Impact of Political Environment on Market Entry Modes

The provided content comprises a collection of academic articles and books related to international business and strategic management. The studies focus on various aspects of market entry modes, including the moderating effect of political environments, imitation, foreign market experience, and host country network ties. Other topics include international strategy, institutional environments, CEO characteristics, and knowledge creation. The articles explore how these factors influence a company's decision to enter new markets and its subsequent performance.

Running head: INTERNATIONAL STRATEGY
International Strategy
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Table of Contents
Introduction......................................................................................................................................2
Background of Bata.........................................................................................................................3
Discussion of two Potential Destinations where Bata can operate..................................................3
Justification for going global to these selected destinations and examining the cultural and
market fit..........................................................................................................................................4
Examining cultural fit in potential destinations...............................................................................4
Examining market fit in potential destinations................................................................................5
Strategic capability, risk assessment and cost of Bata.....................................................................6
Environmental factors to enter potential destinations.....................................................................9
Recommendation on selecting destinations that best fit for market entry for Bata.......................11
Conclusion.....................................................................................................................................14
Reference List................................................................................................................................15

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Introduction
This study deals with suggesting two potential destinations for the company Bata where
they should expand their operations. The Bata Company was started in the year 1990 and owned
by 5 shareholders who had great passion for entrepreneurship (Bata.com 2017). The company
deals with manufacturing of shoes, leather bags as well as belts. The company had opened many
sales outlets in most part of the country. Bata Company purchases raw material that is mainly
animal skins that turns into useful materials. The company shows interest in global presence
where they will make their products available as well as get hold of customers both nationally
and internationally (Bader, Gassmann and Ziegler 2014). The current segment had properly
explained two potential destinations where Bata Company should start thinking of operating in
the near future. The selected destinations are Japan and United States of America where the
company does not have presence yet. Both the destinations are evaluated in areas such as cultural
fit, market fit and strategic operations. There are vast difference present among Japanese culture
and American culture. In order to plan for expansion in these countries, it is important to conduct
market research so that proper information is gathered about the tastes, market trends,
preferences and other vital attributes that will help the company for expansion purpose. After
proper evaluating the factors, it is recommended that Bata Company should set up their
expansion in United States of America and the country will give lot of opportunities and market
presence (Xie and Li 2017).

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Background of Bata
Bata is a private-owned company that operates in retail and manufacturing sector from
the year 1894 (Bata.com 2017). Bata is one of the family-owned global footwear as well as
fashion accessory manufacturer and retailer that are headquartered at Lausanne in Switzerland.
The company is organized into three main business units. The company has retail presence of
over 5200 retail stores in 70 countries.
Discussion of two Potential Destinations where Bata can operate
For this study, the potential destinations selected where Bata can go global are United
States of America and Japan. These two countries are selected as potential destinations because
Bata has not yet operated in these countries (Wheelen and Hunger 2017).
United States of America is one of the federal republics that are composed of 50 states, 5
major self-governing territories and different professions (Bader, Gassmann and Ziegler 2014).
The Capital of United States of America is Washington and largest city in USA is New York
City. The used currency at USA is United States Dollar and population 325365189 by 2017.
Japan is one of the sovereign island nations in East Asia. The population of 127 million at
Japan makes it 11th largest populated country (Song 2014). The capital of Japan is Tokyo.

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Justification for going global to these selected destinations and examining the cultural and
market fit
Examining cultural fit in potential destinations
Culture can be termed as the collection of deeply ingrained values as well as beliefs that
drive behavior of an individual. To explain in detail, cultural environment means culture as a
shared beliefs as well as values of Group (Shaver 2013). There is difference present in cultural fit
in the selected destinations and it is explained below with proper justification:
At United States of America, the cultural fit values are unique and interesting to know as
it will help any company who desire to expand their business in these potential destinations
(Samiee 2013). Bata as a company need to evaluate and understand how is the culture of
American people or what are their preferences towards the products offered by Bata. To explain
in detail, it is noted that Americans strongly believes in the concept of individualism. Americans
consider themselves to be separate as individuals who feel that they have the control of their own
lives rather than members of family, nation or religious group (Bader, Gassmann and Ziegler
2014). The next cultural values present in Americans are sense of equality. It was stated in
American Declaration of Independence that all people are created equal and this belief had been
present in them as their cultural values. They believe in equality and become uncomfortable with
overt displays of respect like being bowed in front of anyone. The next cultural values present in
Americans are informality. They always behave informally with other people while talking.
Americans believes in frankness and openness at the time of dealing with other people. In short,

