Cycles Devinci’s Expansion to Asia Pacific Business Case Study

Memorandum
Name
Institution
Memorandum
To: Simon Brodeur
From: Alex Smith
Date: March 25, 2020
Subject: Expansion of Cycles Devinci to Asia Pacific
Penetrating the Asia Pacific market will require a well-laid strategic plan to ensure that Cycles Devinci invests in the right market. Cycles Devinci needs to identify the countries with the most potential so that they can achieve the objective of selling 1,000 bikes annually within three years. The factors to consider include the key distances that can drive performance, strategies to manage the distances, and the mode of entry into the selected countries. 
Selling 1,000 bikes annually within three years is not an easy task. This requires focusing on countries with the most potential in terms of income, ease of doing business, and the presence of Devinci’s brand, among other factors. The income per capita has to be put into consideration because the prices of the proposed product lines to be sold in Asia Pacific range from C$3,999 to C$ 10,699 (Plourde & Aspirot, 2019). Also, ease of doing business is an indication of the regulations and other administrative measures put in place to promote or hinder the international business. Devinci should focus their expansion efforts in Australia and Singapore
Australia
Australia is a good choice because first of all, Devinci has a foothold in Melbourne, one of Australia’s largest cities. As revealed by Plourde and Aspirot (2019), Devinci gained international recognition in 2008 following the success of BIXI-type bikes in cities such as Melbourne and London. Their presence in such a city implies that they have an existing relationship with commercial agents and representatives, who can be used to sell and distribute the bikes. In terms of ease of doing business, Australia has been ranked 5th, with a score of 14. It has a score of 3 when it comes to enforcing contracts. This means that Devinci will not have a hard time dealing with administrative issues such as regulations and taxes when doing business in Australia, nor will it have a problem enforcing contracts with the commercial agents and representatives. Australia has an import tariff of 5% on Canadian exports, which means Devinci’s bikes will still be attractive to Australians. Australia also has the highest number of mountain bike races, which provides Devinci with an opportunity to market its bikes and get feedback on their performance during those races (Plourde & Aspirot, 2019). Finally, Devinci has received the highest number of google searches in Australia when compared to its competitors in the region. This indicates a preference for Devinci bikes. Australia does not have the largest population, but the factors mentioned above, especially income levels, making it a potential market, more than some of the countries with high population. Also, Australia has the highest average income per capita of $54, 230 among the fourteen Asia Pacific countries that were under consideration (Plourde & Aspirot, 2019). A high income per capita means that a majority of Australians can purchase the bikes within the C$3,999 to C$ 10,699 ranges. 
Canada has an average income of $48,000 (Statistics Canada, 2020). Thus, the two countries do not have a large economic distance. According to Ghemawat (2001), the economic distance between the two bilateral countries increases when they have different levels of income between consumers. A large economic difference can hinder bilateral trade. Le (2017) indicates that countries with a large economic distance experience less bilateral trade because they have different demand structures which affect the number of exports and imports. However, countries with a small economic distance can experience more bilateral trade because their levels of demand are almost equal. Thus, in the case of Canada and Australia, the low economic difference promotes trade between the two countries. This means that Devinci’s performance in Australia will be optimal due to their low economic distance. Also, the administrative distance between Australia and Canada is favorable. 
According to the High Commission of Canada (2020) and Australian Government Department of Foreign Affairs and Trade(n.d.), Canada and Australia share a free trade agreement that was put in place in December 2018. This free trade agreement allows the two countries to exchange products with little government prohibitions. This explains the low import tariffs that Australia has on Canada. It is important to note that the existence of such trade agreements reduces the administrative distances between the two countries (Ghemawat, 2001). Devinci will report optimal sales of their bikes due to this low administrative distance. Further, the use of English as an official language in both countries could lower the cultural distances between them. The use of different languages is one of the factors...