Spanish Information Technology company ITEC is hugely successful in its local market partially due to its innovative business model – selling the franchises of its ‘Portal de tu Ciudad’ portal that provides information about various aspects of different cities within Spain.
Franchisers are offered to sell advertising spaces through franchising a website through the portal that focuses on a specific city for the amount of investment of less than 15,000 Euros. In return they are offered high returns through an expanding business, and training and professional help related to the various aspects of the business. Currently, strategic level management is exploring its opportunities of entering UK market as a part of a global expansion plan.
This article is intended to ITEC strategic level management and advices the company regarding its expansion plans into UK. The article is based on ITEC company and UK information technology market analyses that have been conducted through employing a range of relevant strategic tools. Moreover, the article recommends a strategy ITEC can apply in relation to its UK market entry plans.
It needs to be stressed that along with franchising opportunities the company also offers a range of other products and services such as websites for companies and individuals, optimisation services on Google and other major search engines, reports and researches for companies and industries and others. However, it is mainly the franchising opportunities on the basis of ‘Portal de tu Ciudad’ portal the company is relying on in terms of ensuring success in UK market. Accordingly, the report mainly focuses on franchising offer of the company n terms of detailed analysis.
ITEC Company Analysis
ITEC needs to be analysed in detail in order to advice the company regarding its expansion plans in a most appropriate manner. SWOT analysis is found to be the most appropriate strategic tool in order to undertake this task. SWOT stands for strengths, weaknesses, opportunities, and threats of the company and analysis each factor individually in order to make decisions of a strategic nature (Kotler and Keller, 2006).
SWOT analysis for ITEC is reflected on the following table:
UK Information Technology and Internet Market Analysis
It is necessary to analyse the various aspects of UK market in great detail prior to making any recommendations to ITEC management regarding committing to enter that market. The combination of strategic analytical tools found useful for this purpose is comprised from PESTEL and Porter’s Five Forces analysis.
Kutz and MacKenzie (2009) cofirm PESTEL analysis to be the most appropriate tool to undertake an analysis of external factors affecting a specific company or an industry. PESTEL stands for political, economical, social, technological, environmental and legal factors affecting a company or an industry.
The following table represents PESTEL analysis for ITEC focusing on UK market:
Porter’s Five Forces Analysis
Porter’s Five Forces analysis is an effective strategic tool for industry analysis that is based on five forces affecting the industry: the threat of new competitors, the intensity of competitive rivalry, the threat of substitute products and services, the bargaining power of suppliers, and the bargaining power of customers (Porter, 1985).
Threat of new competitors is exceptionally high in IT industry in UK due to that fact that it is comparatively easy to enter IT industry and the amount of investment required is considered to be comparatively affordable than most of the other industries.
Intensity of competitive rivalry is high in IT sector in UK; however, ITEC possesses first mover advantage in its portal franchising businesses, therefore, the negative affect of this particular factor to the company is minimal.
There is a substantial threat of substitute products and services for ITEC’s portal franchising business that is expressed in two forms. Firstly, there are many franchising opportunities available in UK for potential direct ITEC customers. Secondly, ITEC’s indirect customers – website visitors, have a wide range of alternative options of obtaining information about city like magazines, brochures, other websites etc.
Bargaining power of suppliers would be relatively low in its UK market, because there are many companies, as well as individual writers and photographs who would supply materials to be available in company web-sites.
The bargaining power of ITEC direct customers would not be too high in UK, due to the fact that one customer per city would suffice for the company, whereas ITEC indirect customers would possess increased amount of power.
Recommended Strategy for ITEC
On the basis of above analyses ITEC is recommended to enter UK market with its portal franchising business model with some modifications. The modifications to the franchising model should address the cultural issues that are likely to arise due to the fact that there are great differences between English and Spanish cultures. Specifically, the design of the website should be altered in a way that it should attract UK customers taking into account their cultural differences, assisting the cultural fit between ITEC and its UK-based franchisees.
It has been stated that “a good cultural fit will maximise the potential of the IJV and help deflect threats to its ongoing viability arising from misunderstanding and antipathy” (Glaister et al, 2007, p.159) and this statement equally valid in relation to franchising form of partnership as well.
Moreover, the strategy ITEC would follow in UK market should be based on four components: planning, organising, leading and controlling. The importance of these four components for strategic success of the company has been stressed by many business researchers, including Lewis et al (2006) and Dessler and Phillips (2007).
Planning. ITEC strategic level management has to identify challenging, but achievable aims and objectives that meet the requirements of SMART approach to be achieved in UK market. It may include a point like to achieve 80 percent of the market share and generate a revenue of 1.2 million GBP within the first year of business in UK.
Organising. Authorities should be delegated and tasks should be assigned appropriately by ITEC management in order to achieve the above specified aims and objectives in a most efficient manner.
Leading. Appropriate leadership tools should be exercised by ITEC management in order to increase the overall effectiveness and efficiency if franchising in UK market. This area is very sensitive due to the fact that leadership methods successful in Spain may fail in UK due to cultural differences, therefore universal leadership methods like inspiration and leading by example should be exercised.
Controlling. ITEC’s performance in UK market needs to be closely monitored, both locally and from head-office in Spain. If any deviations from strategic plan are found due to various reasons corrective measures need to be implemented by management timely and effectively.
Today’s marketplace in most of the industries has become highly competitive because of globalisation, technological advancement and various other reasons. Therefore, companies need to possess competitive edges, ideally in forms of innovative products and services in order to succeed both, locally and globally.
ITEC has a strong competitive edge in its market that is offer of its innovative service of internet portal franchising. Currently, the company is succeeding in its home market in Spain and exploring the opportunities of international expansion. This article has critically evaluated ITEC’s potential in UK market on the basis of employing strategic analysis tools such as SWOT, PESTEL, and Porter’s Five Forces analysis.
The article identified good opportunities for ITEC in UK market provided; some alterations are made on the overall strategy of the company to address vast cultural differences between Spain and UK. Moreover, a strategy has been recommended to ITEC, that the company can follow to succeed in UK market.
- Dessler, G & Phillips, J, 2007, Managing Now, Cengage Learning
- Glaister, KW, Husan, R & Buckley, PJ, 2007, Strategic Business Alliances: An Examination of the Core Dimensions, Edward Elgar Publishing
- Kotler, P & Keller, K, 2006, “Marketing Management”, twelfth edition, Prentice-Hall
- Kozami, A, 2002, Business Policy and Management, Tata McGraw-Hill
- Kurtz, DL, MacKenzie, HF & Snow, K, 2009, Contemporary Marketing, Cengage Learning
- Lancaster, G, Massingham, L & Ashford, R, 2002, “Essentials of Marketing”, fourth edition, McGraw-Hill
- Lewis, PS, Goodman, SH, Fandt, PM & Michlitsch, JF, 2006, Management: Challenges for Tomorrow’s Leaders, Cengage Learning
- Porter, ME, 1985, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press