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Table of Contents
Executive Summary..................................................................................................................... 4
1. Introduction to International Expansion ............................................................................ 5
1.1 Decision Criteria: Internet Accessibility..................................................................... 5
1.2 Decision Criteria: Household Expenditures on Culture and Tourism .................. 6
1.3 Decision Criteria: Urban Density and Transportation............................................. 6
1.4 Decision Criteria: Art and Music Schools and Conventions.................................. 7
1.5 Decision Criteria: Economic Assessment of GINI Coefficient and Disposable
Income........................................................................................................................................ 7
1.6 Decision Criteria: Ease of Doing Business .............................................................. 7
1.7 Selection of International Markets ............................................................................. 8
2. Modes of Entry for International Expansion..................................................................... 8
3. Expansion into the United States .................................................................................... 11
3.1 Market Expansion Strategy ............................................................................................ 11
3.2 Competitive Evaluation and Strategies................................................................... 11
3.3 Pricing Strategies ....................................................................................................... 12
3.4 Product Modification Strategy .................................................................................. 13
3.5 Communication Strategy........................................................................................... 13
4 Expansion into the United Kingdom................................................................................ 14
4.1 Market Expansion Strategy........................................................................................ 14
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4.2 Competitive Evaluation and Strategies................................................................... 14
4.3 Pricing Strategies ....................................................................................................... 15
4.4 Product Modification Strategy .................................................................................. 16
4.5 Communication Strategy........................................................................................... 16
5 Expansion into the Netherlands....................................................................................... 17
5.1 Market Expansion Strategy........................................................................................ 17
5.2 Competitive Evaluation and Strategies................................................................... 18
5.3 Pricing Strategies ....................................................................................................... 18
5.4 Product Modification Strategy .................................................................................. 19
5.5 Communication Strategy........................................................................................... 19
6. Expansion into Japan........................................................................................................... 20
6.1 Market Expansion Strategy........................................................................................ 20
6.2 Competitive Evaluation and Strategies................................................................... 20
6.3 Pricing Strategies ....................................................................................................... 22
6.4 Product Modification Strategy .................................................................................. 22
6.5 Communication Strategy........................................................................................... 23
7. Recommendation................................................................................................................... 24
References.................................................................................................................................. 25
Appendix 1: Mobile APP Demo Japanese Version........................................................... 27
Appendix 2: Country Comparison: Internet Accessibility Decision Criteria................... 28
Appendix 3: Country Comparison: Household Expenditures on Culture & Tourism ... 28
Appendix 4: Country Comparison: GINI Coefficient ......................................................... 29
Appendix 5: Country Comparison: Disposable Income.................................................... 29
Appendix 6: Country Comparison: Ease of Doing Business ........................................... 30
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Executive Summary
As a product that combines an online purchasing experience with in-person live entertainment,
SparkGig presents itself as a unique potential player in the world’s growing digital landscape. SparkGig’s
core offering – live entertainment – appeals to an incredibly wide range of demographics from all across
the world. With the aim of addressing how SparkGig can popularize itself internationally, specific decision
criteria were developed to determine the best countries for expansion. Key metrics investigated included
internet accessibility, household expenditures on culture and tourism, urban density and transportation,
number of art and music schools and conventions, economic attractiveness related to GINI coefficient
and level of disposable income and the ease of doing business. It was found that the most attractive
markets worldwide for SparkGig were the US, the UK, the Netherlands, and Japan.
When further analyses were conducted to concentrate on these four countries, clear strengths
and weaknesses emerged for each option. Considering SparkGig has been established in Canada, the
US presents itself as the most culturally similar to the market SparkGig was founded on, and comes with
perhaps the strongest selection of performance schools worldwide. There are significant concerns with
the US market, however, with regards to competition for SparkGig, as well as urban density which could
make further expansion into smaller markets more difficult. The UK features a strong performance culture
and several large and prestigious schools, and is considerably more dense in urban locales (London, in
particular) despite being a smaller market overall. Japan presents an interesting opportunity for SparkGig,
allowing the company to capitalize on Japan’s unique cosplay scene and capitalize on their high urban
density with a more varied approach to marketing; however, there are significant cultural and logistical
barriers to entering the Japanese market that must be taken into consideration. Finally, despite having the
lowest number of prestigious music and acting schools of the countries presented, the Netherlands
present opportunities in their similar preferences to SparkGig’s current product offering, and income
levels suggest SparkGig is something that could be easily adopted once the website’s visibility has been
established in the Netherlands. Each country presents its own strengths and weaknesses, however there
are lucrative options other than exclusive American internationalization that could prove to be extremely
valuable for SparkGig.
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1. Introduction to International Expansion
As an online-based business, SparkGig has the opportunity to go global fairly quickly once
appropriate markets are evaluated, a depth of knowledge of the chosen country’s culture is developed
and resources are set in place for proper expansion strategies. When determining the best markets for
SparkGig to target for their international expansion, an emphasis was placed on six different decision
criteria: internet accessibility, household expenditures on culture and tourism, urban density and
transportation, number of art and music schools and conventions, economic attractiveness related to GINI
coefficient and level of disposable income and the ease of doing business. The following offers a
description of the components of each decision criteria and their importance and application to the
SparkGig business model.
1.1 Decision Criteria: Internet Accessibility
A high level of internet accessibility is a fundamental determinant due to the online platform upon
which SparkGig’s business exists. In this case, the level of internet accessibility was composed as a
component of four different factors: the percentage of internet users, the extent of internet use for
business-to-consumer transactions, level of technological adaptation and the Networked Readiness Index
(World Economic Forum B, 2015). A strong percentage of internet users in a chosen country is crucial to
SparkGig’s successful entry as their entertainment marketplace business model is available to consumers
solely through an online platform, so the greater the number of individuals who have access to the
internet, the greater the potential users of the SparkGig marketplace (World Economic Forum A, 2015).
The extent of business-to-consumer transactions is another key element that determines the
attractiveness of a market as it represents the level to which businesses feel that selling their products
online is successful sales channel as well as the extent to which consumers use online stores and
marketplaces to purchase goods and services. The level of technological adaptation in a given country is
also a component considered in the access to internet criteria as the extent of the availability and
absorption of the latest technologies of consumers and businesses demonstrate the reliance on the
online technologies in everyday and business life (World Economic Forum A, 2015). A superior reliance
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on technology and online resources will benefit SparkGig as it is more likely individuals will use websites
and mobile applications to book entertainment rather than another platform (Appendix 1). The final
component considered in the internet accessibility decision criteria is the Networked Readiness Index
(NRI) which is a measure of the capacity of countries to exploit opportunities offered by information and
communications technology across four sub-indexes including environment, impact, readiness and usage
(World Economic Forum B, 2015). For SparkGig, the NRI represents a holistic overview of a country’s
complete attractiveness using online information and communications technology. Once the components
of this decision criteria were developed, the top 30 countries in each category were considered and
ranked against each other and the top ten countries that ranked the highest after a summation of all four
categories were brought forth into evaluation against the remaining decision criteria (Appendix 2). This
internet accessibility criterion was weighted with 25% of the overall importance for making a decision due
to its necessity for entry into a foreign market.
1.2 Decision Criteria: Household Expenditures on Culture and Tourism
Households’ expenditures on recreation and culture represent how much households generally
spend on entertainment, a particularly relevant statistic for a service like SparkGig. This includes
expenditures on electronic equipment such as computers or cameras, CDs & DVDs, musical instruments,
sports equipment, and gambling, as well as less tangible goods such as theatre, movies or sport tickets
and package holidays. The households’ expenditures percentage retrieved from Nation Master were then
weighed with the total households’ expenditures in the country in order to understand the total value of
the market it represented (2009). The ranking obtained was then weighted at 50% with the ranking of the
total revenue from tourism in each country (Appendix 3).
1.3 Decision Criteria: Urban Density and Transportation
A list of countries ranked by their music, acting and cosplaying educational institutions and
practices was used as a shortlist to find statistics on both urban density and state of transportation
infrastructure. Performance culture is vital to the success of SparkGig, and if no culture is present, data
on urban density and transportation might not reflect SparkGig’s ability to succeed in that country. With
regards to urban density, both urban population growth rate and urban population as a percentage of total
population were researched. This was then incorporated into the transportation infrastructure rankings,
which were determined from quality of overall infrastructure, quality of roads, quality of railroad
infrastructure, quality of port infrastructure, quality of air transport infrastructure, and available airline
seats in KM. These scores were then ranked from 10-1. The United States was ranked sixth out of ten,
and the UK seventh, indicating this was perhaps the weakest qualifiers for these two countries. However,
Japan was ranked second overall (next only to Singapore), and the Netherlands ranked third.
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1.4 Decision Criteria: Art and Music Schools and Conventions
A survey of post-secondary performance schools was done with an eye towards attendance,
prestige and the sheer number of performance schools within the country. These schools ranged from
music school to acting and performance, and included as well the popularity of other, alternative forms of
performance, such as cosplay. With these criteria in mind, the US was the clear first choice, featuring a
strong performance culture as well as more performance schools of prestige, like Julliard, UNC and the
Tisch School of the Arts. The United Kingdom was ranked second, thanks in large part to a strong
musical culture and school such as the Royal Academy of Music and the London Academy of Music and
Dramatic Arts. Japan, with its relatively strong musical culture and vibrant cosplay scene (including being
the home of the World Cosplay Summit), was ranked fourth. Finally, though there were some smaller
music and acting schools within the Netherlands (particularly in Amsterdam and Rotterdam), it was
ultimately ranked fifth overall.
1.5 Decision Criteria: Economic Assessment of GINI Coefficient and
Disposable Income
Of all the countries SparkGig could enter, the Netherlands, Denmark and Germany have the
lowest GINI Coefficient Index (WorldBank, 2015). Japan and South Korea ranked fourth and fifth
respectively, while the UK and US made the top fifteen overall (Appendix 4). This measure indicates that
these countries have larger middle income groups and are therefore more suitable for SparkGig to target.
According to the WorldBank, the US has the highest household net disposable income ($41,355), which
an excellent sign for SparkGig’s performance in this market. The Netherlands and the UK are also in the
top ten, while Japan was ranked twelfth (Appendix 5).
1.6 Decision Criteria: Ease of Doing Business
The ease of doing business was selected as a decision criteria because it is an index that ranks
countries based on the both presence of business regulations and protection of property rights (World
Bank Group, 2015). Higher rankings, represented by a low numerical value, indicate that the economy is
generally simpler to establish a new business and has stronger enforcement of intellectual property rights
and contracts (“World Bank Group”, 2015). Assessing the ease of starting a business is therefore
important as SparkGig is looking to expand and establish operations within international markets within
the next 12 months.
Each year the Word Bank Group assesses 189 economies and assigns an overall ranking to the
country. The overall weighted score considers a number of factors, however, more emphasis was placed
on factors critically important to SparkGig’s international operations to determine the most appropriate
countries, for expansion. Starting a business and trade across borders were both subcategory criteria that
were considered critical as they represent the cost, time, and procedure in starting a business and
SparkGig’s ability to use the selected market to springboard entry into other close markets. Getting credit,
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protecting minority investors paying taxes, and enforcing contracts were other sub criteria that were
considered. Using this approach, a list of the to 20 countries was compiled (Appendix 6).
1.7 Selection of International Markets
It is noted that the aforementioned decision criteria are all not of equal importance to SparkGig.
As such, weights have been assigned to each decision
criteria in order of importance (Figure 1). Based on the
evaluation of international expansion countries through the
six decision criteria factors, the top four countries for
SparkGig to enter are the United States, the United
Kingdom, Japan and the Netherlands (Figure 2). For each
chosen country, critical information for successful
international expansion has been assessed.
