Foreign Market Entry Strategy

Foreign Market Entry Strategy

1. What was the chosen entry mode and why it was chosen?

In an increasingly global world of business, many businesses may presume the international business expansion to be very attractive for their businesses as an option for market expansion. Market entry strategies into the foreign market are however proving tough for many businesses. This leaves many companies with a number of options for the market entry strategies into the foreign market (Durmaz & Tasdemir, 2014). This is because no one market entry strategy works for all foreign markets. Based on the previous assessment, I used the PESTLE and the SWOT as the viable tools that could aid the analysis of the business environment for the Madhuraṁ Confectioneries Limited which is a leading candy and confections in Malaysia. Since the establishment of this company in 1993, it has been the leading producer of hokum in the Malaysian international market. Its good reputation for quality products, excellent innovation have speared headed the popularity of the product among the Malaysians population and the global at large. Despite the large multinational competitor firms like Cadbury, the hokum is still a formidable contender in the international and local markets. The company envisions itself the producer of the leading brand in Malaysia and the international market. Nevertheless based on some factors both internal and external factors, the company has not anchored itself fully to the international market and in particular, Vietnam. As a result, in this assignment, I am going to pick on a market entry strategy for international markets and develop the chosen mode to give a projection and the picture of the company years to come (Jormanainen & Koveshnikov, 2012). I will also assess the operational structure of the company in this assessment and evaluate it on whether it can support the entry mode chosen.

The chosen entry strategy into the international market is exporting. To give a recap on the same, export is the act of supplying the locally manufactured goods and services to the outside countries for sale or trade. There two types of exporting, the direct and indirect exporting. The direct exporting I whereby the goods are sold directly to the chosen market using in the first instance, your own resources. Conversely, indirect exporting is the selling of goods and services in another country by using another company in that country to market or sell the good on your behalf. Exporting is regarded the simplest market entry method into the international markets. Through exportation, a company is able to enter a country without establishing itself in the countries in a plan (Cavusgil et al, 2014). Madhuraṁ Confectioneries Limited does not need to establish itself in the countries like the US or Vietnam in order to trade their products. What the company simply needs to do is to manufacture its goods in surplus so that it can be shipped to the foreign countries. In terms of the indirect exportation, the Madhuraṁ Confectioneries Limited will rely upon the domestic intermediaries who broke the relationship with foreign buyers. The export entry mode is chosen over other contenders like licensing, and joint venture because it is the simplest as aforementioned to gain entry into the global market (Durmaz & Tasdemir, 2014). In this case, Madhuraṁ Confectioneries Limited applies directly exporting to avoid confusion which emanates from the middlemen hence potential benefits due to the elimination of the intermediaries. Besides, due to the export strategy, the agents and the distributors will work closely with the company to ensure the company’s interests are represented.

2. Why do you expect this venture to be successful? And what are the key internal weaknesses?

The previous assessment outlined the SWOT analysis for Madhuraṁ Confectioneries Limited. Under this umbrella, I would only pick on the “S” and “W” (Strengths and Weaknesses). This venture is expected to be so successful regarding the strengths and the weaknesses. According to the SWOT analysis, the company has strengths in the strategic location. The limited company is located in the capital of Malaysia where it enjoys the population of Kuala Lumpur. From this location, the business is set to thrive even higher in terms of marketing magnet locally. Due to this strategic location, the business enjoys all the shipping and it transport when exporting the products to overseas. Being one of the capitals which harbor most Muslims, the business is set to grow since most Muslims fancy candy. So, it, makes the sale of candy even more pronounced locally before thriving into the international markets (Jormanainen & Koveshnikov, 2012). The hokum form Madhuraṁ Confectioneries Limited has reduced level of sugars and dairy free. This makes many customers to be attracted to this hokum in the international market including the Vietnamese market. The company also sells a variety of candy which helps in tapping customers’ preference and tastes both locally and internationally. The company also has an updated market information or the market trends. The trend in the market helps the company in identifying the existing gaps in terms of the consumers’ feedback in preferences (Musso & Francioni, 2012). The company usually tries to manufacture its candy in line with the updated information form the international markets. The “W” of the company is much pegged on the inadequacy of the skilled personnel as well as their frequent rotations in different sectors of production. Form this scale of comparison between the ‘S’ and ‘W’, the Strengths represents the key competencies of the company that will promote success. Moreover, they outweigh the weakness on this scale.

