Market Entry Modes for SMEs

This assignment delves into the market entry modes chosen by Small and Medium-Sized Enterprises (SMEs). It requires an analysis of the various strategies SMEs employ to enter new markets, considering factors like Porter's Five Forces competitive framework and the concept of dynamic capabilities. The assignment encourages a systematic review of existing literature and proposes a future research agenda for this important topic.

Individual Management
Report
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EXECUTIVE SUMMARY:
Macro environmental factors refers to major external and uncontrollable factors that
influences an organisation decision making process, its performance and strategies. The PESTLE
Analysis is a framework used to scan the organisation external environment. It evaluates impact
of Political, Environmental, Legal, Social and Technological factors that affects the operation of
business. These are management tool used by company to evaluate potential impacts,
opportunities and threats that can affect the operation of overall business along with the
Stakeholders that company deals with. Market segmentation is also management tool used for
segmenting, targeting and positioning a product or services provided by company within their
target market.
The mode of Market entry refers to entry within different foreign markets and
participation strategies differ in the degree of risk they present, control and commitment of
resources required and return or investment promised by these foreign markets.
Porter's generic strategy was developed by Michael Porter which is used by company to
gain competitive advantage by applying different components offered through this strategy.
Components are; Differentiation, Cost Leadership and Focus.
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1. Macro environmental analysis of GERMANY and United Biscuits.......................................3
TASK 2............................................................................................................................................5
2. Assess three modes of market entry and recommend the best mode......................................5
TASK 3............................................................................................................................................7
3. Concepts of market Segmentation and targeting. Evaluate the potential target market. ........7
TASK 4............................................................................................................................................9
4. Apply porter's generic strategy and how it will help company to gain competitive
advantage: ...................................................................................................................................9
CONCLUSION..............................................................................................................................11
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INTRODUCTION
Strategic Management refers to managing of organisation resources in order to achieve
the desired objectives and goals of company. It includes setting objectives, analysing competitive
environment and evaluating strategies for firm. United Biscuits is a British multinational food
manufacture industry that provides some of the famous food items like, Jacobs Cream, McVities
and Twiglets. This report discusses about the use of management tools like PESTLE Analysis,
Porter's five generic Strategy, etc. by United Biscuits for introducing its new product Fat Free
Biscuits within markets of Germany.
TASK 1
1. Macro environmental analysis of Germany and United Biscuits
United Biscuits is introducing a new product Fat free biscuits within market of Germany.
Fat free biscuits is an important ingredient used in many dishes for cooking. Company is
introducing this product in London and other parts of Germany; PESTLE Analysis has been
conducted and its impact over the product.
 Political: The government of Germany is taking measures to address deteriorating
economy, which includes mix of monetary and fiscal policies. The government of
Germany is Parliamentary and it has independent federal judiciary consisting of
constitutional courts and other courts with jurisdiction in financial, labour and social
matters. It is one of the most powerful countries of the world. Political Stability of
country is strong and it offers the advantages of both location and world class innovation.
It has strong base of Industrialisation and its membership with European Union has
enabled country to become more competitive. The constitution of The Federal Republic
of Germany lays down the fundamental structure of the government and dictates what
vale system should be followed by the citizen (Lichten and et. al., 2015).
However, The recent elections have created serious problems for Germany and
deeply damaged Europe by wasting the continent and human capital resources. United
Biscuits needs to carefully analyse the market situation. Tax reliefs are given to investors
on their capital gains. The current corporation tax rate for company profits is 15% and it
it is the lowest than other European Union Nations. This will provide great opportunities
for United Biscuits and generates more revenue (Barney, 2012).
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 Economic Factors: The economy of Germany is the 4th largest economy in terms of
GDP in the world. German companies has sold approximately 800 billion euros goods in
2009 and it is the fastest growing start-up ecosystem of the world. The country economy
registered strong growth of 2.5% in GDP and it is the most powerful nation in European
Union. British household faces certain challenges in 2017. The prices within shops got
increased at faster rates. It allows free market economy in consumer goods and business
services thus, it provides opportunity for United Biscuits to exopand their buisness and
generate more revenue in comparison to Germany country or economy (Hitt and Duane
Ireland, 2017.).
 Social factors: Germany has been influenced by the idea of Social classes; however, the
population within country is multicultural. Estimated population of Germany is 82
million in 2016. Nevertheless, the population of country is getting older as well (Scott,
2017).
Germans love hearty and rich cuisines it includes healthy food and drinks in their
diet. Each area of Germany has different cuisines and taste depending upon the local
culture and traditions. Company would be benefited from these sectors of population
(Wilson, Gosling, and Graham, 2012).
