Inter Assignment

NGUYEN, Quynh Ly (11456385) International business

1

2011

INTERNATIONAL BUSINESS

ASSIGNMENT 2

NGUYEN, Quynh LyID: 11456385


1. SUMMARY

The report will start by briefly describing the Wiggles Company, which is known

as an Australian entertainer with highest earning over the last few years. After

that, it continues to identify the Wiggles business model which is family

participation in order to understand the reason for the successful business model.

The Wiggles not only develop successfully products for children but also create

products which are suitable for adults and appealing parents. Furthermore, as the

objective of being global organization, providing the Wiggles’ competitive

advantages analysis is necessary to comprehend how the Wiggles can compete in

the world’s businesses. Next, discussing the concept of corporate social

responsibility as the way by which the firms establish the well – being of its brand

and maintain its growth in long term. As well as this, the Wiggles’ intangible

resources which are knowledge, the firm’s assets, reputational assets and

capabilities will be examined in order to understand how the Wiggles retain its

competitive advantages. In addition to that, having awareness of the effect of

psychic distance seems to enable the Wiggles selecting the appropriate foreign

markets, as well as avoiding the risks of entering to new marketplaces. Finally,

the paper will end with providing the concept of standardization and

customization.

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TABLE OF CONTENS

1. SUMMARY................................................................................................................22. INTRODUCTION.....................................................................................................4

2.1. THE FIRM’S BACKGROUND.......................................................................42.2. THE OBJECTIVE.............................................................................................4

3. THE WIGGLES’ BUSINESS MODEL...................................................................44. THE COMPETITIVE ADVANTAGES OF THE WIGGLES..............................65. THE WIGGLES’ CSR..............................................................................................86. THE WIGGLES’ INTANGIBLE RESOURCES.................................................107. THE EFFECTS OF PSYCHIC DISTANCE.........................................................118. THE CONCEPT OF STANDARDIZATION AND CUSTOMIZATION..........139. CONCLUSION........................................................................................................13REFERENCES................................................................................................................14

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2. INTRODUCTION

2.1. THE FIRM’S BACKGROUND

Originally, the Wiggles were established in 1991, in Sydney in Australia and

simply known as a music band with four men who are Murray Cook, Jeff Fatt,

Anthony Field and Sam Moran. They entertained children by playing instrument,

providing cartoons and games. In 2000, the Wiggles started to perform its

business activities internationally. By prioritizing English – speaking nations

which are US, New Zealand, the UK and Canada to begin first, the Wiggles

earned 65 million American in 2001 after touring in New York City. Afterwards,

they have a consideration in South America and Asia market. That is also a part of

the Wiggles’ strategy to expand its business globally.

Within the high level competitive entertainment industry, the Wiggles have

success in improving and maintaining a strong brand name. The causes of the

success are the combination of several factors, for instance: identifying the

appropriate target markets, providing products effectively based on the

understanding the demands of customers, as well as implementing suitable

business model associated with effective management

2.2. THE OBJECTIVE

The purpose of this report is to explore the key factors that lead to the success of

the Wiggles, ass the result, having an overview of key factors that affect on the

success of any business. In order to accomplish that, this report focuses on the

analysis of six components.

3. THE WIGGLES’ BUSINESS MODEL

Business model has become a crucial factor that determines the success of

businesses. A group of researchers showed that the reasons of the success of

organizations, such as Dell, Amazon, etc are the combination of using new

technologies, performing business efficiently and creating new business models

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(Weil, Malone, D’Urso, Herman & Woerner, 2005). Also, they found that there

are some business models which are used more popular than others. The reason

for this is because those business models perform effectively than others. Hence,

in order to explain the success of the Wiggles, the understanding of its business

models is necessary. A business model is defined as the way the business expects

to gain profits. As can be seen on the diagram below, it contains seven

components which are customers, competitors, offering, activities and

organization, resources, suppliers and the scope of management. More specific,

the model combines the internal factors of a firm, and then changes those aspects

to resources, through activities, to offerings and finally to market. According to

Hedman & Kalling (2003), the seven components of a business model has

relations with each others. For instance, with the purpose of attending a specific

market segmentation and compete with competitors in that segmentation, a firm

needs to provide products in terms of beneficial qualities and prices. In order to

accomplish this, the firm has a need of presenting customer – perceived standard

of products and services, which leads to the requirements of effective

communication and productive division of labor and control. Furthermore, when a

change occurs, it will affect on all of the components of the models. Hence,

managing and developing business models needs to be considered overtime. In

the case of the Wiggles, within entertainment industry, on the one hand, a

majority of companies are unsuccessful because of poor management and limited

planning in long term. On the other hand, the Wiggles establish a successful

business model of family participation and focus on management to avoid the

problems that are dangers to many other entertainment companies. As be

mentioned above, initially, the Wiggles were simply known as a music group.

