Retailing in Foreign Markets
Foreign Market Strategies and Operations
Research Topic: Choosing an appropriate foreign market strategy
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Foreign market strategies refer to the ways of operating in which foreign markets as used by international organizations. Expansion is one of the areas that businesses usually focus on when they want to increase their financial base as well as profits. Businesses enterprises will therefore need to plan and forecast better if they intend to out do their competitors and become the best in the field. The purpose of this research is to determine the importance of formulating effective marketing and operational strategies and how enhance the performance of an organization.
The objective of this research is to analyze various factors and to determine the key factors that determine the success of companies both in the short-term and long-term. Effective marketing strategies can influence business operations. The results are important for strategic planning to be used by those businesses that wish to expand globally. The paper will thus discuss the factors that need to be taken into consideration by companies that want to expand globally.
Company performance is influenced by various things which may include policies within the form and those of the industry, the role played by the top managers, the business environment particularly competition, and marketing strategies, among other things. Studies have shown that marketing plays a central role in the success of any business especially when they are faced with competition (held et al, 1999, 193). In the past, international trade took place when neighboring states and countries used to exchange resources but it came to be practiced more after the WWII. This is because countries produce goods some of which cannot be found in other countries hence the need for exchange. “In the 1960s, many American companies had dominated oversees markets and with the reduction in tariffs, European countries also started expanding their markets (Grimwade, 2000, 120).”
In the 1970s and 1980s, two streams of literature emerged. “The first was the Scandinavian researchers who used a dynamic model to explain the entry of firms into foreign markets using market seeking approaches (Rugman, 2009, 42).” This referred to the procedures used by globally expanding countries to make their operations adapt to the changing business environment. This was based on understanding the particular markets and changes in supply. “The second was based on understanding why firms preferred to own businesses in other countries instead of engaging in contractual transactions with the other countries (Rugman, 2009, 43).” They later identified the benefits got and the strategies that can be used to penetrate into such markets. That is why it is important to look at the things that businesses need to concentrate on if they would like to succeed. By understanding the values and goals of a particular company, then the managers are able to determine the areas and methods they would use so that they can expand their business.
Most developed countries for example the UK has over 55% of its investments in other developed countries. The gradual improvement of developing nations has created potential areas that businesses can invest in. The increased competition among oversees firms and industries operating in the country has led to the UK businesses to devise ways that they too can use to enter the foreign markets. This is something that the leaders of organizations need to observe, forecast and plan so that they can arrive at the best strategy that will enable their business to increase its revenue using the least cost. “Research has also shown that the strategy that will be chosen should be able to match a firm’s resource and capabilities with the market conditions it faces (Welch, Benito & Petersen, 2007, 6).”
The research was done to determine the factors that have enable corporations to compete globally and continue to expand their operations. To address the issues raised, secondary data as well as using qualitative and quantitative research methods was used. Secondary data was more appropriate than primary data because it saved on time moreover it presented similar data as used when got from different sources. Secondary data was got from book publications, newspaper articles, research papers and market surveys on how certain organizations especially multinationals operate.
The following qualitative and quantitative methods were used to analyze the data: comparing and contrasting different company in the way they operate and the different marketing strategies they use through comparative advantage, content analysis, historical methods, and statistical approaches, observing and analyzing trends, deductive and inductive reasoning as well as online surveys and questionnaires.
The questionnaires included questions like: why is it appropriate for companies to select appropriate markets, is it ok for businesses to plan their activities, why operational strategies are important and why they should be considered in business expansion and the kind of products to be sold and in which markets.
Foreign Market Analysis
The following essay looks at international marketing strategies or factors that need to be considered by businesses that intend to expand their businesses globally.
a. Selecting the appropriate market
There are different countries across the globe which produces different goods and services. Most countries are good for doing business with but it will be good to look at the regulations in place that may inhibit business operations. The policies that are set might hinder the company’s entry into the business environment. Therefore, in selecting the countries, it is advisable to compare policies and restrictions used different countries where the business might benefit. The political situations in countries will also determine business operations. If a country has frequent war incidents, then that will not be a good place to invest that will be a risky investment that is definitely bound to fail and expanding business are not looking for that.
The company can also determine what they think will work for them and the risks they are wiling t take. If the market is small as indicated by the population, then that will not be a good area to invest because fewer goods will be demanded and that will limit the production of the business hence it will not utilize the capital it has invested in. “When the appropriate market is determined they will be further observed for attractiveness such that the company’s products and services will be able to out do those of produced by the local industries (Siddiqi, 1980, 1).”
The factors that should be considered in determining if the business environment will favor the thriving of the business will include: if the country and specifically the region will enhance future expansion of the business in terms of increasing demand. The standards that the country has set in terms of product design and quality management standards will also be put into consideration. “The ability of the people to afford the commodity is a vital consideration. This is so, because if they have limited income to buy the products, then it will not help the business much and they will have to look into other regions to explore (Quelch & Deshpande, 2004, 393).”Another consideration will be the accessibility to resources like raw materials and labor and basic infrastructure for example roads. This will enhance production and lack of these facilities will not be good for business. The leaders of the company should be able to develop their own measuring criteria. This is necessary as it will enable the leaders to develop their own parameters and what they think will work for them.
b. Strategic approaches that will be used for the selected countries and the businesses based on the products the company deal with.
