Choosing The Best Prospective Host Country And Entry Strategy For Pestle And Mortar Sdn Bhd

International Business Operations in Global and Consensus Cluster

Business organisations today have to expand into foreign countries in order to earn more revenue and capital. Hohenthal, Johanson and Johanson (2015) mention in this respect that entering foreign countries enables the companies to get access to resources and customer base in the foreign markets. Buczkowski et al.(2015) in this respect point out that entering foreign countries is profitable but exposes the companies to the market risks prevailing in the host countries. These risks necessitate business organisations to select several prospective host countries based certain criteria and then finally select the final country where it decides to enter. The paper would consider the United States of America, Hong Kong, Vietnam, India, South Korea and New Zealand to choose a prospective host country and an appropriate entry strategy for Pestle and Mortar Sdn Bhd (Pestlemortarclothing.com, 2018).

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The objective of Pestle and Mortar to select six country is compare between so as to choose the most profitable future host market among the six countries. The six countries Pestle and Mortar would consider in the initial phase are the United States of America, Hong Kong, Vietnam, India, South Korea, India and New Zealand. It must be noted that since countries chosen are outside the cluster since Pestle and Mortar is not present in these seven nations.

Pestle and Mortar would choose the countries on the basis of several parameters. The first parameter would be International Business Operations in Global and Consensus Cluster coined by Ronen and Shenkar (2013) (Appendix 1). The table takes into account three parameters in relation to global textile industry. The table shows that as far as the first parameter, ‘textile producer’ is concerned, the countries qualifying are the US, New Zealand, Hong Kong, South Korea and India. The countries qualifying based on social media user, are the UAE, Saudi Arabia, the US, China, Hong Kong, South Korea, Malaysia and Thailand. The third parameter is ‘spend most on textile’ and the countries qualifying are the US, Australia, China, South Korea and India.

Pestle and Mortar can apply the findings from the International Business Operations in Global and Consensus Cluster to choose the countries to enter. It can be pointed out that as far as the parameters are concerned, the two parameters textile producer and spend most on clothing are directly linked to the business of retail industry (Thestar.com.my, 2018). The process and successive comparison shows that the US, Hong Kong, South Korea and India quality these two important parameters. India does not qualify as the largest user of social media.

The findings can be interpreted by Pestle and Mortar to choose the appropriate countries to enter. However, table clearly shows that the US, South Korea, India and Hong Kong qualify in the initial screening process (Meyer & Peng 2016). The table does not mention Vietnam but mentions New Zealand once and hence cannot be considered as conclusive.

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This section would take into account location attractiveness and location specific advantages to exclude two countries Pestle and Mortar has chosen to enter. The countries to be considered are the US, India, New Zealand, South Korea, Vietnam and Hong Kong.

Location Attractiveness and Location-Specific Advantages

The objective of this selection criteria would be to exclude four countries. The second objective would be to select the most appropriate country which Pestle and Mortar would enter.

The first parameter of the country comparison using index takes into account Legatum Prosperity Index as per Legatum Prosperity ranking 2017 (Prosperity.com. 2018). The analysis shows that New Zealand tops the list followed by the US and Hong Kong. South Korea, Vietnam and India occupy the fourth, fifth and sixth positions respectively.

The Yale Environmental Performance Index shows that India ranks 177 while the US ranks 27. New Zealand and South Korea ranks 17 and 60 respectively. Hong Kong and Vietnam do not qualify in the list and hence fall out (Epi.envirocenter.yale.edu. 2018).

The world happiness report 2018 shows that the India ranks the lowest followed by Vietnam, Hong Kong, South Korea and the United States. The nation which occupies the highest position is New Zealand for the year 2018 (Countryeconomy.com. 2018).

The Cage Distance Framework framework takes into account cultural, administrative, geographical and economic. It must be pointed pointed out that none of the above comparison tables (appendices 2 and 3) can directly be related to cotton and textile industry. The cage takes into account factors like distance and economic conditions and would provide a stronger ground to the management of Pestle and Mortar to compare between countries.

The resource availability analysis table compares between the nations using five parameters. The first parameter is that of a cotton supplier while the second parameter is labour. New Zealand is unattractive as a cotton producer and as far as labour is concerned. South Korea is not attractive as far as cotton production and supply is concerned. The US on other hand is the third largest producer of cotton after India. The country is technologically very advanced and share technological knowhow with India. As far as internet infrastructure is concerned, all the three countries qualify other than New Zealand. As far as building cost is concerned, India leaves all the three contenders behind.    

