4.0 Mode of Entry and Justification for Selected Mode
Selecting the correct strategy for global expansion is a prerequisite to success in the international market. The choice of the appropriate strategy could very much ensure that the organisation is able to enter into the foreign market with a minimal amount of problems and to be able to establish itself fast and to achieve success very easily, without much obstacles that might be encountered by the use of a wrong strategy for international market entry. For entry to this market, there are many strategies that the restaurant business could use but the most positive and beneficial strategy that is capable of being used is the joint venture strategy, which has been seen as the easiest way for a company like this to be able to achieve a strategic alliance with another company, to facilitate market entry. This strategy for international market entry is very beneficial and highly justified as it is capable of ensuring good political connections with the local government, it would give access to distribution channel, depending on the relationship it has with its partner (Market Entry Strategy – Joint Venture Strategy, 2009).
By the use of this strategy for international expansion, this restaurant business and its partner would be able to adopt each others strategic goals which will converge and their competitive goals will effectively diverge (Market Entry Strategy – Joint Venture Strategy, 2009).
Additionally, the restaurant business is able to take advantage and benefit of the size, the market power, as well as the resources of the partner, as compared to the leaders within the industry. Next, the restaurant business is able to learn its other partner about the industry, it can learn about seasonal changes in trends and it can learn many things about the UAE food industry from its partner which will then enable it to compete by itself once it starts its franchise mode of business in UAE and becomes independent. Most of all, the restaurant is able to learn about pricing within the UAE food market, it is able to acquire technology from its partner and learn about everything it needs to know about rules and regulations that have been set by the Emirati government (Market Entry Strategy – Joint Venture Strategy, 2009).
5.0 Selection of Partner
Making a selection of the correct and suitable partner is very important for a successful venture and for this joint venture the partner that has been selected will be the Al-Marwai Restaurant & Club, which is in the main business district in Dubai. This restaurant is very famous and caters for a large amount of customers from the surrounding area. The restaurant specializes in service Arabic food exclusively. This restaurant as selected primarily because of its vast knowledge and experience of the industry and its popularity amount the residents of Dubai.
6.0 The Internal and External SWOT Analysis
This part of this report examined the what this organisation is strong at doing, what it is weak at doing, what opportunities that it has for it to use and what threats that it might experience. The most appropriate analytical tool that is to be used here will be the Swot tool which will provide the required information about the strengths, weaknesses, opportunities and threats being faced by the restaurant. By using this tool, the business would be able to determine what are the opportunities present which the business can exploit for its benefit (Mind Tools – The Swot Analysis Tool for Analyzing Business Performance, 2009)/
6.1 Strengths
Strengths Analysis
- Advantages that this organisation have?
- What are its strong points?
- What are the factors which help it get the sale that it wants?
(Mind Tools – The Swot Analysis Tool for Analyzing Business Performance, 2009)
Through having consideration of this via an internal perspective, it is quit apparent that the main strength of this organisation lies in the ability of the organisation to win a large market share through a offering a combination of food of high quality, efficient service and effective management that constantly emphasizes the importance of quality of all organisational operations. This is something that the competitors in the industry are not able to achieve. The most important strength is perhaps the fact that the organisation does have a very high quality process of production of food made possible through the use of the available technology. Externally, the organisation has a very strong reputation, especially among the expatriate crowd and its brand name is famous all over UAE and the Arabic Gulf.
6.2 Weaknesses
The Weaknesses analysis:
- What the organisation can improve on ?
- What the organisation needs to avoid?
- What factors makes the organisation lose its sales?
(Mind Tools – The Swot Analysis Tool for Analyzing Business Performance, 2009)
The main weakness faced by this organisation is the fact that it does not offer food from other parts of the world but Arabic food only. Among the local and expatriate crowd that it serves, these people tend to like to try food from other regions and cultures and not just Arabic food all the time as they are liked to get bored of the same food and would change to a competitor, hence causing it to lose customers. There is no harm with having more diverse food items offered on its menu.
6.3 Opportunities
The Opportunities analysis:
- What are the ideal opportunities that are facing the organisation?
