Determination of Entry Modes and Formation of Alliances Choice for Multinational Organization: Sri Lankan Experiences

Abstract

This study provides information for the modes of entry and choices of organization for entering the Sri Lankan industry. The study was based on systematic structure and accounted for the appropriate frameworks for determining modes of entry. A complete literature review have been conducted in the report where the entry modes have been discussed with different author’s perspectives. However, the research methodology depends upon the research onion which consist of six parts. According to the results, the increase in the market share for the FMCG is the major factor affecting entry modes in Sri Lanka. However, the limitation for the research the limited and small number of responses.

Chapter 1: Introduction

1.1 Introduction

A multinational corporation is an organization which distributed assets present in home countries. These organizations tend to attract markets where there is room for investment and drive for growth. The FMCG industry attracts the attention of multinational organizations owing to the investment present in Sri Lankan markets. The common products include non-durable goods, which has a short shelf life and require transport (Mishra & G.Hopkins, 2018). Pre-packaged food, which includes the soft drinks and essential household item, have provided an increase in turnover for sales. The area of packaging is critical for FMCG. A multinational company need to analyse the consumer markets of a present country and promote the product promotion investment.

1.2 Background of the topic

The number people around the globe is getting increased at a tremendous rate. This directly affects the demand and supply for consumer goods, which included packaged materials as well as domestic products. The Fast-moving consumer goods industry of Srilanka has remained prominent for attracting a wider share of the market (Anthonisz & Perry, 2015). This main base is on the short shelf life of consumer goods and the increase in investment for the retail sector. The industry has achieved a higher level of competencies owing to the market innovation as well system of FMCG industry.

The emerging market has an impact on Asian business. The amount of revenues for the FMCG industry has been increased for small and medium companies. This has also opened new entry modes for global companies. The key area which drives the sales of FMCG products in the household items. The FMCG industry is the average income for the middle-class people. Sri Lanka has experienced growth in the FMCG industry. The economic condition of the company has managed to provide a higher opportunity of income to people. This factor is also related to the inclination for the use of western products in the FMCG market. The sale of package product has been increased from eleventh percent to 13 percent in the year 2013.This generated a revenue of 1.9 billion dollars (Liyanage, 2016).

1.3 Problem Statement

FMCG industry has been targeted with the strategies and procedures for market entry and formation of alliances. The main problem is present in determining the specific strategies which can be applied to the emerging market of Sri Lanka. This accounts for the comprehensive analysis of emerging market where challenges face in entry modes would be highlighted for the FMCG industry of Sri Lanka (Anthonisz & Perry, 2015).A difference is present between the theoretical approach of marketing and investment. Choice of a market is dependent on the condition as well as economies. The primary problem for the industry is the competency level required for each of the competitors in the market and account the nature of regional competition for the sale of the product. The behaviour of customer also changes for the used products which raise the challenged for FMCG industry in accounting for the regional customer distribution.

1.4 Aim of the Study

The aim of is to analyse the determinants which affect the choice of entry strategy carried out by the multinational organization. This accounts for the theories which can be applied to the emerging market of Sri Lanka and the relationship present with the customer requirements. This study will explore all the areas of fast-moving consumer good where there are chances of expansion. Information about the market entry strategies would also be analysed because a multinational company need to apply a direction for entering a market and forming alliances with the FMCG brands.

1.5 Objectives of the study

This study would analyse Sri Lankan FMCG on the base of entry modes and path for alliances. The specific focus would be the requirements for the multinational organization for market entry and theoretical strategies. The key objective are given below:

  • Determine the different entry modes which can be adopted by companies for the FMCG industry
  • Analyse the reasons present behind the particular entry modes
  • To evaluate the modes of companies in relations with the Sri Lankan market trends

1.6 Research Questions

  • What types of entry modes are available in the foreign market?
  • How the modes of entry provide information on a company future strategy for business
  • What are the benefits and drawbacks present for each of the mode of entry?

1.7 Research Hypothesis

H1: The choice of entry modes and industry are strongly connected to each other.

H2:.No significant relationship in the choice of modes of entry and industry have been found.

1.8 Rationale for the study

The Sri Lankan FMCG market has experienced bloom for the new products and supply of domestic products. The fast-moving consumer goods have a low shelf life and require a continues to need for transport towards the sales point. The main justification behind the research the market condition and present status of the industry. Sri Lankan market has been providing the potential for future investment, which can increase the brand name and allow multinational companies to increase trade for the emerging market.

1.9 Purpose of the study

The study will provide brief data about the alliances made in the industry. The study species the requirements of trade between emerging countries. However, the goal of the study was to analyse the benefits and drawbacks related to business strategy. Information regarding the objectives would be provided from the context of the literature.

1.10 Structure of the dissertation

This dissertation would be based on a logical format. The first chapter would discuss the introduction of the research topic. The analysis of literature would be carried for the research objective. The third chapter would include the data collection and analysis of research.

Figure 1 Dissertation Structure

1.11 Summary

The introduction part provides information regarding the discussion and target of the stud, which would be achieved with the help of research objectives and question for the entry modes in an organization. Information regarding entry modes and affiliation was provided for the FMCG industry. A research hypothesis was formed to analyse the relationship between companies and the industry. It is required that different entry modes should be discussed for companies and analyse the effect on the overall position of brand reputation.

Chapter 2 Literature Review

2.1 Introduction

Literature review is the best way to represent the information because many different researchers have performed the studies on entry modes and its determinants, so it can provide the basic and important information that has already been approved. It is an effective and essential component of the research study, as it proves that the goals of the research are in the right direction. It gives proof of the objectives that have been already analysed by the researchers and thoroughly studied as well.

