Case study for Hon Chuan enterprise
Chen, C., & Chan, A. (2018). From Asia to Africa: The international expansion of Hon Chuan enterprise. Emerald Emerging Markets Case Studies, 8(1), 1-33
the various aspects of expansion into the global market using Hon Chuan Company as the case study. The company experienced drastic growth into the international market, and it provides essential insights into the same. Expanding operations is conducted to increase the market for the goods or products of an organization. Hon Guan had grown in size and the Taiwan market was no longer sufficient for its growth. There were various drivers to its international expansion strategy, such as the need for partnership with other global companies and seeking market opportunity for its products. During the expansion, the organization experienced various challenges depending on the market. However, the growth also provided the firm with opportunity to meet more customers and improve its revenue stream. The organization experienced sustainability challenges in the African market given the nature of the region. However, it managed to establish a compelling presence in the continent. Sustaining Corporate Social Responsibility (CSR) is an important activity for global firms. That is, they have to adhere to the international regulations of environmental protection to conserve the environment. Product safety, care for the customers, society, and other stakeholders are also vital to enhance social responsibilities. Global organizations such as Hon Chuan are likely to pay hefty fines when they go against environmental provisions. For instance, in 2018, Hon Chuan was fined for violation of the Air Pollution Act, and they were forced to make necessary changes to breach the damage.
Table of Contents
This report uses a case study of Hon Chuan Company to address the drivers of expansion into the global business environment and the challenges that organization met in the process (Chen and Chan 2018). Every region provides opportunities and challenges for an expanding organization. For instance, the business environment in Asia is different from that of Africa. As such, organizations must have strategies to overcome challenges in every business environment in the global market to sustain growth and development in the global market. Corporate Social Responsibility (CSR) is a crucial undertaking for local and international organizations (O’rourke and Williamson 2004). Environmental protection and the wellbeing of society and other stakeholders is a critical concern for the global market. The international regulation on environmental protection guides the activities of organizations in the global business environment. Organizations are likely to face challenges when their concern for profitability and growth is more than that for society and the environment (Akrout and Diallo 2017). The expansion of Hon Chuan into the global scene provides a suitable case for analyzing various aspects of the global business engagements.
2.1. Drivers of Globalisation that Impacted Hon Chuan expansion
Several drivers informed the company’s international expansion strategy. The company needed to expand its markets since its production had increased, and serving the local market was no longer profitable. Hon Chuan was an industrial leader in Taiwan. However, it only served a population of about twenty-three million people (Chen and Chan 2018). Thus, it would be more profitable if it moved to the international market. For instance, it established its operation in mainland China with a population that was fifty times more than that of Taiwan. After launching its first factory in the region, Hon Chuan built nine more factories to increase its market reach. Seeking international partners to sustain profitability influenced the company’s global expansion strategy. Initially, the organization depended highly on Uni-President Enterprises Cooperation, the largest food and Beverage Company in Taiwan. However, in 2012, Hon Chuan lost Uni-president, its leading partner in Taiwan. Uni-President reorganized its operations and created a unit that produced packaging materials. Thus, it stopped orders coming from Hon Chuan. The move sent the company into a three-year slump making significant losses (Chen and Chan 2018). Therefore, Hon Chuan came up with a new strategy to get back into the market, seeking international partners. The company decided to spread orders to more customers. For instance, the organization spread their orders to more big customers such as Master King, China Resources C’estbon Beverage, France’s Danone, and China’s Jiaduobao. The organization did not want a change in single customer to affect their operations as it did with Uni-President Enterprise limited. Thus, the need for reliable partners determined their interest in expanding into the global market.
The study of market trends was crucial in determining international expansion strategy (Paik, Kwon, and Chen 2017). For instance, Tsao discovered that bottled water was among the fastest-growing commodities in Mainland China. Thus, the company expanded the segment by putting up four production lines following its subcontract with C’estbon. C’estbon was Chinas top three brands for bottled water (Chen and Chan 2018). Besides, Tsao was good at studying the local market and finding a missing gap. He realized that the mainland Chinese market loved traditional functional beverages. Therefore, Hon Chuan collaborated with Jiaduobao and Wanglaoji, traditional beverage companies, to build in-house production lines providing bottling services and plastic caps. The strategy was essential for Hon Chuan since it turned slump into growth. Primarily, the expansion strategy of an organization should be influenced by needs in the international market.