- What are the very interesting trends which the organisation must be aware of?
(Mind Tools – The Swot Analysis Tool for Analyzing Business Performance, 2009)
The main opportunity facing this organisation is the influx of entry of highly skilled workers from the East, that especially like Chinese style food preparations and this presents a very good opportunity for the organisation to add more eastern type foods to its menu. The strengthening of the UAE economy will ensure that there is a good potential for growth of this organisation in the future and that their growth is unlikely to be hampered by bad economic conditions.
6.4 Threats
The Threats Analysis
- What are the factors in the environment that could affect its business very badly
- Is there a possibility of a change in social trends?
- What are the government regulations that affect it badly?
- How stiff is the competition in the industry?
(Mind Tools – The Swot Analysis Tool for Analyzing Business Performance, 2009)
Perhaps the main threat that is faced by this organisation is that the liberal policies of the UAE government have lowered the barriers to entry to major industries in UAU including the food industry, which means an increase in the number of competitors that will cause for more intense competition.
7.0 Food Industry Analysis (Examining the UAE Food Industry with the 5 Force Model)
This report is now concerned with making a complete analysis of the UAE food industry. This industry is quite competitive and large and it would now be examined by using the most appropriate analytical tool that has been designed to analyze an industry in question, like the food industry, for example. This tool that is used will be the Five Forces model framework. This tool was bought into existence by Porter and it is widely used to analyze how attractiveness or valuable a certain industry really is. In applying this tool, five fundamental competitive forces that are very important are identified in terms of threats that it has on a firm operating within the UAE food industry (Porter Five Forces Strategic Business Analysis Tool, 2009).
The threat of entry of new competitors is the first threat here and this competitive force relates to the ease or difficult for entrants to enter into the industry and to compete. By looking at the policies of the government to promote increased entry of firms into various Emirati industries, its relaxed rules and regulations, its overall friendly policies and the ability of new food businesses to enter and set up a food business at a relatively low cost, it is apparent that the threat of new entry into the UAE food industry is very high (Data Dubai – Food Industry in the UAE, 2009) and (Porter Five Forces Strategic Business Analysis Tool, 2009).
The next threat is the threat of substitutes and this deals with how simple is it for the product of the restaurant business to be substituted or to be produced at a lower costs. It is generally said that there can be no replacement for food but there definitely are replacements for how food is prepared. In essence, the consumers could always make their own food and not have to eat at the restaurants and this makes the threat of substitutes to be quite high in the UAE food industry (Data Dubai – Food Industry in the UAE, 2009) and (Porter Five Forces Strategic Business Analysis Tool, 2009).
The third force is the bargaining power of buyers the buyers in the industry, which in this case are the customers of the restaurants. The level of strength of the buyer will be very important here. In the UAE food industry, there are indeed many buyers and there are also many sellers. The bargaining power of the buyers would be very high because they are able to change to other restaurants very easily without having to spend much in switching from one restaurant to another restaurant. In addition, the existence of numerous restaurants would make it easy for consumers to find another restaurant that is more affordable and this shows that setting very high prices in an industry like this is not advisable (Porter Five Forces Strategic Business Analysis Tool, 2009).
The next force is the bargaining power of suppliers and this concerns the strength of the suppliers position and this concerns the amount of potential suppliers that are said to exist within the UAE food industry. There are numerous supplies for these restaurants within this industry and none of these have strong enough power to exert and influence over the restaurants, which means that the supplier bargaining power is low (Porter Five Forces Strategic Business Analysis Tool, 2009).
The threat of rivalry between existing industry players would be the next threat and this is said to be a very important threat that would be of concern for the restaurant business. Very strong competition does take place between restaurants that are already operating within this industry. There is no dominant player within industry and each of these compete extensively for market share (Porter Five Forces Strategic Business Analysis Tool, 2009).
8.0 Mission Statement of the Organisation
This restaurant’s mission statement is now discussed. In practice, the restaurant will have the following mission: To sell to its customers, food and drinks that are of a remarkable quality and very delicious. The food and drink that the restaurant sells has to be able to meets the very most highest quality standards, it has to be fresh and does combine cooking styles that are modern, creative and also traditional. Detail is given to all operations within the restaurant especially when it comes to creating and maintaining the restaurant. The restaurant also has the mission of providing the workers that work at the restaurant with a very friendly, a very cooperative and a truly highly rewarding place to work in.
