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How to Compete in a Foreign Market

Executive Summary

Business research reveals that the chief goal of any business is to increase its market share in its undertaking i.e. to increase sales which in turn lead to an increase in profit levels. For firms to attain such objectives it should formulate an efficient marketing strategy. Marketing strategies can be referred to as tactics that a firm intends to utilize to better its performance with particular reference to attaining a large market share and enhance its business survival.

Businesses are increasingly faced with many challenges as a result of changing business environments which has brought about competition among various firms. For firms to cope with such competition brought as a result of rivalry in the market, the respective management has to formulate suitable marketing plans that will enhance their survival and continuity in their businesses. Such continuity may take the form of expanding to new foreign markets by taking advantage of globalization concept.

Introduction

Owing to advancement in technology and modernization in the world these days, most businesses are beginning to explore international markets for better profits and other opportunities. For instance, in the recent past, trading has become increasingly global in some way because of the need to gather and increase the company’s financial base. Advancement in technology including communication efficiency and better international relations has contributed to the promotion of international trade. Competition has however become a great challenge to the success of international trade but most companies are rising to the challenge. To achieve greater investments and better market opportunities in the international market; primary and secondary market research, market analysis, country analysis, product analysis must be done to ensure that information regarding the country, competitors and possible challenges are obtained in advance

Situational analysis

Situational analysis is very crucial to any business who wishes to go international and any successful company has to utilize this concept to expand its market share. This analysis simply involves understanding the organizational business environment and the company in question has to pay attention to the following factors:

Political factors whereby the company in question have to deal with the political interferences that may be practiced by the host government. According to research political systems of nations affect the conduct of businesses, for example some countries practice collectivism while others practice capitalism political systems. In my view, any company that wishes to enter into a foreign market should choose countries that practice capitalism since such governments allows factors of production to be privately owned and the government performs only limited duties that the private sector cannot perform unlike in collectivism and communism that stresses collective goals (Kotler, 94).

Economical factors are factors that mainly deal with financial forces in the economic environment. Such factors include foreign exchange rates, currencies and global monetary systems like the use of Euro currency, inflation, counter trade, balance of payments, monetary policies, and fiscal policies among others. After carrying out careful analysis of these factors the company in question that wishes to enter into a foreign market should ensure that it does not face a lot of these challenges. However, it should be noted that there are some general economic problems which cannot be avoided for instance the world economic meltdown mainly caused by inflation and the balance of payments.

Social factors are other factors that the company that wish to enter a foreign market has to consider before marketing its products. Forces within the society such as religion, family, social structure and education may impact positively or negatively the way the company will market its products. Social factors affect our attitude, opinions and interests on the way we view products from certain companies and therefore it will be necessary for the company in question to look into such issues in depth to avoid reduction in market share through bad reception of its products in the market. On the other hand culture is a problematic issue for many international marketers because it is inherently nebulous and normally difficult to understand. For instance, it is possible that employees of the company in question can violate the cultural norms of the host people without knowing hence the people in foreign market become uncomfortable with the behaviour. Furthermore, there has been a claim that people have become skeptical about the way cheap labour is imported to any country at the expense of the locals.

Technological factors are another key factor to be put in consideration before going global. Advanced technologies are now being experienced by many companies as a result of the concept of globalization. Globalization has taken centre stage and now the use of e-commerce or internet marketing has been increasingly utilized by many firms. Any company entering a foreign market should not be left behind and the management should consider the utilizations of such techniques in maximizing the benefits brought about by globalization.

Legal factors are another factor that must be analyzed before going international. The way the company operates in terms of operating rules of law for example how the company will cope with the legal rules in foreign market is more important because it avoids conflicts and will enhance the success of the organization. The company wishing to go international therefore will has to involve itself in a legal business practice of marketing the accepted products which is permitted by the host country laws (Baker, 58).

Porters Five Forces

Porters five forces analysis has been used by many companies to analyze their position in the industry and therefore strategically position itself to handle the issue of competition. Since the issue has been identified as a major threat to the existence of the companies industry, this kind of analysis is thus suitable for companies which would like to understand their competitors, their customers, buyers, sellers, suppliers, and other stakeholders in the business. Thus any company wishing to enter into a foreign market should evaluate these forces to enhance its business operations in the foreign market; Porters five forces are as follows;

The closeness of substitutes

Substitutes are option goods that can satisfy alike needs and offer same solutions. Substitutes in the businesses environment decrease the potential returns because they put a ceiling on the costs offered for products. Businesses that comprehend that goods being offered fetch substantial profits look for substitutes goods that can replace them to attain more profit levels (Porter, 15).

