Introduction:

Sales are the main source of income for any company whereas, it is right to say that sales highly depends on the effectiveness of market strategy approached and implemented by a particular company. The main motive behind developing a marketing strategy is to increase the lead generation and reach potential customers while retaining the existing ones. In such manner, market entry strategy is an imperative component of international marketing mix because initiating and expanding business in a foreign land includes colossal capital and return on investment (ROI) largely depends on the implemented market entry modes. The present study revolves around external business environment examinations especially conducted for Bunnings with the help of PESTEL tool for both Thailand and Australia. The process is followed by assessment and selection to find out the most appropriate market entry modes for the company. The study additionally provides a brief description of the potential market mix for a similar company.

An Overview of Bunnings, Australia

Bunnings Warehouse – The leading retailers of home and outdoor living products in Australia was established in 1985 at eastern Australia. Bunnings works under the parent organization of Orica Private Limited. Working in the retail sector Bunnings mostly deals in indoor and outdoor products and tools.

The company basically covers the main area of Australia and New Zealand by having more than 300 stores in Australia alone. What attracts the customers is their dedication to providing self-operable household and outdoor items at less than the market price. Customers can easily operate and handle the simple and user-friendly hardware products. Plus, the Bunnings provides the proper training session for complicated hardware products without charging a single penny.

PESTEL Analysis

The following data represent the PESTEL analysis in Australia:

Political Environment:

The political environment of Australia is more stable in comparison to other nations as the political stability, transparency in the regulatory system and a strong governance framework providing the necessary strength to its economic growth. Due to this, the country lands among the top five on the index of Economic Freedom. Its government frameworks attract investors by providing a progressive and regulated platform to work upon. The judiciary a law-enforcement have played a very big in economic development by properly controlling the corruption level in the country. The constant stability of the country is beneficial for companies who are looking forward to starting their business in Australia. Plus, well educated, trained, skilled technicians with fair control over multiple languages is another added benefit.

Economic Environment:

Australia has a mixed-market economy with the GDP of A$ 1.69 trillion as per the survey conducted in 2017. Its strong GDP has made it the second most-wealthiest nation in the world after Switzerland. From the above elements it is stated that in the matter of economy, Australia is well-developed. According to the published report in 2014, the market price in Australia is higher in comparison of per capital income. However, the GDP per capital in Australia is equal to 443 % of the total world. There is a wide scope of economic development in different parts of the country along with the remunerative opportunity for investment. There is a high possibility that investment on property at a couple of areas of Australia can give high returns. Off track, plans are practical in Australia. In addition, the currency exchange rate of Dollar, Sterling, and Euro are valuable for financial specialists at Australia. The cost of living in the developed cities in Australia like Sydney, Brisbane, Melbourne, and Perth is much lower than other luxury known countries around the globe. As already mentioned above the economic growth rate of Australia is appreciably higher than other counties. This continuous growth is mainly supported by the foreign trade and domestic demands as the fixed investment is flat. The stability in interest rate, rise in exchange rates and great control over the inflation rate indicate the economic stability of Australia.

Social Division in Australia: 

The Australian society is classified into three major parts upper class, middle class, and working class. Whereas most of the citizens fall under the middle-class category. The classification of a society can be determined by the lifestyle of living individuals. Although the lifestyle can be deceptive. Eating, contacts, and sustenance can be characteristic of classification. However, Australians pay close attention to their education and irrespective of class, every parent in the Country focus on providing the better education to their children to guarantee better job opportunities in the future.

Technology in Australia:

Australia is known for its achievement in the technology field which is one of the biggest draws for students who wants to make their career in the technology sector. The growth of technology in Australia is responsible for major breakthrough and development around the world. Scientific and Research Organizations keep an eye and support the research and development activities in various fields of science like physics and biology. The government and other Australian organizations financially support research projects also. Advanced technology and research projects now cover a big portion of the scientific development.  Main fields where technology has developed on the basis of research are:

  • Scientific Section
  • Medical Section
  • Medical Arena

Environmental Conditions in Australia:

The change in environment can make a huge impact on various industries. Effect on the environment has been observed and controlled by the government of Australia. However, in 2013 Alden et al stated that the shortage of water resources in Australia has influenced the standard of the water supply. Redirection of water from the coast for water supply has increased the saltiness of water of Murray Valley. The Soil quality has been decreased due to the deforestation. Australian Government has taken initiatives to resolve the major environmental issues.