Afterwards, the Wiggles decided to become an international organization which

presents family entertainments. One of the reasons for its successful business

model is to understand deeply the needs and desires of their target market and

supply an effective products and services that attract both children and adults

(Biddle, 2010). To be more specific, the Wiggles identify particular target markets

that are young children who have a need of entertaining and pleasant experiences;

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however, they recognize that those customers do not have the ability to purchase

products or services. In addition to that, the rock ‘n’ roll music does not only

attract children, but also appeal to their parents. Thus, the Wiggles bring parents

and adults into focus as a second major target market. A research shows that on

the basis of understanding deeply the characteristic of children and adults, the

Wiggles not only satisfy the needs of children, but also provide products and

services that are value for money for parents and adults (Biddle, 2010). Take

examples, with regards to children, the Wiggles realize that children usually pay

less attention, prefer being challenged and demand being empowered, so that the

Wiggles are successful to provide an innovative method to children’s

entertainment. For parents and adults, those customers are more likely to have a

high level of acceptance when making purchasing decisions. The reason for that is

because they seem to seek educational and value products rather than

participating in interesting experiences; hence, the Wiggles have attended to

establish healthy image in order to attract those purchasing customers. Moreover,

to achieve the objective of family participation, in spite of other entertainers who

depend on “pester power”, the Wiggles put a ban on the dependence on “pester

power”. Pester power is defined as the way through that marketers fulfill the

requirements of children with the recognition that children tend to have ability to

persuade their parents to buy products, such as fast food. However, Paul Field, the

product manager of the Wiggles, states that they never support fast food in order

to establish a wholesome image, as well as being accepted by parents and adults.

Overall, the Wiggles are successful to provide products that meet the requirement

of parents and adults, but also satisfy children’ needs and wants.

4. THE COMPETITIVE ADVANTAGES OF THE WIGGLES

Currently, within the entertainment industry, the level of competition is fairly

high. Companies have to face and compete with their existing competitors and the

potential rivalries. Hence, without a competitive advantage, it is difficult for a

firm to generate profits, as well as maintaining its position in market places in

long term. A study presents a competitive advantage as an advantage over firms’

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competitors by which creates better value for customers in terms of lower prices

and greater benefits and services (Fisher, Hughes, Griffin, & Pustay, 2006).

Furthermore, having a competitive advantage seems to not enough to ensure

companies can retain its position on high level competitive market places.

Therefore, the needs of updating and improving the quality of products and

services to meet the requirement of customers are sheer important. According to

Tutor2u, there are four strategies to gain competitive advantages which can be

seen on the diagram below

. Source: http://tutor2u.net

With regards to cost leadership, the aim of this strategy is to provide products and

services with lowest cost in the industry. The companies follow this strategy is

over their competitors in terms of cost advantages. For the differentiation focus

strategy, organizations have an objective to supply products which are obviously

various from competitors. For the differentiation, first of all, firms select

standards from purchasers in a market, and after that performing the businesses

effectively to meet those criteria. This strategy frequently offers the higher costs

of products with extra values for customers. Finally, the cost focus is defined as a

strategy in which seeks for a low cost advantage in a small amount of market

segmentations. In the case of the Wiggles, this paper suggests that the strategy to

gain competitive advantages seems to be the differentiation focus. To be more

specific, first of all, the Wiggles have different market segments from other

entertainers that are the involvement of parents. As be discussed above, the

Wiggles identify the target market on the basis of purchasing power. In addition

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to that, the individual members of the Wiggles have certifications in early

childhood education and development, also have musical background; hence it

contributes a deep understanding regards the needs and desires of the target

markets and enables the firm to satisfy the customers. Another competitive

advantage of the Wiggles is the strong brand name with high reputation that aids

the firm to expand their business activity globally. One of the main reasons for

establishing successfully brand image is by producing great products in terms of

education in order to appeal both children and parents’ attention. What is more,

the Wiggles have effective management which is divided into two tasks, one

focuses on the content’s development, another stresses on the improvement o the

firm’s brand and the business. Hence, the firm control quality effectively and

create carefully plans for long term. Take an example, on the basis of

understanding deeply the characteristic of the industry which depend heavily on

cultures. Products can attract in some nations but in others might be not. Also, the

Wiggles understand that the level of attending in terms of culture seems to be very

low among children in all of the countries in the world. Hence, it would appear

that the products to foreign children do not need to modify too much. The final

advantage of the Wiggles is its business models, in order to achieve the goals of

foreign expansion, selecting Australia which is known as the most multicultural

nation over the world enables the firm to decrease the requirement of modifying

products.

