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Agthia Group’s Entry into UK Market Report


Introduction

The purpose of this paper is to offer a business consultancy report to an UAE-based company to expand its operations in the UK as part of the globalization initiatives. As a result, this paper focuses on reviewing the background, ownership, size, and history of the company, assessing its markets and products, and analyzing the market of the country where it will enter. In addition, for providing accurate recommendations, this paper also discusses the external factors, customer-based factors, industry related factors, marketing mix, staffing policy, justification of selected staffing policy, market entry strategy, evaluation of the six entry modes, appropriateness of preferred entry mode, and strategy for international business operations.

Company Background

Company overview: ownership, size, history, and other facts

Agthia Group is a listed business founded in 2004 in the UAE that produces foodstuffs and other consumer staples; however, it is notable that fifty-one percent ownership of the business belongs to SENAAT, a state-owned organization, whilst the rest of the shares belong to corporate bodies and independent civilians (Gulfood 1). According to Gulfood (1), the company has international presence and the size of this business is huge because it appointed more than 2,200 human resources in its two separate segments. Moreover, the company possesses a glorious history of serving consumers with the best quality food and beverages, and since 2004, it has gained a great reputation for ensuring consumer health safety.

Markets and products

It is important to state that geographically Agthia has expanded its production facilities not just in the UAE, but also in countries like Turkey and Egypt in order to respond to the doctrine of globalization; moreover, it has captured markets in other parts of GCC and Middle East (Gulfood 1). Agthia is observing rapid development since last few years due to its global expansion and it has appropriate resources and capabilities to encourage further growth (Arabian Business 1); therefore, it is eager to show its potential by promoting further expansion strategies (Investor Presentation 23).

Currently, Agthia’s main product line includes dairy, flour, fruit juices, mineral water, iced-vegetables, tomato sauce, chili-paste, and animal food, and the company wants to increase the product ranges further (Duncan 1); however, as Agthia has remained successful with its existing products in the UAE, it should offer the same items in the new market, rather than launching new products initially.

Country and Market Analysis

The company should target the UK as a potential place for market entry because by expanding its production facilities there, it will be able to get easy access to the big markets of the European Union member countries.

External factors

The UK has a very attractive market due to its business friendly economic arrangement; moreover, the political atmosphere is quite amicable for businesses as well. It has free market economy, which allows multinational corporations from around the world to carry out their operation there, and it is notable that the taxation levels are quite reasonable in comparison (World Bank Group 14). In addition, this country has low inflation rate, better technological facilities, efficient human resources, and safer laws and regulations, which can ensure business success in long run.

Customer based factors

The UK has a growing number of Muslim population that strive to find foods that are permissible for Muslims; however, in comparison to the increasing population, the number of companies offering ‘halal foods’ are very few. There are many efficient local and multinational food companies in the UK that offer products at competitive prices, but the competition in the halal food market is very low, and this makes the market really attractive and suitable for Agthia.

Industry and business related factors

In the UK, the trade barriers for companies from non-EU countries include duties, tariffs, certain regulations related to employment, public safety, environment, etc; however, the benefit that would be generated from setting up production facilities and thus expanding the business operations there would greatly overwhelm the costs of establishment (World Bank Group 23). Once Agthia becomes stable after the market entry in the UK, it can slowly expand in the rest of the EU member states at minimal costs because of the laws related to free movement of goods; moreover, the UK has an efficient labor force, which is very important for Agthia’s efficient performance.

Marketing Mix and Staffing Policy

Product

Although the cultural, socio economic, and procedural standards in the UK are different, it is not necessary to make extensive changes to the existing product line initially. Agthia can ensure standardizations in this new market because the products that Agthia currently offers (dairy, flour, fruit juices, mineral water, vegetables, tomato sauce, and animal food) has widespread acceptance in the UK as well. In addition, Agthia will chiefly target the Muslim consumers in the UK, and those customers generally do not prefer the ‘local responsiveness’, rather they will be pleased to get the halal foods. However, Agthia needs to be cautious about the fact that this country has rules about the amount of certain ingredients used in consumer products, and so it must conform to those stated restrictions.

Distribution

The placement and the distribution must be locally responsive; for example, the production facilities in the UK should be located near the retail outlets, so that the transportations expenses remain lower, and the supply chain and distribution channels become less costly and more efficient.

Promotions

Agthia should appreciate the fact that the socio cultural trends are completely different in this new market; therefore, it cannot gain competitive advantage here by running the same promotional strategies, which are used in the UAE. The company should conduct market research to understand the consumer preferences, so that it could undertake appropriate promotional strategies; for example, it should run advertising campaigns and allow discounts during festivals like Christmas, New Year, and Easter Sunday.

Pricing strategy

As the company is completely new in the market, the demand for its products will be inelastic; as a result, in order to attract an increasing number of customers, it should implement economic pricing strategy, so that it can gain popularity and boost the sales.

