Table of Contents

Introduction 2
Research Question 3
Research objectives 3
Literature Review 3
Research Methodology 6
Research Philosophy 6
Data Sources 7
Research Tools 7
Sampling Methodology 8
Logistical and Ethical Consideration 8
Expected Outcomes 8
Planned Timetable 9
Conclusion 9
References 10

Introduction

South Asia accounts for over 17 percent of the total world’s population. Although, there are varying definitions of the South Asian region, for the purposes for this research, the focus would be on three countries which are Pakistan, India and Sri Lanka. India, the second most populous country in the world and the tenth largest economy is expected to bypass the US economy by in the next three decades along with Germany, Italy, France and other economic giants. Pakistan, the sixth most populous country of the world with a population of 180 million people out of which 65 percent are between the ages of 18-35, represents great potential of a highly skilled workforce (Bhattacharya, pp. 41-45, 2009). Bangladesh, the ninth most populous country of the world has shown great economic growth and human development over the past few years thus offering great prospects for economic growth (Harwood & International Finance Corporation. pp. 45-49, 2010). Important here to note is that these three countries are a part of the Next Eleven (N11) nations, selected by Goldman Sachs Investment Bank that are believed to the drivers of economic growth, attractive options for investment and become economic giants in the 21st century (Kotler, pp. 75-76, 2010).

The fact is that western markets are quickly saturating and have realized a significant potential for their growth. In this situation, when the western markets are facing crisis after the recession and the European Debt crisis is expected to create a new wave of recession in the western world, these markets have remained relatively safe from the toxic effects of recession are despite all ups and downs are heading towards economic (Bhattacharya, pp. 41-45, 2009). Large populations and skilled workforces show that there is immense potential in these markets and they in less than a decade, these markets would become the focal point for foreign investors and multinationals, many of which have already diversified into these markets (Harwood & International Finance Corporation, pp. 45-49, 2010).

One can expect that many of the companies from UK would prefer to divert their expansion plans from other European countries, which appear to be beleaguered with the European debt crisis then to the South Asian countries which have great potential for growth and have appeared to be recession proof. Therefore, this research attempts to explore and evaluate the decision making process and approach that UK retailers undertake for determining the attractiveness of South Asian markets.

Research Aim

The research would revolve around the following research question

“To explore and evaluate the decision making process of UK based companies in terms of international market selection with special focus on South Asian Markets”

Research objectives

Following would be the research objectives for this research

• To explore the variables, elements and entities which are given significant weightage when US based companies decide and select new markets for expansions

• To explore and analyse the tentative or formal approach that is used by UK companies To evaluate the effectiveness of different market strategies in the given context

• To understand and analyse the factors that make certain markets favourable or unfavourable for UK based companies

• To apply those thought processes and decision making variables to evaluating South Asian the attractiveness of South Asian markets

Literature Review

According to the Uppsala theory of Internationalisation, firms take an incremental approach towards international expansion. Firms are highly likely to start small and develop their presence, control, scope and reach within the international market in an incremental fashion as they gain knowledge and experience (Blomstermo & Sharma, 2003, p. 63). Furthermore, firms are more likely to first expand into markets which are physically close and then look to move towards market which are distant, once they have tested the international waters and gained the knowledge to sustain international operations (Sachse, 2011, p. 460).

Business Strategy Approach is another theory of internationalisation which believes that firms take a pragmatic approach while deciding to expand and engage in a trade off concerning a number of factors, which then help in making a final decision. For example, a firm in US might decide to expand into China, even if it has no other international presence near China if it appears that the return on investment would be attractive for the investors in the long term, even after adjusting for the political, cultural, economic and social risk (Margardt, 2009, p. 85). In the same way, if a European country thinks that the neighbouring European countries pose more political, economic, social, cultural, legal and competitive risks, the European country might start their internationalization from a distant country and then expand into the neighbouring countries, if deemed feasible (Blomstermo & Sharma, 2003, p. 63).

In the recent years, the network theory of internationalisation has also gained much prominence. The network theory emphasises, as the name suggests, on networks that a firm enjoys or can potentially build with the suppliers, competitors, customers, distributors and other stakeholders in any country (Sachse, 2011, p. 460). If any firm has a viable network with stakeholders in a foreign country, that allows the firm to gain critical and crucial information, only available to the insiders. Therefore, it speeds the internationalization process by assistance from the network members and ensuring that it does not make obvious mistakes (Margardt, 2009, p. 85).

