economies.” Essays sober Political, economic vol.35, no.82 2017, pp.18-24.
Wu, Dazhong, et al. “Cloud-based design and manufacturing: A new paradigm in digital manufacturing and design innovation.” Computer-Aided Design vol.59, 2015, pp.1-14.