Market Entry Mode Choice for SMEs

This assignment examines the strategic decision-making process of small and medium-sized enterprises (SMEs) as they venture into international markets. It delves into various factors influencing their choice of market entry mode, including asset specificity, knowledge safeguards, institutional safeguards, and the impact of globalization on land use and consumption patterns. The analysis draws upon relevant academic literature and aims to provide insights into successful strategies and potential challenges faced by SMEs when expanding globally.

Running head: TOOLSTATION IN AUSTRALIA
TOOLSTATION IN AUSTRALIA
Name of the Student:
Name of the University
Author Note:

1TOOLSTATION IN AUSTRALIA
Table of Contents
Introduction:...............................................................................................................................1
SWOT analysis:.........................................................................................................................3
CAGE analysis:..........................................................................................................................5
Market entry modes:..................................................................................................................7
Justification of choosing joint venture:......................................................................................7
Generic international strategies:.................................................................................................8
Recommendation:......................................................................................................................9
Conclusion:................................................................................................................................9
References:...............................................................................................................................10

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Introduction:
In quest of effective business expansion, organizations have to focus on various
market entry strategies by evaluating the psychological and cultural backgrounds of target
customers. Toolstation is one of the most recognizable brands of UK especially famous for
its online trade tools, accessories and hardware products. Before expanding the entire
business process in the market of Australia, the business experts tend to make an effective
SWOT analysis and CAGE analysis for identifying strengths and weakness of the brand. The
study has provided an in-depth overview about the market entry strategy that Toolstation has
selected in order to grab the attention of Australian customers. The study has focused to
provide major recommendations on how to improve market entry strategies of Toolstation.
 Aims and objectives: To analysis the market entry strategy of Toolstation from UK to Australia To analyse environmental factors for identifying market threats and opportunities To provide major recommendations for improving market entry strategy
 Mission and vision:
Toolstation’s primary mission is to expand their entire business process in various
geographical boundaries. As per current business scenario, the organization has aimed to
enter in the market of Australia from UK by rendering innovative service method and
superior quality of products.
 Organizational structure:
Toolstation is primarily constituted with four major managerial departments
including finance department, human resource department, operation and logistic sector.
Around 200 branches are available all over UK. This specific organization has not

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international experience so far. More than 11,000 products are included within the services.
In addition, the organization is dealing with around 2273 employees.
 Strategic business unit:
Toolstation is a complete autonomous division of a large company that operates an
independent enterprise with the responsibility of specific products and activities.
 Current location of the company:
UK is the current location of the company where the business experts have expanded
around 200 branches.
Yip’s key drivers:
According to George Yip, there are four principal drivers of internationalization that
can assist the companies to generateprospective to penetrate a huge global markets by
introducing more comprehensive policies. The four main drivers for globalisation are market
drivers, cost drivers, competitive drivers and government drivers (Grant 2016).
Market drivers sketch the procedure of progress of the outlines of consumer conduct
distribution, counting the ranges to which the customers’ needs assemble around the world,
locating of consumers in the general basis along with the global systems of circulation
development. It discloses the fact that the marketing podiums are transferrable therefore the
lead nations where most of the modernisations take place can be identified (Panwar et al.
2016). In Toolstation’s case, it will be approachable and prevalent for the higher as well as
middle class of Australia.
Cost international drivers outline the opportunities for the world-wide scale
economics, obtaining competences and reflecting the discrepancies in costs among the
markets of various countries along with their technological advantages. These help to contour

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the assets of the companies (McDougall‐Covin, Jones and Serapio 2014). The company
Toolstation provides relocation of production facilities which will help it in huge cost saving
and it will be taking the advantage of difference in country cost.
Competitive drivers of internationalization are defined by the activities of the
contendingindustries up to the level in which the opponents from varied continents attain the
structure, globalize their methodsas well as their corporate competences then form the
interdependence in the topographical markets. In this field the companies usually face the
threat of entry in a new market as it already remains full with competitors but for Toolstation,
this threat is low as Australian market has limited similar companies as it.
The Government driverscompriseissues like inspiring trade policies, advantageous
regulatory climate, shared product and most importantly technological standards (Meyfroidt
et al. 2013). Toolstation will be benefitted in Australiabecause of its trade policies. The
government is currently unable to favour the national suppliers and aiding international
companies in various ways.
SWOT analysis:
The primary objective of making an effective SWOT analysis is to identify the
strength, weakness, opportunities and threats of Toolstation. Before entering in the Australian
market of Australia, the business experts should make effective strategies for overcoming the
threats and weakness of the organization.
Strengths Weakness
 Product variety
 Workforce strength
 Greater customer base
 Lack of sufficient internal resource
 Lack of communication transparency
Opportunities Threats

