Free Essay - Analyzing the Foreign Market Entry Strategy of Carrefour

There exist multiple modes of entry that Carrefour can implement to penetrate the Saudi Arabian market, including exporting through direct and indirect channels, franchising, licensing, and the wholly owned subsidiary strategy. However, Carrefour must carry out an assessment on the available strategy and choose the best strategy and also conduct a market analysis on whether the desired foreign market has potential growth (Cavusgil and Knight, 2015). Therefore, the paper will focus on the parameter affecting the international market entry strategies of Carrefour taking into consideration the culture of the Saudi market and making suitable recommendations and conclusions.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

It is an obvious fact that multiple types of research have carried out to analyze the concept of international market entry strategies. According to the perception, Chetty (2015) the concept of entry would determine the way a corporation establish access to new and improved global markets. Therefore, Carrefour needs to select appropriate entry mode, which would necessitate sound tactical decision making on senior-level managers of the organizations. However, many factors would have to play a significant role in the selection, including the culture of the Saudi Market.

Market Culture

Carrefour needs to have a comprehensive understanding of the Saudi market to capture a significant market share. Therefore, the organization must engage in comprehensive and extensive research to have a conceptualized knowledge about the market culture, including purchasing patterns, local consumption, and the customers' preferences (Corduroy and Murray, 2014). The market culture of Saudi Arabia is that it is small but having a substantial per capita income. Notably, in the present context, the market is listed among the most viable and lucrative markets based on consumer expenditure.

Moreover, Saudi Arabia has a stern market presence, which is characterized by an increased population as well as gross domestic product (GDP) percentage. The market has a stable and enabling environmental culture due to favorable political and government policies. In terms of size, Saudi Arabia is the ninth largest country across the globe, and its geographic and strategic location has boosted commerce due to increased ease of importation (Coviello, 2015). Moreover, various market studies have associated the Saudi Arabian customers as 'eager set of end-users' across the globe. According to the research conducted by Crowley (2018), it was ascertained that about 83% of the overall Saudi Arabian population are economically stable with high disposable income. Moreover, the Saudi market has been experiencing significant global brands at an increased rate for the last decade, and the market is responsive to foreign brands. Therefore, Carrefour can capitalize on the opportunity and opt for retailing in Saudi Arabia through appropriate entry strategy and join already existing plays in the market, including Lulu Hypermarket of EMKE Group and the Lifco Group of Companies.

Market Entry Strategy (Franchising)

After the evaluation of multiple entry strategies and analysis of the Saudi Arabian market, the best entry strategy for Carrefour would be the franchising methods. Notably, Carrefour must be cautious and be wise in the selection, especially because its market entry in China had initially failed to materialize. Despite the large base of the Chines market offering limitless opportunity, Carrefour could not cope with the challenge of customer taste, which further escalated due to its wholly owned subsidiary entry (De Villa et al, 2015). Since many adequate types of research had not been conducted, the best strategy of the Chinese market would be 'learning by doing' which could have given the company a clear understanding of the frequent changing customer taste in China. Therefore, the best strategy for Carrefour would be franchising entry mode. Eriksson, et al (2015), franchising is a market-oriented entry strategy of selling organization products and services mostly to a small and independent investor with relatively small working capital but has little knowledge of the existing market patterns and trends.

Therefore, franchising would enable Carrefour to develop its brands across the globe. Moreover, franchising would allow the organization to expand and penetrate the Saudi Arabian market with low risk, some extent of control, and at a low cost since the original business idea will be maximized with minimal capital outlay (The game and Apfelthaler, 2016). Moreover, Saudi Arabian customers would benefit from the same level of quality and standards of the products and services at a fixed price. It is an ideal method in attracting and keeping customers since it creates a good image on the mind of both existing and future customers. It is a form of contractual agreement that an organization will consider if it wants to penetrate the foreign market quickly since the risk of starting a new venture will be mitigated due to the flexibility of the structure.

Recommendation

Carrefour should adopt franchising market entry since it would benefit from rapid growth and expansion into the market since the franchisee would use its own capital to put in place facilities. However, the most significant strength of franchising is the trademark strength of franchisors, which would give the corporation immediate accessibility to the customers (Cavusgil and Knight, 2015).The viable opportunity exists in Saudi Arabia, and hence carrefour should capitalize on the opportunity and explore the market. Most corporations have employed franchising entry mode in the Saudi market and have succeeded due to its lows associated risk. Such organizations include Asprey, Burberry, Emporio Armani, Paul Smith, and Jimmy Choo, which entered in Saudi Arabia most recently. Moreover, for smooth and efficient operations, Carrier should consider the following recommendations as well. The corporation should provide quality products and services to gain customer loyalty and command a significant market share, a useful review of the cost structure, handle the retail paradox, and operate with maximum compliance to various regulatory policies in the country including tax compliance and ethical standards on quality of products. Conclusion

In conclusion, contemporary business society is becoming more dynamic and competitive with increased technological advancement and human population. Therefore, with increased globalization, many opportunities have emerged across the global market, and focused organization with the desire to grow and expand like Carrefour can capitalize on. However, an appropriate market entry strategy must be put in place. Otherwise, the organization is bound to face significant challenges. In the last two decades, the globe has witnessed a massive transformation of small organizations penetrating the international market, with effective marketing strategies. Notably, multiple factors influence the motive of an organization to increase its operations beyond regional and national levels including gaining of competitive advantage through significant market share, global recognition, lower cost of operation, the large pull of customers, good enabling business environment and access to readily available skilled and semi-skilled labor. Therefore, business and operational risks would be at its minimum since the organization would have spread its risk across different markets.

Reference

Cavusgil, S. T., and Knight, G. (2015). The born global firm: An entrepreneurial and capabilities perspective on early and rapid internationalization. Journal of International Business Studies, 46(1), 3-16.

Chetty, S., Ojala, A., and Leppaaho, T. (2015). Effectuation and foreign market entry of entrepreneurial firms. European Journal of Marketing, 49(9/10), 1436-1459

Corduroy, R., and Murray, G. (2014). Regulatory environments and the location decision: Evidence from the early foreign market entries of new-technology-based firms. In the Location of International Business Activities (pp. 226-260). Palgrave Macmillan, London.

Coviello, N. (2015). Re-thinking research on born globals. Journal of International Business Studies, 46(1), 17-26.

Crowley, M., Meng, N., and Song, H. (2018). Tariff scares Trade policy uncertainty and foreign market entry by Chinese firms. Journal of International Economics, 114, 96-115.

De Villa, M. A., Rajwani, T., and Lawton, T. (2015). Market entry modes in a multipolar world: Untangling the moderating effect of the political environment. International Business Review, 24(3), 419-429.

Eriksson, K., Johanson, J., Majkgard, A., and Sharma, D. D. (2015). Experiential knowledge and cost in the internationalization process. In Knowledge, Networks, and Power (pp. 41-63). Palgrave Macmillan, London.

The game, R., and Apfelthaler, G. (2016). Attitude and its role in SME internationalization: why do firms commit to advanced foreign market entry modes? European Journal of International Management, 10(2), 221-248.