Cipta Chantique應該進入英國市場嗎？
 

1.0執行概要
 

本文論述了Cipta Chantique(CC)的管理提出的對全球商業擴張的目標:
 

描述和展示了規劃和實施全球營銷對全球市場環境因素的重要性
 

描述和展示了進入全球市場因素模式的重要性
 

本文的結構如下，文章的伊始介紹了整個提案的內容，并且簡述了CC的組織背景,CC公司被認為已經為全球商業擴張做好了準備。
 

第四節回顧了全球市場環境和外國市場進入戰略方面的現有文獻，隨后全面地研究了選擇的國家的市場環境——從全球營銷擴張中選擇出來的英國和其外國進入模式,發生在除子主題5(5)和6(6)的其他情況下。
 

全球業務擴張對國家滲透的戰略選擇提供了第一次確認，本文解釋了關于CC應該使用什么策略的探索性研究。它還針對所選的國家提出了擴張策略的衡量方法。
 

研究還考察了英國政府應對全球化最近的趨勢、相關的機會和對應該經濟的威脅的政策。

 

Should Cipta Chantique enter the UK market?

 

1.0 EXECUTIVE SUMMARY

 

This paper is presented to the management of Cipta Chantique (CC) to propose for the global business expansion with the objectivesT of:

 

describing and demonstrating the importance of the Global Market Environment factor in planning and carrying out global marketing

 

describing and showing the importance of mode of entry factor in global marketing

 

This paper is structured as follows. The paper starts off with an introduction of the contents of the overall proposal and follows by briefing in the organizational background of CC, the company that is believed ready for Global Business Expansion.

 

Section four reviews existing literature of both the Global Market environment and the foreign market entry strategies ensued by comprehensive study covering the market environment of the chosen country – The UK and mode of foreign entry chosen for global marketing expansion that occurs at sub topic no five (5) and six(6).

 

The paper explains the exploratory findings of what strategies should CC use towards business expansion globally providing first confirmatory indications regarding the strategic choice of country to penetrate. It also develops the measurement of the expansion strategies directed towards the chosen country.

 

The paper also considers the UK Government’s policy response to recent trends of globalisation, and the associated opportunities and threats to the UK economy,

 

Finally, the paper finishes by looking at section seven summarizing remarks and points out the potential world economy growth despite the caution about the uncertainty and change at an increasing rate of global expansion.#p#分頁標題#e#

 

2.0 INTRODUCTION

 

Globalisation is changing the world’s economic landscape and the way businesses are expanding. While globalisation, and the arguments that surround it, have flowed for centuries, the wave of globalisation is unique in terms of the speed and intensity of the political, economic, social and technological forces that have collided to create it. It has unleashed a renewed wave of people, commerce and capital throughout the global economy and has powered the creation and transformation of markets, jobs and industries across the world, at ever increasing speeds.

 

This paper sets out how a Batik Producer – CC of Malaysia can take advantage of the opportunities provided by globalisation in terms of new, rapidly-growing markets for producers and investors.

 

The constant change that globalisation brings can create anxiety and uncertainty, as new technologies and methods of working appear to destroy jobs and skills almost overnight. CC must understands that this can be challenging and daunting to workers who have to cope with a changing work environment and need to develop new skills. However, these are not reasons to turn its back on local trade undermining the process of innovation and economic growth, putting more pressure on jobs and living standards.

 

CC role is to work out the global business expansion to enable them to succeed in this changing environment and help ensure that the benefits of globalisation are felt as widely as possible. They have to understand the nature of marketing environment and why it is important, preview the major components of the economic and social environment and how these trends affects marketing. CC has to see how the political and legal environment offers opportunities and threat to them and also appreciate the importance of the technological environment to marketers. Concurrently, they have to comprehend difference in the competitive environment and know how changes in the institutional environment will affect them.

