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The study will provide a deep analysis of the three possible markets namely, India, Germany, and Brazil out of which one is to be selected by Pashley Cycles as the export market as a section of its growth strategy. On the other hand, it will also reflect the examination of the external environments of these three nations with the utilization of the decision-making tools such as pestle, SWOT, and porter's five forces. It will further generate recommendations about which of the three countries would be best for the export market of the Pashley Cycles for their expansions. Finally, it would provide a preferable conclusion about the lessons that had been acquired from this analysis.
Pashley Cycles is termed the tricycle, bicycle, and work bike producer of the United Kingdom which has its headquarters in Warwickshire and was founded by "William Rath Pashley". On the other hand, it has been recognized that they make 40% of their bicycle goods exports to almost fifty nations and the total number of employees working under them is 50 (Pashley, 2022).
2. External Analysis for Identifying the right Export Market for Pashley Cycles
2.1. SWOT Analysis
Brazil
Strength
The biggest strength of the market in Brazil is that it seems to be a very business-friendly environment with complete security and political stability which will make it very easy for Pashley Cycles to open its bicycle stores (Rocha and Caldeira-Pires, 2019). Another strength of the Brazilian market is the easy acceptance of new products and companies among the customers. This will help Pashley Cycles smoothly gain a large number of target customers and market shares.
Weaknesses
The biggest weakness of the Brazilian market is the imposition of high amounts of tax and excise duties on foreign companies that do business in their nation. Moreover, there are reports of huge amounts of corruption in public spending (Passetti et al., 2016). On the other hand, the infrastructure of the technology sector for doing business.
Opportunities
The rising trend of using bicycles for riding and travelling among the youngsters and adult youth population would open new opportunities for Pashley Cycles to increase its sales and revenue in this country's market (Santopuoli et al., 2016). Moreover, the country’s present ruling government had also signed a new trade deal along with upgrading the small and medium enterprises.
Threats
The biggest threat to the Brazilian market is the decline in the commodities' prices along with a slowdown in effective and rational spending on correct development and sustainable projects (Rocha and Caldeira-Pires, 2019).
India
Strength
The biggest strength of the Indian market is the availability of the open market for foreign investment which will help Pashley Cycles in gaining full governmental support for opening their bicycle manufacturing site in India, thereby gaining good market and profit shares (Mathiyazhagan, 2020).
Weakness
The biggest weakness of the Indian market is that there has been a huge decline in its GDP and overseas revenue due to the current pandemic situation which led to the closure of various foreign companies in this nation (Kumar et al., 2018). Moreover, there are very few growth prospects for businesses related to the bicycle business.
Opportunities
On the other hand, India has the largest youth and child population who have the trend of using and riding bicycles which will open huge opportunities for increasing the sales and growth of the bicycle business of Pashley Cycles (Elavarasan et al., 2020). Moreover, they will also get a fixed big target customer as their base in future.
Threats
The biggest threat that India currently faces is the huge trade competition and border dispute with China which might disrupt their influence in global trade and generate political instability due to anticipated future war (Kumar et al., 2018). This can disrupt the planning of expanding business here by Pashley Cycles.
Germany
Strength
One of the biggest strengths of the German market is its developed economy and market structure which will increase the potential buying prospects. Moreover, they are also having a competitive pricing structure which will help Pashley Cycles in tackling rivalry from other companies that seem to manufacture and sell bicycles in Germany (Reißmann et al., 2018).
Weaknesses
The biggest weakness of the German market is the presence of stringent regulations regarding quality along with the current economic depression that has been generated due to the pertaining pandemic crisis (Agrawal et al., 2020). Moreover, it has also been recognized that the growing cases of crimes and racism in Germany’s certain regions and cities will restrict organizations like Pashley Cycles.
Opportunities
The biggest opportunity that could be gained from the German market is the presence of an advanced market structure along with eco-friendly culture which will help Pashley Cycles in flourishing here (Reißmann et al., 2018). Pashley Cycles would be able to make effective utilization of machines that are imported from India in Germany for making cycle tires.
Threats
The weakness of the German market is that they are still not very secular and inclusive to foreign companies (Reißmann et al., 2018). Hence, Pashley Cycles may face various difficulties in the initial phase while taking the production site on rent and acquiring legal permission from German authorities.
2.2. Porter’s five forces
Brazil
Competition level
There are numerous brands and companies in Germany that deal with the business of bicycle manufacturing such as Brazilian Trade, Andre Nicolodi, Bicycle Shop Ltd, and others. All of these bicycle brands will provide huge competition to Pashley Cycles if they enter the market in Germany (Bruijl, 2018). Hence, it can be said that the competition level for Pashley Cycles in Brazil is high.
