The present report aims to evaluate the viability of CG Foods’ international expansion plan into Egypt by analysing its strategies through the lens of the Integration-Responsiveness framework, considering factors that influence market entry timing and scale, suitable entry modes, and Egypt’s current geopolitical and economic conditions in the Middle East.
Task 1
The Integration-Responsiveness (IR) framework is a strategic tool that was developed to assist MNCs to achieve the integration and responsiveness objectives (TAN, 2021). By using this framework, CG Foods can successfully manage the challenges of the global economy and contribute to their mission of bringing Nepal to the world. The IR framework identifies four primary strategies which are discussed below.
The International Strategy builds upon a firm’s strengths by providing similar goods in both home and overseas markets with little local customization (Riyanto et al., 2024). This approach is beneficial for CG Foods as it is able to consolidate production in Nepal, which will help to cut costs while also ensuring quality. In this way, the firm can guarantee that they have the same brand image worldwide and that they are not overcharging for their products.
However, this strategy may not directly address the local customers’ needs and preferences, thus may not be well received in different markets. However, this approach is effective when the local adaptation is unimportant to the consumers and operations efficiency is paramount.
On the other hand, the Multidomestic Strategy focuses on high local adaptation, where products are made to suit the local market needs and demands (Song, 2021). For CG Foods, this could entail creating new tastes and advertising strategies that would be popular in a particular geographic location. This strategy helps to build long-term customer relationships and brand recognition based on the provision of products that are familiar to the specific market.
But it also results in higher operating costs and lower productivity since it requires localized production and management. This approach is particularly suitable for industries such as the food and beverage industry since consumer preferences vary greatly across different geographic locations. This strategy has been used by companies such as Coca-Cola by launching products that are unique to the region in order to suit the different palates of people.
A Global Standardization Strategy is a strategy that focuses on achieving high levels of cost efficiency through the production of standardized products that are marketed in all countries (Song, 2021). CG Foods can benefit from this approach by realizing economies of scale, cutting down on costs of production, and standardizing their products. It is most useful in industries where price is a key competitive weapon and consumers’ tastes are standardized.
However, this strategy may not be very effective in addressing the needs of the local market, especially in markets that may have different tastes from the global markets. Some of the organizations that have adopted this strategy include Lenovo and Apple through centralizing their production and having a standard branding across the globe.
Finally, the Transnational Strategy aims at achieving both the global scale economies and the global scale customization by linking and synchronizing the operations across different countries while permitting the necessary local adaptations (Shams et al., 2021). For CG Foods, this means adopting the best production and marketing strategies from across the world while at the same time adapting to the regional market needs.
This strategy is very intricate and demands a high level of coordination in different areas of the organization. It is most appropriate for organizations that require to be world-class and domestic at the same time. A good example is Unilever; it has a unified global image, but it provides products that are unique to specific regions.
Task 2
The decision to enter the Egyptian market has many implications for CG Foods. Market entry timing and scale are dependent on several factors and therefore needs thorough analysis and planning. Knowledge of these elements can be the key to success or failure in this constantly changing market.
The Egyptian economy is in the process of transition. Some of the recent changes include the floating of the Egyptian pound and the implementation of a value added tax (VAT) that seeks to stabilize the economy and attract foreign investment (Nwani et al., 2023). These reforms can open up a country to investment but at the same time bring about instabilities such as fluctuations in exchange rates. Such volatility may affect the cost structure and pricing policies of CG Foods. Market saturation, high inflation rates, and low consumer purchasing power are unfavourable for market entry.
Another important factor is the political environment in Egypt. Political stability is crucial to market stability and business protection. Egypt has had its fair share of political instabilities in the past, which could have an impact on the market (Sika, 2024). Furthermore, comprehending and managing local policies, including import taxes, food hygiene laws, and labelling policies, is crucial. These regulatory factors could be cumbersome to meet hence may slow down the entry into the market. Nevertheless, these risks can be managed and avoided through proper preparation and adherence to the law.
Furthermore, the Egyptian market provides a large consumer pool with varying needs and wants (Tantawi, 2024). To address these challenges, CG Foods has to engage in advanced market research to identify the local palate and food consumption patterns.
