Entering the Motorcycle market in colombia

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Motorcycle has ever been a signature of freedom, on top of that, Eagles has successfully branded their bike with prestigiousness and manner. To spread out the concern into a new market, research in deepness will be required. This study weights both chances and hazards of the new lifting state in Latin America, Colombia. Colombia is located at the northern most tip of South America, owned the lone land pathway to North America. This gives Colombia a alone advantage for trading between North and South America. With this geographics advantage, it has shown a continues growing and recovery after fiscal crisis in twelvemonth 2009 ( WorldBank 2010 ) . Colombia is known as the 4th largest economic system, similar to developing states, the fast growing of state has caused an unfairness distribution of income and wealthiness ( WorldBank 2010 ) .However, the unfairness is a dual border blade for Eagles, addition of affluent category and high per centum of poorness ( WorldBank 2010 ) . In the recent decennary due to globalisation, there is an addition influence from American civilization such as Pop music, films or life style ( JOHNSON 2010 ) . This may supply an chance to present Eagles motor bike into Colombia. Further more, Colombia signed free trade understandings with United States to let smooth trading between the two states.

This study will place the chief chances and hazards in deepness from four positions as mentioned briefly above, they are economic sciences, civilization, environment, authorities policies, followed by recommendations and ratings of the market potency. Each of these is given analysis and apparent informations to back up. By sing all the chances and hazards, a concluding suggestion will be given at the terminal to demo that Colombia should be consider to go on probe and invested.

Scope of the Report

This study will necessitate seting several premises before come ining the analysis. One of the chief restriction is the existent client behaviour, the variables of it is excessively high which can non be predicted accurately. Second, to supplement for deficient informations, premise of neighbour states holding similar conditions on economic growing and behaviours. It is given that Eagles Motorcycle is priced around $ 20,000, nevertheless, there will be monetary value difference for higher/lower terminal merchandises. On the other manus, the mark clients is assume to be higher-middle category since Eagles bike is a luxury merchandise alternatively of necessity.

Background

Colombia has a population growing has decelerate down in the recent old ages diminishing about 0.2 per twelvemonth, in twelvemonth 2010 merely 1.184 % growing ( SCRIVENER 2010 ) . Within the population of 45,659,709, Eagles should concentrate on the top 20 % of the population because they acquired more than half of the gross income of Colombia which they are the 1s with adequate buying power for luxury bike, this will be discourse further in the undermentioned economic analysis.

As mentioned above, Colombia ‘s boundary lines owns the exclusive tract from South to North America, the land transit provide a footing of basic supplies. In order to do pressing cargos on the bike, a smooth transit of goods through air mail would be required to present it around the state. Having 40 regional airdromes, with the major international Airport in Bogota ‘s El Dorado managing lading weight “ 350 million ” metric dozenss yearly, 1st for lading capacity and one of the busiest in Latin America ( Division 2007 ) . Colombia ‘s air power transit system grants it great advantage with direct flights to 984 international airdromes. This provides a polar chance for Eagles to maintain their stock flows. Therefore, the transferring of goods is dependable, taking to the ability to catch up on tight agendas of these usage made bikes provides a cardinal component for a sustainable and rapid logistics.