 

Finally, CC is to choose the most effective and efficient way of entry among possible entry modes for the company’s international expansion. As part of its long-run strategy, it is critical that they choose stable entry mode strategies in order to stand still in the highly competitive global market situation.

 

3.0 ORGANIZATIONAL BACKGROUND OF CIPTA CHANTIQUE (CC)

 

CC is a pioneer of the much acclaimed batik industry in Malaysia and involves in various batik production processes from manufacturing to printing, colouring/dyeing, designing and tailoring, wholesaling, exporting to retailing of batik products. It was soon destined to grow by leaps and bounds to the multi-million dollar corporation it is today. the batik fashion house or haute couture combines contemporary design and traditional Malay motifs into batik of simple elegance, and are very much sought out by discerning customers from around the world.#p#分頁標題#e#

 

But success did not come without painstaking patience and hard work. Always improvising and striving for the best in batik designs, CC won the admiration and recognition from the local community for their meticulous design and high quality fabrics.

 

Already, CC has achieved the status and rare distinction of being the largest batik producing in the Malaysia, with distribution centre spread throughout the nation. The factory itself occupies a sprawling 2.5 acres site in the Gambang Industrial Area of Kuantan. It houses not only the manufacturing facility but also one of Malaysia's largest batik showrooms. It is frequented daily by bus loads of tourist eager to see the best batik the idyllic state of Kuantan has to offer.

 

With a strong force of more than 200 employees CC continues to strive for par-excellence in meeting the discerning taste of every customer. This commitment pledge from the onset has been held steadfastly through their almost two decades in the traditional batik industry. Over the years, with the benefit of first-hand experience and industry knowledge, CC fine-tuned their business systems, product, services and marketing initiatives and ready for global expansion.

 

VISION

 

Cipta Chantique seeks to be the leading pioneer in the production and distribution of batik products in Malaysia and to be the world known designer label of batik.

 

MISSION

 

It is our mission to produce the highest quality batik product by producing superior and unique designs with the support of a systematic production house and strategic management. We seek to open a chain of Cipta Chantique Batik retail throughout the world.

 

4.0 LITERATURE REVIEW

 

The concept of globalization has evolved in the past three decades. Johanson & Vahlne (1977) defined globalization as a process in which the companies gradually increase their international involvement. Welch & Luostarinen (1988) discussed the globalization as a dynamic concept: the process increasing involvement in international operations, both sides of inward and outward should be involved in a broader concept of internationalization. The consensual concept of internationalization includes a process that requires many incremental decisions and strategies which involves various outward and inward products, service or resource transferring across national boundaries and influenced by a series of factors that come from the companies and environments.

 

In this paper, we adopt the definition from Andersen (1997): Internationalization is the process of adapting exchange transaction modality to international markets. This definition includes both study on Global Market Environment and entry mode strategy for international market selection.#p#分頁標題#e#

 

The study on the literature review reveals certain attempts to identify contingent relationships between Global Market environment and foreign entry mode in the context of globalization.

 

4.1 GLOBAL MARKET ENVIRONMENT

 

Research shows that the rate of market expansion by international new ventures is more rapid than that of conventional firms has been published (Autio et al.2000). However, it remains to be determined whether this rapid expansion is targeted to nearby countries measured by business distance (Luostarinen1979) or to distant, so-called cold markets and thereby requiring further observed investigation.

 

The market environment factors include the existence of common customer needs, social and economic factors, global customers and channels, favourable logistics, information technologies developments, government policies and regulations and finally the transferability of the competitive advantage (Knight and Cavusgil1996; Lovelock and Yip1996; Oviatt and McDougall1994, 2005a).