The Intensity of Rivalry among Established Companies

Businesses are facing extremely competitive business environment thus resulting to a lot of uncertainties in the market place. Businesses battle with each other across all stages and they all try to formulate plan of actions to enhance their survival and growth in the market place. Businesses have to utilize advance technologies to cope with challenges brought about by globalization which has become the modern norm of carrying out business in the modern world. Globalization has brought about intense competition and established firms will fight to have a well developed system that has an excellent consumer foundation to remain competitive and international in scope.

Threat of Entry by Potential Competitors

The entry of new opponents into an industry with a purpose to bring new competences that was not there before their entry has become a challenge to already existing businesses in an industry. Every business new entrant into a particular industry is a huge danger to the established businesses because they always create uncertain environment particularly with regards to attracting customers; for instance they may offer products at lower prices or give attracting incentives that other firms do not offer to their customers thus such new entrants become a threat to the existing businesses.

The Bargaining Power of Buyers

Bargaining power of suppliers in essence is the market of production. Usually customers in the businesses exert a lot of demands given that they are always responsive to any adjustment in price levels and are at all times ready to window shop and uncover where price levels are somewhat affordable. The accessibility of substitute goods in marketplace has made it extremely taxing for all those who operate such businesses and are thus they must study the conduct of their clients to attract them and thus devise best strategies to ensure that their rivals do not attract the customers too which may reduce there market share and thus profitability level.

The bargaining power of suppliers

Suppliers take the benefit of their distinctive supplies to solicit and negotiate for what they desire thus have the monopoly and place high prices for the goods or services. Suppliers are a competitive threat in any industry since they can augment the prices of both new and the old materials and consequently making the clients to look for substitute supplies that can gratify the same want (Porter, 85).

Effective Marketing Strategies

A marketing strategy is a plan of action in which the company in question will have to utilize in order counter the competition from its rivals in the foreign market and the process attain a significant market share in the foreign market arena. The company in question can choose to compete across entire market in its industry or particular market segments in the foreign market. Therefore, the best marketing strategy of the company is to compete in particular segments only that will perform better more than its competitors in the foreign market.

To achieve this market segmentation should be carried out by the company before marketing activities. Market segmentation involves identifying those target markets that the company will do well. It is only through this strategy that the company can ensure its survival and growth in its industry in the foreign market. This is because through market segmentation the company will only specialize in few and potential target markets that will yield good returns and also it will require little resources to compete in the segments than competing across the entire market. The management of the company should ensure that the target market selected provides an opportunity of accessing the market information required to save time and financial resources.

The company can further choose to use Porter Generic Strategies in the foreign market. Porter generic strategies rely on the dimensions of the strategic scope; meaning the market penetration and strategic strength referring to the firms or sustainable competitive advantage such as cost leadership, product differentiation and market segmentation which are required to meet the challenges of the competition. These strategies include; growth strategies, innovative strategies, among others. Although they are believed to be the best in the market so far, they are yet to be applied by most companies because of the costs involved in their implementation

The company in question can further utilize encirclement Strategies when entering the foreign market. This strategy is also called the envelopment strategy and is a more subtle, gentle, broader and a bit non-offensive but harmful way of attacking the competitor.

Normally, this kind of attack is undertaken in two ways. One, introduction of a broader range of products that are similar to the competitor’s products and each of these products will get a share of the same market the competitor is. In the long run, the competitor will be demoralized, weakened and discouraged leading to a state of siege of the competitor. This first method will ensure that full scale confrontation is avoided between the attacker and the target competitor. Secondly, the encirclement can also be based on market niches rather than the products themselves. In this case, the market share is liberated from the target competitor via the expansion of market niches that surround it (Kotare and Helena, 24).

Business-Level strategy

This encompasses plan of actions that try to resolve how a firm should compete in the foreign market. This may take the form of competing across the whole market or in several market sections.

Cost leadership: Under this the business has the aspiration to turn out to be an overall low cost manufacturer inside the marketplace. The business can do this through cutting of prices of its products that it offers in the marketplace.

Product differentiation: Under this the business can concentrates on making unique its products to be exceptional from those of other competitors. The distinctions may either be authentic or castle in the sky even though the chief concern is the sensitivity of variances.

Focus: Focus strategy may be designed for either cost or differentiation strategies. This plan is typically directed to some market parts where firm’s products are alleged to be doing well. So the business can decide whether to focus in costs or differentiated strategies with regards to its undertakings (Hollensen, 40).

 indicating Business-level strategies.
Figure 2 indicating Business-level strategies.

