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NGUYEN, Quynh Ly (11456385) International business
1
2011
INTERNATIONAL BUSINESS
ASSIGNMENT 2
NGUYEN, Quynh LyID: 11456385
NGUYEN, Quynh Ly (11456385) International business
1. SUMMARY
The report will start by briefly describing the Wiggles Company, which is known
as an Australian entertainer with highest earning over the last few years. After
that, it continues to identify the Wiggles business model which is family
participation in order to understand the reason for the successful business model.
The Wiggles not only develop successfully products for children but also create
products which are suitable for adults and appealing parents. Furthermore, as the
objective of being global organization, providing the Wiggles’ competitive
advantages analysis is necessary to comprehend how the Wiggles can compete in
the world’s businesses. Next, discussing the concept of corporate social
responsibility as the way by which the firms establish the well – being of its brand
and maintain its growth in long term. As well as this, the Wiggles’ intangible
resources which are knowledge, the firm’s assets, reputational assets and
capabilities will be examined in order to understand how the Wiggles retain its
competitive advantages. In addition to that, having awareness of the effect of
psychic distance seems to enable the Wiggles selecting the appropriate foreign
markets, as well as avoiding the risks of entering to new marketplaces. Finally,
the paper will end with providing the concept of standardization and
customization.
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NGUYEN, Quynh Ly (11456385) International business
TABLE OF CONTENS
1. SUMMARY................................................................................................................22. INTRODUCTION.....................................................................................................4
2.1. THE FIRM’S BACKGROUND.......................................................................42.2. THE OBJECTIVE.............................................................................................4
3. THE WIGGLES’ BUSINESS MODEL...................................................................44. THE COMPETITIVE ADVANTAGES OF THE WIGGLES..............................65. THE WIGGLES’ CSR..............................................................................................86. THE WIGGLES’ INTANGIBLE RESOURCES.................................................107. THE EFFECTS OF PSYCHIC DISTANCE.........................................................118. THE CONCEPT OF STANDARDIZATION AND CUSTOMIZATION..........139. CONCLUSION........................................................................................................13REFERENCES................................................................................................................14
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NGUYEN, Quynh Ly (11456385) International business
2. INTRODUCTION
2.1. THE FIRM’S BACKGROUND
Originally, the Wiggles were established in 1991, in Sydney in Australia and
simply known as a music band with four men who are Murray Cook, Jeff Fatt,
Anthony Field and Sam Moran. They entertained children by playing instrument,
providing cartoons and games. In 2000, the Wiggles started to perform its
business activities internationally. By prioritizing English – speaking nations
which are US, New Zealand, the UK and Canada to begin first, the Wiggles
earned 65 million American in 2001 after touring in New York City. Afterwards,
they have a consideration in South America and Asia market. That is also a part of
the Wiggles’ strategy to expand its business globally.
Within the high level competitive entertainment industry, the Wiggles have
success in improving and maintaining a strong brand name. The causes of the
success are the combination of several factors, for instance: identifying the
appropriate target markets, providing products effectively based on the
understanding the demands of customers, as well as implementing suitable
business model associated with effective management
2.2. THE OBJECTIVE
The purpose of this report is to explore the key factors that lead to the success of
the Wiggles, ass the result, having an overview of key factors that affect on the
success of any business. In order to accomplish that, this report focuses on the
analysis of six components.
