Business Strategy of China World Buz
In the same year, CAB finally made the first visit to Tanzania establishing the Tanzania office and conducting promotion. Current Strategy For the beginning of CAB, the primary strategy Is substantial promotion. With the help of good relationship with Tanzania government, CAB possess relationship with more than ten news media agents and operated SIX Introduction and marketing events. The whole process only took two months but the outcome Is quite considerable. After promotion, CAB selected target customers and kept track with them.
The principal means Is to dealing with the long-term cooperation relationship. The short-term strategy Is to gathering our strengths and resources to negotiating with local enterprises, middle and large scale wholesalers for business intention. For applies like uniforms, school furniture, schoolbags and other education equipment. The primary intention of this order is to establish an operating model to train Tanzania employees to expand business to other schools in order to set up a long- term and steady customers base.
Wang called this model as reproducible order strategy, especially for start up companies, to establish one order as model for guiding role in expanding more and more similar business. In addition to school, CAB also conducted a long-term contract with Maybe City Soccer Club providing them sports goods. CAB also hired local employees to dig out potential customers in electronic products. On the other hand, in long-term strategy, with the help of local government, CAB started to get in touch with their large-scale electric power company, communication common company, in order to acquire future large size order and projects.
Major Issues The first major issue is divergence inside team. One investor Mr. Chain, who is a moderate businessman, has a willing to running electric products. Another investor is more willing to importing the mineral products to China from Tanzania, but unfortunately rejected by other founders since this goes beyond the current strategy nice the company is not stable enough currently. The African partner has intention in small orders since lacking fund in initial period but was rejected by other co- founders since this is not beneficial to long-term development.
However, Wang intended to develop online business after collecting large customer and supplier base for further development. In long-term perspective, on the condition that Tanzania is the stable market for CAB, continuing expansion in Africa is necessary and unavoidable approach. Since this big and future move, members in CAB have not concerned about that. The second one is training issue. Although the company has hired employees in Tanzania, there are no Chinese managers over there. Therefore, it caused the low quality of management and service. Besides, suppliers are also a concern of CAB.
Due to the strong connection with government, the customers are available for them to acquire. However, Chinese suppliers are not familiar with Africa markets and have concern about making business with African people. Thus, getting enough suppliers is quite tough in the initial period. The last one is expansion, CAB has strong connection with Tanzania government but forever, they don’t have strong channel to other African countries. While CAB aims at doing online business rather than traditional trading business, which is more efficient and profitable, the entry into other countries seems be tough.
External Analysis The rising exposure of Africa to China In the past ten years, China has already become a major business and economic partner of ASS, abbreviation of sub-Sahara Africa. In ASS, China possess a great bilateral relationships with African governments. Chinese private-sector players including small business owner, multinationals, traders, migrants and local overspent get involved and benefit from this layer of relationship. From the Figure 1, it could be found that a significant step have been made by both parties. Bilateral Sino-Tanzania relationship China to Tanzania soared from $700 million in 2011 to $1. Billion in 2014. According to Miramar Equity Research, bilateral trade between two countries has boosted over $2. 5 billion by the end of 2012 while it also brought 150,000 direct Jobs in Tanzania. A series of constructions have been projected under the cooperation between two countries. One of them is the construction of a giant harbor at Bogyman, in which is coated at the northwest of Dares Salaam, the capital of Tanzania. It is considered as the future biggest harbor in East Africa and could bear 20 times cargo more than Dares Salaam. The construction will be finished in 2007.
Since China has a strong and promising relationship with Tanzania in trading and construction business, it could be assumed that the basic external environment is beneficial stably to the development of CAB. Danger in Tanzania Conducting business in Tanzania is relatively dangerous than making money in other developed countries. Through the interview with Mr.. Wang Finnegan, it could be included that three points that attribute to dangerous business and life environment. The first one is wild animal. Tanzania has a large area of natural scenery, one of which is famous Great Migration, which brought uncertainty in transportation.
Although some places are regulated as theme parks, with the development of economy, the management in most African countries is relatively weak. The second one is poor payment system. Tanzania does not possess highly recognized payment system like pay pal. The instability in payment has become concerns of Chinese suppliers and trading companies. The third one is Tanzania police. Unlike developed countries, the police officers are satirized “official robbery’. Equipped with KAKA, police officers make up reasons to intercept any car for money if they want, which bring risk to businessmen, especially Chinese.