The key internal weakness mentioned above hinders success because, at one point during the production process, the company is likely to realize the best candy production with that particular organizational structure. Nevertheless, such organizational structure is never maintained since the company is keen on achieving specialization through the rotational procedure (Ripollés et al, 2012). The rotational procedure makes the company do the shifting in personnel annually. At one point in the candy production, the best candies might be realized at some months during the year but will never the realized again. However, the company management always tries its best to have the best candies on the market. The constant rotation becomes the key factor hindering success because, in terms of tastes and preferences of the consumers, a consumer may decide to stick by a certain product depending on the first impression. If that first purchase of the candy reveals unimpressive product due to the rotation of the production chain, the customer may decide never to purchase the candy. So it depends, if the first impression is on the good side of the purchasing power, the company is destined to succeed, and otherwise, it will face challenges in the consumer market. I would also like to consider the external threats, here the key external weakness, the company lacks the external partnering company which will assist in the direct exporting (Sleuwaegen & Onkelinx, 2014). Besides, the company also lacks the quorum as far as the marketing persons in the foreign countries are concerned. Thus these two factors combined become the main source of external weakness.

3. What are the company’s operational strategy and the corporate objective?

The company applies the strategy-focused method of operation in trying to organize itself both internally and externally in order to tap customers in both markets. Madhuraṁ Confectioneries Limited also applies the following principles of performance to transform the operations of the company. The operation strategies assist the company to realize its set objectives. In this regard, the company’s objective consists of tapping the new international markets via the production of surplus, quality candy. Besides, the company seeks to be the leading exporter of candy in the region and Europe at large. In order to achieve these goals, the company has to strategize in terms of its operations in order to realize these long and short-term goals. The company is looking forward to retail the products abroad. This strategy will ensure the company uses low inventory levels and prices to generate quick sales based on low prices and even the value of the products. If the company keeps the inventory low, the process will consequently reduce the prices for the customers. With low prices, there are increased demands in the international markets and hence increased sales in the company (Musso & Francioni, 2012). Tapping new international markets is a corporate objective is a well-defined and realistic goal that influences how the company makes its strategic decisions. They provide the framework for setting detailed objectives in the company. Another operational strategy geared towards achieving the corporate objective is the B2B (business to business). In this strategy, the company is set to export much of its products to the international market. The B2B strategy will allow the company to sell their products and services to other businesses in these outside countries and have a different strategy to that of the retailers. These two strategies will ensure the company works towards achieving the corporate strategy.

4. What is the intended organizational design?

The intended organizational design is the matrix design. The matrix management is the practice of managing individuals with more than one reporting line. The people with similar work skills are pooled for work assignments. This may at times result in more than one manager in the company (Martin, 2013). This becomes the intended design since it combines two or more types of organization structure such the functional structure or the projectized organization structure. The matrix design is therefore just a balance between these two structures since the two represents the extreme points of a string. The combination of these two extremes helps the company to achieve higher efficiency in its operation, and adopt quick market access. The authority of the functional manager in the Madhuraṁ Confectioneries Limited flows downwards in a vertical manner while the authority of the project manager flows sideways. The employees may report to many bosses in the company. The intended matrix design is to be attributed to a balanced matrix organization structure. Here, the powers and the authorities are shared between the functional manager and the project managers. As the powers and the authority are shared between the two Managers, the project manager will have the full-time role (Martin, 2013). He will be accompanied by the part-time management administrative staff who will work with him or her. Both the managers will control the project budget which will include setting up alternative retail shops in the outside countries to assist in achieving the retail operational strategy. The matrix design will ensure all the foreign markets are tapped due to the production of the quality products to meet the customers’ demands. It will ensure effective communication during the production process. Effective communication across all the levels in the company will ensure all the departments within the company are well-organized. The matrix organizational design also works in close association with the global customer design because of the quality products from the matrix design ready for export. The design will exhibit the following structure.

5. What is the scope for expansion within the chosen market/country?

The scope for the expansion of Madhuraṁ Confectioneries Limited will be done with respect to the chosen market entry method which in this aces is the export. When a company makes the decision to enter the foreign market, there a variety of options open to it. These options vary in cost, the degree of control and the risks expected. All these variations are as well expected in the company when dealing with the scope for expansion. The company and the management expectation is that they develop the value chain-marketing function detail as far as the exporting marketing mix is concerned (Laufs & Schwens, 2014). With regards to the scope of expansion, the company is looking forward to having an elaborate product support which includes product sourcing, product testing, new products, and product management among other ideas meant for sourcing the international market. These ideas geared towards increasing the level of production are integrated with the price support elements which include discounts, distribution, and maintenance of the price lists in competitive environments that exist in the international markets. The company looks forward to opening up of two branches in Vietnam which was the first country chosen for external market entry (Martin, 2013). These two branches will partner with Madhuraṁ Confectioneries Limited in Malaysia in terms of the workforce required. Besides, the company comes next month will be unleashing a new candy in the market mainly meant for promotion purposes. This new candy will be packed alongside large candies such that upon buying the 100 grams candy, the 50 g candy is then provided for free as a promotion. Within Vietnam alone, the long-term goals form the Resource Department indicates that the company is looking forward to opening two more branches in Vietnam, and this expansion targets the beach towns where the sale of candy is likely to be higher due to a large number of tourist visiting the beach resorts. The two towns include Nha Trang and Hoi An.