3. THE WIGGLES’ BUSINESS MODEL
Business model has become a crucial factor that determines the success of
businesses. A group of researchers showed that the reasons of the success of
organizations, such as Dell, Amazon, etc are the combination of using new
technologies, performing business efficiently and creating new business models
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NGUYEN, Quynh Ly (11456385) International business
(Weil, Malone, D’Urso, Herman & Woerner, 2005). Also, they found that there
are some business models which are used more popular than others. The reason
for this is because those business models perform effectively than others. Hence,
in order to explain the success of the Wiggles, the understanding of its business
models is necessary. A business model is defined as the way the business expects
to gain profits. As can be seen on the diagram below, it contains seven
components which are customers, competitors, offering, activities and
organization, resources, suppliers and the scope of management. More specific,
the model combines the internal factors of a firm, and then changes those aspects
to resources, through activities, to offerings and finally to market. According to
Hedman & Kalling (2003), the seven components of a business model has
relations with each others. For instance, with the purpose of attending a specific
market segmentation and compete with competitors in that segmentation, a firm
needs to provide products in terms of beneficial qualities and prices. In order to
accomplish this, the firm has a need of presenting customer – perceived standard
of products and services, which leads to the requirements of effective
communication and productive division of labor and control. Furthermore, when a
change occurs, it will affect on all of the components of the models. Hence,
managing and developing business models needs to be considered overtime. In
the case of the Wiggles, within entertainment industry, on the one hand, a
majority of companies are unsuccessful because of poor management and limited
planning in long term. On the other hand, the Wiggles establish a successful
business model of family participation and focus on management to avoid the
problems that are dangers to many other entertainment companies. As be
mentioned above, initially, the Wiggles were simply known as a music group.
Afterwards, the Wiggles decided to become an international organization which
presents family entertainments. One of the reasons for its successful business
model is to understand deeply the needs and desires of their target market and
supply an effective products and services that attract both children and adults
(Biddle, 2010). To be more specific, the Wiggles identify particular target markets
that are young children who have a need of entertaining and pleasant experiences;
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however, they recognize that those customers do not have the ability to purchase
products or services. In addition to that, the rock ‘n’ roll music does not only
attract children, but also appeal to their parents. Thus, the Wiggles bring parents
and adults into focus as a second major target market. A research shows that on
the basis of understanding deeply the characteristic of children and adults, the
Wiggles not only satisfy the needs of children, but also provide products and
services that are value for money for parents and adults (Biddle, 2010). Take
examples, with regards to children, the Wiggles realize that children usually pay
less attention, prefer being challenged and demand being empowered, so that the
Wiggles are successful to provide an innovative method to children’s
entertainment. For parents and adults, those customers are more likely to have a
high level of acceptance when making purchasing decisions. The reason for that is
because they seem to seek educational and value products rather than
participating in interesting experiences; hence, the Wiggles have attended to
establish healthy image in order to attract those purchasing customers. Moreover,
to achieve the objective of family participation, in spite of other entertainers who
depend on “pester power”, the Wiggles put a ban on the dependence on “pester
power”. Pester power is defined as the way through that marketers fulfill the
requirements of children with the recognition that children tend to have ability to
persuade their parents to buy products, such as fast food. However, Paul Field, the
product manager of the Wiggles, states that they never support fast food in order
to establish a wholesome image, as well as being accepted by parents and adults.
Overall, the Wiggles are successful to provide products that meet the requirement
of parents and adults, but also satisfy children’ needs and wants.
4. THE COMPETITIVE ADVANTAGES OF THE WIGGLES
Currently, within the entertainment industry, the level of competition is fairly
high. Companies have to face and compete with their existing competitors and the
potential rivalries. Hence, without a competitive advantage, it is difficult for a
firm to generate profits, as well as maintaining its position in market places in
long term. A study presents a competitive advantage as an advantage over firms’
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competitors by which creates better value for customers in terms of lower prices
and greater benefits and services (Fisher, Hughes, Griffin, & Pustay, 2006).
Furthermore, having a competitive advantage seems to not enough to ensure
companies can retain its position on high level competitive market places.
