Analysing Foreign Market Entry Strategy for Small Skills Business: Case Study of Carrefour
There are numerous modes of entry that are available to organizations such as exporting via direct and indirect channels; licensing and franchising, FDI and others. But the organization aiming to venture into international operations need to assess whether or not the foreign market that they are aiming for, has the potential to grow or not. Thereby, this research work is a comprehensive attempt to assess varied entry strategies deployed by Carrefour to foray into Saudi Arabian retail market. This research work is extensively based on positivism research philosophy and has been designed on the lines of explorative research design. The researcher further has made use of deductive research approach to derive definitive conclusions for this research wok. The research work is qualitative as well as quantitative in nature. The researcher made use of judgemental sampling to select a sample size of 50 associates where 45 are employees and 5 are managers that worked with the strategy department of Carrefour.
The primary aim of this research work is to undertake a thorough assessment of varied entry strategies that have been deployed by Carrefour to venture into Saudi Arabia’s retail market. In specific terms, this research work will gather pertinent data in reference to parameters that affect the selection of entry strategies of foreign organizations in Saudi Arabia, entry modes and strategies deployed by Carrefour to venture into retail sector of Saudi Arabian market. This research work will also throw light on various bottlenecks that an organization has to confront while foraying into international markets and what can be done to confront the challenge in effective manner.
It is to be noted that when an organization opts for internationalizing its operations, there are three basic questions that are to be answered which include the present standing of the organization, its future place that it aspires to be and how does it plan to accomplish the set goals. The first question renders a clear snapshot about the values and core competencies of the organization. The second question renders a depiction of ambitions and future direction of the organization in reference to foreign markets that the organization plans to foray into. The third question answers the manner and strategy that the organization will adopt to enter into international markets (Hohenthal, Johanson and Johanson, 2015). In the viewpoint of entry strategy can be defined as the mechanism as to how organization will establish access to new set of end users in the new geographical markets by undertaking proper marketing of their offerings. Internationalization strategy spells out as to how the market of the business organization is briskly globalized owing to aggressive or active international expansion opted by the organization.
It is an evident fact that business environment in present context is undergoing tremendous altercations with reference to rising competitive rivalry, technological advances and rising globalization. All these factors have presented a plethora of opportunities to various marketers and business organizations to opt for internationalizing the operations (Tatoglu et al., 2015). In the past 20 years, organizations have shifted their respective orientation from domestic to global and are deploying varied global marketing techniques to serve people globally.
Various researchers have come up with numerous reasons as to why organizations aim for internationalizing their operations. In the opinion of Burton and Cross (2015), there are four basic reasons that prompt an organization to venture into internationalization which include gaining access to large number of new customers which will pave way for the organization to earn higher revenue; will lead to lower cost and foster the competitive positioning of the organization across the globe; will foster the organization to be in a position to leverage organization capabilities and core competencies in a better manner and will enable the organization to have diverse set of business portfolio which will reduce the overall risk that the organization runs (Holtbrügge and Berning, 2018). Even in case of economic meltdown, the organization will remain immune from the adverse impact to a large extent. As per the viewpoint of Welch (2015), it has been observed that the basic desire of an organization to acquire superior resources that are more efficient in comparison to domestic resources also motivates the organization to opt for international operations. In the opinion of De Villa, Rajwani and Lawton (2015), there are certain key motivational factors that drive the organizations to pursue their international expansion and marketing which include costs pertaining to research and development cannot be recovered until they are sold across the globe and a country’s stance to augment and solidify its comprehensive economic position.
The prime business environment altercations that foster brisk growth of global business organizations include rapid technological advancements, attempt to bring down costs relating to communication, fostering seamless logistics and supply chain management, coming up with advanced software applications that can support varied organizational functions; higher level of entrepreneurial innovation, expansion of capital markets and increasing number of strategic alliances and JVs (Game and Apfelthaler, 2016).
It is an evident fact that entering international markets clearly implies that the organization will have to confront an altogether new business environment. The business environment present in host nation may be way different from the business environment prevalent at domestic level. The difference may emerge from socio-cultural traits, trade challenges and may even be challenging to confront (Holtgrave and Onay, 2017). If the organization has dearth of significant resources and relevant organizational competence in the foreign nation, then the difficulties of operating in international market compound by leaps and bounds. It may become extremely challenging for the organization to sustain in the market for longer time. It is imperative on the part of the organizational management to be contextually aware about the potential of the market that it has to enter so as to further take the decision in reference to preferred mode of entry into the market. In the words of Cavusgil and Knight (2015), majority of the organizations have in some or the other form have internationalized the operations through purchasing, selling or working with business organizations in foreign nations. From the viewpoint of end users, global operations enable the consumer to have plethora of options while purchasing at lower costs and of superior quality. This is in line with the outcomes presented in the research work undertaken by Crowley, Meng and Song (2014) who are of the view that organizations must opt for internationalizing their operations to survive and sustain in the market place. But, it is extremely crucial for various business organizations to target a right market so as to further augment their business network (Weismann, Buscaglia and Peterson, 2014). It is an evident fact that there are numerous entry mods from which an organization can choose such as exporting through direct and indirect channels, licensing and franchising, FDI and others.
In order to augment its business boundaries, Carrefour opted for venturing into the market of Saudi Arabia. At the onset and in early stages, the organization confronted higher level of intense competitive rivalry from various local retail players that were already operations in the Saudi Arabia market such as Lifco Group of Companies, Lulu Hypermarket, Fathima Group and others. Among all the varied competitors, Lulu was one of the most popular retail chains among the local consumers (Hennart and Slangen, 2015). In present scenario, the overall economy of Saudi Arabia is performing quite well and thereby Lulu has more than 100 outlets across the region. Various other leading players in the market such as EMKE group are aiming for further expansion into the retail market. Thereby, it can be correctly inferred that the world we live in is highly complex and dynamic wherein the consumer is actually the kind. The end users have an array of options to choose from (Madanoglu and Castrogiovanni, 2017). Further, the competition is increasing at brisk pace owing to varied social and technological advancements. Thereby, business organizations are actively pursuing opportunities in reference to getting new customers for their offerings. This will help them in earning more revenue and eventually lead to overall organizational growth.
In today’s world of rapid growing business industry, selection of correct market entry strategy to invest in foreign market is very important as well as inevitable factor for any organisation in any industry. Tulung (2017) opined that selection of right market entry strategy is very essential and it is very complex too for the companies in any business industry. It is to be highlighted that basic challenges of entering new market is internal and external issues of a company. The top most internal factors are type of product or service, switching cost, acquisition within operation process, etc. The external factor that majorly listed are quality of staff on new market, psychological factors, political factors, etc. Therefore, the main problem statement of this research is “to enter a new market, stimulus and barriers are not only the key concern but also the company have to develop their economies and provide necessary products or services subsequently for the new market”
The primary aim of this research work is to undertake a thorough assessment of varied entry strategies that have been deployed by Carrefour to venture into Saudi Arabia’s retail market. In specific terms, this research work will gather pertinent data in reference to parameters that affect the selection of entry strategies of foreign organizations in Saudi Arabia, entry modes and strategies deployed by Carrefour to venture into retail sector of Saudi Arabian market. This research work will also throw light on various bottlenecks that an organization has to confront while foraying into international markets and what can be done to confront the challenge in effective manner.
- To identify the factor that affect market entry strategy in foreign market for Small Skills Business
- To find the association between factors identified and successful market entry
- To recommend the best market entry strategy to start business in UAE market for Carrefour
In order to accomplish the research aims and objectives and ensure that the research work is carried out in a systematic manner, the research work will attempt to address the following elucidated research questions-
- What parameters affect the selection of entry strategies for foreign organizations in Saudi Arabia?
- What kind of entry strategies Carrefour resorted to while foraying into retail segment of Saudi Arabia market?
- What kind of bottlenecks did Carrefour confront while foraying into retail segment of Saudi Arabia market?
H0: Internal and External Factor affects in selection of Foreign Market Entry strategy for Small and Medium Enterprises
H1: Internal and External Factor does not affect in selection of Foreign Market Entry strategy for Small and Medium Enterprises
H0: Selection of Right Market Entry Strategy that match with the internal and external factors is helpful for Carrefour to start new business at Saudi Arabia market
H1: Selection of Right Market Entry Strategy that match with the internal and external factors is not helpful for Carrefour to start new business at Saudi Arabia market
The focal organization of this research work is Carrefour which is a French multinational organization. It is a leading global retailers in reference to hypermarkets and is fourth largest retailer globally. The organization’s headquarters are institutionalized in Paris, France. Right from its institutionalization in the year 1959, the organization has extensively augmented its boundaries to have a global presence which includes various nations such as Europe, China, and Brazil, UAE, Argentina and others. In general, the retail giant opts and deploys a multi-channel approach which comprises of physical outlets and online channels to have a better customer interaction so as to suffice demands of different set of consumers.