Legal Scenario:

The legal factors existing in Australia has become the important topic for the business. The basic wage of workers has been increased and the obligation of recycling products has been forced upon business organizations due to socio-ecological reason. The agreement at Australia is not a subject to formal paperwork to be lawfully official. Messages, e-mails and any form of writing can be taken as a binding on various issues. The Government of Australia has officially declared that having a relationship with any kind of terrorist group or individuals will be a punishable offense. They have enlisted criminals a company need make distance with to avoid any legal issues in the near future.

PESTEL Assessment of Thailand

The following section represents the PESTEL assessment on Thailand:

The Political Environment in Thailand:

Similar to Australia, Thailand is the second largest economy in Asia right after Indonesia. The political condition of Thailand has changed after establishing a bilateral relationship with neighborhood country Cambodia. The agreement between these two neighbor nations has prompted to joined advancement in marine grounds around the Gulf of Siam. The overall governance parameters that assess the political scene of any nation are political steadiness in the country, the effectiveness of the ruling Government directions of value winning in the nation, administer of law and peace in the country with corruption control. According to the World Bank expressed that Thailand requires the change in each one of the fields for building up the current political situation in the country.

Social Environment in Thailand:

Over the last decade, Thailand has made progress in economic and social development. In less than a generation gap, the nation has moved from a low-pay nation to upper-pay which is absolutely remarkable. The social environment in Thailand refers to cultural aspects and customer demography. As per the sources, the migration rate in the country has increased in the last two decades. Plus, the future rate has likewise expanded and individuals are more worried about owning a house instead of living in a leased apartment. The gender gap between male and female is not that much. It has been witnessed that people in Thailand are more price conscious while going for any product.

Technological:

The access use of smartphone and utilization of the internet can be seen as a major innovative change in Thailand. Now Most of the citizens in Thailand prefer online shopping rather than going for the shop to shop to buy things. It reduces the time and efforts that are involved in a shopping. The Leonidou, Katsikeas, and Morgan (2013) analyzed that most of the companies in Thailand are investing in 3D secured payment integration to ensure secure online shopping. However, a total number of people visiting physical store are no less. Still online marketing is utilized by existing organizations in Thailand.

The Environmental Scenario in Thailand:

The dramatic economic growth has caused several environmental issues in the country. To stop this government of Thailand has taken a step forward and made environmental laws stricter than before. They have done this to reduce presence of greenhouse gases like Nitrogen Oxide, CO2, Methane, ozone, and others. The government agencies are making the surprise appearance to check the waste disposal management, quality of products and several other components of companies.

Legal Issues in Thailand:

The major legal laws applicable to Bunnings are environmental law, child labor laws and licensing laws that revolves around the company. Apart from this fine charges for late tax submission has been increased. The government is focusing to reduce the child labor in the country.

4.0 Main Success Factors:

The main success factors for Bunnings in respect of spreading business in Thailand are given below:

Low Degree of Dilution of Ownership:

As per the Dhakal and Chanthawong (2015), dilution is a result of the reduction in the ownership of the company. The dilution can adversely leave an effect on both financial and non-financial performance of an organization alongside making hierarchical conduct-related issues. Thus, a principal focus of Bunnings should be to stay away from dilution of ownership as this can affect its activities in the native country Australia too.

According to the Chanthawong and Dhakal (2016), weakening is an aftereffect of the decrease in the responsibility for organization. The weakening can adversely leave an effect on both budgetary and non-money related execution of an association nearby making progressive direct related issues. In this way, an essential focal point of Bunnings ought to keep away from weakening of possession as this can influence its exercises in the nation of origin Australia as well.

Low Financial Risks:

Bunnings- a warehouse company has been confronting several financial problems like dormant development and liquidity concerns in overall revenue and increasing expenses. Thus, involving in a high-risk venture would not be appropriate for Bunnings. Consequently, the company needs to embrace a market section mode in which the monetary dangers are relatively lower.

Return on Investment (ROI):

The Principle objective for Bunnings to go into Thailand is to build the net revenue by expanding in general deals incomes. Rate of return (ROI) portrays the net profit a company has earned against the capital invested in a project. In this manner, it is crucial for the business organization to conduct a proper estimate of potential incomes and profitability margin from the new market appearance in Thailand.

