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Abstract
This study focuses on the logistics involved in the proposed expansion of Zip Performance Auto Parts into Rio de Janeiro, Brazil. The study is divided into three important chapters; chapter one introduces the research, chapter two presents the literature reviewed through academic sources and chapter three presents the research methodology that was adopted in the study. The research problem to be solved was the logistical challenges that would face Zip as it expanded to the Brazilian market. These challenges mostly relate to operations and distribution of the Zip products. The research questions to be solved were based on the market of Zip, the profit margin and the competition (Warf et al., 2002).
The researcher adopted descriptive study design since descriptive studies were used in the research. Surveys were adopted to reach out to the respondents who comprised of managers and subordinates of a few selected companies that were operating in Brazil. The survey instruments will be emailed directly to the respondents; these will encourage open responses to sensitive questions and anonymity among the respondents. The sampling design adopted was census sampling, since the target population comprising managers and subordinates was not large since a few companies were selected for analysis. It is expected that these respondents will furnish the researcher with the requisite information required to undertake this study. Data collected will be analyzed through descriptive statistics and presented in tables and charts. Throughout the study, the research has reviewed journals and academic sources to support the literature needed for the study. This study will be mainly concerned with the breadth and not the depth of the study (Kotabe et al., 2002).
CHAPTER 1
Introduction
This chapter introduces the entire research and also provides a theoretical background on which the study is based. It further outlines the problem statement to be solved (the gap to be filled), the purpose of the study, research questions and the organization of the study.
Background of the study
Logistics is a process involving actionable transportation and storage of materials. An organization is differentiated in the industry by its ability to perform logistical functions efficiently and effectively. Logistical tasks form a subset of the entire supply and chain management system. Such elements as “the cost, accuracy, and efficiency are the key factors vital for an effective logistics management system” (Ruigrok & Wagner, 2003). The logistics process involves subsets of processes incorporated within the handling of materials and warehousing of finished products. Logistics operations of Zip Performance Auto Parts are envisaged to widen in scope. In Latin America, Brazil is the largest market economy owing to its Gross Domestic Product (GDP). As a result of its economic growth and GDP, Brazil is ranked as the seventh-largest economy in the world.
In 2013, “a 2.5 % economy growth was achieved in Brazil” (Mentzer, 2001). In the recent past, there has been an increasing trend in globalization; logistic functions involve two primary processes that include the inbound logistics and outbound logistics. Inbound logistics concentrates mostly on the purchasing of materials and the inbound transfer of materials from the suppliers to the assembly plants, or either the retail stores and the warehouses (Lambert, 2008). On the other hand, outbound logistics is a primary process in the supply chain management system involving the transfer of finished products from the production line into the end-user or the consumer.
Outbound logistics mostly concentrate on the movement and storage of the final product (Mentzer, 2001). Within the field logistics and supply chain management, inbound and outbound logistics always combine as the supply chain managers seek to maintain reliability and efficiency of the distribution channels while minimizing costs related to storage and transportation(Wallenburg & Wieland, 2011). Understanding correlation “and the differences between these two primary aspects of logistics can lay a firm foundation for formulating a comprehensive and feasible logistics and supply chain strategy” (Blanchard, 2010). Through imperfections and exploitation of international markets, a company will grow. Growth and “internationalization always impact positively to the firm’s performance” (Blanchard, 2010). The ultimate goal of international expansion is to enhance a company’s value by increasing the cash flow while at the same time decreasing risks. Cash flow is increased by increasing the revenue allocations (Contactor, 2002). Logistics management “is much a wider topic which has been researched extensively from time to time by academicians and managers of different organizations” (Contractor, 2002).