Therefore, the needs of updating and improving the quality of products and
services to meet the requirement of customers are sheer important. According to
Tutor2u, there are four strategies to gain competitive advantages which can be
seen on the diagram below
. Source: http://tutor2u.net
With regards to cost leadership, the aim of this strategy is to provide products and
services with lowest cost in the industry. The companies follow this strategy is
over their competitors in terms of cost advantages. For the differentiation focus
strategy, organizations have an objective to supply products which are obviously
various from competitors. For the differentiation, first of all, firms select
standards from purchasers in a market, and after that performing the businesses
effectively to meet those criteria. This strategy frequently offers the higher costs
of products with extra values for customers. Finally, the cost focus is defined as a
strategy in which seeks for a low cost advantage in a small amount of market
segmentations. In the case of the Wiggles, this paper suggests that the strategy to
gain competitive advantages seems to be the differentiation focus. To be more
specific, first of all, the Wiggles have different market segments from other
entertainers that are the involvement of parents. As be discussed above, the
Wiggles identify the target market on the basis of purchasing power. In addition
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NGUYEN, Quynh Ly (11456385) International business
to that, the individual members of the Wiggles have certifications in early
childhood education and development, also have musical background; hence it
contributes a deep understanding regards the needs and desires of the target
markets and enables the firm to satisfy the customers. Another competitive
advantage of the Wiggles is the strong brand name with high reputation that aids
the firm to expand their business activity globally. One of the main reasons for
establishing successfully brand image is by producing great products in terms of
education in order to appeal both children and parents’ attention. What is more,
the Wiggles have effective management which is divided into two tasks, one
focuses on the content’s development, another stresses on the improvement o the
firm’s brand and the business. Hence, the firm control quality effectively and
create carefully plans for long term. Take an example, on the basis of
understanding deeply the characteristic of the industry which depend heavily on
cultures. Products can attract in some nations but in others might be not. Also, the
Wiggles understand that the level of attending in terms of culture seems to be very
low among children in all of the countries in the world. Hence, it would appear
that the products to foreign children do not need to modify too much. The final
advantage of the Wiggles is its business models, in order to achieve the goals of
foreign expansion, selecting Australia which is known as the most multicultural
nation over the world enables the firm to decrease the requirement of modifying
products.
5. THE WIGGLES’ CSR
Historically, the meaning of responsibility for organizations was simply to
produce money and increase value for shareholder. Nonetheless, currently, the
definition of corporate responsibilities has become broader which refers to the
responsibility for the environment, for working circumstances, for ethical issues
and for local communities. In other words, it is the way a corporation controls its
business in order to generate a positive effect on society based on ethical benefits
and high regard for people, the environment and communities. Hence, when
performing businesses, firms not only focus on making profits, but also need to
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NGUYEN, Quynh Ly (11456385) International business
have a consideration towards its impacts on its employees, its customers, its
suppliers and communities. There is no doubt that becoming social responsibility
brings great benefits for companies (Zynia, 2002). For examples, in terms of
maintaining productivity and competitive advantages, being socially responsible
aids firms to establish the close relationship with their host communities,
understand the marketplace, and also within high competitive environment, it
enables companies to obtain skilful employees, loyal investors and consumers.
Generally, corporate social responsibility (CSR) is a crucial factor that contributes
to the maintenance of companies’ growth in long term. In the Wiggles’ case,
currently, the Wiggles have to compete with a large number of entertainment
companies; hence, to survive, the firm not only attempts to improve products and
services, but also take responsibility for the societies and the environments in
which it perform businesses. As be mentioned above, the Wiggles follow the
model of family participation, hence they are likely to stress on creating family
values and reduce the gap between parent and children. Take an example of The
Word Wits which is one of the Wiggles’ series of musical videos. The Word Wits
aims to help children to establish vocabulary. The World Wits brings kindergarten
teachers, any parents of young children, and the children into focus as target
market. The program attracts to parents who desire to transfer an educational
message through entertainment and appeals to children by using the variety of
teaching techniques. Furthermore, the unique of the World Wits is to emphasis on
education and according to The word wits, the World Wits stress on building
vocabulary more than others series on TV and the Internet. The reason for that is
because they recognize that vocabulary is an important factor to the success of
reading which are comprehension, communication and confidence. Hence, it can
be assumed that the program World Wits produce a great educational value for its
customers. Another example about being socially responsible of the Wiggles is,
the Wiggles have built up play centers in suburban New South Wales. The causes
of choosing the New South Wales is because it closes to suburban family and as a
result parents can participate in play centers with their children rather than leave
them in the centers and do other things. Thus, it can be suggested that the gap
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NGUYEN, Quynh Ly (11456385) International business
between children and their parents is reduced. What is more, in order to maintain
the Wiggles brand’s reputation, the Wiggles come to a contract with Australian
apple farmers with the purpose of enabling farmers to sell apples. Overall, it can
be concluded that by attending on social values, the Wiggles achieve the goals of
building the wholesome image and sustain its growth in long term.
