Entry Strategies to Eastern Europe
The report focuses on the international business environment of Woolworth in Eastern Europe as a strategy of their international expansion. The reasons why the company is chosen is due to its popularity especially in Australia and New Zealand due to their excellence in the retailing sector. The retailer is colloquially identified as the Woolies in Australia, and their products and services include food products such as milk products, meat, tinned products, dairy products and packed products. There are approximately 980 stores worldwide, which are running successfully. The first store of Australia was laid down in the year 1924 in Sydney (Woolworths Team, 2017).
The company has managed to open many other subsidiaries in the country of origin and others and offer products and services to multinational customers. The management of the organization has maneuvered in the business environment, and this is why the firm has maintained in the market in the midst of economic uncertainties and significant technological changes. The expansion of its services to the international arena is imperative, and this has increased its productivity and publicity. The purpose of the report is to analyze the particular attention to be given to the organization in the management of the international activities. This is because its local businesses in Australia are performing remarkably and therefore need to give trial Europe especially Eastern Europe to capture more opportunities.
The chosen organization is Woolworth, and the chose country comes from Eastern Europe, and the focus of the paper is Moldova which was chosen among Russia and Belarus. Woolworth is yet to invest in any of the Eastern Europe countries. In this assignment, the focus is on the entry strategies to be adopted in the region and the best management structure, production, international HRM issues in the global environment and R&D. Therefore the report makes the analysis of these factors in the region and makes recommendations for the Eastern Europe region. The analysis is necessary because it understands the international expansion and the requirement before investing in the country.
Country Analysis for a business seeking to enter an international trade environment is vital and necessary for the success of the business. For instance, it is imperative for the organization to undertake an environmental analysis of the country it seeks to enter. For the Woolworth, the country of choice is Moldova located in the Eastern Europe. Before entering a county, there various forms of analysis where organizations seek to understand general and sometimes information on the state they want to venture (Kamau, 2011). According to Morschett these factors includes the government departments, both local and international institutions in the country such as OECD, World Bank, UN, credit banks and the media channels available such as the newspapers and televisions (Morschett, Schramm-Klein, & Swoboda, 2010).
Recommendations
On the other hand, it is paramount to understand further the country profiles and use of online sources of advertising the business products. The evaluation and the assessment of these factors are what is referred to as the ‘country risk.’ Morschett argues that the detailed market analysis is necessary before the launching of the product in a foreign country as it allows for the evaluation of the prevailing political, cultural, economic environments as this increases the probability of the company succeeding by avoiding the risks and maintaining their reputation (Morschett, Schramm-Klein, & Swoboda, 2010). Understanding of the factors analysis reveals the level of risks involved and this help shape the entry strategy to be used by the organization. These includes joint ventures, franchising and licensing which they can be considered when preferred to full ownership because it can be very costly in risky environments (Moore, Doherty, & Doyle, 2010).
Non-Controlling Interest is an approach used by international retailers especially in their initial stages of overseas expansion with the aim of gaining markets shares because they do not have experience of operating international business operations. This also takes place when the company has no established process in these countries and therefore lack adequate market intelligence, and the general understanding of the market ventured. This means the business management can decide to acquire shares in an established organization in the foreign market where they have no management and operations (Chan & DU, 2016).
Other strategies include the Setting of International stores for the purpose of internal expansion. This is implemented through the opening of stores in the foreign country and promote brands, products, and services offered for the market. The same external stores are used as part of international expansion, and the company uses it to train human resource and accumulate resources that are used in managing international operations (Lojacono, Misani, & Tallman, 2017). Besides the concept of merger and takeovers are used where the foreign company acquires the local company and have access to the countries markets and gain on the established business network. The strategy allows for the transformer of technology. This is also beneficial for the organization as it allows the company to get access to the latest technology, and take control with within a short period (Kamau, 2011).
Others include the Franchise Model and the joint venture. The franchise model is the most recommended by many retailers and other international brands more specifically in the design industry. The model allows the retailer to engage a local business and sign a franchise agreement where it is allowed to access and use the foreign brand its marketing concepts and promotion strategies used by the parent company (Chan & DU, 2016). Further, the international retailer can enter into a Joint venture where the external brand leverage the presence of the local businesses and image and this allows for the expansion of the business under the same brand. The success of the strategy relies on the kind of relationship between business partners and others such as the objectives, financial strength (Chung, 2013).
Targeting and Segmentation Theory
The report recommends the company to enter the country through joint venture and with the leading retail chains. For example, Woolworth can choose to have a 40/60% which is a good joint venture because there will be joint decision making between the two companies and sharing of the managerial position across Eastern Europe. Further, the rationale for the joint venture is that the companies in partnership benefits from the administrative integration, resources and managerial skills needed for the successful business.