To have a clear direction on the proposed logistics on international expansion, the chief executive officer of Zip Performance Auto Parts, Mr. Smith, commissioned two teams to undertake market research and market studies in Rio de Janeiro Brazil. These teams were tasked with finding out the best way to execute the logistics and supply chain management strategy laid by Zip Company in the Brazilian market. The market research “was also meant to enable managers of Zip auto parts gain insights relating to the business operating environment, and the costs associated with operating or expanding into Brazil” (Elton et al., 2003). These operating costs are often related to the taxation systems, legal procedures, environment, distribution, business environment, and the government policies. Inbound and outbound Logistics of Zip Company in Brazil will be challenged due to the lack of infrastructural developments (Kundu & Hsu, 2003). According to Lambert, (2008), a successful Logistics and supply chain management system is based on four important aspects or concepts. These include quality, forecasting or planning, cost containment, and fulfillment. These are meant to ensure that the delivery of supplies or materials occurs on time.
Statement of the Problem
Lately, analyses on foreign direct investments (FDIs) indicate a rapid growth. As such, FDIs “have always been faced by numerous challenges relating to both inbound and outbound logistics, legal systems, business environment, tax structure, trade tariffs, and government procedures” (Kotabe et al., 2002). In Brazil, the lack of sufficient infrastructures for the establishment and maintenance of viable distribution channels negatively affect logistical operations (Warf et al., 2007). This study, therefore, seeks to address these gaps existing in Brazil in terms of logistics and other business operating procedures.
Purpose of the Study
The purpose of this study was to examine the logistics proposed for the expansion of Zip Performance Auto Parts to Rio de Janeiro Brazil. This study, therefore, has put into perspective the existing logistical challenges and business operating environment as it has been mentioned above.
Research Questions
This study seeks to find out solutions to the following research questions: what is the state of marketing and distribution system in the proposed market? What are the normal profit margins in the firm’s industry? How is the competitive situation in the firm’s industry? And, do cartels exist?
Organization for the Study
This study is organized into three critical chapters. Chapter one presents an introduction for the entire research, it also gives a theoretical background for this study, highlights the research problem, the purpose for the study, research questions and the organization for the study. Second, is chapter 2, which presents the literature review for the entire research. This literature is both theoretical and empirical. Last, is chapter 3 which presents the research approach or the methodology that was adopted while undertaking this research? Chapter 3 is crucial since it outlines the techniques adopted for data collection, analysis, and presentation.
CHAPTER 2
Introduction
This chapter will provide theories based on the study; it will provide a review of relevant research and identify the research issues. This chapter reviews previous studies carried out on logistics management and international expansion and critically analyzed the studies. Research gaps will also be identified. There is a need for a review of literature both empirical and theoretical. This is always necessary and the most indispensable part of a research paper. A literature review enables one to have a rich background of the topic under study. One can gain facts on the topic of study and most importantly learn about the authoritative writers or authors in that particular field.
The principal-agent theory
According to Hasty and Reardon (2007), there is a need to balance the capability of the third-party logistics and the need for shipping for Zip Performance Auto Parts. This implies the agency problem. This theory focuses on the efficiency of the contract existing between the sellers and the buyers of logistics services. The main idea underlying this theory is the establishment of the most efficient incentives and outcomes combination of logistics activities (Blanchard, 2010). Logistics performance can be measured by the success of logistical activities, both inbound and outbound. The relevance of this theory to this study is that Zip Company has to focus on the efficiency of logistical operations in order to maximize the profits and enable its growth in Rio de Janeiro (Wieland & Handfield, 2013).
Third-party logistics and Transaction cost analysis theory
According to Powell (2001), this theory is based on the concept of reducing the costs associated with obtaining supplies. These supplies can either be in the form of information, raw materials, fuel, inventory or shipping. This theory, therefore, proposes entering into contractors with operators who will be providing transportation services to Zip Company. These operators will be subcontracted consequently reducing the risks associated with logistical challenges and at the same time, it will reduce the transaction costs incorporated within the logistics management system. Some of the transactional costs within Zip Company are related to a variety of costs that include operating costs, labor costs, adhering to government regulations, taxation, packaging, and delivery and distribution. It estimated that the profitability of Zip Performance Auto Parts will increase significantly as a result of expansion into the proposed market (Powell, 2001). This will be made possible by the growth of the business and the market entry strategy.
