Chapter 2: Literature Review

2.1 Introduction

This section of the research study examines the evaluation of several books, authentic

websites and online articles and journal articles in order to create a literature related to the role of

market entry strategy in order to attain success in the international market. This chapter includes

different effective market entry strategy that a firm can use in order to make a successful entry in

the international market. The main purpose of this chapter is to develop an understanding about

the role of these market entry strategies to get success in the global market.

In addition to this, this section also identifies several strategies that an organization can

use to improve the use of market entry strategy to get success in the global market place.

Collection of all theses information and data will help the researcher to present a theoretical

framework about the research issue. Further, this information will be helpful for the researcher to

analyze the data effectively in order to solve the research issue and attain all predetermined aims

and objectives.

2.2 Different Market Entry Strategy in the International Market

In today’s competitive business environment, companies operate their business globally

for several reasons such as to attain a significant market share, to gain competitive advantage and

to ensure the long-term sustainability of the firm (Lindholst 2009). At that time, it is necessary

that whenever a firm’s enter in new market, it selects a suitable market entry strategy that will

help in maximizing the benefits of entering in new international market. As stated by Ireland,

Hoskisson and Hitt (2008) market entry modes can be of four types, such as exporting, licensing,

contract modes like management contracting, contract manufacturing and foreign direct

investment, including strategic alliance, joint venture and international acquisition. Figure 1
shows that there are different decisions factors that impact on the choice of a particular entry

mode. It is necessary to consider all these factors before choosing a particular entry mode.

In contrary to Ireland, Hoskisson and Hitt (2008), Karakaya and Yannopoulos (2010) said

that there are some effective market entry strategies such as exporting, strategic alliance,

management contracting, contract manufacturing, merger and acquisition, joint venture, counter

trade, management contracting and licensing/franchising. By adapting any of these strategies,

company can enter in different international markets.

Figure 1: Different Modes of Entry

(Source: Ireland, Hoskisson and Hitt 2008).

At the same time, Swayne, Duncan and Ginter (2006) classified market entry strategies in

a different manner. According to them, there can be three types of market entry strategies

including purchasing, cooperation and development strategy. Purchasing strategies include

acquisition, licensing and venture capital investment while cooperation strategies include

mergers, alliances and joint venture. On the other side, development strategies include internal

development and internal venture. Thus, it can be stated that different authors classified market
entry strategies in a different way. Following are some effective market entry strategies that are

frequently used by most of organizations in order to enter in the foreign market.

According to Tielmann (2010), exporting is one of the well established market entry

strategies in which a firm conducts marketing of products and services outside the boundaries of

the home country. This kind of market entry strategy is not required any direct manufacturing in

the international market while it requires significant investment in marketing activities in order

to increase the demand of the product or service in the international market. To support this,

Welz (2007) stated that exporting market entry strategy is beneficial for a company in order to

enter in a new market for several reasons including it is less risky (as manufacturing is based on

home market, thus, reduce the potential risks of operating in the international market) and

provides opportunity to learn international manufacturing processes. In contrary to this, Muthaly,

Ratnatunga and Schroder (1999) described that the main disadvantage of using this strategy is

that there can be lack of organizational control on export operations and procedures. It can

negatively hamper the profit maximization objective of the company.

To support Muthaly, Ratnatunga and Schroder (1999), Chung and Enderwick (2001)

stated that exporting strategy provides lower control to the firm. In contrast to the exporting

strategy, foreign direct investment (FDI) strategy offers the company a higher degree of control

over its international business operations. Generally, profits returns are also higher with the use

of FDI mode in comparison of exporting mode. At the same time, there are also some

disadvantages such as greater risks and higher management complexity of using FDI mode over

exporting. Joint venture, wholly owned subsidiary, strategic alliance are some most widely used

FDI modes.
 Views of Chung and Enderwick (2001) are also supported by Tamer (2009). According

to them, FDI is the most advanced and complex foreign market entry strategy that involves

development of manufacturing plants, marketing subsidiaries and other facilities in the foreign

market. FDI requires local presence and operations in target countries, adequate resource

commitment and global scale efficiency from the organization in order to get success in the

market. In comparison of other market entry modes, this entails greater risk.

