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MBS661 Global Business in the Asian Century & International Business Plan Final Report (Murdoch University)

International Business Plan Proposal

Relstar Lubricants (Brunei)

Introduction

Relstar Lubricants, one of the major businesses of Reliance Group, offers premium quality and next generation engine oil. It offers wide variety of high-performance products across 13 segments starting from automotive to industrial lubricant oils. The company caters to the needs and requirements of their consumers with their advance formulated lubricant oil. The company has been planning to expand its business in the global market. The significance of business expansion is to capture the economies of scale and the geographic scope. This enables the business organization to increase their exposure in the global market and boost the reputation of the business organizations. This positively influences the growth and profitability of the business organization as it determines the international expansion plan for Relstar Lubricants. It further explains the rationale for the chosen country Brunei with the market entry strategy, entry mode, the rationale and lastly concluded with the recommendations.

Discussion and analysis

Through sustainable measures, Reliance creates value for the nation, enhances quality of life across the entire socio-economic spectrum and helps spearhead India as a global leader in all the domains where it operates. This has been the vision of the Reliance that takes the business moves forward. As the lubricant business of Reliance, Relstar Lubricants offers wide variety of product portfolio of premium quality at affordable prices. The business organization has undertaken ambitious target to expand its operations and business activity overseas in the future years. The business organization has been planning to consider expanding its operations to Brunei, exploring the market opportunities for lubricant business. The company is the largest lubricant player in the domestic country. Relstar Lubricants further plans to expand its operations and increase its presence in the global market. Business expansion has been taken into consideration to increase the reputation of the business organizations in the international market. It aims to increase overall revenue and profitability of the business organizations.

Country Analysis: Brunei

Political environment – The political environment is highly stable. The political stability of the country is led by benevolent monarchy.

Economic environment – The country has ready availability of industrial sites. The advanced infrastructure of the country is highly supportive for business expansion (Verbeke, 2013).

Social factors – There are well educated and skilled manpower in the country. The adult literacy rate of the country is 94% (Verbeke, 2013). Majority of the population in the country is high education which increases valuable resources.

Technological factors – The country is technological advanced which makes it favorable for business expansion.

Environmental factors – The country is known for its extraordinary biodiversity. There is rich bio diversity in the country. There is an easy access to hydrocarbon resources.

Legal factors – Brunei has most liberal tax regions. There is tax relief on personal income, export, payroll, or manufacturing. There is less tax controls in the region(Oh & Contractor, 2014).

Rationale for entering Brunei as target country

The first expansion of the market aims to reach all ASEAN countries with the business set up in Brunei. ASEAN, being one of the most open trading regions in the world with attractive investment, is a growing and exciting market for lubricants due to the economy diversity, progressive business prospects and higher household income levels with the potential of developing into one of the world’s leading economies in the future.

Brunei has been considered for business expansion. It is an oil rich sultanate on the northern coast of Borneo. As per research and studies, Brunei has well educated and skilled labour. They have excellent infrastructure and diversifying economy and foreign investment (Oh & Contractor, 2014). The political situation of the country is stable as compared to other countries. This situation welcomes the potential investors. The GDP rate of the country is highest among other countries. There is high level of disposable income among the people in the country (Lasserre, 2017). Most importantly, natural gas production and crude oil accounts to be 65% of the country’s GDP rate. The government of Brunei has been taking initiates and measures to diversify the economy as stated by Bîrsan, Shuleski & Cristea, (2016). As per research, the trade in Brunei has increased in the past years followed by regional economic integration in the ASEAN economic community. Considering the favorable business situation in the country, it can be concluded that Relstar Lubricants can undertake the opportunities prevailing in the country (Lasserre, 2017). Considering the unique business culture in the country, expansion in the target country can be done at ease. Moreover, the country is considered as the world’s most stable macro economy as recognized by World Economic Forum (Holtbrügge& Baron, 2013). This position of the business organization is considered suitable for conducting business and investing in the country. The country has a high quality of life with high level of political stability (Lasserre, 2017). It has been identified, that the oil and gas industry of the country is the backbone of Brunei’s economy. Therefore, Brunei is considered to be a perfect location for investment and business expansion. There are various free trade areas in the country. The country is actively engaged in Free Trade Areas (FTAs) through plurilateral and bilateral basis (Bîrsan, Shuleski & Cristea, 2016). Most importantly, the country has least number of taxes in the country. There is no manufacturing tax. There is ready availability of industrial sites in the country.

Market entry strategy and entry mode

The market entry strategy will be through the global standardization strategy as it aims to have standardized product across the market. The specified product doesn’t have high local responsiveness but rather to look at the pressure for cost and economies of scale in line with production, marketing, and location economies.

The entry mode of the business expansion and investment for Relster Lubricants (Brunie) would be wholly owned subsidiary as there is a need to control over the operation and the technology to be protected. This will be operated through the strategic coordination with more efficiencies and productivity.

