Provide major recommendations on how to improve market entry strategies of Toolstation.
In quest of effective business expansion, organizations have to focus on various market entry strategies by evaluating the psychological and cultural backgrounds of target customers. Toolstation is one of the most recognizable brands of UK especially famous for its online trade tools, accessories and hardware products. Before expanding the entire business process in the market of Australia, the business experts tend to make an effective SWOT analysis and CAGE analysis for identifying strengths and weakness of the brand. The study has provided an in-depth overview about the market entry strategy that Toolstation has selected in order to grab the attention of Australian customers. The study has focused to provide major recommendations on how to improve market entry strategies of Toolstation.
To analysis the market entry strategy of Toolstation from UK to Australia
To analyse environmental factors for identifying market threats and opportunities
To provide major recommendations for improving market entry strategy
Toolstation’s primary mission is to expand their entire business process in various geographical boundaries. As per current business scenario, the organization has aimed to enter in the market of Australia from UK by rendering innovative service method and superior quality of products.
Toolstation is primarily constituted with four major managerial departments including finance department, human resource department, operation and logistic sector. Around 200 branches are available all over UK. This specific organization has not international experience so far. More than 11,000 products are included within the services. In addition, the organization is dealing with around 2273 employees.
Toolstation is a complete autonomous division of a large company that operates an independent enterprise with the responsibility of specific products and activities.
UK is the current location of the company where the business experts have expanded around 200 branches.
According to George Yip, there are four principal drivers of internationalization that can assist the companies to generateprospective to penetrate a huge global markets by introducing more comprehensive policies. The four main drivers for globalisation are market drivers, cost drivers, competitive drivers and government drivers (Grant 2016).
Market drivers sketch the procedure of progress of the outlines of consumer conduct distribution, counting the ranges to which the customers’ needs assemble around the world, locating of consumers in the general basis along with the global systems of circulation development. It discloses the fact that the marketing podiums are transferrable therefore the lead nations where most of the modernisations take place can be identified (Panwar et al. 2016). In Toolstation’s case, it will be approachable and prevalent for the higher as well as middle class of Australia.
Cost international drivers outline the opportunities for the world-wide scale economics, obtaining competences and reflecting the discrepancies in costs among the markets of various countries along with their technological advantages. These help to contour the assets of the companies (McDougall?Covin, Jones and Serapio 2014). The company Toolstation provides relocation of production facilities which will help it in huge cost saving and it will be taking the advantage of difference in country cost.
Competitive drivers of internationalization are defined by the activities of the contendingindustries up to the level in which the opponents from varied continents attain the structure, globalize their methodsas well as their corporate competences then form the interdependence in the topographical markets. In this field the companies usually face the threat of entry in a new market as it already remains full with competitors but for Toolstation, this threat is low as Australian market has limited similar companies as it.
The Government driverscompriseissues like inspiring trade policies, advantageous regulatory climate, shared product and most importantly technological standards (Meyfroidt et al. 2013). Toolstation will be benefitted in Australiabecause of its trade policies. The government is currently unable to favour the national suppliers and aiding international companies in various ways.
The primary objective of making an effective SWOT analysis is to identify the strength, weakness, opportunities and threats of Toolstation. Before entering in the Australian market of Australia, the business experts should make effective strategies for overcoming the threats and weakness of the organization.
|
Strengths |
Weakness |
|
Ø Product variety Ø Workforce strength Ø Greater customer base |
Ø Lack of sufficient internal resource Ø Lack of communication transparency |
|
Opportunities |
Threats |
|
Ø Business expansion in various geographical boundaries |
Ø Competitors market threat Ø Communication gap among the employees |
Table 1: SWOT Analysis
(Source: Zhu and Iansiti 2012)
Strength:
Product variety is one of the most effective strengthsdue to whichToolstationcan easily enhance their entire wings of business in different geographical boundaries. Trade tools, accessories, hardware are core products with which Toolstationdeals. Due to the variety of products, the organization is able to draw the attention of customers from various cultural backgrounds as well as attitudes (Laufs and Schwens 2014).Due to sufficient workforce strength, the business experts of Toolstationdo not have to face difficulties in maintaining a balance between customers’ demands and supply.
In addition, they can receive the services at proper time. Toolstationprimarily provides online delivery of services. As a result, customers of multinational countries as well do not have to face difficulties in being communicated with the service providers. After entering in the market of Australia,the organization would not have to face difficulties in dragging the attention of customers from different psychological backgrounds.
