Assignment No:1

Course:Research Methodology (RM)

Faculty Name:Dr. Shambhu Sajith
Assignment: Research Methodology
Title: Evaluating Market Entry Strategies for an FMCG Company in Emerging Economies

LITERATURE REVIEW
Market Entry Modes
Joint Ventures: Joint ventures (JVs) are the strategic alliances where two or more parties come
together to undertake a specific project or business activity, sharing both risks and rewards. In the
context of FMCG companies entering emerging markets, JVs have become a popular strategy due
to their ability to mitigate challenges associated with new market entry.As Joint ventures offer a
robust strategy making the FMCG companies easy to enter emerging markets. By leveraging local
expertise, navigating regulatory landscapes, and sharing risks, foreign firms can enhance their
chances of successful market entry and long-term sustainability.
Benefits of Joint Ventures:
1) The partnership of a foreign FMCG companies with local firms provides valuable insights
into consumer behavior, cultural preferences, and market dynamics. As local partners are
often more adept at understanding regional tastes and purchasing patterns, which can
enhance product acceptance.
2) The local firms typically have established distribution channels and relationships with
retailers, which can be crucial for effective market penetration. This access allows foreign
companies to scale quickly without having to build their distribution network from scratch.
3) While entering a new market , FMCG companies involves significant risks, including
financial investment and market uncertainty. By forming a joint venture, FMCG companies
can share these risks with their local partners, making it easier to manage potential losses.
Challenges of Joint Ventures:
1) Sharing the control over the strategic decisions and operational management can lead to
conflicts. So to minimize the disputes clear agreements and governance structures are
essential.
2) By relying heavily on the local partners vulnerabilities can be there, particularly if the
partner's business faces challenges or if their strategic goals diverge from those of the
foreign company.
3) In case of misalignments in corporate culture and management styles between the
foreign and local partners can create friction and hinder collaboration.

Franchising: Franchising is a business model in which a franchisor grants a local partner (the
franchisee) the rights to use its brand, business model, and product offerings in exchange for a fee
or a percentage of sales. This arrangement allows the franchisor to expand its market presence with
lower investment costs compared to direct ownership.Franchising is a viable market entry strategy
for FMCG companies looking to expand into emerging economies. It offers lower investment
requirements, faster market penetration, and the ability to leverage local expertise. However, careful
management of franchisee relationships and maintaining brand consistency are critical to the
success of this model.
Benefits of Franchising:
1) Franchising requires less capital investment from the franchisor, as franchisees typically
bear the costs of establishing and operating the business. This reduces financial exposure
while allowing for rapid expansion.
2) By leveraging local franchisees, FMCG companies can quickly enter new markets and reach
a broader consumer base. Franchisees often have established local knowledge, networks,
and customer relationships, which facilitate a quicker rollout of products.
3) Franchisees benefit from the established brand reputation of the franchisor, which can lead
to immediate customer trust and loyalty. This is particularly valuable in emerging economies
where brand perception can heavily influence purchasing decisions.
4) Marketing and Operational strategies can be tailored to fit local consumer preferences and
cultural nuances, allowing the brand to resonate more effectively with the target market.
Challenges of Franchising:
1) The franchisors may have limited control over how franchisees operate their businesses.
This can lead to inconsistencies in product quality, customer service, and brand
representation, which may harm the brand's reputation.
2) Chances of disputes are high and can arise between franchisors and franchisees regarding
operational practices, brand standards, or financial obligations. Like mentioned above ,clear
contracts and ongoing communication are essential to mitigate these issues.
3) In some cases, rapid franchise expansion can lead to market saturation, where too many
outlets compete for the same customer base, diluting profitability for individual franchisees.
4) The overall success of the brand in the market becomes heavily dependent on the
performance and management of individual franchisees. Poorly performing franchisees can
negatively impact brand image and sales.

Direct Investment: Direct investment, often referred to as foreign direct investment (FDI),
involves an FMCG company establishing wholly-owned subsidiaries or acquiring local firms in the
target market. This strategy provides several advantages and challenges.While direct investment can
be a highly effective market entry strategy for FMCG companies looking to establish a strong
foothold in emerging economies, it requires careful consideration of the associated risks and a clear
understanding of the local market dynamics. Proper risk management and strategic planning are
essential to maximize the benefits of this approach
Advantages of Direct Investment:
1) Direct investment allows the company full control over operations, branding, and strategic
decisions, enabling tailored approaches to local market demands.
2) Acquiring local firms can provide valuable insights into consumer preferences, regulatory
environments, and distribution networks, enhancing market penetration strategies.
3) Establishing a physical presence can signal a long-term commitment to the market,
potentially fostering brand loyalty among local consumers.
 4) The integration of local operations with global resources can lead to synergies in production,
marketing, and distribution, often resulting in lower operational costs.