Prior to foraying into foreign market, it is important for the organization to draft proper modes of entry to successfully establish the right kind of market reach. This research work presents a thorough assessment of varied entry strategies deployed by retail giant Carrefour while venturing into the Saudi Arabian market. Hence, it can be said that this research work is of immense significance. This research work will assess as to whether or not Carrefour has deployed the right kind of market strategy or not in reference to venturing the Saudi Arabian market. Also, this research work will foster the process of carving out better strategies in reference to venturing into other markets. This research work will not only benefit the retail organizations but also organizations aiming to enter into Saudi Arabian market in other segments as well. This research work will be beneficial for students, scholars, management professors who wish to refer to this work for academic works.
Chapter 1: Introduction
The first section of the research work renders a comprehensive snapshot in reference to the characteristics of retail market in Saudi Arabia and essentially the market strategies that are deployed by the retail players. Also, this section of the research work will throw light on research aims, objectives and rationale behind the research work. It also outlines the importance of the research work at hand.
Chapter 2: Literature Review
The second section of the research work pertains to review of literature wherein the researcher undertakes a comprehensive study of market entry strategies and frameworks that are deployed by various organizations, in general. This section renders comprehensive and deeper insights about the research topic.
Chapter 3: Research Methodology
The third section of the research work pertains to outlining the process that has been followed by the researcher to accomplish this research work in successful manner and forms the essence of overall research work.
Chapter 4: Findings, Analysis and Results
The next section of the research work pertains to the outcomes that have been derived by the researcher after gathering and assessing relevant and credible primary and secondary data.
Chapter 5: Conclusion and Recommendations
The final section of the research work pertains to conclusion and suggestions that have been put forth by the researcher.
This present chapter identified the content of the research topic through background of the research, aim, objectives, questions and hypothesis. To make a clear research, problem statement and rational of the study also explain. Considering the theme of this chapter, it can is find out that this particular chapter stated the detail concept of enhancing the knowledge level of the readers for the selected topic.
This part of the research work will throw light on varied concepts and theoretical frameworks that is present in reference to market entry strategies, modes of entry and the level of internationalization that an organization can attain. The prime purpose of this section of research work is to gain deeper insight in reference to research topic at hand. For the very purpose, researcher has also made use of varied credible and reliable secondary data sources to gather the required information for this research work so as to infer apt and valid conclusions.
It is an evident fact that numerous researchers have attempted to describe the concept of foreign market strategy, international marketing strategy and internationalization from multiple perspectives. In the viewpoint of Buckley and Ghauri (2015), the concept of entry strategy defines the manner in which organizations establish accessibility for new end users in new geographical markets by marketing their offerings in similar or different manner. Further, the concept of internationalization has been described as the process of how business organizations are increasingly globalizing their operations by undertaking expansion and establishing reach across different geographies in the world (Tolstoy, 2014). Thus, the concept of entry strategy is applicable at initial stages wherein the process has begun or is about to begin in reference to foraying into new geographical markets whereas on the other hand, the process of internationalization is a long term process that covers various aspects pertaining to organizational expansion in reference to global business context.
In the opinion of Meyer, Ding, Li and Zhang (2018), the concept of entry strategy comprises of 4 primary factors which constitute of entry mode that defines the process of how the organization will operate in the market, entry mode which stipulates as to how the organization will join in the local market of the new geography, entry role which elaborates as to what commercial role will the organization act in the local network with reference to manufacturing ,purchasing or selling; and entry process which assesses how has the organization carved and sustained varied relationships in the local market. It is to be noted that renowned research scholars Cavusgil et al., (2014), have presented a similar opinion in this reference as they have clearly stipulated that market entry strategy comprises of a marketing plan as well as entry mode that clearly spells out the level of control the organization has and also the commitment it has made in reference to the new geographical market. In the words of (), there is another parameter pertaining to the timing of organizational entry which is pivotal to be taken into reference while foraying into emerging markets. In the words of Vassileva and Nikolov (2016), there are various other angles in reference to market entry strategies that also need to be considered which pertain to ownership and control. In the last decade, various research scholars and market practitioners have laid higher impetus on sustaining seamless business relationships via networking and strategic alliances (Musso and Francioni, 2014). It is equally significant to gauge the overall performance of business in reference to different options pertaining to modes of entry. A recent research work undertaken by Hennart, Sheng and Pimenta (2015) has put forth the fact that various entry mode strategies have a deeper relationship with facets such as information, anomalies and possible risks, in reference to cases wherein organizations have invested in emerging markets that have lesser developed business infrastructure.
In the viewpoint of Gillespie and Riddle (2015) when they conducted a research study in reference to small family owned businesses in Finland, they found that these organizations opted for a highly holistic approach in reference to the comprehensive process of internationalization. It is to be noted that conventional approach calls for outward processes but this was not the case as the above group substantially adopted the process of inward internationalization (Ho, Shi and Siu, 2015). As per the research participants, in reference to internationalizing operations, it was important on the part of organizations to procure raw materials, technological competence or input received as component of internationalization. It was further put forth that there are four stages of internationalization which comprise of domestic, inward, outward and cooperation stages. Further, in reference to the process of internationalization. Internationalization derives its base from opportunities that are present across the spectrum of global markets (Horstmann and Markusen, 2018). Thereby, the organization should act in sync with OLI framework which comprises of ownership, location and advantages that are garnered by the process of internationalization. It has been stipulated by Lojacono, Misani and Tallman (2017), that an organization will attempt to enter that international market wherein it can leverage sustainable competitive benefits. Further, Sousa and Tan (2015) put forth the fact that the organizations venturing into foreign markets need to have certain level of control over the organizational activities. It was further put forth that entry mode pertaining to licensing calls for minimum level of control whereas on the other hand wholly owned subsidiaries call for highest level of controlling.
There are numerous theoretical frameworks that have been put forth to describe the underlying reasons behind the choice of mode of entry. One of the most significant theories in this reference pertains to transaction cost theory. Apart from the former, other theoretical frameworks such as resource benefit, international product life cycle, strategic behavioural traits and networking frameworks are quite renowned concepts in reference to market entry strategies (Petrou and Thanos, 2014). Some of these theoretical frameworks render emphasis on organizational parameters such as internal resources, management practices and risk tolerance of organizations whereas some other render emphasis on varied external business environment factors such as decisive factor in reference to overall process of internationalization (Machková and Collin, 2015). In reference to the present research work, there is no single precise framework that has been deployed but the researcher has attempted to lay emphasis on varied perspectives of different theoretical frameworks that are pertinent to the research topic in hand.
As per the viewpoint of Monaghan, Gunnigle and Lavelle (2014), there are namely three mechanisms that a business organizations must take into account if it aims for exploring and venturing into foreign markets. These mechanism comprise of decisions that need to be taken in relation to the foreign market to foray into, deciding the time to entry, scale and other strategic organization level commitments. It has been further postulated that if an organization aims for expanding its horizon out of the domestic geography, it has to render higher emphasis on long term returns that the prospective nation may garner for the organization (Naidoo et al., 2016). It is to be further noted that gauging long term returns that can be churned by operating in an unknown market place is very much dependent on varied parameters such as the size of the foreign market and present and potential purchasing power of end users present in that particular geography (Wang et al., 2014). But in reference to large markets, additional factors such as economic growth rate and living standard of the people need to be taken into context as well to make the right decision.
After finalizing the geography that the organization will foray into, it is important to move on to the next stage pertaining to deciding the right time to enter the foreign market. It is to be noted that if the organization has the first mover advantage in the market, it by default will garner certain additional benefits to the organization (Powell, 2014). It has been observed that the first mover is in a position to capture a larger chunk of the overall market. It has been also seen that first mover leverages cost benefit as well which can be further deployed to mitigate competition in the market place. But there are certain disadvantages also that a firm needs to counter effectively to succeed in the foreign market (Hernández and Nieto, 2015). The first limitation pertains to costs relating to pioneering if the organization is the first to enter in a given market segment. This implies that organization will have to commit higher resources in terms of time, effort and finances to gain a holistic level of understanding about the foreign market in consideration.