2.2 Conceptual Framework

Figure 2 Conceptual Framework

2.3 Historical perspective for entry modes

Modes of entry in a particular market depend on the internationalization strategy. Teixiria stated that choices of entry modes are dependent on the host countries system and interest related to the entry mechanism (Teixeira & Grande, 2012). The mode of entry is also connected with the income levels of the country and the type of industry. Manufacturing companies need to determine the relationship between business and market trends. Modes of entry can also be defined on the base of a structured agreement where marketing is carried out to achieve a significant objective of the market.

The international theory accounts for the choice where market condition dictates the choice of entry modes. This especially lists the information related to the knowledge and decisions which company had to take in represent to market and industry requirements. The study provided information about literature and application of theories which help to establish equity modes. Tulung studied key determinants of entry modes and analysed the information with the international strategy. This show that multinational company focus on cost and resources for market entry (Tulung, 2017).

2.4 Introduction to the Entry Modes

A single organization has a large number of entry modes, and they have to choose one to internationalize the operations.

Chen et al. multinational companies have a crucial role in the context of entry modes (Hsu, Chen, & Cheng, 2013). For performing an international business, there is a need to overlook the theoretical and empirical evidence of the entry markets. The authors conducted thorough research on how the companies can choose the right entry mode and how they can gain knowledge about these entry markets.

2.5 The need of Entry Modes

With the passage of time, the need for entry modes has been increased. Different researchers and psychologists have studied the basic need of entry modes for different companies and why they are necessary for them. Questions related to the entry modes have remained a focus of attention for several international business scholars, and a lot has been accomplished in the relevant topic (Shaver, 2013). With the help of these researches, the concept of entry modes has been cleared as a field of study.

In this modern world of business, the need for entry modes has been increased. For this purpose, Jean and Arjen discuss the basic need of entry mode studies (Hennart & Slangen, 2015).

2.6 Importance of entry modes

There are several modes of entry, and every single one has its own implication. Every organization has to decide what type of optimal levels are needed to choose the best strategy such as flexibility, presence, control, commitment and risks are the most important elements to consider while selecting the most suitable modes of entry. The entry choice can be used as a necessary tool for the adjustment of entry modes (Karhunen & Ledyaeva, 2012). The author has also analysed the advantages and disadvantages of entry choice while entering into different countries that are basically corrupt.

2.7 Different Entry Modes

Different type of organizations has to make a certain important decision that is already operating in the international markets.. For this purpose, an examination of also explained the importance of different modes of entry choice and their role in the foreign market (Parker & Van Praag, 2012). Most of the entrepreneurs who wanted to start a new business even from scratch need to gain knowledge to be successful.

2.7.1 Role of Joint Venture in Entry Choice

Most of the organizations join different foreign business for different reasons and may choose a joint venture.

Yi Chang et al. due to the high-quality governance, it is important for the company to choose owned subsidiaries over the joint ventures (Chang, Kao, & Kuo, 2014). However, under the right circumstances, the joint ventures are the best choice for market entrants. It often thrives in some certain conditions, such as converging goals, gaining competitive advantage or intellectual property etc.

Most of the companies also join with the foreign market to avoid the basic and simple problems that occur by inheriting the foreign subsidiaries (Chang, Chung, & Moon, 2013). The authors basically compared the performances of the joint ventures with the owned subsidiaries in the foreign market.

2.7.2 Role of Acquisition in Entry Choice

There are many multinational companies that acquire foreign subsidiaries from the host country. Most of the multi-national companies chose acquisition as an entry mode (Ang, Benischke, & Doh, 2015). There is a different organization that want to limit their risks and maximize their exposure to the foreign market. These types of organizations basically choose acquisition as their entry mode.

With the help of acquisition, an organization can establish a brand name and a customer base. Literature also explains how the image of a company is established after an acquisition (Lee, Chen, & Guy, 2014). The authors mainly examine the influence of different brand strategies and their redeployment factor on brand equity.

The entry modes that are more beneficial to the organization basically depends on the organization’s goals, circumstances and objectives. International independence between the industries has been gain importance (Johanson & Mattsson, Internationalisation in industrial systems—a network approach, 2015).

2.7.3 Licensing

Licensing is the mode of entry which does not require any physical present in the host country and the control over the product or service is kept through the agreement. (Stoian, Rialp, & Dimitratos, 2017).  The drawback of this type of mode of entry is that due to the agreement, changes are not possible in the fluctuating market.

2.7.4 Exporting

It allows the home country to manufacture products and sale to other neighbouring countries. The author discusses the two types known as direct and indirect exporting (Schwens, Zapkau, Brouthers, & Hollender, 2018) The indirect. exporting take place when there is no direct involvement of manufacturing companies. However, direct exporting refers to the involvement of manufacturing companies into production and foreign sales.

2.7.5 Greenfield Venturing

The Greenfield venturing is another important and effective entry mode for international business and corporations. The Greenfield venturing is basically a trade agreement which is a mode of acquisition in which the companies enter into market own its own and build their own unit. The benefit of this mode is that it provides full control of the unit and also builds.trust in the host country. It is not so preferable due to the fact that it with huge investment, and its progress regularly gets disrupted due to the country’s legal structure. Majority of the MNC’s adopt aggressive market capturing strategy and Greenfield venturing is not at all suitable for it (Mueller, Hendriks, & Slangen, 2017).

2.7.6 Benefit and advantages

The above entry barriers can be used by any multinational firm when it decides to go internationally. There are almost five entry modes has been discussed for a corporation who wishes to expand its business. Now, one of the primary advantages is that profit maximizes up to a specific limit. As under joint venture entry mode, the companies or organizations have shared goal and purpose; therefore, and there is a low level of risk in joint venture mode of entry.

