Introduction
Choice of
foreign markets entry mode is a very important issue that most business
organizations face and there are many factors that affect it. Opportunities
need to be assessed before any business organization enters a new market, they
have to be studied in order to apply certain management strategies for
expanding the business effectively. For expanding a business it is necessary to
set the objectives before entering any new market as the business organization
has to examine the investment environment, analyze the market, study different
influences and effects on the chosen market and any other related issues such
as threats or opportunities and so on. The current report is advising J&M company as a
medium sized company that is trying to expand in the Middle East market showing
it how to choose the markets to start with and assessing its opportunities in
the Middle East market region. Because J& M is
still a medium sized company, it should study the steps of expanding in Middle
Eastern Regions well before entering the new markets. The company is suggested
by the top management to enter three markets in the Middle East Region which
are Turkey, Egypt and Saudi Arabia. The current report will include a market
opportunity assessment for the three markets to analyse the market
opportunities in each of the three countries and examine their investment
environments, effects of government interventionist policies, the market
potential, the impact of regional integration initiatives and related issues
with a clear identification of opportunities and threats in each of these
markets. One country will be recommended for the company to enter first based
on some reasons that will be explained. A market entry strategy will be
suggested to be more appropriate with justifications.
Discussion
According to Agrawal et al,
(1991) any business organization that is trying to enter a new foreign market
must be sure of its strategic decisions that are going to be taken regarding
the entry mode that is going to be followed for that chosen market. There are
four main common modes for entry of foreign market which are exporting,
licensing, joint venture and sole venture. They all include the required needs
for internationalization of a business. They referred to a number of factors
that affect the entry mode choice for a specific market and affirmed that they
can be three types of factors which are ownership advantages of a firm,
location advantages of a market, and internalization advantages of integrating
transactions within the firm as mentioned in the Dunning framework. They also
added acquisition to subsidiaries and extent of foreign direct investment added
to the other models and the inter-relationships between these factors. Zhou et al, (2007) added that there is much interest
in the managerial perceptions when it is to choose a market for
internationalize and expand a business as they can give a good assessment of
the country's location advantages. Managers' perceptions yet may differ and
give more than answer such as the current case as there are three suggestions based
on the managerial perceptions which are Egypt, Turkey and Saudi Arabia. There
should be certain analysis and knowledge about the three markets and
justifications for the chosen market for being an entry mode.
According to Yan and Baldwing, (2012) to enter a foreign market, it is
important to align the advantages of a firm and its shortcomings with the
business conditions and resources of the market. The company should also decide
the best types of local partnership to establish, the company should also make
risk analysis in each country's and other different analysis that can enable it
to measure the potential risks and opportunities in these countries and then to
set protection against these risks and make full use of the available
opportunities.
Yan and Baldwing, (2012) confirmed that there are certain competencies
in the country or the market that the firm is going to internationalize its
business in and these competencies should be well studied and assessed in
comparison to the country's and the company's resources. As to J&M, there
are three main markets where the company should analyze their competencies and
assess its opportunities there. They
added that there is a positive relationship between the market expansion and
the productivity growth that depends on expanding the market in international
markets that have to be chosen after making the needed economic analysis and
understanding for the innovation variables in the suggested markets. Quelin and
Guadillat, (2017) discussed how a firm can use market entry strategies such as
strengthening the firm's competencies, adding technology variables and adapting
change through innovative and creative ways.
