Introduction to Market Entry Strategy
In the modern era, internationalization has become very important for overall growth and success of any business enterprise. Nowadays, the competition among business operating in retail sector of UK has become so intense that it is not easy for companies to gain high market share and attract customers. Further, due to limited number of customers in home market and growing competition it has become very crucial for organizations to seek opportunities for international growth and expansion. Entry is new market can be a risky move for any organization as need and demand of people tends to change from market to market. However, it can be argued that entry in new market with the most appropriate strategy can provide several kinds of benefits to a company. For example by finding new customers in international market, businesses have an opportunity to increase their existing sales and profits.
On the other hand, it can also support firm in getting competitive advantage over its major rivals . The present research report is based on Asda which UK based chain of supermarkets. Instead of focusing only on single product or service, the company has diversified its range of products and also offers services related to finance and mobile phones. Founded in the year 1949, the selected organization is now second largest chain of supermarkets in Britain. At present Asda is facing very tough competition from market players such as Tesco, Sainsbury and Morrision. All the above mentioned brands are trying very hard to acquire market share of UK's retail supermarket. Thus, Asda has an opportunity to enter country such as India which is economically growing with a very good pace. The present study, depicts market entry strategy which can be used by Asda for India market.
Literature Review and Critical Analysis
In the present scenario, the concept of internationalization is getting day by day popular along with the passage of time. It can be stated that there are variety of reason due to which companies prefer to opt the strategy of internationalization. According to the view of Das, Roberts and Tybout, the entry strategy in new market relies upon objective of company to a great extent. This means, in order to adopt the most effective and appropriate strategy, businesses are first required to develop aim and objective of entering new market. However, Claver, Rienda and Quer, has argued that firms also have opportunities to adopt standard market entry strategy which is most commonly preferred. The main reason behind expanding operations into new international market is to increase sales and profits of a business enterprise. Along with this, it also supports companies to go for innovations in existing products and services. This sometimes acts as competitive advantage for organizations and assist them in getting high market share.
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As it has been already discussed that Asda is facing very high or intense competition in market such as UK. This has forced the brand to make changes in its products and services at regular intervals in order to attract customers.. Along with this, it is also facing problems in attracting new customers and retain its old ones. At present the brand has adopted for aggressive marketing strategy, in order to acquire adequate number of customers but still it is not able to achieve its desired objective to becoming leading chain of supermarket retail. It can be expressed that the company can expand its operations to other international markets such as India to acquire new customers and enhance its existing financial performance. In last one decade the economy of nation has grown really well and it has also supported foreign investments to a great extent.
Apart from this, the large population of Indian market will support the brand to attract large number of customers. On contrary of this, Brouthers and Hennart, has argued that the major challenge which has been faced by foreign businesses in expanding their operations to Indian market is related to diversified population. The nation is having very diversified population and the need/demand of people in the market differs from each other to a great extent. According to Klepper, and Sleeper, most of companies fail in entering market because they do not carry out appropriate research before entering the same. Adequate research not only support in getting aware about customer demand but it also provides businesses with information related to the level of competition existing in the new international market.
Therefore, before expanding its operations in market such as India, it is required by Asda to carry out market research. This will support in getting aware about the overall business conditions and macro environment of the nation. In addition to this, by carrying out risk assessment, the brand can gain adequate data related to the major risk associated in doing business in new international market which is India. The use of models such as Pestle analysis will help the supermarket retailer to gain adequate data related to customer trend and the overall business environment of India.
Pestle analysis of India
According to the view of Naranjo-Valencia, Jiménez-Jiménez and Sanz-Valle, the form of government which exist in India is federal and the nation is also considered as one of the largest democracy in all across the globe. The policies, action plan and interest of political party's has direct influence on the entire political environment of India. Thus, it can be stated that businesses and their activities are affected by any kind of changes in political environment and policies.
This means at the time of doing business in India, Asda is required to take care of its political environment at the time of carrying out its operations in the country. Apart from this, the system related to tax are developed in very effective manner. The company will be required to pay several kinds of taxes such as sales tax, service tax etc. however Canabal, and White, has argued there are different kinds of subsidies and program which are conducted by government of the nation to support businesses.