Justification of selected staffing policy

It will be less time consuming to train and recruit the local workers in the factories, rather than searching for the UAE expatriates; in addition, Agthia should use the statistics available in the industry to recommend the recruitment managers and improve the recruitment procedure.

Market Entry Strategy

Evaluation of the six entry modes

The Six Entry Modes Pros Cons
1) Franchise
  1. Permits concurrent extension at many other markets
  2. Less expensive
  3. Efficient collaborators can provide competitive advantage in the market
  4. Less socio-political threats
  1. Lawsuits and disagreements are common between the parties
  2. Continuous supervision and assessment of franchisees can become costly
  3. It is tough to remain the commanding authority over the franchisees
  4. After some years, franchisees can use the experiences gained to become a rival
  5. In long run, it gets tougher to uphold the company’s reputation in the market
2) Export
  1. Agthia will have the authority in the newly penetrated market and it can select an intermediary business abroad
  2. The business will obtain opinions from the new market and enhance products accordingly
  1. Real scenarios of the market cannot be analyzed because the agents will not report changes in the market continuously and accurately
  2. In a market like the UK, market entry by exporting would be very costly in long run because the country frequently imposes huge custom duties, tariffs, and quotas on export items
3) Strategic alliance
  1. Ensures full authority over the business in the new market
  2. Collaborators of the alliance can swap technical skills
  3. Lowers rivalry to some extent
  4. Conformity between businesses
  5. Ensures rapid and cost efficient operations
  6. This market entry strategy has almost all the benefits a business can get from amalgamation
  1. Finding the most competent collaborator can be time consuming
4) Joint venture
  1. Collaborators work with same targets and motives
  2. Together, the collaborators can attain a good position in the market due to joint talents and endeavors
  3. Collaborators can help each other in understanding the market in order to grasp more market share
  1. Social differences can trigger quarrel
  2. Disagreement may arise in decision-making
  3. Parties may fail to trust each other in copyright issues
  4. It is tough to measure the individual contributions
5) Direct Investment
  1. Gives full authority
  2. Chances of elevated sales
  3. More information about the market
  1. Greater risks involved
  2. Can be very expensive
6) Licensing
  1. Rapid growth
  2. Fewer threats
  3. Less costly
  1. Less revenue
  2. Less authority
  3. Poor quality
  4. Loss of goodwill

Appropriateness of preferred entry mode

Strategic alliance is the most appropriate entry mode for Agthia because according to Agthia Group (31), it wants full control over its own business on overseas markets, and this strategy offers more benefits that are suitable for this particular expansion. If the company sets up production facilities in the UK, the entry modes like licensing, exporting, and franchising would not be apposite; in addition, as Agthia lacks technological skills, through strategic alliance, it would get the technical support. Working with the partner of the alliance will help Agthia to understand and ensure full compliance with the laws and regulations in the UK as well.

Strategy for International Business Operations

It is important to state that to compete internationally, Agthia should adopt global standardization policy because after the market entry in the UK, it must lower its expenditure, focus on value generation activities at the best international locality, and contend to gain an apposite value, in terms of quality, economies of scale, public safety and so on. As Agthia produces food and beverage items that are widely acceptable in all countries, through this strategy, the company will be able to better control the expenses of market research, multiple research and developments, and multiple product portfolios, thus strengthening a single brand image throughout the world.

Works Cited

Agthia Group 2015, . Web.

Arabian Business 2015, “UAE food giant says Q1 net profit rises by 22%”. Arabian Business Publishing. Web. 13 April. 2016.

Duncan, Gillian. . 2013. Web.

Gulfood 2016, “Agthia Group Pjsc”. Gulfood Online. Web.

Investor Presentation 2013, Agthia Investor Presentation February 2013. Web.

World Bank Group 2016, Doing Business 2016. Web.

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IvyPanda. (2020, September 7). Agthia Group's Entry into UK Market. Retrieved from https://ivypanda.com/essays/agthia-groups-entry-into-uk-market/

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"Agthia Group's Entry into UK Market." IvyPanda, 7 Sept. 2020, ivypanda.com/essays/agthia-groups-entry-into-uk-market/.

1. IvyPanda. "Agthia Group's Entry into UK Market." September 7, 2020. https://ivypanda.com/essays/agthia-groups-entry-into-uk-market/.


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IvyPanda. "Agthia Group's Entry into UK Market." September 7, 2020. https://ivypanda.com/essays/agthia-groups-entry-into-uk-market/.

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IvyPanda. 2020. "Agthia Group's Entry into UK Market." September 7, 2020. https://ivypanda.com/essays/agthia-groups-entry-into-uk-market/.

References

IvyPanda. (2020) 'Agthia Group's Entry into UK Market'. 7 September.

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