International Marketing - Essay Example

? International Marketing Table of Contents Introduction 3 Discussion 4 PEST Analysis 4 Porter’s Five Force analysis 6 Entry Strategy for Magnit 8 Entry Strategy for Cityline 11 Conclusion 13 References 14 Introduction Global business environment is becoming highly competitive as several organizations are trying to implement unique strategies in business process in order to achieve competitive advantages. Globalization, technological advancements and demand for a particular product in international market is influencing several domestic organizations to expand their business operations in global market place. Domestic organizations generally adopt global expansion strategy in order to maximize business profit, achieve significant market share growth and develop a potential global client base. This essay will recommend and develop an entry strategy for two domestic brands in Russia. These two organizations are Magnit and Cityline. The organizations do not have global presence. They are used to operate in different industries across Russian market. Cityline is one of the leading internet service providers across Russia. The organization used to provide internet services to both business houses and individuals. On the other hand, Magnit is one of the leading retail chains in Russia. The organization used to provide consumer goods for the target customers. These two organizations are trying to expand their business operations in global market place in order to achieve several competitive advantages. In addition to this, strong global presence can help the organizations to gain more customer preference in both international and domestic country. The organizations are going to enter in the emerging Indian market. Demand for consumer goods in branded retail chains is increasing significantly among the target customers. This strategy will help Magnit to enter in India and introduce products according to the customers’ preferences. On the other hand, business environment in India is becoming highly competitive as several leading MNCs and domestic companies in India are implementing advanced technologies in order to achieve competitive advantages. The product offerings of Magnit will relate to B2C exchanges. On the other hand, internet service offering of Cityline will relate to B2B exchange as the organization is going to target the business entities in India as their major clients. This essay will conduct an internal and external environment analysis to develop effective business entry strategies. Discussion Magnit and Cityline operate within different industries. It is highly important for the organizations to determine the external environmental opportunities and threats before developing the market entry strategy. Following PEST and Porter’s five Force analyses will help the organizations to determine key external environmental opportunities and threats. PEST Analysis PEST analysis helps an organization to determine the overall impact of external environmental factors on the business performance of the organization. Political India is a politically stable country. The government of India is influencing several international organizations to enter in the Indian market. As the entry of foreign players can overcome several economic and social challenges, government can support the organizations. First of all, the market entry of two organizations can somehow help the nation to overcome challenges like rising unemployment rate. Employment generation will help the people of country to betterment their lifestyles (Shan, 1991, pp.12-15). Looking into these aspects, it can be stated that the political environment is favourable for Magnit retail chain and Cityline internet service provider. Economical India is economically developing country. Purchasing power and disposable income of people are growing at a significant rate on yearly basis. It is true that India has achieved significant growth rate during the period of recent global economic recession and financial crisis. These favourable economic factors can help the organizations to develop effective entry strategy for Indian Market. Social Demand for diversified and differentiated consumer goods is significantly increasing among the Indians. Now-a-days, the purchasing behaviour of Indians is changing quite dramatically. People are trying to shift from small departmental stores to large retail chains due to several advantages. This favourable aspect can motivate Magnit to enter in India. On the other hand, the demand for high speed and low cost commercial internet service is increasing among the business enterprises. This high demand for the commercial internet services can influence Cityline to enter in Indian market. Technological India is technologically developed country. Several organizations in India are trying to implement advanced technology in the business processes to bring efficiency in the business operations. Magnit can get required advanced technological resources in Indian market that can help the organization to ensure effective supply chain management process (Boldgett, 1992, pp.10-12). Cityline needs advanced information technological resources in order to provide high speed internet services. However, Indian internet providing industry is achieving significant growth rate due to availability of advanced information technological resources. These favourable aspects can motivate Magnit and Cityline to enter in Indian market. Porter’s Five Force analysis Porter’s five force analysis is an important marketing strategic analytical tool that helps an organization to determine the industry’s competitive opportunities and threats. Buyers’ Bargaining Power Threat of buyers’ bargaining power is quite high for both the organizations. Indians try to consume high quality products and services in economic pricing. Moreover, both the internet service providing and retail industry is India is highly competitive, several organizations are trying to implement competitive pricing strategy for the products and services in order to develop potential target customer base. Therefore, it is important for Magnit and Cityline to consider economic pricing to reduce the level of threat of high buyers’ barraging power. Suppliers’ bargaining Power Threat of suppliers’ bargaining power is quite low for the organizations due to availability of large number of suppliers in India for different product and service resources. Magnit can have the access to cost effective supply chain network as significant availability of suppliers can motivate the organization to shift towards different cost effective supply chain network (Kogut, 1991, p.4). Same thing can be considered for Cityline as the organization can get effective resources in low supply chain cost. Threat of Substitutes Threat of