Corruption The World Bank and AFC 2006 Enterprise Survey indicated 20% of business reckoned corruption is the largest constraints to business operation in Tanzania, although this data was 51% in 2003. The corruption was mainly demonstrated in “relationship” that government tended to bring benefit to business persons they know without any retention, which is similar to Chinese “Guiana” culture. Five forces analysis First, the new entry threat is quite low for trading company conducting Sino-Tanzania business. As mentioned, three kinds of danger restrict the entry to Tanzania and other African countries.
Besides, strong relationship with Tanzania government is basic requirement in Tanzania business area. Secondly, bargain power of both suppliers and buyers are high. Since CAB is currently in the beginning period and still unfamiliar with transportation, customs clearance and other part of business. Lack of experience and knowledge cause weakness in pricing. On the other hand, supplier is also the major concern of CAB, since a large part of suppliers are not familiar with Sino-African trade. Persuading suppliers put trust in cooperation is costly and tough.
Lowing the price at the beginning is relatively a good choice. Thirdly, SNOW GLOBAL TRADE CO. ,LTD, one of primary competitors for CAB, is Jointly set up by thee Tanzania with work experience in China. The primary business is similar to large scale on-behalf purchasing. The suppliers are mainly from Www, which is famous for small ware. Therefore this company has obvious differentiation to CAB. Since CAB is run as the traditional trading company but will conducting could be believed that the competitive rivalry in industry is low both in short term and long term. Lastly, the threat of substitute is moderate.
Large-scale wholesalers in Dares Salaam could be considered as substitute.. Customers and middle-scale wholesalers procure products directly from them with higher price than from CAB but the process is quicker, which means both of them have their advantages comparing to the other. From the five forces analysis, it could be found out the bargain power of suppliers is the most relevant to Cab’s performance because it is tie costly to manage relationship with suppliers in China and seize the trust from them. Internal Analysis Core competency CAB also possesses their core competency, which is rare, valuable and hard to imitate.
The first core competency is strong marketing strength, which mainly suggest in the strength and channel of promotion. As mentioned, CAB have a grasp of relationship with more than ten news presses in Tanzania. This resource derived from two African co-founders’ families and their influence to Tanzania government. The initial promotion is incredibly substantial. Justine phone keeps ringing all day long and averagely we got one phone call from potential customers every four minutes. When we wandering around the local street, one senior citizen came to us and shook hands with one of our investors and said he saw the news and knew him.
This is absolutely not exaggerating. Wang Finnegan Co-fender of Combinatorial The second core competency also comes from “special relationship” with Tanzania government, which is strong multi-business strength in Tanzania. Strong connection brings more connection with other industry in Tanzania, especially in travel, paying yester, entertainment and other booming industry in this super booming country. For long-term perspective, it is very beneficial for CAB in doing corporate-level strategy. Competitive Advantage Comparing to other competitors, CAB has specialty in attracting customers.
The price of products from CAB has low price advantages, which comes from reasons such as, small amount of employees, simple organizational structure, smooth and low-cost channel in sales and promotion. In summary, the low price in CAB is based on it low cost operation and small size organization. But however, lack of training in Tanzania office leads to weak sales capability, high order faulty rate, which cause more investment on human resource management. From long-term perspective, CAB would have to increase the price to cover the cost. Therefore, it could be assumed that low price advantages may not be sustainable.
Besides, even CAB has core competency of promotion in Tanzania, it is quite challenging to transfer the promotion to profitability, based on lack of money, weak sales force, hard negotiation with suppliers, poor training system in company and the poor organization structure. In conclusion, the core competency and competitive advantages CAB currently assesses could be regarded as a waste unless they operating strategies in dealing with organization structure. As mentioned in current strategies analysis, the main measurement CAB is taking could be concluded into two ways.
The first way is establishing pattern orders like making business with school or football team while the other way is utilizing strong relationship with news press in promotion. Pattern orders could save time and cost in operation plan, training, negotiation, while utilizing relationship to build promotion strength is the most effective and efficient way to acquire customer base. While on he other hand, choosing Tanzania and even whole African market is an approach of saving cost based on high performance. Africa is a booming market and regarded as the “next big thing”.
