Introduction
This report describes the process of international expansion of a business named Al Futtaim. The report refers to the useful considerations for the business to make while expanding its operations globally. These considerations are aimed at the profit maximization of the company through international expansion. The hurdles in the international expansion have also been discussed with possible means of overcoming the problematic areas. The selected geographical region for the expansion of the business is the city of Western Morocco named Casablanca.
Company Background
Al-Futtaim is UAE based company. It is a multi-sector conglomerate. The company was formed in 1930. At the time of inception it was only a trading company but after its success in 1940 and 1950, it expanded its business in different sectors like industries and service sectors. Now its name is included in the top most companies in UAE. It runs 40 companies under its name and has expanded its business in different countries like Bahrain, Kuwait, Qatar and Oman. The Al-Futtaim expanded its business by investing in different international segments to make it known widely all around the world. The expansion of the company in various sectors and countries shows its commitment towards success
The company is currently providing the services in real estate department, automotive and service industry. The company has diversified its operations to include engineering facilities in 1974. The company has completed some successful projects like Dubai Metro and Al Haramain Complex
Country and Market Analysis
Casablanca is the largest city in Morocco. The industry and market analysis of the city reveal that it is the main business and economic center in Morocco. The corporations operating in the country have their main offices and headquarters in this city. The business and economic climate of the city is favorable for international businesses
External factors
Political Stability
The political stability of any region is an important environmental factor that determines the success of any business in that region. If the country is politically stable, it prevents the arousal of unstable conditions and leads the business on the road to the success. Casablanca has a stable financial position and environment. Casablanca was facing a few political issues of destabilized bureaucracy and privatization of industries in the past. However, these problems are solved now, and the political stabilization is up to the mark to support new business developments. In the start, there will be few problems of the market entry due to the legislation and policy framework, but Al-Futtaim is a strong group and has the capability to deal with all these problems (Schlegelmilch, 2016).
Free Market System
Casablanca uses the free market system in which the cost and prices of the products are determined by the forces of market competition. This system will benefit Al-Futtaim and its operations in the country as the market forces check the monopoly of any specific business .
Inflation Rates
The inflation rates in the country are not very high. The current inflation rate in Morocco is 0.9 percent. It has risen from 0.2 percent from the last year. The increase in the inflation rate pattern suggests the economic stability of the country. The purchasing power parity of the people and the GDP growth rates are satisfactory. These conditions suggest the favorability of the environment for the products of the company
Corruption levels
Casablanca is an important industrial and corporate center of the country. It has an established infrastructure network. The management of the infrastructure leads to the problems of the corruption and mismanagement in the metro cities. The corruption level is controlled in the country. In the start, Al-Futtaim has to face some problems regarding market entry because it has to establish a new set up and many people will try to drag it behind but due to its strong background, it can overcome these problems
Customers/Competitors based factors
Availability of products and Services
It has been discussed earlier that Casablanca is an industrial center of the country. It has various businesses already operating. The current competitive landscape suggests that Al-Futtaim will not face the problems of the sourcing of materials for its products and services. The company will be able to satisfy the needs of its customers by taking advantage of the business climate of the country
Level of existing Competition
There are the largest and successful industries of the country operating Casablanca, and all of them are progressing very rapidly. Therefore, it will be difficult for Al-Futtaim to overcome the strong competition at the start. The company can overcome the competitors by creating a strong competitive advantage and by utilizing the goodwill. It will require a lot of resources and aggressive marketing strategy in the entry phase to overcome the existing level of competition .
Efficiency and value of existing Competitors
The top competitors of Al-Futtaim are
Jumeirah
Emad Properties
Al-Alami Group
SOMED
The competitors are providing services similar to the services of the Al-Futtaim. The competitors are pursuing aggressive marketing and expansion strategy as well. However, the financial position of Al-Futtaim is better as compared to the competitors. The financial position of the business matters a lot in the real estate business. The diversified business and the strong financial muscle increase the trust of the customers in the company making it a strong competitive edge for the business
Industry and Business Related Factors
Trade Barriers
Trade barriers will not be an obstacle in the operations of Al-Futtaim because Al-Futtaim already has a set up in many countries and has an experience of the trade activities so it will not face such hurdles. Moreover, the economic setup of the country is based on perfect market competition, and the role of the trade associations and the government is minimum
Suitable Labor Force Availability
The labor force will not be difficult to search because the city has a high literacy rate. There are people of different ethnicities and nationalities living and working in Morrocco. The country has a diversified workforce pool. The hiring of qualified people from this pool is easy for the company. However, the wage rates and the salaries of the employees are higher in the country. The other businesses are paying their employees well. Therefore, the human resource acquisition expense will be higher at the entry phase .