Figure 2
Country
Internet
Users
(0.25)
Culture
&
Tourism
(0.25)
Density &
Transportation
(0.15)
Schools &
Conventions
(0.15)
GINI &
Disposable
Income
(0.10)
Ease of
Doing
Business
(0.10)
Weighted
Total
US 8 10 4 10 10 5 8.10
UK 10 8 3 9 9 8 8.00
Netherlands 9 3 7 5 8 6 6.20
Japan 7 6 8 6 5 1 5.95
Germany 6 7 1 4 6 2 4.80
Hong Kong 2 5 9 2 4 10 4.80
France 1 9 2 8 1 4 4.50
Korea 5 4 5 3 2 7 4.35
Australia 3 2 6 7 7 3 4.20
Singapore 4 1 10 1 3 9 4.10
Where 10 represents the best country and 1 represents the worst country for each respective criteria
2. Modes of Entry for International Expansion
To determine an appropriate method of entry for the selected countries, a strategic approach has
been taken whereby potential entry modes such as licensing, joint venture, and wholly-owned were
systematically evaluated and compared to select the most appropriate entry mode.
SparkGig could enter the proposed markets by licensing the use of their online marketplace in the
form of franchising. In this situation, SparkGig would allow the franchisee (licensee) to operate under the
SparkGig brand name, and SparkGig would provide the franchisee with marketing and advertising
support, training, and/or other related services negotiated in the contract that the franchisee may require
(Unzco, 2015). This could potentially allow SparkGig to enter foreign markets more quickly. Additionally,
licensing may be attractive for smaller firms with limited resources as the financial investment required is
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much smaller and there is comparatively less legal risk than a wholly-owned method of entry. This is
especially advantageous in a new foreign market with a high amount of government instability and a
relatively unknown demand for the firm’s product. Firms with little experience in international operations
can find licensing to be an effective option, as uncertainty in serving in a foreign market can easily
increase costs and reduce the profitability of the firm’s international operations.
Licensing, however, has its disadvantages as well. Primarily, licensing would reduce SparkGig’s
control of their technology and their brand, as the control in thee foreign markets would essentially be
transferred to a new, unaffiliated foreign firm (Unzco, 2015). Although the foreign countries selected are
considered high income and low risk counties, dissemination of SparkGig’s proprietary information always
presents itself as a risk as the franchisee may act in opportunistic ways and make this information
available to unauthorized third parties. Finally, although licensing increases a foreign firm’s time to
market, the opportunity to increase profits is reduced as licensing is generally less profitable than wholly-
owned business models for technology firms (Unzco, 2015).
Another method of entry for SparkGig to consider would be to enter the proposed foreign markets
by forming joint ventures with non-profit or event planning firms in the selected international markets.
Partnering with a firm in the host country is advantageous for firms operating in industries that do not
allow foreign firms to have a majority ownership, however research indicates that these ownership
concerns to do not apply to SparkGig for the proposed foreign markets. As SparkGig is considered to be
a small medium enterprise (SME), partnering with a local firm is attractive as it would share both the
operating costs and risks with the local firm. Although SparkGig has some international experience
through their preliminary US expansion, this knowledge may not translate into success in entering and
establishing operations in other foreign markets. This is particularly evident in Japan and the Netherlands,
as these markets are not as similar as the US and the UK to Canada. A foreign partner would be helpful
to SparkGig in navigating their way through the business environment of these countries through their
prior knowledge of the market and valuable business contacts. In essence, the foreign partner can help to
alleviate some of the sociocultural differences between Canada and the proposed markets to encourage
efficient and profitable operations.
A primary disadvantage of a joint venture is that SparkGig would share management control.
Shared management control with a foreign partner may be problematic for SparkGig as it could result in
undesirable operating margins or compromise the service quality. To circumvent these issues,
negotiations with the foreign partner should carefully examine the impact of management control, and
SparkGig should negotiate to retain majority management control. Through this process, however,
complex legal issues can arise due to the nature of international joint ventures, which can really only be
mitigated through careful selection of the foreign partner to ensure that their interests are aligned with
SparkGig’s.
Finally, SparkGig could choose to enter the proposed foreign markets through a wholly-owned
model, meaning SparkGig would maintain control over their foreign operations and become an
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international company. As previously stated, it is recommended that SparkGig maintain control over their
operations to monitor the quality of their talent and their services. A wholly-owned method of entry would
allow SparkGig to maintain effective management control of their brand, however in the absence of
partners, SparkGig will be required to commit financial and managerial resources to enter these markets.
Fortunately, SparkGig’s business model is based on an online marketplace that is highly scalable and
investments required to enter the proposed countries are less substantial for technology firms compared
to production based firms. Leasing physical facilities and hiring local staff is not required to enter these
foreign markets however, it is highly recommended for some markets ensure high quality and entertaining
experiences for both clients and performers. It should be emphasized that SparkGig’s preliminary
expansion into the US may not translate into success and knowledge for the proposed foreign markets.
To address this issue, it is recommended that SparkGig utilize the services of an international firm that
excels in bridging the gap for firms that are unfamiliar with the foreign market selected due to the
considerable differences compared to their home country.
A central disadvantage for a wholly-owned entry method is that firms are exposed to higher levels
of risk as foreign markets are generally riskier than domestic markets. An assessment of country risk for
the proposed foreign markets has been conducted, and ranks a country’s overall risk relative to their
political, foreign exchange, and economic risks. COFACE conducts this analysis each year and assigns a
ranking to each country based on macroeconomic data, payment experience in the country for the past
70 years, and a comprehensive assessment of the business environment (COFACE, 2016). As illustrated
in Figure 3, the selected countries are of equal or lower risk compared to Canada.
In conclusion, a firm’s entry choice must assess factors that are both internal, such as resources,
capabilities and preference for control, and external, such as country risk and sociocultural differences, to
the firm. Considering these factors, it is recommended that SparkGig enter the foreign markets via a
wholly-owned method to optimize quality, control, and profits.
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3. Expansion into the United States
3.1 Market Expansion Strategy
When first entering the US market, it may be beneficial for SparkGig to conduct their business
from the Waterloo office, since international sellers in the US with no physical American presence do not
have to collect or remit sales tax in the US (Faggiano, 2015). Once the business grows in the US market,
setting up a physical presence there would be beneficial in order to establish stronger business ties within
the US market. SparkGig should initially enter the US market in New York City due to the prominent art
culture and the supply of available talent. Once a presence has been established in New York City,
SparkGig should consider expanding to Boston as it is a city with great potential as it is ripe with talent
due to the presence of arts schools and cosplay activities.
3.2 Competitive Evaluation and Strategies
Competition for SparkGig in the US is already very developed. First, amateur artists can advertise
themselves on Craigslist, as the website has a special section for gigs. Craigslist has a large and diverse
base of users, and posting an advertisement is cheap and easy. However, differentiation on Craigslist is
difficult, and with no “quality requirement” offered, clients seeking performers of a higher skill level might
go elsewhere. GigSalad is a good alternative for these clients, allowing artists to register one of three
different accounts: “Free”, “Pro” and “Featured” priced at, $29.99 per month, and $39.99 per month,
respectively (GigSalad, 2016). The website is appealing and gives clients access to the profile pages of
musicians, entertainers, speakers and the like. GigMasters is another competitor that presents a similar
offer at a higher price point for artists through three kinds of accounts: “basic”, “pro” and “gold” for $33.00
per month, $46.00 per month and $56.00 per month (GigMasters, 2015). This is positioned as a more
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premium option for artists seeking higher-paying gigs, alluding to artists where the investment required is
often paid back with one booked gig, and creates partnerships with more exclusive clientele.
Eventective and Scarlett Entertainment are event planners that are also available in the US.
Additionally, art schools that allow individuals to hire their students through their webpages, such as
Julliard, are also considered competitors to SparkGig. The US marketplace is also full of specialized
websites to hire musicians, belly dancers, and other categories of talent through personal websites or
blogs from artists.
As the US marketplace is characterized by
high levels of competition, SparkGig must
differentiate themselves to alleviate these
competitive pressures and establish a competitive
advantage (Figure 4). Differentiation could be
achieved through low pricing and the support the
company provides to artists in order to help them
secure gigs. Emphasizing on the customer service
for both artists and clients through trainings or
directions SparkGig would provide to their users
would allow the offer to stand out from
competitors.
3.3 Pricing Strategies
The most effective approach to pricing in the US market is a standardized pricing strategy
alongside what it currently effective in Canada. This is a prime opportunity for SparkGig as the ability to
maintain a standardized site across Canada and the United States is very attractive as it will not be a
cost-consuming process for SparkGig other than adding some additional features for currency exchange.
The ability to maintain consistent pricing is also favorable as it allows SparkGig’s business model to
transition smoothly into the US without any major additional costs. Due to the large scope and scale of
the US market, SparkGig may also benefit from introducing an additional flat-fee marketing cost for those
artists who wish to appear on the front page or under a ‘Recommended Artists’ heading for a particular
city, which would introduce another revenue stream for SparkGig.
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3.4 Product Modification Strategy
The US is culturally similar to Canada, meaning SparkGig wouldn’t need to change language and
website structure. The option however for SparkGig clients to use a “Choose Your Country” button could
allow for branding consistency to be maintained easily across international market lines (Figure 5). When
considering the US’s internet penetration (about 9 times larger than Canada’s) and number of performers,
SparkGig may need to upgrade its server and management team (World Bank, 2015).
In order to face the large increase in activity on the site, SparkGig will need to design a more
efficient performer supervision system. The core product for sale on SparkGig is linked directly to quality
of performance, however this is extremely subjective criteria that will likely require some level of
regulation to ensure product and brand consistency, and to ensure performer quality matches said
performer’s profile.
3.5 Communication Strategy
The majority of SparkGig communications within the US should be done over the internet in order
to join the country’s growing online commerce landscape. Facebook and YouTube remain the country’s
most popular digital platforms (MVFglobal, 2015), and resources for each platform should be allocated
dependent on the state of SparkGig’s ecosystem – most American Facebook users are between the ages
of 35-54 (MVFglobal, 2015), making them more likely to be potential clients, while YouTube reaches more
18-34 year olds than any other platform (YouTube, 2015). Along with Twitter (representing 10% of the
American social media community), these platforms will best provide both advertising and public relations
opportunities for SparkGig (MVFglobal, 2015). In addition, having SparkGig’s logo and brand present at
each SparkGig show allows for cost-effective advertising, and could be particularly effective in the United
States, who ranked at the top of the proposed countries with regards to culture and tourism expenditures.
With 286 million mobile users and a mobile market size of 74.98 million in 2015 (MVFglobal, 2015),
enabling mobile purchases and mobile advertising will be critical to SparkGig’s success in the US.
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4 Expansion into the United Kingdom
4.1 Market Expansion Strategy
It is recommended that SparkGig enter the UK market by first expanding into London due to the
high population density, the strong arts culture, and the presence of numerous drama and music schools.
As a foreign company entering the UK, SparkGig must first register and incorporate their business in the
UK, and it is important to note that the rules and regulations for registering a business are straightforward
and transparent (UK Government, 2016). Although the approval process only takes 8-10 days, a number
of business documents, such as articles of incorporation and tax registration, must first be completed.
Services, however, can be utilized to streamline process, such as agents or third party software (UK
Government, 2016). Although not required, it is suggested that SparkGig open a local office to monitor
the talent and service quality while also establishing a connection with the local market. If SparkGig
chooses to open a local office they must first register an an employer with the HM Revenue and Customs
in the UK two months prior to hiring staff (UK Government, 2016).
4.2 Competitive Evaluation and Strategies
Competition in the UK is well established, ranging from simple online amateur artists’
communities and message boards to event planner corporations. The amateur performance segment is
quite developed in the British English culture, with groups such as Making Music or CoMA devoted to
helping amateur musicians find places to perform and get involved in the community. Additionally,
Amdram is a website allowing amateur performers to advertise themselves through a profile page. This,
however, is distinct from SparkGig’s product offering, positioning itself as more of a community helping
amateurs than a website putting performers in touch with clients. The website was first created for actors,
but has expanded to all kind of performers without a clear mission statement or differentiation. The
website’s aesthetic certainly lacks clarity and comes across as chaotic.
