Strategies for Analysing and Entering Foreign Markets Assignment

Strategies for analysing and
entering foreign markets.

Table of Contents
INTRODUCTION...........................................................................................................................1
LITERATURE REVIEW................................................................................................................1
DISCUSSION AND ANALYSIS...................................................................................................5
CONCLUSION ...............................................................................................................................8
RECOMMENDATION ..................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Globalisation is process interacting people, companies and government in different
country's. It is a process of drive trade intentional business, investment and use information
technology. That will affect business environment culture and politics in societies around world.
Globalisation is part of connect different world economic, culture and politics activity. Primark
store limed is subsidiary retail business. Company provide diverse range of product, children,
man, women clothes, home ware, footwear and beauty product etc service offer company for
customer. Report will analyse business tools and framework of foreign market. It will identify
market opportunities and risk for Primark in Indonesia market.
LITERATURE REVIEW
Business tools and frameworks the suitability of the foreign market selected.
Expansions strategy is global plan for expanding business into multiple country in the
world.
According to Grant, (2016) Expansion strategy concentration is grand strategy that
involve Primark company resources and product line and identify market need and how develop
company in the foreign market. The company Primark identifies market penetration, market
development and product development. The company Primark before expand business that time
company concentration on develop company services in Indonesia market so organisation focus
on existing product, market, new product and existing market and existing product new
market(Hitt, Li. and Xu, 2016)
As per the view of Johanson and Mattsson, (2015) diversification followed by
organisation when company aim develop business in new market so the company make strategy
for expand business in new market. The company Primark made diversification of set loss threw
other loss. For develop new market company sat aim and objective for develop business in new
market. In Indonesia company have many competitor so the face problem to develop business in
the new market.

Sassen, (2016) integration is the combination of one more business and develop in new
market. The company Primark make Integration for develop business in Indonesia market so the
company take help to exist business for develop business life cycle and focus on improve
company productivity(Trigeorgis. and Reuer, 2017)
In accordance to Li and Xu, (2016) the strategy like franchisee or joint venture follow
when company aim to expand business in foreign marker so company need to explore potential
risk and opportunity for business. Primark want to develop business in the Indonesia market so
the company make research for identify risk and opportunities for business. Internationalization
helps company to make intentional, multi domestic, global and transnational strategy for the
international business environment.
Trigeorgis and Reuer, (2017). the strategy of cooperation is defined company Primark
expand business in Indonesia market so company enter mutual contract with competitor to carry
out business operation and compete with other. For expansion the company try Merger,
Takeover and joint venture with competitor company
Risk in foreign market
Meyer, Ding, Li and Zhang, (2018) Fluctuation in currency exchange rate effects on
company’s financial position. If home company currency price is law and host country's currency
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Illustration 1: Expanding market
Source: (JOINT VENTURE, 2016.)

price is high so the company transaction cost is high so the company bear high cost for exchange
currency so the company manufacturing cost also increase. Primark want develop business in
Indonesia if country currency rate is low so the company make high profit. The company pay a
large amount for currency exchange that increase company product price that effect on product
price.(Buckley. and Ghauri, 2015)
Costa, Soares and de Sousa, (2016) stated that political climate can affect Primark
because organisation has to perform its business within the regulation made by government.
Local Laws impact on hiring employee, acquire supplier, adopt distribution channel and so on. If
government facilitates ease of doing business facility like rebate in income tax, low interest on
bank loan, establish economic zones, facilitate infrastructure like lower rate of electricity, single
window system, arrangement of public transportation etc, that would help Primark in start its
business as soon as possible.