2.8 Determinants affecting the choice of strategy

2.8.1 Economic Risks

It is well known that when companies go globally for trade purposes, there is a lot of risk in front of them. The first and foremost step in international trade is to select the entry modes. The companies select one of the entry modes based on their capabilities and availability of resources. After identifying the entry mode, the second important task to examine the elements that affect the choice of entry strategy. Different companies in Sri-Lanka expected to move internationally and trying to start their business across the national boundaries (Konara & Wei, 2017). One of the crucial and important risks that companies have to determine to go globally is an economic risk.

Economic risk likely to be defined as the investments and capital of a firm is affected by some macroeconomic conditions such as government regulations, interest rates, exchange rates, and economic condition. The economic condition does not always remain the same; it changes over the period, in both positive and negative way. Such as, if a firm decision to go international, then the company entry mode can be affected by economic risks and factors. Sri-Lankan corporations and companies experience economic risk while when corporations go internationally (Hobdari, Gammeltoft, Li, & Meyer, 2017).

2.8.2 Political Risks

The international entry mode for a multinational corporation can also be affected by political risk.

After identifying the entry mode, another crucial step is to identify the political risk (Jenkins, 2015). For example, if a company decide to enter an international market, then the company will identify the political risk. The political risk for an international firm can also understand that what is a condition of elections and a new government in that country

Political risk affects the trade activities, devaluation in currency and another related factor (Kim & Osgood, 2019). The matter is political risk further affect different factors and conditions. The Sri-Lankan political conditions are usually normal and under considerations. Therefore, the companies are not facing a politics risk while operating their operations.

2.8.3 Institutional Risks

The multinational corporations and companies also faced credit or institutional risk while crossing their national boundaries for trade motive. The institutional risk can be managed under the process of the risk management process. An author defines that institutional risk of the process of management and analyzes the management objectives. Commonly, the institutional risk is the process of how and why institutions manage the credit and capital related to investment (Cagliano, Grimaldi, & Rafele, 2015).

The corporation in Sri-Lankan market also evaluates what the required investment and capital are and how it will affect the business decisions of the company.

2.8.4 Investment Risks and currency risks

One of the effective determinants that affect the choice of entry strategy is currency risk. Currency risk is one of the important and fundamental risks that pre-associated with the currency value of the country. The author defines the currency risk is the risk which defines the low or high value in currency (Richmond, 2016).The price of money or currency can be overvalued or can be devalued in different perspectives. If a multinational company enters into Sri-Lankan country for trade purpose so when a company knows that the value of money devalues with respect to other currency value.

Now, it has been discussed that the currency risk can be evaluated or mitigate through considering investing in such countries where there are strong rising currencies and should have a high interest rate. The companies and corporations can also mitigate currency risk by investing in risk-free securities. It is very important to manage and mitigate the currency risk because it helps to identify the threats as well as to get the profit.

2.9 Entry Modes and Multinational organization

The choice of different types of entry modes also remains principal for examining the companies and demand of the market. A study carried out Oliveira showed that principal decision for the entry modes is based on the performance (Oliveria & Yazdani, 2018). Organizational theories can be applied in accordance with the diversity levels in a company.

2.10 Application to Sri Lankan Experience

Unilever stands as one of the largest companies of consumer goods. This company has adopted different modes of market entry and owns about 12 reputed brands of Sri Lanka. The mode of entry adopted by the company is Greenfield venture, which allows foreign direct investment for the company. This entry mode has allowed Unilever to increase 95 percent of products using the FMCG industry as the principal area of the market. The Sri Lankan industry has maintained full ownership of products and services. This is one of the principal modes of entry where foreign-owned companies have provided sixty percent of the investment for the FMCG products (Mishra & G.Hopkins, 2018).

2.11 Use of Foreign direct investment for FMCG

FDI is accounted for the best possible method to understand the mode of entry for the multinational organization. The FDI score of the country accounts for the positive aspect of the market. Investment policies of the company have also changed since the liberalization actives were carried out (SriLanka Industry, 2018). The Sri Lankan foreign investment has also increased to 56 million dollars, which provides a justification for the principal mode of market entry. Fast moving consumer goods industry has increased the opportunities for multinational corporations.

According to Olivera and Yazdani, the selection of appropriate technologies and application in the industry would resolve the issues for Fast moving consumer goods. This would help Unilever company for increasing the role of brand reputation (Oliveria & Yazdani, 2018). A study carried out by Dulanthi and co-authors accounted for application of foreign investment for the FMCG sector of Sri Lanka (Dulanthi & Bandara, 2017).

A study carried out by Jahfer provided information for economic growth present in Sri Lankan (Jahfer, 2014 ).The study provides information about the correction model and demonstrates the balance between growth and equilibrium process.

Basically, foreign direct investment is a good concept for the companies for entering the market. This accounts for the Nestle and Coca-Cola companies, which can target the growth segment (Anthonisz & Perry, 2015). The principal area of household consumption has raised the value of companies, and it required partnership from the local manufactures.

2.12 Models and Theories of Entry Modes

Most of the retailers use a model which used to indicate the market attractiveness and the distance. The model used by retailers for entry mode is Spatial Interaction model. This model power is specifically strong for the initial start of set entry mode used by the retailers (Gripsrud, 2015).