It can be termed as one of the most important and crucial factor which affect operations and activities of a business enterprise. In terms of economic stability, India is very stable and this has supported organizations to a wider extent. Some key elements which has resulted in economic development of India includes liberalization of foreign capital, reduction in the process and requirements of industrial licensing etc.
Thus, for a company like Asda, economic conditions of India will support in attracting more new customers and expand operations in effective manner. Further, increasing purchasing power of people in the market will result in penetrating the new international market in desired manner.
Blomstermo, Deo Sharma and Sallis, has explained that any kind of changes and modifications in taste and preferences of customers has direct impact on sales and profits of any business enterprise. In the modern era, offering products and services as per changing customer demand is the best and most effective way to sustain in highly competitive marketplace. In terms of India rising population will be the major social factor which is going to support the establishment of Asda. The rationale behind this is that increasing population will help in getting adequate customers. In India, majority of population lies between age group of 15 to 65 years. Thus, Asda will not have any kind of issues in finding skilled and productive employee for carrying out day to day operations. However, changing taste and preference of customers at regular intervals will be a big problem for the brand and as it will need to make changes in its offering on the basis of the same.
Nowadays technological advancements and up-gradations has become very crucial for smooth flow of operations and activities of an organization.. High rate of technological advancements supports in development of new products and delivering more effective services to customers. In last few years, India has emerged as one of the most effective and strongest nation in terms of technological advancements. For a company like Asda, such kind of technology can have wider and positive implicationsof its operations and the way services are delivered. In addition to this, adapting higher technology at regular intervals will result in increasing overall cost of operations.
While doing its business operations in country such as India it is also required by organizations to take care of legal laws and regulations. Further, by following laws and rules, businesses are able to carry out smooth flow of operations and activities in long run. In situations where laws and regulations are neglected firms may start facing several kinds of legal consequences. In terms of Asda it can be stated that the supermarket retailer will need to take care of Acts related to minimum wages, disability-discrimination, working hours and recycling. This will support the enterprise to avoid fines, penalties and legal proceeding.
In order to sustain in long run companies are required to take care of environment and society under which they operate. Nowadays, activities, products and services of businesses has emerged as a very big threat to environment. Government and pressure groups has taken initiatives and started forcing organizations to take care of their activities. Therefore, Asda will be required to take care of the same while carrying out its operations in India.
As per the view of Pradhan, waste disposal, air pollution, environment pressure groups etc. are the major issues which can be faced by the brand in India. The company will need to develop effective strategies and actions plan in order to deal with the same.
After carrying out the above mentioned Pestle analysis, it can be expressed that the macro environmental factors are in favour of Asda in country such as India. The supermarket retailer will not face too much issue or difficulties in terms of establishment or operations. There are certain factors which needs to be taken into consideration in the best possible manner. This includes following all legal laws, regulations strictly. Along with this, the company also need to take care of the changing taste, need and demand of people in India.
Porter diamond model
The diamond model was developed by Michael Porter in his book named “The Competitive Advantage of Nations”. As per the view of Riasi, the model clearly laid emphasis on highlighting the fact that why some businesses become very effective and competitive in some nations. It can be stated that in order to carry out operations in India, there are six major factors which needs to be considered by Asda. The factors are below mentioned as:
It includes major resources which will be required for carrying out smooth flow of operations and activities. In nation such as India, Asda will not face any kind of issues regrading arrangement of resources such as human, capital, infrastructure and technology. Furthermore, easily availability of cheap and productive workforce will support in carrying out operations in cost effective manner.
It is a kind of factor in which competitive advantage is gained by organizations in situation where people in domestic market starts demanding products and services which are highly innovative and creative.
Related and supporting industry
In a country like India, Asda will get adequate support and benefit from all supporting industry. assistance from other businesses will also help in carrying out innovations in existing products and services.
