INTRODUCTION
This report is intended on discussing the entry strategy of a local Nigerian based coconut Chip Company intended on penetrating into the European market. it would highlight and discuss the PESTEL factors of France which is the entry country. Also the report would be highlighting some issues likely to be faced by the business on entry into Europe. Also a few recommendations would be suggested to the board of directors for further review.
HISTORY OF EUROPE
Europe is the world’s 2nd smallest continent by surface area, covering about 10,180,000km² or 2% of the earth’s surface and about 6.8% of its land area. Europe is made up of a total of 51 countries with the largest countries being Russia and the smallest being the Vatican City. Europe is the third-most populous continent after Africa and Asia, with a population of 739-743 million or about 11% of the world population.
FRANCE
France, officially the French republic ( Republique Françoise) is a sovereign state comprising a territory in western Europe and several overseas regions and territories. France spans about 640,679km² and has a population of 67 million. France is also a strong and standing member of the European Union and is the largest country in the union. France is also a member of the Euro zone which automatically makes France a euro € tender country. The official language of France is French and Catalan; also a member of the Shenzhen area. As the country chosen by the board of directors for European entry, some factors have to be considered before entry into the French market, some of these factors include;
POLITICAL FACTOR
France is a developed country; the political environment is stable in the sense that there is no political trouble, no wars, low level corruption, and no conflicts; this is a good factor which can attract investors and new business entry. In another way setting up a business in France requires a lot of capital from the investors. In certain territories in France like: Mayotte, Saint Pierre and Miquelon, Wallis and Futuna, Monaco, the government has fixed an investment limit of 1,500,000 Euros for foreign enterprises. In fact the government has elucidated a precise list of tax or mandatory contributions which have to be paid by business people in France. The government of France has no control on religions or culture, there is no policy stated by the government to restrict any new entry of any business which is not matching with the ‘believes’ of the French population.
ECONOMICAL FACTOR
Economic factors such as highlight: interest rates, level of inflation and employment, gross domestic product of the country (GDP), per capita income and so on. The GDP real growth rate of France has increased from an all time low of $11154.68 in 1960 to $36075.58 in 2014 (World Bank report, 2014), this reveals a better economic situation of the pays although the phenomenon of recession came into play, France has in fact weathered the economic crisis better than the other big countries of Europe. The GDP per capita has shifted from $35216.5, $35678.63 to $35669.59 in 2010, 2012 and 2014 respectively (Gow, 2014); this shows a high standard position of GDP per capita of France which reveals a good economic situation of the country. The unemployment rate was recorded at 10.3% in the second quarter of 2015, and the population poverty line was 60.2% in 2015 (BBC News, 2015).
SOCIAL
France population in 2015 is 66,317,994. The age structures of France population are 0-4years 18.5%, 15-64 years 65% and 65 years above have 16.5%.The population growth rate of France is 0.549%.The life expectancy of France, male average age is 77.78 years and female average age is 84.34 years (diagram 2). The literacy rate of France has 99% of total population. France is highly developing country there are 75 percent of the people staying in the cities. There are two languages spoken in France one as French and another is Catalan but with the globalization of the world English has quickly squeezed itself in to serve as the third spoken language. The French people are very proud of their language which is famous worldwide and also shows their identity. There are different religions, Roman Catholics (33%), Muslim (21%), and Hindu (14%) and others which are all freely practised (diagram 1). The French people share a great passion of food. France is very famous for cuisine, wines and cheese.
DIAGRAM 1
Diagram showing religious distribution in France
DIAGRAM 2
FRANCE AGE DISTRIBUTION
WWW.INDEXMUNDI.COM
TECHNOLOGICAL
France has an excellent scientific and technological environment. As being the worlds 4Th industrial power, one of the world leader in space technology, in nuclear energy, in computer engineering, in environmental protection (Sjsu.edu, 2015). All the credit France owes to its quality education system which includes 230 engineering colleges and 87 universities which are well known for their research. Technological and industrial growth funded by the government helps in increasing the standard of living of people. France spends about 2.2% of its GDP for the development of its technology and industrial growth (on research and development). Number of patent application in a country indicates how a process or product offers a new technical solution to a problem. The amount France gets by exporting its R & D such as in computers, scientific instruments; aerospace and electrical machinery is about $93,209,237,841(2009).There is research credit tax (CIR credit import research), it Is a corporate tax relief which government forgoes the expenditure of the firm on its R & D operations. The technological index of France is 4.65.