Threats from substitutes
As there are a large number of competitors and rival bicycle brands in Brazil against Pashley Cycles, they must ensure the timely delivery of their goods to the customers as per their demand (Isabelle et al., 2020). This is because if they fail to meet the supply and sale of desired bicycles to target customers then they may shift to other big brands for buying bicycles of the same size and price as Pashley Cycles. Thus, threats from substitutes are very high for this organization.
Threats from new entrants
It has been identified that the bicycle industry is of very medium size hence, it will not be very difficult for new start-up companies to open new shops or manufacturing sites. Moreover, the expense of opening up new bicycle production and sales stores is very less (Wen et al., 2021). Hence, they can easily capture the market share of the bicycle business. This proves that threats of new entrants for Pashley Cycles are high.
Bargaining power of buyers
As the bicycles are being sold by Pashley Cycles and other brands at a fixed price along with prior discount offers, hence, the customers will not be able to purchase the product at their desired price (Bruijl, 2018). Thus, it can be said bargaining power of buyers will be very low for Pashley Cycles.
Bargaining powers of suppliers
It has been that Pashley Cycles seems to hire a diverse group of suppliers from whom they seem to acquire different types of tires and alloys for making bicycles. Hence, the suppliers fail to take negative advantage of it, and thereby their bargaining power is low (Bruijl, 2018).
India
Competition level
The Pashley Cycles will face huge competition from various popular bicycle organizations such as Avon Cycles, Atlas Cycles, Dahon Bicycles, and others (Isabelle et al., 2020). They will also encroach upon the profit share of the Pashley Cycles. This proves that the level of competition for this company in India will be high.
Threats from substitutes
As there is a massive range of competitors and rival bicycle manufacturers in Germany in opposition to Pashley Cycles, they need to make sure of the timely shipping of their items to the clients according to their desire (Wen et al., 2021). It is due to the fact that in the event that they fail to fulfil the delivery and sale of favoured bicycles to target clients then they will shift to different large manufacturers for purchasing bicycles of equal length and rate like that of Pashley Cycles. Consequently, threats from substitutes are very excessive for this organization.
Threats from new entrants
The bicycle industry in India is very huge due to the presence of so many local and brandy bicycle companies due to huge sales and demand for this product among the youth population (Wen et al., 2021). Moreover, the expenditure on opening new stores by new companies will be high along with stiff competition. Hence, the threats from new entrants for Pashley Cycles are very low in India
Bargaining power of buyers
As the bicycles are being bought with the aid of Pashley Cycles and different manufacturers within the constant fee in conjunction with earlier cut-price offers, subsequently, the clients will no longer be capable of buying the goods at their preferred rate (Isabelle et al., 2020). Consequently, it is able to be stated that the bargaining strength of consumers could be very low for Pashley Cycles.
Bargaining powers of suppliers
As Pashley Cycles seems to be hiring suppliers from various parts of the world which reduces their dependency on single deliverers. Hence, it can be said that the bargaining powers of
Germany
Competition level
There is an existence of various famous companies that deal with the sales of bicycles such as Trek Bicycle, Peugeot, Focus Bikes, Canyon, and others (Isabelle et al., 2020). Thus, it can be said that the range of competition for Pashley Cycles in Germany will be high.
Threats from substitutes
As there are a huge number of companies and rival bicycle producers in Germany in competition to Pashley Cycles, they are required to make certain the well-timed delivery of their objects to the consumers in step with their preferences (Isabelle et al., 2020). It is because of the truth that within the occasion that they fail to supply the shipping and sale of preferred bicycles to target purchasers then they may move towards other unique massive producers for getting bicycles of identical duration and charge like that of Pashley Cycles. Therefore, threats from substitutes are very immoderate for this corporation.
Threats from new entrants
As the bicycle industry is very small, hence, it will not be difficult for new companies to construct a new store for manufacturing and sling bicycles with low costs. This proves that threats from new entrants will be low for Pashley Cycles (Bruijl, 2018).
Bargaining power of buyers
The bargaining power of purchasers will be low as they seem to be buying the bicycles at a fixed price with a discount.
Bargaining powers of suppliers
The bargaining power of suppliers will be low as a diverse group of suppliers is being maintained by the company and other bicycle brands in Germany (Bruijl, 2018).
2.3. Pestel Analysis
Brazil
Political
The political condition of Brazil is in stable condition with good relations with Venezuela, Argentina, and the USA. However, many politicians are facing charges of corruption which might make it difficult for Pashley Cycles to open new cycle stores there de Sousa, G.C. and (Castañeda-Ayarza, J.A., 2022).
