Market Expansion of Procter and Gamble in Kazakhstan - Essay Example

An Analysis of Market Expansion of Procter and Gamble in Kazakhstan of the Table of Contents Table of Contents 2 Introduction 3 Analysis of the Product and the Company 3 Market Entry Strategies and Specific Entry Mode 4 Analysis of the New Market 5 Growth Strategy over next Five Years 6 Conclusion 8 References 9 Introduction The paper would focus on evaluating the market entry strategy that is ought to be pursued by a multinational company in its endeavor to gain potential presence in an international market. It would also tend to analyze the market potential of the international region which would help in understanding the future prospects in the region relating to the sales of a specific product. Analysis of the Product and the Company ‘Head and Shoulders’ is marketed as an effective anti-dandruff shampoo by Procter and Gamble in United States. Different variants of shampoo combined with conditioners are marketed under the brand name of ‘Head and Shoulders’ under an affordable price range of below $10 (Procter & Gamble, 2014). The products are marketed as a total solution to different hair and scalp problems and thereby act as market leaders in scalp care. Over the years from 1961 to current, ‘Head and Shoulders’ have slowly evolved as one of the best shampoos to fight perennial problems like dandruff and hair fall and also other types of scalp problems. Products marketed under the Dandruff category are further divided into three types like shampoo, conditioner and 2-in-1 for both men and women customers. Shampoos and hair products of Head and Shoulders generate a wide array of benefits to customers like generating protection to damaged and broken hair and also in making hair thicker, stronger and moist in nature (Procter & Gamble, 2014). Procter and Gamble, the company that markets Head and Shoulders operates as a multinational company in the consumer goods segment. The company aims at producing branded products that contribute in enhancing the lives of consumers along different parts of the globe. Value additions are generated in terms of innovating different product offerings to meet the changing needs of the consumers from time to time and in retailing the right quality and quantity of products to the customers (Procter & Gamble, 2014). Procter and Gamble is well known in terms of the global brands created by the company along which are marketed by the company along different consumer segments spread along 180 different countries. Current estimates related to Procter and Gamble reflect that the company through its operation baaed along 23 different brands earns the potential of generating a total sales revenue of around $10 billion. Another set of 14 brands tend to generate a total sales of around $1billion in an annual fashion. The rate of market capitalization for Procter and Gamble is evaluated to be greater than the Gross Domestic Product of a number of economies (Procter & Gamble, 2014). Market Entry Strategies and Specific Entry Mode Business organizations tend to expand both along regional and international markets through the use of a myriad number of market entry strategies. Formation of joint venture and partnership agreements with other companies operating along the like category in newer markets works as an effective market entry strategy. This market entry strategy is both cost effective in nature and contributes in helping the entering company to gain potential access to existing markets and supply chain networks. Other cost effective market entry strategies relate to the generation of licensing and franchising activities in the international markets. These market entry routes contribute in helping the entering company gain effective penetration in the new market through generating control over suppliers and markets (Tielmann, 2010). Forming of acquisitions and mergers also acts as a potential market entry strategy such that the same helps the entering company to gain access to customers, markets, suppliers and resources of the existing companies. Mergers or acquisitions as market entry strategies are observed to be costlier and riskier in nature where the new company has to counter the growth of potential challenges in the new market place. The business organizations can also focus on the development of subsidiaries or in the opening up of branches and manufacturing and sales units in the new markets. This market entry strategy also known as Greenfield Investment is observed to be the costliest in nature such that it requires the development of infrastructural facilities in the new region. Incorporation of Greenfield Investment requires the business organizations to take up potential challenges and business risks related to the new marketplace (Lymbersky, 2008). Development of franchises works as an effective market entry strategy relating to the Kazakhstan region. Franchising is identified as a new and innovative market entry strategy relating to the Kazakh market such that it helps different western business and retail