For organizations, who are interested to expand their business globally or want to enter in

emerging markets, joint venture can be most effective market entry mode. Under joint venture

strategy, a foreign company agrees to share different resources with other partners to build a new

entity in the host country. To favor this, Doole and Lowe (2005) stated that it entails much more

control over the foreign operations. It also enables the company to gain synergy benefits. It

allows firm sharing of capital, risk and other resources including land, raw materials, use of

expertise on the local environment such as legal, political and culture, relations with government

officials and personal contacts with suppliers. Further, all these helps the company to make a

successful market entry in the international market.

In contrary to this, Hisrich (2009) stated that besides these advantages of using joint

venture, there are also some disadvantages that are associated with this form of market entry.

Most of international joint venture fails due to lack of trust and mutual conflicts. There are

different areas like resource allocation, transfer pricing, and control, ownership on different

assets such as brand name and technologies and strategies over which conflicts can arise. In this

way, it is necessary to overcome all these issues at an early stage of joint venture to make it

successful in the international market.

 Strategic alliance is another form of using FDI mode of entering in the international

market. It refers to the coalition of two or more organizations in order to attain strategically

significant goals that are in benefit of all the organizations. Such kind of alliances is increasing

regularly because in current scenario, organizations have not the capacity to face the global

competition on an individual basis. According to Sadowski and Duysters (2008), generally there

can be three types of strategic alliances such as technology based, production based and

distribution based. To support this, Pehrsson (2008) described that most of the technology based

alliances are found in the information technology industries. The main reason behind creating

such an alliance is to get access to markets, exploitation of complementary technology and

reduce the time needed to take an innovation.

In contrary to technological alliances, most of the production-based alliances are occurred

in the automobile industry. Production based alliances can be of two types, first, firms search for

efficiency through component linkages and secondly, they are ready to share the entire

automobile model by producing the product jointly. Similarly, distribution alliances are also

increasing among firms.

Andexer (2008) defined another market entry mode as greenfield venture through FDI.

This strategy refers to an organization’s single-handedly attempt to enter in a foreign target

country. Under this strategy, firms establish a new wholly owned subsidiary from scratch. In

comparison of joint venture and strategic alliance strategy, this strategy is most costly and risky,

but, at the same time, it also provides the highest degree of control to the companies. Greenfield

venture market entry mode is beneficial for those firms which believe that their product or

services have long-term market potential in relatively politically stable countries. Thus, it can be

stated that joint venture, strategic alliance and greenfield venture are some effective market entry
modes with the use of FDI. Any of these methods can be used by a firm which wants to higher

degree of control on foreign market operations.

In contrary to FDI entering modes, Love and Mansury (2009) defined licensing as

another market entry strategy. In this strategy, an organization assigns the right to a patient or a

trademark to another firm for a royalty or fee. They stated that a company can attain market

presence without a major investment through the use of licensing as a market entry strategy. At

the same time, the licensee gains the right to exploit the patent or trademark commercially, on

either an unrestricted basis or an exclusive basis.

Views of Hutt and Speh (2012) support the views of Love and Mansury (2009) and stated

several reasons behind using licensing as a market entry strategy. They stated that a firm that has

limited resources can attain benefit by having a foreign partner (signing a licensing contract) to

market its product or services. Sherman (2011) also support Love and Mansury (2009) and said

that a licensing agreement also helps in avoiding the potential risk associated with investment in

fixed facilities, thus, this method can be an effective strategy to enter in those countries where

the political and economic factors are uncertain. It can be stated that licensing can be an effective

market entry strategy for those organizations that have lack of resources and time to enter

successfully in the international market.