Challenges of Direct Investment:

1) Direct investment can strain the company's finances, especially in the initial stages, as it
requires substantial financial resources for establishment or acquisition.
2) Companies face increased risks related to political instability, economic fluctuations, and
changes in local regulations, particularly in emerging markets.
3) Successfully managing a wholly-owned subsidiary or local acquisition may necessitate
adapting corporate culture to fit local norms and practices, which can be challenging.
4) Navigating the legal and regulatory landscape in a new market can be complex, with
potential barriers to entry that require thorough due diligence.

Resource-Based View (RBV): This theory emphasizes that a firm’s internal resources and
capabilities are key to achieving and sustaining a competitive advantage. When applied to market
entry strategies for FMCG companies, RBV suggests that the firms which can effectively leverage
unique and valuable resources such as brand equity, supply chain efficiency, proprietary technology,
or unique product formulations are more likely to succeed in foreign markets.
For any FMCG company entering an emerging economy, these above mentioned resources will
offer differentiation in a competitive landscape, providing advantages that local competitors might
not easily replicate. For example, strong brand equity can foster consumer trust, while a highly
efficient supply chain can reduce operational costs and improve service delivery in new markets.
The challenge lies in identifying which internal resources can be adapted or applied effectively in
the new market to meet local consumer needs and preferences.

Additionally, RBV highlights the importance of maintaining the rarity, inimitability, and non-
substitutability of these resources, which ensures that competitors cannot easily copy or replace
them, further solidifying the company’s market position.
PESTEL Analysis:
A PESTEL analysis is an acronym for a tool used to identify the external forces facing an
organisation. The letters stand for Political, Economic, Social, Technological, Environmental and
Legal. In this blog, we will look at what a PESTEL analysis is used for as well as the advantages
and disadvantages of using it in a business setting.
In marketing, before any kind of strategy or tactical plan can be implemented, it is fundamental to
conduct a full situational analysis. This analysis should be repeated every six months to identify any
changes in the macro-environment. Organisations that successfully monitor and respond to changes
in the macro-environment can differentiate from the competition and thus have a competitive
advantage over others.
The framework is also used to identify potential threats and weaknesses which are used in a SWOT
analysis when identifying any strengths, weaknesses, opportunities and threats to a business.
Let’s look at each element of a PESTEL analysis.

Political Factors
The factors that determine the extent to which government and government policy may impact on
an organisation or a specific industry. This would include political policy and stability as well as
trade, fiscal and taxation policies too.
Economic Factors
An economic factor is the one which has a direct impact on the economy and its performance,
which in turn can directly impact the organisation and its profitability. Economic factors include
interest rates, employment or unemployment rates, raw material costs and foreign exchange rates.
Social Factors
The focus here is on the social environment and identifying the emerging trends. This will help a
marketer to further understand consumer needs and wants in a social setting. Social Factors include
changing family demographics, education levels, cultural trends, attitude changes and changes in
lifestyles.
Technological Factors
Technological factors consider the rate of technological innovation and development that could
affect a market or industry. Factors could include advances in technology, developments in AI,
automation, research and development. There is often a tendency to focus on developments only in
digital technology, but consideration must also be given to new methods of distribution,
manufacturing and logistics.
Environmental Factors
Environmental factors are those that are influenced by the surrounding environment and the impact
of ecological aspects. With the rise in importance of CSR (Corporate Social Responsibility) and
sustainability, this element is becoming more central to how organisations need to conduct their
business. Factors include climate change, government environmental policies and initiatives, carbon
footprint, waste disposal and sustainability practices.
Legal Factors
An organisation must understand what is legal and allowed within the territories they operate in.
The organisation also must be aware of any change in legislation and the impact this may have on
business operations. Legal Factors include employment legislation, consumer law, healthy and
safety, international as well as trade regulation and restrictions.

Political factors do cross over with legal factors; however, the key difference is that political factors
are led by government policy, whereas legal factors must be complied with.

