This document provides information on international market entry strategies and factors that encourage product standardization. It discusses various market entry methods such as exporting, licensing, franchising, joint ventures, foreign direct investment, wholly owned subsidiaries, and piggybacking. It also analyzes procedures for choosing the most appropriate strategy, including evaluating internal factors like company objectives and resources, and external factors like competition, market size, and cultural differences. Standardization of products is encouraged by factors like customer orientation, environmental conditions, market development stage, legal considerations, and market homogeneity.
Running Head DIVERSIFICATION STRATEGY1DIVERSIFICATION STRAT.docxcharisellington63520
Running Head: DIVERSIFICATION STRATEGY
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DIVERSIFICATION STRATEGY
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Diversification strategy
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College
Course
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Diversification is one of the strategies that the company will use so as to stay afloat in the highly competitive market. It is a risk management technique which involves mixing a wide range of investments in the same portfolio (Kenny, 2009). Most companies use the strategy so as to grow, spread risk, to fully utilize the existing resources and to escape from the undesirable industry environment. The essence of using the strategy is that on average, the different product types will yield higher returns to the company and at the same time reduce risks in comparison to individual products. Since the company market is a highly competitive one, the organization should diversify its products and services so as to attract more customers and reap as much benefits as it can from the potential market.
Diversification of the business
The advantages associated with the diversification strategy are: It creates opportunities to achieve economies of scale. It creates opportunities to expand product offerings and expand into new geographical areas. It reduces the cyclical fluctuations in sales and revenues and cash flows and it lets the company continue to grow after the core business has matured. The disadvantage is that it may be complex and difficult to coordinate the different but related businesses. The other problem with the strategy is that the managers of the firm may lack the knowledge of the firms’ businesses. The strategy may therefore be useful if well implemented and follow ups carried out so as to ensure that the strategy is effective and advantageous to the firm.
Strategy for diversification indicating the products and industries for the diversification and how synergies may be gained from the diversified activities
Diversification could either be related or unrelated to the products currently on offer. In the case of the APAtizer Company, since not all tutors require the assignments to be written in the APA format, tutorials for the other formatting styles such as Turabian, Chicago, MLA and Harvard could also be offered at the APAtizer website. That will highly increase the sales volumes due to the increase in the market size. That will be as a result of different services offered. The site could also use other retailers to offer their services. That could be through affiliate companies which would increase the company’s market.
Synergies may be gained from the diversified activities in the human resource department since there will be no need to acquire new staff as long as the diversified strategy is related. The technology will also not be acquired as the existing one will be shared in the processing of the new products and services. The few resources will be used to produce the new products and increase revenue. By using the unrelated product differentiation strategy, the synergies to be gained w.
market entry strategy of textile and garmentsNasif Chowdhury
Market entry mode selection is very important for doing new business extension. This assignment is based on market entry mode for textile and garments business
A detailed discription about MNCs, history of MNCs, features , benefits to home and host countries, entry strategies and the growth strategies adopted by MNCs with pros and cons and the role of mncs in India.
This ppt will be helpful for BBA AND MBA students for their exam and interviews. Also helpful for those who are teaching this international business for MBA students . This is explaining the meaning and scope of international business and approaches to international business in the current period . This is also explaining the performance of Global business and controlling of international business . Different forms of international business and performance evaluation system
Global business
Running Head DIVERSIFICATION STRATEGY1DIVERSIFICATION STRAT.docxcharisellington63520
Running Head: DIVERSIFICATION STRATEGY
1
DIVERSIFICATION STRATEGY
8
Diversification strategy
Name
College
Course
Tutor
Date
Diversification is one of the strategies that the company will use so as to stay afloat in the highly competitive market. It is a risk management technique which involves mixing a wide range of investments in the same portfolio (Kenny, 2009). Most companies use the strategy so as to grow, spread risk, to fully utilize the existing resources and to escape from the undesirable industry environment. The essence of using the strategy is that on average, the different product types will yield higher returns to the company and at the same time reduce risks in comparison to individual products. Since the company market is a highly competitive one, the organization should diversify its products and services so as to attract more customers and reap as much benefits as it can from the potential market.