Apart from the above two decisions that have to be taken by the organization, the organizational management also needs to finalize the scale of entry in the foreign market. It is an evident fact that organization can opt for penetrating the foreign territory on a larger scale as well but this calls for deployment of higher and complex level of tactics. In reference to large scale entry, the organization has to confront risks pertaining to first mover and higher level of inflexibility (Coeurderoy and Murray, 2014). But if the organization attempts to enter the foreign market on a smaller scale, then the organization has higher time to gain access to the required level of information in reference to the market and thus, mitigate risks that may stem up in the process (Kraus et al., 2014). To a larger level, the overall organizational performance in the foreign nation is dependent upon the mode of entry into the market. The selection of mode of entry that the organization chooses to augment its overall business network in a foreign nation is an extremely crucial decision that the organization has to take.
Noted research scholar Glowik (2016) has defined the concept of entry mode as a specific institutional arrangement that is made to foster the entry of organizational offerings, competence and technology along with a capital to a different geography. In the opinion of Axelsson and Easton (2016), entry mode can be described as a different kind of governance structure that will foster the organization to deploy higher level of control over business in reference to operations in foreign land.
The theoretical framework pertaining to transaction cost is one of the most significant theoretical frameworks that is put into use to define the final selection that is made in reference to preferred entry modes. This theoretical framework stresses on the need to minimize the costs by making investments across different geographies and thus, protecting organizational assets. This theory comes into play when the senior organizational management has to decide between purchasing or undertaking in house production (Knight and Liesch, 2016). Irrespective of whether an organization is engaging in setting up manufacturing facilities in a different geography or is aiming for exporting to a different region, there are numerous factors that come into play and have to be pondered upon. In the viewpoint of Seringhaus (2015), it is important on the part of the organization and its management to choose that mode of entry that will effectively reassign organizational competence from domestic front to host country nation without any kind of reduction in the overall value.
Various research scholars have put forth their viewpoint that rate of growth of local industries is one of the significant factors that affects the entry mode selection. Further, Long (2015) are of the opinion that if the industry segment is at a brisk speed and thereby, undergoing rapid changes, then it becomes all the more significant for the organization to make sure that they do not end up losing their first mover advantage to other competing forces operating in the market place.
There are numerous market entry modes in reference to international markets that an organization can choose if reference to foraying into new markets. It is to be noted that entry modes may differ in reference to the level of control that an organization aims to exert over its resources, the transaction costs of acquiring and deploying the resources, level of ease in reference to the process of transfer of knowledge and deployment of varied kinds of legal rights. Further, Ojala (2015) have put forth three factors that stipulate varied modes of market entry. The first pertains to ownership benefits that the organization has and second pertains to the location benefits in reference to the market and third set of benefits pertain to the process that is to be followed so as to integrate the transaction within the organization.
The further paragraph in the research work stipulates about varied modes of market entry strategies that are pertinent and applicable in reference to players operating in the retail segment and are aiming for foraying into international geographies-
- Exporting- when an organization wishes for pursuing international retailing at the lowest level, then it can opt for exporting. This method is one of the easiest ways to go international and establish a reach in the foreign market with minimal effect on organizational operations. Exporting can be further classified into two types which comprise of direct and indirect exporting. Direct exporting takes place when the organization owns and controls each of the aspect of exporting process on its own whereas indirect exporting involves rendering control to intermediaries in reference to certain aspects of the comprehensive export process (Grant, 2016). In reference to organizational perspective, the process of exporting involves lesser amount of resources, higher level of production capacity, permits the organization to attain competitive edge over other competing forces operating in the market place and above all foster the financial positon of the organization. This mode of international market entry enables the organization to maintain control over production function and getting hold of larger chunk of the market. But in some of the cases, exporting has its own limitations and disadvantages (Gillespie and Riddle, 2015). The organization may be at a loss of losing out on its share of market or exporting may even deter organizational performance which may be due to higher tariffs, logistics costs and quotas. Thereby, exporting should be opted only in those contexts wherein an organization can reap cost benefits and there are lesser barriers of entry.
- Licensing- This mode of market entry is deployed in those cases wherein the organization permits another organization to manufacture the offerings under the name of the former organization. This may involve process technology transfer from domestic to host nation. This is also one of those modes of entry into foreign market that requires lower investment and renders easy accessibility to the local market, mitigates trade barriers and fosters higher level of ease in reference to gaining a deeper level of understanding in reference to the needs of local market (Cavusgil and Knight, 2015). There are certain limitations of this mode of international market entry as well. The organization loses control over organizational operations in foreign nations and may have to confront certain obstacles in reference to effectively executing the process of transfer or knowledge and competence. This mode of entry should be opted in that context wherein there is a possibility for the organization to capitalize on location benefit in reference to the host nation that the organization is aiming to foray into.
- Joint Venture- When the organization enters into alliance with another organization that has similar interest and institutionalized a new business organization, it leads to formation of joint venture. The prime point of this particular strategy are that rights as well as control tend to be collective in nature. By institutionalizing a joint venture with a local alliance, the organization can leverage certain benefits. The advantages in this case comprise of eradication of linguistic and cultural barriers to a great extent and sharing of risks and costs (Rugman and Verbeke, 2017). Further, entering into joint venture with a local player will enable the organization to attain and lease land rights and relief in some of the taxes and duties as well. But, even in this case there are certain limitations and disadvantages such as the organization may not be in a position to exert tight control over the subsidiary organization. It is to be further noted that shared ownership may also lead to some disagreements and conflicting situations between the partners which may or may not affect the business.
- Franchising- In reference to this particular mode of entry into the market, the organization renders the franchiser certain rights in reference to using the name of franchisor to sell the offerings. In reference to the research work at hand, at times the retailers may engage in rendering the other part with higher level of technical competence and training which is imperative for carrying business operations in successful manner (Rosenberg, 2018). In reference to limitations, it is to be noted that the organization does not have higher control over organizational operations and further the revenue stream is divided between the franchisor and the franchisee. It has also been seen that majority of business organizations operating in retail segment opt for franchise as an entry mode in foreign nations as it is a low cost-low risk option to foray into the international markets.
- Wholly- Owned Subsidiary- in reference to this particular mode of entry mode in international market, the organization completely owns the business in foreign markets right from production to selling. There are two ways in which an organization can set up its wholly owned subsidiary in the foreign market. The first comprises of acquiring an already established local player in foreign nation and then manufacture its own offering. The other option is by setting up an altogether new operational unit in the foreign nation which is referred to as Greenfield operations (Eriksson et al., 2015). This mode of entry enables the organization to have tighter control over its operations and will not have to fear losing out its technical competence to others in the market place. But this entry strategy is a cost and risk intensive option.
2.4 Parameters Affecting Decisions in Reference to Selecting Mode of Entry in International Markets Specially in Saudi Arabia
It is important to select the right mode of entry into the foreign market which calls for sound tactical decision making on the part of senior organizational management. It is to be noted that there are varied internal and external factors that affect this particular decision and they have been elaborated as under-
- Size of the organization and resource pool- it is an evident fact that small sized organizations tend to have limited options in reference to market service as they have limited amount of resources which may not render room for such leverage. Thereby, institutionalizing a wholly owned subsidiary calls for higher level of investment and is a high risk option which in general, a small scale organization cannot afford to opt for. Thereby, it can be said that organizational size and resource poll affects the final decision pertaining to selection of entry mode to a higher level. As per the viewpoint of Love and Roper (2014), higher the organizational resources in terms of technology, capital, management, production and marketing, higher are the number of entry mode options it has for itself in reference to international markets.
- Attitude of Management towards Risk- the level of risk that an organization can take very much depends upon its financial position, market competitiveness and other strategic options. The element of risk perception is related to modes of entry into the market and this may impact the final decision in a significant manner (Buckley and Ghauri, 2015). It has already been mentioned in this research work that wholly owned subsidiaries have higher risk owing to high volume of resources relating to such entry whereas on the other hand, exporting involves least risk out of all the options available for venturing into international markets.
- Factors Pertaining to Home Country- In the viewpoint of Root, there are various home country specific parameters such as the level of production, market conditions as well as environmental factors need to be considered as they affect the final decision pertaining to mode of market entry. It is to be noted that when the domestic market is relatively smaller, then the organization has to opt for internationalization and is also tempted to make higher level of investment at the time of venturing into new international market (Axelsson and Easton, 2016).