Weakness:
In order to expand the business in other geographic location business organization should have sufficient internal resources. Technological resource and financial resources can be considered as one of the most effective assets without which the organization can never expand their business in another location. Toolstationis facing difficulties in entering in the market of Australia due to the lack of proper economic strength. In addition,Toolstationbeing one of the most prestigious ecommerce chains should enhance more technological equipments for maintaining the entire process of business systematically(Doherty, Kartasheva and Phillips 2012). On the other hand, the internal employees do not have proper communication transparency with each other due to cultural barrier and language barrier. As a result, employees could not share their views and thoughts properly. Customer service process was highly affected due to the lack of effective communication among the employees.
Opportunities:
After evaluating strengths and weakness of Toolstation, the business experts have immense opportunities in expanding their entire business process in other countries as well. If economy is a primary issue for Toolstation, the organization can make suitable market entry strategy like joint venture (Maekelburger, Schwens and Kabst 2012). As a result, the business experts do not have to face challenges in increasing business wings due to the lack of economic strength.
Threats:
Toolstationhas faced immense market threat from its competitors.Abey Australia, Ace Industrial suppliers, Active Agents Pvt Ltd, A M Contactorshave already established their entire business process in the market of Australia. While entering new business process,Toolstation has faced immense difficulties in drawing customers attention. In this situation, Toolstationcanmake an effective joint venture with an existing company of Australia so that the business experts do not have to struggle in grabbing the customers’ attention.
CAGE analysis primarily aims to evaluate the cultural, administrative, geographic and economic factors of a specific country.Before entering in the new market, organizations have to make an in-depth analysis of those factors. Based on those factors the business experts tend to make strategies and policies for sustaining in the market (Tuschke, Sanders and Hernandez 2014). However, this very specific study has provided detailed overview on how Toolstationafter making CAGE analysis can evaluatecultural, administrative, geographic and economic factors of Australia.
Cultural:
Australia is constituted with various socio-cultural people all over the country. As a result, the business experts of Toolstationcan never concentrate on providing products and services being biased towards specific cultural backgrounds (Evanschitzky et al. 2012). Therefore, the organization is currently dealing with the various products and services. Customer support system is flexible in multiculturalism and multilingual attitudes.
Administrative:
Strong regulations and acts from government administration of Australia help the country to reduce and minimize corruption. Due to the competency of government business organizations do not have to face political chaos within the country (Laufs and Schwens 2014). As a result, both the customers and business employees can maintain an effective relation with each other. In addition, government likes to maintain transparent taxation policies. Business experts as a result, do not have to face difficulties in running their wings effectively.
Geographic:
As a geographic location Australia is one of the most recognizable places surrounded by Indian and Pacific oceans. This specific city is surrounded with different major cities such as Sydney, Brisbane, Melbourne. Toolstation does not have to face any kind of barrier in communicating with the people of Australia.
Economic:
Australia being economically developed country does not have to face major challenges in drawing customers’ attention(Zhu and Iansiti 2012).Toolstationhas the flexibility in maintaining high price range of their products due to economic strength of Australia. In addition, product variety is one of the most significant reasons due to which the business expertsof Toolstationwould be successful to draw the attention of premium customers of Australia.
Toolstation is a company based in UK, therefore the leaders must take the advantages of common language as well as acquainted business framework. Beside these, they need to know the Australian context for their product or service, existing competitors, their standards, government regulations, local sales channels along with applications (Laufs and Schwens 2014).This particular company may find that Australia has a ready access to many Asian countries who indulge in similar trade such as Japan and China. They have long established brands who have a strong reputation in Australia in supplying industrial tools and accessories in the country (Chetty, Ojala and Leppäaho 2015). Due to this, the company must select the Joint-venture mode so that it can utilize the government trade policies to its fullest. This will aidToolstation in accessing the new market of Australia. It will help in gaining scale efficiencies by combining assetsas well as operationswith the local companies. Toolstation will be able to share its risks for major investments, projects, access skills along with capabilities.
The primary reason of making joint venture of Toolstation with the local company of Australia is grabbing customers’ attention. While entering in the new market the business experts of Toolstation may have to face innumerable difficulties in gaining customers’ reliability. Making joint venture with the existing company of Australia may help the business experts of Toolstation to introduce their product in the new market effectively(Zott and Amit 2013). In addition, the company would be able to enhance work force strength, economic strength and decision making strategies. It would help the organization to deliver the best services to target customers.
The pressure for global integration is high. Large number of retail business chains is there in the international market. As a result, Toolstation would have to face immense difficulties in drawing the attention of customers. In case the company finds the competition in the market to be fierce, the advantage of cost leadership will encourage the firm in competing on price (Pantelic, Milovanov and Zehetner 2014). By following differentiation and focus strategies, Toolstation will be able to overcome the price increases of their suppliers and reach to the Australian customers with lower price. The power of the buyers though changes with the generic strategies, the company will be able to offer lesser price options to their large and powerful customers.