Other than a joint venture with local enterprises, Woolworth can also use Foreign Direct investment such as mergers and acquisition. The strategy is good as it is easy to execute compared to starting a company from scratch because it takes a lot of time. Further starting a business from scratch makes companies lose their competitive edge especially when competing with already established brands and this means limitation to market share which could have been obtained through merger and acquisition. Therefore, the report recommends the management of Woolworth to adopt the Joint Venture entry strategy as it will be easy to meet the desired and set objectives about international expansion.
Targeting and segmentation
According to targeting and segmentation theory, for the company to be competitive, there is a need for the management to have a critical exploration of the potential customers and determine the best marketing mix to be applied to them. For the company to be successful in the market, it requires to segment its consumers, and this is essential because it increases the understanding and mapping of different sectors of the target market as well as their evolving market needs and other wants. Therefore it is important for Woolworth to employ demographic segmentation and psychographic marketing strategies and give them the by offering the goods and services at the lowest price possible (Andaleeb, 2016).
The theory outlines that when applied retail chain such as Woolworth can be able to capture the global market share because low pricing strategy helps them in differentiation from other rivals and help complete for the masses. Further, the theory also argues that positioning strategy plays a critical role in the company’s success and this is what Woolworth should use to be competitive in the foreign market. The management should work toward positioning the retail chain as one of the best in offering services and products at the lowest price compared to other chains (Boivin & Saint-Arnaud, 2017). This means that the supermarket can use the pricing advantage to create sustainability in its business model such as low price positioning.
Supply Chain Management
Also, the supply chain management needs to be excellent. When venturing in the Eastern Europe, Woolworth needs to consider its operations to ensure timely delivery of products and services to the consumers. As such, the operations management should be good resources for efficient management of the retail chain across the continents where it operates. Therefore for the weak or insufficient attention to the retail chain management will make the chain uncompetitive. This is because the consumer need to get their products efficiently and also the shelves are supposed to be stocked all the times. Besides, serving millions of customers requires a very robust and firm supply chain and efficient operations management for the same purpose (Coskun, Ozgur, Polat, & Gungor, 2016).
The mention of the term production is linked to the manufacturing industries but not in the retail sector. However, the product is central to the retail sector because the sector engages in the production of service as a merchandise but not the product like in the manufacturing sector. For the retail store like Woolworth, they focus on the manufacture of value through merchandise and application of competitive strategies such as pricing. The factors of production to be considered by Woolworth includes Physical Assets, labor, capital (Spaargaren, Oosterveer, & Loeber, 2013)
Woolworth needs to consider their physical store because it is a factor of production because it is essential for the distribution of goods and services, and to reach its customers. Other that needs to be considered is the technology used to account for the purchased merchandise. On the other hand, the retailer should examine the labor provided by employees because they facilitate the selling of goods and services to the consumers. The company requires labor for the purpose of sales, marketing, technical support such as customer service and others which account for production factors (Fernie & Sparks, 2014; Spaargaren, Oosterveer, & Loeber, 2013).
Besides financial capital is another factor of production to be considered by Woolworth because it is used in the purchase of the needed merchandise that is sold at a profit. Further, it is a factor of production as it is used to pay employees for the provided services and to acquire of physical assets and others such as the distribution of the products. For example, Woolworth will require financial capital to set and implement their distribution channels across Eastern Europe (Fernie & Sparks, 2014). Lastly under consideration is the enterprise and combines all the factors of production. It includes the skill applied by the management personnel for the efficiency of business. Woolworth requires managers who have sufficient skills to provide them with appropriate financial management activities and making decisions to benefit the stores (Saunders & Cornett, 2014).
Factors of Production
The term research and development (R&D) is used to explain an investigative process and activities that are carried by the organization with the aim of improving the existing products and services. It can also be utilized for the purpose of coming up with new and unique products and procedures of manufacturing them. Many companies and factories involved with the production of consumer goods in many sectors use R&D to improve the features and the functionality of their product lines. As a result of the effort, many corporations had experienced growth of revenue and enhanced their profit. In many organizations, the management is fully aware of the benefits of the department and therefore many resorts to committing the company resources which falls below 5 percent of the total revenue (Yu, Ramanathan, & Nath, 2014).
However, the explanation above by Ernst is not likely to fit the retail sector as it is involved in the production of the products provided by the consumers but it can be used in another context. The products produced by R&D in the retail sector are to be used for internal purposes such as detecting fraud and increasing efficiency technologies (Ernst, Hoyer, & Rübsaamen, 2010). According to Srinivasan the modern technology and the consequences have inspired more retailing companies such as Tesco, Amazon, and Walmart to form vibrant department committed to ensuring research and the use of technology that makes them competitive, operate more efficiently and create customer satisfaction as well as increasing the market share in a global environment. For instance, more players in the retailing sector are now establishing strong department tasked with the role of formulating their innovation. The aim and the reason for change are for the purpose of analyzing data to understand market dynamics (Srinivasan, Lilien, & Sridhar, 2011).