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 Business expansion in various
geographical boundaries
 Competitors market threat
 Communication gap among the
employees
Table 1: SWOT Analysis
(Source: Zhu and Iansiti 2012)
Analysis:
Strength:
Product variety is one of the most effective strengthsdue to whichToolstationcan
easily enhance their entire wings of business in different geographical boundaries. Trade
tools, accessories, hardware are core products with which Toolstationdeals. Due to the
variety of products, the organization is able to draw the attention of customers from various
cultural backgrounds as well as attitudes (Laufs and Schwens 2014).Due to sufficient
workforce strength, the business experts of Toolstationdo not have to face difficulties in
maintaining a balance between customers’ demands and supply.
In addition, they can receive the services at proper time. Toolstationprimarily
provides online delivery of services. As a result, customers of multinational countries as well
do not have to face difficulties in being communicated with the service providers. After
entering in the market of Australia,the organization would not have to face difficulties in
dragging the attention of customers from different psychological backgrounds.
Weakness:
In order to expand the business in other geographic location business organization
should have sufficient internal resources. Technological resource and financial resources can

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be considered as one of the most effective assets without which the organization can never
expand their business in another location. Toolstationis facing difficulties in entering in the
market of Australia due to the lack of proper economic strength. In addition,Toolstationbeing
one of the most prestigious ecommerce chains should enhance more technological
equipments for maintaining the entire process of business systematically(Doherty, Kartasheva
and Phillips 2012). On the other hand, the internal employees do not have proper
communication transparency with each other due to cultural barrier and language barrier. As
a result, employees could not share their views and thoughts properly. Customer service
process was highly affected due to the lack of effective communication among the
employees.
Opportunities:
After evaluating strengths and weakness of Toolstation, the business experts have
immense opportunities in expanding their entire business process in other countries as well. If
economy is a primary issue for Toolstation, the organization can make suitable market entry
strategy like joint venture (Maekelburger, Schwens and Kabst 2012). As a result, the business
experts do not have to face challenges in increasing business wings due to the lack of
economic strength.
Threats:
Toolstationhas faced immense market threat from its competitors.Abey Australia,
Ace Industrial suppliers, Active Agents Pvt Ltd, A M Contactorshave already established
their entire business process in the market of Australia. While entering new business
process,Toolstation has faced immense difficulties in drawing customers attention. In this
situation, Toolstationcanmake an effective joint venture with an existing company of

7TOOLSTATION IN AUSTRALIA
Australia so that the business experts do not have to struggle in grabbing the customers’
attention.
CAGE analysis:
CAGE analysis primarily aims to evaluate the cultural, administrative, geographic
and economic factors of a specific country.Before entering in the new market, organizations
have to make an in-depth analysis of those factors. Based on those factors the business
experts tend to make strategies and policies for sustaining in the market (Tuschke, Sanders
and Hernandez 2014). However, this very specific study has provided detailed overview on
how Toolstationafter making CAGE analysis can evaluatecultural, administrative,
geographic and economic factors of Australia.
Cultural:
Australia is constituted with various socio-cultural people all over the country. As a
result, the business experts of Toolstationcan never concentrate on providing products and
services being biased towards specific cultural backgrounds (Evanschitzky et al. 2012).
Therefore, the organization is currently dealing with the various products and services.
Customer support system is flexible in multiculturalism and multilingual attitudes.
Administrative:
Strong regulations and acts from government administration of Australia help the
country to reduce and minimize corruption. Due to the competency of government business
organizations do not have to face political chaos within the country (Laufs and Schwens
2014). As a result, both the customers and business employees can maintain an effective
relation with each other. In addition, government likes to maintain transparent taxation
policies. Business experts as a result, do not have to face difficulties in running their wings
effectively.

