Question

Provide a scenario where a company would enter a foreign market using the creating a turnkey project modal

Answer 1

Solution:-

1. Exporting: It is useful to export the goods when our product have brand recognition in the foreign market.

Advantage: Exporting helps to sell our product retaining of brand value and also creating brand in the foreign market. It is also cost effective. We are not required to have capital expenditure on the foriegn country. Goods can be produced in cost effective country and it can be exported to all other countries.

Disadvantage: Goverment intervention can be harmful for the company as goverment of the target country are not in favour of importing goods.

2. Licensing: It is usefull where there is restricted entries in the market. This option is not by choice.

Advantage: We can get entri in the restricted market. Support of the government is received to the company.

Disadvantage: Entry in such markets are very difficult. Foriogn countries are less preferred. These companies are only preferred only when thry possess very specialised knowledge / technical knowledge to do such job.

3. Franchising: It is usefull when you are required to provide personalised service to the customers.

Advantage: Brand image can be created by having franchisee in the foreign countries.

Disadvantage: The owner of franchisee may not follow quality standard and this can hamper the brand image of the comapny.

4. Turnkey Project: It is useful in case of construction or engineering project.

Advantage: In case of big projects, technical expertise can be used to build the project.

Disadvantage: In case of faliure of project, huge losses can be suffered.

5. Establishing: Many countries does not allow foreign companies to do business in thier countries. In such a scenario, joint venture is very usefull mode of entry in such countries.

Advantage: Expertise of our company and home comapny can be used together to do business in the target foreign comapny.

Disadvantage: In case of dispute between the two companies can hamper the business the joint venture.

6. Wholly owned subsidary is used when it is nessasary to have presence in the target country and the company do not want to share its trade secret with any other company.

Advantage: Benefits can be taken of the target country such as cost effeciveness, infrasructure etc.

Disadvantage: Huge cost is required to set up a wholly owned subsidary.