Question

A group of students pool their meagre resources to start a business. Their plan is to sell an existing product in another country. They have no experience in international business. They decide to target a small, poor, country. Their product targets poor farmers so they have to cover a geographically disperse market in which there are no hugely profitable customers. Their product is not really superior to existing products, just a bit cheaper. They hope for small, steady, growing sales but do not expect to get rich off this product. The product does not need service and is not part of a system. There is nothing to protect with patents. There are no legal requirements that favor one entry mode over another. What entry mode would you advise this firm? Please explain all the reasons that led you to this choice

Answer: I would advise them to use the ___________________ entry mode because….

Explanation: be sure to cover as many criteria as possible and apply the facts from the case.

Answer 1

Let us begin with understanding the types of entry modes available in the international market. The most easiest one being direct exporting where the exporter sends/ exports the products directly to the international market with/ without the involvement of any intermediary and hence reach out to the target market easily, with less costs and legalities.

Another way is franchising where a franchisee is appointed in the international market and he is responsible to sell the product in the international targeted market. But here the franchisee can become a competition in future and can hinder the growth/ revenue generation.

Lastly, a strategic alliance method is another entry method which is crucial in nature and requires high degree of planning and strategy formulation. It involves increasing the communication with globally operating businesses and study their strategies and then take decisions or formulate plans accordingly.

I would advise them to use direct exporting entry mode because it is the easiest method to work with the international market even when the exporter holds less knowledge/ experience about the international market. Moreover due to lack of experience they could not go with strategic alliance or even franchising as this would require high degree of market survey and study. With direct exporting mode, their product will reach directly to the target market and it will be best fit for them as their only focus was poor farmers.

Above all, their product is also not superior than others so therefore adopting strategic alliance/ franchising will land them into losses, as their product will not be able to compete in the market. Also they need not protect the product from patents, which further added to the choice with direct exporting and not other modes of international entry.

Hence, after looking into all the factors and conditions, direct exporting will be considered as the best mode of entry into the international market for the very first time, with less knowledge about the international markets/ strategies, a not so superior product and a pre decided target market.