Nowadays, many companies are increasing their business globally. Some enterprises purchase various materials from one country, implement their production policy in another state, and, finally, sell their products and services in other different countries. Some firms have opted to transfer their departments to the foreign nations in the entire world, contributing to economic globalization. Abu Dhabi Ports is a company that intends to expand into the international market. The firm is currently based in the United Arab Emirates (UAE), but they plan to develop their business in Italy. Therefore, the current report will analyze the suitability of Italy as an expansion destination for Abu Dhabi Ports, formulate a market mix for the company, and recommend a market entry strategy for Abu Dhabi Ports in the new country.
In the course of the given report, it became evident that Italy is a suitable destination for Abu Dhabi Ports company expansion. Among the factors that contribute to the suitability of the given country include low inflation rate, political stability, and a favorable economic system. Regarding market mixing, the firm will produce high quality products at affordable prices, while mainly using the Internet to promote its products and services. Moreover, the company will include permanent online presence as well as physical offices as its placement strategy. An ethnocentric approach will be used in staffing while its market entry strategy will be in the form of a wholly owned subsidiary. Lastly, the firm will use the global standardization strategy to compete in the international market.
Abu Dhabi Ports was founded in the year 2006 by the UAE master, developer of ports, Emiri Decree. The company was formed as part of the reform plan for the commercial port sector of the UAE. It was mandated to control and regulate the assets of the firm that preceded it, the Abu Dhabi Seaports Authority (ADSA). The company is an important contributor to the general economic growth of the UAE. Its main responsibility is managing and developing ports as well as industrial zones in the country. Under the management of the company there are eleven ports, some being commercial, community, logistics and others leisure ports. The company ensures that all of them are operating efficiently in Abu Dhabi (Abu Dhabi Ports, 2016).
Country and Market Analysis
Italy is ranked 10th in the world as foreign direct investment (FDI) destination according to the World Investment Report provided by the UNCTAD. The World Bank places the FDI inflows for Italy at approximately 0.6%. Italy’s strengths as an expansion destination for Abu Dhabi Ports include the fact that the country has highly qualified personnel with technical know-how and experience. Moreover, as a member of the European Union (EU), Italy inclined by the laws of the union treaties and laws to welcome FDI. Additionally, registering a company in the country is easy as the registration can be done over the Internet through a dedicated website provided the Union of Italian Chambers of Commerce.
Italy was ranked 65th, with O.50 points of a possible 2.50, in the world due to its political stability. Consequently, Abu Dhabi Ports can easily and successfully expand to this country. Regarding its economy, Italy is ranked 3rd in the Euro Zone, number eight in the world for nominal GDP, and 12th by GDP. The country is also one of the largest exporters in the world, as it is ranked 8th in the world. This will be advantageous for Abu Dhabi Ports as exporting falls under the services the company offers. The economy of Italy will also support the other aspect of the company, the industrial part, as it is ranked second in Europe for manufacturing after Germany. The country is a world leader in producing luxury cars, industrial equipment, home appliances and high end fashion.
Italy has a mixed economic system, which has the characteristics of both capitalist and socialist market. Private property is, therefore, protected in the economic system while social goals are achieved through the intervention of the government. This means that the company will be able to remain profitable, while contributing positively to the society of its host country, such as Italy.
When the country’s consumer price index is considered, Italy has an average inflation rate of -0.17%. Over the years, the country has managed to maintain a low rate of inflation whit the highest 3.29% in 2011 and the lowest 0.00% in 2014. The significantly low and stable inflation rates serve as an added advantage for the company due to many reasons. First, low inflations result in stable economies and ultimately strong business. Secondly, low inflations encourage competition hence giving the company a fair short of competing in the international market.
Market Mixing and Staffing Policy
A market mix refers to the tactics and actions that the company will use to promote its brand in the new market. There are four elements in a market mix, namely the price, product, promotion, and place. The product will be the services that the company, the Abu Dhabi Ports, will provide to the consumer from its new location in Italy as well as other goods from its industrial activities.
The company will offer its products and services of a high quality, which will be created with for the consumer benefit. That is, the products and services will be aimed at solving specific problems identified by the consumer. For this reason, the target clients for the company’s products and services will be first identified and a research conducted to define their needs and requirements.
Regarding pricing policy, the company will determine the price for each product or service based on the value it brings to the consumer. However, the production, distribution costs and pricing of the competitors will also ultimately influence the prices that Abu Dhabi Ports will set for its products and services.
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Promotion refers to the overall strategies and techniques that the company will employ in marketing itself as a brand and its products. The Internet and social media mostly will be used as they are the most popular and effective platforms in business today. The platform is also cost effective when compared to the avenues such as television and print. In addition, the people seeking freight transport from other countries usually use the Internet, hence the need to focus on it as the primary platform for promotion. Search engine optimization will be involved to make the company emerge first in cases when the freight transport is required in the World Wide Web. A special offer, for example a subtraction of 10% from the actual cost of goods and services, will be given to the businesses based outside of the middle east as an incentive to implement their work with the newly expanded and relatively unknown company Abu Dhabi Ports.