Firm strategy, structure and rivalry
The overall success of Asda in new international market will also rely on the strategy and structure which it has employed in Uk market. By encouraging participation from employees and considering their view, the brand has an option to develop adequate strategy. On the other side of this, the supermarket retailer will not face intense competition in India as compared to the one which it is facing in UK.
In last few years, the government in nation has encouraged foreign direct investments to a great extent. This can act as very important support for Asda in terms of doing business in India.
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By delivering quality services and products to customers on time,Asda has an opportunity to gain competitive advantage over the other market players operating in the country. Along with this, the supermarket retailer will also need to prepare itself of all those events which are beyond its control and have direct impact on sales and operations of the same.
According to view of Abraham, doing business in India is not an easy tasks and there are variety of risk associated with the same. Many business fails in entering new market because they do not carry out analysis or assessment of risk before entering the nation. In country such as India, one of the major risk which can be faced by Asda is related to consumer market. Here, the supermarket retailer needs to become aware of the fact the demand of customers as in India market is completely different from UK. For example in UK, people have standard demand and need whereas in India market need of customers changes from one state to another. Therefore, Asda will be required to offer services and products on basis of the same.
Another major risk which is associated with Indian market is of employees or workforce. Budhwar and Varma, has asserted that many business plan to operate in India with an objective to acquire human resources at low cost and enhance their existing profit margin. It is very true that at the time of doing business in India, Asda will not face issues regrading shortage of human resources. However, Khanna and Yafeh, has argued that the risk with Indian labour is that majority of its part lives in rural areas and it is illiterate. Along with this, the country is having very high power distance which can make it more complicated for a UK based business to acquire desired workforce.
Here, the problem lies in situations where Asda adopts for autocratic style of leadership and all employees will be required strictly follow rules and regulations without communicating the reality of work to the management. Apart from this, for manufacturing units, the country has developed very strict rules and regulations but when it comes to service sector the rules and regulations are not that very strict. This will result in creating several kinds of consequences for a company like Asda.
As per the view of Lewin and Peeters, corruption, bribery and corporate fraud are termed as the major risk which is associated with doing business in India. The number of frauds and rate of corruption has grown with a very good pace.This has affected the overall operations of business to a great extent. In addition to this, foreign direct investment are also affected by the above mentioned reason. Thus, it is more beneficial for company like Asda to carry out appropriate risk analysis for doing business in India. Other than this, the supermarket can also face issues or challenges related to strikes, closures and unrest which is a major threat to businesses in India.
Different type of market entry strategy
According to the view of Khanna, Palepu and Sinha, there are variety of ways which can be used by businesses in order to enter new foreign market. Further, it can be also expressed that there is no single strategy which can used for carrying out operations in all different markets. Selection of right market entry strategy can results higher growth and profits whereas wrong one can results in providing company with huge financial losses. The key strategies include direct exporting, licensing, franchising, partnering, joint ventures, buying a company etc.
On the other side of this, strategy such as establishing own store or business unit can be used to enter market . For a company like Asda, setting up its own stores is more beneficial and effective as it can provide several kinds of benefits to the organization. For example, it willallow the supermarket retailer to have its own decision making. In terms of strategy formulation, expansion and management of the same. Licensing is not suitable because it can it will restrict the brand in terms of taking active participation. Along with this, it is also possible that licensees can emerged as the major competitors of Asda.
The strategy of joint ventures will result in integration of two or more companies to achieve some common goals and objectives. For this purpose, it will be required by Asda to form joint venture with any other business which is operating in India. Here, the major drawback is top management of Asda will not have complete kind of control over the management practises. In addition to this, it may become almost impossible for Asda to recover the capital which it has invested. The strategy of ownership is one of the best and most effective one for company like Asda because it does not include all the disadvantages which are associated with strategies such as joint ventures and licensing. The suggested strategy will have different impact on company and the effects on different areas mentioned below as:
Strategies of business
Ownership will help Asda to develop its own set of strategies without encouraging participation from any other party. This means it will have the right to develop its own set of strategies for attracting customers and getting high market share.
Integration of functional strategy of business
It can be stated that rather than focusing upon selling existing products and services to India market, the company can look forward to offer new services and products to customers. Furthermore, all the functions needs to be directed towards accomplishment of common goals which will be to attract more customers.