Economicss

Opportunity

Colombia in the recent decennary has had continued growing after the recession in the late 90 ‘s. Strong growing is seen between 2005-2007, when the growing rate increased from 5.7 % -7.5 % , while the rising prices rate remained below 6 % ( BARRIENTOS 2010 ) . This shows that the Colombian economic system is retrieving easy without marks of an overheating economic system. Its GNI had significantly increased from $ 1700 to $ 8600 in the past 5 old ages even with the impact of the fiscal crisis in twelvemonth 2009 ( Bank 2010 ) . These factors show steady economic growing. As a consequence, there is an betterment in the Colombian economic stableness, taking to higher assurance for investings. In add-on, other concerns have increased assurance puting in Colombia. There has been an addition in investings from 15 % to 26 % of the GDP from 2002 boulder clay 2009 severally ( Anonymous2009a ) . The Colombian FDI in the twelvemonth 2010 reached $ 6.4B in the first 8 months and rose to 19.7 % , compared to figures last twelvemonth. Reputed diary Business Week even published an article on the Colombian economic system and titled it “ Colombia: the most utmost emerging market on Earth ” ( Farzad 2007, Alsema 2010 ) . All of these positive indexs show that the Colombian economic system will turn out to be a favourable environment to get down concern in. For the instance of bikes, a stable GDP with low rising prices, plus a rapid addition of GNI, will let a higher demand of luxury bikes. This is a critical component because many neighbouring states such as Brazil have non shown economic potency and its recovery norms 2 % less GDP growing as compared to Colombia ( Anonymous 2009b ) , giving Colombia a competitory border.

In sing the relationship between the cost of a bike and income earning, to the Colombians, a bike is considered as a luxury good with an estimated mean monetary value of $ 20000. As such, bike makers targets high income earners in the state. However, Colombia has a important unequal distribution of income with a GINI index of 58.5 ( Bank 2010 ) , and 62.7 % of the income belongs to merely 20 % of the population ( Development 2008 ) . On the other manus, by detecting the fact that the population with disposable income higher than $ 25,000 had increased critically from 6.2 % to 11.2 % , in unit footings, there are 608,000 Colombians who now have the ability to pass $ 18,750 on luxury goods on the norm ( Euromonitor 2010 ) .Such statistics signifies a speedy growing in disposable income as a consequence of an addition in the demand of luxury goods in Colombia. The tendency can besides be seen by the clear addition in the changeless PPP since early 90 ‘s every bit compared to the figures now. In 2010, the value of PPP is $ 1273, amounting to 18, 6 times of that in 1990 ( Nations 2010 ) . Colombians are besides observed to be hiking their life criterion to let themselves to pass their money on luxury goods such as Eagle Motorcycles. Such luxury merchandises require a uninterrupted growing for its demand to increase, and Colombia ‘s growing in disposable income therefore provides a favourable environment for the company ‘s enlargement.

On the other manus, the literacy rate of the state is 95 % , while unemployment rate is 12 % . This indicates labour with basic accomplishments is widely available, plus the high poorness rate, it may intend there are big sum of inexpensive labours that can be hired. This besides has make a hazard for the damaging the potency of Colombia ‘s market.

Hazard

Other than the issue of the reappraisal of Colombian peso, other economic substructure proves to be worrying. Colombia ‘s unemployment rate has non seen a lessening since twelvemonth 2006 and reached 12.5 % last twelvemonth, with 49 % of Colombians staying in poorness ( Benford 2010, John 2009 ) These conditions create a important income spread which would stop the growing of possible clients due to a deficiency of assurance in this country. Eagles will necessitate a changeless addition in the Colombian population to come in the upper in-between category to function as their new clients. However, if a big unemployed population exists, turn outing the deficiency in of in-between category Colombians, possible clients will be progressively hard to pull.

Brief Recommendation

From the high growing and go on strong economic system, Colombia ‘s market is reasonably attractive despite the fact that it may be overheating with no support from the lower income categories. The immense income spread between the rich and the hapless can do jobs while puting up the franchises because if in a long term Eagles realized that the rich-population-customers does non run into their gross revenues demands, any farther development will hold minimum consequence due to the deficiency of raising income category. For now, the economic sciences chance is higher than hazard, but the hazard may do possible jobs in the hereafter.

Culture – ( HOFSTEDE 2009 )

( the follow analysis are based on Hofstede ‘s informations and research of cultural theoretical account )

Base on the cultural theoretical account designed by Hofstede, it is separate into four parts, individuality, Power distanced, Masculinity and Uncertainty turning away. The first three parts gives Eagles chance while Uncertainty turning away is a menace. By utilizing this theoretical account, we can burden and measure Colombia ‘s civilization. To supply a more graphic thought other states will utilize as a comparing. While comparing Colombia with other Latin America Countries, the informations shown that it possibly really similar is most ways.

