Market report for Dubal

Market report for Dubal Introduction The US is renowned for its rich democratic space, strong consumer power, and business astuteness. However, its economic downturn and high cost of business may impede success there.Advertising We will write a custom research paper sample on Market report for Dubal specifically for you for only $16.05 $11/page Learn More A company needs to look into the external and internal factors that will affect it when it enters the international market. The purpose of the report is to determine whether Dubal, a UAE aluminium manufacturer, should enter the US market. Macro business environment political The Unites States of America is a federal state, in which the head of state is the president and the constitution is the supreme protector of citizens’ rights. It has a strong judiciary headed by the Supreme Court and is backed by an equally influential parliamentary system. Therefore, the three centres of power are the executive, the Judiciary and Con gress. Two parties dominate the country’s politics; that is, The Democratic Party and the Republican Party. The latter part depends on business donations for campaign funding while Democrats get it from organised labour. Consequently, parties in office may make policies that protect the interests of their funders. Dubal’s ability to safeguard its needs will depend on the ruling party and their affiliations. Nonetheless, the country is a strong democracy and has a stable political environment. It is unlikely that Dubal will experience cases of war or civil conflict in this nation. Trade restrictions and protectionism exist, albeit at low levels. Constraints exist regarding the legality of a business; Dubal will have to go through a long process before being recognised as a legal entity. Additionally, zoning restrictions exist on firms that can bring goods into the country. Copyright and patent laws are quite severe in this country. Dubal may find difficulties in competi ng with older aluminium companies as they may possess patents over certain business processes.Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Additionally, the country has several requirements on training workers, and licensing is a lengthy process for foreign businesses. Employers are obligated to pay for medical insurance as well other policies, so this may increase Dubal’s labour costs. The UAE and US do not have special trade agreements; however, substantial business still occurs between these two countries. As of 2011, the US had exported $15.8 billion worth of merchandise while the UAE imports about 2.4 billion worth of goods. Since the UAE is not in NAFTA or other trading groups with the US, then trade restrictions on products need to be expected. Minerals are not protected goods, so Dubal will need to pay a huge amount for its raw material-bauxite- if it c hooses to produce in the US (US Department of Energy 13). Macro business environment-economic The US has the second largest economy in the world. As of 2011, its GDP stands at $ 14.82 trillion. This implies that Dubal will have a large consumer market to sell its products to. Additionally, the country recorded a 1.5% increase in the economy. Statistics also indicate that the US is the biggest importer of goods in the world. It allows approximately $2.314 trillion worth of merchandise into its borders. If Dubal opts to enter the market as an importer, then it will have a conducive environment for doing so. The most significant contributor to the economy is the managerial sector while manufacturing accounts for only 0.7%. Dubal will not be entering into a manufacturing zone, and this could prove to be quite useful to the organisation. The US economy is still underperforming thus implying that key product markets, such as the automobile industry, have diminished demand for aluminium pr oducts. The US has several resources such as oil deposits. However, it does not have bauxite, which is the primary raw material for production of Aluminium. Dubal may, however, save on costs by sourcing its supplies from the South American market. Some bauxite-rich nations in this region include Venezuela and Brazil (CRU International 54).Advertising We will write a custom research paper sample on Market report for Dubal specifically for you for only $16.05 $11/page Learn More Unemployment rates are at an alarmingly high rate for a country of such a level. It now stands at 9.1%, and is ranked 105th. This is still an all-time low for the nation. Consumers may be hesitant to buy new commodities like cars and houses, yet these items are made from aluminium. The US’ budget deficit is also at an all-time high; it now stands at $599.9 billion while its external debt to the world is $14.71 trillion. This makes it the second most indebted nation in the world . If Dubal plans on entering such a nation, it needs to prepare for constrained buying habits and rigid monetary restrictions as the government is trying to do as much as possible to cut down on expenditure. Even loan negotiations from banks might be challenging as financial institutions are dealing with the backlash for encouraging this over expenditure. Financial institutions have created high financial obligations and losses that must be paid by consumers. Failure to honour these responsibilities could cause the entire financial sector to go bankrupt. Transport, communication and other infrastructural facilities are already set up in the country. The level of development in the US implies that most of these needs will be easily catered for. Dubal, which depends on a steady supply of electricity, will not suffer from intermittent supplies. It will also not be necessary to invest in back-up generators as the nation’s electricity suppliers are dependable. Additionally, it is relatively easy to get credit in the nation as the country is ranked 4th in the world. Enforcement of contracts is taken seriously in the US, so Dubal will be protected from contract defaults by its business partners. Furthermore, the country does not have complex business networks such as the Chinese system of family ties. Therefore, Dubal can do business with organisations from the business directory. Minimal restrictions exist among the population concerning trade. Macro business environment-social The US is a culturally diverse country, and since the UAE also possesses this trait, then it will be easy to do business there. English is the US official language, and most residents of the UAE are now familiar with it. While individuals are religious, they tend to separate religion from business life. Additionally, most individuals do not pay attention to family ties when doing business, so this will favour Dubal.Advertising Looking for research paper on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Micro