Vehicles Quest Diagnostics May Use To Enter The Turkish Market (Essay Sample)

Potential Entry Vehicles
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Institution
Potential Entry Vehicles
Introduction
Choosing the right entry vehicle is important for success in a foreign market. A firm must carefully consider the benefits and drawbacks of the various entry vehicles, and choose a vehicle that resonates with its strategic objectives. Quest Diagnostics aims to enter the Turkish market in an effort to expand its international presence. Selecting an entry vehicle that will most fruitfully achieve this objective and one that reverberates with the characteristics of the target market will be essential for the success of the firm. This paper compares two vehicles Quest can consider in its pursuit of the Turkish market: a joint venture and a strategic alliance.
Entry Vehicles
A joint venture is one of the common foreign market entry vehicles. The vehicle basically involves two or more entities joining to pursue a common business objective for a specified period of time (Hill & Jones, 2012). The primary objective of a joint venture is to share risks and rewards. A joint venture is also characterised by shared ownership and shared governance. The joint venture may take the form of an equity arrangement (where both the foreign company and the local company share ownership of an existing business) or a joint venture company (where the entities jointly form a new, independent business).
Generally, the joint venture must be incorporated. The incorporation documents defines elements such as the number of entities or parties involved, the geographic and product scope of the venture, the contribution of each party, ownership, economic arrangements, contractual arrangements, exit provisions, and the structural form of the venture (Segal-Horn & Faulkner, 2010). These elements are important as they define how the parties in the venture relate with one another throughout the course of the venture, thereby minimising or avoiding conflicts and disagreements. Although they constitute a partnership in the informal sense of the word, joint ventures can take different legal structures – partnerships, corporations, limited liability companies, not-for-profit organisations, and so forth. The legal structure of the venture must be clearly defined in the incorporation document.
For Quest, a joint venture agreement with a local company would be an ideal vehicle for entry into the Turkish market. Indeed, a joint venture offers important benefits to the parties involved. One vital benefit is quick access to the target market (Segal-Horn & Faulkner, 2010). As a foreign company, gaining access to the Turkish diagnostics market can be a daunting challenge due to not only competition, but also other factors such as political hurdles and inaccessibility to business networks. As a local company has comprehensive knowledge of the local business environment as well as valuable connections with key stakeholders in the industry, it would be much easier for Quest to use this route. Another important benefit of a joint venture is that it facilitates the sharing of resources, distribution channels, knowledge, expertise, technology, skills, and capabilities (Segal-Horn & Faulkner, 2010). While Quest would benefit from the networks of the local partner, the local partner would benefit from Quest’s assets. Over the years, Quest has built strategic resources and capabilities in the diagnostics market. These assets would be of immense value to the local partner. Other advantages include economies of scale, improved synergy, and access to financial resources (Hill & Jones, 2012).
Whereas a joint venture offers valuable benefits to the parties involved, the downsides cannot be ignored. First, joint venture incorporation is usually a lengthy process, taking several months or even years in some cases. The process involves not only bypassing legal requirements, but also aspects such as due diligence and negotiations. As such, the process can be costly. Another important limitation is that partners may often not have full control over management (Segal-Horn & Faulkner, 2010). Additionally, there could be catastrophic conflicts and disagreements over aspects such as sharing of benefits, strategic direction, and organisational culture, eventually hampering the success of the joint venture. Other drawbacks include possible loss of intellectual capital, failure to achieve the anticipated objectives, as well as restrictions on exit and involvement in certain activities (Johnson, Scholes & Whittington, 2010).
Closely related to a joint venture is a strategic alliance. Similar to a joint venture, a strategic alliance is characterised by two or more firms pursing a common business objective. The major difference between a joint venture and a strategic alliance is that the former often involves equity-based arrangements, while the latter does not (Johnson, Scholes & Whittington, 2010). In other words, in strategic alliances entities remain separate and autonomous. Furthermore, a strategic alliance does not necessarily involve creating a new business. Also, a strategic alliance may not necessarily involve incorporation. Strategic alliances are quite common in the airline industry. Firms enter into strategic alliances to share manufacturing, research and development, distribution channels, marketing networks, and so forth (Segal-Horn & Faulkner, 2010).
There are a number of reasons why Quest should consider a strategic alliance. A strategic alliance enables a firm to pursue an opportunity that it may not pursue alone, especially in a foreign market (Johnson, Scholes & Whittington, 2010). The booming Turkish market offers a lucrative business opportunity for Quest. Without a partner, however, Quest may not successfully tap into this opportunity. By forming an alliance with a local firm, Quest would be much better placed to gain entry to the Turkish market. Quest would more readily gain access to the local company’s already established customer base and distribution network. For Quest, this would be important in gaining competitive advantage in the fiercely competitive diagnostics market in Turkey. The market is dominated by powe...