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Market entry is superficially defined as the way a company decides to enter a particular market and reach the new consumers. With the advancement of industrialization and globalization, companies have had to conform to the new ways of reaching the global markets due to the intensive competition especially within the domestic environment (Yirmibeşoğlu 2015). There are several ways in which a company may decide to enter into a foreign market. No market entry strategy may be defined as the best as not any one would work for all international markets. There are several concepts of globalization that need to be analyzed and met in regards to entering international markets and reaching global consumers. These are concepts that are in line with the fact that the entry modes are affected by the degree of risk they present, the commitment and control of the required resources, as well as the promising return of investment. These are the aspects that most companies consider when getting into a new market. However, despite the fact that the concept of globalization and internationalization are fast catching up with the trends and strategies in modern companies, it is quite apparent that there is need for more consideration than more than just the internal aspects and profits of the company. It is quite obvious that the external risks present in the target market are analyzed as well (Hill 2008). These factors include the economic landscape of the target environment as well as the political situation in the country. Studying the trends in the target market are all essential aspects when an international company intends to join a new market. In light of this, it would be easier to create a base for culturally appropriate products.
Indian Smartphone Market
The use of smartphones has tremendously grown the world over. The Indian market for mobile phones is the second largest in the world. The country presents the third largest global market for smartphones and thus presents a particularly attractive one for smartphone markets. It is prudent to note that there are over 200 brands of smartphones targeting the 250 million units per annum mobile phone market that is in India (Davey and Davey 2014). As the market in India quickly transitions to smartphones, it is rather ostensible that several Chinese phone manufacturers are flocking the Indian market. With brands such as Oppo, Lenovo, Gionee, among others marking a place in India, it is quite obvious that there is a great portfolio of smartphones in the country. The latest entrant in the smartphones market in India is Pantech. Unlike the earlier mentioned brands, Pantech is a South Korean mobile phones manufacturing company. Started in 1991, the company commands a sizeable share of the domestic market in the United States, China, Japan, and Europe and is the second best-selling mobile phone maker in South Korea. Most of the transactions outside the Korean market are carried out in partnership with other significant companies in the handset industry such as Samsung and PCD. However, 2014 saw the company listed for bankruptcy with over $475 million in debt. Nevertheless, the following year saw Business Korea report that the Korean market regulators had approved the acquisition of the company by a local technology consortium led by Solid and Optis. With a new lease of life by the new parent companies, it is rather apparent that the company seeks to extend their brand name into the Indian market and book a space in the second largest mobile phone market in the world.
India is generally a price sensitive market and as such there is a critical need of assessment of the value for money for any success for a company. With a market that has an almost standard value to be around $100 to $200 it is rather apparent that a company needs a portfolio that meets this critical aspect (Davey and Davey 2014). The entry strategy of the company not only needs to align itself of the profits from the market but also in line with the purchasing power of the target market. Likewise, it is pretty ostensible that the Indian market thrives on online retailing. This implies that for Pantech Inc. to make a significant entry into the market, there is urgent need for the company to appreciate the presence of the leading online players like Amazon ad Flipkart and get into exclusive sales arrangements or go it alone. In India, online smartphone retailing contributes to more than 10% of the sales. This is a sizeable market considering the country is known to purchase more than a quarter of a billion units of mobile phones in a single year. Online markets not only increases the visibility of the brand but also reduces the time to market and increases the scale of sales. While offline markets may be more advantageous in terms of reaching the scale, it is quite apparent that this type of market would take time to build and as such mobile companies such as Lenovo and Xiaomi that are commanding large shares in this market have definitely mastered the strategy of online marketing.
Entry Strategy for Pantech Inc.
It is quite obvious that the most essential form of entry that Pantech takes in entering the Indian market is through exporting. Exporting is a market entry strategy whereby a company sells services and goods produced in one country to another country or other countries (Peng et al. 2008). Pantech Inc. being a South Korean country implies that the goods to be sold to the Indian market would be direct imports from South Korea. As such, even by going online, the products to be sold would be direct imports from South Korea. In this light, it is quite obvious that a collaborative approach would imply that Pantech Inc. For instance it would be prudent to create build a relationship with major mobile phone carriers such Xiaomi and Samsung. It is quite obvious that Samsung has at least a 10% stake in the company having bought the stakes when the company faced losses and was on the verge of bankruptcy. With Samsung being the number one electronics company in India, it is quite ostensible that the Pantech Inc. has a clear head start in its bid to enter the Indian market. Samsung is likely to take over the franchise management as well as the stocking of goods. In this regards, the entry of Pantech may buy into the niche created by Samsung in the Indian market. However, Pantech may enter into this market as a stand-alone company or as a wholly owned subsidiary. This implies that the company would require an indirect way of exporting by collaborating with other trading companies for licensing agreements and franchising as well as distribution of products. For instance, by collaborating with Amazon or Flipkart, the company would buy into the already existing online trading base. However, with a company that has faced losses in the recent years, entry as a WOS would imply more costs and time towards reaching the target market and making substantial gain in the already flocked smartphone industry that is India.
Nevertheless, besides considering the profits that are associated with venturing into a new market it is quite obvious that there are other factors that ought to be considered in terms of the environment for trade. These are aspects such as the political, cultural, and the economic context of doing business.
