Management Feasibility Report Essay

2088 Words Aug 25th, 2012 9 Pages
Feasibility Report on Internationalisation of an Australian Company

Executive Summary

The following feasibility report on JT Toy’s interest to manufacture overseas has thoroughly explored the positive and negative aspects of local production in comparison to moving its operations to China. Manufacturing methods, such as a wholly owned subsidiary; owning and controlling a factory in China, a strategic alliance and licensing agreements have been analysed in detail.

The evidence shows that moving part of the business to China as a wholly owned subsidiary, whilst keeping its headquarters in Melbourne would be the most beneficial long term option. Paying royalties and dividing profit with an overseas company
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Having to divide profits with the Chinese company is another undesirable factor with this option.

Another option is engaging in a licensing agreement, defined as “agreement in which one organisation gives limited rights to another to use certain of its assets, such as expertise, patents, copyrights or equipment, for an agreed-upon fee or royalty.” (Bartol, K, Tein, M, Matthews). This option is similar to a strategic alliance in using a pre-existing Chinese company’s cheap labour and production costs without actually moving the business overseas. Again this is quick and not as costly in the short-term, but paying royalties to the partner company is an undesirable long-term option.

Social-cultural Elements

Another vital consideration is the socio-cultural elements involved in a move to China. There is much uncertainty when dealing with a foreign culture, a strive for understanding and communication is integral to success. Australia and China’s differences are vast, with just over 1.3 billion people China is the world's largest and most populous country, in stark comparison is Australia’s population of over 20 million.

Fortunately lingual barriers in a Chinese venture are not as extreme as other countries, for behind India China has the most people who speak or understand English in a non-English country.

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