Economic
The yearly GDP of Brazil is 1.363 trillion dollars and it is the thirteenth-largest in the entire globe. Moreover, its per capita income seems to be 6450 dollars and has a very open market for foreign investment (Da Silva and Castañeda-Ayarza, 2021).
Social
The society of Brazil is very much educated and has a high standard of living, however, still 10% of the entire population is still below the line of poverty and its literacy rate is 93.23% (Castañeda-Ayarza, J.A., 2022).
Technological
Brazil has seen huge technological developments in recent years which is evident from the emergence of IT companies and institutions.
Environmental
The Brazilian government very consciously looks after taking effective greenery initiatives for reducing pollution as they are facing land degradation, spills of oils, and others.
Legal
Brazil’s legal structure no longer needed corporations to have an employment agreement, however writing a settlement and signing it is a not unusual exercise (Castañeda-Ayarza, J.A., 2022). Normally, the authorities promote overseas funding in lots of sectors.
India
Political
The current political condition is partly stable and unstable due to huge criticism for managing the economy of the nation (Wajid and Zafar, 2021).
Economic
The current economic condition of India is very bad due to the huge financial losses they are suffering because of Covid-19 (ARUNACHALAM and FOUNTIS, 2021).
Social
The people of India are very hardworking with the world's largest youth population, however, the poverty rate and illiteracy rate are very high.
Technological
The cities of India such as Bengaluru are called the Silicon Valley of India due to a large number of big IT corporate firms (Wajid and Zafar, 2021).
Environmental
The environmental situation is worse due to declining air quality in big cities such as Delhi, Mumbai, and others.
Legal
The legal system of India is very strict with regular changes, however, India encourages FDI with open market conditions (Wajid and Zafar, 2021).
Germany
Political
The political situation of Germany is not stable due to its involvement in the supply of weapons in the Russia-Ukraine war which is making it vulnerable for new companies to invest (Çitilci and Akbal?k, 2020).
Economic
Germany is the fourth-biggest economy in the world thereby providing huge scopes to overseas companies to prosper in business there.
Social
The society of Germany is very advanced and broad-minded with a literacy rate of 100% and has a huge trend of accepting new things (Matovi?, 2020).
Technological
Germany has seen huge technological developments in recent years which is evident from the emergence of IT companies and institutions (Çitilci and Akbal?k, 2020).
Environmental
The sustainable programs of Germany are very wide and productive with good plantation of trees and cleansing of air and soil pollution.
Legal
A written agreement of employment outlining the major components of employment needs to be provided to personnel. The minimal salary in Germany is €9.50 per hour, and it's far anticipated to boom a chunk quickly (Matovi?, 2020).
3. Market Choice Based on the Analysis for Pashley Cycles
From the analysis, it can be identified that India will be the most suitable market for the Pashley Cycle since the market is 2nd largest in the world and the market is going to be one of the huge markets for the bicycle companies like Pashley Cycles (Muthusamy, 2020). The Indian market for the cycles can be observed being an emerging market that has the potential of generating huge profits for the companies that are willing to invest and export cycles to the nation. It can be recognized that the Hero Cycle is among the popular and most purchased brands in India and when the company launched a new range of cycles featuring electric bicycles, it managed to capture an overall market of 72% of the total market share in India (Singh, Singh and Vaibhav, 2021; HT Digital Streams, 2020). This is one of the indications that Pashley Cycles can experiment by launching a wide range of bicycles to the market starting from electric cycles to mid-range cycles to high-end cycles for the consumers living in the nation.
In addition, India has the largest population of children as well as youth that always start their riding journey with the bicycle and the people are also becoming very health conscious which is going to bring more individuals to using the bicycle for travelling from one place to another (Venu, Singh and Aryasri, 2018; Tandon et al., 2020). This can easily contribute to generating new opportunities for the company and the fixed target customer as well in the process. On the positive side, it can be identified that India immensely encourages foreign direct investment and also the open market conditions for foreign companies like Pashley Cycles. In the year between 2020-2021, the inflow of foreign direct investment was very high with $81.97 billion due to the policy India tends to be very transparent as well as liberal (ANI, 2022).