Further, the diversified population of country provides many opportunities for the
successful growth of Fat free Biscuits. Germany is the top countries perceived to have the
most number of literates in the world. Thus, this provides highly competent and skilled
labourers for United Biscuits (Lancee, 2012)
 Technological: Germany is one of the most technologically advanced nations.
Businesses within countries are frequently developing innovative technology to enhance
productivity and customer satisfaction.
Germany is loaded with extremely high standard of technology with the blend of
various methods and techniques. The highly competent working staff helps in achieving
business goals and are well trained to operate different machines and tools. United
biscuits can increase their production of Fat Free Biscuits by using innovative technology
( Fojcik, 2013). Environmental: The environmental regulations within countries are strong and if anyone
found guilty while breaking these regulations may oblige to set punishment for the crime
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conducted. There are government department like; Federal Office of Consumer
Protection and Food Safety (BVl) who responsibility is to control food industry, and
provides assistance by acting coordinating and advisory capacity. It empowers people of
GERMANY to live within the given environmental means. This shows company needs to
build up a proper mechanism to control factors that can harm nature due to pollution
generated by factories and improper practices in manufacturing biscuits. It must consult
to government organisation for regulation and monitoring the harmful impacts of
deforestation (Eckersley, 2016).
 Legal: There are certain laws and regulations for organisational needs to be followed
within their specific industries. The German food regulation is dominated by the
European Harmonisation of food legislation. The European Commission has published
the following guidance document which refers to key Community law requirements.
United Biscuits need to get in touch with competent local food inspection and need to
approve their Fat Free biscuits before launching it in the market. (De Villa, Rajwani and
Lawton, 2015).
Thus, by analysing the Macro environment of Germany it can be stated that there are great
opportunities that can be explored by United Biscuits for introducing its new range of product
i.e. Fat free Biscuits. Opportunities are:
 Germany has strong political system that promotes opportunities for business. Further,
there are multiple economic benefits of being the part of European Union.
 There are well trained, skilled and dedicated staff workforce that will help in attaining
company goals more effectively.
 The tax policies are flexible that provide benefits to United Biscuits (Streck and et. al ,
2013).
There are certain threats that United Biscuit need to address while operating their
business in Germany these are:
 It requires 398 days for registering a company in states of Germany. Further, there are
long bureaucratic proceedings of constructing a building in the country.
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 There is a risk of doing business in Germany without the knowledge of cross culture.
TASK 2
2. Assess three modes of market entry and recommend the best mode
United Biscuits can introduce its product, Fat free biscuits through different modes of
market. These are; Joint Venture, Franchising, Wholly Owned Subsidiaries.
 Franchising: It refers to arrangement where one party grants a right to another party to
use its trade name or trade mark. Along with this, it grants certain business systems and
process for producing and marketing products/services. The terms and conditions of a
franchise vary and it depends upon the contract. It usually pays fees only one-time and
gains certain advantages like tired and tested products, immediate name recognition and
detailed techniques in promoting and running their business (Villar and et. al., 2014)
Franchising can be a beneficial tool for United Biscuits as it helps in cross border market
entry. Further, company would be benefited from local knowledge of franchiser that
would help in expanding business to local people of GERMANY. The chances of risk are
less than equity based foreign entry modes (Nijmeijer and et. al., 2014). Before entering
into this mode of market, United Biscuits should analyse negative impact of franchising,
these are as follows:
◦ Franchises reduces down the revenue generation of United Biscuits. It is because
company would earn only the royalty fees and not the profits which is earned by their
different franchises.
◦ This will increase the chances of nurturing a franchise as a future competitor.
◦ It will take away the control of company.
 Joint Venture: A joint Venture refers to Business organisation undertaken by two or
more person or organisations. In this process two parties agreed to pool their resources
for the purpose of accomplishing a specific task. This as an agreement between parties
for a particular purpose and set time frame. These form of business agreements have
shown a great growth in past years. To enter through this mode of market United
Biscuits needs to join hands with a well established and successful companies. Further,
United Biscuits needs to have common goals and objectives with regards to market
entry, acceptable level of risk/reward of the market enter, sharing of technology and
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following local procedures of government. The benefits of Joint Venture are (Lin and
Wu, 2014);
◦ It will provide company with new insights and ideas which help United Biscuits to
increase it sales of fat free or premium cookies.
◦ Both parties in Joint Venture will share risk . Thus, it will reduce down the burden
over United Biscuits. Further, it is a helpful tool as United Biscuits has introduced it
Fat free biscuits and will need a strong support (Schultes-Schnitzlein and Dettmeier,
2012).
The demerits of joining joint venture is :
 To enter through this mode United Biscuits needs to conduct a detail research of
companies with which United Biscuits will join hands.
 Further, it reduce down the flexibility in operations of company.
 There must be great imbalances in terms of expertise, assets and investments as
different company is working together.
