Having read the case study before the interviews, an analysis of the collective views of the respondents revealed that majority believed the TopicalCare Nigeria/TopicalCare International alliance moved too fast into the Nigerian Pharmaceuticals market without properly analyzing the market environment. Some believed that the Nigerian market is unique and should have been evaluated on basis of its uniqueness; advocating that strategies that ordinarily would work in other parts of the world may not necessarily work in Nigeria.
This may be due to the level of irregularities and anomalies that are associated with business in that part of the world. Only two respondents believed that the choice of mode was unrealizable from the start, stating that financial and stock market institutions in some third world countries are not developed enough to transact business at such a high level. This too was attributed to a lack of market knowledge and negligence on the part of TopicalCare International and its parent company, TopicalCare Group.
While three respondents believed the alliance chose the wrong company to acquire and should have opted to acquire another pharmaceutical company instead. The table 6. 1 below highlights the different judgments of the respondents to the question of the most appropriate mode of entry for TopicalCare. Of the 27 respondents interviewed, 24 individuals had distinct views as to how the alliance should go into Nigeria again (as shown in the table above). The remaining 3 were undecided and said they needed further information to make judgments.
Synonymous to the issue of establishing a wholly-owned subsidiary was that of cost. Respondents that advocated for wholly-owned subsidiaries seemed to be very conscious of the cost implications as opposed to the benefits of the market entry. Surprisingly, it was not the cost of set-up that was their primary concern, as they believed that high cost of set-up is inevitable, however, it was the need for TopicalCare to retain full control over assets and resources as a result of high resource commitments.
One respondent was noted as saying: “…TopicalCare is the world leader in dermal Pharmaceuticals and it obviously has the competitive edge. In order to protect its advantage, it must be careful of whom it shares with”. Another declared saying: “…a joint venture or any other mode apart from wholly-owned will only force the company to share its technology and knowledge in a market with an inefficient legal system. No sir! That’s just too dangerous”. It was clear from these statements that the issue of asset specificity was of primary concern.
Invariably, this sheds the spot light on the transaction cost theory, from the stand point of cost vs. resource commitment (Gilroy, 2004). As it concerns market entry, the transaction cost theory predicts that firms integrate when asset specificity is high; so as to retain control over the specific advantages they offer to the market (Whitelock 2002). In other words, when asset specificity is high, firms opt for a high-control mode of market entry e. g. wholly-owned subsidiary.
Though much more information is required to make balanced judgments, it is evident to see what course of action certain analysts will take when faced with this kind of circumstances. However, the largest vote was for joint venture entry. Majority believed that the country and market was too risky to go it alone. They also noted that TopicalCare International’s lack of knowledge of the Nigerian market (purely evident in the first entry) would limit their successes and survival in the market.
One respondent predicted: “… TopicalCare will fail again if it doesn’t master the art of doing business in Nigeria”. Another responded said: “…the joint venture, to me, seems like the most logical. Through this, TopicalCare can gain understanding of the market, and brand awareness with minimal risk”. According to the transaction cost theory (from a standpoint of cost vs. resource commitment), firms opt for low-control modes (e. g. joint ventures and licensing) in order to reduce their level of exposure to risks, at the expense of profits (Heinz, 2004).
It also states that less control means less responsibility in decision making, as whole control over decision making would involve high resource commitment. This will invariably increase switching costs, exposing the firm to yet more risk (Whitelock 2002). It can be inferred from this dialogue that the debate revolves around joint venture vs. wholly-owned entry. According to Buckley and Casson (1998), multinational enterprises will opt for joint venture when partners have complementary skills. This is an important issue raised by the literature, as the knowledge of local firms will be vital to TopicalCare success.
For example, accurate knowledge of the important seasons and festivals held dearly by the customers can facilitate decision making for TopicalCare, as it relates to timing of new product introduction and development in the market. Other areas where local knowledge can be helpful are; tribal holidays, market segmentation, ascertaining consumer behaviour etc. The interviews conducted were very insightful and educative; however, they were not very helpful in deriving answers to the research question. The primary reason for this was the lack of background information available to the respondents.
This particular limitation was a major complaint by all the respondents. Notwithstanding, this situation could not be helped as the problem of control and the fear of inundating the respondent with too much data could ultimately deter them from volunteering for time to be interviewed. There is also no doubt that other initiative tools (such as tables or charts) couldn’t have been used in educating and conveying important information to the respondents. This is an obvious failure of the research strategy, but not the approach. According to the inductive research approach theory may follow data.
Therefore the results of this analysis will require further prodding into TopicalCare’s strategy and philosophy. As it was mentioned earlier that an in-depth interview was conducted with TopicalCare’s Executive Director responsible for international business. He was interviewed in order to shed the light on the capability of the company’s expansion into Nigerian market. Though the interviewee was short in answering the questions due to the issues of confidentiality, certain answers provide additional information for choosing the proper decision-making.
When asked about expansion plans, the Director mentioned the time frame from 5-15 years indicating possible long-term strategic planning relating to the new market entry. He confirmed that the company develops different plans of further international expansion, but specifically underlined cost and time factors, which will determine the final decision. The Director confirmed the company’s first attempt through wholly-owned affiliate entry strategy mode was a total failure.
According to him, the present high volatility of Nigerian market leaves little hope for fast payoff of the investment and also the present financial situation of the company makes it important to make “one-shot approach” rather than “zeroing in” solution. When asked about possible marketing strategy, the Director was not specific stating that actions will be taken upon the situation. This answer may be viewed in dubious way. There might be two conclusions: the company does not develop a more robust market expansion strategy into Nigeria or is in the process of the market investigation.
However, the description of the company’s expansion into South African market shows that the management is aware of possible threats of entry into African markets, such as cultural differences, adaptation and different environmental factors. The Director also showed the way the company differentiate its competitors as direct, indirect, within the pharmaceutical industry. Finally, the question on key success factors highlighted the nature of the company’s human resource management. According to the Director the company treats its employees as the most valuable assets and undertakes various organizational interventions to improve their skills.