4. SMART Technique
“Simple Multi-Attribute Rating Technique (SMART)” can be observed being mainly utilised for the analysing the decisions of the project that are simple in scale and nature. The characteristics of the right export market can be observed being already figured out by the business. Simple Multi-Attribute Rating Technique is very transparent, simple and it also highlight the significance of the problem and how the problem relates to each other effectively and efficiently. Followings are the four characteristics that are vital for the method of Simple Multi-Attribute Rating Technique (SMART) for choosing the right export market:
Quality of Raw Material
Raw materials are among the most important substances that can be utilised in the manufacturing of commodities like quality bicycles for the Indian consumers living in India. It can be observed that the industry of Indian bicycle immensely engages in producing large number of bicycles. There is a stronger availability of correct grades of having adequate raw materials that is mainly concentrated on aluminium. It also has a infrastructure of robust testing as well as certification which are vastly tested for international standards and the benchmark of high quality raw materials is very high.
Technological Infrastructure
This is another important attribute for entering the Indian Market for the manufacturing of bicycles for the Indian consumer. It can be identified that the technology is advancing at a faster pace which is also influencing the development of new commodities such as electronic bikes, titanium, bamboo and carbon fibre bicycles. This can increase the overall success probability for Pashley Cycles to produce quality premium cycles as well as the budget cycles for the consumers.
Technical Guidance and Support
Creating and producing a bicycle that is exportable has many elements. The commodity must be very durable, made up of aluminum alloy and most importantly durable and lightweight. The manufacturer must have the knowledge and learning from processing the aluminum for the frame as well as other elements. For achieving high-quality of technical guidance and support, there is a strong necessity of advanced technological insights for producing quality modern bicycles. The design also among the major component for satisfying the customer effectively and efficiently in the business environment.
Marketing and Selling Channel
There are many Indian SME that are among the dominant suppliers for the Equipment Original Manufacturer in India. These Small and Medium Enterprises engages in operating within the value chains that is domestic and they do not have any export avenues that are already established. For the industry of Indian Bicycle, the industry must have some grounds in the markets in the case of exporting of bicycle as well as its many components. The Indian Original Equipment Manufacturers are some of the larger companies that are capable of undertaking the functions of sales as well as marketing.
Attributes
India
Quality of Raw Material
100
Technological Infrastructure
80
Technical Guidance and Support
70
Marketing and Selling Channel
80
5. Entry Modes for Pashley Cycles
Market Entry Strategy is among the most crucial and important aspects of entering a new market with proper planning for delivering the commodities as well as services to the market that is targeted by the company (Paul, 2019). Even though, entering a new market can be a complicated as well as challenging step to take by any company like Pashley Cycles in this case. The followings are some of the entry modes that can be considered by Pashley Cycles:
Indirect Export
Indirect export can be an effective means for the company to consider when entering a market like India for generating more profitability and also building a quality customer base. Indirect export involves appointing 3rd parties such as distributors, and agents for the purpose of representing the company and for building goodwill for the company. In the case of Pashley Cycles, the agent will have complete access to the overall market for selling the business offerings and also for distributing to the right customer base (Tien and Ngoc, 2019). On the positive side, the risk related to entering the market is very low as compared to the other mode of entry. The requirement of overall investment for getting started with indirect exporting to any nation tends to be very low and in addition, the involvement in the overall procedure of the export also remains very minimal.
Direct Export
Direct Exporting is another option for entering and building a market in other foreign nations like India in the case of this report. Direct Exporting involves exporting the commodities to the customer directly, especially to the individual that are interested in purchasing the commodities. The complete accountabilities regarding the overall export procedure lie in the hands of the company and also for handling the research in the market, international distribution, shipping or logistics as well as invoicing (Lin and Ho, 2019). There is no involvement of the involvement of middleman since the main control lies in the hands of the parent company which has a huge probability of generating huge profits for the company and the degree of control also tends to be very high. The company will also be able to know from the direct feedback from the consumer and the company can also make effective changes as per the feedback from the customer effectively and efficiently.
6. Recommendation
It can be recommended that out of these three countries, Pashley Cycles should consider India as an export market. This is because they have the biggest youth population who have the highest craze for riding bicycles thereby, increasing the sales and revenue growth of the company in future (Wajid and Zafar, 2021). Moreover, it is an open market for FDI hence Pashley Cycles will not face many legal issues while purchasing land for opening their production site and stores in India. Another recommended entry mode that the company should follow is a foreign direct investment which will help them in acquiring legal permission to buy land, set up a production site for making bicycles and open stores separately for selling them directly to customers. This will help Pashley Cycles in opening a new branch in India with lots of youth population as target customers.
7. Conclusion
From the above study, it has been recognized that the biggest strength of the Indian market is the availability of the open market for foreign investment which will help Pashley Cycles in gaining full governmental support for opening their bicycle manufacturing site in India, thereby gaining good market and profit shares. Moreover, it has been observed that the biggest opportunity that could be gained from the German market is the presence of an advanced market structure along with an eco-friendly culture which will help Pashley Cycles is flourishing here.
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