For Woolworth, they have a Research and Development which is at developmental stages. The retailer aims at using the developed technology to enhance the level of innovation and further increase the competitiveness standards in its operation across the global scale. This is a revelation that the management understands the benefits of the department and therefore ready to use the company resources to shape the future. For example, the retailer invested $1 million in 2012 to fund the research activities of Queensland University of Technology to produce innovative technology to be used for the benefit of the company (Keith, 2012).
The primary focus is directed to the people, process, technology and changing the consumers experience during shopping time, restocking and design of the shopping space. Further, the objective includes identifying and examining the attributes which make fresh food outlets to record outstanding success while other make not progress and end up closing shops. Besides, the research and development of Woolworth have an interest in helping farmers identify sustainable farming practices such as how they irrigate and efficient managing nutrient in the crop and reducing the level of carbon footprint (Keith, 2012).
However, there are areas which Woolworth need to consider to increase their sustainability and competitive ability. Some of the consideration for Woolworth includes developing e-commerce innovations in the organization which will help the company to boost growth in the industry and acquires more market shares. Besides the technology and solution produced should be aimed at revolutionizing the data analytics used by the company, fraud detection tools, improving user interfaces, image processing and online interactions with the consumers. The product and services search should be advanced, and the advertising technology used by the retailer also needs some improvement to attract more business clients.
Besides, there are many changes in the environment and the management need to have the best online business model and the office operations. Therefore, the primary focus should be to carry intensive research into smart searches, big data, internet banking and high-performance computing for the company. The company should consider investing in developing technologies that can be utilized to increase the company sales. Since the company is expanding across the globe, there is a need to improve their supply chain on areas such as ordering, sales forecasting, supply chain analytics and other necessary aspects. This should be designed for their physical and online apps development to boost its marketing competitiveness.
Operating in foreign countries such as in Western Europe present a range of human resources issues that are applied with the cultural and geographic boundaries. Therefore, for Woolworth, there is a variety of challenges and difficult which will be experienced by the management. Nonetheless, the advent and the spread of modern technological tools and the ability of business to communicate with people across the universe and different markets makes it essential for the company to explore international HR issues likely to emerge and come up with some considerations (Ile & Iles, 2013).
Compliance with International Laws
As businesses Woolworth expand to Eastern Europe countries and specifically Belarus, Maldives, and Russia, they must comply with the global HR issues. In these countries, there are required rules when the management is hiring the employees from diverse cultural and geographic backgrounds, and therefore Woolworth needs to consider them (Ile & Iles, 2013). For example in Eastern Europe, the management must comply with tax liabilities and labor laws. Besides, when doing business in Eastern Europe, the company will have to pay value added tax and hiring noncitizens in the workplace require Woolworth HRM to check for their work visas and make a report to the government. Therefore to alleviate complexities when operating a business in Eastern Europe, there is need to implement the legal requirements as required by the laws of these countries (Dickmann, Brewster, & Sparrow, 2016).
Cultural Diversity
Another salient issue and consideration in international HR are the issues of implementing cultural diversity in the workplace. Working with people from different cultural backgrounds and geographical locations requires the business to adapt to cultural diversity and formulate new ways of communicating with strange social practices. Therefore for Woolworth, they need to appreciate new means and ideas of different people on how to run workplace activities such as management and other processes (Ile & Iles, 2013).
Benefits and Compensation
Remuneration and advantages in the workplace form the backbone of HR strategy applied when working in a foreign country. Besides, the issues are critical for international HR, because they emphasize on the balance of employees. Therefore Woolworth needs to initiate and implement workplace programs that are meant to improve the professional and personal lives of the workers (Dickmann, Brewster, & Sparrow, 2016). This is a central aspect of international HR because many multinational firms and Woolworth should not be an exception. They need to consider paternity leave, flexible working time, providing extended holidays, workplace childcare and others to strike a balance for these employees. In Eastern Europe, it is mandatory for the companies to implement these programs (Dowling & Scullion, 2013).
Training and Development
Training and Development are another issues for HR which is closely related the concept of remuneration benefits in the workplace. Woolworth should initiate training programs that are designed to provide employees with job skills and knowledge which are relevant to the global organizations. For the company, they need to have an initiative that includes providing platforms for the employees to engage in networking events, training seminars and other activities aimed at increasing the competency of these people (Dowling & Scullion, 2013).
Conclusion
In conclusion, the report has explored the global business environment of Woolworth in Eastern Europe. When investing in the international context, the management needs to consider certain factors such as the entry strategy of the country by looking at the political climates, economic factors and others which determine who the organization operates. Besides, it is essential to consider the laws and regulation that affects the implementation of the HR practices such as compensation and benefits, cultural diversity and others such as training and development. Further in the modern business environment, there have been changes mainly brought by technology changes and therefore need for R&D to come up with solutions on how it can be used for data analytics, customer satisfaction and others such as fraud detection. Finally, it is essential to consider the factors of production in the retail sector namely the finance, skills, and others that are beneficial to the industry.
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