With the effect of globalization, we have witnessed a fast- changing nature of the international business environment. The competition in global playground, therefore, has been becoming fiercer and fiercer. In this decisive battle, every company must always struggle to survive. There is no other way but developing new strategies, which help to make their products and brand meet the consumers’ needs.
From that standpoint, this paper concentrates on outlining some major strategy pursuits of Multinational enterprises (MNEs), when in the race to be the potential market leadership in the markets. How do they do to adapt and be able to compete in the local economy?
Table of contents Page
2. Necessary conditions5
3. Market penetration strategies5
3.1. Segment penetration5
3.1.1 Forward integration6
3.1.2 Horizontal integration 6
3.1.3 Increase present customers’ rate of use7
3.1.4 Penetration Pricing strategies7
3.1.5 Win consumers from the competitors8
3.2. Segment enlargement 8
3.3. Market repositioning 8
3 Pros and cons of market penetration strategies9
Figure 1: Ansoff Matrix10
Figure 2: Heineken’s acquisitions in Western Europe10
The flow of globalization, along with the enomously potential profitability has driven Multinational enterprises (MNEs) internationally, bringing their brands and products to all parts of the world. However, it is not an easy job to step in and immediately get flourished in a new market, but require thourough strategy implementation to serving different market segmentations. Hill defines a firm’s strategy as the actions that managers take to attain the goals of the firm. For most firms, the preminent goal is to maximize the value of the firm for its owners, its shareholders ( subject to the very important constraint that maximizing value is pursed in a legal, ethical, and socially responsible manner) .1 The crucial issue of companies conducting business is choosing the suitable strategies, which is an approriate combination of global and local resources and the decision is also based on certain situation that the company confronts. Theoretically, the strategies of the firms are mainly based on the economic concepts of economies of scale, which implies that the larger the firm is, the more cost advantage that it has. 2 This paper circle its focus on the main ways of local market penetration with different approaches and strategies towards increasing the number of customers.
Fist of all, let us define: “ What is market penetration?”. Market penetration is one of the four growth strategies of the Product-Market Growth Matrix as defined by Ansoff. This is a strategic option for an organisation seeking to expand its market share in an existing market, with an existing product ( illustrated in figure 1). The growth strategy of Market Penetration option is for a company seeking to maintain or increase share of its existing products within the market place in order to gain market leadership, change competitive processes within an already known market, or increase purchase volume of existing consumers. Hence, the option to penetrate deeper within the marketplace is a low risk option that makes use of existing resources. The growth strategy of one MNE should always start from the existing market with the certain number of customers as well as the advantage of full understanding of legally managed system, competitive conditions and the customers’ preference before thinking of international expansion. Market penetration is a...