On the other side, Keillor (2011) described some disadvantages that can be associated

with licensing as a market entry strategy. According to them, licensing enhances the company’s

substantial dependence on the local licensee in order to gain revenue or royalties. If the

marketing capabilities of local company are less developed, it can adversely impact on the

revenues under licensing. Hitt, Ireland and Hoskisson (2012) also favor this and stated that a
foreign organization’s image can also suffer if a local licensee offers low quality products to the

customers.

Tuunanen (2011) suggested another method for entering in the foreign market. In their

views, franchising is a special form of licensing that is more comprehensive than a regular

licensing agreement because the total operation of the franchisee is prescribed. Under

franchising, franchiser makes available a total marketing program such as logo, brand name,

products and method of operation. There are several companies such as McDonald’s, Burger

King and Kentucky Fried Chicken that have successfully exploited franchising and exploiting

opportunities abroad through foreign entrepreneurs (Jeannet & Hennessey 2005). They stated

that approx 70% of all McDonald’s restaurants are franchised.

According to Perunovic, Christoffersen and Mefford (2012), there is also another method

contract manufacturing in which a company manufactured its products by an independent local

company on a contract basis. In this strategy, the manufacturers responsibility is only restricted

to the production. Once all products are produced, the company turned over all products to the

international company which is responsible for selling, promoting and distribution of the

products. In order to create difference between both licensing and contract manufacturing

Jeannet & Hennessey (2005) stated that with respect to the legal relationship of the firms

involved, contract manufacturing differs from licensing. Nokia is using outsourcing of its

manufacturing in some markets. For example, Nokia handsets for the Korean market are

produced by South Korea’s Telson Electronics Co.

Besides above market entry modes, Hollensen (2009) described another method that is

management contracting. In this market entry strategy, a firm or contractor supplies management

know-how to another company that provides the capital and look after the operational activities
in the foreign country. The main advantage of using this form of entry mode is that it allows a

company to maintain market involvement thus provide a better position to exploit different

opportunities. To support this, Clarke and Chen (2012) stated that it also provides an opportunity

to the company to learn about foreign markets and international business. Hollensen (2009) also

said that the main disadvantage of using this entry mode is that it can cause to potential conflicts

between the contractor and the local government as regards the contract venture policy. At the

same time, it also limits the ability of a contractor to develop the capacity of the venture.

On the basis of above discussion of different market entry modes, it can be stated that

each mode has its own advantages and disadvantages that can impact on the choice of a

particular entry mode to enter in the market. At the same time, different organizational decision

factors such as firm-specific competitive advantages, country specific advantages, need for

control and resource availability also influence the selection of an appropriate market entry

mode.

2.3 Role of Market Entry Strategy in the Global Market

Role of market entry strategy is very crucial in order to determine the success of a firm in

the international market. The choice of entry strategy significantly impacts on the performance

and sustainability of the foreign subsidiary. Selection of an appropriate market entry mode helps

in maximizing the chances of developing a successful operation in a foreign country. According

to Karakaya and Yannopoulos (2010), there are several factors such as cultural, political,

economic, technological, competitive environments, entry barriers, amount of control required,

local market conditions, global experience, resources and managerial commitment that affect the

choice of entry mode. For example, if local laws prohibit foreign control, a joint venture with a

local company is necessary as a strategy to enter in the market. Thus, it can be stated that
understanding of different market entry strategy is important for companies so that they can

select an appropriate mode of entry and can ensure their success in the global market.

In order to define the role of market entry mode, Libai, Muller and Peres (2005) defined

that market entry options provide a path to organizations through which they can enter into

global market place. If an appropriate market entry mode is selected by the organization, it helps

them to gain competitive advantage in the market. It is also beneficial for the company in order

to maximize the use of different resources such as technology, human skills, production

processes and other resources. It also helps organizations to establish a good corporate brand

image in the international market. To support this, Gordanier and Miao (2011) said that market

entry strategy helps organizations in several ways such as access more customers, attain

competitors’ information, improve customer service levels and strengthen the relationship with

customers and suppliers in the international market.