9.0 Strategic Goals
9.1 Sustainable Strategic Advantages
The main strategic advantage that this business would have is the ability to customize its products to be able to meet the needs of particularly profitable segments of the target market.
9.2 Business Strategy
As for the business strategy that this firm is to pursue in UAE, consultation will be had to an analytical framework that was credited to the work of Porter, who had developed 3 so-called generic strategies which was argued by Porter as being able to be used either by itself or being used in combination so as to create a very defendable position as well as to be able to outperform its competitors. This would be the most proper tool which can be used to gain a competitive advantage in the UAE food industry. It was stated by Porter here that these strategies were essentially labelled as generic due to that it was capable of being properly applied to a very large variety of types of situations (Reference for Business – Competitive Strategies by Michael Porter, 2009). These three strategies are as follows below:
- Overall cost leadership strategy
- Differentiation strategy
- Focus on a certain market niche strategy
(Reference for Business – Competitive Strategies by Michael Porter, 2009)
9.3 Pursuing the Focus Strategy in UAE
It is these generic strategies that did provide a very good direction for the firms when it concerned the development of certain incentive systems, the development of control procedures, as well as certain other organizational arrangements (Kim, et al, 2004) and (Kroll, 1999). From looking at the competitiveness of the industry, the high potential for new entrants and the social trends of the local and expatriate consumers in UAE, the generic business strategy that will be selected for this restaurant business to pursue will be the focus strategy (Reference for Business – Competitive Strategies by Michael Porter, 2009).
This generic strategy which is also labelled as the niche strategy, is said to involves placing concentration on a certain customer type, a certain product line, a certain geographical area or a certain market niche. It is noted that the underlying premise in relation to the focus strategy would be that the organisation would be well and much better able to be capable of serving a certain limited segment of the UAE market much more efficiently as opposed to the competitors that act to serve a much wider customers range. The focus strategy is recommended to be used here as it is a very effective way to satisfy the needs to customers that do have a very distinctive preferences as well as specialized needs. In the UAE market, especially Dubai, there is a very large expatriate population that makes up 70% of the population of Dubai and it is apparent from research analysis that this population does prefer the type of oriental and fusion type food that is offered by this restaurant (Reference for Business – Competitive Strategies by Michael Porter, 2009) and (Porter, 1985).
9.4 Justification and Appropriateness of Using the Focus strategy
This strategy would be excellent to be used for this kind of a small and very aggressive businesses which might not be capable or even have the needed resources to be able to engage aggressively in a nationwide marketing effort in UAE. A number of firms have started very small through the use of a strategy like this and then they began to further expand into the format of a national organization. As this restaurant chain is able to gain more and more market knowledge as well as more acceptance within the UAE market, it would be able to expand even more and it can then start to focus more on the use of a cost leader strategy (Reference for Business – Competitive Strategies by Michael Porter, 2009).
A firm like this, which is able to use a focus strategy could be in a good position to be able to fashion its advertising and its promotional efforts to be suited for a particular market niche within UAE. Through the use of this strategy, this restaurant will be able to design its food products in a specific way for its customer. Since the community of Dubai tend to prefer Eastern and oriental type food, this restaurant could focus on selling Indian, Chinese, and other Eastern food to be able to cater for the preference and trends of the local and expatriate community in Dubai (Reference for Business – Competitive Strategies by Michael Porter, 2009).
The customization here could essentially range from the restaurant creating a certain product for the customer by permitting the customer to provide input for the finished product. Another type of customization could take the form of permitting the customer to make a selection from a menu of various predetermined options (Reference for Business – Competitive Strategies by Michael Porter, 2009).