Diversification of the business
The advantages associated with the diversification strategy are: It creates opportunities to achieve economies of scale. It creates opportunities to expand product offerings and expand into new geographical areas. It reduces the cyclical fluctuations in sales and revenues and cash flows and it lets the company continue to grow after the core business has matured. The disadvantage is that it may be complex and difficult to coordinate the different but related businesses. The other problem with the strategy is that the managers of the firm may lack the knowledge of the firms’ businesses. The strategy may therefore be useful if well implemented and follow ups carried out so as to ensure that the strategy is effective and advantageous to the firm.
Strategy for diversification indicating the products and industries for the diversification and how synergies may be gained from the diversified activities
Diversification could either be related or unrelated to the products currently on offer. In the case of the APAtizer Company, since not all tutors require the assignments to be written in the APA format, tutorials for the other formatting styles such as Turabian, Chicago, MLA and Harvard could also be offered at the APAtizer website. That will highly increase the sales volumes due to the increase in the market size. That will be as a result of different services offered. The site could also use other retailers to offer their services. That could be through affiliate companies which would increase the company’s market.
Synergies may be gained from the diversified activities in the human resource department since there will be no need to acquire new staff as long as the diversified strategy is related. The technology will also not be acquired as the existing one will be shared in the processing of the new products and services. The few resources will be used to produce the new products and increase revenue. By using the unrelated product differentiation strategy, the synergies to be gained w.
market entry strategy of textile and garmentsNasif Chowdhury
Market entry mode selection is very important for doing new business extension. This assignment is based on market entry mode for textile and garments business
A detailed discription about MNCs, history of MNCs, features , benefits to home and host countries, entry strategies and the growth strategies adopted by MNCs with pros and cons and the role of mncs in India.
This ppt will be helpful for BBA AND MBA students for their exam and interviews. Also helpful for those who are teaching this international business for MBA students . This is explaining the meaning and scope of international business and approaches to international business in the current period . This is also explaining the performance of Global business and controlling of international business . Different forms of international business and performance evaluation system
Global business
Human Resources Management Practices and Productivity of Selected Mncs in Eme...inventionjournals
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This study investigates the mode of entry of multinational corporation and their performance Nigerian market. Research on the entry mode of multinational companies (MNCs) to Nigerian market has been one of the major topics in the international business, and the performance factor has been regarded as one of the major factors to explain the entry mode selection of MNCs. Based on the developing nature of the Nigerian market, MNCs can enter a market with Franchising, Licensing agreement, Exporting, joint venture or a wholly owned subsidiary, and Turnkey. This study test reasons for entering in the Nigerian market, modes of entering, challenges faced by multinational during entry and finally the impact of mode of entry of MNCs and their performance in the Nigerian market. The research adopted the survey method, with the use of the Questionnaire. The results from the analysis on the first hypothesis show that a MNCs come into the Nigerian market for different reasons with different modes peculiar to their organization. The second hypothesis indicated that there are various challenges MNCs faced when entry into Nigerian market. And the third hypothesis was supported indicating significant influence of mode of entry on the performance of MNCs in Nigerian markets.
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1. DEPARTMENT OF MANAGEMENT
MBM6109: INDUSTRIAL MARKETING
CAT 2
NAME: AHIMBISIBWE LAMED
REG No: MBA/3885/13
SCHOOL: MKU, NAIROBI CAMPUS.
DATE: 13TH November, 2023
COURSE: MBM6104: INTERNATIONAL MARKETING
LECTURER: DR.KLEI
Instructions:
a) Attempt All Questions
b) No related work
c) No plagiarism
a) Evaluate the different market entry methods available to an international
marketer (5 Marks)
b) Analyze procedures used to choose the most appropriate market entry strategy
(or Strategies) (5 marks)
c) What factors encourage standardization of products in international markets? (5
Marks)
2. Part A
Evaluation of the different market entry methods available to an international
marketer
Entering an international market as a strategic task that demands the marketer to
carefully assess the market environment in the country where they intend to expand their
products or services. This demands the understanding critical market information on
which country or to expand their operations, when is the best time to enter, and what is
the scale of entry into such a market as well as the market entry methods. When the
marketer has carefully studied the market environment along these major factors, then
there is a high possibility of successfully expanding their products or services to that
particular market.
In this section, I will focus on the different market entry methods available for the
international marketer through which they can enter a new international market. There
are several international market entry methods that can be used and these need to be
understood carefully by the international marketer since they are the determinants of
success or failure in international market penetration. The different International market
entry methods include Exporting, Licensing, and Franchising, Joint venture, foreign
direct investment, wholly owned subsidiary and Piggybacking.