Market entry strategies are also important for organizations as they are helpful for

mangers to increase their market share. Through the use of a suitable entry mode, firms enter in

the international market and gain significant market share in a particular industry. Mok, Dai and

Yeung (2002) also said that these strategies are also effective for firms to make a global

presence. A firm can use different entry modes to enter in different foreign markets and can

present itself globally. Thus, it can be concluded that role of market entry modes is crucial for

organizations if they are interested to enter in global market. It is also beneficial for firms in

order to Increase customer base and build international brand image in the market.

Kuil (2008) said that market entry modes also help organizations to exploit opportunities

provided by the emerging markets. According to Pan (2001), emerging market refers to a market

that is growing as well as has potential to become a new focus for global competition. In order to
make a successful entry in emerging markets, it is necessary that organizations effectively

analyzed different government rules and regulations regarding mode of entry. Hollensen (2009)

also supports the views of Kuil (2008) and stated that mode of entry is one of the critical

strategic decisions in emerging markets because it impacts on all future decisions. Thus, it can be

stated that market entry modes also play an important role to enter in emerging markets in order

to attain several benefits.

Timing of market entry is also important to consider while selecting an appropriate

market entry mode. By selecting a suitable entry mode, firms can also attain first-mover

advantages. Lilien and Rangaswamy (2004) suggested three different sources such as through

technological leadership or getting success in R&D, preemption of scare assets like channels of

distributions, skilled employees and limited raw material and switching cost that cause to create

first-mover advantages. If organizations successfully enter in the market, they can attain first-

mover advantages such as building of switching cost, knowledge advantage, increase sales

volume and establishment of brand loyalty (Rhee 2006).

In contrary to this, Barringer and Ireland (2008) stated that market entry strategy also

helps organizations to reduce market uncertainty in the international market. In this concern,

through the use of a suitable market entry strategy, they can enter in the foreign market through

as last movers or later entrants. Later entrants learn from the mistakes of early movers that

enable them to improve the way of doing business in the international market. By providing

superior offerings to the customers, they attain significant market share in the market. Further, it

also helps them to attain competitive advantage in the market.

According to Volkmann, Tokarski and Grünhagen (2010), generally a well founded and

target-oriented market entry strategy is of fundamental importance for the market success of a
start-up enterprise. Role of these strategies are crucial in order to exploit the attractiveness of a

market in terms of market growth, market volume, industry and competition structure. By

entering in such markets, companies can get benefit of increasing sales volume due to access

towards several potential customers.

Kotabe, et al (2008) also support this and stated that market entry decisions influence the

firm’s other marketing decisions. Such decisions include target product and the market,

objectives for the target market, time of entry, marketing mix plan and a control system to

monitor the performances in the international market. In contrary to Kotabe, et al (2008), Beamer

and Varner (2011) stated that market entry strategies also help companies to develop their

product as a global product. It means firms product will be known as a single name around the

world. Further, it will also be helpful for the organizations to gain competitive advantages in the

market.

Thus, it can be stated that it is necessary to select an entry mode effectively as the overall

success of a firm in the international market will depend on it. Firms can exploit emerging

market opportunities in an effective manner if they choose an appropriate market entry strategy

or vice versa.

2.4 Strategy to improve use of Market Entry Strategy

One of the most important strategies to improve the use of market entry strategy is to

conduct a comparative analysis of different market entry strategies, before selecting a particular

mode. Above analysis of different market entry strategies show that there are several market

entry modes that a firm can use to develop international operations. The choice of a particular

entry modes depend on different factors including organizational aims and objectives, market to

be enter, availability of resources and other internal and external factors. At the same time,
organizations should also know that each strategy has a different level of risk as well as several

advantages and disadvantages.