From the report of “Seizing Africans Retail Opportunities”, it claimed that the high potential of Africa market for retailers, who could be a strong connection with the development of CAB. The population of Sub-Sahara African is nearing 900 million population and mobile phones and Internet are used increasingly popularly. What’s worth noticing is urbanize rate of 3. 61 percent, which is faster than other region all over the world. The overall GAP growth has almost reached 6%. Seven of Sub-Sahara African Countries including Tanzania was ranked in 10 fastest-growing countries in economy.
Increasing demand in western brands, product and lifestyle emerges in this unknown territory. But, however, its GAP and other economic strength is still low comparing to other developed countries. Hence, the cost of making business is relatively low. From the interview with Wang, setting up an office and a exhibition hall for product show only cost CAB 100,000 ARM including the business trip and field visit fee happening in initial procedure. Comparing to other market like North America, Europe, Japan where most trading companies get involved, generating trading business in African possesses high cost performance with full of risks.
In conclusion, strategies CAB is capitalizing in business-level are mainly competing on cost. Although choosing African market is kind of differentiators action, the booming prosperity in Africa is happening, which could bring more and diversified investment to reducing the differentiation. On the other hand, pattern models determined company is not focusing on niche market, since patterns could be established based on different kinds of products. From the beginning of company, the principal of choosing products is accepting every product unless it makes profit.
Therefore, based on analysis above, CAB is totally focusing on cost saving rather than differentiator. What also should be mentioned is profit- oriented determined CAB is not temporarily accepting orders proposed from small- sized retailers and factories. To evaluate the appropriateness of Cab’s business- level strategies, standards could be based on the analysis of business environment. As external analysis mentioned, the bargain power of both suppliers and buyers are elatedly high but however low competitiveness in this industry.
Hence, differentiation would be less effectiveness than cost leadership strategy. Trying to save cost facing the high bargain power from both sides could be considered as better choice. Although actions CAB is taking right now is kind of relieve of lacking money, it still could not help CAB deal with low profit they are facing and does not provide obvious advantages in long-term development. Hence, enlarging the effectiveness of saving cost while put eyes on long-term effect could be regarded as a next move of CAB.
In corporate level, CAB mainly operate the single business, and its trading business between Africa and China accounts more than 95% of revenue. Therefore, it could be assumed that the business should be classified to single business and low-level diversification. Although Wang Finnegan, the founder of CAB, planned to do BBC business between African and Chinese supplier and Chinese suppliers would mainly focus on overseas students in China, especially Shanghai. This plan would be highly profitable because the increasing number of overseas students in Shanghai and they tend to do small business.
From the statistic of international students in China conducted by China Association for International Education, the total amount of international students in China increased by 28,169 people, which is equal to increase of 8. 58% comparing to the previous year. But unfortunately, because of the initial period all the main business are not mature enough. CAB wanted to focus on BIB business so they decided to give up this part of business which could connect the main business and come up with synergy that they could share the transportation, developing new suppliers in the future online business.
To evaluate the corporate-level strategies, it could be based on the profitability and cost saving as standards. Operating a single business is quite wise for a start-up company to make sure the stability. But however, CAB could also stepped into other industry, which could help the main business with the function of saving cost. Besides, based on the analysis, it could tell the development of promotion already get fast but the human resource and efficiency in suppliers could not catch up the speed in marketing. What’s more the three risks in Tanzania and even African business could also be alt with by penetrating in other industry.
Therefore, it could be assumed that slight move in corporate-level strategies could help CAB in reducing cost and lowering risks. Other Current Strategies Analysis HARM Issues On account of multi-national business operated by CAB, human resource management is especially vital for the company to consider about. Overall human resource management strategies could be separated into China office and African office. In China side, reducing conflict between employees is the main objective. Since CAB is a ten-people team, working together without conflict makes teamwork perfect.
But unfortunately, it is almost impossible for a team to keep harmony during the whole process. Hence, CAB arranges a special team meeting to deal with the problem. It is called “Friday night meeting”, CAB holds the regular meeting every Friday night for one hour. All members will sit as a circle and shut the light down. Everyone will be forced to talk about the issue and problem happening on one person. After executing the regular team, the conflicts and problems between employees get reduced obviously. The effectiveness of reducing conflicts among small-sized team is substantial and satisfied by CAB.