5. THE WIGGLES’ CSR

Historically, the meaning of responsibility for organizations was simply to

produce money and increase value for shareholder. Nonetheless, currently, the

definition of corporate responsibilities has become broader which refers to the

responsibility for the environment, for working circumstances, for ethical issues

and for local communities. In other words, it is the way a corporation controls its

business in order to generate a positive effect on society based on ethical benefits

and high regard for people, the environment and communities. Hence, when

performing businesses, firms not only focus on making profits, but also need to

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have a consideration towards its impacts on its employees, its customers, its

suppliers and communities. There is no doubt that becoming social responsibility

brings great benefits for companies (Zynia, 2002). For examples, in terms of

maintaining productivity and competitive advantages, being socially responsible

aids firms to establish the close relationship with their host communities,

understand the marketplace, and also within high competitive environment, it

enables companies to obtain skilful employees, loyal investors and consumers.

Generally, corporate social responsibility (CSR) is a crucial factor that contributes

to the maintenance of companies’ growth in long term. In the Wiggles’ case,

currently, the Wiggles have to compete with a large number of entertainment

companies; hence, to survive, the firm not only attempts to improve products and

services, but also take responsibility for the societies and the environments in

which it perform businesses. As be mentioned above, the Wiggles follow the

model of family participation, hence they are likely to stress on creating family

values and reduce the gap between parent and children. Take an example of The

Word Wits which is one of the Wiggles’ series of musical videos. The Word Wits

aims to help children to establish vocabulary. The World Wits brings kindergarten

teachers, any parents of young children, and the children into focus as target

market. The program attracts to parents who desire to transfer an educational

message through entertainment and appeals to children by using the variety of

teaching techniques. Furthermore, the unique of the World Wits is to emphasis on

education and according to The word wits, the World Wits stress on building

vocabulary more than others series on TV and the Internet. The reason for that is

because they recognize that vocabulary is an important factor to the success of

reading which are comprehension, communication and confidence. Hence, it can

be assumed that the program World Wits produce a great educational value for its

customers. Another example about being socially responsible of the Wiggles is,

the Wiggles have built up play centers in suburban New South Wales. The causes

of choosing the New South Wales is because it closes to suburban family and as a

result parents can participate in play centers with their children rather than leave

them in the centers and do other things. Thus, it can be suggested that the gap

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between children and their parents is reduced. What is more, in order to maintain

the Wiggles brand’s reputation, the Wiggles come to a contract with Australian

apple farmers with the purpose of enabling farmers to sell apples. Overall, it can

be concluded that by attending on social values, the Wiggles achieve the goals of

building the wholesome image and sustain its growth in long term.

6. THE WIGGLES’ INTANGIBLE RESOURCES

Many researchers have launched to explain the reasons of the differences in the

performance of companies. According to Villalonga, (2004), intangible resources

play a crucial role to sustain competitive advantages of firms, so that it leads to

the variations in companies’ operation. It is defined as the major driver of the

differences in terms of the maintenance of operation across companies. Also,

Villalonga states that the firm has more intangible resources seem to have greater

the maintenance of the firm’s competitive advantages (Villalonga, 2004). The

intangible sources of a firm can be divided into two components which are assets

and capabilities. While intangible assets are identified as what an organization

has, capabilities are what a company does. There are four levels of intangible

resources which are knowledge, firms’ assets, reputational assets and capabilities.

With regards to knowledge, intellectual property is assumed as the most

significant asset of companies. The level of investigating intellectual property has

a part in affecting the success or failure of firms. Hence, intellectual property

assets, such as inventions or copyrights are protected by laws. As a result, a

company can establish and retain its competitive advantages. Secondly, in terms

of the firm’s assets which include technologies, culture, human resources and

brand’s image. Such cultures plays a role as identifying the particular values and

behaviors of companies, as well as producing an environment in which workers

can perform more effective to meet the needs of customers. Thus, according to

Galbreath (2006), culture is a key factor to sustain the competitive advantages.

Moreover, the firm’s reputation is defined as a key driver of the positive behavior

of customers toward companies’ products; thereby has positive effect on company

performance. In the case of the Wiggles, identifying the Wiggles’ intangible

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resources follow the four factors above will be provided. Firstly, regards to

intellectual property, one of the key factors which determine the Wiggles’ success

is to have deep understanding its target market. Having this knowledge is based

on the Wiggles educational background and their experiences in terms of music.

Therefore, the Wiggles supply appropriate products and service that appeal to not

only children but also to their parents, as well as present in time an innovative

approach to the entertainment of children. What is more, the Wiggles have strong

brand reputation that creates a positive effect on the strategy to expand globally.