A great deal of literature regarding international expansions rests on the selection of market entry strategy, something which is an integral aspect of the decision making process of firms that are trying to expand internationally. There are four most important market entry strategies namely, exporting, licensing or franchising, Joint ventures or Strategic alliances and Full ownership or direct entry. All of these entry methods have certain advantages and disadvantages and they can be evaluated on the factors of degree of risk, required initial investment, degree of ownership and control, degree of involvement and possible returns (Mines & Lamb, pp. 85-86, 2010).

Exporting is the traditional and the oldest ways of getting access to different markets. It offers minimal risk, minimal involvement but in turn, the profits are lesser and so is the degree of control. According to the literature, indirect exporting, where exporters sell their goods to intermediaries who take the charge from them thus, reducing the risk in return for commission (Lymbersky, pp. 69-71, 2008). On the other hand, direct exporting offers slightly greater returns with greater risk. Many firms prefer direct exporting and they decrease their risk with careful bargaining, understand other cultures, contacting the host governments, setting up offices in those countries, sending sales representatives or opening overseas subsidiaries (Kotler, pp. 75-76, 2010; Doole & Lowe, pp. 55-56, 2008).

Firms that are looking for greater involvement and risk in return for higher profitability potential and control, they go for the contractual mode which include licensing and franchising. With licensing, the company agrees to sell its trademark, brand name, symbol, logo, patent, trade secret, secret recipe, manufacturing process, technological innovation or other with a domestic firm who then operates with that name and in return the firm gets a share in profits or a fixed fee (Levi, pp. 63-65, 2007). Franchising is another approach in this regard and KFC is famous for the same. For example, KFC runs its operations in Pakistan through a company named Cupola who has authority over all operational decisions whereas the strategic power remains with the management of the KFC (Lymbersky, pp. 69-71, 2008). Although, this generates a stable stream of cash flows with less involvement, the fact is that contractual mode, if gone wrong, could be extremely damaging as well. Any wrong doing by the licensor or franchisee, the consequences of the same will have to be suffered by the firm because it is the name of the firm which is at stake. Furthermore, in the absence of a strong contract and partnership, the licensor may decide to start its own business after learning all the secrets and tips and tricks of the trade (Doole & Lowe, pp. 55-56, 2008).

When UniLever decided to enter into the Chinese ice market, it had various options but it decided to enter into a joint venture with Sumstar, a public sector company in China. Honda could have entered the India automobile market without any help but it joined hands with Hero Group and became Hero Honda in India. Similarly, Toyota initiated a joint venture with Indus Motors when it had to enter into Pakistan (Kotler, pp. 75-76, 2010). Joint ventures and strategic alliances are one of the most widely used methods by multinationals for market entry all over the world. Firms that lack knowledge about the host country, lack access to their supply and distribution channels or lack the physical, financial or intellectual resources may enter into joint ventures (Levi, pp. 63-65, 2007). Also, there are some downsides to joint ventures as well such disagreements with partners, cultural issues, conflict of interest and others (Lymbersky, pp. 69-71, 2008).

Full acquisition or direct entry is the market entry method which offers the most control, involvement and profit potential but at the same time, puts the organization at a greater risk as well. Furthermore, it requires the maximum initial investment and operating expenses (Levi, pp. 63-65, 2007). Firms might go for a green field investment strategy which is to start from scratch in terms of building a plant. Most firms go for direct investment when they are sure of the sustainability, profitability and viability of the investment and projects since the risk and initial investment in high (Bhattacharya, pp. 41-45, 2009).

Research Methodology

Research Philosophy

The research process consists of various research tasks in sequential process involving multiple and clearly distinct steps (Saunders et al, 2007) influences the way of thinking. The research is of two types; basic research and applied research (Easterby-Smith et al, 2002).This proposed study falls in to the category of the applied research as it is an attempt to improve the understanding of particular business or management problem to result in the solution. And, it is expected that the findings would be of practical relevance and value to the organisation. By context wise, it has the fixed time scale, undertaken by the people based in variety of settings including organisation and universities.

