“Market Entry and STP Strategy”
There are three strategies that are evaluated for entry into the international market. It can be Joint Venture, Franchising and Licensing.
|Market entry options||Advantages||Disadvantages|
|Joint venture (JV)||· Separate legal entity and limited liability|
· Benefits from partner’s presence, business contacts, knowledge, and experience (Polidoro et al., 2011).
· Shared development costs and risks
· Political support
· Overcome ownership restrictions and cultural distance
|· Time consuming|
· Lack of control over technology
· Possible shared ownership conflicts (Shi et al., 2012)
|Franchising||· Low development costs and risks in foreign FDI (Deitz et al., 2010)||· Lack of quality control (Wong & Chan 2010)|
· Lack of control in global strategic coordination
|Licensing||· Low risk|
Better marketing effort utilization· Low cost (Gu et al., 2012)
· Speed of entry
· High return on investment
|· Limited form of participation|
· Loss of potential returns from marketing and manufacturing
· Licensees become competitors
· Lack of control
The joint venture is considered as a formation that is occurred between two companies with the aim to establish their mark in the market. At the same time, both the companies made in equal investment for studying the market to deliver the product to customers. In addition to this, it is identified that joint venture is the most suitable method of entry on the new business. It is because the firms are allowed to share ownership and control over property rights and operations (Aulakh et al., 2010). This option also helps the firm in terms to share the risk which is involved in the international market. At the same time, it also assists in providing financial strength, and it is the best sources to supply the information about the local customers. Besides that, it works for the company to successfully establish their business in international market. In this, it allows the company to understand the culture of the particular market and accordingly, it assists the company to design their product portfolio.
Moreover, the strategy of joint venture works through the agreement between the two or more companies in regards to form a partnership. When two companies agree to work together, then it indicates that they are ready to share risk and profits which generate. There are various examples of joint ventures are present (Lee & Lieberman, 2010). Likewise, it includes the Sony with Ericsson cell phone, and Kellogg Company made a partnership with Wilmar through created the Kellogg and Pringles brand in china which is proved to be quite successful as it becomes the largest food and beverage market globally. So such practices indicate that the joint venture is the widely accepted strategy. But at the same time, it consists of some merits and demerits that are mention below:-
- Joint venture helps in sharing of risk such as frequently changing the market structure and increasing business competition etc. (Shi et al., 2014).
- The joint venture also allows to combining the local in-depth knowledge with a foreign partner with know-how in technology or process.
- The joint venture also strengthens the company’s financial health (Teece, 2010).
- It is considered as the best means to entry in the new market due to equal distribution of profits and shares equal risk.
- The major limitation of this strategy is that partners do not have full control of management.
- The chances of conflict are more in this strategy due to Partners might have different views on expected benefits (Deitz et al., 2010).
- This strategy does not sustain over the longer duration.
Thus, this represents that the joint venture is contributed high for the companies to successfully execute their business into the international market. But at the same time, it brings various issues to the company related to less control over the management.
Licensing is the method within this a firm of one country permit to another company for using the manufacturing, processing, trademark, and skill. It is considered to be quite similar to the “franchise” operation. The best example of licensing is the Coca Cola. Likewise, In Zimbabwe United Bottlers have the license to make Coke. This method is proved to be so effective for the new business entity to grab the opportunity in the form of getting recognition in the market. At the same time, the main benefits of this are that licensing has a little expense involvement that gives advantage to both companies (Baena, 2010). Moreover, the only cost is generating the documentation like signing of the agreement and policing for the implementation of an agreement. The licensing strategy works with the agreement between licensor and licensee in which one company provides a license to another company to sell their brand name into their local market. This helps the licensor to expand their market into the new market and able to enhance their customer base.
- Licensing is considered as a superior strategy to start in foreign operations.
- It allows the licensor company to expand their business into the new market with the guarantee of succession (Polo-Redondo et al., 2011).
- It consists of limited form of participation – to length of agreement, specific product, process or trademark
- Less Potential returns from marketing and manufacturing industry (Baena, 2012)
- There is high probability of frauds and misleading in case of licensing
There are two parties exist in franchising strategy one is franchisee and franchisor. In this, the agreements between both the parties’ states that it is the right to use the business trademark sell it in particular country. But, it only possible when franchisor gives the franchise of their brand to other companies in different countries, and it assists in grabbing the different markets (Brookes & Altinay, 2011). Likewise, McDonald’s is the best example of franchising, due to this strategy, McDonald’s deals in different counties and become the leader of food and beverage industry. The working of the franchise is started from the agreement between the parties, and at the same time, franchisee gets the annual fee from the franchisor in regards to promoting their brand in the new market.
