The emergence of technologic advancement helps to create several leaps in the process of communication, information, financial flows, and transportation. The particular phenomenon has continued to cause the world to feel small and smaller, as everything is coming closer to the grasp of individuals and businesses across the world (Johanson and Mattsson 2015). According to Cavusgil (2014), the continuous growth in the technologic environment has offered multiple advancements in the international trade to generate key possibility for the companies and consumers to participate in the business transactions in almost any country worldwide. Based on the survey developed by World Trade Organization, the overall volume of international merchandise has enormously increased 35 times from 1951 to 2016.
As part of preparing this report, an optimum strategy for market entry will be drawn up for Ego Pharmaceuticals by considering two different international markets, such South Africa and China. Ego Pharmaceuticals is one of the constantly growing companies of Australia with the aim of expanding its market within the international platform. The company has already established its presence in the international market, where this particular paper deals with establishing its subsidiaries in either South African or Chinese market. In order to achieve such aim, the paper will attempt to recognise the key risks and opportunities from the different perspectives associated with the specific markets to make a judicious selection of the proper market. Subsequently, it will focus on developing viable market entry strategy communicating with the marketing needs and objectives of the selection company for contributing the marketing success.
It is worth to mention that establishing the operations in the international market decidedly relies on the fact that international brands and products are enthusiastically accepted by the consumers of a different country (Czinkota and Ronkainen 2013). Terpstra, Foley, and Sarathy (2012) importantly mentioned that the growing impact of globalisation has caused opportunities and challenges at the same time for the organizations for building their brand and venture in overseas. The noteworthy concern is the primary reason for undertaking the study based on the two different marketplaces and developing the rational understanding in the following segments.
Background of the Company
Ego Pharmaceutical is privately held Australian multinational corporation operating in the pharmaceutical industry with the involvement of a wide range of skin care products and services. The company has successfully developed its principal subsidiaries in some of the prevailing markets of Singapore, Malaysia, Hong Kong, and the United Kingdom. Apart from that, the international business of Ego can also be traced in the various other worldwide locations of the entire Middle East region (Ego Pharmaceuticals 2016). From analysing the company’s website, one of the dynamic facts can be identified critically suggesting that the skincare products are explored, manufactured, and marketed by the firm for over 60 years while maintaining a workforce comprising of more than 450 employees. Amongst the identified number of workers, 125 staffs are based on international locations outside of Australia.
Apparently, the company was founded as a home-based business in Melbourne in 1953 by a chemist with his wife and a nurse. By the period of 1960s, the company has been able to obtain the historic growth regarding its international operations by developing its business in New Zealand, New Guinea, and Singapore. It mostly capitalised in the exporting process to expand the business to the international platform (Ego Pharmaceuticals, 2016). Subsequently, the company has provided special attention to spread its global business in the Middle East region by constructing its regional office in Dubai. Apparently, the company is highly interested in providing critical priority in one of two markets of South Africa and China. For supporting the fulfilment of the identified aim, the subsequent information is developed for contributing the roles played by the department of international operation management.
Analysis of Risks and Challenges
Johanson and Mattsson (2015) have explained, when a firm make appropriate investment in the foreign market with the inclusion of a value-generating managerial and technological aptitude, both the customers from the target market and the shareholders of the company can be able to take benefits. However, achieving success through the international operations is far from assurance regardless the involvement of an obvious fit between the offerings of the foreign companies and the demands from the host countries (Papadopoulos and Heslop 2014). There is vast array of factors associated with the emerging and developed economies as political events, economic environment, and changes in societal attitudes continuously disrupting the outcomes of the best-laid plans for different economies. In the midst of the interplay of these forces, a multinational firm must need to make prominent choices by identifying the risks and selecting the appropriate approach for capturing the market.
Risks and Challenges associated with South African Market
The market position of South Africa is placed perfectly to take advantage of Sub-Saharan African environment driving the expectation of high level of growth rate in the different industries during the coming period (Terpstra, Foley, and Sarathy 2012). Due to such reason, increasing the number of companies and investors from dissimilar parts of the world including Europe and US are continuously seeking to capture the opportunities from the target market outside of their traditional marketing barriers.