10.0 Functional Strategy Discussion
10.1 The HR Strategy for the Business
With its new business format and its new place of business, this restaurant business will have to change its Human Resource practices in order to be able to make sure that its human resources are able to function at its optimal best when the firm begins its operations in the UAE. When this organisation develops its strategy to manage the HR in its organisation, there are two very critical questions which have to be addressed and the first of these relates to the type of people that need to be managed and how these are to be managed in order to achieve the strategic business objectives of this restaurant and the second issue concerns the type of people programs and also the kind of initiatives that have to be formulated, designed and also implemented in order to be able to attract, to develop and also to retain staff in order for the restaurant to be able to compete effectively in Qatar.
To be able to effectively address these issues a some key dimensions have to be addressed. The first of these includes culture which relates to the beliefs, the values, the norms as well as the management style of this restaurant. In essence, the human resources systems at this organisation, which comprised of the people focused mechanisms that are specifically designed to assists in the selection of employees selection, training of staff, rewarding of the staff, and career development for instance, have to be aligned with the cultural, factors and differences have to be eliminated (UAE Accel-Team – Human Resources Strategy, 2009).
The point that is being emphasise here is that the HR practices that the restaurant business is utilizing at its current location cannot be replicate in the UAE as it would tend to cause many problems within the HR of this organisation. The main point here is that the differences in HR practices in Malaysia and UAE means that the same HR strategy that was successful in Malaysia would be successful in the UAE. The inability of senior managers HR to focus on cultural and other differences in HR practices would mean that they will omit to change their HR practices to satisfy the requirements of HR efficiency in (UAE Accel-Team – Human Resources Strategy, 2009).
10.2 Marketing Mix Strategy for the Business
The suitable marketing mix strategy for this restaurant business will now be elaborated here. This marketing mix is useful when it comes to assisting the firm like this to be able to reach its business objectives through focusing on strategies related to the 4P’s which are price, product, place and promotion. For each of these 4P’s a strategy will be proposed to assist the organisation reach its objectives,
The products of this restaurant at present comprise of chicken rice and its menu does contain fusion items also. These products are recommended to be kept on the menu. However, because of the preference of the UAE consumers for Easter food, this would require additional food items to be included here, which should be comprised of food types from other parts of Asia, like Thai food, Indian food and some western food as well to cater for western expatriates. Hence, there is a need for there to be a modification of the current product line to include a more wider range of food to satisfy this particular market segment.
Being a highly competitive industry where buyers have high power of bargaining, setting the prices too high would be a mistake as customers would simply eat somewhere else and not at this restaurant. The pricing decisions must be made very intelligently here and the prices have to be set low at first so that it can be able to enhance competitiveness. Low prices and high quality would win the market share that the restaurant business needs.
The distribution of the core food products by this restaurant will be done through its restaurants. The place where the restaurant operates would be very crucial and is an important decision that could determine how successful this restaurant really can become. Since it is offering food that is likely to cater for an international crowd in Dubai, it will be advisable for this restaurant to open its outlets in areas that are densely populated with expatriate persons or next to the main office and commercial centers in Dubai. This would definitely ensure that the restaurant is able to be visible to the correct people and be patronized by them eventually. This is clearly more appropriate than opening in a secluded and obscure corner of Dubai where hardly anyone passes by.
Finally, the discussion would be on the promotion strategy that this restaurant is to adopt here. When the restaurant intends to promote themselves to their target market, it could use many different types of methods to get its message to the correct persons. The organisation is able to advertise itself on the available advertising modes in Dubai, like the billboard and poster advertising, promotion on the internet, especially on Dubai expatriate websites and also through newsletters and magazines often read by expatriates in Dubai.
10.3 Financial Management Strategy
The minimization of risks of financial transactions will be important for this kind of business and a clear and accurate financial strategy will be proposed here. One of the main risks of international business is to existence of exchange rate fluctuations and if not properly managed, this risk could have some very bad effects for the firm’s finances which means that the proper management of these fluctuations will be very important. The main exposure that this firm has to be concerned about is the transactional exposures that is said to have an effect of level of profitability of a certain business transaction that the firm engages in and that is denominated in some other foreign currency. Firms normally use the operational hedge strategy to be able to minimize the risks. Here, the firm would seek to achieve a certain match of the revenue of the said currency via same flow of the costs (Griffin and Pustay, 2010).