The Network-based View
This theory is based on the idea that mutual trust and cooperation between Zip Company and the third-party logistics operators as envisaged on transactional costs analysis will be key to improving the logistics management system of Zip Company, consequently making it effective. Automated processes or introduction of quality logistics management control system will enable Zip Company to utilize the skills and competencies of the third-party logistics providers and in the long run, lead to competitive advantage in the Brazilian market. Armstrong (2006) states that a “competitive environment affects the number and type of competitors” (Armstrong, 2006). The marketing management must face how they behave. Although entrepreneurs usually cannot control these factors, they can choose or come up with strategies that avoid head-on competition or even plan for situations where the competition is a guarantee. According to Hines (2004), a few customers and irregular flow of customers would result when there is competition. In the same spirit, Capar and Kotabe (2003) seem to agree as they state that “business competition is essentially a rivalry among business for sales to potential customers” (Capar & Kotabe, 2003). Competition is at the core of the success or failure of an organization. Elton et al. (2003), define competition as the set of alternative firms that could provide a product to satisfy a specific market needs. Sometimes competition is healthy to a business since improvements are made (Feller et al., 2006).
The resource-based view
According to (Jacoby, 2009), this view is based on two key premises; these are the resources and capabilities. These are acquired from the market through interactions within the supply chain. Through these interactions, Zip Company will be able to have competitions either internally or through the contracted third-party logistics providers and in the long run, enable Zip to operate on the competitive edge.
Four levels of competition can be distinguished (Jacoby, 2009). First is the brand competition. At this level, an organization looks at other companies which are offering similar products to the same customer and at a similar price as its competitors. Second is the form of competition where all companies that manufacture products that supply the same service are seen as the competitors. Third is the generic competition where all the companies from the industry compete for the same market share. Finally, we have industrial competition where the companies that offer the same product or class of products are a company’s main competitors. Competition is a major determinant of success or failure in a firm. For a company to remain competitive, it must have good strategies and tactics to achieve its objectives. Competition has to be there in any industry and it cannot be avoided. A company should then ensure that it has a competitive advantage over its competitors. According to Michael Porter, this can be done using “cost advantage and differentiation advantage” (Jacoby, 2009). Competitor’s analysis is crucial to the success of any business, “since improvements made are all based on competition way of doing things” (Hasty & Reardon, 2007).
Chapter 3: Research Methodology
Introduction
This chapter consists of the research methodology that was adopted in this study. It also stipulates on the systematic techniques and procedures that were used to gather data and analyze it respectively. A research methodology refers to a systematic way of solving a research problem. It is basically a science of studying how research is conducted scientifically.
Research Methodology
The design of the study is descriptive. Descriptive research involves the collection of data to test the hypothesis or answer questions regarding the subjects of the study (Miller & Cresswells, 2000). A descriptive study attempts to describe a particular phenomenon. It gives features or characteristics that are common in order to distinguish a phenomenon from others. Descriptive studies are not only restricted to fact findings but may often result in the formulation of important principles of knowledge and solutions to significant problems. According to Yin (2013), descriptive research aims “at establishing the factors associated with certain occurrences, outcomes, conditions or types of behavior” (Yin, 2013).
Research Design
To gain insights on the proposed international expansion of Zip Auto Parts, surveys were adopted as the appropriate research design. More emphasis was put on the breadth and not the depth of the study. The study focused on a few selected aspects from the population; these were used to study the entire population. According to Yin (2013), a survey design is a strategy for doing research that is often used due to low cost and enhances the ease of accessing information using multiple sources of evidence. This design is of particular interest if one wishes to gain a rich understanding of the context of the research and the process being enacted.