Mok, Dai and Yeung (2002) stated that the main aim of going abroad is to develop a

relationship with a foreign distributor. It is the reason that they suggested the use of partnership

methods to enter in the foreign market. In partnership strategy, firms enter in new market

through experienced agents that have knowledge about local contracts, conditions and

regulations. In this way, this method is quite effective to increase sales volume in the

international market. The main problem with this method is that it reduces the control over

foreign operations and can negatively impact on the financial performance of the company.

To favor this, Crawford (2009) stated that if firms want to have greater control on foreign

operations, they can set up their local office in the international market or they can enter through

FDI. They can choose different options such as joint venture, strategic alliances, merger and

acquisition. Joint venture will help the company to gain access to finance, skills and resources

when entering in the market. Firms can also select merger and acquisition method, in which, they

will acquire or merge with an established local company. This method will quite effective to

reduce different barriers such as lack of knowledge about local markets, deal with cultural

aspects and customers and competitors’ knowledge related to entering in an unfamiliar market.

In this way, companies can create competitive advantage in the market by adopting this method.

In contrary to Crawford (2009), Keillor (2011) suggested that in order to improve the use

of market entry strategy first, it is necessary to analyze the scope of firm’s market entry strategy.

In this concern, it is analyzed by the firm that whether it wants a small entry or a major strategic

commitment in the international market. After identifying the scope, firms should compare

different market entry mode options such as exporting, foreign direct investment and
partnerships. By comparing the advantages and disadvantages associated with each option and

by analyzing those with company’s objectives and resources, firms can select an effective market

entry mode and can ensure about their success in the market.

According to Forlani, Parthasarathy and Keaveney (2008), there are different factors that

an organization should consider to make an effective international joint venture. These factors

are as below:

Selection of Right partner: The MNC should invest proper time to identify a right partner

in the international market. Firm should focus on identifying the complementary skills and

resources that will lead to synergy in the potential partner. Selection of right partner will help

the company to attain several benefits of joint venture in the foreign market.

Development of Clear Objectives: It is necessary that organizations clearly set out the

objectives that they want to attain through creating joint venture. It will help the partners to

understand what is expected from the partnership and they will act accordingly to maximize their

benefits. It will also be beneficial that partners know their contribution and responsibilities

(Forlani, Parthasarathy and Keaveney, 2008)

Bridge Culture Gap: Cultural differences between local and foreign partners are also one

of the reasons that cause to failure of joint ventures. It is necessary to understand both local and

foreign culture to ensure the success of joint venture. Besides all these factors, it is also

necessary that there has a strong commitment from the parent companies’ top management

towards joint venture activities.

On the other hand, Slack and Parent (2005) suggested some effective strategies that can

be beneficial for managing strategic alliances. They stated that for each alliance, firms should

name a manager who will be responsible for managing overall alliance activities, resource
allocations and outcomes. Firms should create a plan to implement the alliance effectively and

should define the responsibility of each partner clearly in order to ensure the success of strategic

alliances.

In support of Slack and Parent (2005), Ireland, Hoskisson and Hitt (2008) defined the

strategies to manage the strategic alliances in an effective manner. They stated that businesses

have started to emphasize the management of strategic alliances in a way that help them to build

competitive advantage as well as create value for all stakeholders. In this concern, it is identified

by them in their research that firms are developing units with the responsibility of managing their

multiple strategic alliances. They suggested different actions that can be helpful for managing

strategic alliances effectively (See figure 1).

Figure 2: Managing Alliances

(Sources: Ireland, Hoskisson and Hitt, 2008).

Thus, on the basis of above diagram, it can be stated that by carefully selecting a partner,

assigning responsibilities accordingly, prioritizing resource allocation, proper planning and

implementation, developing trust with partner and by conducting regular evaluation of

performance firms can develop a successful strategic alliances.