Geo-political assessment criteria

India

US

Formal institution component

Strong

Very strong

Informal institutional component

Strong

Weak

Political risks (Oecd.org. 2018)

Low (3)

Not reviewed

The Ministry of Textile, Government of India in its latest report on major cotton producing and consuming countries in the world shows that India is way ahead of the US in both the areas. (Texmin.nic.in., 2018). The trend continues into 2018 which shows that India would be leading the world in cotton product. As far as the US is concerned, its cotton production and consumption is far behind India which means it loser to the latter as the most appropriate host country which Pestle and Mortar should enter.

The graph showing the major textile exporting nations in 2017 measured in billion USD shows that India ranks third globally with an annual textile export of $ 17 billion. The country is surpassed only by China and the European Union. As far the US is concerned, the country comes fourth with an export of $ 14 billion in 2017. Thus, once again it can be pointed out that US loses to India making the latter the most appropriate nation for Pestle and Mortar to enter (Statista.com, 2018).

Legatum Prosperity Index

The country comparison using index can be applied as a strong measuring rod to compare between the six countries. According to the table, New Zealand ranks the highest followed by the United States. India ranks the lowest followed by Hong Kong.

The cage distance framework can be applied to compare between the four existing countries namely, India, the USA, New Zealand and South Korea. The analysis shows that culturally India is closer to Malaysia compared to the other three contenders.  The country is closer geographically to Malaysia and has a more favourable climate for cultivating and manufacturing cotton.

Pestle and Mortar can utilise the outcome of resource availability analysis to make the decision to choose the most appropriate country to expand overseas. The outcome clearly shows that as far resource availability is concerned, India and the US are the attractive nations for entry for Pestle and Mortar.

The geopolitical assessment between the US and India shows that India is politically stable while rating for the US is not available. The latter has a strong formal institution compared to the former. However, considering the high number of terrorist attacks and comparative higher advantage of India, it can be pointed out that India is the ideal country which Pestle and Mortar should enter (Nytimes.com, 2018).

Pestle and Mortar can apply the report published by the Government of India to compare between the cotton production and consumption between India and the United States of America. It can then decide to opt for one of the two countries to enter with its retail business.

Pestle and Mortar can apply the outcome of the graph to finalise on India as the most target host market. The company must choose an appropriate entry strategy by conducting a macroeconomic analysis of India to establish its position further in Asia (Statista.com, 2018).

An interpretation of the country comparison index shows that New Zealand is the most appropriate country while India is the least appropriate.

It can be interpreted from the Cage analysis that India is the most appropriate nation for Pestle and Mortar to enter. However, since the country has not fared well in the previous tests, more detailed comparison would be required to opt for the most appropriate nation for Pestle and Mortar to enter.

The resource availability of chart clearly shows that India and the US are the two most attractive markets which Pestle and Mortar should consider entering. The other two nations New Zealand would be dropped for comparison in the successive discussions.

It can be interpreted from the table that India is the most appropriate host country which Pestle and Mortar should consider to enter. It would enable the company gain an extensive supply chain in India to provide it with cotton at economic rates and take advantage of the rising demand for cotton textile in the country.

It can be interpreted from the graph that India is ahead of the US in textile export. Thus, it can be interpreted that Pestle and Mortar should enter India and use the competitive advantages available in the country in terms of cotton textile business to strengthen its position. The firm must also take into account that the textile market in India is emerging and is already experiencing stiff competition due to presence of multinational companies. Thus, it can finally be interpreted that Pestle and Mortar should study the competitors in the Indian market textile market to form its marketing strategies (Hernández-Perlines, Moreno-García & Yañez-Araque, 2016).

Yale Environmental Performance Index

It can be recommended from analysis of the three processes that India and the US are the two countries which Pestle and Mortar should its foreign expansion strategies. Further analysis between the two countries would bring out the most appropriate host market which the management of the Malaysian retail company should consider to enter. The fifth process clearly shows that India is the most appropriate host country owing to its higher production and consumption of cotton which Pestle and Mortar should enter.

The objective of this stage is to find out an appropriate entry strategy which Pestle and Mortar should adopt to enter the chosen nation, India. Chen et al. (2017) in this respect mentions that opting for an appropriate market entry strategy plays a crucial role in attributing a firm deep market penetration in new host countries.

Pestle and Mortar should opt for partnership with an Indian business conglomerate like ITC Ltd to enter the Indian textile market and establish its business. Chetty, Ojala and Leppäaho (2015) mentions in this respect that using partnership as an entry strategy enables business companies to share resources and markets with the partner companies. This also functions as a competitive strategy since most of the premium fashion brands partner with resident business conglomerates in their host countries. Thus, entering India using partnership strategy would enable Pestle and Mortar to compete with its competitors like M&S which are already operate using partnership strategies (Appendix 7).