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Geographic:
As a geographic location Australia is one of the most recognizable places surrounded
by Indian and Pacific oceans. This specific city is surrounded with different major cities such
as Sydney, Brisbane, Melbourne. Toolstation does not have to face any kind of barrier in
communicating with the people of Australia.
Economic:
Australia being economically developed country does not have to face major
challenges in drawing customers’ attention(Zhu and Iansiti 2012).Toolstationhas the
flexibility in maintaining high price range of their products due to economic strength of
Australia. In addition, product variety is one of the most significant reasons due to which the
business expertsof Toolstationwould be successful to draw the attention of premium
customers of Australia.
Market entry modes:
Toolstation is a company based in UK, therefore the leaders must take the advantages
of common language as well as acquainted business framework. Beside these, they need to
know the Australian context for their product or service, existing competitors, their standards,
government regulations, local sales channels along with applications (Laufs and Schwens
2014).This particular company may find that Australia has a ready access to many Asian
countries who indulge in similar trade such as Japan and China. They have long established
brands who have a strong reputation in Australia in supplying industrial tools and accessories
in the country (Chetty, Ojala and Leppäaho 2015). Due to this, the company must select the
Joint-venture mode so that it can utilize the government trade policies to its fullest. This will
aidToolstation in accessing the new market of Australia. It will help in gaining scale
efficiencies by combining assetsas well as operationswith the local companies. Toolstation

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will be able to share its risks for major investments, projects, access skills along with
capabilities.
Justification of choosing joint venture:
The primary reason of making joint venture of Toolstation with the local company of
Australia is grabbing customers’ attention. While entering in the new market the business
experts of Toolstation may have to face innumerable difficulties in gaining customers’
reliability. Making joint venture with the existing company of Australia may help the
business experts of Toolstation to introduce their product in the new market effectively(Zott
and Amit 2013). In addition, the company would be able to enhance work force strength,
economic strength and decision making strategies. It would help the organization to deliver
the best services to target customers.
Generic international strategies:
 Are the pressures for global integration high or low?
The pressure for global integration is high. Large number of retail business
chains is there in the international market. As a result, Toolstation would have to face
immense difficulties in drawing the attention of customers. In case the company finds the
competition in the market to be fierce, the advantage of cost leadership will encourage the
firm in competing on price (Pantelic, Milovanov and Zehetner 2014). By following
differentiation and focus strategies, Toolstation will be able to overcome the price increases
of their suppliers and reach to the Australian customers with lower price. The power of the
buyers though changes with the generic strategies, the company will be able to offer lesser
price options to their large and powerful customers.
 Are the pressures for local responsiveness high or low?

10TOOLSTATION IN AUSTRALIA
Toolstation has focused to expand their entire business process in Australia.
As per the local response, large number of organizations in retail sector is available in
Australia. Therefore, the pressures for local responsiveness are high. Toolstation will be
facing initial Constraints because the market creates barriers for the new entrants. This firm
needs to be mature enough to compete by lowering prices further without comprising their
profitability.The company has a very good reputation as well as loyalty in the UK, therefore,
the differentiation strategy will also help them to earn trust towards their bands. The
company’s differentiation-focused strategies can effectively reduce the threat of substitutes in
the new market. Brand popularity is a unique aspect that will assist the company to achieve
core competency.
 Depending on the pressure, select the appropriate strategy below?
Therefore, joint venture would be the appropriate market entry strategy based on
which the organization can easily enter in the market of Australia.
Recommendation:
As the market barrier is high Toolstation would have to focus following different
market entry strategy as well. It can be recommended that Toolstation can use direct export
strategy for entering in the market of Australia. Direct export strategy can help the business
experts in leading their organization inown way. Organizational managers of Toolstation
may have to face barriers in making strategic decision due to the work cultural differences of
two organizations. It can be recommended that direct export strategy can help Toolstation in
drawing customers’ attention without being dependent on others.
Conclusion:
Factor 1: Economy
Scenario 1:

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In past few years, Australian GDP rate has been decreased enormously. In this
situation, Toolstation has faced innumerable challenges in drawing the attention of
customers. The business experts had to decrease price range of their products.
Scenario 2:
Toolstation intended to follow high price strategy. As a result, it becomes difficult for
lost cost customers in affording the products.
Factor 2: Technology
Scenario 3:
Toolstation after being accustomed with the emergence of technology has drawn the
attention of young generation. As a result, the target customers of middle age are not flexible
enough in operating technologies. Therefore, the company may have to face difficulties in
drawing their attention.
Scenario 4:
The entire business process of Toolstation has become highly dependent on the
advancement of technology. Therefore, it is difficult for the local business partners of
Australia in being accustomed with the changing process of technology.
Among the four scenarios mentioned above it has been observed that third scenario
based on technological factor is highly significant. The business experts should draw the
attention of people from different age group. Therefore, depending on technology entirely
may prevent the business experts in satisfying needs and demands of every single customer.

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