Introduction
Foreign trade is considered today as an important branch of the national economy having an appreciable influence on the economic development of the country. Now practically there is no branch which directly or indirectly would not have contacts with foreign markets. Direct communications quickly develop and joint ventures are created, and the number of barter transactions grows. In these conditions the questions of the efficiency of foreign trade activities get an increasing value.
For effective functioning in foreign markets, it is necessary to use rather flexibly the various marketing techniques, taking into account market fluctuations and the forecast of development of the foreign markets, trading customs, and the features of the surrounding marketing environment. It is especially important to consider the specificity of the social and the cultural environment, as for example the goods, indifferent to buyers of one country, can be rather important for buyers of another country. Besides, when entering a foreign market, an additional necessity occurs to analyze customs regulation, rates of exchange and etc.
In the international marketing activity, the principles and the functions of marketing remain, but they have characteristics intrinsic to various concepts of the international marketing, related to the distinctions in national, cultural and other characteristics of the foreign markets, and international trade rules and etc.
The multinational concept is based on the characteristics of each national market, in regards of which the adaptation of the marketing to the conditions of each market is necessary.
Such concept is inherent in transnational corporations. Their geocentric orientation considers both, the similar and the distinctive features of the foreign markets, in regards of which the marketing system can be adapted and where it is expedient partially standardized. For example, the advancement of standardized goods can be accompanied by either by completely adapted advertising or all components of the marketing system are subject to adaptations.
The occurrence of multinational corporations has led to the development of numerous local strategies, through which these companies compete. They can have a variety of different marketing strategies, each of which is arranged under a certain local market. Thus, the company can try to be the leader in low prices in one country, on quality – in another, and on innovations – in the third.
The company main task consists in working out of methods and ways of such adaptation of the marketing strategy which will suit each separately taken country. The purpose is to force the environment in which a division of the company exists to perceive as local.
However, the main issue in that matter is determining whether the entry to that specific market is rational in the first place, taking in consideration a thorough analysis of multiple factors of the addressed market. In that sense this paper demonstrates the results of a conducted analysis of the possibility of the expansion of the China based MNC “Teiko” into the UK market. The analysis is expected to show that it is viable for “Teiko” to enter the UK market.
Analysis
The proposed method of analyzing the viability of “Teiko” entering UK market consists of quantitative analysis of specific factors that is believed to be influential in the process of taking the decision. The proposed factors which will be used as independent variables are as follows:
- Market Orientation – This factor can be defined as “the organisation culture that most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers”(Qu, 2007) In that sense, based on a conducted research there is an important role of market orientation on the operation of MNCs, where “despite of the obvious advantages such as economy of scale arising from being a part of the worldwide network of MNCs, many MNC subsidiaries still need to strive to be market-oriented in order to achieve an above average performance.” (Qu, 2007)
- The Transfer of HRM- This factor is concerned to the cultural influences of the host country on the process of transferring human resources and adapting them to act like local firms. In that sense, “certain HRM practices are more localised and affected by the host country’s cultural and institutional environment, while other practices are more likely to be integrated throughout the MNC and show a higher level of conformity to the headquarters’ practices.” (Myloni et al., 2004)
- The Customers’ perception – This factor is mainly addressed to analyze the customer’s perspective on the company and the products they offer. On the basis on the price-value scale, failing MNC is the perception of the company’s products as high price/low value. In that sense, “MNC managers identifying their company as a ‘failing MNC’ according to our typologies should avoid entering the foreign market at least until they improve their positioning.” (FIEGENBAUM and LAVIE, 2000)
In addition to these variables, a separate economic indicator will be composed based on the financial analysis of the market economy. “Teiko” has subsidiaries in four countries, i.e. India, China, U.A.E., and Russia. In each of these countries an economic indicator was formed based on values such as the number of enterprises/establishments, the average salaries, R&D expenditure, Gross output, and turnover.
Based on the comparison of the resulted indicators and the new UK indicator, the economic factor will be used in combination of the previous variables. The combination of those variables will form the necessary framework for the analysis.
The obtained statistical data is analyzed using the program Microsoft Excel, based on which the output tables and graphs will be used in thorough analysis.
At the end of the analysis the company should assess its capability achieving the following:
- The analysis and the adaptation to cultural differences. Here it is necessary to analyze such factors as history, language, habits, tradition, religion, education and to define how they will influence the company’s activity. Business culture and the customs of business communication – a mentality, the style of negotiations and dialogue and etc also should be addressed.
- The ability to correctly understand and interpret the economic conditions. At this level, ability to understand macro and micro business factors (in the local market of UK) becomes even more important.
- Considering the political factors. As the company will be established in another country, rather than just selling its products, it needs to understand the political conditions, where the lack of such knowledge can lead to the most serious consequences. It is obliged not only to know the political environment, but also to understand it, i.e. to determine how and when to sell or buy new assets in different countries.
- The knowledge of legal frameworks. It is necessary for the company to possess the knowledge of the laws and regulations which will influence the business process.
According to the research findings, Teiko’s entry into UK market would require the development of additional strategies regarding the transfer of the resources and training as well as for keeping the advantage position of the company. The most influential factor was found to be less associated with economic indicators, rather than with policies and cultural background.
The company’s established strategies in the other subsidiaries drastically differ than the one needed for the UK market mostly because of the differences in mentality. This could be solved by adapting a specific marketing strategy for the whole product line.
Conclusion
Summarizing the paper, there is an obvious opportunity for “Teiko” to expand to the foreign market. The findings of the research indicate that there are no apparent obstacles that will prevent successful integration into UK market. In that sense, it should be noted that economical factors are not sufficient for forming a decision regarding entry into a foreign market. Thus, several background factors should be considered.
For example, ignoring such factor as customers’ perception of the company could prove inaccurate in forming a decisive opinion. For example, in Procter & Gamble case study it was revealed that the failure in entering the Israeli market was due to the fact that P&G was perceived as a ‘narcissistic MNC’ with low external adaptation competency, unable to identify its customers’ needs in the Israeli market.” (FIEGENBAUM and LAVIE, 2000)
Additionally, it should be noted that despite the possibility of a successful entry the company should address its efforts toward keeping the competitiveness for a long term. As it is possible to see from the aforesaid, if the company intends to enter a foreign market, it is necessary to form some key abilities in advance. At different stages, each factor will be implemented accordingly. However, it is impossible to predict that the abilities or each factor can be developed in a short term. In that matter, “it is important to consider that key success factors may change over time, especially as the product progresses through its life cycle.” (2008) Therefore, the company could develop several strategies for different stages of the entry into the market, where each strategy will address a certain aspect such marketing, policy, cultural adaptations, environmental issues and etc.
References
(2008) Market Analysis. NetMBA.
FIEGENBAUM, A. & LAVIE, D. (2000) Strategic Management of MNCs’ Entry Into Foreign Markets: Experience of Israel in the 1990s. European Management Journal, 18, 93-105.
MYLONI, B., HARZING, A.-W. K. & MIRZA, H. (2004) Host country specific factors and the transfer of human resource management practices in multinational companies. International Journal of Manpower, 25, 518-534.
QU, R. (2007) The role of market orientation in the business success of MNCs’ UK subsidiaries. Management Decision, 45, 1181-1192.
WILLIAMS, D. (1997) Strategies of multinational enterprises and the development of the Central and Eastern European economies. European Business Review, 97, 134-138.