International expansion Essay
International expansion presents challenging tasks, as there are many factors influence the success of any market expansion performed by multinational companies. Well-known brands do not guarantee the companies to succeed in foreign markets. This happens since each foreign market has particular characteristics that they must take into account in their business plans. In addition, the challenges also relates to the fast growing adoption of internet technology that helps corporations to provide attractive online offering.
Another factor is the customer preferences that determine the way customers want to be treated and be approached. The situation suggests that in any market expansion, corporations need to develop marketing plan carefully in order to provide suitable entry strategy, attractive product and service offerings, and use winning risk management, to name a few. Carter (1997) says that marketing refers to a process of generating customers-providers relationship by conducting several initiatives including careful plan, aggressive execution, and periodical evaluation.
Concerning the market expansion into foreign market and the evaluation of marketing plan of multinational companies, this paper will discuss about the assessment of Grupo Bimbo, one of the world’s largest bread and sweet-goods makers. Some issues that will be presented are the proposed solutions to address the challenges that Grupo Bimbo faces in Brazil and specific actions to meet the challenges. In addition, this paper will also discuss the challenges that Grupo Bimbo faces in the United States an specific actions to solve them. 2. Challenges of Grupo Bimbo in Brazil 2. 1.
Customers’ Preference for Healthy Food There are many issues that consumers consider when choosing, buying, and consuming food products. Typically, taste becomes the primary consideration in addition to price, packaging, ingredients, availability, and benefits for health. Some decades ago, food processing had not yet entangled the additional chemicals substances. As the time goes by, the increasing demand for food quantity and variation drives food producers to start using additional chemicals substances in order to rush the growth (with fertilizer) or eliminate the pest.
In order to provide healthier food, nowadays, many people all over the world prefer to buy organic food regardless the price to taking conventional food. Interestingly, the organic food is also offered in various convenience stores in addition to restaurants that start offering special menu like vegetable, chicken, and flesh that produced organically. Concerning the issue, there are opinions whether consumers should change their food consumption into taking only organic food. The situation also happens for a bread market where there is clear path that consumers prefer low-carbohydrate for diet.
2. 2. Exchange Risks The challenging issues in international business within the 20th and 21st century are currency and exchange rate risks. In the late 20th century, for instances, it has been clear that exchange rate risks considerations are critical for business survival. The economics crisis in the U. S. and most of European countries has displayed how the value of currencies in international business settings could alter the faith of millions of people, brought some to welfare and others to poverty.
Concerning the business strategy into Brazilian market, the plan to strengthen market in the country is greatly influenced by economical factors such as the inflation figure of Brazil and the global economics crisis. The inflation figure is important since it influence the purchasing power of Brazilian. The global economic crisis also influences the country’s exchange rate of Brazilian currency that further influence the pricing of Bimbo bread products. In the light of this involvement, companies need to perform foreign currency risks assessments regarding the business activities.
Most companies generally apply some of the financial tools that would protect them from foreign currency risk exposure, like futures, forward contract, etc. 2. 3. Recommendation The first analysis that Bimbo may take in expanding into foreign market is the country risk analysis. This is important factor for Bimbo since retail industry is low concentrated industry in which many local bread providers. In addition, country risk analysis also helps Bimbo in assessing whether a country has a set of policy that benefits business or vice versa.
The figure 1 suggests that the more attractive a country is in terms of FDI index, the more likely that Bimbo must immediately presents in the country. Based on the FDI Index, we assess that Bimbo has performed suitable investment in Brazil. Since a country risk is only one factor in deciding a foreign direct investment, Bimbo must perform the next step that is to define marketing objectives to guide the company in assessing their productivity in foreign market. Figure 1 Top 25 Countries in term of FDI Confidence Index Source: A. T.
Kearney 3. Challenges of Grupo Bimbo in the U. S 3. 1. Choose the Suitable Entry Strategy In terms of market entry, there are many ways of entering a foreign market; each has its own economic and legal implications. Some entry strategies that multinational companies usually take are joint venture and foreign direct investment. Joint venture is a type of foreign market penetration strategy has a considerably large investment risk but this method consists of an opportunity to learn and create a greater presence in the targeted markets.
Companies prefer to perform this type of market entry strategy when dealing with countries whose government put considerable restrictions on foreign ownership (Quick MBA, 2007). In case of Bimbo, the company may conduct joint marketing, for example, with local retailer named Lojas Americanas, a Brazil leading department store chain. This method provides Bimbo with the capability to learn the Brazilian retail market since at that time 3. 2. Customers’ Preferences Other risks in conducting international expansion are cultural issues. This factor then accumulates into becoming customers’ preferences.
According to various studies in the field, culture is often an underestimated factor in managing corporate businesses. These studies also revealed that those companies that failed to place culture as an important business consideration often find themselves in a disappointing circumstance. Business investments that cost millions of US dollars could go down the drain due to such failure (Kwintessential, 2007). For instances, the Brazilian and U. S. customers consider the quality of product as the most important factor when deciding to buy merchandises. The other factors are price, value added and packaging.
Today, however, realizing the global environment we are living in, companies are becoming increasingly cultural sensitive. There are various examples of corporations that hired people from various backgrounds and discover a synergy within their cooperation. In terms of Bimbo, in order to cope with cultural issues, the company also makes some cultural adjustment such as the use of advertisement media. If in the U. S. , the company spends many television advertising, in the Brazil, Bimbo takes many radio advertisings since many Brazilian housewives listen to the radio more often then watching television.
Reference: Ball, Donald A. et al. (2002). International Business the Challenge of Global Competition. McGraw Hill Holt, David H and Wigginton, Karen W. (2002). International Management. Thomson Kotler, Philip. (2000). Marketing Management. New Jersey: Prentice Hall Inc Kwintessential. (2007). Cultural Sensitivity in Business. Retrieved October 10, 2008 from http://www. kwintessential. co. uk/cultural-services/articles/cultural-sensitivity. html Quick MBA. (2007). Foreign Market Entry Modes. Retrieved October 10, 2008 from http://www. quickmba. com/strategy/global/marketentry/