 In contrary to above researchers, Hollensen (2009) described how an organization can

effectively enter in emerging markets. They stated that emerging markets have their own unique

characteristics that impact on the choice of entry modes. Each country has some unique features

with regards to entry mode options in comparison of other countries in terms of political,

government regulations and socio-economic conditions. In regard to this, they present an

example and stated that in India (one of the emerging markets), there has some government

restrictions on FDI and bureaucracy in certain industry sectors and it is the reason joint venture

can be an effective market entry mode to enter for different international firms.

At the same time, Pehrsson (2001) stated that an organization should effectively make

decisions on several factors that are necessary to enter into emerging markets. In this concern,

firms should considered the objectives and goals in the target market, the choice of entry modes

to penetrate the market, a time schedule, needed policies and resource allocations and the control

system to monitor performance in the market. Consideration of all these factors will help the

company to maximize the benefits of entering in the emerging markets.

In contrary to this, Pehrsson (2008) defined that building of a market entry strategy

involved an analysis of potential competitors and customers. Through this analysis, they can

know about the competitors’ position in the market in terms of entry barrier, availability of

substitutes buying power of supplier and buyer and rivalry among competitors. If they found that

there is high rivalry among competitors, they can move to another market in order to expand

their business successfully. Further, it also helps companies to make effective business strategies

regarding the international market to exploit several opportunities.

Gillespie, Jeannet, Hennessey (2009) also support Pehrsson (2008) and defined that

market entry strategies can have a significant impact on an organization’s global strategy. These
strategies help companies to determine the number of international markets, they can enter and

the speed at which they can internationalize. They also affect the profits that a firm will make in

each national market and the risk it will assume. All these show the importance of market entry

strategies for a firm to get success in the international market.

There can also some another strategies to improve the use of market entry strategies in

the global market. Firms should develop a local office and also focus on providing proper

training to employees to work in the international market. At the same time, they should also

make effective promotional activities in order to promote the business globally (Ireland,

Hoskisson and Hitt 2008). It is also necessary that companies make effective differentiation

strategies while entering in the international market. It will help them to attract different global

potential customers besides the local companies.

Cultural understanding and good interpersonal skills will also be beneficial for companies

in order to effectively use different market entry strategies. It is because if the company has

knowledge about the culture of foreign markets, they can easily offer their products and services

to the customers as per their needs and expectations. At the same time Doole and Lowe (2005),

stated that while going abroad it is also important that firms focus on building effective and long-

term relationship with distributors, local government, customers and joint venture partners.

Strong relationship in foreign markets will be helpful for the companies to build a good

corporate image in the international market.

Thus, on the basis of above discussion of different effective strategies for improving the

use of market entry strategy, it can be stated that before selecting a particular market entry

strategy, firms should consider different factors such as timing of entry, control desire and other
factors. At the same time, companies should align its overall objectives with the objective behind

going abroad.

2.5 Market Entry Strategy Used by Coca-Cola

2.5.1 Company Information

Coca-Cola is one of the biggest Multinational Beverage Corporation in the world. It is

founded by pharmacist John Stith Pemberton in Columbus, Georgia. It provides more than 500

brands in over 200 countries. The company’s offerings include a portfolio of more than 3,500

beverages such as fruit juices, waters, fruit drinks, sports and energy drinks, milk-and soy-based

beverages and teas and coffees (The Coca-Cola Company 2011). People at company are

committed to take those initiatives that help Coca-Cola to reduce environmental footprint,

support active, healthy living, build an effective and a safe working environment for different

associates and enhance the economic development of the communities. Company along with its

bottling partners rank among the world's top 10 private employers. By expanding the business in

international market, Coca-Cola has developed a global brand image for its products and

services.

