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This observation indicates that the domestic market has been strong for Richardson. When deciding whether or not to consider going international to Australia, several factors can be taken into consideration. First of all, because Richardson only holds 2% of the domestic market share, they may wish to concentrate on continuous growth in sales within the United States (domestic) and continue to postpone entering Australia’s market until after the domestic market in the United States is saturated. However, one cannot ignore the fact that Richardson’s ending inventory has been decreasing every year by an overall average of 10%, especially in the year 2000 where ending inventory dropped 28.2%. This decreasing movement of ending inventory represents a move toward efficiency for Richardson. This efficiency is exhibited by the cost of goods sold, which has experienced an average growth of 6% over the past six years of operations. In turn, the growth of profit in manufacturing has grown by 16% each year. This observation attests that the market in the United States has been profitable and encourages manufacturing efficiency. Because of this growth and sales profitability, competition may be invited into the United States market, forcing Richardson to go international in order to keep a lower profile on its domestic sales. It is observable that the net profits in manufacturing have increased by an average of 50% points to a very vivacious operation. However, if the performance of each year is assessed individually, one can detect a high volatility (2% to 157%). This high volatility suggests a degree of uncertainty over future profit performance. Because the Australian market in counter cyclical to the United States’, the entrance to the Australian market may smoothen the net profit of Richardson’s manufacturing, providing a more stable profit behavior. As mentioned earlier, Richardson has a strong demand for its products within the United States market as sales continue to increase. Because of their experience and knowledge of this market, Richardson has not been required to spend large amounts of money on marketing its product to the domestic market. However, it must be noted that the percent of increase over the last four years has decreased (down 6% from 1999, and 13% in comparison to 1998). Richardson’s cumulative growth of expenses has increased over the same period of time, in addition to experiencing a decline in its total assets (down 3%). Although Richardson has experienced an increase in sales and profits over the last four years, the decline in the growth percentage in these areas may imply that the demand in the United States for Richardson’s products is currently decreasing. Richardson may desire to ascertain a plan to counter this by increasing sales to maintain increasing percentages of sales growth, net profits, assets, and total net worth. One consideration for Richardson is to enter the market in Australia. Currently, the Australian market offers a high demand for Richardson’s product, especially in the Queensland area. In addition, there are few to no other substitutable products being manufactured in Australia which offer them the same proficiency in farming. The Napier Bros. Company is willing to cooperate and engage in the importation/distribution of Richardson’s mulchers. As the demand for such product increases in the Australian market, they continue to consider the possibility of eventually producing the mulchers currently manufactured by Richardson in Australia via a licensing agreement. Richardson can benefit from this opportunity with a substantial increase to their profit margin. Exportation costs will be high for importing Richardson’s product from the United States, where it is currently being manufactured, to Australia, it may take several years to realize this gain. Currently, Richardson has enough investment in total assets ($332,180.80 as of 2000) and relatively low obligations/total liabilities ($4,180.80 as of 2000) to maintain stability and survival over the period between market entrance in Australia and growth, where profits will be optimistically actualized. 2. If Richardson Manufacturing Company were to go enter the Australian market, alternative strategies should be considered. One of these strategies includes communicating with Australia’s current mulch manufacturer, whose product has proven to be less efficient in comparison to Richardson’s. It may be possible for Richardson to establish a joint venture or a contract-manufacturing license with this company. Richardson would benefit from the company’s knowledge and experience within the Australian market for decisions for advertising and the development of various distribution channels. In addition to this strategy, Richardson could also create foreign-direct investments if they are confident enough with the Australian market to be willing to undertake the risk of losing their investment or even generate a loss beyond their investment. In this situation, Richardson would experience a large amount of control of the market in Australia. They even consider developing product-adaptation to other parts of the world, including South America or other locations within Australia. Their previous interest in South America may be worth investigating and possibly incorporating into the exportation to Australia if Richardson chooses not to engage in direct foreign-investment. Regardless of their decision, it will be necessary and prove to be beneficial to forgo extensive research within both markets and possibly all other feasible market opportunities. This research will, without a doubt, cost Richardson a large amount of money and time, which without proper planning and preparation, will eat into their profit margin and threaten the stability of the company. It is apparent that Richardson will not likely enter the Australian market immediately, and should prepare/analyze a detailed rollout plan to be used for successful implementation. 3. The strategy that I would recommend to Richardson is to thoroughly investigate the Australian market, and if feasible, take advantage of the opportunity to increase profits and international status, recognition, and growth. If Richardson were to enter the international market solo, they would be required to expend a greater amount of time and money towards researching the Australian target market (and possibly other feasible target markets), marketing/entrance strategies, and developing various distribution channels. If Napier Bros. agrees to adopt a licensing agreement with Richardson importing Richardson’s product while assuming financial responsibilities for shipping and manufacturing costs, in addition to providing Richardson with a favorable amount of profit, Richardson should follow this strategy if capacity allows. By doing so, the demand for manufacturing Richardson’s product will be more continuous and stable throughout the year, since the Australian seasons are counter-cyclical to that of the United States. However, before implementing this strategy, the forecasted profits from this decision should be compared to those of a direct foreign-investment strategy. Because of the decline in total assets, Richardson may choose to put off direct foreign-investment until they have ensured the demand and profitability propounded by the Australian market while developing a larger amount of invested capital to ensure stability and longevity in the company. Bibliography: Word Count: 1190
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