Rate of expansion Required
The company should expand its business very rapidly in various regions Casablanca by following aggressive marketing strategy. Moreover, if it does not make its position strong in the start, then its competitors will move forward leaving it behind and then it will be difficult for Al-Futtaim to gain a good position in the competitive landscape of the market. Therefore, the company should benefit from its strong financial position and should acquire maximum customers at in the initial months of the expansion. The company should follow penetration strategy by lowering its prices at the initial phase. The high volume of the sales will offset the lower product prices .
Marketing Mix and Staffing Policies
Marketing mix comprises of the following things
Marketing Mix
Products Attributes
The products that the company is currently offering are real estate, Services, Engineering. The company should also introduce new attributes in its products before starting an international business that will attract a lot of new customers in the international market. These new attributes will include customization based on the local needs of the people, local language support and after sales services. The products should be according to the culture of the new market.
Place
The company should enter the international market with a diversified and extended distribution network. This network will comprise of many offices covering a large geographical area. It should also start its distribution to the areas where it does not have its headquarters so that its product will also be known in those areas.
Price
Competitor’s prices
Regulatory factors
Price Elasticity
Promotion
The promotional strategies that should be used for international business will be online advertisements, social media marketing, and outdoor advertisements. The effectivity of the social media marketing has increased in the recent years as it is a source through which every person can be approached due to increasing social media use. On the other hand, the company should also manage its online website. The website will serve the promotional as well as informational role.
Staffing Policies
While recruiting the staff for the company, the following factors should be noted
The main headquarters of the company should be managed by the trained people from the parent country. The expertise and the proven management experience will facilitate the international expansion.
The operational functions of the company with less strategic nature should be managed by the local talents from the local industry.
The company should focus on hiring the talented persons. The nationalities of individuals should not be given more importance. The diverse workforce should be encouraged.
The managers that are appointed by the company should have the following capabilities
Orientation towards one’s self
Orientation towards others
Ability to deal with cultural problems and conflicts
Market Entry Strategy
The entry modes that can be used by any company for international expansion are
Indirect Export
Direct Export
Joint venture
Licensing
Franchising
The best market entry mode for Al-Futtaim is a joint venture. The company will be able to take advantage of its strong financial position and the knowledge of the local market from the local partner. The involvement of the local partner will decrease the risk of failure as well. The local player in the joint venture will enable the management to have practical insight into the local market structure and the cultural forces of the country. Moreover, the initial legislation and the market entry formalities will be tackled in a better way. The joint venture will also divide the investment into two parts decreasing the capital requirements to start the business
International Strategies
Global Standardization
The company should maintain global standards to attain success because if the company is not able to maintain good standards at international level, then it will fail to attract the customers. This strategy is very necessary for the progress of the company
Transnational
The transnational strategy focuses on the expansion of the business in the international market by introducing the people of different nationalities in the business operations. It suggests the arrangement of the licensing and joint ventures with the local partners in the international host market.
International
This strategy should also be focused upon to expand business on an international level. The products of the company should be made internationally recognized and known. It is possible only by following the international standards of the quality check and through global best practices of the operation
Localization
The company should design its products and services in such a way that they are according to the culture and norms of the area in which the business is about to start. It will make the product familiar among local customers and will attract them. Therefore, the best strategy is the localization of the products and services according to the industry norms. If some of the local attributes are added to any product, then the customers will feel the product is best suited to the needs and the business has empathy to consider the needs from the customer viewpoint. Similarly, cultural homogeneity of the products creates a strong bond between the customers and the company
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