Toolstation has focused to expand their entire business process in Australia. As per the local response, large number of organizations in retail sector is available in Australia. Therefore, the pressures for local responsiveness are high. Toolstation will be facing initial Constraints because the market creates barriers for the new entrants. This firm needs to be mature enough to compete by lowering prices further without comprising their profitability.The company has a very good reputation as well as loyalty in the UK, therefore, the differentiation strategy will also help them to earn trust towards their bands. The company’s differentiation-focused strategies can effectively reduce the threat of substitutes in the new market. Brand popularity is a unique aspect that will assist the company to achieve core competency.
Therefore, joint venture would be the appropriate market entry strategy based on which the organization can easily enter in the market of Australia.
As the market barrier is high Toolstation would have to focus following different market entry strategy as well. It can be recommended that Toolstation can use direct export strategy for entering in the market of Australia. Direct export strategy can help the business experts in leading their organization inown way. Organizational managers of Toolstation may have to face barriers in making strategic decision due to the work cultural differences of two organizations. It can be recommended that direct export strategy can help Toolstation in drawing customers’ attention without being dependent on others.
Conclusion:
Factor 1: Economy
Scenario 1:
In past few years, Australian GDP rate has been decreased enormously. In this situation, Toolstation has faced innumerable challenges in drawing the attention of customers. The business experts had to decrease price range of their products.
Scenario 2:
Toolstation intended to follow high price strategy. As a result, it becomes difficult for lost cost customers in affording the products.
Factor 2: Technology
Scenario 3:
Toolstation after being accustomed with the emergence of technology has drawn the attention of young generation. As a result, the target customers of middle age are not flexible enough in operating technologies. Therefore, the company may have to face difficulties in drawing their attention.
Scenario 4:
The entire business process of Toolstation has become highly dependent on the advancement of technology. Therefore, it is difficult for the local business partners of Australia in being accustomed with the changing process of technology.
Among the four scenarios mentioned above it has been observed that third scenario based on technological factor is highly significant. The business experts should draw the attention of people from different age group. Therefore, depending on technology entirely may prevent the business experts in satisfying needs and demands of every single customer
References:
Chetty, S., Ojala, A. and Leppäaho, T., 2015. Effectuation and foreign market entry of entrepreneurial firms. European Journal of Marketing, 49(9/10), pp.1436-1459.
Doherty, N.A., Kartasheva, A.V. and Phillips, R.D., 2012. Information effect of entry into credit ratings market: The case of insurers’ ratings. Journal of Financial Economics, 106(2), pp.308-330.
Evanschitzky, H., Eisend, M., Calantone, R.J. and Jiang, Y., 2012. Success factors of product innovation: An updated meta?analysis. Journal of Product Innovation Management, 29(S1), pp.21-37.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Laufs, K. and Schwens, C., 2014. Foreign market entry mode choice of small and medium-sized enterprises: A systematic review and future research agenda. International Business Review, 23(6), pp.1109-1126.
Laufs, K. and Schwens, C., 2014. Foreign market entry mode choice of small and medium-sized enterprises: A systematic review and future research agenda. International Business Review, 23(6), pp.1109-1126.
Maekelburger, B., Schwens, C. and Kabst, R., 2012. Asset specificity and foreign market entry mode choice of small and medium-sized enterprises: The moderating influence of knowledge safeguards and institutional safeguards. Journal of International Business Studies, 43(5), pp.458-476.
McDougall?Covin, P., Jones, M.V. and Serapio, M.G., 2014. High?potential concepts, phenomena, and theories for the advancement of international entrepreneurship research. Entrepreneurship Theory and Practice, 38(1), pp.1-10.
Meyfroidt, P., Lambin, E.F., Erb, K.H. and Hertel, T.W., 2013. Globalization of land use: distant drivers of land change and geographic displacement of land use. Current Opinion in Environmental Sustainability, 5(5), pp.438-444.
Pantelic, D., Milovanov, O. and Zehetner, A., 2014. Building Competitiveness Through Globalization: the Impact of Consumption Convergence. Strategic Management, 19(4), pp.58-66.
Panwar, R., Nybakk, E., Hansen, E. and Pinkse, J., 2016. The effect of small firms’ competitive strategies on their community and environmental engagement. Journal of Cleaner Production, 129, pp.578-585.
Tuschke, A., Sanders, W.M. and Hernandez, E., 2014. Whose experience matters in the boardroom? The effects of experiential and vicarious learning on emerging market entry. Strategic Management Journal, 35(3), pp.398-418.
Zhu, F. and Iansiti, M., 2012. Entry into platform?based markets. Strategic Management Journal, 33(1), pp.88-106.
Zott, C. and Amit, R., 2013. The business model: A theoretically anchored robust construct for strategic analysis. Strategic Organization, 11(4), pp.403-411
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