Question

Explore your Own Case in Point: identify the appropriate Global Entry Strategy for your Chosen Company After reading this chapter you should be prepared to answer some basic questions about your target company. 1) Analyze and determine your company’s mode of entry into foreign markets. This should be based upon a serious analysis of your company’s risk-return trade-off. In your opinion, has your company taken the right approach?

Answer 1

My company's mode of entry into foreign markets would be through exports. My company is engaged in sourcing and selling of minerals such as Silica sand, Manganese ore, Iron ore, China clay etc. Since most of these are extensively used as raw materials in various industries such as steel, ceramics, glass and ferro alloys the demand is easily identifiable and the target customer base established. These being raw materials the major advantage is the continuous regular monthly requirement by the customer hence, just a small customer base can provide large business to gain entry into foreign markets.The initial entry would be in markets which I am familiar with and have access to at the same time would be comfortable interacting with for business, a basic level of trust should exist. The quality of raw material directly effects the end product hence, the major risk associated with exports of raw materials is the quality has to be absolutely monitored and match customer specifications exactly to avoid rejection of entire shipments. To control deviations and avoid any major loss the quality check by a world class agency like SGS should be performed at loading port. Another risk factor is payments from foreign clients. I would insist on an irrevocable letter of credit initially and convert it to revolving once first shipment is satisfactory for both parties. Also, I would look for trade intermediaries also as a parallel entry route into the same countries. This would provide a safety net whereby any issues with a importer could be handled through the intermediary. The intermediary would also be a company which has a reputation and strong presence in the local manufacturing markets for forming a strategic alliance as a marketing agent for a fixed percentage fee. Most governments are presently encouraging exports and providing financial and strategic support to exporters which can be beneficial in obtaining capital inputs at very attractive rates. Another risk is shipping and the fluctuating costs of vessels which can greatly impact profits, this can be controlled by identifying the companies most frequent on the required routes especially vessels which come in to loading port and need return consignments. Another option is also to offer goods Free on board FOB instead of cost insurance and freight paid CIF. Export is the lowest risk entry into foreign markets and is the best option for me as in my business I cannot keep increasing product range. I have products the availability and source is directly under my control and exporting offers a lucrative option as I can sustain growth with increase in profits without competition being as tough as in the domestic markets. Due to numerous raw material mines being located around targeted manufacturing units the competition with regards to supply and pricing is cut throat. This has led me to decide to explore other options of growth available and entry into target foreign markets seems the safest, most viable and perfect solution at present.