J&M can enter one of the three markets in the Middle East based on
the following research:
1. Egypt
Egypt is one of the MENA countries that provide
international retailers with competitive advantage that are represented in
limited competition, a growing population, developing middle class, low market
saturation and added opportunities for economies of scale. Yet it can represent
a challenge to the firm to internationalize the business there. This can be
clear when a SWOT analysis is made about internationalizing the business in
Egypt as follows:
SWOT Analysis
|
Strengths 1. The
company has fashionable and high quality goods that make it in a strong
position in the market and can attract many customers to it. 2. The
company can find different tastes in Egypt as there is a very big increasing
number of population. 3. There are
some middle and high classes who prefer Britain goods than others in the
Egyptian society. |
Weaknesses 1. Cultural distance
may be a hinder that the company can't deal with as people's taste in Egypt
may be different from that of people in London. 2. The differences in cultural context such as
language, working styles, religion and attitudes may reduce the chances of
J&M in Egypt as people usually fear trying new things in such culture. 3. The
company is new in the international market and this makes it in a weak
competitive position in the Egyptian market. 4. Most
people in Egypt prefer cheap local clothes than exported ones which may be
expensive. |
|
Opportunities 1. The
company has weak opportuntiies in its retail business in Egypt because many
areas of Egypt are countryside and people are not very interested in exported
products. 2. The
company yet can open many branches in different cities in Egypt such as Cairo, Alexandria and Port Said. |
Threats 1. The market
in Egypt is full with international brands and famous names from UK. 2. Taxation
system in Egypt is not supportive for exporting and puts high fare on export
from Europe and USA. 3. There are
many differences in retail formats from Egypt to UK. 4. Egypt
doesn't have a high GDP. 5. Low
personal incomes. |
The analysis shows that there is a big influence of
the host country's culture on the opportunities of a firm to internationalize
there, retailers have to realize the cultural differences in the target foreign
markets in order to find good suppliers and reach the right consumers. (Flag,
2014)
PESTLE Analysis
|
Political factors |
Egypt political conditions have changed
in the last five years from problems and revolutions to some levels of
stability and people became more aware of the political rights. They have
elected their president yet there are many political issues that are under
many conflicts in courts and need solutions to make the country more stable. |
|
Economic Factors |
Egypt suffers different economic problems
as people always complain prices, individual incomes compared to high
taxations and high prices of different local and exported goods. The country
is trying to face such problems by different economic projects the government
is making but people still suffer high prices on all social classes. High
debts are still there on the country to pay for other countries and for
international Funds organizations. Egyptian currency faces different
obstacles with Dollar prices and other financial issues and this affects the
Egyptian market too much. |
|
Social Factors |
The
country has different social classes that have different shopping behaviors.
The people prefer family life and shopping in groups. They go shopping at all
times especially before feasts and special events. There is high rate of
unemployment in the country and it is increasing along with crime rate.
Industries face different difficulties such as lack of enough equipment in
hospitals and shortage of enough oil for running vehicles and machines. Women
are still in need for their rights and are still need much protection. Most
people live there are Egyptians from different origins and there are some
foreigners from different countries around the world. |
|
Technological Factors |
The country is trying to cope with the
international technological advances by applying different updates on all
fields but the education system suffers lack of applying technology and many
other areas of business as well. |
|
Environmental Factors |
The general environment of Egypt is
desert added to the valley of the River Nile. There is some pollution in the
Nile and the country is almost hot. There are nice historical places in the
country and nice landscapes. |
|
Legal Factors |
The country has strong legal system that
offers different opportunities for making international business there but
the taxation system is very strong especially on exported goods from Europe. (Egypt country profile, 2015) |
2. Turkey
Turkey is a developed country
that has a very vivid business and trade movement, it is a famous tourist
destination and it is considered a European city of culture. It boosts Europe's
sixth largest economy and is candidate for different EU memberships. The country
has big numbers of population under the age of 28 who are preferring European