- Factors pertaining to business environment prevalent in host nation- various factors such as business regulations, competitive rivalry, consumer preferences, purchasing patterns, overall business infrastructure, legislative regulations and technological development level are the prime elements that need to be considered while finalizing the preferred mode of entry in international markets. In the viewpoint of Rothaermel (2015), extremely competitive business environment have an impact on organization’s decision to foray in the market with an option that calls for lesser resource involvement to reduce the level of risks involved in the process.
- Rate of Growth Prevalent in the Market- it is to be noted that this factor has extremely high implications in reference to choosing the final mode of entry. If the chosen international market is registering a higher growth rate, then the organization should leverage the opportunity and opt for exporting as a method to enter into the given international market. Further, if the overall demand volume for the foreign organizational offerings is high, then the organization can also think about institutionalizing its own marketing subsidiary organization in the given market (Cavusgil et al., 2014).
- Barrier pertaining to Entry in the Market- there are numerous market obstacles that exist that further complicate the process of entry into the foreign markets. These obstacles comprise of tariff related challenges, distribution access related challenges, government regulations, exit barriers and others. Such factors tend to have a definitive impact on the final decision taken by the organizational management in reference to preferred mode of entry in international markets (Lasserre, 2017).
With the rising advances in terms of globalization, there is a higher number of organizations that are aiming for venturing into new international markets. It has been further observed that the organizations are more inclined towards entering the emerging economies of Asian continent. The prime reason underlying the same can be attributed to the fact that these economies are extremely lucrative to look over and are regarded as extremely promising market segment (George et al., 2016). Further, these markets are still not leveraged and thereby have superior potential. But, fastest actions taken by the organizations cannot along act as a guarantee for success but it is about the right move at the right time and at the right place which will being in sustainable success for the organizations. In reference to retail organizations, location plays a significant role in reference to devising the right kind of market strategy but the quintessential parameter is the timing of foraying into the given international market.
It is important on the part of organization to have deeper understanding about the market in which it is planning to foray and attain success in. various research works have clearly indicated towards the fact that international retailers need to pay heed to market nature in which they are about to venture into. An organization has to undertake extensive market research so as to gain higher understanding about local culture, its customers, their purchasing patterns and local consumption level which may be quite different from the home nation (Markusen, 2017).
It is an evident fact that retailers across the globe are attempting to globalize their operations at a brisk pace. In the last ten years, the retailers have explored around more than 90 international markets. It is to be noted that 2005 is regarded as milestone year in this reference almost majority of wave 2 organizations ventured into new international markets. It is to be noted that wave 2 organizations are those that are considered as supermarkets and consist of do-it-yourself and retailers engaging in retail of apparels at large (Thrift, and Amin, 2017). But, globalization alone cannot be regarded as a guarantee of success.
It is an evident fact that European nations have now become matured segment for retailers and thereby Asian nations are of immense interest to retailers operating in West. But, even in reference to various Asian nations, it is the Middle Easter nations that have garnered highest growth in sales which is depicted by UAE and Saudi Arabia. The figure presented below depicts the comprehensive positioning of various nations in reference to market attractiveness globally-
(Source: Giaoutzi, 2017, PP. 571)
In between 2014 and 2015, the retail segment in the Middle East registered a phenomenal growth of 30%. This growth rate is only second to Central and European nations. This growth rate is more than other Asian nations which grew around 16% in the same time. It is to be further noted that in the same time, Latin American nations, Western Europe and the USA recorded a growth of 10%, 16% and 10% respectively. Adding on to the above facts, the Middle Eastern nations have registered higher escalation rates with reference to expenditure incurred by shoppers and level of retail concentration. In reference to Saudi Arabian market, the top five leaders have a hold of less than 11% of the retail sales. Owing to thin reason, there is a sudden rise in number of European retailers are planning to foray into Middle Eastern region with special reference to nations such as Saudi Arabia, Kuwait and UAE. Majority of global retailers to enter in this market are non-food retailers. These players have opted for using low risk frameworks such as franchising. Some of the notable global players that have entered the Middle Eastern market include Burberry, Paul Smith, Jimmy Choo, Asprey, Armani and others.
It is to be taken into reference that overall retail market of Saudi Arabia is small but the per capita income is large. In present context, it is regarded as one of the most lucrative and largest market in reference to total expenditure. The overall region has depicted a stern market presence and is further characterized by rise in population along with GDP. It has a relatively stable political business environment and government spending has also augmented in substantial manner (Lebedev et al., 2015).
In reference to area, Saudi Arabia is the ninth largest nation across the globe. Further, the strategic geographic location of the country fosters the nation to import offerings from across the globe. It has been ranked as the premiere market for foreign retail giants who wish to augment their market in the region. In the last five years, the nation has augmented its retail space in a significant manner (Coviello, 2015). In fact, the malls present in Saudi Arabia are characterized by higher number of foreign retailers.
Various market research works have clearly indicated towards the fact that Saudi Arabian consumers can be regarded as the most eager set of end users globally. In a research work undertaken by UMP, it was found out that more than 82% of the overall Saudi Arabian population is economically strong which renders them with higher disposable income capacity. The region has witnessed a higher exposure to big global brands at a brisk pace in the last 10 years and it is interesting to note that the consumers are quite accepting of foreign brands as well (Hair Jr et al., 2015). There is a notable rise in demand of foreign offerings in the Saudi Arabian market. Various leading brands from France, Canada and Germany have leveraged this trend. The shift in tastes of Saudi Arabian consumers is fostering global retailers to establish their footprints in this part of the globe as well.
The following figure clearly presents a comprehensive SWOT assessment of Carrefour for the reader of this particular research report-
It is an evident fact that the organization has already successfully established itself in various high growth regions that include North African nations and Middle Eastern region via entering into long term alliance with varied local organizations. The organization has also carved and deployed exclusive franchise alliance with Majid Al Futtiam group that has further fostered the organization in augmenting its operations in Middle East and Central Asian region. Also, CFAO and Carrefour have signed a memorandum so as to initiate formation of joint venture which will foster the presence and operations of Carrefour in African nations.
Various emerging nations such as the likes of Saudi Arabia are regarded as sound business region owing to their rising per capita income, higher inclination of locals towards western offerings, technologically advanced offerings and others. One of the key challenges that Carrefour had to encounter while foraying into Saudi Arabian market pertained to deciding local player who could share the burden of operations and foster the understanding that Carrefour had about local customs and operational regulations. Further, it was imperative on the part of the organization to comply with varied health and local cultural norms so as to avail product licensing which is required for carrying out business operations in Saudi Arabia. Yet another bottleneck that the retail giant had to encounter pertains to the costs relating to institutionalizing and infrastructure requirements (Ang, Benischke and Doh, 2015). It is an evident fact that it is an extremely cost intensive process to institutionalize outlets and offices in foreign nation. Further, rising competitive rivalry within the food segment was another bottleneck that the organization needed to counter in successful manner. In order to counter the above challenges in successful manner, the organization opted for setting its prices at highly competitive rates and decreased its own profit levels. It is to be noted that Middle Easter region including Saudi Arabian market was never a strategic location for retail giants such as Costco and Wal-Mart, various European retail giants have strategically carved and deployed strategies to enter into this market segment. Further, chronic inflation was yet another bottleneck that Carrefour had to confront (Chetty, Ojala, and Leppäaho, 2015). Also, challenges pertaining to political risks and terrorism related issues acted as a significant hurdle in reference to Carrefour’s venturing into the Saudi Arabian market.
It is to be further noted that various global retailers are undertaking every possible step to answer the bottlenecks in successful manner and establish their presence in the foreign territory. The organizations are undertaking holistic and comprehensive research studies to get a better and deeper understanding about the tastes and preferences of the local consumer segments so that they can serve them better (Laufs and Schwens, 2014). Various international retail giants are entering into alliances with local organizations to establish a better reach in emerging markets.
2.9 Potential in Market, Regulations and governing authorities at Saudi Arabia
Between all factors listed, most of the respondents are of the opinion that market potential as well as government rules and regulations has a major role in affecting the decision of the company to enter in any new nation or not. The purpose behind making an entry into new market is to maximize profit and thus its managers perform the market analysis to estimate its potential. If there seems to be huge potential of business in coming years them in next Step Company decides its strategies for entering in the market for better penetration. On the contrary, if the potential seems to be for short duration only then company avoid entering into such markets as it would lock their investment and would prove to be non-profitable in long run (Hollender, Zapkau and Schwens, 2017). Apart from that, if the organisation wishes to perform smooth business in any country it requires to have support of higher officials as well as government. If the policies of any government are not favourable to the business organisations then it is almost impossible to grow in the country. Hence, market potential and government are major factors which are nation specific which affects the decisions of Carrefour to enter in any new market or not.