However, by the investigation from the commercial perspective, the market provides least amount of chances regarding the outside penetration irrespective of the robust market structure of its pharmaceutical industry (Paliwoda and Thomas 2013). Based on the study developed by Czinkota and Ronkainen (2013), restriction in market entry is considerably caused by the combined impact from various global, political, social, and economic tensions putting huge pressure on the South African managers.
From the financial perspective, the practical participation of South African Reserve Bank is observed significantly due to the uniqueness of roles and functions played by the financial institution. The particular involvement of foundation has caused the risk management not only relying on the risk and return considerations but also taking account of the public interest by keeping the statutory and constitutional responsibilities in the same line (Wei, Samiee, and Lee 2014). In order to develop an international business process within the identified market, the critical investments of the company may significantly give rise to the multiple chief financial challenges like liquidity risk, market risk, and credit risk.
With reference to Cavusgil (2014), the result of the investigation related to the outlook for the overall country suggests, the current economy is experiencing a much worse economy and constantly moving towards Fed lift-off. In such scenario, the country is expected having an insightful potential effect in its recent market trends through some major shifts in the sentiment on domestic characteristics (Shi et al. 2014). However, such criteria should need to be present in the marketers’ agenda.
Lastly, the cross-cultural factors associated with the development of business activities by Ego Pharmaceuticals in South Africa are expected to pose some invisible barriers to business communications involving skills and strategies (Hilmersson and Jansson 2012). The particular business would encounter principle level of issues in embedding the cultural values, norms, and characteristics during manufacturing and distributing their skin care products effectively.
Risks and Challenges associated with Chinese Market
From the commercial aspect, an excessive level of importance is required to be provided by the marketers of an international firm for developing business platform in China. According to Turnball and Vall (2013), the Chinese economy is experiencing a great deal of challenges in its economies, as the country is involved in a huge number of commercial transactions from decades. Over the decades, the country participates in lofty volume of allocation related to funds and physical goods causing the overall scenario to become complicated (Shani and Chalasani 2013). However, Wei, Samiee, and Lee (2014) have clarified that the onset of increasing credit, demand for money, and economic development has contributed to the improvement of the identified risks from the commercial environment by raising the price approximately by 36 percent from 1987 to a1988.
From the financial viewpoint, the specific market of the Chinese economy is going through a domestic reformation agenda extensively influenced by the sluggish growth of the country’s GDP over the past few years (Majaro 2013). Some of the critical factors observed during the investigation are continuously plummeting prices of production, weakening investment, production, imports, and economic activities. The combination of these factors has raised a detrimental effect to the overall financial environment of China.
Based on the country specific viewpoint, it can be investigated that the Chinese market is indeed a growing pool of investments with the numerous application of trade and manufacturing activities. Due to such fact, increasing amount of companies from different countries is developing their international marketing strategies for entering the Chinese market for extending their business. Apart from the fundamental progress of the economy offering benefits to a large number of firms, new market entrants are gradually becoming more exposed to the substantial strain of competition (Piercy 2014).
Lastly, the cross-cultural characteristics associated with the Chinese market are highly different from the Western countries like USA or Australia. Based on the findings outlined by Papadopoulos and Heslop (2014), China is noted as one of the most popular business destinations in Asia driving the particular nation to engage in the international collaboration with a diverse range of foreign partners. The special gaps regarding the cultural perspectives between Australia and China provide a critical degree of threats and challenges to the marketers of Ego to establish its business in the country (Brouthers 2013).
Selection of Destination Country
Based on the comparison of two different markets of South Africa and China, a proper selection should need to be made for providing assistance in securing the international marketing aim of the chosen organization. The result of the company analysis suggests that the firm has already established its international brand image in the Asian market. Therefore, this particular scenario is a profound platform for the company to establish its international presence in the African market. Therefore, from the preliminary viewpoint, the South African market seems to be an ideal scope for the company for providing the major focus.
