Introduction
For a business to grow, it must diversify. One of the crucial ways of expanding is to open branches locally and internationally. This does not only help the business to increase sales, but also to attract a huge base of customers. It is crucial for a business to establish itself in foreign land firmly. When a company is operating overseas, it uses a lot of resources for operation as well as the importation of raw materials from the home country to the foreign nation.
Therefore, the company should increase its revenue to achieve its primary objective of profitability. In this case, Pret a Manger is seeking to enter into a foreign market and begin its operations successfully. A business must decide a proper method of entering a market to achieve profitability. There are various strategies for effective market entry, and they include Licensing and Franchising, acquisition, and Greenfield venture. This essay, therefore, will attempt to find out successful strategies in which the restaurant can enter China and succeed in its operations.
One of the major factors to consider when entering a foreign market is market choice. (de Kluyver,2012). Before a company invests overseas, it must critically examine the market as to whether the market is friendly or not. In other words, the company ought to look at the demand of the clients in the foreign nation. For instance, Pret a Manger is seeking to expand its restaurants all over China and the rest of the world.
As a restaurant, the company must do surveys and know whether their foods are accepted in the host country. This helps a firm locate specific strategic markets. Alternatively, the firm can decide to sample a few products to gauge the reception of the host country. By doing this, they will get the general feeling of the people and can decide whether to invest or not. The market choice is fundamental because, without a market, a company cannot thrive. Besides, the company must know whether their products are readily accepted, and if now, what should they do for the products to be fair.
An effective market selection strategy is to identify specific markets using the global segmentation method. (de Kluyver, 2012).The process of global segmentation means dividing various countries according to their consumer habits. When a company uses this method, they can be able to identify the consumer patterns globally, and they will know which goods to supply to a particular region. For instance, Pret a Manger restaurant should conduct a global segmentation in China and find out the favorite dishes of the locals. Also, they should find which foods are disliked by the locals. This way, they will bring fast-moving products causing them to increase profit margins. Consequently, the revenues will be used to open more branches in the country and other parts of the world.
Another entry strategy is using location strategies. Location strategists provide value creation as well as the low production of goods. (Jeyarathmm, 2008).Over the years, most firms have relocated to China due to low production costs and favorable environments. The environment creates an opportunity for businesses to grow. One of the primary objectives of a company is to increase as well as maximize value creation. This will assure their clients of quality, and the business will attract more customers and retain existing clients.
Advantages and Disadvantages of Different Foreign Entry Mode Decisions
Advantages
Exports have a reduced rate of risk and gain faster entry into the foreign land. (Carpenter and Dunung, 2012).Most exporters hedge from interest rate risks as well as currency rate risk. Therefore, it would be easier for Pret a Manger to start operations in China due to the reduced rate of risk since all businesses are given an equal platform to succeed.
Licensing and franchising are cheaper and faster because the foreign nations make it easier so that they can benefit from imported goods. (Carpenter and Dunung, 2012).In this case, the restaurant business can start operations immediately because of the ease of getting a license.
An acquisition is an easier way of setting up operations in another country. When a company acquires a foreign form, it takes over its operations. (Carpenter and Dunung, 2012).This is very easy for the foreign company because they already have an established customer base, and their primary work will be to improve their operation base and provide quality products and services to their consumers.
A Greenfield venture is where a foreign company buys land in a foreign country and constructs industries to start operations. Therefore, in the case of any challenge, they will be better equipped because they know the region very well by being there for a longer period. (Carpenter and Dunung, 2012).
Disadvantages
Exporting. When a foreign company is shipping its products to another country, it has limited knowledge of the country, and they may end up making losses.
Licensing and franchising may be tricky since the licensee may decide to become your biggest competitor, and this may affect your business negatively.
Acquisition. This is very expensive for foreign company because they purchase all assets of the other company.
In a Greenfield venture, the business may take a lot of time to catch up with local businesses because of the high cost of advertisement and competition from the local companies.
Potential Countries to Operate
Pret a manger should consider entering the Germany market because it is the largest market in Western Europe (Friend, 2015). It also shows great potential for growth. According to de Kluyver, before entering a market, it is important to measure its attractiveness by measuring its market size and growth rate.(de Kluyver,2012).The German market is growing and it the restaurant would experience exponential growth while in the country.
Entry strategies
I would use the acquisition strategy because I would acquire an already existing firm and take over its operations. This would be a little bit easier for foreign direct investment since I would ensure that our firm purchases a reputable firm in the country. This means that I would have a faster entry and established operations. (Carpenter and Dunung, 2012).
A firm has an easy time when dealing with an established firm. For instance, in the article by Junqian, if a restaurant has a slogan like âthe best ingredients from around the worldâ it would be easier to sell that business rather than a start up. (Junqian, 2014).Although acquisition is quite expensive, it is advantageous because the business is associated with the previous brand.
Conclusion
It is evident that for a firm to achieve global recognition, it must use the right entry strategies. In the event of a wrong entry strategy, a business may experience a huge loss. In some instances, some business may end up closing down operations in foreign land. According to the findings discussed above, this paper would advocate for acquisition as the appropriate entry strategy into a market. This would make it easy for a foreign firm to continue operations of an established brand.
References
Carpenter, M., & Dunung, S. (2012). Chapter 8.3: International expansionentry modes. Challenges and Opportunities in International Business. Lardbucket Books. Web.
de Kluyver, C. (2012). Chapter 5: Target markets and modes of entry. Fundamentals of Global Strategy. Saylor Foundation. Web.
Friend Elizabeth. (2015). Fast Casual in International Markets: Whereâs the Opportunity? Web.
Jeyarathmm, M. (2008). Chapter 12: Strategy in a Global Environment. Strategic Management. Mumbai, India: Himalaya Publishing House.
Junqian, X. (2014). Pret a Manger Prepares for Sandwich Battle. China Daily USA, 10(3),16.