6. THE WIGGLES’ INTANGIBLE RESOURCES
Many researchers have launched to explain the reasons of the differences in the
performance of companies. According to Villalonga, (2004), intangible resources
play a crucial role to sustain competitive advantages of firms, so that it leads to
the variations in companies’ operation. It is defined as the major driver of the
differences in terms of the maintenance of operation across companies. Also,
Villalonga states that the firm has more intangible resources seem to have greater
the maintenance of the firm’s competitive advantages (Villalonga, 2004). The
intangible sources of a firm can be divided into two components which are assets
and capabilities. While intangible assets are identified as what an organization
has, capabilities are what a company does. There are four levels of intangible
resources which are knowledge, firms’ assets, reputational assets and capabilities.
With regards to knowledge, intellectual property is assumed as the most
significant asset of companies. The level of investigating intellectual property has
a part in affecting the success or failure of firms. Hence, intellectual property
assets, such as inventions or copyrights are protected by laws. As a result, a
company can establish and retain its competitive advantages. Secondly, in terms
of the firm’s assets which include technologies, culture, human resources and
brand’s image. Such cultures plays a role as identifying the particular values and
behaviors of companies, as well as producing an environment in which workers
can perform more effective to meet the needs of customers. Thus, according to
Galbreath (2006), culture is a key factor to sustain the competitive advantages.
Moreover, the firm’s reputation is defined as a key driver of the positive behavior
of customers toward companies’ products; thereby has positive effect on company
performance. In the case of the Wiggles, identifying the Wiggles’ intangible
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NGUYEN, Quynh Ly (11456385) International business
resources follow the four factors above will be provided. Firstly, regards to
intellectual property, one of the key factors which determine the Wiggles’ success
is to have deep understanding its target market. Having this knowledge is based
on the Wiggles educational background and their experiences in terms of music.
Therefore, the Wiggles supply appropriate products and service that appeal to not
only children but also to their parents, as well as present in time an innovative
approach to the entertainment of children. What is more, the Wiggles have strong
brand reputation that creates a positive effect on the strategy to expand globally.
When Greg is one of the founding members has health problem, the Wiggles still
could continue. The reason for this perhaps is caused by powerful brand image. In
addition to that, another reason for the Wiggles’ successful replacement of Grey is
the low level of dependences on individual among the Wiggles’ members.
7. THE EFFECTS OF PSYCHIC DISTANCE
In the last decade, the international organization has increasingly emphasized on
psychic distance. Historically, the concept of psychic distance was classified as
the factors which prohibit the flowing of information through country markets.
Another definition was provided by Nordstrom and Vahlne (1994) who proposed
that psychic distance demonstrates the elements that prevent the learning and
practicing in the field of understanding foreign environments. While some studies
showed that psychic distance has a negative influence in the performance of
businesses, others suggested a positive impact. Furthermore, the concept of
psychic distance leads to the study of the differences between home country and
host country in terms of socio – culture. According to Dikova, (2008), a firm
attempts to expand its performance to a foreign market is likely to receive
disadvantages that is caused by the unfamiliarity with the local environment.