Transaction cost state the most the firms use different mode for entry, which is the best and effective. In the reference of the theory of transaction cost, the firm chose the mode for international as a mode for entry. But previous scholars have rejected this impact that the effective theory of transaction cost on the entrance modes. The scholar which neglect the effect of the theory of transaction cost on the entry of the mode, also states that it does not affect the firm performance. This study has added the variable of transaction cost in his stud and the state that the transaction cost affects the firm choice of entry modes. At the end, he finds out that the TC theory improves the international entry of modes and they work better than the company which are not using this approach. Moreover, this studied was based on the impact of transaction theories on the entry of mode and their choices. Previous studies were neglected by some scholar, and they believe that TC theory has no impact on the choosing mode for the entry. But the Authors of this studied to prove that the TC theory effects the choosing Mode for the entry and international entry mode is the best entry mode by using transaction cost. (Brouthers, 2003)

In the previous literature, it was proposed that the selection of market and market entry modes are two different things. Adam examines a wide range of categories which factors involves in the Market and modes of entry and selection model. The author said that the model is a universally applicable model and for the business, it is the most relevant model

Moreover, the previous study said that the selection of market and entry the modes are the two different things. But the author argues that the Market and Market Entry modes include the various factors, which made this model worldwide applicable and if it is used in entry mode for business then selection of entry modes and market model is the most relevant model. (Koch, 2001)

Some of the theories and models’ studies show that market entry modes are affected by these models and theories. Some of the scholars show that these models and theory does not affect the entry modes.

2.13 Literature Gap

Literature gap is the gap which is in the study if the entry modes. The gap is which factors are ignored by the scholars. The literature gap is one of the reasons for the low results. Literature gap is the reason for many factors.

There is a literature gap in the study of the entry modes. As explained in the studies that the performance of firm is enhanced by cost and transaction theory. But some of the literature does not accept this theory and consider it as that it has no effect on the entry mode and firm. So, the author explains in the study that there are the various factor and variables which are ignored by previous studies and that is why the result for the entry modes are not accurate, and they consider that theory is not applicable.

There is a literature gap in the study of the entry modes. As (Brouthers, 2003) explain in the studies that a theory related to transaction makes the performance of firm and effect entry modes more efficient. But some of the literature does not accept this theory and consider it as that it has no effect on the entry mode and firm.

In the same way (Koch, 2001) explains in its study that the market and the market entry mode selection model (MEMS) is cover those factors that, are necessary for the market entry mode, and still, some of the studies neglect this . But Author argues that the gap in the literature view is the reason of the ignoring some factors which are ignored by the previous scholar for this study and author mentioned it that the Market and market entry modes selection study still need some improvements.

A study in 2011 has shown that there was a literature gap in the entry mode of the fashion retailer’s studies. They said that for the fashion retailer’s entry modes; there was a literature gap between theories. Theories explain something else, and the study shows something else. Authors have tried to the full filled that gap by covering most of the aspects of entry modes. Their study shows that the fashion retailer entry modes studies were not full filling all aspects and that’s why they do a study and try to overcome all the limitations which were included in the previous studies and try to give the comprehensive details about fashion retailers entry modes. (Lu, 2011)

Conclusion

In the conclusion, it is stated that the literature review significantly reflects and give evidence of the study through some speeches and comments of the well-known person and to support the analysis and the study regarding detriment of entry modes. After the comprehensive analysis and studies literature review has still some gaps and limitations. If these gaps are filled and limitations are fulfilled, then it will be helpful to get the accurate result.

Chapter 3: Research Methodology

3.1 Introduction

The research methodology is a method of direction which gives the overview of overall research that how work well do. It shows that in which way research work will be done and how many methods will be used. A brief description of the research design, sample size, research philosophy, and data collection method, ethical consideration, sampling technique, data analysis strategies and research instrument will be provided.

3.2 Method Outline

Each of the parts is necessary and important, to the gather the techniques and methods for searching the topic to research. Method outline shows the technique of the researcher and the methods of a study to examine the study significantly. Moreover, the method outline shows the data collection, data sources, and research philosophy, and so on. This part shows the components and an essential section for the collection of different methods and techniques for the topic. However, for this research, it is needed to select the quantities data collection to collect the information for the FMCG companies. In order to primary data collection through questionnaire surveys (Jiang, 2015).

3.3 Research Onion

Research onion helps to research analysis of the study through the steps. For this purpose, is defined as that research onion is consist of the six-part, and these particular parts are located in the layers of the onion.

Fig 3. 1 Research Onion (Anthonisz & Perry, 2015)

3.4 Research Philosophy

It shows the mechanism of the study and works on how the research will be done. Research philosophy helps in being familiar and to understand all parts and section of the study topic. Research philosophy is consisting of three research philosophy, which is, realism, post-positivism and positivism. Research philosophy directs the researchers to identify and define the information and the topic to the readers of the study. The positivism philosophy proves to be helpful. Because we use quantitative techniques to collect data, and that why we use

Research Philosophy

positivism philosophy (Mayer, 2015).

Positivism

3.5 Research Approach       

Deductive

We have used a deductive method for data gathering and data analysis. We have selected the following approach for the research whom the data will take from a common point of view to some particular views. The deductive approach is more suitable for this research for data gathering and data analysis (Kruth, 2015).

Inductive
Research Approach

3.6 Research Design

In research design, there is three design including exploratory, descriptive and explanatory research designs. These three designs help in the study to explain and do an analysis of the study to provide the current information and analysis to the readers (Lewis, 2015).

We have used the most effective design for the research known as deceptive research; it includes the collection of data in the form of the questionnaires. For the positive perception of the work, the descriptive research design is good because the work is comprised of the primary data.

3.7 Data Collection Method

We have used the secondary resources for this research, because all the information which collected is from the different independent and government organization. We collected primary resources from the survey about the preferences of the consumers. Primary data is used to know the preferences of the customer that they use the product of the multinational companies, or they use the joint venture products. Secondary data is used to get the information through different sources. Secondary data is collected from different organizations (Sutton, 2015).

3.8 Data Source

This research mainly uses the secondary data because most of the data is gathered from the trade associations, censuses, organizational record and information collected by government departments. The primary data is used to get the data for the preferences of the people through the sampling of 100 people aged between 25 to 40 years old, having the experience of using the products of the multinational companies and local companies. This technique is used to know whether the people use multinational company’s products or products of the joint venture.