Exporting. Exporting can be defined as the direct sale of goods or services in a foreign
market or in another country. Exporting is one of common and well known method of
penetrating a foreign market and also known to have the lowest risk involved. It is also
not expensive in terms of costs since there is no need for investment in establishment of
production facilities in the target country, goods can still be produced in the country of
origin and be exported to the target new country or countries market for sale. The major
visible factors affecting this method to watch is the ever increasing costs of transportation
as well as the risks related to security on the route to the foreign country as well as
government policy of the country. (Workspace, 2023)
Licensing. With licensing, another company in the target market country uses your
property and this property in question is normally intangible. It can include such
properties like trademarks, production techniques or patents. The business is done in
such a way that the party receiving license (licensee) will have to pay an agreed fee in
order to be given the right to use the property. The advantage with this method is that it
3. can generate more returns on investment with little costs of investment since the license
will also cover other such costs like marketing and manufacturing. (Workspace, 2023)
Franchising. In this method. Just as it is in licensing, intellectual property rights are sold
to a franchisee. However, the rules guiding how the franchisee carries out business are
always very strict. For example, specific components must be used in manufacturing and
also certain processes must be followed. (Workspace, 2023).
Joint venture. A joint venture is an international market entry method where two
companies establish a jointly-owned business. In this jointly-owned business, one
company will be a local business and local to the foreign market while the other one will
be a new company from another country. They will provide the new business with a
management team which will be jointly supervised and controlled and they will share
the overall control of the joint venture. The major benefits of joint venture is that it allows
the marketer to benefit from the local company knowledge of a foreign market and allows
for sharing costs. There are some bottlenecks as well especially challenges in deciding
who invests what and how to split profits and these can affect the business if not well
managed.(Workspace,2023).
Foreign direct investment (FDI). This method involves directly investing in facilities in
a foreign market or foreign country. This method is associated with huge costs and need
for a lot of capital to cover costs for premises, technology and staffing. It can be done by
acquiring an existing company or establishing a new venture. (Workspace, 2023).
Wholly owned subsidiary (WOS). A wholly owned subsidiary (WOS) is somehow
similar to foreign direct investment. This is because money goes into a foreign company
in another target country but money is not invested into another company but rather that
foreign company is bought outright. After buying the company, the owners are at liberty
to decide whether the company will continue operating as before or they take more
control of the WOS and make needed adjustments in form of adaptation or
standardization to fir their own required company profile. (Workspace, 2023).
Piggybacking. With Piggybacking method, two non-competing companies come
together to start working together to cross-sell each other’s products or services in their
home country. Piggybacking is a low-risk method and it involves little capital. This
method requires very high level of trust between companies and also the risk of allowing
a foreign company to determine how your products or services will be marketed and
4. distributed and therefore there are some companies that will not be comfortable with this
method. (Workspace, 2023).
Greenfield investments. Greenfield investments involve buying the land and resources
to build a facility internationally and hiring a staff to run it as an independent business
facility. These investments can subject a company to high costs and risks but they enable
firms to catch up with compliance standards to comply with government regulations in
a new market. These kind of entry strategies benefit large and already established
organizations and companies as opposed to new enterprises. (Indeed, 2023)
Turnkey projects. Turnkey projects apply mostly to companies that plan, develop and
construct new buildings for their clients. The terminology "turnkey" refers to the idea that
the client can simply turn a key in a lock and enter a fully operational facility. A company
can consider this market entry strategy if their customers clients consist of foreign
government agencies. These arrangements are most of the time managed by International
financial agencies on behalf of companies and their overseas clients in order to ascertain
that the companies provide high-quality services to clients and the clients pay the full
amount due for their work. (Indeed, 2023).
Part B
Analysis of the procedures used to choose the most appropriate market entry strategy
or Strategies.
According to Study.com, (2023), Market entry strategies are approaches or methods and
that a company’s uses to enter a new market.
There exist various ways of entering a new market and for the company to choose the
most appropriate one, it needs to consider specific procedures to enable it choose the best
and appropriate entry strategy in order to enter the market successfully and achieve
sustainable growth. The company needs to put in consideration such factors like its
resources, objectives, and the target market itself. Market entry strategies can either be
domestic or international.