The research philosophy to be considered could be that of positivism or phenomenology. The positivism philosophy is more towards scientific research and usually ends with law-like generalisations, where as the phenomenology forms as logical part as it refers to the way in which we as a human, makes sense of the world around us. The phenomenological philosophy view formulate the researcher actively flexible, objective and allows to develop ideas all the way through social behavior (Saunders et al,2007). The phenomenological view of the research proposed to this study as it launches different views and ideas with flexible approach. Furthermore, the research would be inductive in nature which means it would take a “bottom-up” approach, moving from specific observations towards making broader generalisations, in an attempt to explore the patterns across different UK companies. Moreover, the question of how and why are the characteristics of the inductive approach which is proposed in this research.

Primary data collection;

This is essential because the primary data would be collected through dual types of data collection of archival data and email / postal questionnaire. The collection of the data will be through the companies who entered the market in the previous years. The Archival data which enables the researcher to mix some desirable changes in sequential process that equally produces an acceptable goodness to fit. The email / post questionnaire will be send to business that had the market entry in the past. Therefore, it would be important for the researcher to engage in a comprehensive process aimed at understanding and exploring the background, assumptions, predispositions, thought processes and approaches of the data so that subjective meanings could be understand from the primary data. However, in no possible way, only looking for subjective meanings and patterns would lead to the desired conclusions, it would be imperative to critically analyse all evidence, whether primary or secondary for generating new knowledge (McBurney & White, p. 96, 2009; Yin, p. 241, 2003; Silverman, p. 262, 2004).

Data Sources

The research would give equal attention and weightage to both the data sources, primary and secondary. This is because both primary and secondary data sources have their advantages and disadvantages and the best way to go about it is to use both them in such a way that they could complement each other. Nevertheless, considering the fact that not much research has been conducted on this specific topic, primary data and its analysis would be the focus of attention (McBurney & White, p. 96, 2009; Yin, p. 140, 2003).

Research Tools

Since the study aims at exploring the thought processes and decision making process, questionnaire is appears to be the best fit research tool. The questionnaire have been selected as the research tool because not only the target population is rather limited but at the same time, these questionnaire would allow to reach the respondents as the chance of having other types of data collections seems to tough due to their nature of business and the researcher’s time constraints. The respondents would be the company executives and senior managers who craft and orchestrate much of the international expansion process (McBurney & White, p. 96, 2009) in the past and future. The researcher has a plan to collect 15-20 filled up questionnaires to enable the depth in the research. The questionnaires will be piloted with at least three respondents before it float to other respondents. The questionnaire will have the valuable responses aim to explore and analyse;

How UK companies rank different countries on the basis of their attractiveness?

What factors they give the most weightage? and

How they made / make these entry decisions?

Sampling Methodology

Non-probability convenient sampling method appears to be suiting the needs of the research, although, it is more subjective and less reliable than objective and technical sampling techniques such as simple random sampling, stratified sampling, cluster sampling and others. The above mentioned sampling methods are more feasible when there is broad and well defined population (Silverman, p. 262, 2004). However, in this case the respondents are limited due to the nature of the work /industry and it would up to the researcher to select the most appropriate person for sending questionnaire and collecting the responses for the analysis and arrive the aanswer for the research question..

Logistical and Ethical Consideration

Since the research would rely heavily on data that would come from interviews conducted with executives and senior managers, ethical and logistical considerations would have to be given due importance. The interviewees would have to be informed about the research aims and only if they allow, the information provided by them should be made public or else it would have to be kept confidential (Goddard & Melville, pp. 106-108, 2008). Mostly likely, these interviews would be conducted in the offices of the respondents based on their appointments and availability.

Expected Outcomes

It is rather troublesome to expect any outcomes since there is no strong literature present in this regard but it can be expected that different companies would be making a list of factors that could influence their business in a country and assign weightage to them based on their business, products, offerings, required return on investment, product and industry life cycle, competitive pressures and others. Furthermore, many UK companies would be focusing more on the potential for growth and sustainability of that growth while choosing an international market (Mines & Lamb, pp. 85-86, 2010).

Planned Timetable

Conclusion

There are no doubts in the fact that as the world is becoming more global, more and more businesses are expanding into different countries. However, what remain uncertain is how they make these decisions, what factors are considered and how much weightage they are given. This research would not only find answer to these questions in context of UK based companies but it would also open avenues for further research. Furthermore, application of the frameworks on South Asian countries would also allow predicting and understanding the relative attractiveness of South Asian countries to UK companies and the same could be improved.

References