Several event planners, however, are currently targeting the professional segment of performers.
Alive Network features a diverse offering of professional performers that are reviewed by the company to
ensure a base level of quality. Performers decide what their fees are and can be messaged or researched
on their profile page. The company then takes a percentage of the profits from each played gig. Their
selling points are great quality service for their suggested price points.
15
Scarlett Entertainment is a global company with operations in North American and many
countries throughout Europe and Asia-Pacific. Scarlett Entertainment has a team of coordinators who can
work in a variety of languages and travel around the world to oversee their events. They have head
offices in the US and the UK, and typically receive phone calls for information regarding international
expansion and setting up branches in new markets. While they focus more broadly as “event planners”,
many performers register with them to become eligible performers should any appropriate events arise.
While there does seem to be a preference for professional talent, there are no barriers for amateurs, they
can register as long as they provided pictures and
videos of their performances. It should be noted, as
well, that the Scarlett Entertainment’s website only
functions in English for the many markets it serves. In
summary, SparkGig would be facing competition with
high quality performers in the UK, but could
emphasize their relatively low cost in the market
(Figure 6). Moreover, UK values amateur artists thus
positioning the offer as a way to help amateurs
penetrate the market would allow for differentiation.
4.3 Pricing Strategies
When entering the UK, a differentiated approach to pricing is recommended due to the difference
in average income levels and cost of living around large cities like London where SparkGig will likely be
focused, and the additional costs that would be incurred by opening up an international office in the UK.
When looking at the Purchasing Power Parity (PPP) which is worldwide method use to compare income
levels in different countries, it is clear that the UK has a higher PPP than both the US and Canada so the
ability to charge a higher commission is feasible in this country (World Bank, 2015). A representative
example of this in the UK market is Uber’s pricing model where the average 5-km ride in London, England
is $15.91USD compared to $7.53USD in Toronto, Canada (Wade, 2015). A higher level of commission
will likely lead to performers charging a higher fee which will be affordable in the UK. A commission
model of 10-15% rather than the current 8% may be the most effective pricing strategy which provides a
balance between covering additional costs and the increased income levels in the UK, while also
maintaining a low cost position so that SparkGig has the ability to gain a significant share as the digital
marketplace is growing exponentially (International Trade Administration, 2015). Another important
consideration with reference to setting a pricing model in the UK is that a Value Added Tax (VAT) must be
be included in the retail price for online services for all countries that are in the European Union, which is
20% in the UK (GOV.UK, 2015). This means that SparkGig must incorporate this into their pricing model
by either adding an additional 20% to the fee established by the artist or incorporating it into the fee set by
16
the artist which means that the artist will receive their set fee with the subtraction of both the commission
fee set by SparkGig and a 20% VAT.
4.4 Product Modification Strategy
Similar with US, SparkGig wouldn’t need to change its site structure when considering a move
into the UK. In order to fit the European market’s demand, however, SparkGig would need to extend its
performance category. This could include categories for opera, as an example (Figure 7).
In European countries, attracting street artists in
particular would be key to the success of a potential
expansion, due to their popularity and sizable numbers when
compared to North (World Bank, 2015). To do this, SparkGig
can help these street artists advertise in street performance
spots, such as subway stations, to promote local performers
while also creating brand awareness for SparkGig.
Alternatively, SparkGig could help these street artists by
taking videos, posting this content to SparkGig’s YouTube
channels, update artists’ profile and help them to raise their
brand awareness through the SparkGig platform (Figure 8).
4.5 Communication Strategy
Current trends in the United Kingdom with regards to communications strategy are similar to that
in the United States, but with some exceptions. With the third highest number of internet users in the
European Union (MVFglobal, 2015), online communications and marketing should be the main focus of
SparkGig’s expansion into the UK. Search engine optimization, still the largest digital public relations
initiative taken in the UK, an activity done by 53% of English firms with in-house public relations
17
(Sudhaman, 2015), is being overshadowed by both content creation like making videos and blogging and
online reputation management which is growing at a rate of 14% year over year (Sudhaman, 2015),
Content creation for SparkGig seems to be of particular relevance, offering the new service to introduce
the kind of talent clients can expect from booking through the service through YouTube videos of
SparkGig performances. While television proves to be an effective advertising platform in the UK,
accounting for the most average screen time for the British, prices tend to begin at 685 pounds per 30
second ad, so long-term investment could be a capital drain (Thompson, 2014). With 80.4 million mobile
users, however, app creation and advertising through social media such as Facebook could be a less
capital-intensive alternative.
5 Expansion into the Netherlands
5.1 Market Expansion Strategy
The expansion of SparkGig into the Netherlands could be achieved through entry into either
Amsterdam or Rotterdam as the culture of arts and performance is pervasive in each of the cities. To
establish operations in the Netherlands, SparkGig must first register their business with the Chamber of
Commerce then register with the tax authorities whereby the firm will be assigned a VAT number, which
SparkGig would be legally required to pay (I Amsterdam, 2016). To incorporate the business model in the
Netherlands, SparkGig would be required to complete a deed of incorporation. This must be completed in
Dutch and as such it is highly recommended that SparkGig work with a company, such as Expatax, that
specializes in providing translation services (Tax Consultants International, 2015). Similar to the UK,
physical facilities are not required to conduct business in the Netherlands however a local office is highly
recommended for SparkGig to interact with foreign customers, while monitoring the quality of their
services.
18
5.2 Competitive Evaluation and Strategies
GigStarter is already established in the Netherlands with a fully translated version of their website
allowing potential clients to view the profile pages of many of their artists. Secondly, Scarlett
Entertainment features artists available throughout the Netherlands, but as mentioned before, there is no
localization tool on the site, making this a labour-intensive process. However, the Dutch have one of the
highest English speaking proficiency rates worldwide for a second language (R.L.G, 2011), meaning
language in performance shouldn’t be a massive barrier for international performers. Other similar but
smaller websites are available as well, such as Talent Production.
Overall, the market in the Netherlands is not
particularly saturated, making expansion
favourable from a competition perspective (Figure
9). As a result, SparkGig’s current business model
would fit the competitive landscape in the
Netherlands. To maintain differentiation in this
market SparkGig should emphasize their artist
diversity available on the same platform, while
also offering a lower price relative to Scarlett
Entertainment.
5.3 Pricing Strategies
A differentiated pricing approach is suggested if SparkGig wishes to enter into the Netherlands
based on the overall culture of entertainment spending, the income levels and the extra costs of doing
business internationally. The entertainment industry in the Netherlands is large and very competitive, in
fact the Netherlands ranks in the top 5 of the most social entertainment spending countries in Europe
(Dutch Daily News, 2011). In this sense, there are many places to go for entertainment and artists may
have a more difficult time finding gigs as it it already a large industry. So in this sense, SparkGig can be a
very valuable tool to them and a 15-20% commission rate could be feasible. The Netherlands also has a
higher Purchasing Power Parity (PPP) than the US and Canada, which is worldwide method use to
compare income levels in different countries, so the ability to charge a higher commission is reasonable
in this country (World Bank, 2015). The higher commission price would be valuable to SparkGig as it will
be costly to set up an office in the Netherlands, particularly in Amsterdam, as well as the time and
monetary cost of translation of services and online communications to Dutch. In terms of any extra costs
that must be considered when doing business in the Netherlands, it is also part of the European Union so
a Value Added Tax (VAT) of 21% must be incorporated into their pricing model (EY, 2015). To
incorporate the VAT into their pricing model, SparkGig could either add an additional 21% to the fee
established by the artist or incorporate it into the fee set by the artist, so that the artist will receive their set
fee with the subtraction of both the commission fee set by SparkGig and a 21% VAT.
19
5.4 Product Modification Strategy
The Netherlands has a slight language barrier as the main language spoken is Dutch, however
the Dutch people have a very strong comprehension of the English language and many popular
international websites in the Netherlands feature English content. Even though the Netherlands has a
fairly similar culture to Canada, the development of a local office is still recommended, in order to
supervise the performers, connect with business clients, and handle the customer service issues. If this
proves to be too capital-intensive, SparkGig can set up a European office to allow for more regional talent
supervision and qualification. The downside of this is the hiring process would require employees to have
strong communication skills and partake in frequent business trips, which could simply mean offering
increased salaries, thus offsetting the advantages to regional offices. Finally, and similarly, to what is
recommended for potential expansion into the UK, attracting street artists to move to SparkGig is also a
key success factor for expansion into the Netherlands.
In addition, for each foreign market entered, SparkGig can improve its connectivity with social
media networks, since the social network feature can help SparkGig expand their market presence much
faster. In addition, SparkGig should also improve its geographic search feature, to ensure users can find
clients and talent closest to them. In order to do that, SparkGig may need to hire programmers who
specialize in geographic locating for each specific expanded network.
5.5 Communication Strategy
Television ads in the Netherlands are not a suitable communications strategy, due both to a trend
of younger people watching less television than the prior generation (Bakker, P., & Vasterman, P,2010),
and because of complex and often subjective TV advertising laws (Dutch Advertising Code Authority,
2011). Print media is facing a similar crisis in the Netherlands, as less than 10% of Dutch circulation is
distributed through single copy sales, forcing media companies to go online, where paywalls are more
prevalent (Piet Bakker, 2015). On the other hand, 90% of the entire country are active internet users, with
more than half of this figure being active on social media (MVFglobal, 2015). The most common websites
include Facebook, Youtube, Twitter and LinkedIn, as well as Hyves, a Dutch service more popular with
Dutch users over the age of 35, a potential age range for SparkGig clients. In addition, 88.6% of the
Netherlands population have been active in some form of e commerce, thanks both to a relatively low
unemployment rate of 4.3% (MVFglobal, 2015) and the aforementioned high online rate, making online
advertising a lucrative option for SparkGig in the Netherlands. The country currently has an estimated
21.182 million mobile users, a considerably smaller market compared to the other three countries
discussed in this report, making expansion into m commerce less imperative if SparkGig were to enter the
Netherlands. Finally, SparkGig could well take advantage of the Netherlands’ vibrant music festival
culture, such as Solar Weekend or Pinkpop, featuring a mix of international superstars and local talent
(Music Festival Wizard, 2016).
20
6. Expansion into Japan
6.1 Market Expansion Strategy
To enter the Japanese market, it is recommended that SparkGig first establish a presence in
Tokyo and later expand to the Aichi Prefectures, because of high urban density as well as these locales’
cosplay, tourism and performance school activities. As illustrated in Appendix 6, Japan ranks 81 out of
189 countries for starting a business and 53 overall for ease of conducting business, indicating that the
business environment is much more complex in Japan compared to the other proposed countries. As
such, it is highly recommended that SparkGig utilize the services of a company that excels in market entry
for technology firms, such as Venture Japan, as entry into this market would be complex. Also, it is highly
recommended that SparkGig open a local office in Japan and hire local staff to assist in dealing with the
complexities that can arise from operating within the Japanese market.
6.2 Competitive Evaluation and Strategies
The Japanese market could be very attractive for SparkGig as it shows a strong performance
culture, through both traditional arts like music performance or more modern innovations like cosplay.
GetStage is a Japanese website that would represent SparkGig’s main competition in Japan. It allows
musicians, designers, DJs, dancers and photographers to build their profile page, look for gigs and
participate to contests. Typically, these contests are featured on their social media pages and are
positioned as great visibility opportunities for performers. Their Facebook page has 2900 “likes” and is
regularly updated with original content from their blog. Clients can contact artists for parties, corporate
events, birthdays or weddings. They have over 7000 artists registered, whose profiles are categorized by
location, type of performance and genre.