(Source: Johanson and Mattsson, 2015, pp- 103)
The chart displayed above clarifies that forty participants are of the opinion that potential of the market for an organisation is a crucial factor for deciding whether to entre in a specific market. In addition to that thirty eight participants consider that rules and regulations of governments are necessary to be considered by business organisations prior to making decisions of entering in unknown markets. The competition in the market has also been selected by some participants as a vital factor for considering foreign market for business.
Strategic objectives of any company along with availability of resources widely affect the future of the organisation. If an organisation wish to diversify or expand its business then this point to be included in its strategic objectives. If a company has the strategic objective of penetrating in existing market only then it must remain away from foreign markets. This is so as the organisation is not ready with any plan for expansion. In the same manner, resource availability also helps in understanding that whether to make an entry in unknown market or not (Surdu, Mellahi and Glaister, 2018). An organisation with lack of finance and expert human force would not survive in new markets effectively. For making a business to succeed at international platform, a firm must possess adequate capital and capable workforce. Therefore, based on the replies of participants, resource availability as well as strategic objectives are critical to deciding entry strategy of the company.
(Source: Tatoglu et al., 2015, pp- 1170)
The above graph reflects that thirty nine participants given 5 points to resources and forty three participants have selected 5 for objectives. The analysis of company specific factors indicates that objectives of the company as well as potential and available capabilities has major role in affecting the decision of the organisation about entering in foreign market. Next ranking is obtained by competitiveness. Under this, participants of the view were that an organisation should be competitive for sustaining in the markets in the foreign land (Burton and Cross, 2015). Hence, as per the analysis resource availability and strategic objectives are important company specific factors that must be considered by Carrefour while taking decision of entering in new market.
In the prevailing business environment, there are various modes of entry available before an organisation to entre in any foreign market. Carrefour uses sole venture and franchising mechanism mostly. The franchise system is preferred by Carrefour as involves no capital infuse from company’s end. Apart from that, the whole ownership is held with the partner and brand receives income in the form of royalty paid by the partner. As per replies of participants the amount of royalty is usually between 1 to 2 percent of the sales made in a year. Moreover, in the franchise system, Carrefour is not required to make investment in relation to management and infrastructure development as it is to be done by its partner (Game and Apfelthaler 2016). If the option of franchise is not available to the Carrefour, then the company performs its own cash and carry venture under which it maintains as well as controls all its operations. The sole venture model is used by the company at locations where potential is high but availability of renowned player for managing operations is restricted or low or no one is interested in franchise format (Cavusgil and Knight, 2015). Majority of participants are of the view that both the modes of entry have proven successful in the case of Carrefour.
(Source: Hennart and Slangen, 2015, pp- 121)
Replies collected from respondents reflect that in most of the instances Carrefour has used franchise mode for expansion of business in foreign land. Forty six respondents have replied that company’s first choice is to use franchise model by establishing partnership with local player (Buckley and Ghauri, 2015). If such option is not viable, company uses sole venture.
(Created by Author)
This particular chapter observed the details of foreign market entry strategy for small skills business. Theories related to foreign market entry strategies are designed. Type of market entry modes like joint venture, merger and acquisition, etc has been descried with examples. A theoretical framework also provided to give a clear outcome of the research
This section of the research work elaborates about the method that the researcher adopted for undertaking this research study and answering the research questions in the best possible manner. This section of the research work will throw light on research approach, tools and processes adopted by the researcher to derive definitive conclusions.
It is to be noted that the research process is defined as a systematic assessment that is undertaken by a research scholar so as to gain deeper level of understanding in reference to the research topic at hand. In order to get hands on to precise statistics, it is extremely significant to gather the right data which will further foster the overall research quality. Thereby, to arrive at highly reliable and credible data for the research work, it is important for the researcher to choose the best possible research approach. It is important on the part of the researcher to have a comprehensive understanding about varied research methodologies.
This section of the research work comprehensively presents various methods and approaches that have been deployed by the researcher so as to carry out the research process in effective manner.
It is to be noted that research onion is a methodological tool that helps researcher in listing the division of research in a scientific way to make a successful analysis. Saunders, Lewis and Thornhill (2009) stated that research onion is categorised in six division such as research philosophy, research approach, research strategies, research choices, data collection method and sampling technique.
(Source: Saunders, Lewis and Thornhill, 2009, pp- 52)
In order to gauge the precise background information and nature of the research work, it is important for the researcher to carve out a research philosophy. It is the element of research philosophy that renders a precise idea in reference to choosing the best technique that will foster the researcher in undertaking a research work that suffices its aims and objectives in a better manner. It is to be noted that the research philosophy involves research ideas, values, perception and belief that population has in reference to a general topic. Hence, it is on this basis that the researcher is in a position to deduce precise inferences. In the viewpoint of Mackey and Gass (2015), researcher should finalize the research philosophy for the research work on the basis of research questions that need to be answered in the research work. Hence, there are two common research philosophies that comprise of interpretivism and positivism. In reference to interpretivism research philosophy, the notion is that there are numerous feasible solutions that can be taken to resolve the research challenge on the basis of situational context of the research problem. This philosophy is not scientific and thereby does not resort to carve out various theories and laws. On the other hand, positivism research philosophy which is also referred to as scientific philosophy derives its basis from facts and figures. It also puts forth the fact that there is only one solution to the research problem. Further, the solution devised on the basis of this philosophy is independent of surroundings (Taylor, Bogdan and DeVault, 2015). It is to be noted that interpretivism philosophy is put into effect in case of qualitative research that are performed on smaller sample sizes whereas positivism research philosophy is put into effect in case of quantitative research work wherein the size of sample is large.
In order to conduct this research, positivism research philosophy is applied. It is applied to make the analysis in better way as well as identifying the hidden facts that are correlated with the foreign market entry strategy for small and medium enterprises. Above all this, it is to be noted that this study is completed in short span of time. Hence, realism as well as interpritivism cannot be applied for the choice of research philosophy. Apart from that, positivism research philosophy helps in manipulating as well as evaluating the information to make error free.
The two types of research work consist of inductive and deductive research approach. The first of the research approaches is inductive research approach which deployed a bottom up approach wherein the researcher does not need to examine the present theoretical frameworks. On the other hand, in reference to deductive research approach, it flows from top to bottom so as to be in a position to draw out definitive conclusions in reference to the research topic at hand (Lewis, 2015). It is imperative for the researcher in this case to gather information about present theoretical frameworks in reference to the research topic. This research work is based on inductive research approach as the research work clearly emphasizes on assessing the market entry strategies that Carrefour adopted for venturing into international markets and will then proceed to generalize the outcomes of the research work.
This current research is related to analysing the correct foreign market entry strategy for Carrefour to enter the new market of Saudi Arabia through the use of various theoretical methods. Hence, all those theoretical knowledge needed to be precise to conduct the research work. As inductive approach helps in making the small information in broad ways, deductive approach is applied. It helps in analysing the large amount of information and by evaluating that data, makes a suitable outcome.
Basically, there are four different categories of research which include explorative, descriptive, explanatory and causal research work. The primary aim of any casual research work is to gauge the parameters that can be held accountable in reference to particular kind of behaviour. Hence, this is used in those research works wherein the researcher has to come up with cause and effect relationship. In reference to descriptive research work, the root cause of the challenge is unknown and researcher has to work on the basis of the factual information that he has. In reference to exploratory research work, there is an acute dearth of background information in relation to the research topic as nothing substantial has been researched earlier about the research topic (Flick, 2015). As there is very less secondary available in this reference, it is important on the part of the researcher to gather data from various sources such as interview, surveys and others. The last category of research is explanatory research work in which researcher attempt to describe some topic.
This particular research work will be explorative research work as not much information is available about the entry strategy that Carrefour adopted and its implications. This will render a deeper understanding about the research topic at hand.
Vaioleti (2016) explained that to conduct research work, data is the most useful factor because it holds the information and facts that are really needed.
Source of information are useful in entrance of the examination subject and aides in extricating data as per the prerequisites (Neuman and Robson, 2014). Essential and auxiliary are the two information sources that are giving materials supportive in picking up points of interest of a specific research subject.
