Degree of Marketing Activities and Involvement MNCs - Coursework Example

Global Market Entry Strategies AFFILIATION: Introduction to Global Marketing In order to have amuch wider access to customers worldwide, most of the Multinational Corporations (MNCs) are doing expansion at an accelerating rate. The primary purpose of these MNCs is to expand their reach internationally while carrying their brands and products to the markets that are new and diverse; most of the markets are emerging ones as they have a lot of opportunities for MNCs (Hollensen, 2007). As an organisation’s aim is to enhance its growth, it needs to customise its strategies that are compatible with the local product; the companies have to develop an attractive and appealing portfolio of brands that will ensure that they are successful in their targeted market (Meyer & Tran, 2006). When a company is planning to enter into a global market, it has to ensure that it designs a strategy specifically for the international market so that it can enter in an appropriate and strategic way. However, the strategies have to be assisted with required factors and sources in terms of people/labour, resources, finances availability, government support and regulations compliance law; the foreign entrants will have to select the entry mode that will ensure that the target market is provided the right mix of products and services (Wu & Zhao, 2007). Any organisation that is considering the option of entering foreign market will have to critically evaluate all the factors that can impact its business operations. Any organisation that does not develop a separate global strategy for entering any of the international markets has to encounter various challenges especially the market acceptability of the company’s offerings and promoting the brand according to the target market’s preferred mediums so that it can get the mind share of the customers (Leelapanyalert & Ghauri, 2007). When McDonald’s entered Asian countries with the same strategy that it was following in the Western world, it had to face huge problems as the fast-food concept in Asian countries is totally different from that in Western countries. Hence, McDonald’s had to change its global strategy so that it was able to attract the customers and retain them by offering them the value added services that are desired by them. Therefore, the foreign entrants will have to develop their operational capabilities in accordance to the particular context so that the resources are complemented with the requirements of the firm to meet the demands of the target market. Factors that will have to be considered for entering the market All firms that are planning for internationalisation will have to decide about the best mode of entry for the respective market; it is important to make the most efficient use of the resources so that they are able to earn good amount of revenue stream. According to London and Hart (2006), the globalisation has compelled the businesses to explore the opportunities that are available in the international market; every size of organisation whether small or large needs to do careful analysis of the market that it is planning to enter along with its own capabilities. It is vital for the firms to ensure that they develop an adequate understanding about the relevant market context in term of the destination’s economic, political and social institutions so that they have an insight about the feasibility of doing business in the market (Tielman, 2010). Along with the macro environmental factors, there are some micro aspects that need to be taken into account as well such as geography, culture, history, lifestyle, demographic and psychographic factors of the market so that the global strategy developed can be implemented successfully and effectively (Parker, 2005). When an organisation wants to enter a foreign market, it will have to ensure that it has the latest information about the country’s business environment such as policies of government, financial institutions, political systems and economic data so that the strategy is developed in accordance with the most recent and up-to-date information about the target market (Jeannet & Hennessey, 2004). Broadly, there are various modes of entrance into the foreign market; every small and large organisation needs to evaluate the positive and negative aspects so that they can make the final decision wisely and appropriately (Taylor, 2011). In order to select the right entry mode for correct implementation of the global strategy, an organisation will have to do proper research and analysis of the target market so that it has complete awareness about the context that it is planning to enter. It has been found by Keegan and Green (2008) that the organisations which perceive to target homogenous market cannot be as successful in their global strategy as compared to those that design separate strategies for each of the heterogeneous market so that they offer the right brand portfolio to the customers. Once the entry mode is decided, the organisation will have to select the degree of its marketing activities, involvement, commitment and objectives that will be attained in the international market. Hence, the entry mode should be selected after studying and doing analysis of the potential of market and strengths and capabilities of the company. When entering into diverse markets, the business people and marketing people of the company will have to ensure that they are prepared in dealing with various food, language, communication styles and dress problems that will be faced in the foreign markets (Bradly, 2005). Entry modes/strategies for global strategy implementation According to Keegan and Green (2008), the mode of entry into a market of international level is the channel used by an organisation that wants to start its operations in a foreign market to gain entrance into that specific market. The selection of the entry mode is a crucial determinant of the smooth functioning of a company in its international market. Hence, the final decision made by the firm on entering any of foreign markets can have drastic affect on its end results especially profitability (Zekiri & Angelova, 2011). The five entry strategies available for the businesses to enter international markets are: 1. Exporting 2. Franchising 3. Licensing 4. Foreign Direct Investment 5. Strategic Alliances/Joint Venture Exporting Exporting is defined as the directly selling and marketing of goods that are produced in the home country in other country; it is the traditional and well-known way of reaching the foreign markets (Zekiri & Angelova, 2011). The company does not need to make any investment in the foreign country as exporting does not mandate goods to be produced in the targeted country. In exporting, coordination among four players is the most important aspect i.e. exporter, government, transport provider and importer. The primary advantages of exporting are that the firms doing initial investments have capital available to do expansion, reaching the customers is fast and easy, there is complete control over the products and production process and a lot of experience is gained by the professionals about the market as the managers and employees are given the opportunity of enhancing their knowledge about the particular context of the market (Wu & Zhao, 2007). In exporting mode of entry, the potential disadvantages are