Foreign direct investment (FDI) involves establishing foreign business operations in the target country. It involves acquiring foreign direct assets in the target country. As per research and analysis, it has been identified that FDI rate has increased by 635.30 BND Million. Brunei attracts FDI to strengthen the overall economy of the country (weforum.org, 2020). The government spending is focused and geared to strengthen to GDP of the country especially the oil and gas sector. This lures foreign direct investment in the country (weforum.org, 2020). Therefore, it can be said that foreign direct investment is most suitable strategy for expanding the business activities. The government facilitates foreign business in Brunei as this is the driving force for the development of the country. Moreover, there are free trade agreements with the international partners which increase the opportunity for Relstar lubricants.

Competitive analysis – Five force analysis

Porters five force analysis helps to understand the industrial forces which affect the functioning and activities of the business organizations. The threats of new entrants, the threat of substitute products, bargaining power of the consumers, bargaining power of the suppliers and rivalry among the existing firms of the business organizations can impact the operations and performance of the business organizations (Dobbs, 2014).

Threat of new entrants: The barrier to entry in the Brunei market is low. The threat of new entrants in the market is high. It is easier for new firms to entry in market considering the favorable situations prevailing in the country (Dälken, 2014). The laws and regulations of the country are supportive to the business activities.

Threat of substitute products: The threat of substitute products in the target country is high. There are many alternatives in the country for the customers to choose from. The quality and price of the substitute products are high, which increases the level of competition in the market.

Bargaining power of the buyers: The bargaining power of the buyers affects the pricing of the products and services. Relstar Lubricants needs to take measures to reduce the bargaining power of the consumers by offering them discounts and offers (Dobrivojevic, 2013). The company needs to take initiates to gain loyal customers. Since there are many alternatives in the country, the consumer bargaining power is high.

Bargaining power of suppliers:  The bargaining power of the suppliers has the ability to affect the price for the supplies. The supplier’s products can create high switching costs. The suppliers are large in the market; therefore, the power of the suppliers is low to moderate. This situation is favourable for the business organizations (Amrollahi & Akhgar, 2013).

Intensity of rivalry among the competitors: There is intense competition preset in the country. The rivalry is high among the competitors. Relstar Lubricants might face stiff competition in the market. The product offered by the company is similar to the competitors’ products.

Conclusion and recommendations

Therefore, from the above analysis, it can be concluded that Relstar Lubricants (Brunei) offers wide variety of premium products at affordable pricing. The company has been planning to expand its operations to Brunei. As per research and analysis, it can be concluded that Brunei is a favorable country for business expansion considering its stable political environment, the legal systems of the country and the taxation policies. The report has conducted external environment analysis to determine the factors suitable or unsuitable for business expansion. Further, it has been identified that foreign direct investment is most suitable as a market expansion strategy considering the low risks and other benefits. However, it has been identified that Relstar Lubricants might face stiff competition in the market as there are low barriers to entry and abundant availability of raw materials and skilled labour. Therefore, it is recommended that Relstar Lubricants must incorporate rigorous market strategies and promotions to influence the customers towards purchasing their products instead of the competitor’s products and set good footprints for ASEAN market.

References

Amrollahi, A., &Akhgar, B. (2013). Analyzing open source business with Porter’s five forces. International Journal of Computer Theory and Engineering, 5(1), 162.

Ang, S. H., Benischke, M. H., & Doh, J. P. (2015). The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), 1536-1553.

Bîrsan, A., Shuleski, D., & Cristea, C. V. (2016). Practical Approach of the PEST Analysis from the Perspective of the Territorial Intelligence. Ovidius University Annals, Series Economic Sciences, 16(2).

Dälken, F. (2014). Are Porter’s five competitive forces still applicable? A critical examination concerning the relevance for today’s business (Bachelor’s thesis, University of Twente).

De Villa, M. A., Rajwani, T., & Lawton, T. (2015). Market entry modes in a multipolar world: Untangling the moderating effect of the political environment. International Business Review, 24(3), 419-429.

Dobbs, M. E. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review.

Dobrivojevic, G. (2013). Analysis of the competitive environment of tourist destinations aiming at attracting FDI by applying Porter’s five forces model. British Journal of Economics, Management & Trade, 3(4), 359-371.

Holtbrügge, D., & Baron, A. (2013). Market entry strategies in emerging markets: An institutional study in the BRIC countries. Thunderbird International Business Review, 55(3), 237-252.

Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.

MUNIANDY, S. (2015). THE PEST ANALYSIS.

Oh, C. H., & Contractor, F. (2014). A regional perspective on multinational expansion strategies: Reconsidering the three‐stage paradigm. British Journal of Management, 25, S42-S59.

Verbeke, A. (2013). International business strategy. Cambridge University Press.

 

 

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MBS661_Business Plan Proposal_Relstar Lubricants

 

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