Those handicaps are the variation of consumers’ needs, consumers’ perspective,
cultures and the business structures. The estimation of psychic distance is the
combination of three factors which are languages, culture and business
environment (Dikova, 2008). In the case of the Wiggles, the company bring the
foreign expansion into focus as a part of the firm’s strategy to maintain its growth
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NGUYEN, Quynh Ly (11456385) International business
business, examining how psychic distance associates with the Wiggles
performance. To begin with the varieties in language and business learning, some
researchers suggest that it is easier for the international organizations to operate in
similar markets. However, other studies claim that entering new market places
produces a high volume of uncertainty and risks. Nevertheless, attempting to
decrease the uncertainty, such as researching, learning and planning, seems to
improve the firm’s performance in foreign markets. For the Wiggles, in order to
reduce the failure of entering to foreign markets, they choose the easy nations first
and then target the more difficult. Therefore, in 2000, it started performing its
international activities by touring in English – speaking nations, for instance New
Zealand, Canada, and UK. Thereby, they not only do not need to change the
products or services, but also reduce the cost of researching, learning and
practicing. Moreover, apart from selecting familiar markets, the Wiggles avoid
hazards by focusing on researching in unfamiliar markets. Take an example from
the Wiggles’ case study, in order to understanding new markets, they examine the
markets first, and then selecting the best method of changing their operations to
be suitable with particular markets. Another strategy which is useful to decrease
the drawbacks of participating in foreign markets is to share ownership (Dikova,
2008). The close relationship with local partners enables foreign organization to
reduce the environmental uncertainty. Hence, building up local partnerships is
likely to diminish the negative impact of psychic distance on the performance of
firms. In the case of the Wiggles, entering to Taiwan is a great challenge for the
firm. Whereas most of necessary knowledge to perform in Taiwan seems to be
tacit and hard, local partners become quite helpful. Thus, the company overcome
the unfamiliar environment by bring local partners in Taiwan to Australia and
teach them everything.
8. THE CONCEPT OF STANDARDIZATION AND
CUSTOMIZATION
The concept of standardization and customization are opposite each other.
Standardization is defined as the circumstance through which products or service
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NGUYEN, Quynh Ly (11456385) International business
is similar to every time, whereas customization is the circumstance where
products and service are provided based on the needs of an individuals (Sundbo,
2002). The reason for product standardization is to increase productivity, while
the purpose of customizing products is to satisfy individuals by serving customers
individually. On the one hand, the concept of standardization is characterized as
an economic productivity. In this situation, companies bring prices and quantities
into focus, and pay less attention for consumers. The reason for this is the cost
reduction; hence firms can gain the lower cost competitive advantages in
marketplaces and expect to sell products with huge quantities. As the result, profit
will increase because of rising sales. On the other hand, customization is
expressed as economic expectations. It does mean that consumers purchase
product customization with an expectation of problem solving or having
experiences. In this situation, productivities become irrelevant issues. In the case
of the Wiggles, as be discussed above, the Wiggles aim to perform its business
globally, therefore, the needs of reducing the modification cost is necessary.
When touring in the English – speaking countries, they have the same music back
ground, the same business model of family participation and even the same
children’s programs. Nonetheless, entering to other countries which do not speak
English, the Wiggles follow product customization strategy. For example, when
participating in the South American and Taiwan, the Wiggles have to translate the
music into particular languages.
9. CONCLUSION
Taking everything into account, the Wiggles are an international firm which
survives successfully in long term. From the Wiggles’ experiences, a company
want to achieve the goal of being internationally has a need of identifying the real
customer needs and wants and also building up and maintaining competitive
advantages. A firm needs to guarantee that products are provided has to meet and
satisfy the customers’ needs. In addition to that, for long term growth, a firm need
to aware and pay more attention on social responsible, as well as intangible
resources as crucial factors to sustain competitive advantages. Also, having
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NGUYEN, Quynh Ly (11456385) International business
consciousness of psychic distance concept relates to the differences between
countries in terms of social – cultural aspects.
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