STRATEGIC MANAGEMENT
ASSIGNMENT NO. 1
SUBMITTED TO: DR HAMEED AKHTER
MAY 12, 2020
MARIA FATAH (1925125)
MBA 2 (SECTION-D)
Requirement:
As a motivation for expansion of your business you are given a project of formulating an
international strategy for your organization. Representing your organization and your
business and competitive understanding. Draft a short international strategy which consists
of:
1. Motivation and rationale for going global.
2. Which country/market you will choose and why? Supplement your answer through
PESTEL analysis.
3. What entry mode you are going to choose and why?
4. What would be your global strategy? Global, mega national or transnational?
Solution:
Engro Fertilizers ltd is one of the most successful fertilizer companies in Pakistan due to its
clear strategies regarding the operations and growth. The company has always been working
hard on the synchronization between the goals/objectives and the strategies. The company
has always strived hard for the expansion. Engro’s fertilizer manufacturing facility at Daharki
has been experiencing ongoing expansion as company’s policy always revolves around the
market and product development. This, coupled with distinct dynamics of highly nuanced
fertilizer industry warranted an independent and dedicated business entity and approach.
Engro fertilizers has already established its 2 fertilizer plants in Pakistan. The newly
established fertilizer plant which is Envin 1.2 is known to be the biggest fertilizer plant in the
entire subcontinent. This expansion led the company towards growth as now Engro
Fertilizers is big enough to serve the entire Pakistani market. Now company is determined to
grow more and to go global that’s why a decision has been made in order to work on the
market development as well as the product development.
1. The motivation towards going global is the expansion strategy as the top
management is seen to be determined since the day first. Company in the past
tried to establish fertilizer plant in Brunei so it shows that Engro fertilizers is
capable enough to go global and starts its operations internationally. As
competition is also increasing day by day due to the entrance of Fatima Fertilizer
and Fauji Fertilizer so there are technically 3 big and giant companies serving the
Pakistani market but majorly there are 6 fertilizer companies. Currently, in
Pakistan, there are six major producers of fertilizers which include Fauji Fertilizer,
Engro Fertilizer Company, Dawood Hercules, and Fatima Fertilizers. Media
reports suggest that the Chinese government is keenly looking for avenues to enter
Pakistan's agriculture and fertilizer sector. And the Engro Fertilizers has been
coming up with the production at its full capacity. So the main motivation towards
going global is the increased competition and the smaller Pakistani market as
compared to the other markets such as china. Another rationale for going global is
the current consumption of fertilizer in Pakistan and the current production
capacity of the entire Pakistani market. According to business recorder magazine
the consumption capacity of fertilizer sector has been increased approximately by
45% to 1.63 million tons while the production rate of urea stands somewhere
above the consumption capacity which is 4.3 million tonnes according to the
fao.org. so this is quite clear that the production capacity of urea is much bigger
than the total consumption rate of urea throughout the country. So this rationale is
quite solid enough to go globally as Engro Fertilizers is capable enough to serve
the most convenient international market. The company needs to enter the
international market in order to keep the production rate same and not to waste its
product in the current market.
2. I would like to choose Singapore for the global expansion and according to the
PESTEL analysis. If we look at the political environment of the Singapore so this
market has been ranked globally number 5 in the list of friendliest business
countries throughout the world. That means the government politically has
flexible policies, rules and regulations for the new entrants in the business market.
Usually companies face tougher government policies in the entire new countries
but this market seems to be a bit relieving in case of startups. And the other main
reason for choosing this Singaporean market is its current fertilizer consumption
capacity which is 30,237 kg per hectare of arable land, this shows that demand for
fertilizer is very high in the Singaporean market which is economical analysis.
This shows that the economic conditions are all set to support the entrance of
Engro Fertilizers in the whole new and alien market. The legal policies of
Singapore are quite transparent as the legal authorities always encourage such
business activities that are exactly in accordance with the legal obligations and are
entirely transparent. If we look at the technological trends of the world as well as
the Singaporean market so it is the world’s leading country in terms of the
technological advancements which will help Engro Fertilizers in bringing the
innovation in the production process and help in improving the business
operations as well. If we look at the social trends so many people prefer growing
plants and vegetables for domestic use mainly so fertilizer is always in high
demand, so after discussing the PESTEL analysis it would be the better idea to go
for Singaporean market in case of going global.
3. Foreign direct investment would be the most suitable mode of entry for Engro
Fertilizers in case on entering the global market. Engro Fertilizers contacted world
bank for the debt while establishing the South Asia’s biggest fertilizer plant so the
company holds good reputation among the international financing institutions so
investing directly in Singaporean market would be easier in case of support from
the financing institutions. The company has strongly centralized structure so going
for joint ventures and licensing would be risky because company management has
never compromised on bringing flexibility in the policies, rules and regulations.
While it is quite clear that in case of joint ventures and licensing companies
incline towards decentralization which brings a lot of irregularities in the
operations of parent companies as well. In order to protect itself from
irregularities in operations Engro Fertilizers would choose foreign direct
investment which will help the company management to carry on their current
business practices smoothly without causing any problem for the company
operations and company can go for the rapid market entry with the help of
acquisitions that’s how company may take less time to grow more and more. As
greenfield investments are always possible and there maybe chances of getting
subsidy on the greenfield projects so going for foreign direct investment would be
better idea.
4. Transnational strategy is a more personalized approach to selling and marketing
your goods and services, with your target audience in mind. The global strategy
would be to follow transnational strategy as in this a firm always seeks to stay on
the middle ground between a multidomestic strategy and the global strategy. In
this strategy Engro fertilizer will try to create a balance between the domestic and
the global strategy. The company has been serving the domestic market since 55
years and has always proved to be the market leader while going global the
company cannot totally avoid the domestic market. The company may go for
some concessions to the local demands, needs and trends. That’s how Engro
fertilizers will be able to hold control over the entire domestic Pakistani market as
well as it will be able to focus well on the global market as well. Following this
transnational strategy is totally in the favor of the management of Engro
Fertilizers as in this firms try to balance the desire for efficiency with the need to
adjust to local preferences within various countries.
Maria Fatah.
1925125.
Mba-2 section D