 More over United Biscuits cannot enter through this mode as Joint Venture are for
short period of time (Merchant, 2014).
 Wholly Owned Subsidiaries: This refers to a firm which is completely owned by another
company. Business entity which owns that subsidiary is known as Parent or holding
company. Parent company has the right over all the stock of subsidiary and it can
appoint there directors which controls operation of company. The benefits of Wholly
owned subsidiaries is that it provides chances of diversification and manage their risk.
Further, company can rely upon suppliers and service providers. It can take control of
their supply chain (Ziolkowska and Ziolkowski, 2015).
The recommendation for United Biscuits to enter into new market with regards to it new
product is that company should enter through Wholly Owned Subsidiaries. This mode of
market entry is been recommended due to following reasons:
 Wholly Owned Subsidiaries provides a full right to United Biscuits to exercises control
over the operations in foreign country.
 This benefits United Biscuits as it does not need to share it Trades secrets and process
with others.
 This reduces the risk of competition and competitors within Fat free biscuits industry.
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 It will be benefited tool as United Biscuits will have all the rights and powers of it
Subsidiaries. Company can change or appoint Boards of Director accordingly.
 Wholly Owned Subsidiaries would be a suitable option as United Biscuits can ask it
subsidiaries to imply all it resources to developed new product or to create a product
differentiation.
 Firm can use earnings of its subsidiaries to expand it business to other parts of the world
(Wright, Paroutis and Blettner, 2013).
TASK 3.
Market Segmentation:
The term Market Segmentation and Targeting is used within marketing strategy of a
company. According to marketing theory in order to developed a successful marketing strategy.
The service marketers must developed a successful market segmentation.
 Market Segmentation: It refers to process of dividing or segmenting a market into
smaller uniform groups. That have similar needs and characteristics. Segments created
are composed of individuals that will response similarly to the marketing strategies. It
assumes that different market segments required different marketing programs and
techniques. There are five type of market segmentation which are; Geographic,
Demographic, Behavioural, Situational and Psycho graphic Segmentation. The benefits
of market segmentation is that it will help United Biscuits to realise the needs and wants
of their targeted consumers before their competitors. Market Segmentation reduce down
the risk of an unsuccessful marketing campaign conducted by company. Further, it helps
to target a potential segment and formulate plans of marketing accordingly (Laufs and
Schwens, 2014). To properly practice segmentation the marketer within United Biscuits
need to keep certain things in their mind i.e.
◦ It should be measurable i.e. in terms of size, buying power and profiles of each
segment.
◦ It must accessible which means the company should reach to all target consumers
through it marketing mix.
◦ Each segment must be different from another segment.
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 Targeting: The term targeting means to break a particular market into a segments and
then to concentrate over marketing strategies of that particular segment. This consist of
two steps which are:
◦ Evaluating Market Segments: The evaluation of market means to examine the
suitability and attractiveness of particular segments. To determine attractiveness of a
particular segments United Biscuits must look to characteristics like; accessibility,
potential for growth, scale of economy and size. Also, firm should consider that
particular segment must suit to objectives of company and its new product (Wedel
and Kamakura, 2012) .
◦ Selecting Market Segments: After evaluation of market segments company deicide
to enter which particular segment or how many segments. To accomplish this task
United Biscuits must analyse target market. These market consists of various groups
of buyers to whom company wants to sell their products (Teece, 2012)
The benefits of using market targeting strategies is :
◦ It helps United Biscuits to be cost effective in its operations.
◦ Assist company to prioritize their consumer market and formulate plans and
marketing strategy according to needs and wants of target consumers.
◦ It helps to differentiate companies brand from its competitors (Gould and et. al.,
2015).
United Biscuits needs to adapt market segmentation and targeting policies of marketing
for effective positioning of it is new product within market of GERMANY. Fat free biscuits is
the world's most widely-traded and versatile vegetable oil. There are many countries across the
globe which are the largest producers of fat free or premium cookies. Thus, it creates a potential
target market for United Biscuits fat free cookies. The market segmentation and targeting
practices that can be applied by United Biscuits within Fat free biscuits marketing strategies are: Geographical segmentation: This will include cities, regions and climate of
GERMANY. The cities are; Ireland, England, London and Wales. The climate of
GERMANY is pleasant and this will promote more usage of fat free or premium cookies
(Semeraro and Fregonara, 2013). Demographic Segmentation: In this form of segmentation consumer market is divided
on the basis of; Age, Gender, Religion, family size, Income and Education. United
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Biscuits has great opportunity to serve diverse population of GERMANY ( (Dixon and
et. al., 2012). ). Behavioural: It divided consumers on basis of their knowledge, attitude towards product
and how they would response. United Biscuits should analyse the consumer behaviour in
relation to use of Fat free biscuits and how they would response to changes in their
cooking oil (Bell, 2012).
