Emerging Markets : a Case Study on Foreign Market Entry in Laos; MBA-thesis in marketing

Abstract: Background This thesis is conducted for Husqvarna AB with the aim to map the Laotian market for them in terms of market potential for forestry power equipment. In order to provide decision material for further action I was asked to give a description of the Laotian forestry sector; research potential harvesting volumes; analyze the competitive situation; describe the general business conditions in Laos; and provide some insight as to how Husqvarna can enter the Laotian market. Method The method I have used for collection of information is two-fold. The empirical data has mostly been derived via interviews with forestry officials and companies involved in forestry. The theoretical review and collection of secondary data has been performed by research of books, journals, reports, newspapers and online sources. The research methodology can accordingly be labelled "the actor approach" which methodology is based on understanding social entireties. An important element in this approach is a process referred to as the hermeneutic circle - a process in which new knowledge is continuously incorporated into the understanding and used as base for further research. An important part of the method is my personal experience of Laos, from which I consider myself being able to base some conclusions. Theoretical Review Foreign market entry can generally be made in four modes: Exporting, licensing, joint ventures, or sole ventures. Foreign market entry strategies may involve adapting the marketing strategy. It may also necessitate product adaption.   Market entry in developing countries will most likely mean being exposed to unfamiliar environments. The general business conditions might be very different from the home market and constitute higher levels of trade barriers and sociocultural distance may be difficult to deal with. Case Study, Conclusions and Reflections The highlights from these two chapters include:

Laos offers foreign investors to use any of the four market entry modes. Doing business in Laos receives a low international rating, especially in terms of labor restrictions. It also has rather high trade barriers. Laos is developing its commercial tree plantation sector and estimates suggest that the harvesting volumes will be increasing rapidly in the coming 10-15 years. Importing and selling forestry power equipment is restricted. Laos does not yet have any authorized dealer for chainsaws. This provides for interesting opportunities. The market is flooded with cheap, illegally imported, Chinese chainsaws, but it is questionable whether this actually constitutes any competition to Husqvarna, being a high quality brand. The Chinese chainsaws might however soon increase in terms of quality and be more competitive. Obtaining an import and sales license for outdoor power products may be a rather lengthy procedure but once in place would mean being the first authorized dealer - which might be advantageous.   Recommendation Due to Laos making efforts to increase the commercial tree plantation area, the harvesting volumes will increase rapidly the coming years. The sales potential for forestry equipment will hence increase in the years to come.   My recommendation to Husqvarna, if they have resources, is therefore to locate a dealer and enter the Laotian market. Plantations are however still mostly in the development phase. It is therefore doubtful that early entry is profitable enough to be motivated if there are other markets with higher potential that Husqvarna wants to enter.