2.5.2 Market Entry Strategy Used by Coca-Cola

In order to make a global presence as well as to increase the market share, managers at

Coca-Cola also decide to take the business globally. In regard to this, they have selected different

markets to be entered and make an appropriate strategy accordingly. According to Tian (2007),

in the early 1990s when the company moved to China, it had to make a decision regarding

selection of a particular mode of entry between joint ventures and wholly foreign-owned

enterprises. At the same time, there were also some considerations for the company that were

necessary to be considered such as to take precautions against the possible infringement of its
intellectual property and to make use of local partners in order to attain cost benefits and to

localize the product.

With the consideration of both these factors, managers at Coca-Cola decided to use both

entry modes at the same time. Coca-Cola set up one WFOE in Shanghai to produce the

concentrates for Coca-Cola drinks that allowed the company to maintain control over its core

competencies. At the same time, the company had established one joint venture to design and

produce localized soft drinks and twenty-four joint ventures to engage in bottling (Tian 2007).

Such joint ventures enabled the company to reap the benefits that local partners can bring to

company’s Chinese operations. In the end, researcher suggested that use of mix mode of entry

provide several benefits to the company and proved as an effective mode of entry.

To support this, Hill and Jones (2009) described that by transferring its iconic brand to

local subsidiaries and letting them develop the market in conjunction with local bottlers, Coca-

Cola entered in the foreign market. BY the 1980s, the company felt the need for greater control

over local strategy and it is the reason that company centralized power in Atlanta though

acquiring an equity stake in many local bottlers. It shows that company has used a global

coordinated strategy in order to enter in the international market. Under this strategy, company

rolled out centrally produced marketing messages and products globally. Use of such kind of

strategy helps the company in several ways such as realized economies of scale from

standardization and large increase in sales volume. It reflects that Coca-Cola first, used

localization strategy and then, global standardization strategy to get success in the international

market.

In support to this, Daft (2007) stated that Coca-cola has marketing and production

facilities located in several countries and more than one-third of its sales outside the home
country. It has used globalization approach in which, the main focus of the company is towards

offering a similar product to multiple countries. At the same time, the company is also

standardized product design, marketing and advertising strategies throughout the world.

In contrary to Tian, X. (2007), Saul (2010) defined that Coca-Cola used the backdoor

market entry strategy to enter in the developing world. The company’s traditional hub and spoke

distribution cannot work in different countries, especially in remote areas and those with many

consumers living in densely populated areas. It is the reason that in order to expand the business

in East Africa’s high-density urban areas, company selected one of its distributer: Coco-Cola

Sabco (South African Bottling Company). Further, Sabco build a model known as “Manual

Distribution Center (MDC). This model uses small businesses including women and

entrepreneurs to deliver the company’s products manually to local small-scale retailers.

Generally, MDC used bicycles and pushcarts to deliver their products as those areas are beyond

the reach of delivery truck.

Further, they stated in their research that this model has been so successful for the

company because it not only solves the distribution problem for Coca-Cola but also provides

immediate and substantial benefits for target communities. The model was also effective in terms

of promoting entrepreneurship, strengthens local communities and created new jobs. Thus, it can

be stated that the use of a different market entry strategy was beneficial for the company as well

as other stakeholders to maximize benefits from the new market.

Besides above researchers Tian, X. (2007), Hill and Jones (2009) and Saul (2010),

Tielmann (2010) stated that Coca-Cola’s typical entry mode into foreign markets is to license

independent bottlers in a franchising arrangement. At the same time, the company has also used

FDI method (by making direct investment in the bottling plant) of entry to enter in some
emerging countries. FDI method is used by the company in order to control quality in an

effective manner.

Above discussion of market entry strategies used by Coca-Cola shows that company has

used different market entry strategy such as licensing, franchising, joint venture and product

standardization in order to enter in different international markets. Use of market entry strategies

used by Coca-Cola suggested that people at the company was able to use these strategies

effectively. Success of Coca-Cola in the international market through the use of these market

entry strategies can be an example for companies those are interested to operate their business

globally.