taste especially the British one. It is regarded in Europe as an emerging
market. With its youthful population who seeks development and taste in diverse
sectors from education to finance, the British good is seen as a valuable
commodity. The country has a specific privatization system that encourages
businessmen from different countries of the world to internationalize their
business in Turkey. For J&M it can analyze the different aspects of life in
Turkey and the opportunities available there versus threats as follows:
SWOT Analysis
|
Strengths 1. The
company produces high quality goods and clothes that are of English taste
that is highly preferable in Turkey and by Turkish youth. 2. The
company can meet the needed European quality measurements set in Turkey. 3. The
company can open many branches in the different modern cities of Turkey. |
Weaknesses 1. The
company is new and Turkish people prefer famous international brands. 2. The
Turkish production of clothes is cheaper and of high quality and is exported
to many areas of the world especially the Middle East. 3. The
company may find it difficult to boost other international different brands
in Turkey. |
|
Opportunities 1. There is a
great opportunity to sell many good for the number of population is high
especially among young people. 2. There is a
presence of many British business in Turkey which make it good for J&M to
internationalize there and be welcomed by Turkish people. 3. Turkish
shipping is a very big industry with different availabilities from and to
England which facilitates the business there. 4. There are
different educated people who can work with the company and the Turkish
people will be friendly clients. 5. The
country is considered European and this encourages the company to invest its
money there with many facilities from the EU. |
Threats 1. The
Turkish goods of clothes are of high quality and may represent great
competition to J&M in Turkey. 2. There are
different international and British clothes companies in Turkey and this
raises the competition levels in that country. 3. The people
of Turkey prefer travelling to buy their clothes. 4. Rules and
regulations in Turkey may change quickly and this means it is important to
have a local partner who can deal with these issues effectively. 5. Development
in Turkey is fast in everything and this means high competition on the
company in updating its technology and products. (Turkey country profile,
2016) |
The company can also analyze the different conditions of Turkey based on
this PESTLE Analysis
PESTLE Analysis
|
Political factors |
Turkey has strong political system that
depends on liberalization policies and this supports many international
businesses to open there. Turkey supports liberal trade and open trade
between different countries in the EU. Turkey formed a custom union agreement
in 1996 to allow many Turkish companies to get bigger and more successful in
the global economy. Yet there are currently a series of terrorist attacks in
the country that makes it threatening to new businesses as they are related
to Al Qaeada and this is very dangerous. |
|
Economic Factors |
Turkey has a strong economy that is
characterized with high flow of foreign investment from different countries
in the world. The national and individual incomes in Turkey are high and the
country attracts many businesses to be done there. The privatization program
in the country supports many businesses that can be local or international.
Currently there is an economic challenges in Turkey which is the current
account deficit for Turkey. The declining current account delayed the
economic stability. |
|
Social Factors |
The
country's social system depends on the family and youth gatherings and it is
a society that includes different types of people and accepts foreigners.
There are high employment rates as the country tries to increase the labor
forces of youth there and this makes it a good chance to make business there.
Yet there are some social challenges in Turkey for a new business such as
J&M, among these challenges are the high unemployment levels as Turkey
unemployment level rose by 38,000 in that year to 2.3 million in 2007 but
then in 2008 it rose again by 737,000 from the previous year so this shows
that there was a substantial increase, another thing is the desire of
travelling to London and other European cities to buy clothes by Turkish
people. |
|
Technological Factors |
Turkey is a country that is very strong
in the technology as the country is developing greatly in the ICT sector and
it is highly expanding. In 2007, Turkey's ICT market reached $24 billion and
in the previous year it reached $21 billion and this shows great advance in
technology. The country has also strong telecommunication system, effective
shipping technologies and effective manufacturing techniques. This can be an
advantage for J&M and a disadvantage at the same time as the country's
clothes' industry has been developed greatly to boost other European clothes
businesses. There is another challenge which is the lack of interest in
research and development in the country.