On the other hand Trigeorgis and Reuer, (2017) corrupt bureaucracy can increase the
operation cost as company may have to pay huge amount as bribery. Political turmoil create
situation of anxiety and uncertainty which can impact decision making of Firm and productivity
of higher management. On the other hand Costa, Soares and de Sousa, (2016) .states that
economy factor will affect company on daily basis, because customer take all the decision on the
basis of economic changes. Political factor will create problem at initial level only, Which is
temporary in nature but once Firm successfully set up its business , it will get effected by
changes in economy as economic condition increase or decrease disposable income of customer
upon which customer make their purchasing decision. Bank rate impact growth and development
decision as high bank rate will enhance project cost and lower bank rate support company to
open its new store and franchises in Indonesia. Lower tax rate render large retain earning in
hand, which can be further spend but higher tax rate shrink the profitability. Cultural factor force
company to make its product, advertisement, store design as per cultural norms of targeted
company, otherwise company would not be accept by local people.(Patel and et.al., 2014)
Mode of entry
As per Frynas and Mellahi, (2015) must go for open Franchise in Indonesia as it give fast
entry with less risk and cost. In this decision interested business entity can take permission form
Primark to use its intangible assets like trademark and goodwill. If Primark opt this option, it
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will give cost benefit to it as potential franchisees will use their own money to open store and
shop, even Primark don't have to take tension regarding distribution channel as it partner will
use their well established industrial relation. Wide Geographical market size lower the risk also
company get customer very fast, it does not have to make huge expense on brand introduction
Franchise owner company know culture, trend and customer preference regarding clothing which
help Primark to take proactive action to meet customer satisfaction. Primark will get assured
income form licence taker, but Patel And et.al., (2014) states Franchise can adversely affect
company if Franchiser fail to meet standard of product because organisation has good
international image in fashion. Author suggests going with joint venture with domestic
company for new entry (Sui and Baum, 2014). Other benefit of joint venture is, second
company(with whom Firm make its business relation )also has market knowledge and expertise
which can help in market research to first company(Primark). Fear of Losing earned goodwill is
not a problem is joint venture because primark will have full control on cloth quality..(Frynas
and Mellahi, 2015)
Management responses to realise opportunities in Indonesia
Buckley and Ghauri, (2015) States that first firm can deploy is current employee in target
countyr by sending them on deputation because company has some quality standard for product
and uncompromising organisation policy for its stakeholder interest. if company hire local
employee, these set standard can be affected. For instance organisation use PolyPM. by Polygon
Software to design cloth, this software required high level of computer literacy, company may
face lack of desired skill and knowledge in local employee, by chance Firm appoints these local
staff, it has to spend huge amount to render training secession. On the other side Ang,,
Benischke. and Doh, (2015) argued that implementing advance technology increases cost of
business as Firm has to give extra benefit, handsome salary, other financial and non financial
facility to convene current employee to work in foreign country. Sassen, (2016) stated that local
employee in fashion industry is the best option for company as they have all the information
about customer, their fashion sense, they also have adequate fashion industry knowledge and
experience ,which can help organisation in marketing mix. Local employees help primark in
increase share market, grab competitor advantage by offer what local customer want( not what
company has)(Buckley. and Ghauri, 2015.)
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Operation management decision cover resource, logistics, procurement and logistic
decision. When a company establish it business in foreign country manager generally faces
difficulty in taking decision whether he should avail raw material from host country or procure
raw material from domestic country. Location, timing, cost, currency value, weather, logistic
barrier affect supply chain and logistic decision. According to Frynas and Mellahi, (2015)
primark can avail its fabric from mother country if company want to maintain quality of the
product remain unhurt or Firm don't want to waste its time on research the best supplier for its
product. But Gillespie and Riddle, (2015) think that this strategy is not a good decision for
organisation because Indonesia is not so near to mother country, company may has to face issue
in case of adverse climate condition (like maritime disaster affects port and weather can disturb
air transportation ), also cost of the product will increase in market due to heavy export and
custom duty. High price is not good for entry level. On the contrary Grant, (2016) argued that
Primark can choose procure raw form local supplier. If company has quality concern it can set
quality standard for supplier because quality is prime concern is operation. It can be control by
taking help of technology like more automation can be use(RFID) in production, procurement,
logistic and distribution. (Trigeorgis. and Reuer, 2017)
DISCUSSION AND ANALYSIS
From the above literature review it is analysed that The company wants to expand their
business in many countries, so it has to make various strategies, policies and plans for their
business growth (Ang, Benischke and Doh, 2015). Primark company focuses on develop
company services in Indonesia market thus, enterprise has to conduct survey and gather
information from their sales team. The company can analyse its customers demands before entry.
These Needs can be full fill by rendering product according to their demand. Integration is the
most important combination of many businesses and development in new countries. The
company will full on concentrate to change and improve their products.
