Competing In Emerging Market
Institutional environment analysis
An institutional void is referring to the absence of intermediaries like market research organizations and credit card system to effectively connect the buyers and sellers (Menkhoff, 2013). Market intermediaries refers to the middlemen on which the company is based on the wholesalers and retailers, agents and brokers, distributors or financial intermediaries typically enter into the long-term commitments with the producers and make up what is known as the marketing channel, channel of distribution. The present report is based on Smart control company which operates its business in commercial building automation and sell the various products of new technology. They design the controls into the building and also manufacture and then sell it nationally and internationally. The present report will provide client company information and about its business model in the US. Along with this, potential institutional voids that the client company may encounter if it were to operate in Peru will be analysed.
Smart control company is operating its business in the US where they have specialised market intermediaries (Hennart, 2012). As they have strong supply chain and they buy their raw materials from electronic components distributors i.e. resistors, capacitors, transistors, integrated circuits etc. Further, they also go to fabricated part suppliers to get the printed circuits boards manufactures and for avoiding distribution they go to the manufacturer directly like sensors and microcontroller. Apart from this their sales channel is that they manufacture the products and then sell it to system integrators to directly to customers who are the owner of the building. In order show reputation of company and product, they purchase qualified installer to install the product. Marketing channels of Smart control company in the US are a website, word of mouth, trade shows (ahr expo North America) though they are not as strong as previous years. Along with this they export their products in different countries such as UK, Australia, Canada etc.
At present Smart Control want to expand its business in Peru as there are certain institutional voids that the client company can encounter while operating in emerging market. Part of the problem which is believed is that the absence of regulatory system, specialised intermediaries and contract in emerging market are considered as institutional voids which can hamper the implementation of global strategies of cited company(Cuervo-Cazurra and Ramamurti, 2014). Soft infrastructure plays important role in the execution of the business model in home markets. However, in the Peru emerging market there is absence or underdeveloped infrastructure which is one of the issues that can be faced by Smart control. Along with this, there are few ends to end logistic providers due to which Smart control need to reduce the cost, they also face issues in getting transport material and finished goods. Furthermore, services provided by intermediaries are not available in emerging markets or they are sophisticated. Due to this reason Smart control unable to carry out its business operation and strategies in smoothly in Peru as compared to their home country. One of the main issues which smart control can face is related to the availability of quality raw material and advance technology for preparing its products (Kearney, 2012). Therefore, if the company does not get raw material on time then it unable to manufacture products on time. Along with this to develop a product it needs to have employees who possess technical skills. To produce a complex product company not only need hard infrastructure of logistics but also soft infrastructure in order to develop a deep supplier network which is not easy in Peru.
Furthermore, while entering into an emerging market Smart control need to relate their business model and their firm to competitors and other stakeholders in the emerging market (Hoskisson and et.al., 2013). It can enter into a market with a partnership or joint ventures with local companies. It is so because partners can be served as a valuable source for gathering local market information and substitute of missing marketing intermediaries. For instance, before entering a new market is important to properly analyse competitors, price and requirement of customer and this all can be done with the help of a local partner. Institutional voids lead to make difficult for Smart control to acquire new capabilities through collaborations (Sako, 2015).. Along with this partnership bring some profit as well as risk.
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In present era every organisation is in the need to explore the business to beat the competition. The same is the factor chosen by the Smart Control company to explore its business. It wants to make its position in the market of another country . There are various factors or institutional void which can affect the company while encompassing the another region. The absence of market intermediaries is generally referred as institutional voids. These intermediaries are either the available market place for them or any other system of transaction like credit card or other. This occurs when there is no effective support system.
Market intermediaries include middle man or the distributors which serves as a channel for transacting any business by transferring the products from manufacturer to the end users. They helps to accelerate the sales process. Various types of market intermediaries are as follows:
- Agents: They are the main individuals to expose the Samrt control to the customers or other to enhance the sell of products. While entering the new country, it makes it hard for any organisation to have a contact with any agent. Many government policies and rules play an important role while shaking hands with the people.
- Wholesalers:They are the person who takes bulk production of the Samrt control. As the company is new entrant, no other person will rely on it at the early stages and hence, make it difficult for them to avail more market region.
- Distributors: They are the individuals who promotes the business. No new men can do the favour for the Samrt control and hence reduce its sales sellers (Menkhoff, 2013).
- Retailers: They are the individuals who sell the products to the customers in a more direct way. Lack of trust is important factor which drives the new retailers away.
While entering the new country, the currency factor comes . Thus, government interruption is really very high (Marquis and Raynard, 2015).. This leads to inefficient transaction between the buyers and the sellers and hence ultimately, less sales. Credit card system is very important to have proper money transaction in any business. Government will put restriction to use the same in another country
The company has to enter the new market at the time which it has decided to do so. Every business have to face some challenges to reach to the destination. At the initial stages the company may face the problems of buyers, retailers, etc. But , with time the company has to set the healthy relations in the another company to explore the business and to attract more and more customers. The company has to invest more in the advertisement at the early stages. It has to bear some loss to start a business by offering various discount schemes for the customers. But , once the image get set, the business can achieve the success. Monetary transaction problem may also occur, for this the company has to contact at the other region at the early stages of installation, so that at the time of opening , no such kind of problem will occur.
Books and Journals:
Cuervo-Cazurra, A. and Ramamurti, R. eds., 2014. Understanding multinationals from emerging markets. Cambridge University Press.
Hennart, J.F., 2012. Emerging market multinationals and the theory of the multinational enterprise. Global Strategy Journal. 2(3), pp.168-187.
Hoskisson and et.al., 2013. Emerging multinationals from mid‐range economies: The influence of institutions and factor markets. Journal of Management Studies. 50(7). pp.1295-1321.
Kearney, C., 2012. Emerging markets research: Trends, issues and future directions. Emerging Markets Review. 13(2). pp.159-183.
Marquis, C. and Raynard, M., 2015. Institutional strategies in emerging markets. The Academy of Management Annals. 9(1). pp.291-335.
Menkhoff, L., 2013. Foreign exchange intervention in emerging markets: a survey of empirical studies. The World Economy. 36(9). pp.1187-1208.
Sako, M., 2015. Competing in emerging markets. Communications of the ACM. 58(4). pp.27-29