In general, researcher can opt for gathering the stipulated data for research from either primary or secondary sources. In reference to this particular research work, researcher has purposely decided to use both primary and secondary data (Panneerselvam, 2014). Primary data is collected on first hand basis and is exclusively gathered to suffice the purpose of the research work. It is gathered from actual data sources and does not have any earlier interpretation.
In reference to secondary data, it is that kind of data that has already been gathered, assessed and presented by someone before the researcher. It is regarded as second hand information. The various sources of gathering secondary data include online sources, published reports, journals, books, periodicals, government publications and others. The secondary data is available and accessible easily (Smith, 2015). It is a low cost method of gathering data. In reference to the research work at hand, the researcher has collected secondary data from varied sources such as annual reports of the focal organization, official website, journal articles and books.
There are basically two types of research which comprise of quantitative and qualitative research work. In cases wherein the researcher needs to assess how and why, he opts for undertaking qualitative research work. In this kind of research work, researcher is in a position to gain deeper insights and understanding about the research topic. It is through this research type that researcher is in a position to assess the option, values and beliefs of people in reference to the research topic so as to draw effective concluding remarks (Ledford and Gast, 2018). On the other hand, in reference to quantitative research work, the research makes use of statistical techniques along with mathematical formulas to arrive at what and where aspects of the research topic at hand.
In reference to this particular research work, the researcher has used a mix of qualitative and quantitative research work.
It is to be noted that the sampling in general is of two types which include probability and non-probability sampling. In reference to probability sampling, each of the elements has equal chances of making it to the final chosen research sample whereas on the other hand, in case of non-probability research sampling, each of the element do not have equal chances of making it to the final sample. Probability sampling is divided into various types such as a simple random probability sampling; cluster probability sampling, stratified probability sampling and random probability sampling (Bauer, 2014). On the other hand, non-probability sampling is divided into judgemental non-probability sampling; snowball non-probability sampling; convenience non-probability sampling and quota non-probability sampling. In reference to this particular research work, the researcher made use of random probability sampling.
In reference to gathering the primary data, the researcher purposely chose a sample of 50 associates of Carrefour where 45 participant are from R&D team of Carrefour and 5 managers.
3.9 Ethical Considerations
In order to maintain ethics during the entire course of research process, researcher made sure to take prior permissions from all the respondents. It was only after they gave their consent to be a part of the research work that the researcher carried out the further process. The researcher further told them about the research purpose and how the data given by them will be kept confidential and will be used. The researcher has made all the efforts to maintain confidentiality of respondents along with ensuring authenticity of fata gathered as a part of the process.
In this research work, there are several limitations identified such as –
Time: It is the top most limitation of this research. As per the nature of the research, deep analysis was required but due time constraints, proper analysis and evaluation is not done.
Reliability: The data that are provided is not so much reliable. The selected respondents were the employees and managers of Carrefour. Therefore, due to security reason, they can provide bias information.
Budget: The budget of this research was limited. Therefore, lack of available finance, use of SPSS application cannot be done. All the analysis is made using excel only.
In order to present highly reliable and precise research outcomes, it is imperative on the part of the researcher to have interviews with managers in reference to market entry strategies that have been deployed by organizations to venture into foreign markets. Further, researcher has been extra cautious to only make use of highly credible and reliable secondary sources of secondary data. It is important on the part of the researcher to maintain higher level of reliability and validity of the research work as both of them play equally significant role in augmenting the overall research quality of the research work. In order to sustain higher level of validity in the research work, the researcher attempted to uncover possible solutions to real life challenges that have been specified in the research question section of this research work.
Analysis of collected data and deriving findings on the basis of that data is a vital activity for reaching at a final outcome. Hence, this section of the research has special importance for the researcher. The term research itself denotes searching of data and information. Therefore, researcher is required to gather huge data for performing the research successfully. So gathered data or information might be quantitative, qualitative or a combination of both and researcher is required to filter that information for generating content for the analysis. Hence, in this chapter researcher transforms the raw data in certain useful information to be presented before the readers. In addition to that, report which is well presented is easy to understand. For the analysis of gathered data, various techniques and tools are used by the researcher which helped him in deriving useful information from that data.
One crucial goal of data analysis chapter is to reach at a conclusion of the research. And depending on raw data only would not help the researcher to reach at any reliable and authentic conclusion. Hence, for ruling out such issues and for concluding the study in effective way it is required to perform data analysis because it incorporates internal findings and facts related to the topic of the study.
In this research, researcher has applied both quantitative as well as qualitative techniques for analysing the data which is both in qualitative and quantitative form. For qualitative data analysis researcher hasused qualitative techniques and under this thematic analysis has been adopted by researcher on the data gathered. For that, researcher has used some specific graphs and themes on utilising that a conclusion has been drawn. Apart from that, with respect to the quantitative data analysis, the quantitative data analysis tool used by the researcher is MS Excel utility. The statistical use of this software has helped researcher in generating pie charts and graphs which assisted in reaching to a reliable conclusion.
The analytical observation provides clear evidence on the age group of the respondents who are involved in the first hand data collection. Most of the respondents from the Carrefour are between the age group of 20-60 years are given their opinion of market entry strategy analysis of Carrefour. The participants of the age group of 41-60 are mostly given their answer on the role of different types o marketing entry strategy while the company is taken part in the international business market. The market entry strategy of Carrefour is based on the FDI and licensing and franchising process for the successful business improvement. 4.4% has given valid answer on the impact of direct and indirect channels in the mode4 of market entry and the implication of the franchising processing order to make the successful and sustainable business management implication. The distinctive feature of the market entry process of Carrefour is supported with the implication of direct market entry as the reputation of the company is very high in the business world. This kind of strategy helps to maintain the success measurement process of the company to make the distinctive feature of the business innovation. Apart from this the respondents of the young age are likely to give their answer on the business market innovation process on the business success.
The opinion of the respondents is classified according to their gender classification. Here, the analysis provide clear evidence on the gender of the respondents who are participated in the data collection process of Carrefour business management strategic innovation. The analysis shows that 31 of the total respondents are male and 14 of the total respondents are female. The valid percentage of the male is considered as 68.9% that clearly evokes about their knowledge on the market entry strategic innovation in the competitive business market. The procedure is very effective where direct market entry strategy has been considered as the effective medium of business in the competitive market place. This procedure provide the determination of the successful business implication procedure of the company where the business environment is negative. The male respondents having core knowledge on the business environ has given their answer on the strategic marketing management process. The observation of the female respondents are not strongly considerable due to the lack of suitable idea on the mode of market entry procedure in the business market. The procedure has the determination on the effect of marketing management evaluation process in the business management initiative of the company while the market is not proper and different negative factors may takes place in the external market entry process. The mode of the market entry must be suitable and effective to strengthen marketing position of Carrefour in the competitive business world.
From the analytical observation, income inequality of the respondents has been clearly evaluated. The observation provide clear evidence on the total income of the respondents who are involved in the activity of the business related management process of the company in the internal market place. The analysis shows that the basic income of the respondents who are involved in the data collection process is the 18,000-22,00 per year. The frequency of the respondents who are belonging to the income group is very high in this process. Therefore, it can be said that most of the respondents who are participated in this data collection process are very much rich in their income. The income related analysis of the research provide clear evidence on the identity of the respondents who are involved in the data collection procedure of the company. The analytical observation can be defined as the important process in order to deal with the process of making suitable data observation process in the first hand data collection process of the Carrefour. Apart from that, from the analysis, basic income of the respondents of the income group has been represented very significantly.
Working experience of the respondents has been clearly evaluated through this analysis where, this point is properly been identified on the income group response in this research. The analytical observation provide clear evidence on the procedure on the working experience of the respondents. Most of the employees in the research are from the work experience of the 0-2 years who are working in this company. 22 respondents who are given their response are from the experience of the 2 years. This research has the effectiveness to understand the employee retention process of Carrefour in the market. Furthermore, information can be taken on the impact of the employee retention process in the company for the sustainable business management and business innovation process management.
