Entering efficient strategy as per the market’s demand,

Entering into international markets has become increasingly
common for firms of all sizes. The process of selecting a right country in
which to establish a new business venture is a significant and important
managerial decision, and requires the evaluation of many criteria. Above all,
the major concern for all the firms is to choose an effective and efficient
strategy as per the market’s demand, competition and risks. In this report we
will dig deep into the concept of choosing the right strategy that fits
emerging markets. Emerging markets are considered as the best ground to make
higher profits than developed markets. Since both transforming economics have
different trends, expectations and people’s preference, companies cannot use
the same strategies they use in developed countries.

 

Top level managers of different companies have a common
concern. Whether we talk about giant corporate players especially in United
States, Europe, and developed countries in East acknowledge the challenge of
developing a successful and flexible strategy. Globalization is becoming the
priority of all the organizations, from a national company they are striving to
be a successful multinational firm. We all know that we must follow the
well-known management process that starts from idea generation followed by
selecting the right idea. Second and one of the most important step is to form
a plan and then transform into a plan of action i.e., a strategy. After that
all a manager should keep his focus is to execute the strategy well.

 

All the corporate firms are very aware that it has become very
sensitive, critical and challenging to face in today’s world. They are also
keenly aware that it has become tougher during the past decade to identify
internationalization strategies and to choose which countries to do business
with (Khanna et al., 2005). Whereas on another end it has been noticed that
most of the companies are still stuck with their plan of actions they have
developed traditionally. That strategy generally focuses on a standardized
approach to all new markets rather than introducing a change, though sometimes
they bring a little change with a focal twist. past records show many
multinational firms are struggling to develop a successful strategy to
introduce their products and services in developing countries or transforming
economies.

 

Part of the problem, as per the past researchers, is that the absence of
specialized intermediaries, regulatory system, and contract-enforcing mechanism
in emerging markets – “Institutional voids,” (Khanna et al., 2005). Khanna
et al. (2005) coined the phrase ‘Institutional voids’, a phrase coined by
Khanna in his book “Winning in Emerging Markets”, “refers to the absence of
intermediaries like market research firms and credit card systems to
efficiently connect buyers and sellers”. Past studies have shown, that very
often multinational firms neglect the importance of infrastructure and its role
in the effective and efficient execution of the strategy. Since we know,
developed countries have better manpower and market research firms that enable
them to fight with the all the present odds in the market. whereas transforming
economies lack these resources hence we cannot expect same results from the
strategy used in a developed country.

 

Above mentioned concept can be understood if we take the example of
different types of soil and their productivity. We can have a wonderful harvest
of wheat and rice if grown in areas
having alluvial soil whereas in the black soil or laterite soil we cannot
expect the same results, moreover, we cannot grow wheat and rice.  Because
the alluvial soil is more futile and moist, it can grow almost everything. But
to make other kinds of soil as futile as the alluvial we need years continues
plowing and good irrigation facility. In this example, the alluvial soil is
referred to the developed nation whereas other kinds of soils represent
developing nations.

 

Taking the same example of the alluvial soil and other kinds of soils,
we can also explain institutional voids. Alluvial soil is very rich because the
land was flooded with water for a long time and now it’s very soft and ready
for any kind of crop yield – whereas in other areas where there is lack of
irrigation facility or the areas having very less amount of water and rainfall
will take years to become futile. Here the absence of water is the
institutional voids.

 

Companies in developed countries usually take for granted
the critical role ‘soft’ infrastructure plays in the execution of their
business models in their home markets (Khanna et al.2005). But that infrastructure
is often undeveloped or absent in emerging markets (Khanna et al. 2005). We
always have the option to hire a third party to do market research for us in
emerging market but the question is, can we trust in their results. It is hard
to cater the market and customer’s preferences as per the results given by
research firms. it becomes hard to find a firm that can be trusted, said by
Khanna et al., (2005). If we talk about top emerging markets i.e., BRIC, the
biggest question is what market entry strategies do foreign firms choose for
entering the BRIC countries (Holtbrügge, Dirk et al., 2013).  It has been
noticed that the level of economic freedom is low and corruption level is very
high, that give rise to institutional weaknesses. In fact, according to the
Index of Economic Freedom, the BRIC countries are classified as mostly unfree.
Of 183 countries analyzed for different aspects that constitute economic
freedom, Russia is ranked 143rd, China 135th, India 124th, and Brazil 113th
(Heritage Foundation, 2011).Moreover, corruption tends to be a major problem in
the BRIC countries. Russia is ranked 131th of 176 countries in the Corruption
Perceptions Index, followed by India, China, and Brazil (78th) (Transparency
International, 2016).

 

Having all these situations in emerging markets, it also becomes hard to
find right manpower too. Companies screen a large number of candidates to dig
out the best people to work for the organization’s goals. Due to all these
institutional voids, many firms have not succeeded in emerging markets. Though
many companies are trying to invest in emerging markets, we also have a healthy
amount of CEOs who prefer developed countries over developing countries to
avoid the risk of not doing good.

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