Choosing the right market entry strategy for DePuy (a division of Johnson and Johnson)
Abhishaik Kumar Reddy
Student ID: 1453562
29 May, 2010
Word count 1520
University of Auckland
Table of Contents 1.0 Introduction1
2.0 Choosing the right market entry strategy 2
2.1 Background 2
2.2 Schools of Thoughts and Key Ideas 3
2.3 Implications for orthopedic medical device companies 4 2.3.1 Identifying a potential market to establish a subsidiary 5 2.4 Conclusion6
3.0 DePuy (a division of Johnson &Johnson)6
3.1 Current Impact6
3.2 Potential Impact7
3.3 Alternative strategic response:7
4.0 Recommended strategic responses7
This report gives an overview on the current global market scenario of orthopedic implants and the potential demand for artificial high flexion knee in the Indian market. It discusses approaches essential to identify a potential market and various strategies required in positioning a firm in targeted country. 2.0 Choosing the right market entry strategy:
Market entry strategy is one of the most important element included in the market plan, this often shapes the organizational structure and market positioning of the firm in the targeted country (Gurau, 2004). Generally, the strategy that is best for a specific competitive situation can be found by analyzing the firm’s resources and expertise. The specific circumstances of the foreign business environment and the strategic objectives of the firm and various factors influencing aspects like profitability, market share and degree of operational control are also analyzed (Gurau, 2004). In general various classical market entry strategies followed by companies while entering foreign markets are exporting; licensing, franchising, wholly owned subsidiaries either developed or acquired strategic alliances and joint ventures (Gurau, 2004).
2.2 Schools of Thoughts and Key Ideas:
Subsidiaries are used to expand the activities of a firm in foreign markets by establishing a direct presence in the target market. Compared to the other forms of market entry strategies subsidiaries may require more investment and carries considerable risk but they allow a great degree of control and coordination (Gurau, 2004). Subsidiaries can be either newly created which involves large investments in terms of money and effort. They can also be created by acquisition of local firms which requires restructuring at various levels to transform an acquired subsidiary into the corporate culture of the mother company. Merging helps two or more firms to unite into a single enterprise, this enables the united enterprise to position a product quickly in the market. Merging between firms increases the resources and upgrades the technology of the enterprise, but it could decrease the profits of individual firm as it being shared after merging (Lolyd, 2010). In general firms are assumed to enter attractive markets through wholly owned subsidiaries as they are expected to provide the greatest potential for long-term profits (Taylor et al., 1998; Brouthers,2002;Randøy and Dibrell, 2002).Greater potential to absorb additional capacity is observed in countries which are characterised by high market attractiveness; this provides an opportunity to improve firm efficiency (Morschett et al., 2010). Vertical integration is used by firms in markets with high market attractiveness as it can gain economies of scale and secure a long-term market presence (Agarwal and Ramaswami 1992; Brouthers, 2002). The benefit of internalization is enhanced in attractive markets as the potential risks associated with shrinking are high. Most of the authors believe that market size is positively related to internalization (Gomes-Casseres, 1990; Taylor et al., 1998). It is...
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