The analysis provide clear evidence on the process through which the Carrefour can be able to carry out their sustainable business management process in the business market. The procedure has the determinative process of the implication in making suitable business operation. The role of the decision making can be considered as the effective process that can helps to make effective business innovation and business improvement. In most of the case where the business market is not suitable enough for the company needs proper market observation to have assessment of the risk associated factor. In this case external and internal market analysis process of Carrefour allows them to understand the role of making effective marketing entry strategy for the sustainable business improvement process. The mean squire result of the ANOVA test result is 0.527 that clearly evaluates about the different types of challenges in the process of making marketing management process in the process of making business. Different types of issues and challenges are found to be the dominating in feature in the business market entry process of Carrefour. The analysis shows that, local culture of the community has negative impact on the market entry process of the organisation. The procedure has negative implication in the fruitful business innovation of Carrefour. While entering in the UAE market, the cultural factors of the country may stands with the negative impact to make the business successful. In this course of action, organisational efficiency can be considered as the negative implication of the company. By obtaining business licence, the company may face some issues from the political parties of the county. Huge cost is needed in the building set up planning process of Carrefour in the foreign land. The market entry needs specific strategic management process in the business improvement and sustainable operational efficiency is needed to include the strategy in the proper direction. It is very difficult for the company to make the foreign customers attracted towards the company if the cultural integrity cannot take place in workplace. The range of strategic innovation has the suitable process on the assessment of sustainable business operation management process in the workplace. Furthermore, it can be defined that organisational initiative can be defined as the significant process of business operational improvement and the strategic innovation.
The analysis provides clear evidence on the analytical observation customer’s attraction process that helps to improve the mode of organisational management strategy in the business management. The business improvement of the company is very helpful in making their position strong. According to data collection first reason that makes Saudi Arabia a potential business goal in retail fragment is its consistently developing economy. As the Saudi Arabia economy is rising ceaselessly, the proportion of joblessness is low and the normal salary is high. Expanded pay positively affects the retail area of a country. Thus individuals in Saudi Arabia spend more on their needs and needs. Notwithstanding that, rising populace is additionally great for the retail part. With the rising ways of life and high buying force the items which are prior viewed as unimportant has been acquired generally by individuals. And every single such reason demonstrate that Saudi Arabia offer immense business potential for the Carrefour.
From the above table, it can be illustrated that there is positive link between the questions. The developed questions have significantly supported the researcher to ensure the reliability between the items.
The correlation analysis of the research provide explanation on the relation between market entry strategy and chosen country’s position. Winning host country conditions influences the passage mode choice and more often than not impacts the determination of the country. From the review obviously Carrefour considers the administration endeavours for fare advancement as a vital country’s connected factor for choosing passage display in the country. The greater part of the members answered that between government activities for fare advancement and accessibility of simple home fund, the first is more essential. This is along these lines, as Carrefour is in the situation to effortlessly get back from remote banks in light of its sound money related position in the market and there is no necessity of relying upon home bank fund. On the off chance that the approaches of a country don’t offer help to the association, it would be less secure for the organization to degree its activities over the fringes.
From the correlation evaluation, it has been identified that different foreign market entry modes are selected by the organisations then it can support them to gain foreign customers. In that relation, it can be mentioned that various international marketing strategies would have distinct impact on the buying behaviour and intention of customers. For instance, one group of consumers would be satisfied if they would have opportunity to direct purchase product from the company and other group of customers would be pleased by obtaining desired products through agents. Thus, it can be effective for the organisations like Carrefour to focus on more than one foreign market entry modes as they can largely help the company to attract foreign customers, thereby increasing sales and revenue. It has been studied from previous researches that it is not possible for companies to use different marketing entry strategies. However, for using various modes, the organisations needs to have capabilities and resources as these elements can support in achieving expected benefit from the international markets. On the other hand, it has been found from the reply majority respondents that Carrefour has the strong potential to foray into the retail segment of Saudi Arabia market. The adoption of effective foreign market entry modes can significantly support in penetrating into the retail market of the country. It can be discussed that the organisation has the opportunity to use marketing entry strategies like joint venture, licensing, etc., which can considerably support the company to create a significant marketplace for its products and services. It has been determined that by expanding business into international markets then there is high potential to gain exposure, which can support in attracting targeted customers. In that context, it can further be discussed that it is crucial for the company to consider various factors impacting the industry such as political and legal framework for international firms, suppliers’ availability, customer culture, etc. It would be highly difficult for the company if it fails to consider different factors while expanding the business into Saudi Arabia.
One of the elements that can impact the entry mode of Carrefour is related to the regulatory bodies of the nation. Respondents have significantly accepted that government rules and regulations can create hindrance in the path of international expansion. In that context, it can be illustrated that the government of the nation can make changes in the foreign business policies or increase tax rate, etc., which may be tough for the company to fulfil them. It is imperative for the organisations to provide all details to the regulatory bodies about the business expansion so that expected support can be received in terms of setting business in the country. On the other hand, it has been figured out from the survey result that the organisation, Carrefour can face considerable competition in Saudi Arabia market. There is an increasing competition in the market because of the continuous change in the technological and social change. It is crucial for any business organisations to strengthen its capabilities and infrastructure so that they can strongly compete in the intended market. The small skill company would need to ensure that the quality of products and services is maintained as it can help in seeking the attention of the consumers. It has been studied that various companies focuses on standardisation and adaptation approach so that their products and services can be well accepted by the foreign consumers. It has been determined that the goods and services offered by majority of small skilled businesses have limited exposure due to which it is difficult to create an expected marketplace in the international market. Carrefour can also witness similar situation due to which it would be important for the organisation to make significant investment so that consumers and suppliers can become aware about the potentiality of products and services to meet customers’ expectations.
Majority of the respondents have opined that the different international market comprises distinct market entry modes. There is a positive correlation between using international market entry strategy and foraying into Saudi Arabia’s retail market segment. It has been ascertained that it is important to assess the current situation of the market and existing condition of the small skill businesses in the market. This helps in evaluating the industry, thereby determining the effective foreign market entry modes, which can ensure expected return from the investment and market. On the other hand, it has also been found that there is significant relation between the competition and regulations in the market as both can present considerable challenge for the organisation to enter in the targeted market. The decision of international expansion can be affected if the intended market does not have the potential to ensure future success then it is most likely that the organisation would face unexpected challenges, which may not be easy for them to overcome. However, it has been determined that the company can seek experiences and talent from international markets that can support in establishing a strong marketplace for the products and services. This in turn, helps in attracting the attention of the consumers, thereby leading to sales revenue and income.
According to the opinion of most of the respondents, it has been evaluated that the sole venture and franchising are not the only international marketing strategies, which can be adopted by Carrefour. In relation to that, it can be pointed out that the organisation has number of opportunities to select strategy among numbers of international market entry modes. It is imperative for the company to understand the strengths and weaknesses of each foreign market entry strategies so that best one can be selected that can ensure expected benefit and provide potential advantages in Saudi Arabia market. Some participants have also stated that for Carrefour, sole venture and franchising are the common mode for entering into the retail industry of Saudi Arabian market.
1. What are the potential challenges that would be faced by Carrefour while selecting the foreign market entry strategy?
One of the manager opined that the lack of international market awareness among the market analyst in the company may not provide accurate response regarding the selection of foreign market entry mode.
Another manager have pointed out that shortage of financial capability is a potential challenge for the organisation to choose the foreign market entry strategy.
Other group of managers have similar opinion that lack of awareness about the products and services of Carrefour would create potential challenges for selecting the market entry mode.
2. What are the possible benefits of expanding business into Saudi Arabian market?
One manager stated that Carrefour would have an access to more customers that can support in increasing customer base and building corporate image
Other managers answered that the organisation can utilise the resources available in Saudi Arabian market.
Some managers replied that the company can increase corporate exposure, which can help in further expansion of business.
3. What resources the organisation will require or need to develop to enter into the selected international markets?
One of the managers opined that that employees need to be trained so that they can become competent enough to meet the expectations of foreign customers.
Another manager responded that the relationship with foreign suppliers and distributors would require to be organised so that expected return can be obtained from the market.
Other managers said the organisation need to enhance its infrastructure in order to improve organisational capabilities.
4. What are the factors, which can affect the decisions of Carrefour to expand internationally?
One manager said that the competition from the established and local companies would be one of the crucial factors that can create huge hindrance to create strong marketplace for products and services.
Another manager answered that preference of consumers and customer buying culture will be another aspect, which needs to be considered in order to expand business successfully.
Other managers opined that government rules and regulations would impact the decisions of Carrefour to expand business internationally.