For domestic market entry strategy, this is when a company is expanding within its home
country with the goal of growing the company's local market share. And on the other
hand, international market entry strategy is when a company intends to expand to a
foreign country. For a company to successfully expand internationally, it will require
awareness of the different cultural, political, and economic environments in the target
5. country it intends to expand to, other factors like the legal and regulatory requirements
of that country need to be considered as well.
The procedure of choosing the most appropriate market entry strategy or strategies
requires through analysis of certain critical Internal and external factors regarding the
firm itself, and external factors related to the target market in another domestic or
international market. The Internal factors include
Company Objectives.
Company size.
Company available resources (Human and financial).
Company’s International experience and agility.
Company’s products and services.
Company Objectives. It is very important to look at the company's resources and
objectives when designing a market entry strategy. If a company has limited human and
financial resources, it is very important for such a company to opt for less expensive
market entry strategy like direct selling or licensing. But if a company has sufficient
resources and is aiming at quickly gaining and expanding its market share, then such a
company might need to opt for a more aggressive and expensive strategy such as joint
ventures or acquisitions. (Prime Target, 2022).
Company size. Internal factors such as Firm size is very important when determining the
entry mode. This can be measured in terms of revenue and number of employees to work
as an indicator of the company’s resources availability. Small and medium size
companies will always wish to have presence on the international market but due to their
resource constraints, they will always opt for export modes which are cost friendly while
for bigger companies, they can choose to rapidly and quickly expend to international
markets using expensive entry modes like acquisitions and joint ventures due to their
resource stability. (Prime Target, 2022).
Company’s International experience and agility. Another important internal factor to
take note of is the company’s international experience and agility. The firm’s previous
experiences in operating in foreign markets and dealing with international clients will
determine the entry strategy. It also applies to the international experience of company
managers and the decision makers themselves, a company with an experienced team will
manage the entry mode selection much confidently and differently than a team targeting
international markets for the first time. This international experience will enable the
6. company to mitigate risks and increase its commitment of resources to foreign markets.
(Prime Target, 2022).
Company’s products and services. Another determinant factor for entry mode is the
company’s products or services. For example, with low cost and low margin products, a
company might choose to move production to the target market through licensing or
direct investment in the form of a joint venture, an acquisition or establishing a local
production subsidiary. This also is favorable option when a firm intends to adapt the
product to the local market and this may influence companies to work with local partners.
If the firm has an innovative product, it will place a lot of value on retaining full control
of its entry and operations in foreign markets meaning that it will less likely go for
licensing and joint venture as an entry mode of choice. (Prime Target, 2022).
The External factors affecting choice of market entry strategy are factors that apply to
the target market and these include;
The level of competition.
The market size.
Ease of Market access and regulatory environment.
Social Cultural differences.
The risk associated with the target market.
The level of competition. Every company's market entry strategy is designed to
minimize risks and maximize opportunities on the target market. The most important
external factor is the level of competition. If there are already many companies selling
similar products in the target market, it can be hard for new entrants to gain market share.
A company may in this case need to differentiate its product or offer a lower price and if
the market is not yet saturated, a company may have more flexibility in choosing market
entry strategy to apply. (Prime Target, 2022).
The market size. Size of the target market and its potential can lead to different
considerations regarding the choice of entry mode. The size of the country and its market
size is the higher the market growth rate and the more likely firms will be to commit
resources to expand to such markets. This might influence companies to establish a
wholly owned subsidiary or seek acquisition when entering such a large market with
significant growth opportunities and if the market size was smaller, the approach would
different in terms of market entry strategy. (Prime Target, 2022).
Ease of Market access and regulatory environment. The regulatory environment and
ease of accessing the market can inform the market entry strategy. Trade barriers and
7. custom duties on the import of foreign goods will influence establishment of production
operations locally. Also, the tendency to prefer local suppliers and buying local products
can encourage a marketer to consider a joint venture or other contractual partnerships
with a local company where by the local partner will help in negotiating sales, developing
local contracts and establishing distribution channels. If a market is hard to access, it
requires the commitment of more resources and this leaves the company with less
appropriate entry modes to choose from. (Prime Target, 2022).
Social Cultural differences. When there are Sociocultural differences between a
company’s home country and its target market country, this can pose some uncertainty
for the firm and this will influences the mode of entry the firm will take. In situations
where there are significant differences in culture, product preferences and consumption
behaviors in terms of the company’s product, it will require commitment of more
resources to the target market for adaptation purposes which might translate to
establishing a joint venture with a local company which will take lead in providing
helpful insights for a successful adaptation to the market. And, in markets which are
similar to the company’s home market, entry modes requiring less commitment such as
exporting might be applied. (Prime Target, 2022).
