By: Ahmed Moguib
Table of Contents:
1- Research Objectives
2- General Introduction
3- Global Market Entry Strategies: Advantages and Disadvantages a. Exporting
e. Joint Venture
This research is undertaken to identify, analyze and evaluate the various market entry strategies in global markets. Specifically, the research will examine exporting, franchising, acquisition, merger, wholly owned subsidiaries and joint ventures. Furthermore, the research will also analyze entry strategies implemented by a number of multinational corporations operating in different industries. Finally, the research will conclude with the factors that need to be examined and investigated before entering a global market.
Multinational firms deciding how to enter or operate in a global market must carefully and precisely take into consideration many critical factors including the local business environment in addition to the firm’s own core competencies. An entry mode is defined by Wild & Wild (2012) as “the institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market.” (Wild & Wild, 2012, p.358)
Wheleen & Hunger (2010) stated that research had indicated that growing globally is linked with the organization’s profitability. This means that firm’s who are looking for ways to increase their long-term profitability, are now looking for profitable and appropriate markets to offer their products and or services. A firm can select from a number of strategic options the most appropriate method for entering a global market or establishing production plans in another nation. Zekiri & Angelova (2011) argued that Firms that want to internationalize must decide on a fitting mode of entry into a foreign market in order to make the best use of their resources. “The age of globalization has both facilitated and necessitated businesses to move towards the internationalization of organizations of all sizes.” (Wood and Robertson, as cited in Zekiri & Angelova, 2011, p.573).
There are many different modes of entering into foreign markets. Each mode has its strengths and weaknesses in general terms. However, Zekiri (2011) explained that each single multinational firm would be more attracted to a type mode depending on their backgrounds, nature of the company, strategic objectives as well as the resources. In many cases, there are many obstacles that companies have to meet while deciding to enter other markets, for example; safety, environmental, packaging, labeling, patents, trademarks and copyrights, are factors that businesses depend on being successful. Moreover, It should be stated that the local business environment in terms of political, technological, legal, environmental, and cultural factors should be deeply studied to assess the attractiveness of the target market. This argument is also supported by Zekiri & Angelova (2011) as he stated “it is difficult to understand the business environment in a country without studying the current political system and institutions, government policies, and a variety of data and other information on the country’s economy.” (Zekiri, 2011, p.573)
Kotler & Armstrong (2008) as well as Chung & Enderwich (2001) explained that some of the benefits associated with operating on international basis are the increased profits and sales growth, the chances of achieving both economies of scale and location economies. Zekiri & Angelova (2011) also added that many firms are operating on international basis for better opportunities and profit potential in emerging markets such as (India, China, Brazil and Russia) As globalization now is fostering international operations as...