Products that are in tune with the local culture will likely sell well. This insight will be useful in product development and marketing strategies since the company will be aware of what the Egyptian consumers will find appealing. The scale of entry will depend on the extent of market penetration that is required and the fit of the products with the market needs.
The competitive environment in Egypt is also a critical factor to take into consideration. Conducting a competitor analysis, including the identification of competitors, their market share, and advantages and disadvantages, will help CG Foods (Adel et al., 2020). If there are already established industry leaders, CG Foods may have to differentiate their products by offering them at low prices or with unique selling propositions. This competitive analysis will also determine the level of investment and marketing that will be needed to penetrate the market.
Additionally, transportation and supply chain are critical infrastructure that influence market entry in Egypt (Tantawi, 2024). Transportation and distribution play a significant role in ensuring that products reach the target markets on time and in good condition. Inefficiencies in infrastructure invariably lead to time overruns and higher expenses. Thus, CG Foods needs to assess the stability of local transport and storage infrastructure. It is possible to avoid these risks and guarantee that the processes will run smoothly by investing in high-quality logistics solutions.
It is equally important to comprehend the Egyptian sociocultural environment. Culture, religion, and social factors greatly determine consumers’ buying habits and inclinations (Keleg et al., 2021). Examples include ensuring that products are available for consumption during specific religious occasions in cases of restricted diets to improve market access. Using local cultural values to market a brand can help reinforce the relationship between the brand and the consumer.
Task 3
Given the fact that CG Foods has a vision of entering the Egyptian market, it is crucial to identify various entry modes to maximize the chances of a successful market entry. The following is an analysis of the different entry modes:
Exporting means producing goods in the home country and then selling them in the foreign market. This mode involves little or no cost and is less risky compared to the other strategies, which makes it ideal for use as the first approach (Arkolakis et al., 2021). It enables companies to try the market without having to invest a lot of resources. However, exporting can involve high transportation costs, tariffs, and reduced control over the distribution and marketing of goods. Due to the difficulties in logistics and possible regulatory issues in Egypt, exporting may not be the best approach for CG Foods, especially because food products are considered perishable goods.
For instance, most global food and beverage MNEs enter internationalization process through exporting (Kpoku, 2021). It also enables them to learn market conditions and consumer trends before they sink a lot of money into the business. However, Nestlé and Unilever and many other companies have understood that exporting is a good starting point, but it is often necessary to be more present at local level in order to guarantee the quality of the products and follow the market needs.
Licensing is a framework of entry where a foreign entity is granted permission to manufacture and market goods under the licensor’s brand name, technology, or specifications for a consideration in terms of royalties or fees (Fuchs, 2022). This method provides a low risk and low investment approach to entering the market while allowing for a fast entry. But it means surrendering some control over the manufacturing process and product quality, which may harm brand image. In addition, the licensee can turn into a competitor after gaining the knowledge of the patented invention.
In the technology industry, Microsoft has effectively applied licensing to take its software products internationally. However, in the food industry, licensing is very risky because it affects the quality and image of the product since the local manufacturers do not have the same strict standards as the parent company (Pinho et al., 2023). This could lead to the creation of incongruencies, detrimental to the image of the brand.
Franchising is a system where the owner of a business (franchisor) allows another person (franchisee) to sell goods and services under the franchisor’s name (Aziz et al., 2021). This method is also effective for rapid growth with less risk and capital requirements. It is often the case that franchisees have local market knowledge which can be advantageous.
However, the issue of controlling operations of franchises and guaranteeing the same quality of services across the franchises may be complex. Franchising is ideal for companies with well-developed brands and systems, so it is feasible for CG Foods to franchise if they can develop effective franchise agreements to protect their brand image and consistency.
Take McDonalds for instance, this organization has managed to expand across the globe through franchising. Each McDonald’s franchise operates under certain rules and regulation to make sure that all the franchises around the globe are similar (Seva-Larrosa et al., 2021).
Similarly, franchising could help CG Foods expand rapidly in Egypt because local franchisees understand the market and have the financial resources to invest in the business, while the company retains the power to dictate the quality of the products and the image of the brand.
Joint venture means that a foreign company will enter into an agreement with a local company to pool resources, risks, and revenue (Fuchs, 2022). This mode can help CG Foods to gain local market knowledge and distribution channels, thus lowering entry barriers. It is especially useful in high-risk markets with stringent regulations or where local partnerships are required.