Tsao wanted to be closer to the customers due to the competitive nature of the business. Therefore, he expanded its operations to Southeast Asia. The company’s products were already selling in countries such as Thailand, but they were directly imported from Taiwan. As such, Tsao thought to start an operation base in Southeast Asia to be closer to customers and ensure that the supply of its goods is not interrupted (Chen and Chan 2018). The political situation in southeastern Asian countries such as Myanmar determined the strategies of the organization to expand its operations into the country. For instance, Hon Chuan only established a production unit in Myanmar after its political environment became favorable. Besides, the choice of global market was determined by competition and potential for growth (Chen and Chan 2018). For example, the company chose to expand its operations in southeast Asia since it provided an opportunity to operate a self-owned brand compared to china that already had several brands competition for the same market.
2.2. Opportunities, Challenges, and Influence of Globalization in the Strategic Goals of Hon Chuan
Going global not only provides opportunities for organizations, but also comes with its set of challenges. Hon Chuan has managed to consolidate its resources through progressive growth and international partnerships to establish a significant global market presence. Hence, the company already enjoys opportunities provided by globalization. For instance, going global has provided growth imperative to Hon Chuan (Chen and Chan 2018). The organization has the chance of growing faster to more markets. The first international presence of the company was in mainland China. The vast market in the region provided an opportunity to create more product lines within the area and become one of the market leaders. Through international partnership and demand for its products, Hon Chuan managed to develop market presence in Southeast Asia. Countries such as Thailand and Myanmar had been receiving products of the firm through importation from Taiwan.
However, globalization enabled the organization to establish production units in the regions to reach out to customers and to ensure steady supply of their products in the market. It provided an opportunity for the company to attract a broader customer base. The local market may not be sufficient as an organization grows (Chen and Chan 2018). Thus, there is need to broaden the market scope by going global. Hon Chuan started its operations in Taiwan and later realized that the market was squeezed for its growth agenda. Therefore, it decided to expand its operations to mainland china to take advantage of the huge market that was more than fifty times that of Taiwan. The expansion provides an opportunity to meet and expanded customer base (Verbeke, Coeurderoy, and Matt 2018). Nonetheless, it also expanded into Africa, Southeastern Asia among other countries to be closer to its customers. Having presence in difference countries can lower risk and balance revenue stream (Chen and Chan 2018). When business is not doing well in one country, it is booming in the other and the organization is able to balance revenue stream by reducing risk. Nonetheless, it provides global knowledge for Hon Chuan that they need to enhance innovation for business sustainability and growth.
Nonetheless, globalization also has its challenges that affect business strategic goals and objectives. For instance, global market has increased competition from established firms. Hon Chuan experienced stiff competition from companies such as Coca-Cola when it established its operations in the mainland China (Chen and Chan 2018). Thus, an organization must address specific needs of customers in the global market to have a significant market shares. Unstable political environment in some countries affects business operations and profitability. One of the reasons that Hon Chuan delayed its entry into Myanmar market was unsuitable political environment. Nonetheless, Thailand also had difficulties aligning its political activities to favor business in the initial stages of operations (Chen and Chan 2018). Nonetheless, an organization is subjected to different environmental laws and policies that may hinder its growth objectives. The cost of Corporate Social Responsibility in the global market also interferes with the profitability of an organization.
2.3. Expansion of Hon Chuan from Asia into Africa, Challenges, and Implication to its CSR
Hon Chuan decided to expand its business from Asia to Africa. African had a potential since is a fast growing economy, especially for consumer goods. Thus, Hon Chuan started to take part in exhibitions in South Africa long before their entry into the African market. Entry into the African market came with business suitability challenges that have implication for the Hon Chuan’s co-operate social responsibility (Chen and Chan 2018). For instance, African countries have different geographies, political and economic cultures, and histories. The differences created difficulties of regional manufacturing. Production in east Africa was not similar to that in the South African economic block. The incidental political clashes affected the safety of the employees of the firm (Khojastehpour and Shams 2020. Poor infrastructure was a serious impediment to establishment of operations in the region. Thus, the company had to cover large regions to cover the balance of low consumptions especially when the goods were transported across borders. The stability of electricity slowed production.
The supply was done in limited hours per day, including major cities. The diversity of legal systems was also a challenge to effective operations since Hon Chuan operated across borders. It was subjected to different legal business requirements and some of them were not business friendly. Thus, Africa was a new battleground that offered more challenging conditions than it experienced in Asia. For instance, getting a strong team to steer its agenda in the region was challenging. Most experienced employees never wanted to leave comfortable working conditions in Taiwan and China to work in the challenging African environment (Chen and Chan 2018). Language problems made it difficult to deal with cross-cultural management and marketing. The challenges in the African market had implications for Hon Chuan’s Co-operate Social Responsibility.