ENVIRONMENTAL
In France, forest covers about 30.3% of land. France is the first country to have a separate ministry for environment. France is been ranked 17th for carbon dioxide emission. The EPI score for France is 78.2 and it holds 7th rank. This could be achieved as Frances 78% of energy production comes from nuclear power. France has even imposed a carbon tax. It is about 17 Euros per tonne of carbon dioxide emitted. It contributes about 4.5 billion Euros per year. France carbon emission is about 382,870kt. Being a member of G8 France has decided to cut short its carbon emission by about 20% since 2012. (Ec.europa.eu, 2015)
LEGAL
Employment laws
Hiring: Written contract are mandatory to all grades and levels. It should be in French. Firing: employees cannot be removed unless the organization specifies one of the claws mentioned in the French law. The dismissal process on disciplinary basis is very official and failing a practical step, even where the firing is clearly reasonable on the merits, May effects in the Courts overturning the firing and ordering the recall of the employee (Frenchlaw.com, 2015).
Taxation
The current standard rate is at 19.6%. The reduced rate (for food and books) is 5.5%. A specific rate of 2.1 % applies only to the drugs taken in charge by the Social Security. The net revenue of VAT in 2008 is 126 billion euro. (Icaew.com, 2015)
Subsidy policy
Are applicable to agricultural and green revolution companies (supporting ‘save earth’).
FDI
Policies on direct investment flows are there since 1984-1985. Both inward and outward flows are at a higher rate.
KEY POINTS BUSINESS SHOULD WATCH CLOSELY
• Competition: as a new company in the European market, it is only proper and wise for the business to size up its competitors and make it topmost priority to take over the market.
• Changing consumer taste: as a business already established in Nigeria, the company understand that consumer taste changes with time. This change in consumer taste is going to be a new experience for the company after entry into the European market and a close eye must be kept on these changes.
• Language and cultural barriers: as a company coming into France which is highly a French speaking company, information passed across must be clear, precise and understandable by the customers and local workers to avoid misunderstanding and conflict of interest. Cultural differences are sure to exist and should be respected accordingly.
• Route to market: as a new product in the market, availability of the product to the final consumer should be of paramount importance. Ease of access to a product has proven to increase product sale by a considerable amount. Every channel possible for marketing and availing product should be considered e.g. internet sales, home deliveries, supermarkets, vending machines and shopping malls.
RECOMMENDATIONS
For any business which intends on internationalising itself into a new market, such a venture must consider a lot of factors before moving in; stability of the policies, economy of the region, among other factors. Examining the PESTEL factors of France, I would suggest France as a suitable market for the following reasons.
A stable and peaceful environment is always a win for any new and existing business venture, and France is a country which enjoys such political stability with no wars, inter racial conflicts and the government has given security and protection of people and property high attention. Whereas in Nigeria which is a developing country, political stability seems like a far cry from perfect, with religious wars, steady change of government, high corruption scale and a high armed robbery rate therefore impeding safety of goods and property which is unattractive for foreign investment and business growth.
Secondly, France has the world’s sixth-largest economy by nominal figures and the ninth largest economy by PPP figures. It has the third-largest economy in Europe; OECD is headquartered in Paris, the nation’s financial capital. The economy of France is so stable and large that it is 12.75 times larger than that of Nigeria which is the 2nd largest economy in Africa. This high ratio only shows that the economy of France is at a drastic boom as compared with that of Nigeria, meaning the par capital of France is clearly higher and better than that of Nigeria which in hand means more money to spend reflecting higher patronage from the French masses.
Nigeria vs France
Nigeria France
Population 117,155,754 67,025,974
Largest city Abuja Paris
Human development index 0.499 0.955
GDP per capita $2,800 US $35,700 US
Legal tender Naira ₦ Euro €
Literacy rate 68% 99%
Corruption perception 2.7 6.9
Unemployment rate 23.900% 10.200%
The world today has become a global village with the presence of the internet which has made everything easily accessible. France is one of the most modern and highly-developed countries in the world with high grade technological advancements. A lot of this technology are aeronautic inclined which are exported to other parts of the world. France is also a world leader and exporter of R&D. Meanwhile Nigeria which is a developing country in Africa; technological advancement is at a very drastic low. This been said such R&D could be used by the new company to promote efficiency of production helping to reduce production time, save production cost, produce high quality product and the internet would help in marketing the product, bringing the customer and producers in closer contact.
With the study of the France macro environment, the business has to be able to inculcate the marketing mix into its penetration strategies.
Price- having in mind that this is a new market for the company, the price which would be assigned to product has to be favourable to both the customer; inviting enough for them to be willing to spend their money on the product, efficient to the producer; not lower than production cost and strategic against competitors; relatively lower than that of competitors to win and attract the market.
Place- this mix involves the places where the product would be sold and also the target market. Here the company has to consider its level of sales either retail, wholesale, peer to peer, direct sale or through internet. Here the distribution channel has to be favourable to the customer. France has a well structured environment and these environments have to be penetrated strategically to meet the final consumer.
Promotion- as a new product in the market some promos have to be offered to the customer to attract them to the product. Some of these product promotions include leaflets, competitions, free gifts, and advertisements.
Product- the outer look of the product matters a lot. The customer needs to be able to locate the product at any point in time, so the design, packaging, branding, quality and warranty of the product have to be of competing and attractive nature for the customer to purchase and be attracted to.