India is a democratic nation in which the government places a significant active role in determination of the business affair. Being the largest democracy in the world implies that politics has a significant influence in the ways of life both economically and socially. However, despite this fact, it is quite apparent that this is a country where only a handful of the political class control more than a sixth of the world population. Politics, not the government, significantly controls business in India. Political changes also have a fundamental influence in the way companies and especially international and global ones run business. The relationship between politics and business is seen in the fact that business has to work within the framework of rules and laws of the country. Some significant aspects in the laws of the country include the rights of the citizens as specified by the constitution, flexibility and adaptability of the laws, laws about promotion, as well as the promotion and expansion of business, judicial system of the country, among others. However, it is prudent to note that the recent years have seen substantial modifications in several laws governing the business environment in India. One of the most significant aspects in the changes in doing business is the removal of controls in foreign exchange and the liberalization of foreign direct investment, which has consequently led to the entry of several global and multinational companies into the country.
Nevertheless, it is notable that crony capitalism has proven to be a major challenge in carrying out business in India. According to Asher and Novosad (2017), political favoritism has proven that there is an increase in corruption that has raised costs in doing business and reduce the efficiency and resulting income transfers that have proven to be regressive in the environment for carrying out business.
Economic Context of Doing Business
Economic freedom is perhaps one of the most notable concepts when discussing the economic environment of doing business in any nation. Beach and Miles (2006) define economic freedom as "the absolute right of property ownership, fully realized freedoms of movement for labour, capital and goods and an absolute absence of coercion or constraint of economic liberty beyond the extent necessary for citizens to protect and maintain liberty itself". India ranks at position 130 in index in economic freedom up by 13 spots from 2017 according to the Index of Economic Freedom (Miller 2018). This leap is an implication that the country is definitely moving towards becoming an open-market economy. This economic spat has been prompted by reforms in judicial effectiveness as well as the government integrity, business freedom, and fiscal health. In addition to that, there have been significant changes towards economic liberalization measures including aspects of industrial deregulation and privatization of several state-owned enterprises. Besides, the government policies have transformed to reduce controls on foreign trade and investment. Trade with government agencies have also seen increased transparency. Despite the improved economic environment in India, it is quite apparent that the cost of doing business for foreign companies still faces several impediments thus making it an expensive and challenging venture. The Heritage Foundation reports that the openness of the government to foreign investment still remains below average. As such, state-owned corporations still dominate the financial sector and foreign participation is quite limited.
It is quite notable that despite the challenges that exist in doing business in India for foreign investors, the country still boasts of an economic growth that thrives essentially on Foreign Direct Investment (Balasubramanyam and Sapsford 2007). In 2015, the Financial Times reported that India had overtaken the United States and China to claim the top spot as the most preferred country for foreign investment globally (Miller 2015). The country has risen substantially in terms of FDI especially after the Make in India initiatives that saw increased liberalization and increased upper limit for foreign investment from 26% to 49% in the essential sector (Goyal et al. 2015). The changes in the economic environment in India has seen its economy move from a command economy to a mixed and market economy. These changes imply that there is a line between private ownership and the government ownership of resources and companies (Aggarwal and Aggarwal 2012). In addition to that aspects of capitalism dominant in a market economy are also apparent in the economic system of India. In this regard, property rights and individualism are respected especially in line with the democratic structure that India observes.
As globalization continues to be rife and companies continue to expand across borders and continents, global markets are becoming more accessible. However, with the increased in international opportunities, it is rather apparent that there is an increase in challenges especially in terms of cultural diversity. In this regards, collaboration between multinational and cross-cultural teams is becoming quite common (Christie et al. 2003). Along with the benefits that come with insight and expertise, global corporations face the potential challenge of culture and international business. Culture may be defined in many ways but is simply defined as the accepted norms and beliefs accepted by a society. However, in a business context, culture is defined as that which is accepted professionally from one country to another. Understanding how culture affects business is core towards successful entry into a country. Culture has a direct impact on the strategic direction that a business intends to take. It influences the decisions, management and the business functions such as production and accounting. Culture affects how the intended market for a business communicates and behaves. It also affects how they carry out transactions and negotiate them. Differences in culture may create barriers that impede or stymie the negotiating process for a successful business transaction (Baron and Baron 2003).
In India, for instance, the culture may be defined as an amalgamation of several cultures that have been greatly influenced in evolution for millenniums. The country is made of 29 states each with distinct cultures heavily influenced by traditional religions. India is one of the countries with the highest diversity in religions and is one of the most deeply religious society in the world. Religion place a significant and definitive role in the lives of most Indians with religions varying from Islam, Hinduism, Buddhism, Christianity, etc. Language is also diverse in various parts of India and the dressings and age and family structure determine a lot in terms of interaction between the various members of the society.
Generally, politics, economic environment and the culture of the people of India play a significant role in determining how business is ran. In a country that boasts one of the highest populations in the world, it is rather apparent that any multinational company intending to join the Indian market would have to create a strategic entry platform in this light. With a more liberal market and an improving global market and economic freedom index, it is rather apparent that India is quickly becoming a major force in terms of foreign investment. This fact plays a significant part of consideration for Pantech Inc. in its quest to join the Indian smartphone market. The Indian smartphone market is the third in rank in the world and is thus a multibillion dollar industry. This explains the increase in mobile market in the country. In this regards, Pantech Inc. may consider an entry strategy that also considers the political laws and regulations as well as the business culture. Perhaps the growth of the FDI in the country would favour a direct export strategy with aspects of indirect entry that buys into existing frameworks for licensing and franchising.
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