Africa has different cultural orientations. Thus, cross-cultural attitudes to CSR relating to the expectations and orientation of various stakeholders, such as consumers are not universal. It differs across borders from one nation to the other. Therefore, Hon Chuan is likely to experience challenges in meeting its CSR in Africa (Chen and Chan 2018). The concept of Corporate Social Responsibility is different from one culture to the other. Most African countries are becoming environmental conscious, and most of them subscribe to the United Nations policies on environmental protection. Hon Chuan deals in plastic manufacturing packages. Thus, it will have its strategic plan for CSR, especially in reference to environmental protection. However, the degree of enforcement of CSR policies varies from one country to the other (The Economist 2013). That is, while some countries offer strict measures, others have relaxed the provision for the same. The Inadequate personnel in Africa have affected the implementation CSR. The responsibility to manage CSR is assigned to particular department, and this may not the case when employees are not enough (Kuehn 2014). Most Hon Chuan’s employees are reluctant to come to Africa due to its challenging business environment.
2.4. Hon Chuan’s CSR Practices and Approach to Addressing Contemporary Challenges
Hon Chuan is concerned about community and environmental safety and is involved in various CSR activities (Chen and Chan 2018). The organization understands the improvement in every respect is crucial for growth and operational stability (Lowitt 2014). The company has set up a CSR committee to enhance social responsibilities in various categories. Environmental concern is an example of an area of intense commitment. The organization promotes environmental policies and issue awards on performance excellence award for Energy Conservation Service Group through the Taiwan ministry of economic affairs. Hon Chuan has committed to environmental sustainability by enhancing sustainable development with the stakeholders, society, and employees (Chen and Chan 2018). On the other hand, the company assists in learning and development, especially in the rural areas, for vulnerable children. The company has developed high quality packaging materials that abide with the food safety regulations. Nonetheless, Hon Chuan has strict control for customer’s product safety.
They have established a food safety management system that protects the final consumers from any form of contamination. Besides, they strive to meet the needs for internal and external customers. Hon Chuan have effective plan for care for its employees as part of its corporate social responsibility. For instance, it encourages healthy work life balance for its workers. Nonetheless, it organizes outdoor activities that increase departmental interactions, which are important in maintaining good mental and physical health (Chen and Chan 2018). The front workers in the production line are provided with safety equipment to prevent them from work related injuries. Nonetheless, Hon Chuan operates an improved factory environment that creates a safe and healthy workplace.
Following the evidence presented in the company’s website, I believe the organization is having a robust plan for corporate social responsibility, which has been helpful in addressing contemporary challenges. Its commitment to providing quality and safe products has helped the organization to comply with food safety regulations that affects most organization in the market. The development of Corporate Social Responsibility department ensures that issues concerning the department are affected (Chen and Chan 2018). The department has aided the implementation of environmental policies, especially the energy conservation concerns. Organizations should be in the forefront to champion for environment protection (Winston, Favaloro, and Healey 2017). Hon Chuan employee activities have helped to reduce workplace boredom. Hon Chuan provides occupation medicine doctors to check the wellbeing of its workers. The move is essential in ensuring sustainable production by healthy team members. Suckling mothers are provided with breastfeeding rooms to have sufficient contact with their children.
2.5 Evaluation of Hon Chuan’s Response to Limiting the Impact the 2018 Breach
In 2018, Hon Chuan brushed shoulders with the authorities for going against the Air Pollution Act. The company was punished in various ways following the case. However, it has responded by limiting the impact of the breach and ensuring greater accountability to its corporate conduct. The organization conducted a complete remedy to correct the area of deficiency relating to the environmental protection procedures. For instance, it ensured that all its processes are compliant with the all the latest regulations (Chen and Chan 2018). Nonetheless, the company has had its improvement plan confirmed by the Taichung Environment Protection Bureau to ascertain compliance. Hon Chuan has invested more than NTD seventy million to establish to purchase new air pollution control and establish an effective VOC system. Nonetheless, the company has promised that they will conduct environmental protection policies in full compliance with the laws in the best way they can. For instance, they will implement environmental regulations following the updated rules (Chen and Chan 2018). The organization has employed many environmental professionals and external consultants with practical experience for future operations.
Hon Chuan experienced drastic expansion into the global market due to well-established strategies to achieve the same. The company production was increasing and had become bigger than Taiwan market. The first point of expansion was the Chinese mainland that had population almost fifty times that of Taiwan. It then expanded to Southeast Asia and Africa. While the expansion provided the company with opportunities to meet more customers and establish global presence, it also experienced several changes. For instance, every region has a unique business environment. Thus, the organization had to overcome several obstacles in the process. For instance, Africa had different cultural activities, language barrier, political instability, poor road network. The challenges had significant influence on how the organization implemented its CSR. CSR is an important consideration in the global market. Organizations must ensure strict compliance with the international regulations, especially on environmental conservations. Nonetheless, other aspects of social corporate responsibilities such as concern for society, employees, and other stakeholders.
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