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Americans believes in directness where problem can be solved by telling the person directly
rather than using any other method to solve it (Regnér and Zander 2014).
At Japan, their cultural fit is thoroughly rooted in all aspects of life and always impact
family, work as well as social interactions. Japanese people are very helpful by nature. Family
tie-ups are very strong in Japan where they live in joint families Some of the core values of Japan
are thinking for others first, not giving up, respecting elders as well as working in a group
(Peppard and Ward 2016).
Examining market fit in potential destinations
At United States of America, it is a fantastic market for expansion for company like Bata.
US market has huge single market, open-minded buyers as well as access to fantastic tech talent
from the greatest universities as well as Holy Grail of venture capital (Naidoo and Wu 2014).
This study had been conducted to find out whether US market will be potential destinations for
expansion of Bata as they want to go global and recognized all over the world. The advertising
market of US is saturated. There is some of the modest priced advertising market hidden in USA
but it very costly or expensive advertising market in and across the world. USA does not have
more clever scientists or innovators as compared to rest of the world. They have better need for
marketing activities. It is difficult for any company to enter into US market and start to attract
local capital (Leonidou et al. 2015).
Recently in Japan, they are suffering from weak GDP rates. In order to recover from the
sluggish domestic economy, most of the Japanese companies are engaging in evaluating the
opportunities to overseas countries such as China with its geographic and cultural advantages

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(Bader, Gassmann and Ziegler 2014). The economy of Japan had expanded at faster pace for
more than 2 years with domestic spending that accelerates rapidly. Japan is shrugging from past
decades in terms of growth and attempts to counter with a massive money printing programs in
order to stimulate bank lending, investment from companies as well as buying among computers
at the same time. There are several factors that in actual had been the reason for most recent
growth in GDP that rises from domestic activity where consumer spending accelerated
significantly. Japanese customers can be very demanding and have frequent changes in their
tastes and needs as compared to that of Americans (Ang, Benischke and Doh 2015). It is for this
reason why companies based in USA redesign or redevelop products so that they can succeed or
can offer it to Japanese customers. After looking at the size of market of Japan, it is necessary to
engage in substantial investments and it give rise to inherent risks at the same time (Bader,
Gassmann and Ziegler 2014). To that, Japan has many strong local companies. In Japan, the
people mostly do not welcome new competitor but engages in developing strategies to compete
with the new entrants. It is important for any company who wish to expand to be ready for
competing and have thorough knowledge of market and strategy development (Laufs, Bembom
and Schwens 2016).
Strategic capability, risk assessment and cost of Bata
The strategic capability and risk assessment of Bata is explained in this section that will
help in understanding how far they are ready to go global with their existing strategies (Andreu,
Claver and Quer 2017). There are various challenges faced by Bata because of fast-changing
market trends in the form of increased competition from the local players as well as increased
threat from Chinese imports. Traditionally, Bata had targeted lower middle class as well as

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middle class segments of the society but now they are planning to expand and change their
strategies so that they are well-recognized in and across the world (Laufs and Schwens 2014).
Strengths Weakness
Brand Image
Strong financial position
Recognized in most of the countries
Best quality at reasonable price (Ang, Benischke
and Doh 2015)
Footwear for entire family
Targeting all income segments
Lacks proper planning of advertisement
No variety in fashionable shoes
No continuity of leadership (Bader, Gassmann and
Ziegler 2014)
Opportunities Threats
Entering new segments of markets
Capturing markets where no other potential
competitor exists (Bader, Gassmann and Ziegler
2014)
Acquired and partnership with small players
New mediums for advertisements
Innovative products
Price war with competitors
Political instability
Customer dissatisfaction
Economic threat
Frequent change in consumer preferences (Ang,
Benischke and Doh 2015)
Strategic options of Bata
There are primarily three strategic options of Bata that are explained as under:

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Manufacturing- One of the strategic options of Bata is manufacturing where the
company uses regional expertise for meeting the needs of the product lines and they
enjoys some sort of cost advantages. In addition, the company has the potential to deal in
international markets that are beneficial to them in order to compete with the potential
competitors (Huettinger 2016).
Distribution- One of the strategic options of Bata is distribution where the company
should give more value to their company-owned stores (Bader, Gassmann and Ziegler
2014). Giving important to company-owned stores will help the company to have control
and manage the operations smoothly. The company should arrange more training sessions
for the employees where proper explanation is given to the employees about the product
quality that matches with frequent consumer preferences and market trends. The
company even can enjoy profits from franchises but they should make sure that the
employee working for that stores are well-trained and experienced; otherwise the
company’s image will be hampered in negative form (Hollender, Zapkau and Schwens
2017).
Brands- One of the strategic options of Bata Company is brand recognition. The
company should target middle as well as upper class (Bader, Gassmann and Ziegler
2014). The reason to that is lower class start preferring to purchase Chinese and local
shoes. To that, Bata should try to continue their business and target upper middle class
and provide them with better quality products at reasonable prices. The company should
follow their traditional image and not focus upon fashionable footwear as it will change
the strategy to large extent. The company should continue following their older strategy

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as they are well-known for their functional footwear for its reliability (Hitt, Li and Xu
2016).
Environmental factors to enter potential destinations
In order to understand the external environment of Bata, the best tool used is PESTLE
analysis as it clearly talks about several relevant factors such as Political, economical, social,
technological factors (Bader, Gassmann and Ziegler 2014). These factors are mentioned below
with proper justification:
Political factors- It is difficult to expand in other countries due to strict rules and
regulations that are present. There is government stability that acts as one of the political
factors of Bata. Huge market pressure is there for the company as far as sales is
concerned. To that, the company faces stiff competition from local and Chinese products
that operates in footwear industry (Hitt 2016).
Economical factors- Bata faces several economic factors that restrict further
international expansion for the company. Most of the buyer looks for branded shoes. Bata
fails to target the women and kids segments. Bata has huge consumer market to deal with
(Hill, Jones and Schilling 2014).
Social factors- Frequent changes in the lifestyle of consumer or buyers is one of the
social factors that need proper attention by the company (Bader, Gassmann and Ziegler
2014). Trends in fashion are increasing each day but Bata believes in reliability and does
not focus on offering fashionable shoes to the target customer. Their main focus is on
reliability and durability of shoes. There is frequent change in buyer behavior that pretty

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much become difficult for company to understand at faster pace. Other social factor
includes advertising, media as well as publicity (Hill and Jones 2013).
Technological factors- There had been increase in technology recently that defines
technological factors faced by Bata Company. In addition, upward shift in innovation as
well as manufacturing maturity is other technological factors that need urgent attention
by the company (Hennart and Slangen 2015).
The above are the external environment analysis that is faced by Bata. The next segment
explains micro analysis so that there is clear understanding on the current position of Bata
Company.
Customers- Bata Company targets a wide range of customers that include police, army
and other individuals from all locations. The company deals in wide range of products
that are offered by them. The company believes in offering good quality products with
best prices that means price-quality ratio is excellent as in case of Bata Products
(Golbatenmofrad and Zhou 2017).
Competitors- Bata Company faces stiff competition from other footwear brands such as
Puma, Reebok, Adidas, Reebok and Woodlands (Bader, Gassmann and Ziegler 2014).
Suppliers- Bata Company needs raw materials such as PVC soles and animal skin. The
company gets supply from China and other local cottage industries that eventually
supplies raw materials to the company (George and Iravo 2014).
Audit of Bata Company

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The Internal Audit Department of Bata Company aims at providing assurance of adequate
as well as effective process of internal control and functioning in an effective way so that the
assets are safeguarded and there is proper recording of accounts (Frynas and Mellahi 2015). The
auditing department makes sure that the accountings records are maintained and financial
information are reliable without any misstated figures. The Audit Department confirms
transparency in all the auditable entities. In case of pre-audit, it means carrying out all the
operational checks. As far as post-audit is concerned, it means conducting internal control review
as well as physical verification on different audit functions. To that investigation means
conducting audit functions through review in any of the specific area of audit function by the
concerned audit entity (Ethiraj, Gambardella and Helfat 2016).
Ethical conduct and corporate social responsibility at Bata Company
Bata Company is famous for their traditional and authentic products they offer and being
the good corporate citizens as well as contributes to the well-being of the countries and
communities as a whole (Ang, Benischke and Doh 2015). The company believes in contributing
to the members of the community where they operate by providing employees with a safe as well
as healthy work environment. To that, the company is committed that the operations are
conducted ethically and in compliance with applicable laws and regulations. The company is
concerned with the environmental safety related issues (De Villa, Rajwani and Lawton 2015).
Recommendation on selecting destinations that best fit for market entry for Bata
After analyzing all the important aspects in the study, it is now important to recommend
one potential destination where Bata should expand their operations so that they get global