In views of Beamer and Varner (2011), while deciding to take the business at

international level, managers at Coca-Cola decided to use a standardized product throughout the

world. In this concern, all the syrup for Coke is produced in the United States and shipped all

over the world. At the same time, the level of sweetness of the syrup is adapted by the company

to specific cultural preferences. In order to define the strategy behind success of the company in

the global market, they also stated that even though Coca-Cola used product standardized

strategy, it changed its communication styles and techniques as per the culture in different

countries. All these strategies help the company to create a successful presence in the

international market.

2.5.3. Role of Market Entry Strategy in the Success of the Company

Market entry strategies play a crucial role in the success of Coca-Cola in the international

market. It moved in other countries with the purpose of exploiting huge growth opportunities.

Selection of appropriate market entry strategies helps the company to create value for different

stakeholders worldwide. As stated in company’s annual report, it has derived a significant

portion of its net operating revenues by selling products in the international market. In the year

2011, the company’s operations outside US accounted for $27.8 billion of its net operating

revenues (Annual Report 2011).

With the use of different market entry strategies, Coca-Cola has attained competitive

advantage over its competitors in the international market. FDI mode of entry helped the

company to exploit opportunities from emerging markets. Through the use of these strategies,

the company presents itself globally. They help the company to increase its market share in the

beverage industry. They are also effective in order to increase the global customer base for Coca-

Cola. The company has also built a strong global brand image by these entry strategies. In

several countries, it has also attained first-mover advantages that work as a competitive

advantage for the company. This statement is supported by Hollensen (2009); he stated that

Coca-Cola became international much earlier than Pepsi did. In this concern, company had

created a significant brand loyalty for their products in foreign markets. Such kind of brand

loyalty works as a competitive advantage for the company because for later entrants it will be

difficult to break down such brand loyalties.

At the same time, Bijwaard, Janssen and Maasland (2008) stated that different other

advantages are also attained by the company, through the use of different market entry strategies.

These strategies enable the company to strengthen the sales volume. Similarly, it has also

realized cost advantages due to scale economies and learning effects. Coca-Cola operates its

business in different international market through the use of several market entry strategies that

helps it to reduce the dependency on a particular market or US market. These strategies also help

the company to reduce dependency on suppliers for raw material from a particular market.

Further, it helps the company to reduce the risk of shortage of raw material from supplier’s side.
 In contrary to this, Beamer and Varner (2011) use of effective market entry strategies

able the company to present its product as a global product. According to them, when thinking

about Coke, “ people don’t think in terms of German Coke, Indian Coke, Mexican Coke,

American Coke-they think of Coke, even it tastes different from country to country. Thus, it can

be stated that market entry strategies play a crucial role in the success of Coca-Cola in the

international market in terms of global brand image, gain competitive advantage, improve market

share and build strong customer base.

2.6 Summary

In the end of this section, it can be summarized that there are several market entry

strategy such as exporting, licensing, franchising, joint venture, strategic alliance, greenfield

venture, management contracting and contract manufacturing that a company can use in order to

enter in the international market. Each entry mode has its own advantages and disadvantages that

should also consider while selecting an appropriate mode of entry. There are several internal as

well as external factors that a firm should also consider before selecting a particular mode of

entry. Selection of an appropriate market entry mode helps organizations to attain different

benefits such as build global brand image, increase customer base, enhance market share and

make a global presence.

Role of market entry mode is also crucial in order to ensure the success of a company in

emerging markets. Some effective strategies are also suggested by the researcher in the above

literature. These strategies will be helpful for firm in selecting a suitable entry mode to enter in

the international market. This section also critically analyzes different market entry strategies

used by Coca-Cola in UK market. Understanding of all these strategies will help other

companies to make a successful entry in the international market. Next chapter will be related
with the research methodology section in which researcher will describe about the use of

different research strategies that he has used to collect primary and secondary information.
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