Nevertheless, regular team still cannot eliminate the human resource management problem in China office. Because CAB started in college student dormitory in Shanghai Finance University and all the a student, he concerned some members in the team cannot catch up the whole crew’s pace because of lacking experience and unstable mentality. Therefore, what he actually intended to do is to let unsuitable members leave. Although the process is cruel, it is regarded as an approach to benefit the future development. In African side, the situation is even worse. Employees in Africa are local people and there is no
Chinese member as manager over there. Therefore, the inconvenience in negotiation is obvious and decreases the efficiency of sales. CAB does not have a prepared training system according to African office. Instead, Wang and other co-founder would take time to fly to Tanzania for business visit to customers, which is very costly and time-consuming. In conclusion, regular team meeting is effective in short-tem but only specialized in small-sized team and not a good choice in long-term human resource management. Downsizing could be regarded as a relief but not wise and will cause disharmony inside team.
Lacking training system increased the cost and time to expand business and could be fatal to multi-national business. Original Strategy Recommendations In business level, resulted from limitation and development of both company and Tanzania, strategies analysis could be classified into two types according to short term and long term and both of them are based on cost saving. Building efficient scale facilities Although one of the founders in CAB proposed to take small orders because of lacking money, the proposal got refused since the confusing positioning will be harmful in long-term development.
What’s more, small orders includes facilities purchased by small-size factory, which have an extremely low reorder rate. Another aspect of small order is retailer who only wants low quantity because too much quantity exists high risk for them and normally the quantity for retailers is lower than MOOS, which means minimum order quantity, which result in rejection by most of factories. Besides, retailers want low price and short lead times. For CAB, that would be considered as a barrier to make deal with retailers because of low cost performance.
But however, taking small orders also has positive aspect. Firstly, African manufacturing industry is improving, although it is still a large net importer since imports are more than three times higher. But however, from African Economic Report, South Africa, Tunisia, Morocco and Egypt are Africans largest exporters of manufactured goods and account for about 80% of exports to Europe. The overall export in Africa is rising up while African export has increased from 17% in 2005 to 24% in 2010. As report shown, the Africans economic integration is improving.
Despite Tanzania is still considered as a relatively weak country in Africa, the future scenario f manufacturing could be assumed as potential opportunity. From the report “The 2014 African Retail Development Index” by Takeaway, Sub-African countries were ranked according to ARID (African Retailer Development Index) and Tanzania was ranked 4th. Therefore, making deal with small-sized factories could be regarded as a measure of building relationship and future business, which is beneficial in future business in import. Secondly, capital shortage is a barrier in further development.
Making move without funding support is challenging CAB in both customers and worthy considering. In all, cost leadership strategy for CAB could be based on building efficient scale facilities for small-sized factories and retailers while satisfying Chinese suppliers’ MOOS and shortening lead time as few as possible. The first strategy is building a retailers association that assembling all of the retailers in Africa and gather them as a big integral retailer. As analysis mentioned, Tanzania has low GAP per capita level implies that retailers should focus more on basic goods if they want to make profit.
The basic goods include food, beverages, low-cost beers, and household essentials. Business Monitor International expects grocery retail sales to increase by 30. 1% in the next few years. Therefore, CAB could assemble these small- sized retailers specialized in these basic goods into an alliance. The management should be under the government department in commerce and trade. Extracting tax as commission from the deal could support management activity generated by government. In this case, a large and stable scale of retailer demand would be generated to meet the MOOS of Chinese suppliers.
Besides, with a larger quantity, delivery would be faster and convenient since it doesn’t have to share a container tit other order in small quantity situation. Since retailers want lead time as short as possible while basic good like food and beverage cannot stay fresh in a long lead time, KIT system could be transferred in this situation. But however, it is quite hard to implement KIT system, so a perfect schedule according to different retailers would be a wise choice. Retailers would be classified according to their regular ROPE and association will design a schedule customizing and classifying everyone.
Computer system would also be established for association noticing when they are going to supply retailers. Under this digital system, suppliers don’t have to order by themselves and their inventory information will be directly shown in association’s computer. Therefore, association with KIT and digital system could be designed to build an efficient scale in reducing cost while making profit. In long term, Internet business would be a better choice in gathering these small-sized factories and retailers. Since CAB already put www. Combinatorial. Mom online, it still cannot completely penetrate into Tanzania market. But from the statistic of Internet user of population sourced from World Bank, it still keeps drastically increasing trend in Tanzania while its current number is 13. 1% of the whole population and the number was 0. 9% in 2004. Therefore, the future potential of e-commerce seems positive. With e-commerce, retailers and small-sized factories could be assembled more easily at an even lower cost. In corporate level, although CAB lack of fund in initial period, it could still try to get into other industry under the government support.