In the current era, the business environment is becoming fast moving with respect to technology advancement and competition as well. Increase in globalization increased opportunities within the marketplace for firms as well as big organizations which resulted in leading them to go globally. Past 20 years are witness about motive transformation of organization from national to international. In order to establish themselves in the international market, organizations are making their strategies with marketing techniques. Several factors affect and motivate organizations for increasing the operations in international market landscape. Factors which can motivate organizations are: to improve the position of organization along with competitive advantage in the foreign market; to lower the cost and offer products to more number of buyer which ultimately helps in generating more revenue for the organization; to increase operational capabilities of the organization and develop core competencies; to go to business in the large market; so, risk could be limited because no slowdown can put organization in loss if organization has different markets. Moreover, there are many more factors which are responsible for fast development of the organization in global circumstances such as excessive decrease in prices of communication, growth of sophisticated as well as diverse software applications which are beneficial to support different kinds of functions of the organization, growing trends of joint ventures and strategic alliances, development in know-how, risk-taking innovation, development of supply chain as well as logistics management, development of capital markets etc. On the other hand, it is necessary for organizations to select correct market for expanding the operations of the business and to target the market.
Carrefour also realized above opportunities and went for retailing in Saudi Arabia. Local players who were in the retail market gave tough completion to the organization; players like Lulu Hypermarket of EMKE Group and the Lifco Group of Companies. It can be concluded from the literature part, there must be three factors consider by the company before entering in the international market. These factors are: 1. Timing of entry, 2. Decision with respect to which international market to go for, 3. Strategic commitments and mode of entry. It is concluded from the research, a company can enter in a new foreign market with different mode of enter. Following are some practiced strategies for entry:
Exporting: If an organization wants to go for globally in retail market at low level then one of the correct choices would be exporting. There can be two kinds of exporting: direct and indirect exporting. In direct exporting, each and every activity is controlled as well as owned by the company itself. On the other hand, in indirect exporting, intermediaries are involved in order to perform some activities. Exporting can be advantageous for the company with the benefits like it requires less investment, it increases capacity of organization’s production, and it gives competitive advantages to a company over its competitors and ultimately exporting helps to expand economic position of the organization. It also offers the company to reach maximum buyers by controlling over production activities. (EIU, 2015)
Licensing: It can be used when a company allows another company to manufacture the product but under the name of the company. It might be a process of transfer of technology to host nation form home nation. This strategy involves easy and less investment at initial level. Benefits of this strategy are: ease to gain understanding about the needs of local consumers, prevention of barriers to trade, and very easy entrée to the international market.
Joint venture: When a company joints other company to form a new unit of business is called joint venture. Both organizations have common interest in deal. Basic attribute of joint venture is that the new firm in owned and controlled by both. All the things in business are shared by both organizations. A company can have several benefits if it joints hands with local partner like the company can easily deal with the barrier like different language and different culture and cost as well as risks are shared by two organizations. In addition to this, this mode of entrée allows the organization to have rights like land lease and duties and tax exemptions.
Wholly-owned subsidiary: In wholly owned subsidiary, the organization owns a corporate in international market. That is from manufacturing to final sales, each function and activity of the business done in the international market place. On the other hand, wholly owned subsidiary is most risky than other modes of entrée in new market and it needs huge investment.
Franchising: It is a mode of entrée in a new market which allows a franchiser a right for using name of the organization in order to sell the services or products. With respect to the current report, the organization has an option to allow franchiser with training and technical knowledge to make them skilled to operate business effectively.
However, before going for new market, an analysis is required within the organization in order to analyse external as well as internal factors. These factors could be number of resources, size of the organization, attitude of top level management towards risks, factors within home country, and business surroundings of international market, growth rate of market and entrée barriers.
As per analysed from literature, the case organization realized for entering in the retail market of Saudi Arabia because from the year 2001 to the year 2005, there was a thirty per cent hike in the retail industry of middle east nations. It counts second highest growth after the growth in Central and Eastern Europe across the world. Retail market of Central and Eastern Europe grew by forty one per cent. In addition to this, Middle East nations have noted highest growth in retail industry with respect to market, customer spending power and level of retail focused. Moreover, in Saudi Arabia, 81% of population is financially strong and it is supposed to increase by two more per cent. People of Saudi Arabia are focusing towards foreign products and ready to use global brands. Therefore, the companies have got the opportunities to explore their businesses and establish their products and services in the region. At the same time, in the markets, global brands’ demands are getting motivate. In Saudi Arabia, consumers demand for the products from different nations like Germany, Canada and France as well. Preferences of consumers in Saudis are changing and it motivates the organizations towards international market in order to increase their market as well as business in the region. Due to this, there are many organizations from European countries which are going for Middle East countries such as UAE (United Arab Emirates), Kuwait and Saudi Arabia. Most of the retail organizations which are currently entering in the region are non-food retailers. Among them, most of the companies are using franchise as a mode of entrance. In this low risk entrée mode, organizations take franchise of several different brands. Paul Smith, Asprey, Burberry, Emporio Armani and Jimmy Choo are some organizations which entered in the Saudi Arabia in past years. One of the organizations which are under process to gain a foot hold in the Saudi Arabia is Louis Vuitton. The market is also supposed to have Harvey Nichols very soon. Retailer from US i.e. GAP is also evaluating market demands and risks in order to enter in the five of the markets of Middle East with its Banana Republic and GAP stores. In order to enter in the market of Saudi Arabia, the organization made a franchise partnership and efforts to strengthen the business with Majid Al Futtiam groups. That would be helpful to operate business in Middle East.
As per analysed from literature, although the market of the region was looking attractive for the organization in order to go for operations in the respected nation; but, Carrefour faced tough competition from leaders and local players. In addition to this, Carrefour faced several challenges in order to gain foothold. One of the most tough challenge faced by the Carrefour was finding a local partner who might able to share the risk, the responsibility and the burden of directing tough local operations and regulations for pre-operations. At the same time, one of the challenges in front of the organization was to meet local culture as well as health standards in order to get product licensed. One more challenge in front of the organization was cost with respect to infrastructure as establishment. At the same time, chronic inflation was a big challenge realized by the organization. Some more hurdles were terrorism and political issues of Iran and Iraq in the entry of the organization.
After analysing opportunities as well as challenges of the retail market in Middle East, it could be said that Carrefour put its efforts in an effective manner in order to enter in the international market in best way. As a partner, the strategy of Majid Al Futtiam groups was to gain an edge to the organization in order to penetrate in Saudi’s retail market. The research also analysed different regulations of government of host nation which can directly impact the organization’s mode of entrée. Before going for the new market, the organization assessed its reach and considered whether it can operate business in the market of Saudi Arabia or not. Ultimately, Carrefour selected an appropriate strategy to enter in the market of Middle East and currently the organization is operating its business in the region successfully.
Below are the suggestions that would help Carrefour in operating its business in Saudi Arabia smoothly-
Improve level of service to Customer: For gaining Customers loyalty in Saudi, company is require providing reliable and consistent service. If the company provides responses against requirement of customers in courteous, knowledgeable and timely manner then it would make business more sustainable and Brand would gain the trust of customers. With respect to this, Carrefour is required hire analyst of human capital who is able to select right candidate possessing right skills as per the requirement of the job.
Leverage Payroll Expenditure: Carrefour is also required to review its cost structure. For managing the profit level from the Kingdom, organisation must look for ways to bring down the cost. For that Carrefour should improve its labour spend, streamline and simplify its processes and performance consolidation of distributed system for saving more cost.
Dealing with Retail Paradox: It is widely accepted that superior service at low cost are opposite to one another as for providing finest service, organisation requires to incur heavy expenditure. Hence, Carrefour must plan its budget wisely to manage its cost but with plan for expenditure which are required for sustaining and growing the business.
Reduce employee turnover: Currently, Carrefour is required to retain its employee. If its employees continue to withdraw from the organisation them it would not be able to gain best from them. Therefore, Carrefour is required to motivate its employees to remain associated with the organisation for long run by offering all opportunities to grow within the organisation. This will also save much of the recruitment cost of the company. This way both employee and company will get benefited.
Fulfil all statutory requirements: At last, Carrefour is required to fulfil all statutory requires of Saudi Arabia, as rules are stringent with no excuse. The Labour laws must be followed while hiring teenagers. This necessitates requirement of human capital analyst to make sure that all labour related laws has been complied with.
This research work explore the theoretical gap and the entry barriers of foreign market specially Saudi Arabia market. This study also explore the use of market entry strategies in developing new business with respect to Carrefour. The factors are also identified for foreign market entry strategy in this study. Therefore, the next research may conduct to analysis the effect of foreign market entry strategy barriers for small and medium enterprises.
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