21
Registration is free for artists and clients alike; moreover, there is no an additional fee or
commissions. GetStage is completely free because it is more of an advertising tool for the company. It
was used to develop their networks and improve their brand image, and allow them to increase profits in
other event planning segments (Dreamgate, 2013). GetStage works with high-profile companies such as
Universal, Hardrock Cafe, and HP. The brand is part of Gandh, a company whose purpose is to help
artists through new technologies. The website primarily targets artists with a professional background
starting their career, but amateurs can also register.
The website is only available in Japanese, making it inaccessible to expatriates working in Japan.
This is even more important as the percentage of immigrant workers in Japan increased by 49% since
2009, largely localized in Tokyo (Arnaud, 2016). There is also a high probability that immigration will
continue to increase, as indicated by their shrinking native population (Yoshida, 2015). Moreover,
Mangaka and Japanese traditional or cosplay artists are not part of their product offering, though it is an
important part of Japanese culture.
Event planner websites are also accessible in the Japanese market to hire artists, through
websites such as Event Partner. The typical price point for performers, however, is about $400 US. Event
21 is another event planner with a diverse offer from event set up to hiring performers, differentiating itself
by allowing users to change languages from Japanese to English. In addition, Japan has many
specialized websites offering to hire more specific types of performers (such as magicians), however
these are aggregated independently and are only sometimes available in English.
The Japanese market could be quite attractive to SparkGig, with no identical competition with
regards to market offering aside from GetStage, a company already well established in Japan (Figure 10).
To succeed, SparkGig will need to focus on localizing the website with regards to language in particular,
to accommodate the largest amount of clients
and performers possible, as there is a real lack of
options for non-Japanese speakers in this
increasingly-multiethnic country. In Japan,
SparkGig could differentiate through diversity of
artists while emphasizing the low cost of securing
a gig through the website. SparkGig could
further differentiate by adding categories for
traditional and cosplay artists in addition to
introducing both an English and Japanese
website.
22
6.3 Pricing Strategies
When entering Japan, a differentiated pricing strategy is recommended due to cultural
preferences and the higher cost of doing business in Japan due to international office expansion and
fairly dynamic changes to the online platform visuals in order to best appeal to this market. In the
Japanese market, there is strong competition from the online entertainment marketplace, Getstage which
offers their marketplace for free to artists (Dreamgate, 2013). So in order to successfully enter the
Japanese market, SparkGig must position themselves differently – perhaps as a premium cosplay-
focused entertainment marketplace – in order to differentiate themselves and add value to their service
over the competition. With Tokyo as a target market for the SparkGig operations, the cost of doing
business is quite expensive so a commission price structure of 15-20% is necessary to ensure business
is viable in Japan. With this higher price point, SparkGig would do well to market itself as a premium
brand in Japan. According to research by Hofstede, Japanese consumers are more likely to be receptive
to paying a higher price to avoid any uncertainty, often seeing higher price points as an indication of high
quality (Hofstede, 1991). In Japan, an 8% Japanese Consumption Tax (JCT) is applicable instead of the
VAT and is assessed on the supply of digital services so SparkGig would have to incorporate this into
their pricing structure by either adding it as a charge on top of the fee outlined by the artist or
incorporating it into the cost that is taken from the set fee of the artist (Ernest & Young, 2015). The JCT is
also scheduled to increase to 10% in April 2017.
6.4 Product Modification Strategy
A language barrier is the most important consideration for entering the Japanese market as 99%
of 125 million people speak Japanese almost exclusively and browse websites with content only in the
Japanese language (Digital River Blog Team, 2015). Although the expat and by extension, English
speaking, community in Japan is growing, SparkGig would still need to open a Japanese sub site in order
to attract the majority of Japanese users. 10.2% of Japanese ecommerce buyers shop from overseas
websites, so the Japanese site should be highly localized, featuring for example photos with Japanese
people as models. (Figure 11).
23
Japan has its own comic culture, called “manga” and it very popular to cosplay whereby
individuals dress up as different characters from video games and manga - and SparkGig is in a prime
position to capitalize on this trend. As such, the Japanese version of the website should focus more
heavily on cosplay, offering this valued service to Japanese clients and increasing the site’s popularity
with cosplayers in Japan (Figure 12).
6.5 Communication Strategy
Japan presents an interesting opportunity for SparkGig to advertise both on and offline. With an
extremely high 144.914 million mobile users and 91.1% internet penetration, advertising and
communications simply must be done at least in part online (World Bank, 2015). With regards to public
relations, 16% of all internet users are active on twitter, a statistic 6% higher than the US, presenting
SparkGig with an opportunity to stay in contact with fans and potential clients at minimal cost (MVFglobal,
2015). Search engine optimization should work similarly as with the other countries listed above, with
Google being by far the dominant search engine of the Japanese people and Baidu, the only outlier,
taking a minimal .23% of the search engine market share (MVFglobal, 2015). At the same time, due to
both the varied nature of the product SparkGig could capitalize on and the high population density of the
country, physical advertising could prove to be extremely effective. Care should be taken, however, as
the Act on Specified Commercial Transactions prohibits businesses from using high-pressure sales
tactics both on and offline (DLA Piper, 2016). With regards to competition, Japan is a deeply ritualized
culture who could and could interpret aggressive salesmanship as unorthodox and therefore high-
pressure (Hofstede, 1991). However, if done correctly in strategic areas of Japan, such as at Tokyo’s
Jingūbashi bridge, a local hub of cosplay activity and tourism, physical advertising could be highly
effective (Haley, 2011). Finally, Japan’s vibrant cosplay culture should be capitalized on by SparkGig, not
just through offering cosplay services on the website, but through a presence at conventions, key among
which being the World Cosplay Summit in Aichi, Japan.
24
7. Recommendation
For SparkGig’s initial international expansion, supplementing growth into the US market is easily
the most convenient and cost-effective initial model for SparkGig. However, due to the high level of
existing competition across the US market, the United Kingdom and the Netherlands seem to be the most
attractive markets for SparkGig to expand to in its initial stages of global development. Both countries
feature a low level of competition, a bustling arts and entertainment culture, strong urban densities, a high
level of disposable income and many performing arts schools. This means SparkGig can find quality
artists and musicians as well as consumers who would utilize the online platform to hire entertainment,
connecting the online marketplace. SparkGig could maintain the same online platform with English
content when expanding into both of these countries, however additions to the mapping feature as well as
the currency and payment system that includes the VAT for each country will need to be integrated into
the international offering. It’s also recommended that SparkGig open international offices in London and
Amsterdam, in order to develop effective selling and communication initiatives, build key relationships,
and to attract talent for the online marketplace. Overall, SparkGig has great potential to move into
international markets successfully and this evaluation will help provide some of the key information
necessary to keep in mind when expanding globally.
25
References
Arnaud, R. (2016). Le Japon fait mauvaise fortune immigration. Retrieved from
http://www.challenges.fr/monde/asie-pacifique/20160407.CHA7521/le-japon-fait-contre-
mauvaise-fortune-immigration.html
COFACE. (2016). ECONOMIC STUDIES. Retrieved from http://www.coface.com/Economic-
Studies-and-Country-Risks
Digital River Blog Team. (2015). INFOGRAPHIC: JAPAN ECOMMERCE MARKET. Retrieved
from Digital River : http://www.digitalriver.com/infographic-japan-ecommerce-market/
DLA Piper. (2016). doing business in Japan. Retrieved from
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ss%20in%20Japan/Files/DLA%20Piper%20guide%20to%20Doing%20Business%20in%
20Japan/FileAttachment/DLA%20Piper%20guide%20to%20Doing%20Business%20in%
20Japan.pdf
Dreamgate. (2013). ビジネスモデルを転換し、第二のスタートで急成長。1 万 2000 人が
参加! アーティストにもっと脚光を!. Retrieved from
http://www.dreamgate.gr.jp/news/835, Dreamgate
Dutch Advertising Code Authority . (2011). Dutch Advertising Code.
Dutch Daily News. (2011). Netherlands in Top 5 Social Spending in Europe. Retrieved from
http://www.dutchdailynews.com/netherlands-in-top-5-social-spending-in-europe/
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http://www.ey.com/Publication/vwLUAssets/EY-japan-tax-alert-29-June-
2015/$FILE/EY-japan-tax-alert-29-June-2015.pdf
EY. (2015). Netherlands. 2015 Worldwide VAT, GST and Sales Tax Guide. Retrieved from
http://www.ey.com/GL/en/Services/Tax/Worldwide-VAT--GST-and-Sales-Tax-Guide---
XMLQS?preview&XmlUrl=/ec1mages/taxguides/VAT-2015/VAT-NL.xml
Faggiano, M. (2015). Do International Sellers Have to Deal with Sales Tax in the US? TaxJar.