As mentioned, the retailing industry is quite booming according to ARID index in Tanzania. CAB could penetrate into retailing industry in Tanzania to reach the up-to-down corporate integration. With the help of government, setting up a retailing store cost less, which brings benefit to CAB. The location could be chosen in Dares Salaam, the capital of Tanzania. Set up a new store would be effective in generating synergy. The benefit to CAB is finding a way of dealing with unstable relationship between supply and demand. As analysis mentioned, the supplier is quite conscious of the African market.
Building own-stated retailing store brings more effectiveness of introducing African market to suppliers for future constant development. Besides, retailing store owners. What’s more, self-owned stores could start building Cab’s own brand and set up brand image for future business. In long-term, after utilizing the online shopping, CAB could also penetrate into the payment system business in Tanzania, since there is no mature and prepared payment system in Tanzania. In Tanzania, people mainly use mobile phone to doing payment.
Specifically speaking, people will dial number and input account number and other information to pay the bill. This payment system could not reveal vital information on the screen, which brings extensive risk to both buyer and seller. Without technology and human knowledge, it is difficult to execute a prepared payment system in Tanzania right now. Bringing safety in CAB online system is almost equal to increase one brilliant core competency in industry. CAB could design an online payment system for bringing convenience and reliability for its customers and increase customers’ satisfaction.
Imitating “Chi If Boo”, Chinese version of Papal, could bring high profit and brings Cab’s main business more synergies that reducing high risks in Tanzania online trading business. Once payment system is built, it would also be reasonable for CAB o start their online BBC business in long-term aspect based on its retailing stores as mentioned. Overall, CAB could execute horizontal and integrated corporate-level strategies in both short-term and long-term perspective by establishing retailing, online payment and online BBC business.
These moves could be regarded as relatively diversified and low cost in bringing synergies into several business units. HARM As mentioned, CAB has serious issue in training program in Tanzania, which increased difficulty in sales force. An integrated human resource management system could be applied in CAB in dealing with shortage of human resource management in Tanzania office. Integrating e-training system and multi-national training system would be a wise choice. Web-training system could be an increasing trend in recent years. From the report “Online Training in An Online World” written by Curtis J.
Bonk from Indiana University, the percentage of outsourcing e-training for companies has already reached 54%. E-training could provide CAB low-cost and convenient training system, which does not require core members in Shanghai to fly to Tanzania for training the salesperson in Africa. CAB could outsource their training to e-training company like e-training world. Although whether the e-training system would be effective in Tanzania does not have measures to prove, it still could be regarded as a good choice for CAB in short-term.
The other system, based on e- training, could select elite employees in Tanzania and bring them to Shanghai for core training. This measurement could enhance the cultural understanding and try to bring synergy from cultural communication. This training system could ensure the quality and transfer correctly the intension of management level. Taking staff from Tanzania to China is costly for a start-up company but this cost less than frequent lights from China to Tanzania. After all, based on current situation CAB has, this training system still had better be implemented for a small part of employees in Tanzania.
Conclusion Although CAB is a start-up company, it would be already amazing and bravery for a young college student to seize the precious opportunity. Wang, an extraordinary one of Chinese culture “Guiana”. It could be expected that the following result could happen on the condition of implementing several recommendation as mentioned above. Firstly, it would relieve the shortage of fund. Since it is quite difficult to absorb nether investment in short time because the risk of Sino-Africa business and interest of current investors, the lack of fund brings a barrier to future development and implementing business strategies.
By integrating small-sized factories and retailer, CAB could apply business-level strategies to relieve the problem. A series of online strategies including e-training system at least would decrease the cost in business. Secondly, it would enhance the core competency inside CAB by establishing payment system. As mentioned, the payment system brings safety in payment, which could never be seen in Tanzania. This action actually gave people a reason to choose CAB rather than the competitors.
Thirdly, it could enhance the sales force in Tanzania by introducing integrated training system, which costs less but could be consider effective in international business. Last but not least, in long- term perception, recommendations could also consolidate the Tanzania basis for development in other countries in Africa. Since the overall recommendations are based on cost leadership concept, which could reduce cost from CAB. It is obvious for CAB to take over this plan because strategies reducing cost would be considered ITIL in dealing with strong bargain power from both sides.