3.9 Data Analysis

After gathering the all available and needed data, it is necessary that to analysis it in order to explain the different issues and their solutions. For a better understanding of the readers, it is necessary that the data analysis should be practical and describe the issues and their solutions. These all data analysis is done by analysis of the give data of the research study (Zamawe, 2015) .

3.10 Sampling Method

Probability sampling is based on the general method in which everyone has an identical opportunity to explain insights inside the mind and to express their views regarding the topic. Non-probability sampling method, everyone has not equal opportunities to explore their views and express their thoughts. For this probability, sampling has used as selected 100 people have been selected randomly to know which sort of FMCG (fast moving consumer goods) they use the multinational or the joint venture. The reason for using probability sampling for this research is that the FMCG (fast-moving consumer goods) are commonly used products and almost used by everyone.

3.11 Population and Sample Size

Population and sampling size are also beneficial and necessary for the study. Sampling size is consisting of people or those who are the respondents and providing information for the research and analysis regarding the study. In this 100 people have been selected based on age (25 to 40 years old men and women) to gather the information for the research study.

3.12 Accessibility issues

While researching the study or analysing the beneficial research study, it is to be justified that to face the number of accessibility issues irrespectively. Issues that involve the legal issues and policies of entering in the country market.

3.13 Ethical Consideration

During the study, it is necessary to maintain ethics while gathering information and data. While gathering the data, it is necessary to be careful and attentive relating to study. The data should not be used for commercial purposes, which was collected in from different sectors for study. During or after the research, the priorities and opinions of the customers are kept confidential and is not released in public. The secondary data which is collected should only be used for the research purpose. The latest data is used. Data which is gathered for the data research should not be shared with anyone and not used for commercial use.

3.14 Research Limitation

For the research study, there are some limitations which was faced while finalizing the analysis. The limitations can define as the data required, time and money. The result can be enhanced if future research expands the study and cover the different aspects of the research topic.

3.15 Timetable of research

Table 3. 1 Gant Chart

  Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9
Problem statement                  
Literature review                  
Data collection                  
Data analysis                  
Description                  
Data analysis                  
Formation of Draft                  
Final work                  

3.15 Conclusion

At the end of the chapter, we can define that this portion contains sources of methodology used in the research. The chapter has covered the different and required aspect, including data collection, data source, data analysis, sampling, sampling size, ethical consideration, and so on. The chapter is covering the aspects of data collection and data interpretation. In the conclusion, we have provided methodology, the study provides the process and techniques of gathering and collection of data of SPSS, which is beneficial and adequate to identify the presences of the customer regarding the multinational FMCG (fast moving consumer goods) and joint venture (fast moving consumer goods). This chapter is defining that the data which was used is from the valid source’s fora study.

Chapter 4 Finding and Analysis

4.1 Introduction

The findings and analysis chapter will evaluate the data gathered from questionnaires and SPSS results. This would also look toward people response toward the use of FMCG products for Sri Lankan companies. The preference of the response would identify the present trends for FMCG products and modes of entries required for multinational companies. Quantitative and qualitative data methods would help to collect information regarding Sri Lankan companies and local distribution centres. It would provide detail about the relationship between modes of entry and its impact on FMCG industry. All the data would be analysed, and a suitable justification would be made for the participant’s response. The data collection method also raised significant issues with the findings. One of the important areas was the form and process of data and time required for questionnaires evaluation. Data inputs were analysed to reach a formal conclusion of the study.

4.2 Data Collection for analysis

It was based on the people preferences for using FMCG products. A questionnaire was designed to analyse the opinions of people regarding the regular use of products and the impact of different entry modes fora multinational organization. The data was collected for 36 people. Analysis of the question is carried for the data collection modes.

  1. Are you satisfied with the multinational FMCG products?

Table 4.1 Table of respondents

Options Number of respondents Total respondents Percentage of the total respondents
Strongly Satisfied 30 36 30
Satisfied 20 36 20
Neutral 5 36 5
Dissatisfied 25 36 25
Strongly Dissatisfied 20 36 20

Fig 4. 1 Bar Chart for the Results

Table 4.2 SPSS values for the question

Are you satisfied with the multinational FMCG product?
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 6 16.7 16.7 16.7
2.0 11 30.6 30.6 47.2
4.0 16 44.4 44.4 91.7
5.0 3 8.3 8.3 100.0
Total 36 100.0 100.0  

The fig 4.1 shows the bar chart results for the participants who were questioned about the satisfaction level for the use of multinational products from FMCG industry. The special focus was given to the Sri Lankan companies which have formed alliances with the multinational corporation. Respondents were asked about the products of Unilever and Nestle. All the present brands for FMCG products were analysed for the respondent’s experience. It was found from the data analysis that 30% of the people were strongly satisfied with the use of fast-moving consumer goods. The percentage of people who were merely satisfied with the use of consumer goods was 20. This showed that a positive effect is present in the industry regarding the sales of consumer goods and open up pathways for multinational companies.

However, 25% of people were dissatisfied with the use of products. This can be accounted for the less shelf life or the modes of entry which company seek for the Sri Lankan market. The level of service and product nature would also be a key role in determining the satisfaction level of customers.5% of the people were neutral in the survey. This provided information that few groups also exist in the market, which does not depend on the use of FMCG products. The presence of the retail sector would be a basic reason present behind the figures. The Sri Lankan companies need to focus on product service and quality for the customers. This would account for the maximum sales and increase the growth of the market for new companies. The higher level of satisfaction also states the economics of people in Sri Lanka is present in the growing stage, and this would account for the development of the FMCG industry.

The results of the questionnaire were then fed to SPSS software to analyse the relationship between satisfaction and nature of the industry. The principal Likert scale was used to test the results where levels of satisfaction were grouped with the outputs ranging from 1 to 5. 5 Represented the principal satisfaction level while 1 represented dissatisfaction level for the participants. It was found from SPSS statics that higher frequency values fall in the satisfaction category where 44 percent of people were in agreement with the use of multinational products. Total of 36 valid cases was reported for the test. Fewer people were dissatisfied with the use of FMCG products.