|
|
Environmental Factors |
The country has fair environment that is a European
one. It has wide diversity in the national resources. |
|
Legal Factors |
The legal system in Turkey is strong and
supports exporting and international business. It has a robust framework for
different types of business entities and the registration system is quite
easy and free. There are some legal challenges that are represented in the
judicial inefficiencies as there are some delays in the Turkish judicial
system which can cause some serious issues. (Turkey country profile, 2016) |
3. Saudi Arabia
Saudi Arabia is one of the Middle
East countries that attracts many businesses to internationalize there as the
country has strong economy based on its resources of oil and related industries
and other industries. The government is powerful and taxation system is fair
and good for many exported goods as sometimes shipping is free which encourages
many firms to internationalize their business there. J&M can investigate
its chances in Saudi Arabia based on the following SWOT Analysis
|
Strengths 1. The
company is new and Saudi Arabian people like to try new ideas and new brands
especially in clothes and fashion. 2. The
company produces goods of the finest preferred by people of Saudi Arabia. 3. The
country has diversity of people from different countries of the world. 4. The
country has high population. 5. The legal and
taxation systems are supportive for international business. 6. Saudi
Arabia doesn't produce clothes that can boost those made in UK. |
Weaknesses 1. The
company is new with low experience in Arabic. |
|
Opportunities 1. The
company can attract the youth of Saudi Arabia as British goods are preferred
in the country. 2. The
company can make good business by exporting goods without fares and taxations
due to Saudi laws. 3. The
company can open many branches in the different modern cities of Saudi Arabia
and in its big malls. |
Threats 1. There are
many international companies with international brands in Saudi Arabia. |
The company can also analyze the following PESTLE analysis about Saudi
Arabia:
PESTLE Analysis
|
Political factors |
Saudi Arabia
enjoys stable political environment and the country is considered the main
Muslim country and one of the most important countries in the Middle East.
There are no terrorism there and no fights inside the country. This makes it
good to invest business and internationalize it there. |
|
Economic Factors |
People in Saudi Arabia enjoys high
salaries compared to other countries in the Middle East and the government
has high GDP and national income. This makes it good to invest there and
expect good purchasing levels. |
|
Social Factors |
The Saudi society
depends on families as main component of the society. There are no cinemas or
theatres there which makes shopping the main entertainment way for people
there. People are lovers for new brands, new experiences and they like
fashion too much especially women and young people. The Saudi society
includes high diversity of cultures and many people there are to choose from
international brands, |
|
Technological Factors |
The country is interested in adding new technology
to the different sectors of business, industries and education but there
should be more interest. |
|
Environmental Factors |
The country's environment is that of dry deserts but
the country is developed and people prefer modern life and modern clothes. |
|
Legal Factors |
The legislations and laws of KSA are good
and supportive for international businesses and taxations system is very easy
and flexible. This raises the opportunities of J&M to internationalize the
clothes business there as the country is trying to develop and people are
preferring laws following. (the report KSA, 2016) |
From the analysis above, it
becomes clear that Saudi Arabia is the most suitable country for J&M to
internationalize their business there. The country is supportive by its people
who are friendly preferring the British goods and who like trying new shopping
experiences. Another factor is that the company can boost the market with its
new products as people prefer new trends in fashion. The legal system of KSA is
flexible and shipping may be free or with very little money. Taxation system is
easy and supportive too and the company can meet the high diversity in the
Saudi society with all tastes. (Yener et al, 2014)
Conclusion
In conclusion, it is important
to refer to the necessity and need for internationalizing the business in order
to enter new markets as this can increase the number of clients and can enhance
the name of the brands. It is important to remind the firm J&M to make deep
analysis in order to choose the best market to enter. A SWOT analysis is
effective and can help the company understand and study the three suggested
countries, Turkey, Egypt and Saudi Arabia and then to choose the most
convenient referring to our analysis. PESTLE analysis too is effective and
require deep studying for the countries and then to either accept the work or
refuse it. J&M can
begin its business in KSA as the country is very suitable for
internationalization.
Recommendations
J&M is recommended to internationalize its business in Saudi Arabia
because the country is supportive for different businesses and the legal system
of the country is easy and supportive for exporter, the shipping may be free or
costs very little money and the new projects are welcomed there. The company is
recommended to make analysis as the existed here before opening the business as
these analysis can help in deciding the right market to begin as an entry mode.
References
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