PROFORMA
11.0 Control Framework
There needs to be some very tight controls to be placed on this strategic plan to ensure that the restaurant will be capable of making sure that they achieve their strategic goals and vision. Investments that are small have to be made so that more supervision can be made on the progress that the plan is taking and that there also as to be a strategy to put the plan back on track in case the objectives are in capable of being met well. When control is not able to be effected, then the vulnerabilities will be high and chances of the plan being affected by an external or internal threat is apparent.
12.0 Uncertainties
In a venture like this, the number of uncertainties can be very high, especially in a case where an international firm is operating within an international market domain. These uncertainties could be in the form of uncertainties of economic stability, uncertainties of expatriate trends in UAE, uncertainties of government regulation in UAE, that might change in the event of a change of governments, and the uncertainty of war and terror attacks that could disrupt or even ruin a business.
13.0 Contingencies
For a challenging and very risky business venture like this, it is always useful for there to be attention given to contingencies. There needs to be some kinds of a plan that deals with these contingencies that might arise in the modern day business environment that is very challenging and uncertain. This would mean that it is very important for the business to have a “plan B” that can be used in case something goes wrong or that an uncertainty that was project did become are reality. Hence, it is advisable for the business to plan way ahead of time to make sure that the negative impacts of these problems are reduced as much as they can. Back-up resources will be very important and crucial here.
14.0 Conclusion
After a great deal of analysis, the selected country for international expansion by this restaurant business from Malaysia was the UAE as there was great potential for the business to expand to Dubai. Things are made very easy for an international business due to decent and encouraging government regulations that did promote entry of foreign business. Together with its high economic growth and promising social trends, UAE was certainly the place to be for a business like this. The mode of entry that was selected as the joint venture strategy that ensure a string of benefits could be enjoyed by the restaurant business together with more control over its operations and direct participation as well. A perfect partner for expansion was selected and through the joint venture, many important and much needed technical knowledge and abilities can be learned and used to improve the business.
15.0 Reference
Pest Analysis, 2009: available from this resource-
retrieved on: 7-12-2009
Market Entry Strategy – Joint Venture Strategy, 2009: available from this resource-
retrieved on: 8-12-2009
Mind Tools – The Swot Analysis Tool for Analyzing Business Performance, 2009: available from this resource-
retrieved on: 7-12-2009
Porter Five Forces Strategic Business Analysis Tool, 2009: available from this resource-
retrieved on: 7-12-2009
Reference for Business – Competitive Strategies by Michael Porter, 2009: available from this resource-
retrieved on: 8-12-2009
UAE Accel-Team – Human Resources Strategy, 2009: available from this resource-
retrieved on: 8-12-2009
UEA Setting Up A Business, 2009: available from this resource-
retrieved on: 7-12-2009
Invest Qatar, 2009: available from this resource-
retrieved on: 7-12-2009
Time Out Dubai, 2009: available from this resource-
retrieved on: 7-12-2009
Dubai Chronicle –Pillar of Economic Stability, 2009: available from this resource-
retrieved on: 7-12-2009
UAE Interact - Political System, 2009: available from this resource-
retrieved on: 8-12-2009
UAE Business Law, 2009: available from this resource-
retrieved on: 10-12-2009
Qatar Business Scene, 2009: available from this resource-
retrieved on: 7-12-2009
Data Dubai – Food Industry in the UAE, 2009: available from this resource-
retrieved on: 6-12-2009
Uaeinteract – Stability of Food Prices, 2009: available from this resource-
retrieved on: 6-12-2009
Kim, E., D. Nam, and J.L. Stimpert, 2004. "Testing the Applicability of Porter's Generic Strategies in the Digital Age: A Study of Korean Cyber Malls." Journal of Business Strategies 21, no. 1 (2004): 19–45.
Kroll, M., P. Wright, and R. Heiens, 1999. "The Contribution of Product Quality to Competitive Advantage." Strategic Management Journal 20 (1999): 375–84.
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Griffin R and Pustay M, 2010 “International Business” 6th Edition Pearson