Pestle and Mortar should use partnership strategy to enter the Indian textile market with a resident Indian business conglomerate. This would bolster the opportunities of the company to establish itself as a top brand in the market (Grant, 2016).

It can be interpreted that Pestle and Mortar should enter the Indian market by partnering with an Indian business conglomerate. It can be interpreted that the company should however maintain its distinct label and brand name to maintain its distinct market status.

The entry strategy which Pestle and Mortar should follow should be that of a partnership strategy and can transform into a listed wholly owned subsidiary in the long run. This would allow it to raise from the Indian stock market and make its Indian operations sustainable.

The company should follow a flat organisational design to function in India. This would aid in more dynamic decision making.

Pestle and Mortar should adopt the process of establishing a strong functional unit in India. This is because though the process would attract huge initial expenditure, in the long run an India based operational structure would enable the organisation to adapt to the macroeconomic conditions of India in order to take more prudent business decisions (Hohenthal, Johanson & Johanson, 2015).

Pestle and Mortar should apply the process of setting up an Indian operational branch. The company as shown the previous may establish its Indian operational branch in form of a partnership, the company in the long run would convert it into a public limited company.

It can be interpreted that Pestle and Mortar should should utilise its Indian operational branch to operate more profitably in the country. Bouncken, Pesch and Kraus (2015) mentions that a strong and dynamic regional branch based in a host market enables direct and more efficient business operations in the host market. The first advantage of an operational branch is that the Indian subsidiary owing to its physical presence in India would be more aware of the changing business conditions and would be in a better position to take more appropriate business decisions. Secondly, the regional office would serve as a powerful launch pad for the company to expand into the other emerging markets of Asia like Vietnam.

World Happiness Report 2018

It can be summarised from the discussion that Pestle and Mortar should aim to establish a strong Indian subsidiary right from the entry stage. As shown in second table, the company should however consider the existing competition in the Indian textile market and market growth opportunities in the market to make prudent business decisions.

The objective of Pestle and Mortar should right from its very entry into the Indian textile market acquire the image of a responsible corporate citizen. The objective of this move should be strengthening its brand image (Schwartz, 2017).

Pestle and Mortar should concentrate on acquiring raw materials for its designer outfits from local suppliers. This would promote economic development of the latter and make the Indian operations of company more sustainable (Tai & Chuang, 2014).

The Malaysian retail chain should apply its CSR strategy to participate in the various social development initiatives with the local government bodies. Singh and Kaur (2016) point out in this respect that participation in social development initiatives today form a crucial part of the business strategies of MNC retail chains like M&S. Thus, Pestle and Mortar should get involved in the social development in India in order to strengthen its social image like its competitors.

It can be interpreted that CSR would strength the social image of the company and enable Pestle and Mortar get more allowances from local government bodies (Grayson & Hodges, 2017). Obtaining these allowances would ultimately boost the business of the compnay in India.

It can be summarised from the discussion that getting involved in CSR would strengthen the corporate image of Pestle and Mortar in India. It would also boost its business and promote its further growth.

Pestle and Mortar must aim to position itself strategically in the Indian market as a premium textile retailer. This would enable to gain more competitive advantage and generate higher profits.

The company must adopt the process of adopting a formidable marketing mix to position itself strategically in the Indian market. This would enable company to boost its market position before more powerful rivals like M&S.

The company must apply the process of promotion on both on non-digital and digital media. The company must also participate in fashion shows to establish itself as a high-end fashion brand.

It can be interpreted from the discussion that company must establish itself as a premium fashion brand.

It can be summarised from the discussion that appropriate positioning would enable Pestle and Mortar to establish its business more profitably in India. It would also pave ways for further foreign expansion.

PM should enter India and adapt to the market conditions like cultural perceptions of the customers. The company should conduct a thorough macro analysis of the Indian market to understand the perception and culture of Indian customers.

It can be recommended that Pestle and Mortar should make Indian style outfits. This is where it can outpace its competitors like M&S which do not manufacture Indian outfits. Pestle and Mortar can manufacture both Indian and western outfits to attract customers seeking both the types of outfits.

Conclusion:

It can be concluded that PM should operate in the Indian market profitably and attain sustainability. It can be concluded from the above discussion that Indian textile market is profitable and can provide growth opportunities to resident as well as foreign firms. However, it can also be pointed out that this profitability has made the market extremely competitive. Strong competitors like M&S have already opened their stores in several locations and sources raw materials locally as well as enjoy immense customer base in the country. The discussion necessitated a few recommendations which the management of Pestle and Mortar should take into account to establish itself in the face of this stiff competition.

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