Fig 4. 2 Histogram of Spss results

Fig 4.2 shows the graphical representation of Spss results in the form of a histogram. The mean values for sale were 2.9, which shows that fewer people responded in a neutral category. The standard deviation of the results was 1. 341.The fewer values of deviation showed that recorded entries were valid and accurate regarding the use of FMCG products in Sri Lankan industry. The histogram also represents the higher percentage of frequency in the satisfied region, which provided that the use of regular household products has increased in the fast-moving industry.

  • Multinational companies are preferred over local companies in FMCG Sector

Table 4.3 Data for Respondent

Options Number of respondents Total respondents Percentage of the total respondents
Strongly Satisfied 40 36 40
Satisfied 30 36 30
Neutral 5 36 5
Dissatisfied 15 36 15
Strongly Dissatisfied 10 36 10

Fig 4. 3 Results in Bar chart

Table 4. 4 Spss results

Multinational companies are preferred over local companies in FMCG Sector  
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 6 16.7 17.1 17.1
2.0 8 22.2 22.9 40.0
3.0 2 5.6 5.7 45.7
4.0 13 36.1 37.1 82.9
5.0 6 16.7 17.1 100.0
Total 35 97.2 100.0  
Missing System 1 2.8    
Total 36 100.0    

Fig 4.3 shows the results related to the people prefer for the multinational and local companies in fast moving consumer goods. The question was asked from 36 participants, and their response was recorded in different scales. The bar chart shows that 40% of people are strongly satisfied with the concept of multinational companies in the local market. This can be justified by the branding strategies and market promotion carried in industry.30 % of people provide a response regarding the satisfaction level with the question. Local companies do not attract attention for sales as compared to the multinational corporations. Only 10% of the people are dissatisfied with the multinational corporation. This can be accounted for multiple modes of entry adopted by companies.

SPSS results were applied to the questionnaire results. All of the cases were valid for the study. Higher frequency of data was collected in the satisfaction level where people provide positive responses regarding the presence of companies in the local market.36.1 percent of people were satisfied with the fast-moving consumer goods industry. The results also showed that 16.7 level of participants were present in disagreement section. The cumulative percent of satisfaction was higher for the questionnaire results.

Fig 4. 4 Histogram

Fig4.4 shows the representation of SPSS results for question 2. The value of mean for all of the participants was recorded in the range of 3.14. This showed that 80 percent of the population was in agreement with the results. It was found from the data that the standard deviation of data was present in the acceptable range. Fast moving consumer goods are preferred on the base of demand and market requirements. Multinational companies in Sri Lanka have also increased the amount of investment carried out for the project. The results obtained from the bar chart and Spss values are in complete agreement because a similar trend is observed for the multinational companies in using fast moving consumer good.

3) The foreign direct investment is a suitable mode of entry for multinational companies

Table 4. 5 Data for question

Options Number of respondents Total respondents Percentage of the total respondents
Strongly Satisfied 50 36 50
Satisfied 30 36 30
Neutral 5 36 5
Dissatisfied 10 36 10
Strongly Dissatisfied 5 36 5

Fig 4. 5 Results for question

Table 4. 6 Spss results

Foreign Direct Investment is suitable for Multinational?
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 8 22.2 22.2 22.2
2.0 7 19.4 19.4 41.7
3.0 6 16.7 16.7 58.3
4.0 9 25.0 25.0 83.3
5.0 6 16.7 16.7 100.0
Total 36 100.0 100.0  

The participants in the study were questioned about the preferred mode of entry for fast moving consumer goods. Total of 36 participants was selected for the research question. It was found from the results that about 50% of people were strongly satisfied that foreign direct investment mode should be selected for the multinational companies. This helps to increase the investment and secure the cost of the emerging market. One of the main justifications for the higher reason for respondents was the condition of the FMCG market. FDI would prove a significant element for securing alliances with Sri Lankan companies.30% of people were present in the satisfied region. This shows that foreign direct investment remains a key determinant for entry modes in the FMCG industry. Only 10 percent of people were dissatisfied with the question. This can be accounted for the drawbacks related to foreign direct investment.

Table 4.6 shows values for SPSS results. Higher frequency of 9 was recorded in the satisfaction area where a major portion of the sample population provided answers in favour of the foreign direct investment. The valid percent was 25, and it was the higher figure present in the results. The trend can be justified because the foreign direct investment accounts for the cost and operations present in the FMCG industry. This increases the room for investment and allows multinational companies to form alliances with the local companies of the emerging market.

Fig 4. 6 Histogram

Fig 4.6 shows the graphical representation of Spss results for the selected sample population. It was found from results that results were present in agreement with the FDI mode, and the mean of the selected sample size was 2.94. Average satisfaction level was achieved for 36 participants which a standard deviation of 1. 433. All the reported cases were valid, and there was no missing entry present for the study. The variation between 4 five digits represents a strong agreement with the hypothesis of the question.

4)Do you agree that joint ventures are strategy can fulfil the entry modes of MNCs?

Table 4. 7 Entries for question 4

Options Number of respondents Total respondents Percentage of the total respondents
Strongly agree 45 36 45
Agree 40 36 40
Neutral 0 36 0
Disagree 10 36 10
Strongly Disagree 5 36 5

Fig 4. 7 Results

Participants were asked about the joining of two companies, strategy as the principal entry modes for new companies in Sri Lankan industry. It was found that 45 percent of people agreed that joint ventures could be used as an alternative for companies. It can also create a balance between the investment and the sale of products in the country. The share of the agreement was also present in the close range for the previous terms. It was identified that zero percent remain neutral on the question. This significant yield information for the potential growth of the FMCG sector. Only five percent of people strongly disagreed with the question. This can be accounted for the different recommendation for entry modes and reservation related to the local and international companies.