 

The impact of International Trade System, economic, social and political conditions on global expansion has attracted a great deal of attention over the past three decades, and there is much consonance in the literature over its association. The consulted literature proved to be quite useful in the sense that it gives a realistic idea about how to measure different determinants of the subject at hand. Many studies proved the positive link between the economic variables and the social factors. The political environment was perhaps the most emphasized determinant of globalization, as all the literature selected pertains to the developing countries which have law and order issues, a matter of grave concern for foreign investors. Therefore all these factors i.e. political, social, economic and technologies development conditions makeup the entire investment environment which either attracts or distracts foreign investment. This market environment is regarded as the institution and its ability to attract foreign investors is its effectiveness.

 

Busse (2006) findings are that global expansion activities are affected by the variables of political conditions such as government stability, corruption, internal and external conflict, ethnic tensions, law and order, democratic accountability of government, and quality of bureaucracy.

 

The economic model used by Khan (1998) involves certain variables such as certain types of government policies, International Trade System and other variables necessary to attract foreign companies. He conducted a comparison between the developed and developing countries from 1980 to 1994 and concluded that lack of consistency in economic policies have discouraged foreign investors besides slow bureaucratic inefficiency, inappropriate business environment including lack of adequate infrastructure, lack of trained, educated and disciplined labour force along with the cultural and social taboos have all accumulated into less foreign companies inflow and hence led economic growth.#p#分頁標題#e#

 

These studies identified the positive relation on global market environment that countries have to create in order to lure in foreign investors.

 

4.2 FOREIGN MARKET ENTRY

 

Internationalisation has been thoroughly examined by the Scandinavian process school (Johanson and Vahlne1977; Luostarinen1979). They depict a mainstream pattern by which companies gradually increase their commitment in international markets. This risk-averse and learning-based approach of the decision makers influences both the market entry and penetration strategies and also the establishment chain of business operation modes.

 

Bradley (1995) also believes that foreign market entry strategies usually accord with the sequential stages of Exporting, Competitive Joint Venture, licensing and Foreign Direct Investment.

 

(Dunning 1997) The Global expansion strategies of firms are determined by ownership advantages for contractual resource transfer (i.e. outside the boundaries of the firm), exporting in case of internationalization advantages and Foreign Direct Investment (FDI) for location advantages. Only two strategies within the boundaries of the firm were concentrated: exporting and FDI (Dunning 1980).

 

Different from the above dynamic models which just mentioned few factors, Driscoll (1995) introduced a comprehensive foreign market entry decision framework, which identifies export, contractual and investment as the main foreign market entry modes. It defines that the contractual entry modes include a variety of arrangements such as licensing, franchising, management contracts, turnkey contracts, non-equity joint ventures, and technical know-how or co-production arrangements. The investment entry mode includes acquisitions (purchasing stock in an existing company in an amount sufficient to acquire control), joint venture and start-up investment.

 

Driscoll (1995) also analysed the characteristics of export, contractual and investment entry modes from five aspects of control; dissemination risk; resource commitment; flexibility and ownership. Control refers to that the extent of a firm in governs the production process, co-ordinate activities, logistical and marketing and so on. Dissemination risk refers to the extent to which a firm’s know-how will be expropriated by a contractual partner. Resource commitment refers to the financial, physical and human resources that firms commit to a host market. Flexibility assesses that whether a firm can change the entry modes quickly and with low cost in the face of evolving circumstances. Ownership refers to the extent of a firm’s equity participation in an entry mode.

 

However, after analysing the foreign market entry strategies, the case of internationalization of CC shows that Batik enterprise in the new economy may apply different modes in different host markets at one stage of internationalization.#p#分頁標題#e#

 

The above literature review is empirical as it explicitly describes these strategies as “alternative to each other in serving global markets” as this paper sets to propose on both Exporting and Joint Venture to the company as the global expansion strategies.

 

IT IS A FACT that rapidly growing companies have to focus on domestic markets initially to build credibility with reference customers and that pleases the Venture Capital and banks they partner with no end. But to be a dominant force in future years, companies must also make plans for business development internationally, and in reality this should be undertaken as early as possible.