After assessing and choosing the potential areas that the business can maximize on profits, then the next strategy will be to look at the economic situations in the countries and if they will favor the thriving of the business. This will entail looking at the degree with which the locals are able to accept the new foreign product in their market. Factors that will be considered at this stage are:
Accessibility of markets will help the company know if they will consider producing products either for exporting or as imports. Looking at the local competition will enable the company know of they can consider linking with a local firm as a joint venture, partnership or as an acquisition. If they are able to face the competition on their own, the n they can consider starting and running their own independent company. “Analyzing the consumer preferences is also important as it will enable the company to define and plan the ways it will use in promoting and advertising its products in the region (Smith & Albaum, 2005, 328).” The ability to re-import the products will be important in the global marketing strategy. These factors should all be considered as they will determine if the company will be able to survive in the new country. “The leaders who make decisions on the companies should be able to create a marketing strategy based on the risks that they are likely to face, how pricing policies are determined in the region especially the country, the products to be produced and the investment procedures (Haahti, Hall & Donckels, 1998, 139).”
c. The marketing strategies that will be used and how it will fit with the company’s targets and objectives.
The marketing plan will entail at top most, placing the company’s products in the preferred local industry and the kinds of resources that will be used. Estimation of the prices will be done looking at the global business prices, sales that the company and similar companies are making as well as the targeted revenue to be got. “Resource allocation estimates will then be made according to the management needs and capabilities while looking at the expected investment returns and labor requirements (Rughase, 2006).” This will be done for all the potential investment countries and the kind of enterprises they would like to establish which can either be big or small.
In resource allocation, several factors need to be considered. This will include; the company history and its culture, the kind of products the business produces, business opportunities, goals of the company and the number of countries that the business has planned on opening up business In among other things. “Focusing on what the company needs helps in shaping the needs of the company and that will help in forming a strategic marketing plan (Krafft & Mantrala, 2005).” Each department or division for this reason, they will be able to focus on the countries that will enhance their vision by coming up with marketing strategies that are fit for the individual countries. The role of the top managers on the other hand is to monitor, coordinate, guide and assist in planning while supporting the efforts of other employees by making strategic decisions that help the company during this expansion periods.
Perceptions that are mostly confused in formulating the strategy is that company’s usually think that there is one global market outside their countries but in reality, there are many markets that are unique in their own ways. Many people also think that the products from developed countries will always find market in foreign countries but that is not the cases as they have to abide by the rules of different countries and there are regions where people are loyal and trust their local products therefore serious marketing campaigns need to be formulated to promote products in such environments. Moreover, countries and regions are different therefore the techniques used need to be changed very so often to suit different needs.
Companies can also be advised wrongly or they allocate resources differently such that at some point in the production process, the process is cut short because some vital resources are not present. The problem found within the developing nations is that there are a few distribution agents and this means that this does not favor expanding business as they may have a good strategy but they will have less people to link them with the markets they want. In some markets there are a few sales people as they cannot sale the vast products that some companies have produced in large scale as a form of meeting the customer demands. It is therefore necessary to formulate strategies that will have the least possible errors and in markets where the consumers are willing to buy the products at an affordable and appropriate price.
The advantages of these global marketing strategy is that
o It enables the organizations to plan and budget well because they have done background research on various countries on the resources that will be needed according to the needs of the company.
o Countries are treated in a unique nice manner that encourages business growth and development. This is because, when a country is chosen, they deal with how the company can adjust itself to the business environment there and they o not compare it with other organizations. “In addition, the introduction of such foreign direct investments improves the country’s balance of payments as well as reduces unemployment (Barker & Peterson, 1987, 210).”
o Thorough research is undertaken therefore the best opportunities are chosen thus reduces the use of ineffective strategies that usually risked business enterprises.
o The organization is more organized and managed as new corporate strategies are developed to fit with the international expansion strategies and operations. In addition, they also learn better ways of conducting their activities as they continually interact with foreign organizations.
o Managers are required to be skilled and more organized as they have to fairly locate resources both within and outside the country. “Through this, they will be promoting transparency and accountability.
Globalizing corporate activities is increasing and that is why businesses have to make proper decisions when they are looking to expand their markets. “Fewer restrictions especially the fall in tariff barriers promotes cross boarder trade and technological improvements other than improving the designs of commodities, it has led to advanced transportation systems thus making it favorable to conduct trade (Madura & Fox, 2007, 19).”