Opportunity

Colombia ‘s Individualism is well low comparison with other Latin America states, 13 and 21. The low individuality index indicates that the society value trueness, and committedness extremely. Eagles clients in the United States has shown a trueness attributes ( SHTIFFIRG 2008 ) . The corporate society will let Eagles to hold an chance by presenting trueness while set uping franchises.

Sing that Colombia have a high difference between the rich and the hapless, 49 % of poorness ( Benford 2010 ) , the high power distance ranked 67 which reveals the instability in the society for both wealthiness and societal power. This is an chance is because one of the value in Eagles merchandise is Esteemed, when clients who believe in high power distance purchase an Eagles motor rhythm, he/she may experience a position encouragement. Another influence on their and chance we have on higher power distance degree states is that, people from poorness possibly lament to life the “ American Dream ” . Through Globalization, the pop civilization of United States has addition, where Eagles merchandises are invariably ride by famous persons and looking on the Movie screen. It would give the feeling of high power/ rich people that are trendy will utilize Eagles bike and make consequence of being one of the cardinal chances of power distance.

Aboard with the high power distance, Colombia besides has a high maleness ranking of 64 which illustrates the gender inequality. Eagles motor rhythm is a signature of freedom, buying the bike can be an imagination of holding a fresh start and freedom, consequence as making equality in ideal.

Hazard

As everyone knows, bike is more unsafe comparison to other cars despite the trade names and quality. Colombians have a high uncertainness turning away, which means they may non back up the use of bike because it may be unsafe when accident happens. The Uncertainty turning away degree is 80 which is significantly high, the low tolerance of hazard may do a hazard for Eagles since the limitations and policy will be implemented. If a major accident happened that is cause by bike, the state may increase the barrier of safety to take down the opportunities of uncertainness occurs. In add-on to that, the society of Colombia may non be ready for the new thought of luxury bike since it may non be common in Colombia.

Brief recommendations

Out of the four cultural analyses made above, it is obvious that it has more chances than hazards. The hazard of uncertainness degree is difficult to change by Eagles Motorcycle, they must clearly indicate out their bikes are safe and will non make hazards of client ‘s life.

Policy

Having a free trade understanding with the United States is one of the major chance of the legal environment. It will let Eagles to export their merchandises into Colombia with lower duties ( United States Trade Representatives 2006 ) . This allows Eagles to hold a lower cost of production which increase the advantage. Therefore, holding a free trade understanding policy with United States gave Eagles an chance to set up franchises at a lower monetary value.

Hazards

Other neighbours such as Ecuador do non possess the economic ability to digest extra supplies from Colombia. As a consequence, weak demand from neighbouring states can non supply as a buffer for the happening of any incidents that might happen to halter Colombia ‘s economic growing. United States has a free trade understanding with Colombia in twelvemonth 2006 that gives advantage on both state cut downing trade barriers ( Defaer 2010, Smith 2008 ) , one time the relationship between the two trading spouses breaks down ( United States Trade Representatives 2006 ) , there will be less exports to Colombia and therefore it is of import to distribute Colombian exports to environing states. With weak demand coming from the environing states, an surplus in the sum of stocks would happen which will be damaging to the economic strength of Colombia ( STUMO 2008 ) .

The free trade understanding between Colombia and United States can be simplified into a basic game theory theoretical account. Colombia has bad repute of bewraying their trading spouses ( DAMME 2010 ) . As the logic of game theory, United States was trusting for a stag Hunt manner game theory, which if both parties ratifies so they can acquire the hart, if Colombia darnel, so both parties may non acquire the award. This may do a hazard, because in this instance, United States Government may stop up anticipating the worse and rip off no affair Colombia follows or non, transgressing the Free trade understanding, so both states will stop up with no benefits to each other at the terminal. As a consequence, concerns will be the victims of the bad determinations made by the two authoritiess.

