Present report aims to evaluate the factors by which success of Verncare is affected in market of Saudi Arabia and South Korea. In this report, market of both the countries will be analyzed to explore opportunities for business and to reduce the impact of future strategy. Main objective of this report is to analyze the opportunities and challenges that are faced by Vernacare in strategic alliance and joint venture. Vernacare is a leading organization in infection control industry (Hyder and Abraha, 2004). Company is planning for the expansion on global level. For this purpose, they will start their operational activities in Saudi Arabia and South Korea. Management of organization had launched their products in the market of targeted countries. At present, they are exporting their products in different nations but in future, they are planning to operate in Saudi Arabia and South Korea by using the opportunity of joint venture. This study is focused on the evaluation of achievement of firm by considering their strategies. For this evaluation, different models will be implemented such as SWOT and PESTLE (Francis and Collins, 2000). By this study, company will be able to make improvement in strategies and can attain competitive advancement to enhance their profitability.
Overview of market of Saudi Arabia and South Korea
In Saudi Arabia, health care industry is at booming stage. They have the largest economy in the Middle East. In 2013, economic performance of Saudi Arabia was exceptional. Government and regulatory authorities are supporting the growth of private sector. 3.7% of total GDP is consumed on health and care expenditure. In accordance with the market trend of country, there is annual growth of 2% to 3% in population of country (Hyder and Abraha, 2004). Government is planning to make an additional average annual investment of $587 million in health care sector in order to cope up with the increasing demand. In comparison to other countries, they have high budget allocation in health care sector. At present, Vernacare is providing their services in many hospitals and medical institutions. There traditional waste system has been replaced by innovative concept of Vernacare. Main scope of company is in capital of Saudi Arabia i.e. Riyadh. It is because major medical centers are situated in this area and there is high scope of growth in the public sector (Kirby and Kaiser, 2003). There is continuous improvement in technologies of medical system. Due to this aspect, regulatory authorities are promoting medical services. In next five years, there will be huge increase in hospitals and medical projects. For this purpose, they have set regulatory guidelines for the organizations.
South Korea is at the forth position in Asian economy and on thirteenth position in terms of global GDP. Within time span of 12 years, health care industry in country is converted into government-mandated universal coverage from private voluntary health insurance. South Korea was able to maintain rapid growth level due to strong exports and low state of debt (Analoui and Karami, 2003). With the internationalization of country, there is huge improvement in business environment. Health care system is of high quality and it is also booming as a medical tourism destination. For effective growth and development, strong support is provided by the government. In medical device market of Korea, there is an increase of approximately 20% in comparison to previous year. Company is making domestic production of medical equipment but still they are not able to meet the demand of economy. As a consequence, there are high opportunities for foreign manufactures of medical equipment to enter into this growing market. However, success of foreign supplier will be based on their ability of negotiation in the bureaucratic procedure of import (Chi, Lewis and Park, 2003).
Threat and Opportunities in market of Saudi Arabia and South Korea for Vernacare
Health care sector of Saudi Arabia is largest in terms of expenditure, size, activity and potential. Estimated annual spending of government is more than $35 billion. Main part of government revenue will be allocated in construction of 17 new hospitals and completion of existing 137 hospitals and health care centers (Fernández and Nieto, 2005). However, instability is noticed in political policies of Saudi Arabia due to lack of transparency of banking and financial institutions. In addition to this low level of territory enrollment is affecting recruitment of local talent. Due to this aspect they had introduced strict regulatory policies to increase employment. Lack of consistency in development policies can increase issues for Vernacare (Gnyawali and Park, 2009). This may lead in reduction of customer segment due to bad reputation and high fluctuations. On the other hand, company can cope up with rapid changes with effective strategies in order to attain benefit of potential opportunities. By operating there company can also attain growth in neighbor markets.
SWOT analysis of Vernacare position in Saudi Arabia is as follows
- Company is using updated and productive technologies for the management of waste (Das, 2001). Due to this aspect, demand of their product is continuously increasing. As a consequence, they are able to make increase in the brand value of product. By this approach they had made expansion in their market share.
- Vernacare is having effective channels for distribution by which they are able to make timely delivery of their products and services by considering demand in the market. With the minimum cost they are able to reach large audience in order to enhance their level of satisfaction (Frost, 2003).
- Major weakness of the company is sole reliance on individual product. At present company is only providing waste management system to health care entities. If there is reduction in demand of this product, then performance of company will be significantly affected (Hoffmann and Schlosser, 2001).
- Revenue and profitability is highly influenced by customers power due to their high bargaining power.
- Vernacare can select strategy of diversification for expansion of their market share.
- Company has huge opportunities for entering into new markets.
- Company has to incur high costs for raw material, energy and transport. Due to increasing cost there is threat of reduction in profitability of business.