However, there may be conflicts between the partners and the fact that the operations may be difficult to manage are some of the issues that need to be considered. An example of a successful market entry is Starbucks venturing into China through a joint venture with Tingyi.
This partnership enabled Starbucks to leverage on Tingyi’s established distribution channels and understanding of the Chinese market to expand quickly (Cadestin et al., 2021). Similarly, accessing the Egyptian market by forming a joint venture with a local experienced partner would help CG Foods to navigate the regulatory challenges, consumers’ preferences, and competitive landscape.
Recommendation
Considering the nature of the products sold by CG Foods, the company’s strategic direction, and its goals and missions, it is evident that the best entry model into the Egyptian market is the Joint Venture. This approach represents a middle ground between the strategic imperative of having a significant market presence and distribution networks in the target country and the desire to maintain control over production and quality (Aharoni, 2024).
The employment of a competent local partner can assist CG Foods to handle the local legislation more efficiently and align its products to Egyptian consumers. A joint venture would entail risk and capital sharing; thus, it would be less difficult for CG Foods to establish itself in the market while still controlling a significant portion of the business. This also provides an opportunity to meet the local partner and obtain some valuable information about the market situation that would contribute to the improvement of the strategic position of CG Foods.
Additionally, a joint venture means that CG Foods can start small and grow the business as they establish themselves in the market (Brouthers et al., 2022). This approach reduces the financial risk inherent in large initial investments needed for wholly owned subsidiaries while offering significantly more control over operations than licensing or franchising.
Task 4
Taking into consideration the current global economic and political realities, CG Foods should analyze its expansion strategy into Egypt. The environment has both potential benefits and threats which may affect the company’s strategic objectives.
Egypt’s economy has proven quite stable, and the country is expected to achieve a GDP growth rate of 4.1% in 2024 (Egypt State Information Service., 2024). The last few years have witnessed efforts at economic reforms through devaluation of currency and fiscal measures to counter high inflation and fluctuations in the currency market. The UAE’s increased investment and a higher IMF loan have also reduced the near-term fiscal vulnerabilities. Nevertheless, inflation persists as a problem, rising to 35.7% in 2023, and affects the purchasing power of consumers and economic stability (Makary & Lewis, 2023).
Nonetheless, the geopolitical realities of the Middle East region are complex. With Egypt’s strategic location and political significance, a lot of financial assistance has been obtained, but there is the issue of regional volatility (Krasna & Meladze, 2021). Political instability, especially in the Gaza Strip and in the region in general, can impact economic stability and investors. This exposure to political unrest and security challenges could be very detrimental to CG Foods’ business.
However, these challenges do not completely detract from the potential market in Egypt. The world is home to a burgeoning population and a ready market for food products. Government initiatives to develop business friendly environment, increase private sector involvement, and undertake structural changes make the country attractive for foreign investments. The development strategies adopted by Egypt like the “Egypt Vision 2030” for the country’s future development make it a good market to invest in (El-Sayed et al., 2024).
Thus, CG Foods has to consider the advantages and disadvantages of entering the Egyptian market. While the economic liberalization measures and external funding indicate medium-term prospects, the immediate context is characterized by high inflation, exchange rate fluctuations, and geo-political risks.
Recommendation
Instead of completely de-internationalising its expansion strategy, CG Foods should consider a phased entry strategy. This includes market analysis to identify consumer trends and market conditions, entering into strategic partnerships with local companies to minimize risks and leverage local knowledge, and having a dynamic investment approach to adapt to changes in the market and the global economy (Tang et al., 2021). Also, the risk management plans will help in the event of disruptions and keep the businesses running.
This way, CG Foods can leverage on the opportunities in Egypt while at the same time managing the related risks, and the various market dynamics to foster sustainable growth in the region.
Conclusion
This report assessed the possible strategies CG Foods could use in penetrating the Egyptian market through the application of the Integration-Responsiveness grid, timing considerations, and scale considerations. It advocates for joint ventures to mitigate risks as well as take advantage of local knowledge to achieve viable growth in the face of economic and geopolitical dynamics. This phased strategy is in line with CG Foods vision of expanding its operation globally.
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References
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