INT-20151 Environmental Factors

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To: Talkbox Leadership Team From: Erika Paradis Date: May 12, 2023 RE: Expansion into Japan Due to Talkbox’s planned expansion into the TMT market in Japan I have been asked to share a PESTLE (Political, Economic, Social, Technological, Legal, Environmental) analysis with the team to include other important key factors that will address several management considerations as well as recommendations for a strategy model. Please see the information provided below: P The government of Japan is a monarchy, and they have an emperor Akihito. The emperor has little said in any political developments and serves as a figurehead. Japan has five political parties which have a significantly larger influence. Those parties include:  Democratic Party of Japan (DPJ)  The People’s New Party (PNP)  Liberal Democratic Party (LDP)  The Social Democratic Party (SDP)  The New Clean Government Party (Komeito) Once a party has been elected the country will elect a Prime Minister who will influence political and economic laws. (Frue, 2016) E The Japanese economy is in the top five largest economies in the world. The Japanese culture places a big emphasis on education and everyone contributing to the economy. Men are expected to join a company and stick with it throughout their working career, while women are expected to work until they are married. (Frue, 2016) S Japan has over 127 million residents, they have a cultural norm with the use of technology that would be of great benefit to the TMT business. Socially Japan is a big advocate of relationships and maintaining those relationships throughout their career which will be a great benefit to TMT business with creating a long-lasting support for Talkbox within the Japanese culture. Once the Japanese people become a customer, they are loyal customers to a brand they are familiar with. (Frue, 2016) T Japan has one of the most advanced telecommunications systems in the world, they continue to be innovative and creative with technology allowing them to have a more sophisticated take on technology. (Frue, 2016) L Japan has high legal standard that relate to telecommunication products, transparency, and cyber crime transparency. These ambitious standards coincide with the TMT business maintaining safe and secure products. (Frue, 2016) E Most of Japan’s businesses reside in Tokyo because much of the island is overrun by mountains and forests. These areas are inhabitable and reduce the business space available. This along with the fact that Japan contains large population will present a risk

of natural disaster. (Frue, 2016) Type Market Factor Effect/Implication Classification: Importance Political Japan has a stable government which is divided and not controlled by one single entity. (Frue, 2016) The Japanese government holds education to an exceedingly high standard creating an environment where innovation and technology tend to strive. (Frue, 2016) A stable government provides a sense of stability and a minimal chance of changes in laws which could impact business. (Frue, 2016) With Japanese culture placing such a large emphasis on education which provides the ability for innovation and highly skilled workforce and technology in the present as well as in the future. (Frue, 2016) Important Important Economic The Japanese economy is in the top five largest economies in the world. (Frue, 2016) Having a great economy provides the ability to make the newest technology and drive sales up for the business. (Frue, 2016) Important Socio Cultural Japanese cultural places a large emphasis on building long standing relationships. (Frue, 2016) By Talkbox building a relationship with the Japanese consumer, we will have assurance that once they trust the brand, they will have loyalty to the company and our products. (Frue, 2016) Particularly important Technological Japan has one of the most telecommunications systems in the world. The technology in Japan tends to be very The increased availability of technology in Japan as well as the investment opportunities will increase the need and Extremely important

innovative, and a constant investment for the people and the culture of Japan. (Frue, 2016) increase market shares of TMT services. (Frue, 2016) Legal Japan has high legal standards when it relates to telecommunication products as well as transparency with cyber- crime regulations. (Frue, 2016) Talkbox will need to understand how each product or service offered meets regulatory requirements. (Frue, 2016) Very Important Environmental Much of the island is overrun by mountains and forests. These areas are inhabitable and reduce the business space available. This along with the fact that Japan contains large population will present a risk of natural disaster. (Frue, 2016) Talkbox will need to ensure that their products and locations are insured against any natural disasters. (Frue, 2016) Talkbox will also have difficulty finding property and physical locations. (Frue, 2016) Very Important Relevant Trade Policies Implications 2019 US - Japan Trade agreement Eliminates or reduces tariffs on about 7.2 billion in US agricultural exports. (Japan - trade agreements, ND) US - Japan Digital Trade Agreement The U.S.-Japan Digital Trade Agreement includes more sophisticated provisions to ensure data can be transferred between borders without restrictions, restrictions, support use of encryption technologies as well as boost digital trade. (Japan - trade agreements, Nd) Trade barriers (non-tariff) With Japan placing a high importance on personal relationships the culture may be reluctant to break or modify any existing business relationships. (Japan - trade agreements, ND) Relevant Strategy Model Franchising

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Explanation Franchising is a method used to distribute products by a franchisor who has an established trademark, trade name, and/or business system and a franchisee who will pay the franchisor a royalty and an initial fee to use the established business name/systems, This strategy model is going to require Talkbox to establish a relationship which entails trust and risk with a new partner. With the Japanese culture being so loyal to their already established relationships this may be a difficult strategy for Talkbox to establish and establish while the home office is so far away. (What is a franchise? ND) Relevant strategy Model Indirect Export Explanation Indirect export is when a company appoints a third party such as an agent or distributor to represent the company abroad. Some of the advantages of this strategy model are that it requires little to no staff, there is more complete market coverage with a distributor or agent who is familiar with the country, and low financial risk. While there are many advantages to this strategy model some of the advantages include lower profit margins, the company is giving control to a third party over customer experience, and a third party will have less knowledge and expertise on the Talkbox products. (Direct and indirect export: Pros and cons, ND) Proposed strategy Model Joint Venture Explanation Joint Venture is a business arrangement in which two or more parties agree to pool their resources together for a specific business purpose. A common use of a joint venture is to partner up with a local business to enter a foreign market. Some of the advantages of a joint venture include the ability to leverage resources and provides the opportunity for both parties to combine levels of expertise to achieve success. A joint venture will also reduce the cost for both parties specifically with advertising and labor cost. By Talkbox partnering up in this type of arrangement we can partner with a local entity, and which will create the ability to build relationships, and trust instantly within the country of Japan. With the importance that Japan places on established relationships this will remove a large barrier for the company and allow us to enter the market and become successful. (Hargrave, 2023)

References Frue, K. (2016, November 14). Pestle analysis of Japan. PESTLE Analysis. https://pestleanalysis.com/japan-pestle-analysis/ (n.d.). Japan - trade agreements. International Trade Administration | Trade.gov. https://www.trade.gov/country-commercial-guides/japan-trade-agreements What is a franchise? International Franchise Association. (n.d.). https://www.franchise.org/faqs/basics/what-is-a-franchise Direct and indirect export: Pros and cons. business.gov.nl. (n.d.). https://business.gov.nl/running- your-business/international-business/export/export-direct-or-indirect/ Hargrave, M. (2023, March 28). Joint Venture (JV): What is it and why do companies form one? Investopedia. https://www.investopedia.com/terms/j/jointventure.asp

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