Economic factors provide a big threat to candy vending machine business entry in foreign markets like US. Global recession experienced in the last two fiscal years has resulted to high rate of inflation with a corresponding increase upsurge in product prices. This will basically affect the buying patterns among consumers who will find our service useful in key convenient shops. Venturing into market would result to decline in profits due to adjustment to provision for inflation losses (Oldroyd, 2006). For instance, US federal government predicts an increase in inflation rate from 1.15% in fiscal 2008 to 3 % in present fiscal period. Similarly, as result of the on going subprime mortgage crisis in US, which has been escalating since 2005, the investment market in the country and globally has been weakened. The crisis has led to increased interest on commercial loans; collapse of housing bubble among other negative effects which poses as a threat to aim in targeting various states in future. Our product has opportunity owing to guaranteed redemption package from the state which may see regain perhaps after consistent decline in profitability levels in future.
Technological forces poses both as an opportunity and a key threat to candy vending machine business. Due to the recent development in technology, Candy vending machine business could use the new technologies to improve efficiency and thus increase output. Additionally, technology can also be used to reduce cost for the company. For example, use of facilities such as internet will help in cost saving and increasing efficiency in service provision and thus an opportunity for Candy firm. However, due to increased internet crimes such as data hacking could lead the company to incur losses especially if it's involved in e-commerce in future. Technological improvement has made it easier for insider's to steal proprietary information (Oldroyd, 2006). Competing with other technologically-established firms is a big threat for our vending machine.
Changes and/or dynamism in social trends will present an opportunity for the new entry of new firm in new foreign market. Social structure and organizations, norms and beliefs, social organizations, customs and taboos will pose as a potential threat or opportunity depending on the degree of dynamism in a particular region. For example, entry of the candy vending business in developed countries is an opportunity as the societies are highly dynamic. In contrast, in underdeveloped countries the social-cultural factors in most instances are a threat as the society is not open to change.
Political rules and regulations regarding incorporation of foreign firms can pose as a threat to new business entry. For example, legal requirement that offers stringent and discriminative regulations on foreign business will act as a threat to Candy vending machine business. However, favorable regulations for foreign investors in a country will act as an opportunity for Candy vendors business (Oldroyd, 2006).For instance, legal requirements within federal state boundaries instigates the need for business licensing under the federal regulatory framework.
Thus if the vending machine business is instituted in US, the firm will be a licensed business entity as per the regulations contained in the legal framework for the city businesses.
Our vending machine will go for direct foreign investment owing to protocol involved during other entry approaches. This is because direct foreign investment involves direct transfer of labour, capital and personnel, thus enabling the business to enjoy high quality output due to the quality in factors of production or related input. Also, direct investment benefits the country on which the investment is carried out as it causes an inflow of cash or returns in an economy and thus enhancing economic growth. Similarly, direct investment results into increased employment level (Lymbersky, 2008).
Lymbersky, C. (2008). Market entry strategies. New York, US: Christoph Lymbersky publishers
Oldroyd, M. (2006). Marketing environment. London, UK: Butterworth-Heinemann publishers
Source: ChinaStones - http://china-stones.info/free-essays/business/candy-vending-machines.php