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recognition and generate more profits as well. Before suggesting a potential destination, it is
important to find out why Bata not has any outlets in the United States of America. The reason to
this question is Bata products is not that much good as compared to other shoemakers or
competitors at the time when someone talks about shoes, sneakers or casual wear and footwear.
Bata is famous in India and mainly segmented among the middle class people (Ang, Benischke
and Doh 2015). The company produces decent shoes for kids at cheaper prices. Bata proves to be
dominating brands in footwear in Asian countries. In that way, Asian countries are different from
US market and that is the reason why Bata had not yet decided to expand the business in US.
It is recommended to Bata Company that they should expand their operations in United
States of America and this will be one of the potential destinations markets that will help the
company to gain more market share. Japan is also a potential destination for expansion purpose
but comparing it with USA, Bata should start making strategies to expand in USA. In the
previous assignment, it is suggested that Bata Company should select Export strategy as it will
be easier way to venture into global market. In this way, the Company should start exporting
their products to USA and start targeting their customers. Export strategy will be best among
licensing, franchising and joint venturing. The reason for selecting Export strategy is that the
strategy does not need several procedures to undertake (Ang, Benischke and Doh 2015).
Bata Company wants to expand their operations and ready to go global, then the potential
destination selected for the company is United States of America. It is one of the toughest
decisions to decide the potential destinations for further expansion by any company as it come
along with risk, uncertainty and many more challenges that cannot be avoided or predicted
during initial stages of operation (Brouthers 2013).

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The main requirement for expanding any business is the product or brand (Brouthers
2013). Bata Company already has an existence in many countries. US market is extremely
competitive than any of the other market. Barrier to entry in US market is difficult as there are
already so many competitors present in the footwear industry. But, as Bata is a known brand,
they can take the risk to enter the US market and try to go global. Before entering into US
market, it is important for the company to have good traction in the country that they are
planning to operate. Bata Company should make sure that their product has Unique Selling
Proposition so that they can compete with the other global and local brands. To this, Bata has its
Unique Selling Proposition as they believe in durability and longevity of the footwear that people
are wearing. Therefore, strong references help in product legitimacy at the time of entering into
foreign markets (United States of America) (Barney 2014).
As a whole, it is recommended to Bata Company to provide sales discounts and free
samples to influence more sales in the destination that is selected for expansion purpose. In USA,
the company should make strategies to lower their price level to attract more customers. The
company needs to invest in advertising and promotional activities so that people based in USA
are aware of the new market entrant. The company should build awareness among the potential
users of the particular type of footwear product that is liked by the Americans. The company
need to change their strategy of producing or manufacturing classic or reliable footwear, rather
they should now bring more design, color and combination of both so that they can compete with
other global and local brands of USA. The company can even merge with local brands to expand
more segmentation. The company should work upon their weakness area and try to enhance their
strengths so that they can very well manage to enter the new market of USA. To that, the area of
weakness faced by Bata Company are insufficient lack of development because of rapid

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changing needs and preferences of consumers, lack in promotional activities as well as
downward trend in quality. This weakness should be handled at top priority before thinking to
expand in USA because the county is highly competitive and entering in this market need best
products at prices that can be affordable by the Americans. The strengths of Bata Company are
distribution system as well as vertical integration. To that, it is important that Bata Company
should take corrective actions to minimize the risks as far as possible.
Conclusion
At the end of the study, it is concluded that Bata Company is a well-known footwear
brand that has strong market presence and financial position. The company decides to go global
and plans to evaluate between two potential destinations as to which country will best suit for
their current product offerings. On analysis, it is found out that United States of America will be
the best suited destinations where Bata Company can export their products and gain profits from
the customers. Exporting is the best strategy to venture in the global market. It is a known
concept that foreign investment proves to be the best approach that help countries, both host and
source country. The company under study had been famous for decades and enjoys strong capital
base as well as human capital. It is for this reason that the company feels that they can better
perform in other countries as well. Expanding in global market will help the company to gain
many customers that has varied tastes, preferences and provides an opportunity for the company
to manufacture various styles of products in order to meet the needs and expectations of the
customers.

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