6. What is the financial capital requirements?

The financial capital requirement for export as a market entry method is dependent on the profit the company makes in its annual sales of the product. The financial analysis for the capital requirement is based on the following ratios. The liquidity ratio, the profitability ratio, the leverage ratio, and activity ratio. The financial capital requirement for Madhuraṁ Confectioneries Limited will depend on the number of countries the company wishes to open up for candy macerating, the types of new products to be exported and the method of exporting these products (Hilmersson & Jansson, 2012). If the goods the goods are to be exported to Vietnam, the most suitable means of export form Kuala Lumpur is the use of sea or air depending on the bulkiness of the products and the cost incurred in what is termed as activity ratio. All these factors have to be integrated into the annual estimation of the capital requirement for exporting the candy products. The export method of market entry will mean an increased level of production of the candy and other related products. This will consequently mean an increase in the number of employees and the expansion of the organizational structure to accommodate the new management schema. Moreover, the opening of the two branches in Vietnam will also require some good amount of capital. The two branches will also need to run their own enterprise even though they will still partner with the main company at Kuala. Once these companies are opened for either retailing or wholesale, they will need to be established just as the mother company. Thus increasing the scope of the financial requirement for this strategy. The company also has to include the distributors in these newly tapped markets in its payroll. The fiancés meant for settling the employee salaries will therefore increase. The liquidity ratio involves the liquidity index which shows how a company can quickly turn its assets into cash (Sleuwaegen & Onkelinx, 2014). It is given by the following formula. ((Trade Receivables ×Days to liquidate) + (Inventory ×Days to liquidate))/((Trade Receivables + Inventory))

7. What is the staffing policy?

The staffing policy at Madhuraṁ Confectioneries Limited follows the rationale for designing the matrix for the company. The company assumes geocentric staffing. The employees are employed only on merit regardless of one’s country of origin (Musso & Francioni, 2012). The company has employees form India, Pakistan and Vietnam, even though the highest percentage is from Malaysia. The Chief Executive Officer (CEO) is the topmost staff assisted by the three managers. The communication policy among the staff is expected to follow the upward-downward trend or sideways. This means that the junior staffs can communicate to the CEO only after the information has passed the product managers. The CEO and his staff are appointed by the stakeholders and are viable in office for a maximum of five years when the next team will be appointed. Nevertheless, the policy allows for the retention of any staff except the CEO based on the work merit rationale for the previous tenure in office (Sleuwaegen & Onkelinx, 2014). This process is also done to meet the rotational program in the company. The employees are recruited after every five years with the help of the Human Resource Department. This HRD ensures qualified persons are employed on a contractual basis. There will only be one CEO and three top managers who will be in charge of business analysis, quality assurance and development of the company. The other managers are in charge of the production process. Each manager must stick to his or her area of jurisdiction, otherwise, it is considered a breach which will attract stringent measures. The total employees as per the staffing policy should be between 400 and 500 employees. Each departmental staff is expected to carry out their deities with decorum to ensure the resultant products are of quality.

References

Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L.       (2014). International business. Pearson Australia.

Durmaz, A. Y., & Tasdemir, A. (2014). A Theoretical Approach to the Methods Introduction to   International Markets. International Journal of Business and Social Science, 5(6).

Hilmersson, M., & Jansson, H. (2012). Reducing uncertainty in the emerging market entry process:           on the relationship among international experiential knowledge, institutional distance, and           uncertainty. Journal of International Marketing, 20(4), 96-110.

Jormanainen, I., & Koveshnikov, A. (2012). International activities of emerging market     firms. Management International Review, 52(5), 691-725.

Laufs, K., & 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), 1109-1126.

Martin, X. (2013). Solving theoretical and empirical conundrums in international strategy research: Linking foreign entry mode choices and performance. Journal of International         Business Studies, 44(1), 28-41.

Musso, F., & Francioni, B. (2012). Foreign markets entry mode decision for Italian Small and       Medium-Sized Enterprises.

Rask, M. (2014). Internationalization through business model innovation: In search of relevant     design dimensions and elements. Journal of International Entrepreneurship, 12(2), 146-           161.

Ripollés, M., Blesa, A., & Monferrer, D. (2012). Factors enhancing the choice of higher resource commitment entry modes in international new ventures. International Business             Review, 21(4), 648-666.

Sleuwaegen, L., & Onkelinx, J. (2014). International commitment, post-entry growth and             survival of international new ventures. Journal of Business Venturing, 29(1), 106-120.