Market Entry Strategy of Companies - Essay Example

International and Global Marketing Portfolio Part Market Entry Strategy Each and every successful and leading multinational organisation is trying to implement unique and different international market entry strategy due to globalisation. McDonalds is one of the leading multination fast food producing organisations. According to an explanation of Jeannet & Hennessey (2005, p.296), McDonalds has adopted and implemented franchising market entry strategy in global business operation process to expand its business practices in emerging international markets. This part of the report will try to critically appraise franchising market entry strategy of McDonalds in emerging Indian market. 1.1 Critical Assessments India can be considered as one of the developing and emerging economies in this world. Looking into favourable business environment and growing market demand, the management of McDonalds decided to enter in India market place. The organisation has followed franchising business model in Indian market. Misra & Yadav (2009, p.26) has described that the management has decided to develop McDonald’s restaurants across the urban areas in India to capitalize on the advantages of the favourable growing market demand of McDonald’s burgers and other popular fast food items. Government of India has supported the management of McDonalds to implement business expansion strategy in Indian market as it has helped the organisation in several matters. Alain (2009, p.521) has stated that, it helped to attain economic growth rate as it helped to overcome rising unemployment rate slightly. This aspect motivated Indian government to introduce favourable business policies for organisation like McDonalds. Introduction of 100 percent profit repatriation helped McDonalds to enjoy 100 percent business profit in Indian market. However, Gareth (2010, p.65) has explained that the government has developed some environmental and employment policies for each and every business organisation. McDonalds effectively follows those policies in Indian market. The knowledge of franchisee owners about local and regional market places helped McDonalds to overcome several market entry and business operation barriers. Moreover, knowledge of franchisee owners about business policies in India helps the management of McDonalds to conduct a favourable market survey that ensures right products according to accurate market demand. In terms of disadvantages, innovation challenges are some major challenges for the franchisee model of McDonald’s in Indian market. The strategies and innovations of franchisee owners are not considered in the business operation process. Therefore Kotler (2010, p.481) has stated that, in some cases management of McDonalds has to pay for this due to limited market knowledge in India. 1.2 Influential Factors It has been mentioned earlier that India is one of the emerging and developing business markets across the globe in terms of fast food products. Day-by-day, the socio-cultural demand of burgers, wraps, sandwiches, fried chicken, French fries, salads and carbonated soft drinks are increasing among the Indians. Yip (2007, p. 267) has explained that market demand motivated and influenced the management of McDonalds to enter into the emerging Indian markets. In essence, several advantages of franchise model influenced the organisation to adopt this international market strategy. It is evident that market demand for fast food items has increased in India in last 10 years quite effectively. Therefore, Saxena (2005, p.76) has stated that, McDonalds used to offer traditional cultural food items in different countries according to the socio-cultural trend of the country. The management of the organisation thought that this franchising model will help McDonalds to offer fast food products according to the cultural trends of Indians with the help of Indians franchisee owners. For example, Big Mac Burger, Chicken Maharaja and Burger Alu Tikki are the popular McDonalds fast food items among the Indians. Srivastava & Verma (2012, p.316) has described that the knowledge about local culture and tradition of franchisee owners helped McDonald’s management to offer above mentioned products that helped the organisation to maintain competitive edge in the potential and competitive Indian market. Moreover, the organisational work culture of India significantly differs from America. Therefore, the knowledge about the regional and local work culture of franchisee owners helped McDonalds to develop a potential and strong workforce in India. These things influenced McDonalds to adopt and implement franchisee business operation model in India. 1.3 Possible Future Strategies to Penetrate the Market and gain benefit in India in future McDonalds can implement several unique marketing strategies to penetrate emerging Indian market. It is true that the demand of fast food product items is increasing significantly among the Indians. By the same token, the market is highly competitive as several leading organisations are operating within it. Hence, the organisation should focus on social media advertising strategy and cost leadership business level strategy. Number of social media users is significantly increasing in India. Fawzy & Dworski (2010, p.149) has argued that, it will be effective in future if the management of the organisation continue to follow this strategy as it will help to target consumers at a mass level in India. As such, implementation of cost leadership business level strategy will help McDonalds to reduce its overall business operation cost. Therefore, Sidhpuria (2009, p.20) has stated that, it will help the organisation to help McDonalds to sell its products at economic price level that can back affected purchasing power of Indians due to recent global economic crunch. Overall, these