International Market Entry and Development - Essay Example

International Market Entry and Development Abstract International market selection shapes one of the most significant decisions to be arrived at by companies seeking to engage in international trade. Business In the age of globalization has both eased and necessitated a move towards the internationalization of organizations. Companies that desire to internationalize must choose a fitting mode of entry into a foreign market so as to make the best use their resources. However, despite its significance, the approaches adopted by some companies in spotlighting profitable and serviceable markets within the international context are frequently grounded in ad hoc decisions and intuition, instead of a systematized market research to match companies with appropriate foreign target markets. The paper seeks to clarify some of issues surrounding international market entry and development. International Market Entry and Development A. The Process for Market Research to Assess Foreign Market Potential The process of market research seeks to unravel the market potential of the foreign market. This entails exploring whether the export market of interest possesses the necessary means to purchase imported products, as well as to whether the needs of the market are being adequately satisfied. The analysis of foreign market potential takes into account information regarding aspects such as competition, market size and the country's growth rate, and existing trade barriers. The analysis of market potential also involves competitive intensity analysis by analyzing the number of competitors in the market, as well as relative size distribution of the market shares (Sakarya, Eckman & Hyllegard, 2007). Market size analysis entails an assessment as to what share of the total market within the country that the firm can reasonably expect to obtain, based on factors such as competition and product pricing. Market growth analysis involves an assessment of current demand and future demand, as well as untapped or unfilled demand (Sakarya, Eckman & Hyllegard, 2007). There are several competitive strategies that might influence the selection of markets such as entering a market in order to forestall the entry of related companies or entering a market in which large competitors are absent. B. The Considerations for Product Adaptation in Foreign Markets Product adaptation deals with a wide range of issues ranging from quality and appearance of products, to other aspects such as materials, production, packaging, style, and modeling. A product may have to be adapted in several ways so as to meet physical, social, or mandatory requirements of a fresh market (Ajami, 2006). Similarly, the product may be redesigned or repackaged to satisfy diverse buyer preferences or standard of living. In pursuit of product adaptation, companies should be wary of the pitfalls associated with adaptation. Complete adaptation of marketing solutions is not essentially useful since it constrains companies capability to use advantages availed by aspects such as economies of scale (Ajami, 2006). However, adaptation aids companies to evaluate and effectively utilize cultural differentiations, as well as separating products, the company’s properties and possibilities. Some of the factors encouraging product adaptation include differing use conditions, government and regulatory influences, differing consumer behavior patterns, local competition, and alignment with the marketing concept. The cultural and psychological factors influencing product adaptation constitute aspects such as consumption patterns (patterns of purchase and patterns of usage), and psychological characteristics detailing attitudes towards the brand (Goldman & Nieuwenhuizen, 2006). C. Common Approaches to Adjusting Promotional Strategy to Fit Foreign Markets Segmentation, Targeting, and Positioning Segmentation in marketing is usually undertaken at the consumer level. However, within international marketing, it is essential to view countries as segments. This enables the decision maker to focus on shared aspects of countries and circumvent information overload. It is essential to note that variations among countries are apparent and significant; hence, averages may not be necessarily meaningful (Czinkota & Ronkainen, 2007). Country-level segmentation may be undertaken on levels such as geography (grounded in the assertion that neighboring countries share a certain set of attributes such as terrain, climate, income, and demographics (education attainment, population age distribution, and population growth). Segmentation shapes decisions on who to target or how to implement positioning via the diverse parts of the marketing mix. This, in turn, shapes distribution strategy and promotional strategy. When observing extensive markets, one should be wary of the pitfall of attempting to sell “all products to all consumers,” since this is a counterproductive strategy as the company may distort its distinctive appeal to its identified segment (Czinkota & Ronkainen, 2007). There are two core approaches to global segmentation, namely: at the macro level where countries are perceived as segments informed by the country’s aggregate characteristics and statistics to differ significantly (Goldman & Nieuwenhuizen, 2006). At the micro level, the main focus hinges on segments within countries where two approaches exist, namely: intra-market segmentation and inter-market segmentation. D. The Strategic Marketing Planning Process Strategic marketing process infers systematic approach for managing strategic change comprising of the following: positioning the company via strategy and capability planning, efficient management of resistance during strategic implementation, and real-time strategic response via issue management. Strategic management pursues to maintain fit or alignment between the company’s activities, as well as its operating environment. This allows the company to stay aligned with the overall changes witnessed in the surrounding world (external or internal) (Zekiri & Angeloya, 2011). Marketing planning allows the development/revision of marketing goals relative to performance; assessment of marketing opportunities and resources; revision or creation of marketing strategy; institution or revision of the plan for implementation and control and lastly, implementation of the marketing plan. Global strategic marketing