Strategies for Market Penetration
Abstract With the effect of globalization, we have witnessed a fast- changing nature of the international business environment. The competition in global playground, therefore, has been becoming fiercer and fiercer. In this decisive battle, every company must always struggle to survive. There is no other way but developing new strategies, which help to make their products and brand meet the consumers’ needs. From that standpoint, this paper concentrates on outlining some major strategy pursuits of Multinational enterprises (MNEs), when in the race to be the potential market leadership in the markets. How do they do to adapt and be able to compete in the local economy?
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2. Necessary conditions
However, an MNE should only pursue a market penetration growth strategy if at least one of the following conditions exists: a. Unsaturated market : An satured market is situation when a product is already widely distributed within a market, or frankly saying, the amount of product has been maximized in the current state of the marketplace. There is basically no change in the demand of the customers, or further growth of sales, exept that there are some effects of special factors, for instance, product improvements or population growth. b. Increasing industry growth rate, but decreasing competitive market share: the increase of industry growth rate may bring greater productivity to the manufacturing, additionally, the rate of competitiveness decreases, then the company has more chance to enlarge its market share when applying the market penetration strategies. c. Current customers are likely to purchase higher quantities of existing products or services: In this case, conducting market research is necessary, in order to know how the demand of existing customers change. Therefore, company may design an appropriate strategy towards the existing markets instead of expanding operation abroad. d. Economies of scale provide a competitive edge: When reaching the point of economies of scale, firms are allowed to achieve a cost advantage over
Firms must consider many strategies when attempting to realize growth. Depending upon the stage of
In a monopolistically competitive industry, the goods sold, while not perfect substitutes, can be viewed as acceptable substitutes by most people. As a result, if Firm A raised the price of its good substantially, consumers would decrease the quantity demanded from Firm A and would move to other firms selling similar products. As a result, Firm A would sell few units at the new higher price. As the quantity a firm sells falls, so does its percentage of sales in the industry, also
C. The partners combine resources and capital to create competitive advantages in a new market
Another factor is the quality of the product companies may have to buy cheaper products in order to keep the business running. The cost of living is going to be more expensive now since people are making more money the prices are going to go up. The creation of unions is a huge influence, sometimes they offer a lot of benefits but,
A technological improvement in production means that more of that good can be produced. When more of a product can be produced then more of it can sell thus making the company more money at a lower cost to them. A supply curve shows the
- The industry grow is staggered (less than 1%). This will result in a market share competition that will benefit the companies who have the means to survive, e.g. the means to lower their costs.
b. It allows the company to integrate scale-efficient operations and to cross-subsidize subsidiaries when necessary.
With this come different strategies to achieve growth such as through market penetration, product development, market development and diversification. When these all are broken down in details, it becomes a clearer picture. So when it comes to market penetration it is the objective of reaching higher number of sales and having a larger share with products already existing. Out of the four strategies this is the least risky one. However, there is still some low risk because prices which are low are being used to penetrate markets and it could lead to potentially damaging price wars that reduces the profit margins of all firms in the industry. When it comes to market development, it means to sell the products already existing in a market, but to sell them in a new market, this includes exporting goods to overseas markets or selling to a new market segment. When it is about Product development it is the progress made in current existing products and then sold or even new products being sold in existing markets. For example, the launch of red bull standard, they took a product which had already been in the market before, changed it a little bit and modified it and converted into a different version and sold it in the same market where red bull standard was sold. Product development is about creating something new or modifying product into its better self to attract consumers. Moving to Diversification- it means selling unrelated goods or new products, in new markets The
“Economies of scale are unit cost reductions associated with a large scale of output” as it is able to spread over the fixed costs over a large volume of quantity (Wickramasekera, Cronk & Hill 2013 p90). “First-mover advantages are the economic and strategic advantages that accrue to early entrants into an industry and the ability to capture scale economies ahead of later
The world offers significant business opportunities for every company, however, opportunities are accompanied by significant challenges for managers. Managing global operations across diverse cultures and markets represents a big challenge and opportunity for companies. To compete in the global market and be successful, companies must learn the strategies, policies, norms and technology necessary to conduct international business. The opportunities for global expansion are numerous, and attaining success is a matter of developing the right strategy to win local markets and its consumers.
The objective of MNC to operate in other countries is to gain competitive advantage through several ways. Firstly, MNC is able to take advantage of difference in country-specific circumstances. For example, MNC may choose to locate its productions in less developed country like Vietnam to gain cheap labor cost. Secondly,
Subject : Appraisal of a MNE's recent market entry (2007-2010) ( 1. Firm Motivations for internationalization 2. Entry Strategy 3. Corporate Strategy)
As trade increases hyper-competition grows forcing organizations to go global. By a company going global it requires them to rethink strategy and reform (Ananthram and Pearson, 2008). Global organizational structure is the way a company aims to merge local preferences with global strategy. The definition of global strategy is “strategic choices that have the characteristics of being globally uniform or integrated,” (Yip et al., 1997) such as standardization of products, uniform marketing, and competitive moves, but all globally (Townsend et al., 2004; Zou and Cavusgil, 2002; Bayraktar and Ndubisi, 2014). Global strategic strategy is a way to adjust to globalization. Globalization is “the economic and social process by which economies and communities grow inextricably interdependent “(Jhirad et al., 2009). The recent financial crisis (Das, 2010), large amount of poverty, and climate change are all problems that show how the world is globally connected because all countries impact each other (Jhirad et al., 2009).
Dr. Farok J. Contractor is a professor in the Management and Global Business department of Rutgers Business School, New Jersey. He has written hundreds of articles on the topic of international alliance and foreign direct investment. “Punching above their weight: the sources of competitive advantage for emerging-market multinationals” is one such article of global interest which has been declared of great value both for the public as well as for policy makers. The prime focus of this article is upon the phenomenon of emerging market multinationals which have swept the world by storm and introduced a whole new way of conducting global leadership and business. These emerging market multinationals are specifically discussed