Table 4. 8 Spss Results

Can a joint venture be the best strategy to enter the market?
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 5 13.9 13.9 13.9
2.0 9 25.0 25.0 38.9
3.0 2 5.6 5.6 44.4
4.0 16 44.4 44.4 88.9
5.0 4 11.1 11.1 100.0
Total 36 100.0 100.0  

Table 4.8 provides results for SPSS analysis carried out for 36 participants. Results show that most of the participants agree that joint venture mode would be principal entry modes for an organization in Sri Lankan market. The proportion for the response is recorded as 44 percent. The cumulative percent is higher for the recorded entry. All the cases were sufficiently reported in the test. The least frequency is present for the neutral section, where fewer people have recorded their response. This accounts for five percent of the test results.

Fig 4. 8 Histogram for Spss

Fig 4.8 provides a graphical representation for the variable of the joint venture and its frequency with the respondents. The mean value for the joint venture was recorded as 3.14. This value is significant with the tabular values. A standard deviation of 1.3 was recorded for a total of 36 cases. So it has been proved that tthe joint venture provides more advantages to companies in emerging markets. However, it can be recommended that modes of entry should be selected on the cost and economic model of an emerging industry.

5) Do you agree that Household items have a higher proportion of sales and favoured by people?

Table 4. 9 Table values

Options Number of respondents Total respondents Percentage of the total respondents
Strongly agree 35 36 35
Agree 40 36 40
Neutral 5 36 5
Disagree 10 36 10
Strongly Disagree 10 36 10

Fig 4. 9 Results for Household product sales

Participants were asked information about the sales of household items in context with the fast-moving consumer goods. 35% of people agreed that household items consisting of packaging material have higher sales for the local companies. 40 % of the people agreed that local and international companies invest in package products for revenues and increased shares.Only five percent of people remained neutral in this question.

Table 4. 10 SPSS values for question

Household items have a higher proportion of sales and favoured by people
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 6 16.7 16.7 16.7
2.0 10 27.8 27.8 44.4
3.0 2 5.6 5.6 50.0
4.0 13 36.1 36.1 86.1
5.0 5 13.9 13.9 100.0
Total 36 100.0 100.0  

Table 4.10 shows the SPSS values for household items in the FMCG industry. Higher frequency of responses was recorded in the fourth category. The cumulative percent of this area as 86. This showed that the majority of results are present in agreement with the questioners. The mean values calculated for the sample entry were 3.03. This represented that a large number of respondents were present in agreement segment where people agree with the sales of household products. The standard deviation recorded for this sample category was 1.94. Answers have less deviation from each other.

Fig 4. 10 Histogram values

The fig 4.10 represents a graphical representation of the SPSS results. This show that higher values are recorded for the 4 categories on the x-axis. The main base of variation was the responses and portion of household materials. It was justified that packaged materials have less shelf life and account for higher sales for local customers. This area can be explored for investment as multinational companies can increase products in the market.

6) Country Political system also affects the choice of entry mode. Do you agree?

Table 4. 11 Table for question 6

Options Number of respondents Total respondents Percentage of the total respondents
Strongly agree 40 36 40
Agree 30 36 30
Neutral 0 36 0
Disagree 20 36 20
Strongly Disagree 10 36 10

Fig 4. 11 Political system and results

Srilanaka political system will also be a key determinant for analyzing the choice of entry modes.Participants were asked about the country political risk and its effects on the industry modes.It was found from the results that 40% of people agreed with the question. Only 10 % of people were present in disagreement with the political system.This can account for the changing business perception and room present for the FMCG industry.In order to validate this result, SPSS analysis was carried out for the total participants.

Table 4. 12 Table for Spss values

Do country politics risk affect the choice of entry mode?
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 5 13.9 13.9 13.9
2.0 9 25.0 25.0 38.9
3.0 4 11.1 11.1 50.0
4.0 12 33.3 33.3 83.3
5.0 6 16.7 16.7 100.0
Total 36 100.0 100.0  

Table 4.12 shows that a large number of people provide a positive response to the question and represent a higher valid percent. However, a variation is present in disagree options where the frequency of 12 and 9 are reported for each of the valid cases. This accounts for the business trends and changing perception of people. The mean values were 3.1, and the standard deviation was 1.35. Political risk provides information regarding the future of business and prospects of the industry. A multinational company would analyse the determinants of entry mode, which can provide future benefit to the investment.

Fig 4. 12 Histograms

7) The key determinants affecting the mode of entry is the Cost of Goods sold. Do you agree?

Table 4. 13 tables for question 7

Options Number of respondents Total respondents Percentage of the total respondents
Strongly agree 35 36 35
Agree 25 36 25
Neutral 15 36 15
Disagree 25 36 25
Strongly Disagree 10 36 10

Fig 4. 13 Key Determinants for cost

Participants were asked information regarding the determinants of modes of entry and cost of goods sold. It was found that the majority of people were confident that the cost of goods should be analysed for the principal market entry. This would not only account for the Sri Lankan market but also provide information regarding the economics required for multinational companies. Only 10 percent of the people disagreed with the fact the cost of goods sold is an important variable for MNCs.

Table 4. 14 Table for Spss values

The key determinant affecting the mode of entry is Cost of Gods sold
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 4 11.1 11.1 11.1
2.0 10 27.8 27.8 38.9
3.0 2 5.6 5.6 44.4
4.0 15 41.7 41.7 86.1
5.0 5 13.9 13.9 100.0
Total 36 100.0 100.0  

Table 4.14 represents statistical values regarding the cost of goods and the mode of entry. It can be exhibited that a pattern is present for the frequency distribution. This accounts for the higher portion of agreement with 86 of people answering the results at required expectation. All the entered cases were valid and based on statically representation. The mean value was present in the third category and had a minimum level of standard deviation. It is exhibited from the graphical representation.