 

CC is expected to behave conventionally by first entering countries with shorter business distances from Malaysia and then those that were physically, culturally and economically more distant. Therefore, base on these three criteria, this paper serves as a proposal on the business expansion plan into United Kingdom (UK), USA and Russia Market.

 

However, the focus of CC market entry will be the UK. This paper will look at the market environment and strategizing on how to enter the market.

 

There were several reasons for selecting UK as the target market. The other countries which were considered as potentially attractive were: the USA – the largest market size in the world, Russia – emerging market with significant sales potential. The option of the USA as target market was declined due to extremely high quality requirements and other non-tariff barriers which make it hard for a new entrant to enter this market. Besides, this market is highly mature and experiences extreme level of competitive pressure. With regards to Russia, there were several unfavourable factors which made it less attractive then the UK – the uncertainty of the further economic state, high entry barriers and no well—developed dealership network.

 

UK MARKET OVERVIEW

 

The United Kingdom (estimated 2009 GDP of $2.2 trillion) has the sixth-largest economy in the world, the third-largest economy in the European Union, and is a major international trading power.

 

Highly developed, sophisticated, and diversified, the UK market is the largest in Europe and the fifth largest in the world for U.S. goods exports.

 

With few barriers, the UK is the entry market into the EU for more than 40,000 U.S. exporters.

 

The UK is the single largest export market for U.S. services exports.

 

Over two million jobs have been created over the years to manage and drive business investment and FDI.

 

Over 7,500 U.S. firms are present in the UK, and the UK is the top location in Europe#p#分頁標題#e#

 

for U.S. regional headquarters covering Europe, the Middle East, and Africa.

 

5.0 MARKET ENVIRONMENT

 

Changed in the marketing environment profoundly affect a firm’s marketing operations. Social environment, new technological developments, economic conditions, increased competition, the population changes worldwide, legislative requirement and political events around the world are some of the factors affecting CC current and future business expansion efforts.

 

The critical point of this discussion is that CC needs to understand the marketing environment of the country that it is penetrating to be able to make good decisions. Changes in the marketing environment may create opportunities or threats either by affecting markets or directly influencing marketing activities. Often, short-term threats might offer opportunities in the long run for wise companies.

 

Exhibit 1: The Marketing Environment

 

As shown in Exhibit 1, these perspectives are at the interface between the controllable marketing circle and the uncontrollable marketing environment. The marketing environment consists of all factors external to an organization that can affect the organization’s marketing activities. These factors are largely uncontrollable, although businesses can influence some of them.

 

5.1 SOCIAL ENVIRONMENT

 

5.1.1 The Demographic Environment

 

The UK population is growing. In 2009 it reached 61,113,205, its highest ever level and the population growth rate is 0.279%. Population projections into the future are difficult because we can’t be sure what will happen to factors such as birth rates. However, growth is expected to continue up to the middle of this century, peaking at roughly 67 million (ONS, 2005: 8).

 

Population size is determined by the combined effects of

 

1. Natural change resulting from birth and death rates (i.e. the number of births/ deaths per 1,000 of the population)

 

2. Net migration (i.e. the difference between inward and outward migration flows).

 

Natural increase was the main source of population growth, but since then net in-migration (the excess of in-migration over out-migration) has been the principal factor. For example, in the year to mid-2005 migration contributed two-thirds of the UK population increase.

 

AGE STRUCTURE#p#分頁標題#e#

 

PERCENTAGE

 

MALE

 

FEMALE

 

0 – 14 years

 

16.7 %

 

5,233,756

 

4,986,131

 

15 – 64 years

 

67.1 %

 

20,774,192

 

20,246,519

 

65 years and over

 

16.2%

 

4,259,654

 

5,612,953

 

Exhibit 2: Socio demographic of he UK (July 2009 est.)

 

Overall UK population statistics are important, but growth of the urban population trends in population subgroups are typically the most useful to CC. The largest and fastest-growing markets for many products are located in the urban areas of most countries. Significantly UK urban population is 90% of total population make it a good country for CC business expansion.

