The study of Market Entry Strategies of SGP to expand into China Literature review

The study of Market Entry Strategies of SGP to expand into China - Literature review Example During its expansion programs SGP already had bought a stake in China’s Liquid Petroleum Gas market and is looking forward to become the market leader for the product. (Forbes.com, 2010). Literature Review One of the largest Liquid Petroleum Gas distributors, SGP based in Thailand as studied focuses on its strategic move on gaining entry into the Chinese soil. To this end, Levi (2006) states that the strategy devised by a company to make its entrance into a totally new or sub-divided market is better known as the ‘market entry strategy’ for the company. These firms further adopt another strategy to support its expansion to newer markets. This strategy helps the firm to make reasonable allocation of its resources to gain the potential of effectively operating in the newer markets. Levi (2006) further states that through the employment of the ‘market entry strategy’ the firm successfully draws out a plan to tap the newer markets. The plan incorporates a n outlook through which the newer market is properly segmented and effective plan of actions are chosen to meet the demands of the target group through acquisition and expansion operations. The central component of the strategy taken by the company to enter into newer markets is constituted by ascertaining the ‘mode of entry’ by the company into the foreign market. Research made along several firms on a global scale confirms that there are mainly five modes through which a firm plans to make a foray into foreign markets. (Levi, 2006, p.34). Levi (2006) states in this regard that entry models like ‘exporting’, ‘licensing’, ‘financing’, ‘building up a joint venture with the foreign firms and establishment of subsidiaries in the foreign land are considered feasible by a firm willing to enter into foreign markets. Each of the several modes of entry has significant advantages and disadvantages which can be underlined as follows. T he company through the export mode targets to push the products produced in its own country to the foreign market. Thus the company is not required to set up a new factory in the foreign market. The company through the export mode endeavours to build huge amount of revenues by exporting a large number of products to the foreign nations. Export strategy used by the firm to enter into foreign markets however faces some distinct disadvantages. The company using such strategy may have to face the stringent regulations and market policies of the foreign market which can prove detrimental to its expansion. The cost of transferring products along the borders also tends to impose huge costs to the production firm. Again the foreign market may happen to be non-demanding to the products produced by the exporting firm. The level of obstruction can also result out from the barriers relating to difference of culture between the exporting and the receiving nation. Thus the above reasons may happe n to make the export mode unsuccessful for the exporting firm. Levi (2006) further observes that the company can also take help of transferring the license to produce a stated amount of the products and thereby to market the same in the foreign market. In that the company renders a sum to the firm in the foreign nation taking such task. The company operating through the licensing mode gains the advantage of cost for not