- Domestic firms will not enter into joint venture with Vernacare because it will make reduction in their market share (Kirby and Kaiser, 2003).
- There are complex policies and procedures for entering into joint venture in this market due to rigid government policies.
PESTLE analysis of Vernacare position in Saudi Arabia is as follows
Political: The governance in Saudi Arabia is based upon actions of king. All decisions are taken from king so if governance will have any changes in law that have relation with health care sector then it will have impact on working of Vernacare. The political stability and changes in taxes rates will also impact the operations of organization. If King will change the tax rates on medicines then it will also force organization to have increase or decrease in pricing of products or services while operating in Saudi Arabia.
Economic: The Economic condition of Saudi Arabia is stable so it is good indication for Vernacare business expansion (Jutla, Bodorik and Dhaliwal, 2002). The economic system of nation is depends upon oil industry as country is one of leading supplier of oil in world. Nation mainly have trade with United nation so if oil industry of US is facing economic issues then economy of Saudi Arabia can also face some issues.
Social: The culture of Saudi Arabia is based on Muslim religion so it is necessary for Vernacare to have proper identification of Muslim culture. Literacy rate of nation is low and workers are not much skilled so it can be a critical issue for firm while business expansion.
Technological: In Saudi Arabia the use of technology is not in trends so it can be a challenge for Vernacare to make technological equipments arrangements. Company will also need to provide training to employees for better use of technological equipments. It may increase overall cost (Hyder and Abraha, 2004).
Legal: Laws are formed by king and the standards sets in health and social care industry is very high so it is necessary for Vernacare to follow those standards. If organization will not follow the rules then company may face various issues and king may also restrict firm to operate business in nation.
Environment: The governance of Saudi Arabia has focused on adaptation of various international and regional environmental conventions. So it is necessary for Vernacare to make sure that the organist working is not affecting environment of nation (Fernández and Nieto, 2005). Otherwise, they can face some issues that may affect the business opportunities.
Vernacare has high opportunities for growth in South Korea in comparison to Joint venture in Saudi Arabia. It is because, there is high technology development and government is making continuous reduction in their development cost. By entering into joint venture with domestic firms of South Korea company can make significant reduction in their production costs (Gnyawali and Park, 2009). In addition to this, medical institutions are providing variety of services.
SWOT analysis of Vernacare position in South Korea is as follows
- Company is leading brand in health care sectors. Products provided by the company are unique and different from products provided by their competing firms. By considering this aspect, company is having effective credibility and goodwill in the market.
- High market share in comparison to competitive firms is also assisting them in achieving high profitability and creating brand value (Analoui and Karami, 2003). With this image they are able to enhance their customer segment.
- Uncertainty in legal provisions for making improvement in medical facilities.
- Poor infrastructure will not be coordinated with the advanced technologies of company.
- Government of South Korea is focused on improvement of medical technologies. Thus, they are supporting foreign companies for operating in their companies.
- Established with leading countries for development of medical tourism.
- Company has to face high competition in international market (Frost, 2003).
- Medical products are available at cheap cost which may make reduction in the demand of the products.
PESTLE analysis of Vernacare position in South Korea is as follows
Political: Due to centralized economy there is high influence of regulatory authorities on operational activities of government entities. Country is focused on the medical development thus they are promoting FDI.
Economic: There is favorable economic environment for Vernacare so there is low medical cost and high inflation in demand.
Social: With the improving lifestyle there is high economic growth in South Korea. As a consequence Vernacare has good target market.
Technological: South Korea is making technical improvements in both public and private sector. Due to this aspect they are inviting foreign companies for operating in their country (Jutla, Bodorik and Dhaliwal, 2002).
Legal: Regulatory policies of joint venture are liberal due to which company can easily enter into South Korean market.
Environment: Environmental conditions are favorable for Vernacare. As government is making changes in their medical facilities for improvement and upgrading their technologies.
In accordance with the above description it can be said that strategic alliance of joint venture will be profitable for Vernacare. With this strategy they will be able to make diversification in their products to attain high profitability. Further, they can take advantage of exemption provided by the countries to the domestic firms. Both Saudi Arabia and South Korea are developed countries and planning to upgrade their medical policies. As a consequence, company will be able to enhance their global market share. In addition to this, they make increase in their resources and capabilities by strategic alliance of joint venture. However, procedure of joint venture is complex due to rigid regulatory policies. Company is required to comply these policies for implementing strategy of joint venture. Another factor that creates threat on the growth of the Vernacare is sole reliance on individual product i.e. waste management systems. Most of the governments are focusing to provide minimum health care services due to population. They are not focused on improving technologies. Products provided by Vernacare is making increase in the cost of business due to which country with rural population cannot afford their product and services. Thus, company is required to make diversification in their product for high growth and development.
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