Retrieved from http://blog.taxjar.com/international-sellers-deal-sales-tax-u-s/
GigMasters. (2015). Membership Fees and Benefits. Retrieved from
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Global Marketing Today. (2015). Walmart’s Entry into Japan. Retrieved from
https://globalmarketingtoday.net/the-real-world/case-study-1/
GOV.UK. (2015). Tax on Shopping and Services. Retrieved from
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Haley, A. (2011). Jingu Bashi. Retrieved from http://en.japantravel.com/tokyo/jingu-bashi/607
Hofstede, G. (1991). Country Comparison. Retrieved from http://geert-
hofstede.com/countries.html
Hollensen, S. (2012). Essentials of Global Marketing. In 2nd Edition. Harlow: Pearson
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International Trade Administration. (2015). 2015 Top Markets Report: Media and
Entertainment. Retrieved from
http://trade.gov/topmarkets/pdf/Media_and_Entertainment_Top_Markets_Report.pdf
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Music Festival Wizard. (2016). PINKPOP 2016. Retrieved from
https://www.musicfestivalwizard.com/festivals/pinkpop-2016/
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netherlands
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27
Appendices
Appendix 1: Mobile APP Demo Japanese Version
28
Appendix 2: Country Comparison: Internet Accessibility Decision Criteria
Rank Country
Internet
B2C
Internet
Users
Tech
Adoption
NRI Total
1 Sweden 26 28 28 28 110
2 Norway 24 29 27 26 106
3 UK 30 22 29 23 104
4 Netherlands 27 26 22 27 102
5 Luxembourg 12 25 30 22 89
6 Switzerland 21 20 21 25 87
7 US 29 15 15 24 83
8 Japan 28 19 11 21 79
9 Denmark 8 27 25 16 76
10 Iceland 9 30 23 12 74
11 Finland 24 20 29 73
12 Germany 18 14 18 18 68
13 Korea (Republic) 25 16 6 19 66
14 Canada 14 18 9 20 61
15 Singapore 5 24 30 59
16 New Zealand 22 12 8 14 56
17 Australia 15 13 12 15 55
18 Hong Kong SAR 4 1 26 17 48
19
United Arab
Emirates 11 21 7 8 47
20 Austria 7 9 13 11 40
25 France 2 10 14 5 31
Source: (World Economic Forum, 2015)
Appendix 3: Country Comparison: Household Expenditures on Culture & Tourism
Country
Cultural
Expenditures
Tourism
Arrivals
Weighted
Results
Ranking
US 10 9 10 1
France 6 10 8 2
UK 9 7 8 3
Germany 7 8 8 4
Japan 8 2 5 5
Hong Kong 2 6 4 6
Korea 4 4 4 7
Netherlands 3 5 4 8
Australia 5 1 3 9
Singapore 1 3 2 10
Source: (NationMaster, 2009; World Bank, 2015)
29
Appendix 4: Country Comparison: GINI Coefficient
Rank Country
GINI
Coefficient
Year
1 Netherlands 28 2012
2 Denmark 29.1 2012
3 Germany 30.1 2011
4
South
Korea
31.3 2007
5 Japan 32.1 2008
6 UK 32.6 2012
7 Taiwan 33.8 2012
8 Australia 34.9 2010
9 Spain 35.9 2012
10 Portugal 36 2012
11 China 37 2011
12 US 41.1 2013
13 Malaysia 46.3 2009
14 Singapore 46.4 2014
15 Hong Kong 53.7 2011
Source: (World Bank, 2015)
Appendix 5: Country Comparison: Disposable Income
Rank Country
Household Net Adjusted
Disposable Income (USD)
1 US 41,355
2 Norway 33,492
3 Switzerland 33,491
4 Australia 31,588
5 Germany 31,252
6 Austria 31,173
7 Sweden 29,185
8 France 28,799
9 Netherlands 27,888
10 UK 27,029
11 Denmark 26,491
12 Japan 26,111
13 Spain 22,104
14 Portugal 20,086
15 South Korea 19,510
Source: (World Bank, 2015)
30
Appendix 6: Country Comparison: Ease of Doing Business
Economy
Starting
a
Business
Getting
Credit
Protecting
Minority
Investors
Paying
Taxes
Trading
Across
Borders
Resolving
Insolvency
Weighted
Average
Overall
Country
Ranking
Weight Assigned 0.25 0.125 0.125 0.125 0.25 0.125 1.00
Denmark 29 28 20 12 1 9 16.13 1
Canada 3 7 6 9 44 16 16.50 2
Hong Kong 4 19 1 4 47 26 19.00 3
Singapore 10 19 1 5 41 27 19.25 4
Macedonia, FYR 2 42 14 7 26 37 19.50 5
United Kingdom 17 19 4 15 38 13 20.13 6
New Zealand 1 1 1 22 55 31 20.88 7
Korea, Rep. 23 42 8 29 31 4 23.88 8
Sweden 16 70 14 37 17 19 25.75 9
Ireland 25 28 8 6 48 20 26.00 10
Netherlands 28 79 66 26 1 11 30.00 14
United States 49 2 35 53 34 5 32.63 20
France 32 79 29 87 1 24 35.63 23
Australia 11 5 66 42 89 14 40.88 28
Germany 107 28 49 72 35 3 54.50 47
Japan 81 79 36 121 52 2 63.00 53
Bolded items represent the countries included and ranked in the decision matrix
Source: (Economy Rankings, 2015)

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BU612 Sparkgig.com International Market Expansion Research

  • 1. 1
  • 2. 2 Table of Contents Executive Summary..................................................................................................................... 4 1. Introduction to International Expansion ............................................................................ 5 1.1 Decision Criteria: Internet Accessibility..................................................................... 5 1.2 Decision Criteria: Household Expenditures on Culture and Tourism .................. 6 1.3 Decision Criteria: Urban Density and Transportation............................................. 6 1.4 Decision Criteria: Art and Music Schools and Conventions.................................. 7 1.5 Decision Criteria: Economic Assessment of GINI Coefficient and Disposable Income........................................................................................................................................ 7 1.6 Decision Criteria: Ease of Doing Business .............................................................. 7 1.7 Selection of International Markets ............................................................................. 8 2. Modes of Entry for International Expansion..................................................................... 8 3. Expansion into the United States .................................................................................... 11 3.1 Market Expansion Strategy ............................................................................................ 11 3.2 Competitive Evaluation and Strategies................................................................... 11 3.3 Pricing Strategies ....................................................................................................... 12 3.4 Product Modification Strategy .................................................................................. 13 3.5 Communication Strategy........................................................................................... 13 4 Expansion into the United Kingdom................................................................................ 14 4.1 Market Expansion Strategy........................................................................................ 14
  • 3. 3 4.2 Competitive Evaluation and Strategies................................................................... 14 4.3 Pricing Strategies ....................................................................................................... 15 4.4 Product Modification Strategy .................................................................................. 16 4.5 Communication Strategy........................................................................................... 16 5 Expansion into the Netherlands....................................................................................... 17 5.1 Market Expansion Strategy........................................................................................ 17 5.2 Competitive Evaluation and Strategies................................................................... 18 5.3 Pricing Strategies ....................................................................................................... 18 5.4 Product Modification Strategy .................................................................................. 19 5.5 Communication Strategy........................................................................................... 19 6. Expansion into Japan........................................................................................................... 20 6.1 Market Expansion Strategy........................................................................................ 20 6.2 Competitive Evaluation and Strategies................................................................... 20 6.3 Pricing Strategies ....................................................................................................... 22 6.4 Product Modification Strategy .................................................................................. 22 6.5 Communication Strategy........................................................................................... 23 7. Recommendation................................................................................................................... 24 References.................................................................................................................................. 25 Appendix 1: Mobile APP Demo Japanese Version........................................................... 27 Appendix 2: Country Comparison: Internet Accessibility Decision Criteria................... 28 Appendix 3: Country Comparison: Household Expenditures on Culture & Tourism ... 28 Appendix 4: Country Comparison: GINI Coefficient ......................................................... 29 Appendix 5: Country Comparison: Disposable Income.................................................... 29 Appendix 6: Country Comparison: Ease of Doing Business ........................................... 30
  • 4. 4 Executive Summary As a product that combines an online purchasing experience with in-person live entertainment, SparkGig presents itself as a unique potential player in the world’s growing digital landscape. SparkGig’s core offering – live entertainment – appeals to an incredibly wide range of demographics from all across the world. With the aim of addressing how SparkGig can popularize itself internationally, specific decision criteria were developed to determine the best countries for expansion. Key metrics investigated included internet accessibility, household expenditures on culture and tourism, urban density and transportation, number of art and music schools and conventions, economic attractiveness related to GINI coefficient and level of disposable income and the ease of doing business. It was found that the most attractive markets worldwide for SparkGig were the US, the UK, the Netherlands, and Japan. When further analyses were conducted to concentrate on these four countries, clear strengths and weaknesses emerged for each option. Considering SparkGig has been established in Canada, the US presents itself as the most culturally similar to the market SparkGig was founded on, and comes with perhaps the strongest selection of performance schools worldwide. There are significant concerns with the US market, however, with regards to competition for SparkGig, as well as urban density which could make further expansion into smaller markets more difficult. The UK features a strong performance culture and several large and prestigious schools, and is considerably more dense in urban locales (London, in particular) despite being a smaller market overall. Japan presents an interesting opportunity for SparkGig, allowing the company to capitalize on Japan’s unique cosplay scene and capitalize on their high urban density with a more varied approach to marketing; however, there are significant cultural and logistical barriers to entering the Japanese market that must be taken into consideration. Finally, despite having the lowest number of prestigious music and acting schools of the countries presented, the Netherlands present opportunities in their similar preferences to SparkGig’s current product offering, and income levels suggest SparkGig is something that could be easily adopted once the website’s visibility has been established in the Netherlands. Each country presents its own strengths and weaknesses, however there are lucrative options other than exclusive American internationalization that could prove to be extremely valuable for SparkGig.
  • 5. 5 1. Introduction to International Expansion As an online-based business, SparkGig has the opportunity to go global fairly quickly once appropriate markets are evaluated, a depth of knowledge of the chosen country’s culture is developed and resources are set in place for proper expansion strategies. When determining the best markets for SparkGig to target for their international expansion, an emphasis was placed on six different decision criteria: internet accessibility, household expenditures on culture and tourism, urban density and transportation, number of art and music schools and conventions, economic attractiveness related to GINI coefficient and level of disposable income and the ease of doing business. The following offers a description of the components of each decision criteria and their importance and application to the SparkGig business model. 1.1 Decision Criteria: Internet Accessibility A high level of internet accessibility is a fundamental determinant due to the online platform upon which SparkGig’s business exists. In this case, the level of internet accessibility was composed as a component of four different factors: the percentage of internet users, the extent of internet use for business-to-consumer transactions, level of technological adaptation and the Networked Readiness Index (World Economic Forum B, 2015). A strong percentage of internet users in a chosen country is crucial to SparkGig’s successful entry as their entertainment marketplace business model is available to consumers solely through an online platform, so the greater the number of individuals who have access to the internet, the greater the potential users of the SparkGig marketplace (World Economic Forum A, 2015). The extent of business-to-consumer transactions is another key element that determines the attractiveness of a market as it represents the level to which businesses feel that selling their products online is successful sales channel as well as the extent to which consumers use online stores and marketplaces to purchase goods and services. The level of technological adaptation in a given country is also a component considered in the access to internet criteria as the extent of the availability and absorption of the latest technologies of consumers and businesses demonstrate the reliance on the online technologies in everyday and business life (World Economic Forum A, 2015). A superior reliance
  • 6. 6 on technology and online resources will benefit SparkGig as it is more likely individuals will use websites and mobile applications to book entertainment rather than another platform (Appendix 1). The final component considered in the internet accessibility decision criteria is the Networked Readiness Index (NRI) which is a measure of the capacity of countries to exploit opportunities offered by information and communications technology across four sub-indexes including environment, impact, readiness and usage (World Economic Forum B, 2015). For SparkGig, the NRI represents a holistic overview of a country’s complete attractiveness using online information and communications technology. Once the components of this decision criteria were developed, the top 30 countries in each category were considered and ranked against each other and the top ten countries that ranked the highest after a summation of all four categories were brought forth into evaluation against the remaining decision criteria (Appendix 2). This internet accessibility criterion was weighted with 25% of the overall importance for making a decision due to its necessity for entry into a foreign market. 1.2 Decision Criteria: Household Expenditures on Culture and Tourism Households’ expenditures on recreation and culture represent how much households generally spend on entertainment, a particularly relevant statistic for a service like SparkGig. This includes expenditures on electronic equipment such as computers or cameras, CDs & DVDs, musical instruments, sports equipment, and gambling, as well as less tangible goods such as theatre, movies or sport tickets and package holidays. The households’ expenditures percentage retrieved from Nation Master were then weighed with the total households’ expenditures in the country in order to understand the total value of the market it represented (2009). The ranking obtained was then weighted at 50% with the ranking of the total revenue from tourism in each country (Appendix 3). 1.3 Decision Criteria: Urban Density and Transportation A list of countries ranked by their music, acting and cosplaying educational institutions and practices was used as a shortlist to find statistics on both urban density and state of transportation infrastructure. Performance culture is vital to the success of SparkGig, and if no culture is present, data on urban density and transportation might not reflect SparkGig’s ability to succeed in that country. With regards to urban density, both urban population growth rate and urban population as a percentage of total population were researched. This was then incorporated into the transportation infrastructure rankings, which were determined from quality of overall infrastructure, quality of roads, quality of railroad infrastructure, quality of port infrastructure, quality of air transport infrastructure, and available airline seats in KM. These scores were then ranked from 10-1. The United States was ranked sixth out of ten, and the UK seventh, indicating this was perhaps the weakest qualifiers for these two countries. However, Japan was ranked second overall (next only to Singapore), and the Netherlands ranked third.