 Psycho Graphic: it divides targeted market on basis of values, attitudes, interests and
traits and lifestyles of people. United Biscuits has great opportunity to established a
strong market for it product. Diversification in beliefs and value will help company to
effectively places it product into market (Alexandris, 2013).
United Biscuits targeting and positioning for Fat free biscuits is as follows:
 Target groups for United Biscuits new product includes: Household consumers, Old Age
Population, Young students. The focus of company would to target each groups
separately and position product accordingly. It will formulate different marketing
strategies for individual segments. For instances; It includes household as target group.
The marketing strategy of company for this particular group is to attract people who are
facing issues related to obesity. It will display this product into all the supermarkets
owned by United Biscuits In GERMANY. Similarly, to lure young consumers United
Biscuits shall elaborate the nutritional benefits of using fat free or premium cookies.
Further, it can reduce prices of its product as compare to it competitors. Company must
do effect positioning of its product by adopting Functional positioning. It means to
increase quality of product and sold by way of effective advertising it to targeted
consumers (Hitt and Duane Ireland, 2017).
TASK 4.
4. Apply porter's generic strategy and how it will help company to gain competitive advantage:
Porter's Generic Strategy is used to determine a firm's relative position within a particular
industry. It indicates direction or strategy for an organisation. These strategies are; Cost
Leadership, Differentiation, Cost and Differentiation Focus (Porter's Generic Strategies. 2017..
The application of Porter's Generic strategy is as follows:
 Cost Leadership: It means to become a leader in terms of cost within dimension of the
industry in which company operates. This can be achieved in two ways i.e.
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◦ Increasing profits by reducing cost. This means to charge industry-average prices.
◦ Secondly, by increasing market share through charging lower prices while still
making a reasonable profits due to reduction in cost.
United Biscuits can gain competitive advantage by using both the techniques. Company
can reduce cost of it products in compare to its competitors. This would attract more consumers
from each target groups. Secondly, United Biscuits must reduce down its cost of production by
attracting more customers outside GERMANY. Further, it can employ budgetary control
technique which helps in exerting control over expenses and enhances profit margin. This will
help company to provide better quality of product at cheaper rate (Mathooko and Ogutu, 2015).
 Differentiation: In this strategy firm needs to be unique and provide different product as
compare to their competitors. This means company needs to build a unique product. It
can do this by adding values, innovative feature, increase it durability, etc. United
Biscuits needs to build a unique feature while introducing Fat free biscuits within markets
of Germany. As, Fat free biscuits is been sell earlier by other competitors of United
Biscuits. This requires company to build a new and innovative feature. It can achieved
this objective by:
◦ Conducting a deep research and development regards to current needs and demands
of target consumers.
◦ United Biscuits should conduct effective marketing of it products. This will help it to
reach to widespread consumers in Germany.
◦ Company needs to be adaptive to changing Dynamic environment (Rudnicki and
Vagner 2014). Cost Focus: This involves business seeking a low-cost advantage in just particular or
small number of market segments. United Biscuits needs to be clear while targeting its
niche market. After, targeting it can offer the lowest possible price. This can be done
through understanding needs and preferences of that targeted market and dynamics
within that market. To provide the lowest cost it is important for United Biscuits to
ensures that it cost of production remains low. If the cost increase and still company
provides at same rate then it may create loss to United Biscuits (Robson, 2015).
 Differentiation Focus: The firm seeks differentiation in it target segments. This refers to
special customer needs of particular segment. It creates opportunities for company to
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provide a complete different product from that of its competitors. To implement this
strategy it is important for United Biscuits to see that there must be a different and special
needs prevailing within target groups. To achieved differentiation focus United Biscuits
can make use of it strong brand loyalty. It will it to easily sell it new product into it
targeted market and will create a competitive advantage for company (Tanwar, 2013).
To choose any generic strategy United Biscuits needs to conduct SWOT analysis for each
strategy. Further, company needs to conduct a Five Forces Analysis and must evaluate the result
of each generic strategy. After, conducting a comparison then it must determine which strategy
will be best suited to achieve competitive advantage (Sharifi and et. al., 2013) .
CONCLUSION
This report concludes that how a particular firm can establish and operates it business
within a new market or different country. The report shows that by using different management
tools company can evaluate opportunities and threats for its product. To introduce a new product
fate free biscuits, within markets of Germany United Biscuits needs to conduct PESTLE
Analysis of Germany and it impact over the product. Further, there are different modes through
which United Biscuits can enter into wide markets of Germany. These are; Joint Ventures,
Franchise and Wholly Owned Subsidiaries.
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<https://www.mindtools.com/pages/article/newSTR_82.htm>
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