that the trade barrier costs may be too high such as quotas and tariffs, increasing cost of transportation, inefficiency is responding to the needs and wants of customers and economies of location may be lost (Taylor, 2011). Hence, exporting is an ideal option for those locations where the trade barrier is comparatively low, the home location has various cost advantages and standardised products can be offered. Exporting will not be applicable for the products that are of premium quality as a company will have to bear heavy cost for in acceptance by the target market (Taylor, 2011). Franchising One of the fastest growing market entry strategies is licensing and it is the most viable option for those companies that have a specific brand name and reputation in the market; it has become so popular because of an increase in the usage of Internet. It is a highly recommended strategy for only those companies that have a strong brand name; it is not a good option for small companies as it is difficult for them to ensure compliance with the laws of the country in which they are willing to do franchising (Tileman, 2010). According to Taylor (2011), the advantages of franchising are that the business risk is dispersed, relatively low cost for entering any new market and can do easy capitalisation on the Key Success Factors of the partner. However, the negative points of franchising are that it can create competition in the market and the company has little control on the business operations. Almost all the top-ranked and leading brands are following this market entry strategy that has helped them in maintaining their positive image in the respective markets. Licensing Licensing is among the most popular and frequently used market entry mode as it allows diversification of risk and ensures that the market will respond properly. According to Keegan and Green (2008), the license agreement is basically an arrangement by a business in which a licensor uses its monopoly position along with rights such as Trademark, Patent, Copyright or design which is an exclusive right given to it for protection from any kind of exploitation by any other company or competitor; it protects the company’s offerings from getting copied. A fee amount is paid by the licensee to get the complete rights for using a particular property that is intangible or is given assistance for technical capabilities. In terms of advantages of using licensing as a market entry mode are that the businesses have to incur low initial investment cost, any kind of trade barriers are completely avoided, location economies of scale can be utilized fully, easy and quick access to information and data about the local market and response to the changing consumer’s needs is instant. Some of the disadvantages of the licensing are that companies have difficulty in transference of tacit knowledge such as transfer outcome monitoring and negotiation for transferring price and there are chances that the licensee becomes the competitor in future. It is an ideal entry mode in those markets where knowledge can be transferred, property rights regime is strong and there is location advantage for the firm as well. Foreign Direct Investments Foreign Direct Investment (FDI) is the best option available for the companies that are looking for market entry mode that will allow them to bear minimum amount of risk. FDI has two versions; one is when a company buys a local firm in the foreign market and other option is to start the business from scratch by establishing the entire set up of a factory or office in the new market (Taylor, 2011). The advantages of FDI are that the organisation has complete control over the local firm’s operations, investment is done by the company and there is a greater return expected from the investment. However, some of the disadvantages of FDI are that the company has to bear a high financial risk and its operations can get severely impacted by the changes in government policies, rules and regulations, political conditions and economic aspects (Wu & Zhao, 2007). Hence, FDI is the best option for that company that has adequate amount of capital for investment purposes and also has detailed information about the market in which it is planning to enter. Strategic Alliances/Joint Venture A joint venture or strategic alliance is an agreement in which two parties agree to work together for a particular project or expand operations in new or existing market. The primary objective of a strategic alliance or joint venture is to allow an organisation to enter into a new market easily while minimizing the risk of loss (Bradly, 2005). It also allows the firms to share their resources and capitalize on the strengths so that they can offer the best range of products and services to their customers. The advantages of this market entry mode are that the firms will have easy access to knowledge about the local market or new market for entry purpose, the performance incentives are available for both particles, proper control on the business operations and employees are offered a compensation package in accordance with the market so that overpayment is avoided. The major disadvantages of this entry mode are that the proprietary knowledge can be lost, partners can have many conflicts, neither partner has complete control nor entire set of performance incentives (Tielman, 2011). Hence, it is the best option for those companies when both firms have effective mechanisms for measuring the inputs and considerable mutual benefits are expected in long-run. Conclusion When considering the market entry modes for global strategy, an international business will have to ensure that it selects the entry mode that is compatible to the factors that can impact its business operations. It is vital to select the best market entry strategy so that it can sustain its business in the new market and be successful in the target market. Every small company should also make sure that it conducts proper analysis of the target market so that it is able to capture its target market effectively. In order to select the best entry mode in a market, the key factors that need to be considered by an international organisation are degree of expertise in the international market, potential of acceptance and good response in the target market, labour force availability, willingness of managers to make good contribution in the development of a right global strategy and availability of resources that can be committed in the respective market. Hence, when the analysis and evaluation of the market is done effectively by using right methods, the market entry mode selected in the ideal one for the success of a company in an international market. References Bradly, F., 2005. International Marketing Strategy. 5th ed. Harlow, UK: Prentice Hall. Hollensen, S., 2007. Global Marketing: A Decision-Oriented Approach. 4th ed. London: Pearson Education Jeannet, J. and Hennessey, H.D., 2004. Global Marketing Strategies. 6th ed. Boston: Houghton Mifflin Keegan, W.J. and Green, M.C., 2008. 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Entry modes for international markets: Case study of Huawei: A Chinese Technology Enterprise. International Review of Business Research Papers, 3(1), pp. 183-196. Zekiri, J. and Angelova, B., 2011. Factors that influence entry mode choice in foreign markets. European Journal of Social Sciences, 22(4), pp. 572-584. Read More