substitute is low for the organizations. It is true that demand for consumption of consumer goods in a large retail chain can help Magnit to increase its number of retail stores in Indian market. On the other hand, Cityline is focusing on B2B business model. The organization will provide internet services to several business organizations. For both these organizations, threat of substitute products and services is low. Threat of New Entrants Threat of new entrants is also low for Magnit and Cityline as the new organizations have to face several entry barriers, such as legal barriers, high business operation cost and huge requirement of start-up capital that can make it difficult for the organizations to enter in the competitive market place. Degree of Industry Rivalry Degree of industry rivalry is quite high for Magnit and Cityline. Retail chain and internet service providing industry is becoming g highly competitive as several leading MNCs and domestic organizations are operating within the industries. Reliance Fresh, Big Bazaar and Spencer’s are the major competitors of Magnit. On the other hand, Vodafone, Airtel, Tata Communication and Reliance communication are the major competitors of Cityline. All of the mentioned organizations have a strong client or customer base. In addition to this, each and every organization is implementing advanced technology in the business operations in order to achieve significant sales and market share growth rate (Geringer, 1991, p.12). Entry Strategy for Magnit Magnit is one of the leading retail chains of Russia. The organization is trying to enter in the potential Indian market in order to maximize the business profit. It is important for the organization to determine appropriate market entry mode strategies in order to develop a market entry strategy for Indian market. There are different types of entry mode strategies that can help the organization to select an appropriate one for Indian market. Exporting, licensing, franchising, wholly owned subsidiaries, turnkey projects and joint ventures are the different types of entry modes. Exporting can be categorized into two types, such as direct and indirect exports. Direct exports represents the fundamental exporting mode adopted by a holding company, capitalizing on the opportunities of economies of scale in manufacturing focusing on the home country and affording significant control over the distribution networks (Park and Ungson, 1997, p.12). On the other hand indirect exporting is a particular exporting process in domestic markets based on several key export intermediaries. In this case, the exporter has limited control over the products in international markets. An international licensing agreement used to allow the international organizations to manufacture products of a proprietor for a permanent term in a particular market. A licensor in the home country can make limited resources or rights to a specific licensee in a particular host country. Franchising is an effective international market entry mode. Franchising system can be defined as the system in which several semi-independent business entrepreneurs or the franchisees used to pay royalties and fees to a franchiser or a parent company as the franchisees use the trademark of a franchiser to sale its products or services. In franchisee model, the franchisers influence the franchisees to use the business format and system of the parent companies. Turnkey project is also considered as an important foreign market entry mode. Turnkey project is considered as a project in which the clients used to pay the contractors to develop, design and construct train personnel and new facilities (Koh and Venkataraman, 1991, p.9). It is considered as an effective way for an international organization to exports its technologies and processes to different countries by developing a plant in that specific country. Several industrial organizations that specialize in the complex manufacturing technologies generally use turnkey projects as the foreign market entry strategy. Wholly owned subsidiary is also an effective foreign market entry strategy. This wholly owned subsidiary strategy can be categorized into two parts, such as acquisition and Greenfield investment (Park and Russo, 1996, p.17). Acquisition is the most popular mode of foreign market entry due to several key advantages and its quick access. This particular strategy offers the largest, fastest and most important initial global expansion of an organization. On the other hand, Greenfield investment can be defined as the establishment of a new wholly owned subsidiary. This strategy is costly and complex to implement. Joint venture is the most popular and effective foreign market entry mode strategy. There are five different objectives in a joint venture foreign market entry mode strategy. These objectives are reward or risk sharing, market entry, technology sharing, conforming to developed several government regulations and joint product development (Hennat, 1991, p.7). Effective political connections and effective access to an efficient distribution channel are the major advantages of joint venture. Looking into different characteristics of each and every foreign market entry mode strategy, it can be stated the Magnit should adopt joint venture entry mode strategy for foreign market. It is discussed earlier that the Indian retail chain industry is becoming highly competitive due to presence of several leading domestics organizations. In addition to this, organizations like Walmart and Tesco prefer Indian market due to emergence market growth rate and increase in demand of the people. Initially Magnit can face huge entry barriers if the organization decides to follow different market entry mode strategy (Yan and Gray, 1994, p.15). It is important for a domestic organization to manage huge business start up cost in international market due to several reasons. The organization needs to develop stores, gather business operation resources and market the products with the help of effective promotional strategy. Looking into these aspects, it can be stated that the organization requires huge capital to enter in India and start business operation individually in India. However, it is better to consider joint venture as foreign market entry mode strategy as it will help the organization to reduce business operation cost in India comparing to other entry strategies that are mentioned in this study (Tsang, 2002, p.10). Business of any size can adopt joint venture foreign market entry mode strategy. It will help Magnit to maintain strong and long term relationship with the venture that can help the organization in several ways. It will help Magnit to achieve fast market share and sales growth rate in Indian market. High productivity, business operation cost reduction and high maximized