Easy to Reach Local Marketers and Clients:

As per the Droege, Lane, and Casile (2013), the existence and limited access to local clients and marketers in the foreign land can threaten the survival of the company in the country. As a result, it is essential for Bunnings to seek a marketing entry that ensures the good access of local marketers and clients. This can likewise help the company to accomplish greater sales.

Liquidity of the Company:

Liquidity describes how quick an asset or security can be sold in exchange for cash in the market. Liquidity is important for every business and Bunnings is no exception. The income generation through sales can improve the total liquidity of the company. Thus, whatever marketing approach to be chosen by the company must be capable of generating sales leads.

Selection of Marketing Modes:

There are various ways a company can enter into the international market to sell its products and services. In 2013, Mintz and Currim stated that selection of particular marketing strategy depends on the several marketing factors like business environment analysis, nature of the business and offer products and services.

Assessment of Marketing Strategies:

Read the top market strategies given below:

Licensing:

Licensing refers to the business arrangement in which a firm legally give permission to another firm to use its brand name to produce and sell products in a foreign country. Zhang and Chen (2015) stated that compared to other marketing modes, licensing is a less-risky methodology. In this type of market entry strategy, the firm who granted the permission will receive the royalty payment.

Partnering:

The partnership is a mutual agreement where two or more than two firm share ownership of the company to sell products and services in a local market. During the partnership, no separate entity is created by the firms as shares the profits and losses in a fixed ratio which was already decided in advance. As per the represented facts by Droege Lane and Casile (2013), the partnership is one of the most considerable in situations where culture, social factors and business environments of a new nation is far different from the nation of origin. This will eventually reduce the risk as the quantum of the capital venture is lower than green-field speculation technique. The partnership market can help the organization who is entering in the different market to learn about the business sectors, clients, competitors and several other elements of the business environment of the new nation effectively. Also, Partnership can assist the company to gain admittance to local distribution frameworks, vital contacts and clients effortlessly with the help of existing firms who are already familiar with operating in the new country.

Green-field Investment:

A Green-field is a type of direct investment where a parent company like Orica Private Limited builds its operations and manufacturing in a foreign country from the very ground. The process includes a huge capital investment, purchase of new plots, building, and machinery for establishing the new manufacturing unit. Chen & Zhen (2015) stated that both the quantum of investment and financial risks are very higher in green-field investment compared to other marketing options. However, the business rule higher risks result in higher earning is applicable in green-field investment strategy. Plus, the absence of business substances and middleman makes it more profitable.

Joint-Venture:

The joint venture is an agreement in which two or more than two parties come together with a legal agreement to create a company with the purpose of accomplishing a particular task. This task could be anything from a launch of the new brand to selling services in a completely new market. As said above in the joint-venture each participates is responsible for cost, profit, and losses at an agreed ratio mentioned in the contract. However, unlike other modes of entry, joint-venture has its separate entity.

Choosing the Right Market Entry Mode for Bunnings:

It can be overwhelming to choose an appropriate market entry mode for the Bunnings. In the current scenario the major success factor the company should be focusing on are:

  • Low degree of dilution of ownership
  • Low financial risks
  • Return on Investment (ROI)
  • Easy to reach local marketers and clients
  • Liquidity of the Company

From the above study, we have found out that a high return on investment (ROI) can be generated through Green-field investment but risks and capital investment associated with the method is highest which made it inappropriate for many businesses. However, marketing strategies such as joint-venture can cause dilution of ownership and overall management control. Compared to other mentioned market entry modes licensing and franchising associate low risks but these strategies do not provide any direct access to a concerned company in the new market. Thus, Bunnings will not be able to gain any knowledge or learn anything new while expanding business in Thailand. Now, in case of the partnership, no division of business management control and ownership will take place as no separate entity will be created.  The financial risks and capital investment are lower if the Bunnings enters into Thailand through partnership. By partnering with the local company the Bunnings can gain knowledge and shared the risk involved in the marketing process. Furthermore, the return on investment (ROI) will be lower than Green-field investment but the plus point is the stability in return on investment can be higher than other entry modes. Coming to the last concept liquidity which is a primary concern for Bunnings. In the after comparing all of the market entry modes, we find out that partnership is the easiest mode to get access to the local marketers and clients in Thailand. With this market entry mode, the company can generate sales leads faster resulting in the quick flow of cash in the business. Hence, it is suggested for Bunnings to go with the “Partnership” as it is the most suitable mode of market entry in Thailand.

