Question

1)Explain the best two strategiesfor halwa factory to reach the global markets from the 4 strategies below ?
a. Licensing
b. Franchising
c. Joint Venture
d. Foreign Direct Investment
2) explain any four trade barriers you would face in the US based in the strategies you choose in question1?

Answer 1

Franchising and Joint Venture seems better to reach global markets.

Franchising A longer-term and more comprehensive way to access the global market is through franchising. Under the terms of a franchise agreement, a party (franchisee) acquires access to the knowledge, processes, and trademarks of a business (the franchisor) in order to sell a product or service under the business’s (franchise’s) name. In exchange for the franchise, the franchisee usually pays the franchisor both initial and annual fees. McDonald’s, Holiday Inn, Hertz Car Rental, and Dunkin’ Donuts have all expanded into foreign markets through franchising.

If financial capital is scarce, this approach allows companies to have a global presence without heavy investments.

A joint venture establishes a new business that is jointly owned by two or more otherwise independent businesses. The most common joint ventures involve two companies that are equal partners in the new firm, investing money and resources while sharing control of the newly formed firm. Often, the foreign partner provides expertise on the new market, business connections and networks, and access to other in-country aspects of business such as real estate and regulatory compliance. For example, in 2015 Fiat Chrysler entered into a joint venture with Tata Motors of India to expand the production of Jeeps in India. The company created in this joint venture is Fiat India Automobiles Private Limited.

Joint ventures require a greater commitment from firms than other global strategies, because they are riskier and less flexible. Joint ventures may afford tax advantages in many countries, particularly where foreign-owned businesses are taxed at higher rates than locally owned businesses. Some countries require all business ventures to be at least partially owned by domestic business partners.

The greatest advantage of joint ventures and strategic alliances is the knowledge and experience of the market offered by the local partner—on everything from consumer preferences to cultural differences, language, and political/economic systems. Another advantage is that the risk of entering the market with a new product is shared by more than one firm, thereby reducing each company’s exposure to potential losses.

FDI won't be suitable because if a business is not already established in other global locations and lacks experience with FDI, it may be in for a series of unpleasant surprises in the form of regulations, licensing, taxes, and other “red tape”

Trade barriers that one may face in US.

• problem related to rules of origin requirements.
• a standards-related barrier in an export market related to a government regulation requiring mandatory standards, testing, or certification
• a sanitary or phytosanitary (SPS) barrier to trade which has kept your food or agricultural product out of a specific export market
• a tariff classification or customs barrier. Difficulties with a foreign customs office that will not clear your goods to a buyer/importer
• the country restricting your product because of its components/ingredients, structural composition, or product design
• product facing overly limiting or unreasonable shelf life restrictions in the foreign market
• registration requirements, licensing procedures, qualification requirements and procedures, and technical standards in a foreign market more burdensome for your company than for domestic service providers