Advantages of a PESTEL Analysis:

1) It can provide an advance warning of potential threats and opportunities.
2) It encourages businesses to consider the external environment in which they operate.
3) The analysis can help organisations in understanding of the external trends.
Challanges of a PESTEL Analysis:
1) Many researchers have argued on the simplicity of the model that it is a simple list, but it’s
not sufficient and comprehensive.
2) The most significant disadvantage of the PESTEL model is that, it is only based on an
assessment of the external environment

Key Insights from Literature:

• The need for FMCG companies to adapt their product offerings and marketing strategies to
fit local preferences is a recurring theme. By maintaining a balance between global brand
consistency and local relevance will help in successful market entry.
• Joint ventures and strategic alliances are frequently highlighted as effective strategies for
gaining local knowledge and mitigating risks in unfamiliar regulatory environments.
• The literature also underscores the importance of understanding the political and economic
volatility in the emerging markets, which can impact long-term profitability.
• The recent researchs highlights that how the digital infrastructure in emerging markets is
affecting FMCG companies ability to reach consumers, particularly in e-commerce and
mobile commerce channels.

Gaps in Literature
• Impact of Technological Advancements: The increase in digital transformation is
important, so there is a limited research on how emerging technologies like AI, blockchain,
or digital payments systems specifically affect FMCG market entry strategies in emerging
economies.
• Long-Term Sustainability Practices: There's a need for more research on how
sustainability and environmental concerns influence FMCG companies’ market entry
strategies in emerging markets, particularly in regions where environmental regulations may
be less but consumer awareness is growing.
 • Post-Entry Challenges: Much of the research focuses on the initial entry phase, but less
attention has been given to the challenges FMCG companies face after entering a market,
such as scaling operations or managing post-entry competition.

RESEARCH QUESTIONS

1. Which market entry mode is most effective for FMCG companies entering a specific
emerging economy?
Strategic Alliances are often the preferred method for FMCG companies to enter emerging
markets because they can help bypass local government barriers
2. What role do strategic alliances and joint ventures play in mitigating risks for FMCG
companies in volatile emerging markets?
Strategic alliances and joint ventures are vital risk mitigation tools for FMCG companies in
volatile emerging markets. They provide access to local expertise, share financial and
operational burdens, and enhance market penetration while offering flexibility in times of
uncertainty. These collaborations help companies navigate complex environments and
position themselves for long-term success in challenging markets.
3. What role does digital transformation, particularly e-commerce, play in the market
entry strategy of FMCG companies in emerging economies?
Digital transformation, especially through e-commerce, is a critical component of the market
entry strategy for FMCG companies in emerging economies. It allows for faster market
penetration, cost efficiency, access to new consumer segments, and the ability to leverage
data-driven insights to tailor products and marketing. By integrating e-commerce with
omnichannel strategies and local market adaptations, FMCG companies can overcome
traditional barriers to entry, scale their operations, and effectively compete in dynamic and
often volatile emerging markets.

RESEARCH DESIGN
1. Research Methodology
• Mixed-Methods Approach: A mixed-methods approach is most suitable for this research as
it will include the need for both quantitative data (e.g., market conditions, consumer
preferences) and qualitative insights (e.g., expert opinions, case studies).
• Quantitative Analysis: For quantitative analysis conducting surveys and secondary
data collection from market reports and databases, offering measurable insights into
consumer behavior, market size, and growth trends.
• Qualitative Analysis: For qualitative analysis the interviews with industry experts,
company executives, and stakeholders will provide in-depth insights into the
strategic decisions behind market entry and the challenges faced in emerging
economies.
2. Data Collection Plan
• Surveys:
• Executives and managers from FMCG companies that have entered emerging
markets, along with market analysts and industry experts will be the target
respondents.
• The survey questions will focus on their experiences with market entry modes,
challenges faced by them and the success factors.

• Interviews: Target respondents will be the company executives (e.g., country heads or
regional managers) who have been directly involved in the market entry processes. These
interviews will explore deeper insights into decision-making, regulatory challenges, and
strategic adjustments made post-entry.
• Case Studies: Analysing past market entries by major FMCG players in specific emerging
economies (e.g., Unilever in Africa, P&G in China). This analysis will provide concrete
examples of successful and failed market entry strategies.
• Secondary Data: Gathering the data from market research firms like EY, Deloitte,KPMG on
consumer preferences, economic conditions, and market growth in emerging economies.
This will provide the quantitative foundation to support qualitative findings.

Conclusion
By utilizing a mixed-methods research design, this study aims to provide actionable insights into
the market entry strategies of FMCG companies in emerging economies. The integration of both
qualitative and quantitative data will allow for a comprehensive analysis of the factors driving
successful market entry and provide strategic recommendations tailored to the specific dynamics of
emerging markets.

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Submitted By:Kartik Sharma

Student ID:500128815