two strategies will enhance effective brand awareness and market competitiveness. These will automatically penetrate the Indian market. Nargundkar (2010, p.331) has accepted and mentioned that, India is an effective market to enter for McDonalds comparing to the other countries as India is second largest consumer market in this world right after China. Further, globalisation and technological advancement can help McDonalds to attain essential technological other resources. In addition, India is enriched with business resources. Favourable social demand and political environment can ensure positive business growth rate of McDonalds in near future. Thus, it will help McDonalds to gain positive business growth rate in Indian market in future. References Alain, A. (2009). Economics A level student book. New Jersey, NJ: Pearson, 521. Fawzy, L., & Dworski, L. (2010). Emerging business online. New York, NY: FT Press, 149. Gareth, J. (2010). Organizational theory, design, and change. New Jersey, NJ: Pearson, 65. Jeannet, J., & Hennessey, H. D. (2005). Global marketing strategy. New York, NY: Dreamtech, 296. Kotler, P. (2010). Principles of marketing: A South Asian perspective. New Jersey, NJ: Pearson, 481. Misra, S., & Yadav, K. P. (2009). International business. New Delhi: PHI Learnings, 26. Nargundkar, R. (2010). Services marketing 3E. New York, NY: McGraw-Hill. Press, 331. Saxena, R. (2005). Marketing management. New York, NY: McGraw-Hill, 76. Sidhpuria, V. M. (2009). Retail franchising. New York, NY: McGraw-Hill, 20. Srivastava, M. R., & Verma, S. (2012). Strategic management: Concepts, skills and practices. London: PHI Learning, 316. Yip, G. (2007). The Asian advantage. London: Basic Books, 267. Portfolio Part 2- Contemporary International Marketing Issue In fact, the population growth rate in urban areas across the world is increasing significantly and quite impressively. Several possible factors are behind these aspects, such as job opportunity, better access to public services and better life styles. These aspects also have motivated several leading multinational and domestic organisations to enter into the potential global markets. However, several international and domestic marketers are trying to focus on emerging consumer market places across the globe rather than already developed and saturated market place. Several emerging markets, such as India, China, South Africa and Brazil are the major business growth drivers for several leading multinational organisations, such as KFC, McDonald’s, The Coca Cola Company, PepsiCo and others. However, Doole & Lowe (2008, p.8) has discussed that, demand for these goods among largest consumer markets is influencing these organisations to adopt and implement business expansion strategy in new emerging and potential market places. 2.1 Issues in Emerging Markets Indeed, several leading multinational organisations have to face different types of trade obstacles in case of market entry into global emerging markets. Wal-Mart is one of the leading multinational retail chains that have business presence in several developing and developed countries. This organisation is also eying for several new potential emerging market places in order to maximize business profit. Underdeveloped technology, high income inequalities, low per capita income, growing population, growing market demand for outside goods or services and diminishing business obstacles are the characteristics of emerging markets. Generally, the government of emerging and developing countries support the leading multinational organisations to enter into the market place in order to overcome several national challenges, such as destabilise growth rate, rising unemployment rate and fluctuating GDP growth rate. However, coming back to Wal-Mart, this global retail giant decided to enter into the emerging Indian market joint venturing with Indian Bharti Group. Bharti Group is one of the leading India based multinational group of companies. A report (Wharton, 2013, p.1) has mentioned that, several political issues and vote against FDI de-motivated the management of Wal-Mart to change their decision regarding entry into the emerging Indian markets. Accordingly, several leading multinational organisations, except Wal-Mart, are facing several issues in emerging markets. Communication and distribution challenges are the major issues that have significant presence in emerging markets. For example, Duiker & Spielvogel (2010, p.759) have stated that, McDonalds faced huge problem initially in the Chinese market due to inadequate health consequences of fast food consumption. Chinese market can be considered as one of the leading and largest consumer markets across the globe. Lack of knowledge in English language of Chinese people made it difficult for the management of McDonalds to present promotional messages to the consumers. Eventually, it affected the sales growth rate of McDonalds in Chinese market. Miller (2000, p.224) has argued that, it is the inadequate market research and poor marketing practices that have impacted the business performance of McDonalds in Chinese market. Hodgetts (2005, p.32) has stated that, language differences can create huge problem for the multinational organisations in emerging market places. According to Cornelissen (2011, p.15), availability of sufficient media platforms can be considered as other marketing challenges for the multinational organisations in emerging market places across the globe. China is one of the leading consumer markets. Therefore, several organisations tend to use the potentiality and emergence of this Chinese market in order to ensure high global market share growth rate. Social media promotional activity has become one of the important marketing activities for organisation that can enhance effective brand awareness among the target customers. Chinese