  • 7. 7 1.4 Decision Criteria: Art and Music Schools and Conventions A survey of post-secondary performance schools was done with an eye towards attendance, prestige and the sheer number of performance schools within the country. These schools ranged from music school to acting and performance, and included as well the popularity of other, alternative forms of performance, such as cosplay. With these criteria in mind, the US was the clear first choice, featuring a strong performance culture as well as more performance schools of prestige, like Julliard, UNC and the Tisch School of the Arts. The United Kingdom was ranked second, thanks in large part to a strong musical culture and school such as the Royal Academy of Music and the London Academy of Music and Dramatic Arts. Japan, with its relatively strong musical culture and vibrant cosplay scene (including being the home of the World Cosplay Summit), was ranked fourth. Finally, though there were some smaller music and acting schools within the Netherlands (particularly in Amsterdam and Rotterdam), it was ultimately ranked fifth overall. 1.5 Decision Criteria: Economic Assessment of GINI Coefficient and Disposable Income Of all the countries SparkGig could enter, the Netherlands, Denmark and Germany have the lowest GINI Coefficient Index (WorldBank, 2015). Japan and South Korea ranked fourth and fifth respectively, while the UK and US made the top fifteen overall (Appendix 4). This measure indicates that these countries have larger middle income groups and are therefore more suitable for SparkGig to target. According to the WorldBank, the US has the highest household net disposable income ($41,355), which an excellent sign for SparkGig’s performance in this market. The Netherlands and the UK are also in the top ten, while Japan was ranked twelfth (Appendix 5). 1.6 Decision Criteria: Ease of Doing Business The ease of doing business was selected as a decision criteria because it is an index that ranks countries based on the both presence of business regulations and protection of property rights (World Bank Group, 2015). Higher rankings, represented by a low numerical value, indicate that the economy is generally simpler to establish a new business and has stronger enforcement of intellectual property rights and contracts (“World Bank Group”, 2015). Assessing the ease of starting a business is therefore important as SparkGig is looking to expand and establish operations within international markets within the next 12 months. Each year the Word Bank Group assesses 189 economies and assigns an overall ranking to the country. The overall weighted score considers a number of factors, however, more emphasis was placed on factors critically important to SparkGig’s international operations to determine the most appropriate countries, for expansion. Starting a business and trade across borders were both subcategory criteria that were considered critical as they represent the cost, time, and procedure in starting a business and SparkGig’s ability to use the selected market to springboard entry into other close markets. Getting credit,
  • 8. 8 protecting minority investors paying taxes, and enforcing contracts were other sub criteria that were considered. Using this approach, a list of the to 20 countries was compiled (Appendix 6). 1.7 Selection of International Markets It is noted that the aforementioned decision criteria are all not of equal importance to SparkGig. As such, weights have been assigned to each decision criteria in order of importance (Figure 1). Based on the evaluation of international expansion countries through the six decision criteria factors, the top four countries for SparkGig to enter are the United States, the United Kingdom, Japan and the Netherlands (Figure 2). For each chosen country, critical information for successful international expansion has been assessed. Figure 2 Country Internet Users (0.25) Culture & Tourism (0.25) Density & Transportation (0.15) Schools & Conventions (0.15) GINI & Disposable Income (0.10) Ease of Doing Business (0.10) Weighted Total US 8 10 4 10 10 5 8.10 UK 10 8 3 9 9 8 8.00 Netherlands 9 3 7 5 8 6 6.20 Japan 7 6 8 6 5 1 5.95 Germany 6 7 1 4 6 2 4.80 Hong Kong 2 5 9 2 4 10 4.80 France 1 9 2 8 1 4 4.50 Korea 5 4 5 3 2 7 4.35 Australia 3 2 6 7 7 3 4.20 Singapore 4 1 10 1 3 9 4.10 Where 10 represents the best country and 1 represents the worst country for each respective criteria 2. Modes of Entry for International Expansion To determine an appropriate method of entry for the selected countries, a strategic approach has been taken whereby potential entry modes such as licensing, joint venture, and wholly-owned were systematically evaluated and compared to select the most appropriate entry mode. SparkGig could enter the proposed markets by licensing the use of their online marketplace in the form of franchising. In this situation, SparkGig would allow the franchisee (licensee) to operate under the SparkGig brand name, and SparkGig would provide the franchisee with marketing and advertising support, training, and/or other related services negotiated in the contract that the franchisee may require (Unzco, 2015). This could potentially allow SparkGig to enter foreign markets more quickly. Additionally, licensing may be attractive for smaller firms with limited resources as the financial investment required is
  • 9. 9 much smaller and there is comparatively less legal risk than a wholly-owned method of entry. This is especially advantageous in a new foreign market with a high amount of government instability and a relatively unknown demand for the firm’s product. Firms with little experience in international operations can find licensing to be an effective option, as uncertainty in serving in a foreign market can easily increase costs and reduce the profitability of the firm’s international operations. Licensing, however, has its disadvantages as well. Primarily, licensing would reduce SparkGig’s control of their technology and their brand, as the control in thee foreign markets would essentially be transferred to a new, unaffiliated foreign firm (Unzco, 2015). Although the foreign countries selected are considered high income and low risk counties, dissemination of SparkGig’s proprietary information always presents itself as a risk as the franchisee may act in opportunistic ways and make this information available to unauthorized third parties. Finally, although licensing increases a foreign firm’s time to market, the opportunity to increase profits is reduced as licensing is generally less profitable than wholly- owned business models for technology firms (Unzco, 2015). Another method of entry for SparkGig to consider would be to enter the proposed foreign markets by forming joint ventures with non-profit or event planning firms in the selected international markets. Partnering with a firm in the host country is advantageous for firms operating in industries that do not allow foreign firms to have a majority ownership, however research indicates that these ownership concerns to do not apply to SparkGig for the proposed foreign markets. As SparkGig is considered to be a small medium enterprise (SME), partnering with a local firm is attractive as it would share both the operating costs and risks with the local firm. Although SparkGig has some international experience through their preliminary US expansion, this knowledge may not translate into success in entering and establishing operations in other foreign markets. This is particularly evident in Japan and the Netherlands, as these markets are not as similar as the US and the UK to Canada. A foreign partner would be helpful to SparkGig in navigating their way through the business environment of these countries through their prior knowledge of the market and valuable business contacts. In essence, the foreign partner can help to alleviate some of the sociocultural differences between Canada and the proposed markets to encourage efficient and profitable operations. A primary disadvantage of a joint venture is that SparkGig would share management control. Shared management control with a foreign partner may be problematic for SparkGig as it could result in undesirable operating margins or compromise the service quality. To circumvent these issues, negotiations with the foreign partner should carefully examine the impact of management control, and SparkGig should negotiate to retain majority management control. Through this process, however, complex legal issues can arise due to the nature of international joint ventures, which can really only be mitigated through careful selection of the foreign partner to ensure that their interests are aligned with SparkGig’s. Finally, SparkGig could choose to enter the proposed foreign markets through a wholly-owned model, meaning SparkGig would maintain control over their foreign operations and become an
  • 10. 10 international company. As previously stated, it is recommended that SparkGig maintain control over their operations to monitor the quality of their talent and their services. A wholly-owned method of entry would allow SparkGig to maintain effective management control of their brand, however in the absence of partners, SparkGig will be required to commit financial and managerial resources to enter these markets. Fortunately, SparkGig’s business model is based on an online marketplace that is highly scalable and investments required to enter the proposed countries are less substantial for technology firms compared to production based firms. Leasing physical facilities and hiring local staff is not required to enter these foreign markets however, it is highly recommended for some markets ensure high quality and entertaining experiences for both clients and performers. It should be emphasized that SparkGig’s preliminary expansion into the US may not translate into success and knowledge for the proposed foreign markets. To address this issue, it is recommended that SparkGig utilize the services of an international firm that excels in bridging the gap for firms that are unfamiliar with the foreign market selected due to the considerable differences compared to their home country. A central disadvantage for a wholly-owned entry method is that firms are exposed to higher levels of risk as foreign markets are generally riskier than domestic markets. An assessment of country risk for the proposed foreign markets has been conducted, and ranks a country’s overall risk relative to their political, foreign exchange, and economic risks. COFACE conducts this analysis each year and assigns a ranking to each country based on macroeconomic data, payment experience in the country for the past 70 years, and a comprehensive assessment of the business environment (COFACE, 2016). As illustrated in Figure 3, the selected countries are of equal or lower risk compared to Canada. In conclusion, a firm’s entry choice must assess factors that are both internal, such as resources, capabilities and preference for control, and external, such as country risk and sociocultural differences, to the firm. Considering these factors, it is recommended that SparkGig enter the foreign markets via a wholly-owned method to optimize quality, control, and profits.
  • 11. 11 3. Expansion into the United States 3.1 Market Expansion Strategy When first entering the US market, it may be beneficial for SparkGig to conduct their business from the Waterloo office, since international sellers in the US with no physical American presence do not have to collect or remit sales tax in the US (Faggiano, 2015). Once the business grows in the US market, setting up a physical presence there would be beneficial in order to establish stronger business ties within the US market. SparkGig should initially enter the US market in New York City due to the prominent art culture and the supply of available talent. Once a presence has been established in New York City, SparkGig should consider expanding to Boston as it is a city with great potential as it is ripe with talent due to the presence of arts schools and cosplay activities. 3.2 Competitive Evaluation and Strategies Competition for SparkGig in the US is already very developed. First, amateur artists can advertise themselves on Craigslist, as the website has a special section for gigs. Craigslist has a large and diverse base of users, and posting an advertisement is cheap and easy. However, differentiation on Craigslist is difficult, and with no “quality requirement” offered, clients seeking performers of a higher skill level might go elsewhere. GigSalad is a good alternative for these clients, allowing artists to register one of three different accounts: “Free”, “Pro” and “Featured” priced at, $29.99 per month, and $39.99 per month, respectively (GigSalad, 2016). The website is appealing and gives clients access to the profile pages of musicians, entertainers, speakers and the like. GigMasters is another competitor that presents a similar offer at a higher price point for artists through three kinds of accounts: “basic”, “pro” and “gold” for $33.00 per month, $46.00 per month and $56.00 per month (GigMasters, 2015). This is positioned as a more
  • 12. 12 premium option for artists seeking higher-paying gigs, alluding to artists where the investment required is often paid back with one booked gig, and creates partnerships with more exclusive clientele. Eventective and Scarlett Entertainment are event planners that are also available in the US. Additionally, art schools that allow individuals to hire their students through their webpages, such as Julliard, are also considered competitors to SparkGig. The US marketplace is also full of specialized websites to hire musicians, belly dancers, and other categories of talent through personal websites or blogs from artists. As the US marketplace is characterized by high levels of competition, SparkGig must differentiate themselves to alleviate these competitive pressures and establish a competitive advantage (Figure 4). Differentiation could be achieved through low pricing and the support the company provides to artists in order to help them secure gigs. Emphasizing on the customer service for both artists and clients through trainings or directions SparkGig would provide to their users would allow the offer to stand out from competitors. 3.3 Pricing Strategies The most effective approach to pricing in the US market is a standardized pricing strategy alongside what it currently effective in Canada. This is a prime opportunity for SparkGig as the ability to maintain a standardized site across Canada and the United States is very attractive as it will not be a cost-consuming process for SparkGig other than adding some additional features for currency exchange. The ability to maintain consistent pricing is also favorable as it allows SparkGig’s business model to transition smoothly into the US without any major additional costs. Due to the large scope and scale of the US market, SparkGig may also benefit from introducing an additional flat-fee marketing cost for those artists who wish to appear on the front page or under a ‘Recommended Artists’ heading for a particular city, which would introduce another revenue stream for SparkGig.
  • 13. 13 3.4 Product Modification Strategy The US is culturally similar to Canada, meaning SparkGig wouldn’t need to change language and website structure. The option however for SparkGig clients to use a “Choose Your Country” button could allow for branding consistency to be maintained easily across international market lines (Figure 5). When considering the US’s internet penetration (about 9 times larger than Canada’s) and number of performers, SparkGig may need to upgrade its server and management team (World Bank, 2015). In order to face the large increase in activity on the site, SparkGig will need to design a more efficient performer supervision system. The core product for sale on SparkGig is linked directly to quality of performance, however this is extremely subjective criteria that will likely require some level of regulation to ensure product and brand consistency, and to ensure performer quality matches said performer’s profile. 3.5 Communication Strategy The majority of SparkGig communications within the US should be done over the internet in order to join the country’s growing online commerce landscape. Facebook and YouTube remain the country’s most popular digital platforms (MVFglobal, 2015), and resources for each platform should be allocated dependent on the state of SparkGig’s ecosystem – most American Facebook users are between the ages of 35-54 (MVFglobal, 2015), making them more likely to be potential clients, while YouTube reaches more 18-34 year olds than any other platform (YouTube, 2015). Along with Twitter (representing 10% of the American social media community), these platforms will best provide both advertising and public relations opportunities for SparkGig (MVFglobal, 2015). In addition, having SparkGig’s logo and brand present at each SparkGig show allows for cost-effective advertising, and could be particularly effective in the United States, who ranked at the top of the proposed countries with regards to culture and tourism expenditures. With 286 million mobile users and a mobile market size of 74.98 million in 2015 (MVFglobal, 2015), enabling mobile purchases and mobile advertising will be critical to SparkGig’s success in the US.