Placing in this context refers to the manufacturing of a product, which is available to the final consumer For this reason, location be focused on distribution. The company will have a large web involved, as well as physical presence, since bookings will be made online and also in the booking offices spread around UAE and Italy.
The company will apply the ethnocentric approach of staffing. Due to such a policy, the topmost positions in the firm will be filled by expatriates from the UAE, while the junior positions will be occupied by the experts from Italy. This approach will be selected due to the fact that the expatriates will represent better the interests of the company in a foreign land than the foreigners. The approach will be also advantageous as it uses expatriates from the current staff of the company. For this reason, the foreign experts will already have the knowledge of working in the company. Consequently, it will not be necessary to provide additional training for these people. The language and cultural barriers affecting foreign staffing policies will not be an issue when the ethnocentric approach is used, since the employed expatriates come from the home country.
Market Entry Strategy
The first market entry strategy involves exporting products directly to the customer. While using exporting as a strategy, the company will be responsible for the market research, overseas distribution shipment logistics, and the actual collecting of the payment. This strategy is advantageous due to the fact that it usually causes the realization of high profits. The benefits usually result from the elimination of the intermediaries. In addition, the company will have the privilege of knowing personally all its customers as well as exercise the control over each element of transaction. Feedback on the quality and performance of the product will be easily obtained as the company will be in the direct contact with the customers. Moreover, exporting leads to a better general understanding of the marketplace, which is an added advantage for Abu Dhabi Ports (Reynolds, 2003).
It is worth noting that exporting has a number of disadvantages. The main deficiencies include the fact that the export business is rather costly. In addition, creating a customer base, which is sufficient to sustain the business, would be a challenge. Responding to the feedback of each consumer may be impossible, especially when the company has a large customer base. Lastly, the given firm will have to bear great responsibility, which may be overwhelming to the company, especially the transaction liability (Reynolds, 2003).
A turnkey project is a program created with the intention of being sold upon its completion. The main advantage of the turnkey project is that it provides a ready solution to an existing problem. Other advantages include the fact that the owner will not incur any expenses until the project is completed and the project developer is highly rewarded after it is finished and sold. The disadvantage of this strategy is that the buyer will have to trust the developer in order to deliver a high quality project, and the developer will incur huge expenses during the implementation of the project.
Licensing refers to a situation, where a company, which owns a brand, a piece of technology or a firm, agrees to allow another business entity to use its assets and competitive advantage, while assuming the low risk in a foreign market. The strategy is advantageous as it facilitates quick entry into a foreign market through a partner. Secondly, the given program is not affected by the local barriers to the related entry as it uses a local partner. The main disadvantage is that the company licensing will assume the highest risk and capital investment. In addition, quality control becomes rather hard as the company will not be able to ensure sufficient control (Reynolds, 2003).
Franchising as an entry mode refers to a situation, where the local business owners would pay the certain amount of fee to a large company in order to use its trademark, offer its products and services, and also to apply its style of doing business. The advantages of franchising include low financial costs to the parent company, low political risks, facilitates easy expansion for the firms into the global market, and the fact that the partners will bring the financial investments to the parent company. The disadvantages include the difficulty for the parent company to maintain control over the franchise, rampant conflicts between franchisers and franchisees, the constant monitoring and evaluation as well as the possibility of a franchisee to become the future competitor (Sherman, 2004).
A joint venture occurs when two or more businesses bring together their resources in the pursuit of a common goal. The preferences of a joint venture include the expertise and capacity that the involved parties will gain. In addition, they will get access to the greater resources during the venture and share the risks, which occur while doing the business. The disadvantages include the unequal distribution of expertise, investment or resources throughout the parties in the venture. Moreover, forming the right partnership may be challenging and timewasting as it requires much time to establish business relationship.
Wholly Owned Subsidiary (WOS)
This occurs, when a company owns 100% of the common stock of another business entity. Moreover, it would be the best market entry strategy for Abu Dhabi Ports into Italy due to the fact that it is the most appropriate for the companies seeking to operate in a location away from the parent company, venture into new markets or try a different industry. The main advantage is that the parent company will have control over its WOS. The parent enterprise can appoint expatriates as executives for the WOS, hence establishing an operating process similar to its own. The resources from the parent company can be used by the WOS, which will increase its efficiency. The disadvantages include the cost of wholly owning a subsidiary. Moreover, the parent form requires much time to establish good relationships with the customers and suppliers. Finally, the company will face the problem of cultural barriers when the expatriates are used to run the WOS. In addition, all the risks related to the WOS will be assumed by the parent company.
International Business Operations Strategy
Ii is considered that the most appropriate international strategy for Abu Dhabi Ports would be the program of global standardization. The strategy involves marketing the company’s products in such a way that the marketing campaign will conform to the cultures other than the one of the parent company. Due to the fact that the firm will be operating in Italy, the strategy will be the most appropriate as the culture of the UAE, the company’s mother country, is different from that of Italy, which is the country, in which the company intends to invest. (Yadong, 1999).