The risk associated with the target market. Risks that are associated with international
markets influence the choice of mode for market entry. A company need to properly
evaluate target country risk before choosing an entry mode there by evaluating the
political, economic and market related risks as the risk of exchange rate. Companies like
restricting their resource commitments to markets with high risks associated. In so doing,
companies will opt for highly flexible entry modes such as export in order to avoid
committing heavy investment while entering high risk markets.
In conclusion, selecting a suitable entry mode is an important step in a firm’s process of
internationalization. This is because the choice of the entry mode made can determine the
success or failure of a company’s expansion in the international market. When firms base
their decision on extensive evaluation of the different available market entry modes can
help the firm choose the most appropriate entry mode for a specific international market.
This tasks the firms that need to expand to foreign markets to go through a procedure of
evaluating the different entry modes by assessing the different internal and external
factors and this evaluation procedure will always lead the firm to selection of the mode
that will help it expand successfully and sustain the market of fail and withdraw from
the market.
8. Part C
Factors encourage standardization of products in international markets
Product standardisation is the process of making modifications and changes to the
product in order to deliver a single unified product that sits comfortably in all target
market segments. It involves offering a common product on a worldwide basis and it
allows company to keep costs down using one set of manufacturing tools and the same
packaging there by creating a truly global product in the process. (Mbaskool, 2023). The
factors that encourage standardization of the product on the international market are;
Customer Orientation. This is the most important factor that influences an exporting
firm to take decision of product standardization due to customer’s response to the
product. Customer orientation also concerns customers demand or purchasing power,
tastes and preferences and habits, socio-cultural factors, literacy and education levels.
When customers are used and familiar with the product, they tend to identify with it
according to its likeness and features and this promotes loyalty to the brand and product
justifying reason why companies will favour standardization.
Climatic Conditions and Physical Environment. Companies can be made to
standardize due to environmental concerns so that the product can remain in good and
recommended standards of use. The physical environment like hot weather, cold
weather, the terrain like plains, hills, as well as living environment in homes can all act
as determining conditions for the standard of a product.
The Stage of Market Development. Another reason why the firm will choose to go
for standardization is the stage in which the market lies in terms of development. There
are different factors that characterize stages of market development including the
availability of reliable infrastructure facilities like transportation and communication
facilities, the level of technical skills and Maintenance. These characteristics of stages
in market development will influence companies to standardize. For example in markets
where the facilities are advanced, there will be evidence of improved product quality in
9. terms of design and product form while in market stages where such advancements has
not reached, there will be high need for companies to favor standardization.
Legal Considerations. Sometimes firms are made to opt for standardization due to
legal requirements in the country where they are exporting. There are countries which
have specified products, packaging, and labeling standards for specified commodities
and mandate all exporters to adhere to such standards and regulations have to be
followed and implemented. Example of such legal considerations include patents,
safety standards, and commercial terms. And control requirements. These legal
considerations will influence companies to go for standardization in order to align their
products in terms of brand name, labels, language used, measurement units and sizes,
packaging as well as instructions for use of the product. In such instances, all these
features are required by law to be matching the set standards.
Market homogeneity. This is yet another factor that can influence standardisation.
There are some products which are homogenous on the world market and it’s necessary
for companies to standardise such products where they can’t match the homogeneous
features without product modifications being necessary. Such products as raw materials,
DCDs and some clothing products.
10. References
Workspace, 2023. How to enter a foreign Market. Retrieved fromhttps://www.workspace.co.uk/content-
hub/business-insight/how-to-enter-a-foreign-market
Indeed, 2023. 10 International Market Entry Strategies (With Definitions). Retrieved
fromhttps://www.indeed.com/career-advice/career-development/market-entry-strategies
Study.com, 2023. What are Market Entry Strategies? Retrieved
fromhttps://study.com/learn/lesson/market-entry-strategies-examples.html
Prime Target, 2022. How to choose the right entry mode for new international markets? Retrieved
fromhttps://primetarget.tech/how-to-choose-the-right-entry-mode-for-new-international-markets/
Mbaskool, 2023. What is Product Adaptation? Retrieved
fromhttps://www.mbaskool.com/business-concepts/marketing-and-strategy-terms/3035-
product-adaptation.html