Market entry is described by a company’s strategy to pursue new markets, usually international. This occurs when a company is looking forward to expanding globally. A company can expand into a developed industrialized region like the EU and a developing economy like China. Both markets offer big buying and development potential for further expansion. Both strategies have their positive and negative sides, which will be analyzed further.
Expansion into a developed industrialized economy might seem easier for a company. Benefits of entry into the EU market involve good governance, environmental protection, human and labor rights, health and consumer protection, and protection of cultural diversity (Bourreau & Streel 2019). The business will be in a protected and regulated market environment when entering the EU. This leads to increased customer levels and results in higher profits for the company. However, the same aspects can also have a negative effect on the new business.
The company would also have to cater to different countries within the EU, majority of which have different tastes. For example, when Starbucks entered the EU, they opened their first store in Paris, which is very different from USA and UK culturally. Even though Starbucks thrived in the EU and made profit, they still struggled to attract French customers (Amato-McCoy, 2018). Parisians are used to café culture, which prompted Starbucks to change their strategy. The company rebuilt their stores offering a relaxing atmosphere, and adjusted their menu for the local tastes (Amato-McCoy, 2018). Thus, a company has to consider not only regulations, but also adaptability to the local requirements of each EU member. The company has to prepare to a variety of tastes and embed that into their strategy.
On the other hand, a company might have an option to expand into a developing economy, such as China. Developing economies are identified by their high population levels, uneven wealth distribution, poor infrastructure, and unstable economies. Despite its economic achievements, China remains a developing country (The Economist, 2022). When entering a developing economy, a company must consider its poor infrastructure, different regulations, and cultural aspects. Whereas a high population might lead to greater sales, the company must keep in mind that they would have to expand only into developed cities, such as Beijing.
Moreover, cultural traits of Asian market are vastly different from the European. For example, Dolce & Gabbana faced a backlash over a series of controversial ads in 2018 exploiting cultural appropriation. Three years later, the brand still struggles to remain in the Chinese market (Hills, 2021). On the other hand, Starbucks has vast success in China. The company studied the local market before expanding and fully adapted its operations. China’s Starbucks are laid out to welcome crowds; they offer localized drinks and provide support programs for the employee families (Zakkour, 2018). These examples demonstrate that a company should primarily consider and adapt to cultural differences when entering China. Other aspects such as regulations and infrastructure should come subsequently.
The key to success in the Chinese market would be knowledge of the market and its culture. Contrary to the EU market, where the company has to primarily focus on regulations and competition, on top of accounting different tastes of the vast market. Both markets offer good potential and have their drawbacks. However, accounting to the local tastes and culture should come first when entering either market.
References
Amato-McCoy, D. M. (2018). Starbucks shaking things up in Europe. CSA. Web.
Bourreau, M., & De Streel, A. (2019). Digital conglomerates and EU competition policy. Available at SSRN 3350512. Web.
Hills, M. C. (2021). Three years after ad controversy, D&G is still struggling to win back China. CNN. Web.
The Economist (2022). China may soon become a high-income country. The Economist. Web.
Zakkour, M. (2018). Why Starbucks succeeded in China: a lesson for all retailers. Forbes. Web.