The Primark company has to research and analyse .There are currency exchange rate
impact on their products, services and prices. if, local country currency is very low and
international country currency value is very high so it would be increase manufacture cost of the
product .high manufacturing cost lead lo high price offering to customers. The company should
have taken a risk for their business size, complexity and change environment. They have faced
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limited resources for the critical trade off of bonding slowly increasing expectations with the
analysis of difficult risk locations(Frynas. and Mellahi, 2015.)
It is analysed that company has to chose correct entry mode for entering into foreign market.
The modes of entry will be taken into consideration as risk for participation strategies.
Nowadays the risk is control and commitment of resources. Because they have needs return
investment and promises.
Form the above literature review it is identified that if Primark wants to expand its
business in Indonesia market it then it can take support of several strategies such as
diversification, integration, internationalization, cooperation, joint venture etc. all the ways
have their own advantages and disadvantages. After discussing all the advantages and
disadvantages, internationalisation is considered as best strategy. Through this tactic, Firm
can expand its business throughout the world after analysing risks and opportunities involved
in the market. In order to expand the business in Indonesia, through internationalisation, Firm
has identified all the risks involved in the market expansion in Indonesia, all the
opportunities of the market and have analysed them carefully for the purpose of making
expansion plans and taking effective decisions regarding it(Buckley. and Ghauri, 2015)
Expansion of any business involves a huge risk with it. Although, if the company get
success in expanding its business, it can result in providing a huge profit to the company.
Currency fluctuation, change in political party and political operations as they effect majorly
to the business operations are some of major risks involved in expansion of business.
Primarks has considered all the risk involved in its decision of expanding its business in
Indonesia. Aaove review described that huge cost involved in expansion of business like
manufacturing cost, cost of transportation, labour cost etc. in order to analyse cost of expansion.
It has also analysed all laws of Indonesia which will have effect over the business operations, all
the financial facilities available in the Indonesia market, rules related to bank loans, etc. this
analysis help the company in predetermining the risk which can be faced by the company in
future for finding its solutions in advance in order to enhance efficiency of the business and
effectively building the expansion strategies(Patel. And et.al., 2014)
Before expanding the business, Primarks has to analyse every economic factor like
inflation rate in the country to analyse the purchasing power of the consumers, bank rates,
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interest rates prevailing in the country, GDP of the nation and most importantly trend of
country's economic growth rate because it has a huge impact over the business operations. For
example if the purchasing power of the people in Indonesia is very low, they cannot afford the
luxurious and high priced products, likewise if the economy is showing declining trend in the
country, this will have negative influence on the business operations and the country will be less
attractive proposal for the potential investors. If low interest are there in the country means that
capital could be raised at low cost, paying less interest to the banks would be an attractive factor
for Primarks to invest in the proposed country. All these factors are needed to be analysed in
detail for a company's growth and expansion in the proposed market(Grant, 2016.)
For entering into a new market of Indonesia, organisation have some options for deciding
mode of entry like, franchise, joint venture, licensing etc. after analysing all the pros and cons of
all the modes of entries, company has decided to enter into market through joint venture with a
well established domestic company of Indonesia. Joint venture is an enterprise formed by
different partners of different nations in which risks and rewards are shared by the joint
venturers. This type of entity is formed for a shorter period and the reason for opting of this
mode could be utilising the local business knowledge of the Indonesian business houses,
technological benefits. The joint venture has its own advantages like it helps in rapid expansion
into foreign market, it enhances the productivity of the partners involved in the joint venture and
larger profits for both the parties..
Domestic company's experience in the market will also help the company in predicting the future
of the company and future risks that can be faced by the company in the market in the future in
Indonesia market and finding their best solutions in advance so that the these predictable
situation can not become hurdle for the company in future and company keep doing its business
smoothly(Gillespie. and Riddle, 2015)
Also, for the purpose of the purpose of operating company's business operations in
Indonesia, Primarks have some options like transferring its existing employees to its new
business. In this strategy company will have well trained employees in its business premises.
Company will need not to trained them about the values and culture of the company. Primarks
will also not need to trained its employees about its organisational structure and the quality of
work of the business. However, this strategy will lead in increasing cost of company.