Evaluation of Marketing Mix:

Product:

The product is an item which is produced to satisfy a need or want of the customers and more or less has an impact on the customer satisfaction. Thus, as a leading warehouse company in Australia and now expanding its business in Thailand, Bunnings must ensure that whatever products they are offering customers in Thailand are the best in quality. In the beginning, Bunnings would start offering the following products in Thailand:

Price: 

As a beginner in Thailand, Bunnings closely follows the cost leadership strategy to compete with existing companies in the local market. Dhakal and Chanthawong (2014) mentioned at the beginning providing products at the lower price without compromising with quality is one of the best ways to build the brand reputation in a foreign market. It is suggested to Bunnings to pursue the same strategy as it can help them to attract new customers in Thailand.

Place:

The place describes a particular point, are or location where sales take place. Chanthawong and Raefel (2013) explained that number, space, and location are the main elements that affect the effectiveness of products a company is providing in the market. In the current situation, Bunnings needs to find a busy location to set up their retail shop along with several other stores in Thailand.

Promotion:

In this modern market with a combination of both traditional and advanced marketing techniques can increase the success rate in the foreign market. Bunnings being an experienced company can develop a marketing plan incorporating following online marketing tools:

  • Online articles, blogs and press release
  • Social media marketing
  • Radio and television advertising
  • Newspaper advertising
  • Celebrity branding

The Conclusion:

The above discussion indicates that Thailand could be a great opportunity for Bunnings to expand their current business. To achieve a higher return on investment, partnership has been the most appropriate market entry mode of the Bunnings. However, the company should ensure all products are high in quality and providing products at the lowest price. Plus, Bunnings can incorporate both traditional and modern marketing tools in its marketing strategy to promote the brand in Thailand. The retailing store must be located on a busy street.

Reference List:

Alden, D.L., Kelley, J.B., Riefler, P., Lee, J.A. and Soutar, G.N., 2013. The Effect of Global Company Animosity on Global Brand Attitudes in Emerging and Developed Markets: Does Perceived Value Matter?. Journal of International Marketing, 21(2), pp.17-38.

Anil, I., Tatoglu, E. and Ozkasap, G., 2014. Ownership and market entry mode choices of emerging country multinationals in a transition country: evidence from Turkish multinationals in Romania. Journal for East European Management Studies, pp.413-452.

Arora, S.K., Youtie, J., Shapira, P., Gao, L. and Ma, T., 2013. Entry strategies in an emerging technology: a pilot web-based study of graphene firms. Scientometrics, 95(3), pp.1189-1207.

Berthon, P.R., Pitt, L.F., Plangger, K. and Shapiro, D., 2012. Marketing meets Web 2.0, social media, and creative consumers: Implications for international marketing strategy. Business horizons, 55(3), pp.261-271.

Chanthawong, A. and Dhakal, S., 2016. Stakeholders’ perceptions on challenges and opportunities for biodiesel and bioethanol policy development in Thailand. Energy Policy, 91, pp.189-206.

Droege, S.B., Lane, M.D. and Casile, M., 2013. A tumultuous decade in Thailand: competitive dynamics among domestic banks and multi-national entrants in an emerging market. International Journal of Business and Emerging Markets, 5(4), pp.371-387.

Glanz, K., Bader, M.D. and Iyer, S., 2012. Retail grocery store marketing strategies and obesity: an integrative review. American journal of preventive medicine, 42(5), pp.503-512.

Leonidou, C.N., Katsikeas, C.S. and Morgan, N.A., 2013. “Greening” the marketing mix: do firms do it and does it pay off?. Journal of the Academy of Marketing Science, 41(2), pp.151-170.

Mintz, O. and Currim, I.S., 2013. What drives managerial use of marketing and financial metrics and does metric use affect performance of marketing-mix activities?. Journal of Marketing, 77(2), pp.17-40.

Zhang, X. and Chen, Q., 2015. Innovation or Imitation? The Impact of Organizational Culture on Market Entry Strategies. The Josai Journal of Business Administration, 11(1), pp.7-19.

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