The advantage of this is that it provides all information to the business in regards to running the operation in the different market.
The disadvantage is that the initial cost of buying the franchise is quite high as it includes the management services fees and product buying price (Aliouche & Schlentrich 2011).
Best Suited Market Entry Options for the Hotel Holiday Inn
In case of Holiday Inn Hotel to provide the services of virtual tour facility in the Australia market, for that joint venture could prove to be the well-suited strategy to enter into international market. Holiday Inn Hotel can enter into the partnership with a technical firm to provide the virtual tour services to the customers, and it enhances their satisfaction level. It is more extensive form than licensing and franchising (Guo et al., 2013). It is because joint venture allows to sharing ownership and control over property rights and operations and it reduces the high investment of company in the international market since both the parties are equally liable to invest in the same ratio. However, by using this method of entry, the Holiday Inn Hotel able to perform well in the international market and develop the goodwill in the market. The technical company could also help the Holiday Inn Hotel to understand the Australia local people cultural taste and preferences. It guides the Hotel to design their infrastructure similarly so that target audiences could easily relate to the services offering and attracts the large customers’ base. Meanwhile, this strategy is best suited for the virtual tour services which Holiday Inn Hotel wants to offer to local customers. By making the partnership with the local technical company, it would also provide excellent services to the Holiday Inn. Likewise, it helps the Holiday Inn to target the large segment through designing their services in such a way that is accepted by the large clients. Moreover, joint venture strategy also reduces the risk of high financial loss due to the involvement of multiple corporations. However, in case Holiday Inn Hotel is failed to influence the tourist then also hotel could able to compensate their loss by investing in another portfolio. This can be possible due to combination investment which protects the companies from the situation of bankruptcy. Thus, from the above mention strategy, the joint venture is appropriate for this case.
Segmenting and Targeting Strategy
The strategic approach which is used by the Holiday Inn Hotel group is B2C model through which it will target the market segment and position its virtual services in the mind of the target customers. The market for the virtual tour services is segmented on the basis geographical and behavioral segmentation (Koh et al., 2010). Holiday Inn Hotel will focus on the Australia market imparting their services in that also Holiday Inn could divide the market based on the perceived value, benefit or advantage that consumers perceive from the product or services. So, on the basis of benefit segmentation, it can be easily highlighted that hotel Holiday Inn is providing special facility to its target market and targeted customers. In order to achieve business goals, Holiday Inn Hotel needs to understand the benefit segmentation regarding proving quality services as pre the customer preferences. This helps in targeting the tourist, local customers and allows to achieving high customers base.
In order to target the market, the Holiday Inn Hotel could follow the undifferentiated targeting strategy as they want to appeal the Australia tourist and customers with their services. In this marketing, Holiday Inn group ignores the market segment differences and focus only on the one services, i.e., virtual tour services are offered to the entire market of Australia (Winston & Cahill, 2013). Thus, in regards to this, it can be stated that Holiday Inn Hotel to enter into the Australia market focused on the geographical and benefits strategy for segmenting the market of Australia. Likewise, with the showing of high-quality services with positive amenities of the infrastructure, Holiday Inn could try to attain the maximum attention of the target customers and tourist. Hence through designing the virtual tour facility in an effective manner, Holiday Inn can achieve the target market (Dou et al., 2010). In short, Holiday Inn incorporated the B2C model in which it targets the Australia customers and tourist by offering the virtual tour facility services with the aim to attract the large segment of the target market.
Holiday Inn should use the quality and feature-based positioning strategy in which it is recommended that the company need to focus on the characteristics of the product and services. However, Holiday Inn should need to highlights their unique facilities such as mentioning the destination where hotel visited their guest indicates the food and comport levels which are Holiday Inn group offered. So through highlighting all these facilities on the virtual tour facilities, the target audiences get an idea about the services offering and customer perceived accordingly. Thus, this helps the tourist to take their decision regarding visit at the place or not (Teece, 2010). Besides that, Holiday Inn could also use the culturally based positioning strategy as it is found that group members nowadays are very conscious about their religion, culture, and customs. So in that case, the hotel should include such services which are easily relatable to the target audiences. Likewise, they need to involve such food outlets that represent their culture famous cuisines, or they can make visit the tourist on the religious places. Therefore, such types of the offering will have a great impact on the target market decision in regards to avail the facility of Holiday Inn.
It can be summarized that Holiday Inn could easily target its market through positioning their services based on the quality oriented and giving the taste of their culture. These both factors will help the Holiday Inn to attract the maximum target customers and achieve its objective promptly.
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