  • 14. 14 4 Expansion into the United Kingdom 4.1 Market Expansion Strategy It is recommended that SparkGig enter the UK market by first expanding into London due to the high population density, the strong arts culture, and the presence of numerous drama and music schools. As a foreign company entering the UK, SparkGig must first register and incorporate their business in the UK, and it is important to note that the rules and regulations for registering a business are straightforward and transparent (UK Government, 2016). Although the approval process only takes 8-10 days, a number of business documents, such as articles of incorporation and tax registration, must first be completed. Services, however, can be utilized to streamline process, such as agents or third party software (UK Government, 2016). Although not required, it is suggested that SparkGig open a local office to monitor the talent and service quality while also establishing a connection with the local market. If SparkGig chooses to open a local office they must first register an an employer with the HM Revenue and Customs in the UK two months prior to hiring staff (UK Government, 2016). 4.2 Competitive Evaluation and Strategies Competition in the UK is well established, ranging from simple online amateur artists’ communities and message boards to event planner corporations. The amateur performance segment is quite developed in the British English culture, with groups such as Making Music or CoMA devoted to helping amateur musicians find places to perform and get involved in the community. Additionally, Amdram is a website allowing amateur performers to advertise themselves through a profile page. This, however, is distinct from SparkGig’s product offering, positioning itself as more of a community helping amateurs than a website putting performers in touch with clients. The website was first created for actors, but has expanded to all kind of performers without a clear mission statement or differentiation. The website’s aesthetic certainly lacks clarity and comes across as chaotic. Several event planners, however, are currently targeting the professional segment of performers. Alive Network features a diverse offering of professional performers that are reviewed by the company to ensure a base level of quality. Performers decide what their fees are and can be messaged or researched on their profile page. The company then takes a percentage of the profits from each played gig. Their selling points are great quality service for their suggested price points.
  • 15. 15 Scarlett Entertainment is a global company with operations in North American and many countries throughout Europe and Asia-Pacific. Scarlett Entertainment has a team of coordinators who can work in a variety of languages and travel around the world to oversee their events. They have head offices in the US and the UK, and typically receive phone calls for information regarding international expansion and setting up branches in new markets. While they focus more broadly as “event planners”, many performers register with them to become eligible performers should any appropriate events arise. While there does seem to be a preference for professional talent, there are no barriers for amateurs, they can register as long as they provided pictures and videos of their performances. It should be noted, as well, that the Scarlett Entertainment’s website only functions in English for the many markets it serves. In summary, SparkGig would be facing competition with high quality performers in the UK, but could emphasize their relatively low cost in the market (Figure 6). Moreover, UK values amateur artists thus positioning the offer as a way to help amateurs penetrate the market would allow for differentiation. 4.3 Pricing Strategies When entering the UK, a differentiated approach to pricing is recommended due to the difference in average income levels and cost of living around large cities like London where SparkGig will likely be focused, and the additional costs that would be incurred by opening up an international office in the UK. When looking at the Purchasing Power Parity (PPP) which is worldwide method use to compare income levels in different countries, it is clear that the UK has a higher PPP than both the US and Canada so the ability to charge a higher commission is feasible in this country (World Bank, 2015). A representative example of this in the UK market is Uber’s pricing model where the average 5-km ride in London, England is $15.91USD compared to $7.53USD in Toronto, Canada (Wade, 2015). A higher level of commission will likely lead to performers charging a higher fee which will be affordable in the UK. A commission model of 10-15% rather than the current 8% may be the most effective pricing strategy which provides a balance between covering additional costs and the increased income levels in the UK, while also maintaining a low cost position so that SparkGig has the ability to gain a significant share as the digital marketplace is growing exponentially (International Trade Administration, 2015). Another important consideration with reference to setting a pricing model in the UK is that a Value Added Tax (VAT) must be be included in the retail price for online services for all countries that are in the European Union, which is 20% in the UK (GOV.UK, 2015). This means that SparkGig must incorporate this into their pricing model by either adding an additional 20% to the fee established by the artist or incorporating it into the fee set by
  • 16. 16 the artist which means that the artist will receive their set fee with the subtraction of both the commission fee set by SparkGig and a 20% VAT. 4.4 Product Modification Strategy Similar with US, SparkGig wouldn’t need to change its site structure when considering a move into the UK. In order to fit the European market’s demand, however, SparkGig would need to extend its performance category. This could include categories for opera, as an example (Figure 7). In European countries, attracting street artists in particular would be key to the success of a potential expansion, due to their popularity and sizable numbers when compared to North (World Bank, 2015). To do this, SparkGig can help these street artists advertise in street performance spots, such as subway stations, to promote local performers while also creating brand awareness for SparkGig. Alternatively, SparkGig could help these street artists by taking videos, posting this content to SparkGig’s YouTube channels, update artists’ profile and help them to raise their brand awareness through the SparkGig platform (Figure 8). 4.5 Communication Strategy Current trends in the United Kingdom with regards to communications strategy are similar to that in the United States, but with some exceptions. With the third highest number of internet users in the European Union (MVFglobal, 2015), online communications and marketing should be the main focus of SparkGig’s expansion into the UK. Search engine optimization, still the largest digital public relations initiative taken in the UK, an activity done by 53% of English firms with in-house public relations
  • 17. 17 (Sudhaman, 2015), is being overshadowed by both content creation like making videos and blogging and online reputation management which is growing at a rate of 14% year over year (Sudhaman, 2015), Content creation for SparkGig seems to be of particular relevance, offering the new service to introduce the kind of talent clients can expect from booking through the service through YouTube videos of SparkGig performances. While television proves to be an effective advertising platform in the UK, accounting for the most average screen time for the British, prices tend to begin at 685 pounds per 30 second ad, so long-term investment could be a capital drain (Thompson, 2014). With 80.4 million mobile users, however, app creation and advertising through social media such as Facebook could be a less capital-intensive alternative. 5 Expansion into the Netherlands 5.1 Market Expansion Strategy The expansion of SparkGig into the Netherlands could be achieved through entry into either Amsterdam or Rotterdam as the culture of arts and performance is pervasive in each of the cities. To establish operations in the Netherlands, SparkGig must first register their business with the Chamber of Commerce then register with the tax authorities whereby the firm will be assigned a VAT number, which SparkGig would be legally required to pay (I Amsterdam, 2016). To incorporate the business model in the Netherlands, SparkGig would be required to complete a deed of incorporation. This must be completed in Dutch and as such it is highly recommended that SparkGig work with a company, such as Expatax, that specializes in providing translation services (Tax Consultants International, 2015). Similar to the UK, physical facilities are not required to conduct business in the Netherlands however a local office is highly recommended for SparkGig to interact with foreign customers, while monitoring the quality of their services.
  • 18. 18 5.2 Competitive Evaluation and Strategies GigStarter is already established in the Netherlands with a fully translated version of their website allowing potential clients to view the profile pages of many of their artists. Secondly, Scarlett Entertainment features artists available throughout the Netherlands, but as mentioned before, there is no localization tool on the site, making this a labour-intensive process. However, the Dutch have one of the highest English speaking proficiency rates worldwide for a second language (R.L.G, 2011), meaning language in performance shouldn’t be a massive barrier for international performers. Other similar but smaller websites are available as well, such as Talent Production. Overall, the market in the Netherlands is not particularly saturated, making expansion favourable from a competition perspective (Figure 9). As a result, SparkGig’s current business model would fit the competitive landscape in the Netherlands. To maintain differentiation in this market SparkGig should emphasize their artist diversity available on the same platform, while also offering a lower price relative to Scarlett Entertainment. 5.3 Pricing Strategies A differentiated pricing approach is suggested if SparkGig wishes to enter into the Netherlands based on the overall culture of entertainment spending, the income levels and the extra costs of doing business internationally. The entertainment industry in the Netherlands is large and very competitive, in fact the Netherlands ranks in the top 5 of the most social entertainment spending countries in Europe (Dutch Daily News, 2011). In this sense, there are many places to go for entertainment and artists may have a more difficult time finding gigs as it it already a large industry. So in this sense, SparkGig can be a very valuable tool to them and a 15-20% commission rate could be feasible. The Netherlands also has a higher Purchasing Power Parity (PPP) than the US and Canada, which is worldwide method use to compare income levels in different countries, so the ability to charge a higher commission is reasonable in this country (World Bank, 2015). The higher commission price would be valuable to SparkGig as it will be costly to set up an office in the Netherlands, particularly in Amsterdam, as well as the time and monetary cost of translation of services and online communications to Dutch. In terms of any extra costs that must be considered when doing business in the Netherlands, it is also part of the European Union so a Value Added Tax (VAT) of 21% must be incorporated into their pricing model (EY, 2015). To incorporate the VAT into their pricing model, SparkGig could either add an additional 21% to the fee established by the artist or incorporate it into the fee set by the artist, so that the artist will receive their set fee with the subtraction of both the commission fee set by SparkGig and a 21% VAT.
  • 19. 19 5.4 Product Modification Strategy The Netherlands has a slight language barrier as the main language spoken is Dutch, however the Dutch people have a very strong comprehension of the English language and many popular international websites in the Netherlands feature English content. Even though the Netherlands has a fairly similar culture to Canada, the development of a local office is still recommended, in order to supervise the performers, connect with business clients, and handle the customer service issues. If this proves to be too capital-intensive, SparkGig can set up a European office to allow for more regional talent supervision and qualification. The downside of this is the hiring process would require employees to have strong communication skills and partake in frequent business trips, which could simply mean offering increased salaries, thus offsetting the advantages to regional offices. Finally, and similarly, to what is recommended for potential expansion into the UK, attracting street artists to move to SparkGig is also a key success factor for expansion into the Netherlands. In addition, for each foreign market entered, SparkGig can improve its connectivity with social media networks, since the social network feature can help SparkGig expand their market presence much faster. In addition, SparkGig should also improve its geographic search feature, to ensure users can find clients and talent closest to them. In order to do that, SparkGig may need to hire programmers who specialize in geographic locating for each specific expanded network. 5.5 Communication Strategy Television ads in the Netherlands are not a suitable communications strategy, due both to a trend of younger people watching less television than the prior generation (Bakker, P., & Vasterman, P,2010), and because of complex and often subjective TV advertising laws (Dutch Advertising Code Authority, 2011). Print media is facing a similar crisis in the Netherlands, as less than 10% of Dutch circulation is distributed through single copy sales, forcing media companies to go online, where paywalls are more prevalent (Piet Bakker, 2015). On the other hand, 90% of the entire country are active internet users, with more than half of this figure being active on social media (MVFglobal, 2015). The most common websites include Facebook, Youtube, Twitter and LinkedIn, as well as Hyves, a Dutch service more popular with Dutch users over the age of 35, a potential age range for SparkGig clients. In addition, 88.6% of the Netherlands population have been active in some form of e commerce, thanks both to a relatively low unemployment rate of 4.3% (MVFglobal, 2015) and the aforementioned high online rate, making online advertising a lucrative option for SparkGig in the Netherlands. The country currently has an estimated 21.182 million mobile users, a considerably smaller market compared to the other three countries discussed in this report, making expansion into m commerce less imperative if SparkGig were to enter the Netherlands. Finally, SparkGig could well take advantage of the Netherlands’ vibrant music festival culture, such as Solar Weekend or Pinkpop, featuring a mix of international superstars and local talent (Music Festival Wizard, 2016).