There is an evident deficiency of involvement in Colombian peso and this is a important job to be resolved. It is suggested that they revalue the currency ( STRAITS 2010 ) in order to decide the job. Trade with adjacent states should be taken into history, peculiarly since Venezuela had implemented a trade prohibition on Colombia ( Anonymous 2010e ) . This will be impacting the export of Colombia which because Venezuela is one of the biggest importers of Colombian goods. This trading restriction is because Venezuela authorities seeking to diminish the rising prices, which besides have military forces implanted on both states ‘ boundary lines ( SWIFT, 2009 ) . The determination can do both economic development decelerate down and pandemonium for Colombia which will be a hazard. Furthermore, after the trade prohibition, the Trade Minister of Colombia Sergio Diaz-Granados has rush to claim a $ 800 million debt payment from Venezuela, nevertheless, this may do heating up of two states ‘ relationship as a consequence longer trade prohibition and perchance serious military actions taken by Venezuela.

Brief recommendation

Having a free trade understanding with United States is a asset for Eagles, nevertheless, the unstable state of affairs and ill-famed for their trading understanding and weak relationship is reasonably hazardous. Therefore, under the range of authorities policies, it is hazard over chance.

Environment

The air pollution in Colombia is being worsen due to the big sum of transit, it already hold reached to a jeopardy degree that if the yearss are bad, it is suggested people should remain place ( Diaz 2010 ) . The pollution, smog, is caused by big sum of autos being stuck on the route. This can be an chance to bikes is because it is easier to go on going between autos while there is a traffic jam.

However, holding a bike requires exposed in atmosphere the whole clip, if the smog is earnestly doing problem, clients may prefer a normal with air conditioned so that they can be healthier.

Brief recommendations

Eagles can plan their bike to hold less pollution emanation and advertise on single/couple travellers does non requires a four wheeled, alternatively picking a Eagles can salvage the environment and as a leftist society, people will be willing to input attempt for the greater good. So, it is an chance instead than a hazard.

Recommendations

There has been a roar in the demand of bikes in the Latin American states ( Corredor 2002 ) . It has been observed that Latin America has the 2nd highest addition in the demand of bikes, ranking merely below the Asia Pacific ( Paul 2007 ) in this regard. The addition in exports from major rivals proves that a similar addition in the demand of bikes ( Farlex 2007 ) is happening every bit good. Two major rivals in the industry, Honda and Mitsubishi, had increased their exports to 100,000 units to run into the increasing demand of bikes in Colombia ( ANONYMOUS. 2010c, Anonymous 2010d ) . Although such statistics may change with the existent statistics of each merchandise, it is a certain indicant of the high demand of bikes observed in Colombia. As a consequence of the steady addition in demand, Eagles might be able to derive a profitable market portion during the roar in demand of bikes, particularly since the mark market is merely 11.2 % of the population, and therefore has more room for growth..Nonetheless, Eagles may see take downing their monetary value or get downing a new merchandise line with cheaper motor rhythm to vie with Toyota and Mitsubishi. It is difficult for $ 20000 to vie with $ 600 particularly in a underdeveloped state.

Decision

Colombia is a really attractive market which meets the demands for a lifting market. Even though there are several hazards, the chance has outweighed them. While analyzing the hazards, political menaces are the most unsafe, as mentioned above, the intense state of affairs between United States and Colombia may be complicated. If a breakage of trading understanding and friendly relationship, the pandemonium will hold a great impact and damage the concern. However, most of the underdeveloped states require a batch of hazard to let the concern to go successful. Once the stigmatization is built and recognized, more people will be attracted and the concern will turn. Finally it, Eagles should look into further and see puting up franchises in Colombia.