Market entry strategy
A market entry strategy refers to the period when a business decides to enter a certain market. It can be entering a market that is full of competitors or it has just introduced a new product and it is the first one in the business. “New products in a market are acceptable by the buyers so long as they are quality products that have been tried and tested prior to introduction in the market thus making them safe for human consumption (Dunning, 1997, 393).” Therefore, of it is acceptable and its price is controlled, then there is a high chance that it will generate more sales to the business.
If the country is the first in the business, then it has a greater chance of enjoying the profits and should be in a position to save on costs in the production process. Competitors arising thereafter will not easily outdo them and will even benefit more if they acquire intellectual property rights. Such companies when they expand globally have a greater chance of being successful as they can merge with smaller companies or create their own enterprises but still emerge successful as their businesses will grow. An example is the Coca Cola Company.
Dimensions of market strategies
A company can either serve a wide market or smaller markets within a specific region. When a business decides to concentrate its products on one area, this is referred to as the market scope strategy. Under this, the company can either use the single market strategy, the multi market strategy or the total market strategy. In the total market strategy, a company that produces a variety of products can decide to sell them to a specific area an example is an automobile company that makes cars as well as spare parts. The strategy is good for a company that wants to wants to grow and increase its profits.
The single market strategy involves a company that produces a single product targeting a specific market. This is especially good for small or medium-sized growing companies. The multi market strategy, a company chooses to deal with products that it knows it can profit in and where there is less competition. Moreover, it serves several markets therefore its activities are not limited. “It is therefore necessary for businesses that are expanding to know the type of markets they will de targeting and if they will be selling a single product or many products. If there are many products involved, then they will have to take time and analyze the markets of the different products separately but this is bound to take time (Doole & Lowe, 2007, 6).”That is why it is advisable for a company that is expanding internationally, to start with one product so that they are able to monitor how it is doing and if they are doing well, they can slowly introduce the other products.
Market Commitment strategy
Because of different consumer preferences in a company’s products, a company can decide to treat the different customers separately. Commitment to a certain market can therefore be strong or not strong. The level of commitment can be in monetary form or the managerial approaches that are used. Therefore, the revenue that the company gets is a reflection of their chosen level of commitment.
Strategies that are chosen by any competitive business can either be long term or short term depending on the company’s objectives. Strategies are either developed at the business level or in relation to the functions of the business. Operational plans mainly dwell with the production aspect of the businesses. “For productivity to take place there needs to be proper operational strategies as they help in determining the kinds of products to manufacture thus charting the way businesses operate (Clausen, 2003, 130).” Operational strategies need to be improved on as they will enhance a businesses competitive aspect as they are able to choose the products they will deal in and the markets where they will be sold. Therefore, businesses need to focus on product expertise such that they continually develop better designs to enhance their acceptability and fast delivery of the products so that they can satisfy the consumer’s needs. “The ability to produce a product within a short time is good as the company will have surplus and they will be forced to look into untapped markets so that their efforts and resources do not go to waste (Webster & Webster, 2005).” In addition, production is supposed to be flexible so that as new technology is introduced, the process still goes on without hitches.
Product variety and the physical size of the facility will also be put into consideration when the businesses want to expand. If the facility is small, then this will limit production as the facility can only accommodate a limited capacity. “Quality is very vital in the manufacturing process and that is why goods of high quality will attract more consumers as compared to those of substandard quality (Tolentino, 1993, 48).” Even if a good of lower quality is cheaper compared to a high quality good, consumers will go for the higher quality because it will satisfy them better and they will have pride in using it (Samli, 1995). Therefore, when businesses want to expand, they should ensure that they have a good place with ample space so that they can produce different varieties as well as many quality products.
An operational strategy is a plan that aids in coordinating activities as well as the systems in place. Some of the factors that need to be considered include: being able to allocate the required resources to various divisions, planning the working environment, developing and designing the product, choosing the appropriate technology and designing the manufacturing system.
In designing the manufacturing system entails choosing the method of design that has been agreed upon by the management after experts have approved its usage and following the appropriate production standards and policies as stated in the industrial laws. The workers should be trained on the technologies that are used. Moreover, the technology chosen should be appropriate and relevant for every stage of manufacturing. They systems of production can either be focused on the product or on the process. “When it is focused on the product, its aim is to produce a variety of products or one product by engaging many workers and raw materials. Process focused systems concentrate in enhancing the already produced product and will include things like packaging or branding (Findlay & Sparks, 2002, 270).” From this we can say that a lot of things need to be considered when a business is expanding its business as they will have to look at how the operational factors will relate in the new country, the extra resources they need to budget for, the policies and standards of the country in relation to production and the technologies that exist there.
Expanding a business globally requires in depth research on the regions and countries a business wants to expand in. Proper marketing and operational strategies therefore need to be adopted and perfected so that businesses can gain from the investments they make in other regions. In addition, the choice, use, management and change in foreign operational methods are very important in the international business especially when choosing to enter a foreign market. In addition, the managers need to ensure that they formulate proper policies and plans so that they choose good markets where they are able to build themselves further.
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