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Company also have an option to employee domestic people of Indonesia. It will reduce
the cost to company but the new employees will need to be trained first. It will also include some
cost to company. It can choose a combination of both the options. Company transferred some
existing employees to Indonesia and also employed some domestic people to company it reduced
the cost to company and also enabled the company to have some well trained employees in the
organisation for the efficient move to the Indonesia market.(Meyer, Ding, Li. and Zhang, 2018)
CONCLUSION
Form the above study it has been concluded that entering into foreign markets is not an
easy task, it contains huge financial and non financial risk (goodwill), so brainstorming become
very important task to do. Organisation must not rely on reactive action, it must focus on
proaction actions because reactive action are more expensive than precaution. Deep research and
analyse help a lot in case of expansion because company get to know the factor that can affect
its profitability. Firm must try to make its policy regarding product, technology, human capital
according to that country because very country has different business environment and one
single policy can not work in all nations.
RECOMMENDATION
Market expansion decision is very sensitive decision as company has to invest huge
money in it, so half home work can lead huge financial loss to Primark. First organisation must
analyse its external environment(P.E.S.T.L.E), so company can get to know opportunity and
threats. For this purpose Primark should take help professional business adviser and consulting
company. These companies has all the data which can be used to know more about host country.
To manage political risk organisation must focus on building industrial relation with
government. To tackle economic risk, company can use its retain earning and reserve. It can only
possible by maintain sound financial condition.
Cross cultural issue can be resolve by adopting a organisation culture where cultural
difference is appreciated or rewarded.(Ang, Benischke. and Doh, 2015) Primark must give
opportunity to employee to know the host country culture so that they can feel attached.
Company must use its foreign currency reserve very carefully because it is the only element
which is critical in foreign business. A very important thing that primark can do to manage
human capital requirement is, it must communicate with current employee for expansion plan,
so employee can make up their mind to go oversea for work and improve their communication
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skill. These proactive precaution is better than huge failure. Company must know all the legal
compliance imply in host country and make policy and strategy with in it. Organisation must
have insurance for risk( insurable risk) as it will help in case of mishandling(Frynas. and
Mellahi, 2015.)
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REFERENCES
Ang, S.H., Benischke, M.H. and Doh, J.P., 2015. The interactions of institutions on foreign
market entry mode. Strategic Management Journal. 36(10). pp.1536-1553.
Buckley, P. and Ghauri, P., 2015. The internalisation theory of the multinational enterprise: A
review of the progress of a research agenda after 30 years. In International Business
Strategy (pp. 99-121). Routledge.
Costa, E., Soares, A.L. and de Sousa, J.P., 2016. Information, knowledge and collaboration
management in the internationalisation of SMEs: a systematic literature
review. International Journal of Information Management. 36(4). pp.557-569.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press,
USA.
Gillespie, K. and Riddle, L., 2015. Global marketing. Routledge.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Hitt, M.A., Li, D. and Xu, K., 2016. International strategy: From local to global and
beyond. Journal of World Business. 51(1). pp.58-73.
Johanson, J. and Mattsson, L.G., 2015. Internationalisation in industrial systems—a network
approach. In Knowledge, networks and power (pp. 111-132). Palgrave Macmillan,
London.
Meyer, K.E. and et.al., 2018. Overcoming distrust: How state-owned enterprises adapt their
foreign entries to institutional pressures abroad. In State-Owned Multinationals (pp. 211-
251). Palgrave Macmillan, Cham.
Patel, P.C. And et.al., 2014. Beating competitors to international markets: The value of
geographically balanced networks for innovation. Strategic Management Journal. 35(5).
pp.691-711.
Sassen, S., 2016. The Global City: Strategic Site, New Frontier. In Managing Urban
Futures (pp. 89-104). Routledge.
Sui, S. and Baum, M., 2014. Internationalization strategy, firm resources and the survival of
SMEs in the export market. Journal of International Business Studies. 45(7). pp.821-841.
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Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal. 38(1). pp.42-63.
ONLINE
JOINT VENTURE. 2016. [ONLINE] Available through:
<https://www.thebalancesmb.com/what-is-a-joint-venture-and-how-does-it-work-397540>
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INTRODUCTION
1