A design is the structure of any work that is scientific. It systematizes the research and also gives the directions. The design chosen affects the results and the conclusion of the findings, scientific studies involve interests in getting reliable observation that helps in understanding the phenomenon under study. As such, the research problem involves two main approaches; these are quantitative and qualitative approaches. Quantitative research is always viewed as a perfect way of standardizing and finalizing the results. On the other hand, a quantitative approach is always viewed as a precursor to a quantitative approach. This approach is used to study the qualitative aspects such as behavior and attitude. This design is viewed as the most flexible experimental techniques which encompass a variety of accepted structures and accepted methods. A qualitative approach is extremely helpful when the subject under study is complex. It is not dependent upon the sample sizes as opposed to the quantitative methods. The qualitative approach cannot review and is usually unique and cannot be exactly created (Yin, 2013).
Research Techniques
Scientific studies and inquiries have always been described as a puzzle-solving activity. After reasoning, we communicate the message. This is called the ‘meaning.’ ‘Meaning’ involves conveying messages into important ways. These are “exposition and arguments, where exposition means giving statements which are not supported by any facts or reasons” (Yin, 2013). On the other hand, arguments allow explanation, interpretation, defense, and exploration of the meaning. There are two types of arguments- these include deduction and induction. Deduction involves making of an inference that tends to be conclusive. Deduction involves making inferences from a general view to a particular instance; for it to be correct it must be valid and true. On the other hand, “induction involves making inferences from a particular instance to a general perspective; It involves concluding pieces of evidence” (Yin, 2013). An induced conclusion explains the facts, and these facts support the conclusion. It is a process of generalization explaining the relationship of the objects under study. Confirmation of the conclusion comes more with the evidence.
Sampling Design
Census will be used in the study. The researcher will collect responses from all the employees at the selected companies operating in Brazil. Census will be used as their number is low. It is also felt that each respondent should give responses that are essential in the study. Therefore, they should all participate in the study (Creswell & Miller, 2007). The basic concept underlying sampling is that by selecting some of the elements in a population, conclusions are drawn from the entire population. A population element is the unit of the study and it is the subject on which the measurement is taken. A census, therefore, is the count of all the subjects in the targeted population (Creswell & Miller, 2007). Census method is undertaken to improve the quality of the information to be collected.
Data Collection Instruments and procedures
The questionnaires will be mailed to managers and subordinates of companies operating in Rio de Janeiro. The researcher will use primary sources of data in order to collect first-hand information relating to the study. They will contain pre-determined questions whereby respondents will be given a chance to give feedback and the questionnaires collected on the same day (Creswell & Miller, 2007). The types of questions used will be close-ended. This will ensure that the given answers are relevant. The researcher will phrase questions clearly to ensure the simplicity and clarity of the respondent. The presence of the researcher will not be required as the questionnaire is self-administered. Questionnaires will be pre-tested on five respondents before the final copies are prepared. The managers and subordinates will be interviewed. The interview will contain both structured and unstructured questions (Creswell & Miller, 2007).
A proper choice of the types of data needed for any particular statistical investigation is important. The self-administered questionnaires have always been used for evaluation of different products; mostly a short questionnaire is left to be completed by the respondents in convenient locations (Miller & Cresswells, 2000). Mailed surveys typically cost less than telephone interviews or personal interviews. The more dispersed is the sample in terms of geographical parameters; the more likely it will be a low-cost method. To maximize the probability of the overall response, attention is given to each point of the survey process where the response may breakdown. A questionnaire is a list of printed questions to be answered by the respondents. They are always designed and structured to be used to gather information (Creswell & Miller, 2007). Questionnaires allow standardization of responses due to the aspect of similarity.
Data Analysis and presentation
After the fieldwork before analysis, all the questionnaires and interviews will be checked for reliability and authenticity. The data will be analyzed using qualitative and quantitative techniques such as recursive methods of data representation (Yin, 2013). This information will create descriptive statistics namely percentages and frequencies. The data will eventually be represented by the use of tables, graphs, and charts.
Reliability and Validity
The data collection instrument will be used to reach many respondents and save time since the questionnaires will be mailed directly to the respondents. This will create cost-effectiveness and a greater feeling of anonymity and, therefore, encourage open responses for sensitive questions. This will yield information that is relevant to the subject under the study for reliability and validity to exist.
References
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