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Companies that choose new markets systematically often use tools like country portfolio analysis and political risk assessment, which chiefly focus on the potential profits from doing business in developing countries but leave out essential information about the soft infrastructures there (Khanna, Palepu, & Sinha, 2005). China and India have a culture distance that makes it harder for an international company to enter for the first time. Joint venture or a licensing agreement would be the best entry strategies to look at. The government in China is very strict and keeps a majority of what the companies can and cannot do under their control. Establishing a joint venture with an established company that knows how o operate under such strict circumstances would be the wisest choice.
When it comes to determining a market entry strategy for retailers targeting China, India, and other emerging markets, there are four main frameworks: organic, chains acquisition, franchise and joint venture. Retailers need to understand the complexity of entering a market, and determine if the countries are easy or difficult to enter. Retailers also need to know the culture of these countries, to best understand cultural themes and the best marketing methods for the country. Countries that are culturally close and easy to enter, such as China, should follow the organic method. Firms would use their own resources to open their shop and be able to build personal relationships with their consumers from being a ‘mom and pop’ shop. Countries that are culturally distant, but easy to enter would have companies use a franchise method. For example, McDonalds is a huge franchise company. They are more focused on gaining consumers and making profits, rather than building and maintaining relationships with their customers. If a country is culturally close, but difficult to enter, a chain acquisition would suit the firm the best. Chain acquisitions allow for firms to purchase a company with already existing outlets in other foreign countries. In India, there is a retail company known as Flipkart, which is India’s version of Walmart. In 2018, “Walmart acquired 77% of Flipkart for $16 billion”, making it India’s largest chain acquisition (Bureau, 2018). Lastly, if a country is difficult to enter and culturally instant, a retailers best strategy is a joint venture. Joint ventures allows for a company to share resources with other companies who already understand the different cultural and consumer needs for a specific targeted market.