 

5.1.2 The Cultural Environment

 

The potential consumers purchasing behaviour and types of products they desire is greatly affected by the factors and trends related to the values, ideas, attitudes, beliefs, and activities of specific population subgroups known as cultural environment. Therefore, CC has to develop specific strategies to complement different cultural groups in international markets specifically UK and ready for continual challenge.

 

The UK is often described as a ‘multicultural’ society, referring to the co-existence of different communities defined by their race, ethnicity or faith. Sub-cultures can also be related to class membership or age. Youth and modern society culture is, of course, itself diverse, partly reflecting lifestyle choices in relation to clothing and music. Exhibit 2 shows that 67% of UK Population is from youth age structure; therefore government might be interested in promoting cultural change as a way of boosting economic competitiveness.

 

The growing market of upscale women is attractive to CC to promote the Batik Products as study found that more women enter the workforce and provide much or most of the financial resources for a household means no more financially supported by men. The change of lifestyles and habits has direct impact on the consumer expenditures. For instance, Mintel (2006) points out that the impact of lifestyle factors such as fashion and luxury preferences are so strong that it removes the negative effect of market maturity and clothing prices in retails segments.

 

Attractively, since the 1980s both Conservative and Labour governments have attempted to make the wider culture and society of the UK more supportive to local and foreign businesses.#p#分頁標題#e#

 

5.2 ECONOMIC ENVIRONMENT

 

Whereas demographic and cultural trends generally affect the size and needs of various markets, the economic environment includes factors and trends related to income levels and the production of goods and services that affect the purchasing power of these markets. Thus, it is not enough for a population to be large or fast growing, as in many developing countries, to offer good market opportunities; the economy must provide sufficient purchasing power for consumers to satisfy their wants and needs.

 

The UK market is matured. The current strong state of British pound against other currencies have created various benefits for foreign business operating in pound zone such as predictability of operations and minimised currency fluctuation risk.

 

The Gross Domestic Product (GDP) represents the total size of a country’s economy measured in the amount of goods and services produced. Changes in GDP indicate trends in economic activity. Initial Q2 2010 data suggest the UK GDP grew by 1.1%. Consumers in this country may have a lot of purchasing power and The UK typically offers attractive market opportunities for luxury products.

 

Personal disposable income (PDI) is 19% and consumer expenditures remains at 18% reflect the high level of consumer confidence. These statistic claims that in terms of the purchase of new clothing consumer confidence has significantly raised.

 

UK inflation, measured by the Consumer Prices Index (CPI), remained positive throughout the recession. That contrasts with other major economies, including the US, France and Germany, which saw deflation (negative inflation, or falling prices).

 

In the year to June, UK inflation was 3.2%. The Bank of England’s UK inflation target is 2%. This rate was the fifth highest rate in the EU (the highest being Greece with 5.2%) (Source: UK Economic Indicators update 16 August 2010).

 

A relatively new innovation for evaluating economic performance is the development of National Customer Satisfaction Indexes (NCSI) in several countries.

 

Customer satisfaction for Retails and Department Stores improves for the first time after three straight quarters of small declines, according to the National Customer Satisfaction Index (NCSI-UK). As a result of increased customer satisfaction with retail, the index gains 0.1% to 72.9 on the NCSI's 100-point scale, which coincides with a 1.1% initial Q2 growth in GDP, the first positive growth for the economy since the first quarter of 2010. The latest NCSI study measures customer satisfaction with department stores, supermarkets, electrical retailers, petrol stations, and E-commerce.

 

QUOTE:#p#分頁標題#e#

 

“The uncertain economy has led consumers to be more cautious with their money,” said Claes Fornell, ACSI founder, professor at the University of Michigan, and author of The Satisfied Customer. “But the improvements in retail customer satisfaction are a good sign that customers may be ready to spend again – if they can find the means to do so.”