When Greg is one of the founding members has health problem, the Wiggles still

could continue. The reason for this perhaps is caused by powerful brand image. In

addition to that, another reason for the Wiggles’ successful replacement of Grey is

the low level of dependences on individual among the Wiggles’ members.

7. THE EFFECTS OF PSYCHIC DISTANCE

In the last decade, the international organization has increasingly emphasized on

psychic distance. Historically, the concept of psychic distance was classified as

the factors which prohibit the flowing of information through country markets.

Another definition was provided by Nordstrom and Vahlne (1994) who proposed

that psychic distance demonstrates the elements that prevent the learning and

practicing in the field of understanding foreign environments. While some studies

showed that psychic distance has a negative influence in the performance of

businesses, others suggested a positive impact. Furthermore, the concept of

psychic distance leads to the study of the differences between home country and

host country in terms of socio – culture. According to Dikova, (2008), a firm

attempts to expand its performance to a foreign market is likely to receive

disadvantages that is caused by the unfamiliarity with the local environment.

Those handicaps are the variation of consumers’ needs, consumers’ perspective,

cultures and the business structures. The estimation of psychic distance is the

combination of three factors which are languages, culture and business

environment (Dikova, 2008). In the case of the Wiggles, the company bring the

foreign expansion into focus as a part of the firm’s strategy to maintain its growth

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business, examining how psychic distance associates with the Wiggles

performance. To begin with the varieties in language and business learning, some

researchers suggest that it is easier for the international organizations to operate in

similar markets. However, other studies claim that entering new market places

produces a high volume of uncertainty and risks. Nevertheless, attempting to

decrease the uncertainty, such as researching, learning and planning, seems to

improve the firm’s performance in foreign markets. For the Wiggles, in order to

reduce the failure of entering to foreign markets, they choose the easy nations first

and then target the more difficult. Therefore, in 2000, it started performing its

international activities by touring in English – speaking nations, for instance New

Zealand, Canada, and UK. Thereby, they not only do not need to change the

products or services, but also reduce the cost of researching, learning and

practicing. Moreover, apart from selecting familiar markets, the Wiggles avoid

hazards by focusing on researching in unfamiliar markets. Take an example from

the Wiggles’ case study, in order to understanding new markets, they examine the

markets first, and then selecting the best method of changing their operations to

be suitable with particular markets. Another strategy which is useful to decrease

the drawbacks of participating in foreign markets is to share ownership (Dikova,

2008). The close relationship with local partners enables foreign organization to

reduce the environmental uncertainty. Hence, building up local partnerships is

likely to diminish the negative impact of psychic distance on the performance of

firms. In the case of the Wiggles, entering to Taiwan is a great challenge for the

firm. Whereas most of necessary knowledge to perform in Taiwan seems to be

tacit and hard, local partners become quite helpful. Thus, the company overcome

the unfamiliar environment by bring local partners in Taiwan to Australia and

teach them everything.

8. THE CONCEPT OF STANDARDIZATION AND

CUSTOMIZATION

The concept of standardization and customization are opposite each other.

Standardization is defined as the circumstance through which products or service

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is similar to every time, whereas customization is the circumstance where

products and service are provided based on the needs of an individuals (Sundbo,

2002). The reason for product standardization is to increase productivity, while

the purpose of customizing products is to satisfy individuals by serving customers

individually. On the one hand, the concept of standardization is characterized as

an economic productivity. In this situation, companies bring prices and quantities

into focus, and pay less attention for consumers. The reason for this is the cost

reduction; hence firms can gain the lower cost competitive advantages in

marketplaces and expect to sell products with huge quantities. As the result, profit

will increase because of rising sales. On the other hand, customization is

expressed as economic expectations. It does mean that consumers purchase

product customization with an expectation of problem solving or having

experiences. In this situation, productivities become irrelevant issues. In the case

of the Wiggles, as be discussed above, the Wiggles aim to perform its business

globally, therefore, the needs of reducing the modification cost is necessary.

When touring in the English – speaking countries, they have the same music back

ground, the same business model of family participation and even the same

children’s programs. Nonetheless, entering to other countries which do not speak

English, the Wiggles follow product customization strategy. For example, when

participating in the South American and Taiwan, the Wiggles have to translate the

music into particular languages.

9. CONCLUSION

Taking everything into account, the Wiggles are an international firm which

survives successfully in long term. From the Wiggles’ experiences, a company

want to achieve the goal of being internationally has a need of identifying the real

customer needs and wants and also building up and maintaining competitive

advantages. A firm needs to guarantee that products are provided has to meet and

satisfy the customers’ needs. In addition to that, for long term growth, a firm need

to aware and pay more attention on social responsible, as well as intangible

resources as crucial factors to sustain competitive advantages. Also, having

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consciousness of psychic distance concept relates to the differences between

countries in terms of social – cultural aspects.

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