Suppose that you’re a consultant of Bain&Company Korea. Your customer, Tim Hortons Inc. (Canadian multinational fast...

Suppose that you’re a consultant of Bain&Company Korea. Your customer, Tim Hortons Inc. (Canadian multinational fast casual restaurant known for its coffee and doughnuts), now considers entering into S. Korea. Which entry mode (among JV, wholly-owned, and licensing) would you suggest and why? (*There is no right or wrong answer for this. Plz explain why your choice would be better than the other two in the Korean context)

Expert Solution

Canada and South Korea are the two countries with people having different cultural characteristics, social behavior and dietary preference. Hence, It is important for the Canadian MNC to partner with a local ally in the market of South Korea so that the Canadian MNC can get the expertise of the local market, culture and dietary habits as far as the fast food segment is concerned. Therefore, it is advised to go with the joint venture mode to enter the market of South Korea. It will help the Canadian MNC to have a local partner that can provide exclusive market information that will help the company to succeed in quick time. Besides, building a delivery network, logistics supply and market communication will also get customized as per the preferences of customers in the market of South Korea. Besides, risk quotient is also reduced while entering via joint venture.

In contrast to it, wholly owned subsidiary attracts huge investment as well as huge risk, even if it brings full control. Here, the company has to develop its network and understand the market on its own. It increases the scope of failure if it is not learned quickly by the Canadian MNC. So, this method is highly risky, when there is a difference in culture, social and dietary preferences. Further, licensing can bring stable revenue to the company, but it does not bring control to the market and market share goes to the company who takes the license. Further, after some time, the same company can become a competitor to the Canadian Company. Hence, in the long term, licensing is not a good entry mode.

Hence, the best mode of entry is JV mode.

Rahul Sunny answered 1 year ago

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