Fig 4. 14 Histogram

8) Do Sri Lankan brands are successfully placed in the market?

Table 4. 15 Table for brand placement

Options Number of respondents Total respondents Percentage of the total respondents
Strongly agree 40 36 40
Agree 25 36 25
Neutral 10 36 10
Disagree 20 36 20
Strongly Disagree 10 36 10

Fig 4. 15 Results

A questions based survey was designed on the base of requirements of the brand in Srilankan market. People were asked about the companies, and their position in makret.35% of people agreed that Srilankan brands had been placed in the proper position for customers. This can become a key lead for attracting major competitors in the market. SPSS analysis was also carried out to analyse the results. The results from the table clearly show that major agreement can be recorded in the market.

Table 4. 16 Spss results

Sri Lanka brand Successfully placed in Market
  Frequency Percent Valid Percent Cumulative Percent
Valid 1.0 5 13.9 13.9 13.9
2.0 9 25.0 25.0 38.9
3.0 2 5.6 5.6 44.4
4.0 16 44.4 44.4 88.9
5.0 4 11.1 11.1 100.0
Total 36 100.0 100.0  

Fig 4. 16 Branding Histogram

Chapter 5 -Conclusion and Recommendations

5.1 Conclusion

Sri Lanka market has a big share in the market of FMCG. Multinational seeks Sri Lanka as the potential market for the FMCG. The world is moving towards the packing materials and people sue packed goods. Sri Lanka market is very potential for FMCG. The increase in the market share for the FMCG in the small and medium industry, the multinationals also see Sri Lanka Market as the future of an FMCG market. But there are some problems in the entry mode of the market. Sri Lanka Market has some problems for the entry modes. A selection of wrong entry mode can result in the loss. The study shows the effect of modes of entry on the Multinationals. The modes of entry for the Sri Lanka Market identify as a joint venture, acquisition, licensing and the franchising. These are the entry mode which can be used as to enter in the market. Each of them has some limitation. In this case, a question air-based study has been conducted in which respondents have participated. Most of the respondent are agree with the questions asked in the question air. People are ready to accept the multinationals in Sri Lank, and the result shows that there are two major factors which affect the entry modes first one is the economy and second is the cost. Different studies show different aspects of entry modes. Moreover, the result shows that most of the people are agreeing to welcome the multinational in Sri Lanka.

5.2 Connecting Objectives

This section involves analysis the linkage between the research objectives and the applications.

  • Linking Object 1: Identify the different entry modes which can be adopted by companies for the FMCG industry
  • Linking Object 2: Analyse the reasons present behind the selection of the particular mode of entry
  • Linking Object 3: To evaluate the modes of companies in relations with the Sri Lankan market trends

After all the research, it can be defined as modes of entry for the companies of the FMCG industry are the joint venture, licensing, franchising and the acquisition. Each of the entry modes has its own feature and way of working. Still, every entry mode has some limitations, but we can use these modes of entry for this specific market. Market entry is one of the major factors which is taken into concern before going for the market entrance. Some of the entry modes are discussed which are suitable for the Sri Lanka market.

5.3 Recommendations

In the analysis, it has been clear that the companies are taking great interest in the investing in the Sri Lanka FMCG market and there is some entry mode which can be used for the entry. Some of the aspects that need to be cove; there is a great gap in the market of Sri Lanka, and the FMCG industry has potential market share.

5.3.1 Eliminating Hurdles

There is some hurdle in the entry of Sri Lanka Market if the Hurdles are removed then it would be a great chance for the market to grow. People and multinationals are willing to invest; they just need a market structure improvement.

5.3.2 Flourish the Market

Sri Lanka FMCG market has potential very much it is attracting people worlwide. If the market is developed and has an accurate structure, then there is a great chance of growth in the economy of the Sri Lanka.

5.3.3 Full Filled the Market Gap

As discussed earlier, we have evaluated a market gap in the market of Sri Lanka, if this gap is full filled by the Sri Lanka local products then the economy will grow. Multinationals also want to invest in Sri Lanka Market then there will be progress.

5.3.4 Use Right Entry mode

If the multinationals have chosen the right entry mode, then the market entrance will be easier. There is some recommendation which can be helpful if the mentioned gaps are fulfilled and there is a great chance of the growth in the country.          

5.4 Future Scope of Study

This section explains what can be involved in future research. As some limitations are mentioned above if the researcher overcomes these limitations, then they can get better results. This study can be helpful for those who are looking forward to the entry modes of the Sri Lanka market. This study will help them to understand the conditions of the market better. The future researcher can expand the study by conducting research on the micro level and get more respondent opinion so the result can be better

5.5 Summary

This section of the research depends on a critical analysis of the result. The literature review has been linked with the research. In addition, give more than two recommendations are given that some of the markets can be captured if the necessary changes will be done. Some future scope is also given for the better future result.

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Appendix

  1. Are you satisfied with the multinational FMCG products?

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

  • Multinational companies are preferred over local companies in FMCG Sector

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

  • The foreign direct investment is a suitable mode of entry for multinational companies

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

  • Do you agree that joint ventures are strategy can fulfil the entry modes of MNCs?

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

  • Do you agree that Household items have a higher proportion of sales and favoured by people?

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

  • Country Political system also affects the choice of entry mode. Do you agree?

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

  • The key determinants affecting the mode of entry is the Cost of Goods sold. Do you agree?

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

  • Do Sri Lankan brands are successfully placed in the market?

Strongly Agree           Agree  Neutral                        Disagree          Strongly Disagree

 

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