government has restricted several social media networking sites. YouTube can be considered as one of the leading social media websites that can help people to learn about current affairs that are happening across the world. Most importantly, several organisations do use You Tube as major social media networking platforms to create brand awareness. O’Guinn, Allen & Semenik (2014, p.73) has stated that, lack of access to You Tube creates difficulty for the global organisation in Chinese market. The internet censorship in China affects the brand awareness aspect of several organisations. This can be considered as a significant example of market challenge that faced by several multinational organisations in Chinese market place. Christian & Gereffi (2010, p.443) has discussed that, distribution challenges can be considered as other significant marketing challenges for the multinational organisations in international markets. Many small shops are the characteristics of the emerging nations in which small and medium entrepreneurs used to run their business operation activities through small shops. These small shops already have developed own distributing and marketing channels throughout the years. Moreover, it is quite easy for them to operate with the local and regional distribution channel due to language and cultural proficiency. Therefore, it is quite difficult for several multinational organisations to develop new distribution channel. Fernando (2009, pp.5-16) has stated that, Coca Cola Company is one of the leading soft drink manufacturing and distributing organisations in this world. Today, the organisation has business operation presence in several developed and developing countries. Moreover, the organisation is still trying to focus on several emerging global market places to expand its business operation practices. 2.2 Examples of MNCs facing Issues Initially, the Coca Cola Company faced several issues in emerging markets, such as India regarding the distribution channel. Slowly and gradually, the management of the Coca Cola Company realised and understood the seriousness of the problem. Soon after the management of the organisation adopted and implemented a unique business strategy to boost the sales growth rate of Coca Cola soft drinks. In 1980s, Thumbs Up dominated the India soft drink market. The organisation already had developed a potential distribution channel and huge customer base. At that point of time, Coca Cola was operating as a market challenger in Indian market. However, Kumar (2011, p.106) have mentioned that, the organisation tried to acquire Thumbs Up in order to avail the developed client base and distribution channel of Thumbs Up. Soon after, Coca Cola Company successfully acquired Thumbs Up and started to sell the soft drink products under the brand name of the Coca Cola Company. However, this process boost the sales growth rate of Coca Cola too as the management of the organisation successfully attained an established distribution channel, marketing channel and potential client base for Coca Cola and other brand portfolios of Coca Cola Company. This strategy can be considered as unique marketing strategy adopted by the Coca Cola Company in emerging Indian market. Looking into the significance of this strategy, several leading multinational brands, such as P&G. HUL and PepsiCo followed this strategy. Most importantly, all these organisations have become successful by adopting and implementing this strategy. Generally, multinational organisations use pull marketing strategy and push marketing strategy in emerging markets. There are several advantages of both these marketing strategies to ensure business growth rate. In terms of new emerging market places, several multinational organisations use push marketing strategy as it is both time and cost effective. Aggressive pricing and promotional strategy, such as direct sales and discounting pricing strategy can be considered as push marketing strategies. These have several negative aspects. In emerging markets, these are several well-known and potential SMEs that already have developed a potential customer base. Despite, the affordable, durable and functional products, it is important for each and every MNC to determine the market trend. It will help MNCs to enter into an emerging market successfully. With respect to the views of Keillor (2007, p.39), it will be effective for a multinational organisation if they use pull strategy. Although it is time and cost consuming, but it will help the organisation to ensure mass marketing for the products and services respectively. References Christian, M., & Gereffi, G. (2010). The marketing and distribution of Fast Food. [PDF]. Retrieved from: < http://www.cggc.duke.edu/pdfs/GlobalHealth/2010-09-03_Christian_Gereffi_The_marketing_distribution_of_fast_food_Ch30.pdf>, 443. Cornelissen, J. (2011). Corporate communication. London: Sage, 15. Doole, I., & Lowe, R. (2008). International marketing strategy. [PDF]. Retrieved from: . Stamford: Cengage Learning, 8. Duiker, W., & Spielvogel, J. (2010). The essential world history. Stamford: Cengage Learning, 759. Fernando, C. A. (2009). Business ethics. New Jersey, NJ: Pearson, 5-16. Hodgetts, L. (2005). International management: Culture. New York, NY: McGraw-Hill, 32. Keillor, B. D. (2007). Marketing in the 21st Century. London: Greenwood Publishing, 39. Kumar, R. (2011). Merger and Acquisition. New York, NY: McGraw-Hill, 106. Miller, R. R. (2000). Doing business in newly privatized markets. London: Greenwood Publishing, 224. O’Guinn, T., Allen, C., & Semenik, R. (2014). Advertising and integrated brand promotion. Stamford: Cengage Learning, 73. Wharton. (2013). The Bharti-Walmart breakup: Where does FDI in India go next?. [Online]. Retrieved from: < http://knowledge.wharton.upenn.edu/article/bharti-walmart-breakup-fdi-india-go/>, 1. Read More