In case of the Chinese market, the market is full of tight competition with the parallel existence of the domestic firms as well as the key international market entrants (Reardon, Coe, and Miller 2015). Therefore, the marketing planning and investment may encounter a superior level of threats during their application within the identified market. Paliwoda and Thomas (2013) have signified the requirement of an elevated level of skills and techniques to be possessed by the marketers of a company to promote the establishment and smooth functioning of business in the Chinese market. Additionally, the sufficient involvement of the market players in progressing economy of the country has caused multiple diversities and complications in setting up a legitimate business activity in the Chinese market (Wei, Samiee, and Lee 2014).
On the other hand, the study conducted by considering the marketplace of South Africa, the government offers the marketers and investors the satisfactory stability of a developed country. The individual sustainability is offered to the foreign companies operating in the marketplace by providing sufficient opportunities from its vibrant emerging market and associated climate (Papadopoulos and Heslop 2014). The combination of climate and constantly progressing market environment is highly capable of fostering the growth of international business within the country. Additionally, concerning the statement carried forwarded by Shi et al. (2015), the specific market is not highly swarmed by the participation of multiple market players due to the restrictions in entering the foreign market.
Based on the comparative overview, South Africa can be referred to as the most sophisticated, diverse, and promising market for Ego Pharmaceuticals for ensuring capturing vivid opportunities from the emerging market (Piercy 2014). Lastly, from the outcomes of investigation, it is also observed that the particular market is strategically located at the centre of African continent receiving key investment opportunities to elevate the overall commercial platform.
Discussion and Justification of Proposed Entry Mode for the Chosen Country
Various ways are supporting a company to penetrate into the foreign markets. Out of the variety of methods, exporting, franchising, and contract manufacturing are the some of the important techniques applied wisely by the marketers to enter in a chosen international market. According to Czinkota and Ronkainen (2013), the marketers need to evaluate the specific risks and opportunities linked to their target market to judge the validity of nature related to the identified market entry strategy. Based on the company information, Ego Pharmaceutical has a vast range of experience in developing international business in the global market through the application of exporting strategies. Exporting is referred to as one of the most traditional and well-established forms of ensuring the establishment of international marketing initiatives in the global podium (Terpstra, Foley, and Sarathy 2012). Exporting simply deals with marketing the manufactured product of an individual company from one country to another. In order to develop an international marketing relationship in the South African market, exporting strategies should need to be employed by the marketers of Ego guided by the simplicity of the process. Apart from that, the overall approach discerns the engrossment of any direct manufacturing hub in the overseas market and downsizing the cost of investment in the overall marketing approach (Brouthers 2013).
The selection of exporting strategy is based on the tendency of limited requirement of marketing information as compared to the contract manufacturing. Due to such factor, the overall process also negates necessary involvement of comprehensive marketing strategy in the first place. Alternatively, Turnball and Valla (2013) explained, exporting process eliminates the worries related to developing a suitable control over the market, unlike the venturing method. Most importantly, the exporting mode provides some critical advantages to the Australian drug manufacturing company, as the manufacturing operations will remain home-based driving the overseas operations to become less risky (Majaro 2013). Furthermore, the particular mode will provide vigorous opportunities to Ego for learning the overseas market before deciding upon investing in bricks and mortar stores.
Figure 1: Suitable Export Marketing Model for Ego Pharmaceuticals for marketing its skincare products in the international market
(Source: Turnbull and Valla 2013)
From the overall investigation and theoretical guidelines, it is estimated that the South African market is continuously becoming demanding to position it as one of the promising markets in the heart of African continent. It is also understood that Chinese market, despite becoming one of the fastest growing economies in the Asian content creating an extraordinary level of troubles and vulnerabilities for a new market entrant. It is critically observed that the economic growth offered by identified market highly contributes to the growth of industrialisation, which should need to be capitalised by Ego Pharmaceuticals through the implementation of a robust exporting strategy. The particular process will drastically contribute to achieving the critical aims regarding business expansion.
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