organizations to gain an effective market presence in the international market. The gradual westernization of the Kazakhstan market is observed to encourage the growth of franchising opportunities in the region. Growth of demand of the franchising activities is observed develop around 300 franchisees in the region. Estimates made during 2009 reflect that on an average the franchisees tend to generate a turnover of around $500 million which reflects on the significance of the market entry method (Parshina, 2009). Analysis of the New Market Kazakhstan having gained independence from the realms of Soviet Union during 1991 has considerably developed in terms of trade and investment opportunities which in turn reflect the growth of business activities in the region. The growth of flow of foreign direct investments (FDI) in the region has largely helped in the generation of restructuring efforts along the economic and social landscape of Kazakhstan. The government of Kazakhstan through the aid of FDI is observed to develop on the technical, management and scientific know-how. This helps in considerably attracting the growth of different business sectors and organizations in the region. Geographically, Kazakhstan ranks ninth in the global landscape stretching over a large expanse of land and water bodies (CIA, 2014). During 2009 the population of the country was recorded to be around 15 million which is constituted by an ethnic mix of people belonging to different nationalities (Tugut & Lee, n.d.). The strategic location of Kazakhstan in the Eurasian region contributes in the growth of different economic enterprises and multinational organizations. In terms of economic potential, Kazakhstan operates as a significant exporter of mineral resources, natural gas and petroleum and oil products to different regions around the world. Though Kazakhstan reflects the existence of bribery and corruptive practices; the legal and political framework however encourages the growth of foreign business growth in the region. Business organizations in Kazakhstan reflect greater focus on enhancing the production volumes rather than standardizing on the product quality. Lack of potential transportation, logistics and supply chain infrastructures generates potential constraint in the growth and development of quality products. The country reflects a dearth of industries and companies to help meet its demands relating to consumer products which is taken to help in the growth of the market for Head and Shoulders in the region (The World Bank, 2014). Growth Strategy over next Five Years The growth strategy of Procter and Gamble in the Kazakhstan market for consumer goods based along a five year period ranging from 2014 to 2018 is generated as follows. The above analysis reflects that Kazakhstan would stand as a prospective market for the company in that the sales income relating to consumer products is observed to continually grow along the five year period. Similarly the growth in the flow of cash along the different periods also reflect the potential of the company in generating needed funds from the sales and marketing operations of consumer products. In overall, Kazakhstan thus stands to be a promising market for Procter and Gamble relating to consumer products like Head and Shoulders. Conclusion The analysis made reflects that Kazakhstan emerges as a potential market for the sales of Head and Shoulders by Procter and Gamble. The company in the initial period would however be required to invest in developing its transportation and supply chain potentials to help in reaching the consumer product to the customers located in remote regions. Government support and the steady westernization of the region are taken to potentially influence Procter and Gamble’s growth in the region over the years to come. References CIA. (2014). Kazakhstan . Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/print/country/countrypdf_kz.pdf Lymbersky, C. (2008). Market Entry Strategies: Text, Cases and Readings in Market Entry Management. United States : Christoph Lymbersky. Parshina, O. (2009). Franchising in Kazakhstan . Retrieved from http://www.franchise.org/uploadedFiles/Franchise_Industry/International_Development/Resources/USCS-kazakhstan.pdf Procter & Gamble. (2014). Classic Clean . Retrieved from http://www.headandshoulders.com/en-US/anti-dandruff/classic-clean Procter & Gamble. (2014). Dandruff Products. Retrieved from http://www.headandshoulders.com/en-US/anti-dandruff/ProductCollections Procter & Gamble. (2014). Heritage. Retrieved from http://www.pgbalkans.com/en_US/company/heritage.shtml Procter & Gamble. (2014). The Power of Purpose. Retrieved from http://www.pgbalkans.com/en_US/company/purpose_people/index.shtml The World Bank. (2014). Doing Business 2014. Washington DC: The World Bank. Tielmann, V. (2010). Market Entry Strategies. Netherlands : GRIN Verlag. Tugut, M., & Lee, C. Y. (n.d.). Doing Business in Kazakhstan: Opportunities, Challenges and Suggestons. Retrieved September 30, 2014, from http://www.jgbm.org/page/14%20%20Choong%20Y.%20Lee.pdf Read More