CNPC's Entry Strategies in East Africa

This assignment examines strategic options for China National Petroleum Corporation (CNPC) to enter the East African market. It explores various entry modes like joint ventures, acquisitions, franchising, and greenfield investments, evaluating their associated risks and benefits. The analysis considers factors influencing CNPC's decision, such as market growth potential, competitive landscape, and regulatory environment. The goal is to provide recommendations for effective market entry strategies that maximize CNPC's chances of success in East Africa.

Strategic Decision Making

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Approaching the East African oil
and gas market............................................................................................................................1
TASK 2
..........................................................................................................................................................3
Entry strategies............................................................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
“Strategy is a pattern in a stream of decisions.” Hence, these are very important in
business to ascertain proper decision-making. This document consists of information regarding
strategic decisions which CNPC has to make while entering into East African oil and gas market.
TASK 1
Approaching the East African oil and gas market
Entry into a new market requires several type of research and development which
supports as a base for evolution of strategies which can be used to get into a target market.
CNPC (China National Petroleum Corporation) is a leading oil organisation which is aiming to
enter into East African Oil and Gas market first have to study various business situation
framework that are Customer, Company and Competition so that company can easily penetrate
in that area. Following is a brief justification to evaluate these elements:
Customer
CNPC should evaluate customers and demand in East Africa for petroleum products. As
we know that Africa is a petroleum hub so there are many companies operating for same
business in that nation (Robert Mitchell, 2011). Customers of that country must be using petrol
on low rates or they might have easy availability of petroleum. Hence, market needs to be
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identified before entering into that market so that demand can be analysed accordingly supply
can be initiated.
This analysis will help Chinese Giant to target people in that continent and risk of failure
will be minimised. Before entering into market potential customer has to be recognised so that
company has a knowledge of its success and development in that area. This demographic
evaluation helps in forecasting futuristic scope of business in a particular geographical area.
A company expands its business in another country so as to earn more profit and
maintain an edge over competitors. International business is expanding because of tying up of
countries for expansion of world's economy which is a fact that there is trading exchange across
borders.
China and Africa's relations are very healthy so CNPC wants to expand its business in
that market by entering into it. But before doing that customer and scope in that market has to be
identified because population is what returns backs to company in terms of competing with cost
of expenditure (Papadakis, 2012). Simultaneously, this population have those customers who are
potential buyers of products which are there in market.
Company
A company targets a market which already have some companies which are already
operating in same line of business in which targeting company is dealing. So, this can be used by
company as a positive aspect in order to approach that market. There are several ways of
entering a market through companies.
First, all companies in market in same sector has to be identified. Than they must be
classified in most leading and least considered companies. This will help CNPC to have a base
for entry through mergers or acquisition or joint ventures. Through this oil giant can enter the
market easily by tying up with already established companies.
This study will help in establishing and penetrating in market through which a company
can have best entry strategies in order to develop its business like CNPC in East Africa.
Situations of companies can help business to have a complete information about success of
business in that particular market which it is aiming to work for.
Competition
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Identification of competition in market is most important as a company must know who
all are its substitute (Jansen, 2013). Formation of competitive advantage strategies is a must in
current scenario which is only initiated after identifying key players in market. As we know
CNPC is an oil giant and Africa is hub for same so there must be a lot of competition which is
there for company. Hence, competition evaluation id necessary in order to achieve success in that
market.
Competition is external factor which affects operations of a company directly. It is vital
for organisation to have a complete knowledge of rivalry so as to minimise threat from it. CNPC
can achieve an edge over market only by knowing its substitutes and by adopting competency
strategies to overcome the same.
Major threat to a company in new market is from its competitors which have potentiality
to gain share of company in market by providing more good services than company. So, they are
necessary to be identified so that company can make appropriate strategy in order to deal with
such threats (Nooraie, 2012). Hence, competition is important in business strategy framework.
TASK
Entry strategies
Foreign market entry can be accessed by various methods by a company. As we know