Market Entry Mode Strategies

These are ways in which firms and companies seek to market there products globally and usually depends on the quality of the company’s products and the nature of competition that rival firms employ in trying to expand there market share and to maintain there growth. There are various methods of entry to different markets and any company has to select the effective ones depending on cost, risk and the degree of control which can be exercised over them in terms of security. The following are some of the modes of entry:

Direct Exporting

Direct exporting involves the producer of the products or services dealing directly with a buyer in the foreign country and often regarded as the difficult method of entry because the owner or the exporter of the product is entirely responsible for the business undertaking for example researching the suitable market for the products and establishing the suitable distribution channels to be used. Therefore this method requires much attention in terms of management and the resources to be used in the entire exporting process. It is also arguably the best method because the exporter may benefit from reaping maximum profits and may enjoy long-term growth thus the company can maintain its base in those countries (Dole. and Lowe, 33).

Indirect Exporting

Under indirect exporting an exporter can access foreign market free from risks of doing it directly. It involves the use of independent organizations within the exporter’s domestic markets. It can be done through various ways, for example, a domestic based export merchants, who take the title of the goods and sells them in those countries abroad, domestic based export agents who sell and market the goods on behalf of the exporter and co-operative organizations who act on behalf of the producers. This approach might be cumbersome to undertake because the cost of getting links with agents thus taking long time to establish a market.

Joint Ventures

Joint venture partnership can be defined as a partnership created by one or more companies to carry out a common business together. They contribute equally to the business and agree to share any profits in a certain percent in the course of the business. Such a business is referred to as equity joint venture and it is favorable because there is sharing of risk and loses. There is also contract joint venture which involves creation of new firms in which foreign and local investors share ownership and control.

Generally joint ventures are common where government conditions demand so to ensure control, nationalism and reduced re-patriation of profits. It will be an ideal situation if the company is still young and wish to exploit other markets for its products since it require fewer resources. However, it has potential problems and includes sharing of profits, employment issues, market coverage and decision making due to different long-term interest of partners (Blythe, 55).

Licensing

Licensing method of entry can be termed as contracts in which a foreign licensor provides a local license with access to know-how in exchange for financial compensation. It presents an opportunity to entering markets that may have been otherwise closed to exports and also it will not require the company to have substantial capital investments in the host market horizon.

Franchising

Franchising involves one partner called franchisor licensing trademarks and established methods of entry to a party called a franchisee in swap for a recurring compensation. A good example that illustrates this method is that of a company selling its products together with the rights to use its trademark and name to other independent producers of the same product. It is easy to start the business abroad, there is room for rapid expansion, there is stable offering of the same products for a long time and therefore will attract customers and most of the time franchisors offer training for free that is always not offered to individuals setting up their businesses (Fletcher and Brown, 72).

Strategic Alliance

Strategic alliance method of entry can also be employed by the company when going international which involves formal partnership between two or more parties to undertake a common business with the view of attaining same objective but the parties involved always remains independent to each other. Business resources to be shared may include common distribution channels, knowledge, products or expertise. This method has the following advantages; there are low research and development costs, getting access to partner’s capital, new markets for the products of the company and quick time in marketing the products, there is sharing of distribution channels and tapping the other partners advanced technology and intellectual property among others. An example here is a company may agree with any producers of its products to market and distribute its products on its behalf.

Foreign direct investment (FDI)

FDI is the direct ownership of processing, manufacturing or assembling facilities in a target country by a mother company. The company in question can transfer resources to a developing country which has a good customer base and then set up branches in any other regions or areas of the country. The resources include; technology, personnel and capital. The company will be able utilize the resources in the target country including in the human resources, manufacturing equipment among others. The company can also acquire existing companies which are not particularly achieving enough sales from the domestic markets. It is also possible for the company to set up its own company and start manufacturing the products directly

After careful considerations of the above methods I will recommend that the company uses the strategic alliance method since it is cost effective and will involve the company employing fewer financial resources in entering the market. Therefore the company will identify the companies that deal with its products in the foreign market and try to enter into contract with them in marketing of the products (Brennan, Canning, and McDowell, 37).

Effective Marketing mix

Product

Product is the basis of existence of any business. The product of the company should be unique and more appealing to customers when compared to that of its competitors. The products produced by the company wishing to enter the foreign market should meet the set standards for instance by the local bureau of standards in the host country as well meeting the demands and the desires of the targeted markets.

Therefore product branding should be identified to cope with the ever changing business world. Product branding is a key factor in determining the selling trends of the company’s products in foreign market. For example, the company in question can adjust its branch name and rename it after a populous host personality to increase perceived value of the customer towards the product. A good brand name should be; legally protect-able, easily pronounced, easily remembered, easy to recognize and to attract attention from everybody. There are different kinds of brands that can be applied by the company and include; premium brands, economy brands, fighting brand as well as licensing brand (Carter and Lee, 65).