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Corporate culture of company
As per the view of Uhlenbruck and et.al., corporate culture of a company has direct impact on all operations and activities. For example open and innovative cultures helps businesses to gain competitive advantage over other market players by offering something new and unique to customers. On the other hand, power culture results in creating dissatisfaction among workers as the power of decision-making is concentrated in few hands.
At the time of using strategy of ownership for long term growth and success India market, Asda should look forward for developing open culture which has been already developed in its stores in UK. It can be stated thatrather than focusing only upon achieving higher sales and profits, the brand should also seek for delivering satisfactory products and services. This will not only provide long term growth but will also contribute a lot in achieving customer loyalty which is very beneficial.
Major advertising media used in the country
In the last few years, there has been a significant change in the way how advertising is carried out in India. Earlier advertising on newspaper and television was carried outwith an objective to attract more and more customers and inform them about products and services of a business enterprise. Now, the focus of companies has changed to adaption of modern marketing tools and techniques such as emails, mobile messages and social media. At present, companies are carrying out advertising on social media such as Facebook and Twitter.
The increasing number of internet user has resulted in developing social media as one of the most effective platform for marketing and advertising of products and services. Promotional events are also carried out in the country with an objective to attract more and more people. Therefore, Asda has wide range of alternatives available in terms of advertising its products and services in India. For example, it can display ads regrading its products and services in newspaper and business magazines. Along with this, advertising can be also carried out on internet by making use to tools such as social media, pay per click and emails.
Conclusion and recommendation
From the above carried out report, it can be concluded that for a company like Asda, it has become very difficult to gain higher market share and increase customer base in UK. At present, the supermarket retailer has an opportunity to expand its operations in country like India which is growing with a very good pace. The country is politically very stable and the rate of technological advancement in India is also very high. It can be inferred that there are large number of benefits which can be gained by Asda by carrying out its operations in India. For example the rising population of the nation will help supermarket retailer to find large number of customers easy. Along with this, political stability will support in establishing itself and carrying out smooth flow of operations in desired manner.
However, it can be argued that there are certain challenges which can be faced by Asda in doing business in the country. For example, majority of population in nation lives in rural areas and thus it will face issues at the time of hiring qualified personnel. Another issues will be related to understanding the diversified population of India will create problems for the brand as need and demand of people changes from one state to another. At the time of carrying out its operations, it will be required by the brand to identify customer demand and then deliver products/services according to the same. From the above conducted research, it can be also concluded that corruption, bribery, strikes and unrest are the major threats which can be faced by Asda at the time of doing business in the country. For this purpose, the supermarket retailer will be also required to develop effective strategies to deal with the above mentioned threats.
- It can be recommended that before carrying out its operations and activities in country like India, it is required by Asda to conduct adequate market research. The research should include key areas such as market trends, customer demand, buying behavior, competitors and macro environment analysis. This will help the brand to understand new international market more effectively and attain desired results. Adequate research will provide detailed information about the product, price, place and promotion which can be used in India by Asda.
- It can be also suggested that among different types of market entry modes such as exporting, licensing, joint ventures, franchising etc. the strategy of ownership is more suitable for brand like Asda. The reason behind this is that ownership will allow the brand to have complete control on decision-making. Joint venture will lead to distribution of authority and decision making whereas the issues with licensing is that there are chances that licensee may emerged as competitor. Exporting is also not suitable because if the company does not remain focused, it may start losing its share in home market as well. Therefore, the strategy of ownership is more effective and suitable for the brand.
- It can be also suggested that rather than offering same kind of products and services in the new international market, Asda should introduce a new range of products as per the culture and need of Indian customers. Along with this, it can also introduce existing products which are successful in the UK market. This will support the brand to penetrate Indian market more effectively and achieve all its desired results.
- At the time of carrying out its operations, it is recommended that Asda should adopt democratic leadership style and open culture. This will encourage employees to take part in process of strategy formulation and decision making. Furthermore, it will also result in carrying out smooth flow of operations and activities in the new international market.
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