 

5.3 POLITICAL AND LEGAL ENVIRONMENT

 

The political and legal environment is closely tied to the social and economic environments and encompasses factors and trends related to governmental activities and specific laws and regulations that affect marketing practice. That is, pressures from the social environment, such as ecological or health concerns, or the economic environment, such as slow economic growth or high unemployment, typically motivate legislation intended to improve the particular situation. Therefore, it is important for CC to understand specific UK political processes, laws, and regulations, as well as important trends in each of these areas.

 

The policy response to recent trends in globalisation, and the associated opportunities and threats to the UK economy, has centred on three key priority areas.

 

Firstly, in recognition of the potential benefits to be derived from globalisation and greater openness, the UK is committed to reducing international barriers to trade.

 

At the same time, The UK needs to work with international partners to ensure that international institutions such as the IMF are fully equipped to provide the necessary direction and support to the ongoing process of globalisation.

 

Secondly, the Government’s strategy of raising productivity through ensuring macroeconomic stability and putting in place policies to strengthen the productivity drivers (competition, investment, innovation, enterprise and skills) will also work to ensure that local and foreign business is best placed to take advantage of the benefits of globalisation and compete effectively in international markets.

 

Thirdly, to ensure the benefits of globalisation are felt as widely as possible, the Government has a number of policies in place to help the UK economy adapt to its changing role in the global economy, as well as to reduce regional economic performance differences and to protect the most vulnerable workers through targeted labour market interventions.

 

The Government has a strong International policy in building and improves bilateral relationships with other countries. The countries of CC operations, Malaysia cooperates with the UK within the regime of favourability which implies the certain benefits as reduced tariff and non-tariff barriers.

 #p#分頁標題#e#

Government employs commerce policy which identifies certain industries that are instrumental to the economy and provides subsidies for an industry that produces consumer necessities. They allow the companies to sell the product for less than Marginal cost of processing the product, and in turn, provides these businesses with cash incentives. This promotes the product in the view of the public, hence, is favourable to the business.

 

Government controls the taxation and spending. The Government sets taxation policy for businesses, so that they pay their taxes. This way, a Firm can make its contribution towards the society. As a result, Government uses these receipts for Economic growth and Development. Paying taxes help these businesses to streamline their processes, as a result of more efficient infrastructure and management.

 

The new Government of UK is ensuring that business is competitive, consistent and fair with those of other major industrial countries. To enhance the UK’s attractiveness as a destination for high value investment, government needs to set a strategic objective by reducing the overall burden of business taxes to the headline rate of corporation tax down to 18 per cent.

 

5.0 TECHNOLOGICAL ENVIRONMENT

 

The technological environment includes factors and trends related to innovations that affect the development of new products or the marketing process. The UK advances in information and communication technologies. Perhaps one of the most convenient and facilitative aspects of recent trends in business models is the high speed internet that is easily accessible.

 

These technological trends and advances can provide opportunities for new-product development and CC has to view from the technology perspective to perform the marketing activities. Using these technological advanced products can help CC to be more productive.

 

As new and improved communication tools combine with advanced Internet technologies, online collaboration becomes a reality. Emerging of advanced Internet technologies enable Batik products creation between CC designers and clients can be done via online. A trend that is catching on quickly in the business world is the parcelling of work for our Batik specialists to work from home – Malaysia.

 

The use of advanced technology on the internet indirectly stops the operation from the rapid rise in costs associated with the traditional business model. Internet and its widening technological trends are making room for online Batik designing and the retail operation will be staffed with only sales people who are willing to work for less than average wages.

 

MOVING FORWARD

 

As in the past, The UK society and culture will continue to change. Processes of globalization, including trade and migration, will continue to make the society more diverse and cosmopolitan.#p#分頁標題#e#

 

Population growth will be driven mainly by immigration. Migrant labour from the new EU member states in Eastern Europe will continue to be an important feature of the social and economic landscape. Ageing of the population is a long-term trend that will continue to influence political and business agendas.

