Discuss about the Analysing Foreign Market Entry Strategies.
Joining the global market is something that ought to be planned and strategized beforehand because it is a move that is usually accompanied by several steps. One fact that needs to be acknowledged is that any business, whether small or big, can enter the global market and succeed. All that determines the success of a business that has entered the global market is how prepared the entrepreneur was at the time of entering the market. Now, joining a global market is usually accompanied me a couple of events. For instance, you need to know the type of the commodity you want to introduce into the target country. Here, an entrepreneur has to determine all the possibilities of the product doing well in the proposed country. One of the primary factors influencing the success of the introduction of a product to another country is whether or not the social patterns and believes of residents of that particular country support consumption of that product. Other factors are the political, economic and technological environments of the country that the entrepreneur proposes to extend the business too. The internal business environment also determines the success of taking a business to the global level. The business must determine whether it is capable of producing products enough for both domestic and foreign market. The business should also be in a position to comply with all legal requirements associated with the business. Overall, there are several capabilities that a business must exhibit to be in a position to go global. This paper is aimed at selecting an Australian company from where a product will be selected to be taken to the international market. The company that was chosen in this case is the Australian Ugg Boots whose product is to be taken to the Chinese market.
Ugg Boots is an Australian both gender footwear that is made from sheepskins by an Australian company called Australian Ugg Boots Pty Company. During the initial days, this product’s retailers got them from some manufacturers and later sold them directly to customers (Meyer, 2015). However, the business became hard after some time since these manufacturers began reducing selections and stocking substandard products that made the sellers lose the trust they had gained from their customers. For the first time, that made the sellers have no other choice but accept the low-quality Boots since there was no a variety from where they could choose. However, these sellers reached a point where they felt that it had become the best time to reclaim their quality as well as innovation without giving up. It is therefore during this time that the company evolved into a fully operating and functional entity. The company believes in the selection of the highest quality components like natural sheepskins, threads, hard wearing soles among others.
China, also known as the people’s republic of China is located in East Asia and “it covers 960, 000 square kilometers” and it is one of the modern emerging economies in the world with India, Russia, among others. Its biggest city is Shanghai but its capital city is Beijing. China is believed to be the most populous country in the world “with a population of 1.404 billion people.” The country is also believed to be the origin of several products that are associated with the modern world. Some of these products include credit banking, paper, money, compass, gunpowder, among others. The country is now undergoing what is known as the second industrial revolution which arose after the rigid communist rule was abandoned. The country is now regarded as having the fastest growing economy. The expected success with the launch of the product can be best determined by the use of the PEST analysis tool that looks at the political, economic, social and cultural environment (Delios, 2017). Carrying out the analysis with this tool will help the entrepreneur in making the necessary decisions as to when and where specifically to locate the business depending on the likelihood of the products doing well in that economy. The pest analysis of the targeted country which is China is carried out below.
Political factors significant influence on international marketing and this explains the reason as to why it is very critical to determine the political environment of the targeted country before the real act of marketing. Marketing managers are obliged to carrying out thorough research before any global investment is made failure to which the proposed marketing will be prone to failure (Bonaccorsi, 2016). Some countries like Thailand embrace strict trading policies and bureaucratic procedures in foreign investment. This fact scares away many entrepreneurs who are willing and equally able to make investments in the county. Contrary to Thailand practice, China is regarded as one of the worlds that give much attention and support to international trade (Richard, 2016). That gives assurance that the proposed business will maneuver up well. Again, the country enjoys a stable political environment which ensures that there is sufficient labor force and good infrastructure hence making China one of the most preferable grounds for direct foreign investment. That is evident from a research that showed that the country “attracted a record of $ 139 billion of direct foreign investment in the year 2016” (Buckley, 2015) This fact has made China qualify to be the world’s third leading foreign direct investment destination. China is also a known to be a “dominant overseas investor” whose having invested in several foreign countries. Some of the countries that its foreign direct investment has reached are “the United States, the UK, Australia, Pakistan, Bangladesh, Indonesia, the United Arab Emirates, Venezuela, Argentina, Angola, Chad, Niger, among others” (Miller, 2016). The bottom line is that China is one of the world’s countries that enjoy good political stability. The effect of political stability is having the country as one of the best countries that entrepreneurs can consider when intending to launch their products into the global market. As a result, therefore, there is an assurance that the Ugg boots will do well when launched into the Chinese market.
Economic factors immensely affect the launch of a product in a new country due to several reasons (Ramaswamy, 2016). For instance, the likelihood that the Chinese people will purchase the product will majorly depend on their economic and financial ability. China is considered to be the 2nd largest world’s economy in terms of nominal Gross Domestic Product and the leading world’s economy on the basis of purchasing power (Waterschoot, 2017). The rapid Chinese economic growth was brought about by economic reforms which began in the late 1970s. According to a research done by (Constantinides, 2016), “the country has made a shift from a centrally planned to a market-based economy and the GDP growth has averaged nearly 10% a year.” That is to imply that the country enjoys a stable economic environment with its citizens having high purchasing power (Vickery, 2015). As a result, it is assured that if the Australian Ugg boots are taken to this country, they will definitely be bought. Therefore, an entrepreneur should not be afraid or hesitate to launch the product in the country as the economic environment of the country assures success.