  • 20. 20 6. Expansion into Japan 6.1 Market Expansion Strategy To enter the Japanese market, it is recommended that SparkGig first establish a presence in Tokyo and later expand to the Aichi Prefectures, because of high urban density as well as these locales’ cosplay, tourism and performance school activities. As illustrated in Appendix 6, Japan ranks 81 out of 189 countries for starting a business and 53 overall for ease of conducting business, indicating that the business environment is much more complex in Japan compared to the other proposed countries. As such, it is highly recommended that SparkGig utilize the services of a company that excels in market entry for technology firms, such as Venture Japan, as entry into this market would be complex. Also, it is highly recommended that SparkGig open a local office in Japan and hire local staff to assist in dealing with the complexities that can arise from operating within the Japanese market. 6.2 Competitive Evaluation and Strategies The Japanese market could be very attractive for SparkGig as it shows a strong performance culture, through both traditional arts like music performance or more modern innovations like cosplay. GetStage is a Japanese website that would represent SparkGig’s main competition in Japan. It allows musicians, designers, DJs, dancers and photographers to build their profile page, look for gigs and participate to contests. Typically, these contests are featured on their social media pages and are positioned as great visibility opportunities for performers. Their Facebook page has 2900 “likes” and is regularly updated with original content from their blog. Clients can contact artists for parties, corporate events, birthdays or weddings. They have over 7000 artists registered, whose profiles are categorized by location, type of performance and genre.
  • 21. 21 Registration is free for artists and clients alike; moreover, there is no an additional fee or commissions. GetStage is completely free because it is more of an advertising tool for the company. It was used to develop their networks and improve their brand image, and allow them to increase profits in other event planning segments (Dreamgate, 2013). GetStage works with high-profile companies such as Universal, Hardrock Cafe, and HP. The brand is part of Gandh, a company whose purpose is to help artists through new technologies. The website primarily targets artists with a professional background starting their career, but amateurs can also register. The website is only available in Japanese, making it inaccessible to expatriates working in Japan. This is even more important as the percentage of immigrant workers in Japan increased by 49% since 2009, largely localized in Tokyo (Arnaud, 2016). There is also a high probability that immigration will continue to increase, as indicated by their shrinking native population (Yoshida, 2015). Moreover, Mangaka and Japanese traditional or cosplay artists are not part of their product offering, though it is an important part of Japanese culture. Event planner websites are also accessible in the Japanese market to hire artists, through websites such as Event Partner. The typical price point for performers, however, is about $400 US. Event 21 is another event planner with a diverse offer from event set up to hiring performers, differentiating itself by allowing users to change languages from Japanese to English. In addition, Japan has many specialized websites offering to hire more specific types of performers (such as magicians), however these are aggregated independently and are only sometimes available in English. The Japanese market could be quite attractive to SparkGig, with no identical competition with regards to market offering aside from GetStage, a company already well established in Japan (Figure 10). To succeed, SparkGig will need to focus on localizing the website with regards to language in particular, to accommodate the largest amount of clients and performers possible, as there is a real lack of options for non-Japanese speakers in this increasingly-multiethnic country. In Japan, SparkGig could differentiate through diversity of artists while emphasizing the low cost of securing a gig through the website. SparkGig could further differentiate by adding categories for traditional and cosplay artists in addition to introducing both an English and Japanese website.
  • 22. 22 6.3 Pricing Strategies When entering Japan, a differentiated pricing strategy is recommended due to cultural preferences and the higher cost of doing business in Japan due to international office expansion and fairly dynamic changes to the online platform visuals in order to best appeal to this market. In the Japanese market, there is strong competition from the online entertainment marketplace, Getstage which offers their marketplace for free to artists (Dreamgate, 2013). So in order to successfully enter the Japanese market, SparkGig must position themselves differently – perhaps as a premium cosplay- focused entertainment marketplace – in order to differentiate themselves and add value to their service over the competition. With Tokyo as a target market for the SparkGig operations, the cost of doing business is quite expensive so a commission price structure of 15-20% is necessary to ensure business is viable in Japan. With this higher price point, SparkGig would do well to market itself as a premium brand in Japan. According to research by Hofstede, Japanese consumers are more likely to be receptive to paying a higher price to avoid any uncertainty, often seeing higher price points as an indication of high quality (Hofstede, 1991). In Japan, an 8% Japanese Consumption Tax (JCT) is applicable instead of the VAT and is assessed on the supply of digital services so SparkGig would have to incorporate this into their pricing structure by either adding it as a charge on top of the fee outlined by the artist or incorporating it into the cost that is taken from the set fee of the artist (Ernest & Young, 2015). The JCT is also scheduled to increase to 10% in April 2017. 6.4 Product Modification Strategy A language barrier is the most important consideration for entering the Japanese market as 99% of 125 million people speak Japanese almost exclusively and browse websites with content only in the Japanese language (Digital River Blog Team, 2015). Although the expat and by extension, English speaking, community in Japan is growing, SparkGig would still need to open a Japanese sub site in order to attract the majority of Japanese users. 10.2% of Japanese ecommerce buyers shop from overseas websites, so the Japanese site should be highly localized, featuring for example photos with Japanese people as models. (Figure 11).
  • 23. 23 Japan has its own comic culture, called “manga” and it very popular to cosplay whereby individuals dress up as different characters from video games and manga - and SparkGig is in a prime position to capitalize on this trend. As such, the Japanese version of the website should focus more heavily on cosplay, offering this valued service to Japanese clients and increasing the site’s popularity with cosplayers in Japan (Figure 12). 6.5 Communication Strategy Japan presents an interesting opportunity for SparkGig to advertise both on and offline. With an extremely high 144.914 million mobile users and 91.1% internet penetration, advertising and communications simply must be done at least in part online (World Bank, 2015). With regards to public relations, 16% of all internet users are active on twitter, a statistic 6% higher than the US, presenting SparkGig with an opportunity to stay in contact with fans and potential clients at minimal cost (MVFglobal, 2015). Search engine optimization should work similarly as with the other countries listed above, with Google being by far the dominant search engine of the Japanese people and Baidu, the only outlier, taking a minimal .23% of the search engine market share (MVFglobal, 2015). At the same time, due to both the varied nature of the product SparkGig could capitalize on and the high population density of the country, physical advertising could prove to be extremely effective. Care should be taken, however, as the Act on Specified Commercial Transactions prohibits businesses from using high-pressure sales tactics both on and offline (DLA Piper, 2016). With regards to competition, Japan is a deeply ritualized culture who could and could interpret aggressive salesmanship as unorthodox and therefore high- pressure (Hofstede, 1991). However, if done correctly in strategic areas of Japan, such as at Tokyo’s Jingūbashi bridge, a local hub of cosplay activity and tourism, physical advertising could be highly effective (Haley, 2011). Finally, Japan’s vibrant cosplay culture should be capitalized on by SparkGig, not just through offering cosplay services on the website, but through a presence at conventions, key among which being the World Cosplay Summit in Aichi, Japan.
  • 24. 24 7. Recommendation For SparkGig’s initial international expansion, supplementing growth into the US market is easily the most convenient and cost-effective initial model for SparkGig. However, due to the high level of existing competition across the US market, the United Kingdom and the Netherlands seem to be the most attractive markets for SparkGig to expand to in its initial stages of global development. Both countries feature a low level of competition, a bustling arts and entertainment culture, strong urban densities, a high level of disposable income and many performing arts schools. This means SparkGig can find quality artists and musicians as well as consumers who would utilize the online platform to hire entertainment, connecting the online marketplace. SparkGig could maintain the same online platform with English content when expanding into both of these countries, however additions to the mapping feature as well as the currency and payment system that includes the VAT for each country will need to be integrated into the international offering. It’s also recommended that SparkGig open international offices in London and Amsterdam, in order to develop effective selling and communication initiatives, build key relationships, and to attract talent for the online marketplace. Overall, SparkGig has great potential to move into international markets successfully and this evaluation will help provide some of the key information necessary to keep in mind when expanding globally.
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  • 27. 27 Appendices Appendix 1: Mobile APP Demo Japanese Version
  • 28. 28 Appendix 2: Country Comparison: Internet Accessibility Decision Criteria Rank Country Internet B2C Internet Users Tech Adoption NRI Total 1 Sweden 26 28 28 28 110 2 Norway 24 29 27 26 106 3 UK 30 22 29 23 104 4 Netherlands 27 26 22 27 102 5 Luxembourg 12 25 30 22 89 6 Switzerland 21 20 21 25 87 7 US 29 15 15 24 83 8 Japan 28 19 11 21 79 9 Denmark 8 27 25 16 76 10 Iceland 9 30 23 12 74 11 Finland 24 20 29 73 12 Germany 18 14 18 18 68 13 Korea (Republic) 25 16 6 19 66 14 Canada 14 18 9 20 61 15 Singapore 5 24 30 59 16 New Zealand 22 12 8 14 56 17 Australia 15 13 12 15 55 18 Hong Kong SAR 4 1 26 17 48 19 United Arab Emirates 11 21 7 8 47 20 Austria 7 9 13 11 40 25 France 2 10 14 5 31 Source: (World Economic Forum, 2015) Appendix 3: Country Comparison: Household Expenditures on Culture & Tourism Country Cultural Expenditures Tourism Arrivals Weighted Results Ranking US 10 9 10 1 France 6 10 8 2 UK 9 7 8 3 Germany 7 8 8 4 Japan 8 2 5 5 Hong Kong 2 6 4 6 Korea 4 4 4 7 Netherlands 3 5 4 8 Australia 5 1 3 9 Singapore 1 3 2 10 Source: (NationMaster, 2009; World Bank, 2015)
  • 29. 29 Appendix 4: Country Comparison: GINI Coefficient Rank Country GINI Coefficient Year 1 Netherlands 28 2012 2 Denmark 29.1 2012 3 Germany 30.1 2011 4 South Korea 31.3 2007 5 Japan 32.1 2008 6 UK 32.6 2012 7 Taiwan 33.8 2012 8 Australia 34.9 2010 9 Spain 35.9 2012 10 Portugal 36 2012 11 China 37 2011 12 US 41.1 2013 13 Malaysia 46.3 2009 14 Singapore 46.4 2014 15 Hong Kong 53.7 2011 Source: (World Bank, 2015) Appendix 5: Country Comparison: Disposable Income Rank Country Household Net Adjusted Disposable Income (USD) 1 US 41,355 2 Norway 33,492 3 Switzerland 33,491 4 Australia 31,588 5 Germany 31,252 6 Austria 31,173 7 Sweden 29,185 8 France 28,799 9 Netherlands 27,888 10 UK 27,029 11 Denmark 26,491 12 Japan 26,111 13 Spain 22,104 14 Portugal 20,086 15 South Korea 19,510 Source: (World Bank, 2015)
  • 30. 30 Appendix 6: Country Comparison: Ease of Doing Business Economy Starting a Business Getting Credit Protecting Minority Investors Paying Taxes Trading Across Borders Resolving Insolvency Weighted Average Overall Country Ranking Weight Assigned 0.25 0.125 0.125 0.125 0.25 0.125 1.00 Denmark 29 28 20 12 1 9 16.13 1 Canada 3 7 6 9 44 16 16.50 2 Hong Kong 4 19 1 4 47 26 19.00 3 Singapore 10 19 1 5 41 27 19.25 4 Macedonia, FYR 2 42 14 7 26 37 19.50 5 United Kingdom 17 19 4 15 38 13 20.13 6 New Zealand 1 1 1 22 55 31 20.88 7 Korea, Rep. 23 42 8 29 31 4 23.88 8 Sweden 16 70 14 37 17 19 25.75 9 Ireland 25 28 8 6 48 20 26.00 10 Netherlands 28 79 66 26 1 11 30.00 14 United States 49 2 35 53 34 5 32.63 20 France 32 79 29 87 1 24 35.63 23 Australia 11 5 66 42 89 14 40.88 28 Germany 107 28 49 72 35 3 54.50 47 Japan 81 79 36 121 52 2 63.00 53 Bolded items represent the countries included and ranked in the decision matrix Source: (Economy Rankings, 2015)