 

The UK is still learning how to operate successfully as a multicultural society. Sensitivities relating to different values and lifestyles will continue to pose challenges for politics and business. The occupational order and class structure will continue to alter as a result of economic change. In particular, globalization will continue to make it difficult to sustain low skill jobs in manufacturing in the UK.

 

Income inequality has widened markedly in the UK since the 1970s. New Labour has set ambitious targets to reduce poverty but has not accepted that inequality should be tackled as a social problem.

 

Determined political action to reduce inequality seems unlikely in the foreseeable future. However there will continue to be controversy over executive pay and business will have to respond to criticism on this issue. The long-term shift towards greater equality between men and women in economic life will continue.

 

6.0 FOREIGN MARKET ENTRY MODES

 

Currently the UK is considered as one of the most pro-FDI country in EU. It means that foreign ownership regulation provides foreign companies with flexibility of choosing between all possible entry and expansion modes.

 

The decision of how to enter a foreign market can have a significant impact on the results. Expansion into foreign markets can be achieved via the following four mechanisms:

 

Exporting

 

Licensing

 

Joint Venture

 

Direct Investment

 

Different modes of entry may be more appropriate under different circumstances, and the mode of entry is an important factor in the success of the project.

 

6.1 EXPORTING

 

Exporting is the traditional and well-established marketing and direct sale of domestically-produced goods to reaching foreign markets. Since exporting does not require the goods to be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.

 

Exporting commonly requires coordination among four players:

 

Exporter

 

Importer

 

Transport provider

 

Government

 

For the very first stage of internationalization, CC is proposed to employ export method as the entry mode. The selection of export entry mode is due to high flexibility, low resource commitment, low dissemination risk and the issues of geographical distance and local market conditions.

 

CC is to sent out many of trained Regional and Sales Managers from home country to setup retail outlet in few big cities in UK.

 

CC will apply the Export Marketing Strategy tailored to leverage its competencies and designed to achieve our profitability goals. We will need to hire multilingual sales support to help our sales department better understand customer needs and close more sales. Often we can accomplish this with the manufacturer exporting direct, without resorting to local

 

distributors, thus eliminating mark ups.

 

Export mode will help us manage the overseas market sectors we have identified as core business without overburdening our present business and marketing organization.

 

ENTRY MODE

 

GROUNDS OF ENTRY

 

ADVANTAGES

 

DISADVANTAGES

 

Exporting

 

Limited sales potential in target country; little product adaptation required

 

Distribution channels close to plants

 

High target country production costs

 

Liberal import policies

 

High political risk

 

Minimizes risk and investment.

 

Speed of entry

 

Maximizes scale; uses existing facilities.

 

Trade barriers & tariffs add to costs.

 

Transport costs

 

Limits access to local information

 

Company viewed as an outsider

 

Exhibit 3: Comparison of Foreign Market Entry Modes - Exporting

 

6.2 JOINT VENTURE (JV)

 

To maximize the speed of entry and minimize the risk of failure, CC should also consider the entry mode which provides the fast access to customers. At the same time, the entry mode shall secure certain long-term benefits like access to market knowledge and the development of firm’s presence on the new market. Given these requirements contractual JV is the next optimal entry mode. This mode of operations provides a fast access to the facilities, political connections and wider distribution channel access to customer of contractual partner#p#分頁標題#e#

 

The other advantage of this mode of market entry is that it limits the possibility of technology or knowledge transfer.

 

CC is to decide on strategic partners when entering the JV ensuring the convergence of business goals while their competitive goals diverge, the partners' size, market power and the willingness of partners to learn from one another while limiting access to their own proprietary skills for favourable alliances. CC also should concentrate on the issues of ownership, control, marketing mix, transfer of technology and Government support.