operations of a country are diversified in various sections through which it functions. Hence,
while targeting business expansion in new market an organisation can adopt various ways which
can be through direct exporting, licensing, franchising, partnering, joint venture, buying a
company, piggy banking, greenfield investment or turnkey investment. An illustration to justify
competitiveness of these strategies are listed below:
 Direct Exporting
This related to exports of goods and services of a company from its home country to
other parts beyond its borders. It is most traditional way of operating in foreign market for
trading of goods and services. When a company use exporting it have several advantages by
which it has more effective and efficient operation which reduces chances of risk for working in
another nation (Ibrahim, 2015). In this manufacturing is completely domestically based which
reduces risk of overseas production, it helps in developing a base to learn dealing in other new
markets so as to have an edge and also reduces risk of operating risk at overseas.
 Licensing
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The process in which a company allows some other company to use its manufacturing
process and ways to operate business in other country or market. This type of business is done
because a company have good brand value in market. This is a good way to start a business,
marketing effort for parent company is reduced, financial investment load is reduced on host
company in order to expand and an advantage of royalty is there with the company.
 Franchising
It is a process which is used by most of North American companies to expand their
business. This is a form in which company opens its outlets in various other locations. CNPC
have various branches of it all over globe. This helps a company to settle in a country really
easily and rapidly. First a company should have good brand image and franchisee may create
future competitor for same business.
 Partnering
Partnering is way in which two company comes together for same purpose of doing
business in a country (Lunenburg, 2011). This is necessary in many foreign market where new
entries happen to be more in numbers. This method is a used to expand business of country by
globalisation. By this risk of business gets divided into two parties and also reduces work load
which is very important for a company's owner.
 Joint Venture
Joint venture is another way of partnership but in this a new venture is created by two
companies by coming together for similar business. This way a new entity is introduced in
market by two giants. CNPC can use this technique as this is most popular and best way to enter
into a market by merging with another company and introducing a new joint venture.
 Buying A Company
A whole company is acquired by a firm which is operating in targeted market. This is
also a way of entering into a market which reduces expenses on establishment of new venture,
marketing and various other new business settlement expense.
 Piggy Banking
This is a way in which a company gives its most popular product in domestic market to
other company for sale. By this way a company reduces risk of establishment into a new market
and it gets a knowledge of that market by this way of entry so that it can further make strategy to
enter into that marketplace.
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 Greenfield Investment
It is the costliest way of doing business in a country by opening a whole new firm by
investing in establishment of it in a new nation. Whole of risk is on company which is taking this
step and loss of this have to be beard by that company only. To do this a proper research has to
be done so as to have less chances of failure.
These are some entry strategies which can help CNPC to enter into East African market
according to this it can make business operating strategies (McGuire, 2015). Decisions regarding
entry into a new market can be taken on the basis of risk and growth factors of these above
methods. Some of these will also help in having healthy competition as well will reduce threats
from rivalry as there are many presents for CNPC in East Africa.
CONCLUSION
Research is a way to ensure risk and development in a particular business expansion.
Strategies to enter a new market and justification for business framework elements have been
concluded in this report. This will help CNPC to make entry into East Africa to operate business.
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REFERENCES
Books and Journals
Enders, K., Strategic Decision Making.
Robert Mitchell, J., Shepherd, D.A. and Sharfman, M.P., 2011. Erratic strategic decisions: when
and why managers are inconsistent in strategic decision making. Strategic Management Journal.
32(7). pp. 683-704.
Papadakis, V. and Barwise, P. eds., 2012. Strategic decisions. Springer Science & Business
Media.
Jansen and et. al.,2013. Information processing and strategic decision-making in small and
medium-sized enterprises: The role of human and social capital in attaining decision
effectiveness. International small business journal. 31(2). pp. 192-216.
Nooraie, M., 2012. Factors influencing strategic decision-making processes. International
Journal of Academic Research in Business and Social Sciences. 2(7). p. 405.
Ibrahim, B., Dumas, C. and McGuire, J., 2015. Strategic decision making in small family firms:
an empirical investigation. Journal of Small Business Strategy. 12(1). pp. 80-90.
Lunenburg, F.C., 2011. Decision making in organizations. International journal of management,
business, and administration.15(1).pp. 1-9.
Online
UK supports growth and development of East African oil and gas sector, 2016. [Online].
Available through: <https://www.gov.uk/government/speeches/uk-supports-growth-and-
development-of-east-african-oil-gas-sector>. [Accessed on 29th June 2017].
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