The social-cultural environment is one of the greatest factors to be considered before making a decision to take a product in any country. That is because it is possible to take a product in a particular country and none consumes it since the cultural beliefs of that particular country are completely different from those of the host country (Grönroos, 2015). A country may be having a good political and economic environment with potential customers with high purchasing power but have a culture that is totally against the consumption of a particular product (Ivy, 2014). The widely spoken language in China is the Chinese language. Language is one of the major factors that affect international marketing because different words may mean different things in different countries. It is due to this reason that marketing managers are clad with the duty to ensure that the most accurate translations are made during product branding or advertising. The country’s test and preference are also critical (Rodriguez, 2017). Lucky enough, Chinese have a substantial passion for closed shoes and this an assurance that the sale of Ugg Boots in this country will succeed. However, it should be known that China’s Chinese have the smallest feet in the world and thus the product should be redesigned to suit them (Håkansson, 2016). Another key advantage is that Chinese do not have religious believes, practices or superstitions that discourage wearing of boots. Based on these reasons, it is therefore certain that the business will definitely do well.
The technological environment has a substantial environment on global marketing. The acquisition of modern production technology and the aspect of virtual connectivity has helped companies to improve performance as well productivity. For instance, most of the companies in the modern business world have embraced the use of new human resource information systems that have made it easy to monitor the performance of their employees hence achieving maximum productivity (Yoo, 2017). Again, new production technologies have made it possible to produce more products per unit time thereby reducing the cost of production. That acts as a source of competitive advantage for the company and thus is able to beat its rivals. China is one of the countries experiencing industrial growth as well as the acquisition of modern technologies in both production and distribution. As a result, it is expected that the product will do well in the country because of the availability of a supportive technological environment.
As evident from the pest analysis carried out above, China is one of the best grounds for foreign direct investment. It has proven to be having a supportive political, economic, social and technological environment. The primary reason for choosing China as the target market for the product is that it has the required factors that should be there for business success.
There are several reasons as to why a government may decide to intervene in an economy. These reasons include and are not limited to achieving maximization of social welfare, national unity, economic factors, among other reasons. The government may use taxation and subsidy tools to intervene in the market (Hofer, 2017). For the Chinese government, it is committed to combating market inequalities in the country. It ensures that there are no market inefficiencies and whenever they arise it uses the two intervention tools to correct it. Again, due to economic reasons, the government often coffers subsidies to the companies which produce items that satisfy basic human wants such as food, clothing, and shelter (Peng, 2016) and (Tang, 2015). Ugg Boots lie under this category because they satisfy the clothing want. Because of this reason, therefore, it is certain that the product will certainly succeed when launched in the country.
Economic integration is the “arrangement between different regions that often includes the reduction or elimination of barriers and the coordination of monetary and fiscal policies” with the aim of reducing costs for both consumers and sellers thereby improve trade between the involved countries (Goodnow, 2014). China is known to be one of the nations that value international trade, a fact that is evident from its free trade agreement with Australia. The impact of this free trade is that there will be a free and easy entry into the market thus ensuring the success of the marketing of the Australian Ugg boots in the country. In cases where countries exhibit trade restrictions, it becomes difficult for other countries to market their products there.
Business strategy means the way in which a business will achieve its long-term goals and objectives. There are various reasons attached to a business strategy that prompted choosing China as the target country. Ugg boots have well stipulated long-term goals such as globalization, growth and attaining and maintaining competitive advantages (Wang, 2017). Now, joining the Chinese market that has high purchasing power will enable the company to grow tremendously and be in a position to enter other countries in the global market. After the acquisition of enough resources through mass Selling in the country, it will enter other countries and become one of the world’s renowned boot production industries. Therefore, the main reason for choosing China and not any other country is because it will help the company reach its set goals and objectives.
There are different factors affecting the choice of business entry strategy which includes “tariff rates, the degree of adaptation of your product required, marketing and transportation costs.” These factors are expected to offset marketing related costs. After consideration of the necessary factors, the entry strategy that was arrived at is the direct exporting which involves selling directly using the first instance resources are owned (MacLeod, 2015). Marketing will be done by well-selected agents and distributors who will be the representatives and image of the company. The entry strategy was chosen because it suits the product.
The marketing mix is an important marketing tool that helps entrepreneurs decide how to launch a product in a new country to increase its utility (Dodge, 2017). For the case of the Australian Ugg boots, the marketing mix must be modified to suit the market. For instance, the boots will be resigned to ensure that they suit the Chinese have small feet. That explains the product aspect of the marketing mix. It will be aimed at increasing the form utility of the producer so that it completely suits the proposed market. The boots will be sold in the open air markets that have a large population as well as the markets where the people whose social status is a high trade. This move will ensure that the products are available at places convenient for the target market so that consumers can conveniently purchase them. The company will ensure that it sells a relatively low price that can be managed by every citizen, a price that matches the value of the product. This step will ensure that the company makes mote sales as opposed to other boot vendors. Product promotion will be done through social media platforms as well as mainstream media adverts. Adequate advertisements will ensure that the product gets known to a wider group of people and therefore attract and maintain customers.
Conclusion
Contrary to a popular view, entering new markets is not an easy task. It is a step that is accompanied by a number of considerations. Making the wrong decisions leads to business failure. It is therefore imperative to consider a number of factors such as the political, economic, social, cultural, religious, and technological environment of the target country. These considerations make the entrepreneur come up with a sound decision as to whether the business will do well in the target country in terms of purchase of its products. It is also critical to determine the government intervention in the industry of venture as well as the market integration. Market integration enables countries to trade with ease since there are no trade barriers. The business must lay out good reasons as to why it chooses a particular country based on its strategic goals and objectives. The choice of the most appropriate entry strategy is very crucial because it ensures that the business does exemplary well even in the initial entry stages. The marketing mix must also be modified to suit the target market. In conclusion, therefore, it is expected that the marketing of the Australian Ugg boots in China succeeds since the necessary considerations have been made.
References
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