 

On the other hand, CC should also anticipate the conflicts of cooperation and competition as the JV is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control. The potential partners may want to maximize the advantage gained for the JV and simultaneously want to maximize their own competitive position. CC should also attempt to develop and protect its own proprietary resources while sharing them with the partners.

 

ENTRY MODE

 

GROUNDS OF ENTRY

 

ADVANTAGES

 

DISADVANTAGES

 

Joint Ventures

 

Import barriers

 

Large cultural distance

 

Assets cannot be fairly priced

 

High sales potential

 

Some political risk

 

Government restrictions on foreign ownership

 

Local company can provide skills, resources, distribution network, brand name, etc

 

Overcomes ownership restrictions and cultural distance

 

Combines resources of 2 companies.

 

Potential for learning

 

Viewed as insider

 

Less investment required

 

Difficult to manage

 

Dilution of control

 

Greater risk than exporting a & licensing

 

Knowledge spill over

 

Partner may become a competitor.

 

Exhibit 4: Comparison of Foreign Market Entry Modes – Joint Ventures

 

7.0 CONCLUSION

 

This paper suggested that CC should enter the UK market. This country was chosen due to the presence of the number of favourable business and environmental factors such as economic stability, relatively medium entry barriers, positive growth of certain market segments and the future growth potential within EU whereas the UK might be used as expansion base. The analysis of business factors indicated the importance of choosing fast mode of entry and the development of contractual relationships with UK market. To address this issue the paper suggested that CC should look at the Market Environment use exporting and JV as the mode of entering UK market. This strategic option will provide CC with fast market penetration, access to market knowledge and reduced financial strain. At the same time, possible negative aspects of this choice should be counterbalanced. CC is suggested to focus on building customer relationships and employ marketing tools designed to increase the level of customer loyalty in order to strengthen its position against aggressive tactics of competitors.#p#分頁標題#e#

 

Economic factors are just some of the "environmental uncontrollable" which businesses must consider when deciding to market globally. Businesses have had to contend with changes and developments in the economic environment, including the growth of regional economic blocs, all aimed at increasing cooperation between the grouped nations.

 

Markets differ widely in their size and state of development world wide. It would be too easy to classify these markets as "rich" or "poor", "developed" or "less developed", although this is often done for ease of analysis. Countries show great within country differences also and marketers have to be aware in assessing market potential that they do not use general descriptions of nations as criteria of whether to, or whether not to, open trade negotiations.

 

With the global retail environment emerging from a period of considerable weakness, the author believe now is the time to be focusing on the expansion opportunities found in U.K. markets. Current conditions are also setting the stage for forward-thinking retailers to be better positioned to realize faster, more profitable growth once the markets sufficiently recover.

 

For a retailer considering international expansion, it is still essential to begin the strategic development process at home. By taking a thorough inventory of the organization’s unique capabilities, resources, and goals, the retailer can create a framework by which market-entry vehicle options can first be evaluated, measured, and prioritized. Following that evaluation, external market factors and over-arching strategic objectives can be introduced to refine the selection process. Importantly, a successful market-entry strategy must be flexible enough to accommodate changing markets, growth in the company’s skill sets, and economic swings.

 

Global expansion is evolutionary not revolutionary. Retailers can start by adapting their own value proposition and core strengths in the context of the global expansion. This understanding can help a retailer gain a new focus and provide a stable and more risk-free platform upon which to base market-entry decisions.

 

CC must understand that global expansion will not happen overnight. It requires a significant time and resource commitment to be successful in the long term. Retailers that are taking strategic actions now will be in a stronger position to grow.

 

The Author would like to remind CC that the only certainty about the future is that it will be uncertain and change will occur at an increasing rate. Despite this caution, there are hopeful signs that the world economy will exhibit strong growth. The world growth rates for the past three years was nearly double that of the past two decades. The expansion of economic freedom and property rights, more fiscal restraint by governments, increases in investment, freer trade, and exploding technological innovation are some of the forces supporting world economic growth.#p#分頁標題#e#