business profit is the major objectives of joint venture. If Magnit decides to make a joint venture with a large Indian retail chain then the organization can get required business operation resources in quick time and low operating prices. In addition to this, Magnit can use the distribution and supply chain network in India. It will help the organization to reduce supply chain management time and cost. In addition to this, the organization can arrange require start up capital in Indian market from the venture that can help the organization to reduce the business risk. The production and distribution capacity will also get increased through this strategy. It is true that Magnit is a retail chain organization. It is also important for a retail chain organization that is focusing on business to customer business model to ensure effective distribution and supply chain management. On the other hand, the organization can use the existing promotion agents of the ventures in order to create brand awareness among the target customers in India. Sharing risks and costs with the venture will help Magnit to reduce business costs or loses in economic downfall or other types of distressed situation. Technological resources and skilled employees are also considered as major business growth drivers for the retail chain organizations. Availability of skilled employees and access to the technological resources of ventures can help the organization to ensure high profit margin. Entry Strategy for Cityline Cityline is one of the leading and popular internet service providers in Russia. The organization is entering in Indian market and will follow a B2B business operation model. The organization is trying to provide internet services to several business organizations. In addition to this, the organization is targeting both urban and semi urban market to develop a strong client base in India. Cityline should follow franchising foreign market entry system in India (Hing, 1995, p.23). It is true that business culture and tradition used to vary from a country to different country. In B2B business, model it is important for an organization to maintain a strong relationship with the business clients by ensuring effective customer service. Internet service provider industry is achieving high growth rate in recent days in India. The number of industries and companies are growing at a significant growth rate in the urban and sub-urban areas of India (Lusch, 1976, p.23). Franchising market entry model will help Cityline to make a strong relationship with the business clients in different areas through the franchisees. Cityline has to face low political issues as the franchisees or the independent business owners used to take care of and resolve the issues. It is important for the business owners to pay a lump sum amount to the franchisor as franchisee fee (Jambulingam and Nevin, 1999, p.21). In addition to this, the business owners have to pay the royalties to the franchisers in order to get the rights to run a franchisee. It will help the organization to reduce the business operation cost as the maximum costs can be covered with the help of franchisee fees. This strategy also can help the organizations to allow simultaneous business operation expansion into new different Indian regions. The business culture in India is totally different from other countries. Customers or clients always demand effective customer service; otherwise they can shift to other organizations (Knight, 1986, p.6). It is true that several organizations within this internet service providing industry is trying to develop unique business strategies in order to gain potential competitive advantages. In this competitive situation, it will be effective for Cityline if they consider franchising model. The franchisee owners are always familiar with the needs and culture of the customers. It will help the organization to develop a potential client base. It is important to maintain organizational and corporate culture in different countries. But, it is also important to maintain business operation processes according to the needs of customers. The franchisee owners can help the organization to determine the prospect of market and needs of target customers, this strategy can help the franchisers to develop business or marketing strategies (Morrison, 1996, p.9). Looking into the above aspects, the business nature of Cityline and the environment of country it will be effective if the organization adopts franchising models in its market entry strategy. Conclusion Magnit and Cityline are the Russian organizations that do not have any kind of international presence. Huge popularity and high market share in Russia influenced these two organizations to decide to go for global expansion strategy. Magnit is one of the leading retail chains in Russia. On the other hand, Cityline is one of the largest internet service providers in Russia. Magnit is trying to target potential target customers in India as it is true that the demand for consumption of consumer goods in the retail chain has increased significantly among the target customers. On the other hand, Cityline is trying to follow B2B business model as the organization is trying to target the business units and organizations to provide high speed internet prices in competitive package prices. It is clear from above discussion that both the organizations can capitalize on several favourable external environmental opportunities. The external threats are quite minimal for both organizations. It is important for both of these organizations to develop an effective market entry strategy as the future performance in India is highly depending upon the developed market entry strategy. It is important for Magnit to follow Joint Venture Model in Indian market as it will help the organization in initial stages. The associated venture will help Magnit to get required business capital and operation resources in low cost. On the other hand, it will be effective for Cityline to follow Franchisee business model as it will help the organization to reduce initial political risks and high operation cost. The franchisee owners will help the parent company or franchiser or Cityline to develop effective customer base. References Blodgett, L., 1992. Research notes and communications factors in the instability of international joint ventures: an event history analysis. Strategic management Journal, 12(1), pp. 10-12. Geringer, J., 1991. Strategic determinants of partner selection criteria in international joint ventures. Journal of International Business Studies, 15(1), p.12. Hennart, J., 1991. The transaction costs theory of joint ventures: An empirical study of Japanese subsidiaries in the United States. Management science, 8(1), p.7. Hing, N., 1995. 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