Price

Price is an important tool in competition and thus firms use it as a mechanism to outdo themselves in the market. According to research, reports suggest that any company that wish to enter into foreign market should strive to be overall low cost producer of its products when compared to other firms that have the same desires and produces same products to the market. The product of the company should be cheap and affordable to its customers. This will propel the company to attain the position of becoming a market leader because of the cheap prices associated with the products (Manuel, 102).

Place

Distribution channels determine the sales of any company and any company that attempts to enter into a foreign market should develop the best distributional channels that results to increase in profit levels of the company due to availability of the products to its customers. This will automatically enable the company to have competitive edge over its competitors and thus lead to increase in market share, profitability, and growth rate.

Promotion

Any company that opts to go international should engage itself in promotional activities to attain significant results in terms of its target market responding well in consuming the its products in the market. The company therefore should engage itself in vigorous advertising activities for instance through media, internet and bill boards and thus will attract a large number of customers to use its products (Borden, 78).

Manpower Planning and Employee recruitment, Training and Selection

Manpower planning in firm is very vital since it will avoid cases of both overstaffing and understaffing which is disadvantageous to a firm in its planning process. The economies of scale for the firm jointly with specialization orders may be misplaced if the firm is understaffed. Overstaffing also may lead to wastage of resources since it may be expensive for the firm to sustain such workforce. Such issues are thus part of the planning process that must be considered by the HRM department of a firm that wishes to enter a foreign market. They guarantee that the firm’s workforce is adequate to meet the general requirement of the firms.

An appraisal of the existing and future labour force requirements for the firm is carried out in advance to establish the level with which the firm can maintain, select or retrench its workforce in the new market. Human resource management is therefore made use of to balance the available assets to be applied for human resource development with a vision to guarantee that the firm compositions and goals are supported in the foreign market.

The most excellent means a firm can openly develop its financial performance in the new foreign market is to employ, choose and train the right personnel. The most excellent strategic exercise to realize this goal is to carry out what is usually termed as job-fit practice. Such practice is practical to firms which do not desire their workforce to undertake further extensive training but carry out their responsibilities right away applying their skills gained somewhere else. Another strategy is person-organization fit practice. In this case, the organization seeks to recruit and select persons with good morals who can meet the organizations’ values, culture and structure.

Human resource management practice has been exploited in measuring the examination of the task to be carried out. Such management practices will direct in choosing individuals with sought-after attitudes and character appropriate for the job description. To make certain that this procedure becomes a triumph, firms should seek services from expert recruiters to aid them get the best workforce in the marketplace. Even though the process may be very costly to the firm it is regarded to be worth such cost (Cinchona and Ronkainen, 115).

Implementation, Evaluation and Control

Under this, implementation will simply require the company to carry out its laid down tasks to achieve its objectives in the foreign market. Implementation will involve the company putting in practice its planned activities as well considering identifying alternatives and choosing from those alternatives the best options which will yield excellent outcomes for the company in the new foreign market. The implementation process will entail the company allocating resources to the strategic business units to carry out the marketing strategies adopted. The use of financial forecasting techniques such as those of seasonal trends and cyclical variations should be utilized by the company’s staff to determine the appropriate amount of funds, human resource and other materials required for the successful completion of implementation of the adopted marketing research.

Evaluation should also be done constantly by the management of the company. The target foreign markets that the company gets in to should be constantly assessed to know there productivity. Such evaluation should be based on profits levels that each target market identified contribute to the company. Under control strategy, the management of any firm should constantly monitor the activities of the company in terms of its productivity in the foreign market entered. It is the duty for the management concerned to ensure that all production activities are in order, the human resource recruited are competent and that the products manufactured are availed to the market without further delay. Controlling activities will also provide an opportunity to the company to compare the actual results with the expected outcomes and thus identify the areas that need to be addressed urgently (Steven, 22).

Conclusion

It should be noted that any marketing tactic adopted should be in line with business strategies formulated. Research indicates that business strategies take in to account the essence of the business existence i.e. what to accomplish, how to conduct business undertakings, what products to produce, location of the business and the target audience. Marketing on the other hand entails selling of business, mainly linking the business with its potential consumers. Therefore we can conclude that business strategy have a closer link with marketing strategy in that at one point they focus on how to improve performance of a business based on some tactics i.e. strategies. On the other hand the marketing strategy is concurrent to a well written marketing plan since it outlines how to implement the action plans chosen.

Reference

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