environment-competition Several aluminium producers already exist in the US, such as Alcoa, Century Aluminium, RUSAL, Alcan, and Chalco. Alcoa accounts for 54% of market share in the target market, and has a presence in other parts of the world. In fact, these dominant players will minimise Dubal’s capability to operate successfully in the market. RUSAL is one of the most formidable aluminium producers in the international aluminium industry, it controls 16% of the world market and has integrated various aluminium-based firms. Some of them are producers of bauxite while others manufacture aluminium (Aluminium Industry Association 15). Furthermore, some of them even produce packaging material and electricity products. Alcan is a Canadian firm, and has an advantage over other players owing to its high product volumes. Chalco on the other hand is a Chinese-owned firm that dominates is domestic market as well as a substantial portion of the US market. Foreign competitors fr om China are a force to reckon with. The entrance of Chinese players in the US market leads to market surplus hence price declines. The market for aluminium products is highly accessible. Companies need to choose the best strategies for entry, and they have a chance at succeeding. Most equipment and resources needed to manufacture the product are found in the country, but Dubal would be better of it imported these products from its cheapest markets. Nonetheless, it is likely that, in the long run, the growth potential for this company will be quite low since the US is saturated with aluminium smelters. Approximately 12 companies are responsible for performance in this industry. However, in the next five years, it is likely that domestic demand will grow if the economy improves. Projections indicate that the US aluminium industry will increase by 12% in 2013. Such changes will stem from better energy supply, government support, and cost efficient technologies. Furthermore, consumersà ¢â‚¬â„¢ need for sustainable construction practices is likely to increase the demand for Dubal’s product (Green 46). Profitability in the aluminium industry has not been very promising. In 2009, some 6 aluminium smelters closed their businesses. The biggest problem for most organisations is high production expenditure. These organisations need to pay a lot of money to use electricity. Additionally, the US lacks bauxite resources, so many firms need to import their own resources and this costs them considerably. If Dubal opts to take production into the US, then its profitability could be substantially diminished. However, if it only treats the US as a market, then chances are that it will have a greater competitive edge. Consolidation is now a reality in the industry and could be used as a source of competitive advantage for Dubal. The most powerful player in the world-RUSAL is using this strategy to remain a market leader (Bloomberg 40). Likewise, Dubal ought to borrow and customise that approach. The firm can merge with large aluminium purchases in order to foster cost management. Vertically integrated firms in the global aluminium industry are generating their own electricity. Access and prices of power can substantially reduce if Dubal has control over them. In fact, this explains why many aluminium firms are choosing developing nations as new target locations. They can produce electricity cheaply and efficiently in those areas. If Dubal chooses to generate its own electricity, then it ought to do this in the UAE rather than in an expensive country like the US. The organisation can also instate strong governance structures that emphasise strong environmental performance, human rights, and community relations. Additionally, the firm may focus on low cost energy sources since these would cut costs and secure better prices for the product. It should also have a green innovation strategy. Dubal should consider importation as a strategy for entrance int o the US market. This will protect the organisation from the high production costs that stem from operating in the US. All processing should occur in the UAE, so that it can have a ready-product to bring into the US. The US has fewer import restrictions on aluminium than it does on bauxite. Microenvironment-customers The principal type of consumer in the US aluminium market is the manufacturer. Therefore, Dubal Aluminium should consider using B2B partnership models to do business. Some of the frequent buyers of aluminium include automobile manufactures, bicycle, motorcycle, railways and aircraft firms. Beverage manufacturers such as Pepsi and Coca Cola need to the product to make cans and foils. US consumers are generally known for their impulsiveness. However, because Dubal sells intermediary products, then the same psychology cannot be applied to their products. Many B2B approaches work by initiating a strong relationship with the targeted enterprise. Dubal needs to demonstrate th at its products are superior or that they come at a lower price with no compromise on quality. These factors will set them apart from other retailers. American firms focus on product quality more than affordability so Dubal would be better of if it focused on the first approach. In addition to these differences, it may be imperative for the company to sharpen its negotiation skills as American buyers are astute bargainers. Culture has a positive impact on business in this nation because most people are individualistic. They are highly competitive and always do due diligence before getting into a business arrangement. Furthermore, it is the most qualified person that wins a contract rather than the most affable one. As such, Dubal needs to focus on its tangible advantages and business numbers if it wants to get a market there. Conclusion The purpose of the report was to establish whether the US is a feasible target market for Dubal. It was found that the cost of production is too hig h, owing to absence of the main mineral ore and high electricity costs. Additionally, there is stiff competition from local players. However, the US ranks well in terms of ease of doing business. Dubal should produce in the UAE and consider exporting its finished products to the USA. Aluminium Industry Association. The versatile metal. London: McMillan, 2005. Print. Bloomberg, Jerry. â€Å"Short run demand and supply elasticities in the West European market for secondary aluminium.† Resources Policy 26(2005): 39-50. Print. CRU International. Report in the aluminium and alumina industry. London: CRU International, 2008. Print. Green, Samuel. Aluminium recycling and processing for energy conservation and sustainability. NY: ASM International, 2007. Print. US Department of Energy. US energy requirements for aluminium production. Washington DC: DOE Press. Print