planning has overtime become increasingly significant owing to the advent of global competition and the quick changes witnessed within international marketing. The key determinants of planning formality include aspects such as corporate culture, foreign regulations, supply chain elements, and competition. E. Strategies for Entering Foreign Markets Firms that desire to internationalize must decide on a fitting mode of entry into a foreign market so as to make the best utilization of their resources. Some of the entry strategies in foreign markets include domestic production and/or foreign production. Domestic production entails both indirect exporting and direct exportation. Indirect exporting may encompass aspects such as casual exporting, trading companies, cooperation in exporting, and export Management Company. Direct exportation, on the other hand, may entail aspects such as international representative, local agents, commercial subsidiary, local agents, and foreign distributors (Belu & Caragin, 2008). Exporting is a comparatively low risk strategy as few investments are undertaken in the new country. The other strategy details foreign production involving aspects such as assembly, contract manufacturing, licensing and franchising, joint ventures, and 100% ownership. Licensing and franchising details the firm allowing another entity to use its trademarks and accumulated expertise. The challenge occasioned by this strategy is that the company is training a potential competitor as it has little control on how the business is operated. The firm may also employ turnkey projects, whereby the firm utilizes knowledge and expertise derived from one or more markets so as to avail a working project to a buyer in the new country. Direct entry strategies in which the company either acquires an entity or builds operations “from scratch” presents the highest exposure, but also the biggest opportunities for profits (Belu & Caragin, 2008). F. Considerations for Subsequent Market Expansion Companies entering new markets should not delay the expansion of operations since they risk facing a competitive disadvantage. The initial step within the process of expansion features spotlighting markets that bears the most strategic significance to the business. Similarly, it is essential to comprehend the cultural forces influencing international business. The cultural environment is critical as it influences the labor environment, socio-economic environment, and the politics of the populace. Cultural products, for instance, by virtue of their marketing process detailing mass advertising, sales promotion, and personal selling are inclined to require a strong degree of cultural awareness as the knowledge relates strongly to human communication within the selling process. Other considerations for global expansion include compliance with the existing laws such as franchise laws. It is also essential to understand how the company’s brand “translates” locally within the market. This may entail adapting the entity’s trademarks and related characteristics of the brand to the local language and tastes (Zekiri & Angeloya, 2011). G. The Challenges to Global Product Management and Branding Marketing changes are highly likely to be successful if the instituted actions are informed by knowledge of the forces driving market behavior, and insights that avail the development of sustainable competitive advantages. Global product management and branding faces significant environmental forces influencing marketing behavior such as changing consumer markets, designing products for global acceptance, increased power of distribution and the evolution of channels, time-based competition, and increasing openness of markets. The outlined challenges also represent opportunities for growth and marketing success. The firm may also face difficult tradeoffs between enhanced significance of coordinating brand activities (both within and outside the entity) and the pressures to decentralize decision making. Other constraints to global product management and branding flow from global communication, namely: language barriers, cultural barriers, inadequate media infrastructure, regulations, and prevailing local attitudes toward advertising (Zekiri & Angeloya, 2011). Each level of globalization heralds changes in the manner in which the company competes and requires diverse strategies in accordance with marketing programs, planning, organization, and control of the international marketing effort. The firm may opt to globalize its product strategy (product designs, brand names, and product lines), and localize its marketing communication and distribution. Some of the marketing strategies that the firm may adopt include integrated global marketing strategy, global marketing mix element strategies, global branding strategies, composite global marketing strategy, and competitive global marketing strategies (Zekiri & Angeloya, 2011). Conclusion Entering a foreign market has potential to enhance growth, profit, and brand company’s brand. Underlying the choice of which foreign markets to engage in, should be a tactical orientation that considers market entry choice as a component of the company’s overall policy that responds to the firm’s resource base and its competitive position. In order to come up with effective strategies, a company should appreciate its internal competencies, as well as enveloping restrictions so as to highlight appropriate foreign target markets. In the international markets, marketing practices, market sizes, and buyer behavior, all vary; thus, international marketers must carefully evaluate all market segments in which they anticipate competing. References Ajami, R. A. (2006). International business: theory and practice. New York, NY: M.E. Sharpe. Belu, M. & Caragin, A. (2008). Strategies of entering new markets. The Romanian Economic Journal, 27 (1), 83-98. Czinkota, M. R., & Ronkainen, I. (2007). International marketing. Mason, OH: Thompson. Goldman, G., & Nieuwenhuizen, C. (2006). Strategy: Sustaining competitive advantage in a globalised context. Cape Town: Juta. Sakarya, S., Eckman, M. & Hyllegard, K. (2007). Market selection for international expansion: Assessing opportunities in emerging markets. International Marketing Review, 24 (2), 208. Zekiri, J. & Angeloya, A. (2011). Factors that influence entry mode choice in foreign markets. European Journal of Social Sciences, 22 (4), 572-584. Read More