Question

Background

You have just begun a new job as President of Unlimited Combines (UC), a Canadian farm

equipment manufacturer whose flagship product utilizes new technology to increase the

productivity of grain harvesting. UC’s equipment allows farmers and commercial grain-growing

operations to harvest wheat, barley and similar cereal crops faster and with less waste than any

other equipment manufacturer.

You are surprised to find that while UC’s products sell very well in the domestic market, they

appear to be a well-kept secret around the world. Recognizing that the world market offers an

excellent growth opportunity, you hire Patricia Paget, a new business school graduate, as your

export manager, and assign her the responsibility to create and implement an international

business plan and begin developing new global business opportunities for Unlimited Combines.

The International Business Plan

Patricia’s first task is to generate an international business plan. She develops a table of contents

making sure to mention issues of the new era in global business, the global supply chain,

technology, culture and ethics. Also addressed are international market research, entry and

maintenance, trade finance, global logistics and distribution, and legal issues and compliance.

When her plan is complete, Patricia emails a form letter to more than 130 Canadian trade offices

around the world in order to confirm which markets are the most suitable. Within two weeks, she

receives responses from more than sixty of the offices, with contact information for a total of more

than four hundred potential business partners. However, she is puzzled as to why some of the

companies appear to have no relationship with farm equipment. She receives no reply from the

other seventy or so offices.

In order to qualify the potential distribution channels, she sends an English form letter out to the

four hundred potential business partners, with a questionnaire for them to fill out. After three

weeks, she had received replies from only 12 of them. Patricia is becoming frustrated that she

has now spent over a month on trying to find potential distributors for the products, with few

results.

International Market Entry Strategies Module — Planning for International Market Entry

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One of the positive results Patricia has received is from a Japanese manufacturer of farm

equipment. She arranges for a business trip to Japan to meet with them. Upon arrival, she

encounters several problems. The company is located several hundred kilometers from the

nearest large city, and by sheer luck she finds an English-speaking person to help her with a train

connection. When she arrives, she is given several attractive gifts, but has brought none with

her—just brochures. She quickly finds that nobody at the company speaks English, although the

written communications had been in English, and she only brought English language brochures.

The company eventually brings someone in to help with translations. However, this only highlights

a major problem: the company thought the UC combine would work on rice, which was incorrect.

Rice turns out to be the main crop grown in Japan, but few cereal crops are grown because they

are easily imported at low cost. Only a small percentage of Japan’s land is suitable for farming,

so farmers focus on higher-value produce.

Because Patricia has arranged for no other meetings during her trip to Japan, she is determined

to make this one a success. They discuss many topics as she tries to forge a relationship with the

company, and it turns out that the Japanese company exports its equipment around the world

and might consider a strategic alliance with UC, whereby it would leverage its distribution network

to sell UC’s products.

One troublesome issue is financing. She is surprised to find the Japanese company prefers to

arrange for long-term payment terms through trade financing, but she insists that they work on a

cash in advance basis. She knows from what she has heard that international trade is risky, and

that payment in advance would eliminate the risk of non-payment.

Another issue is technical support. The Japanese suggest that they would like to have technical

training as part of a legal contract they would sign, if they decide to work together. Patricia knows

that they might reverse engineer UC’s product, and does not want to be constrained by a

contractual or legal obligation, so is not enthusiastic about this.

Marketing support also presents a problem. The Japanese want to translate her brochure into

other languages at their own expense, and ask if she would email the document to them so they

could do the translation. However, she says she cannot, for copyright reasons, but that they can

use the brochure she is going to leave them if they don’t tell anyone.

Another feature of “marketing support”, it turns out, is that it is occasionally necessary for them to

pay bribes to government officials in some of their non-Japanese markets. They matter-of-factly

say this is just a cost of doing business in some countries, and ask if UC will be able to contribute

to paying these “commissions”.

Finally, the Japanese want Cost, Insurance and Freight (CIF) pricing, but Patricia insists on Ex

Works (EXW) terms. This will also help her to minimize risk and keep costs down, and let the

Japanese pay the cost of freight. She has enough to do, after all, and does not want to get involved

with the complexities of global logistics.

As Patricia leaves the meeting, pleasantries are exchanged. When she asks if they think there is

a chance to do business together, she receives a smile from the general manager, who says, “We

will try.”

International Market Entry Strategies Module — Planning for International Market Entry

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When Patricia returns, you ask her how the trip went. She provides the details outlined above,

and replies that although it went reasonably well, the Japanese were fairly demanding and difficult

to do business with. During the next month, after repeated and increasingly demanding attempts

to extract an agreement to purchase from the Japanese company, she finally receives a simple

reply saying, “We are sorry, but we prefer to do business with Unlimited Combines at some time

in the future.”

Learning Outcomes

This case study relates to the following learning outcomes from the module Planning for

International Market Entry in the course International Market Entry Strategies:

• Explain the types of market entry strategies and considerations for both products and

services in terms of their application, advantages and disadvantages.

• Select the most advantageous market entry strategy for an international venture based on

the results of feasibility research, risk analysis, and competitive analysis.

• Identify, research and analyze potential business partners to determine compatibility for

an international venture.

• Develop a strong international business plan including key business strategies with

identified metrics upon which the organization can monitor progress, success and

weaknesses.

• Develop a strategic plan for market entry, based on the international business plan.

International Market Entry Strategies Module — Planning for International

Answer 1

Answer: There are a variety of ways wherein a company can enter a remote market. Direct exporting may be the most appropriate strategy in one market while in another you may need to set up a joint endeavor and in another, you may well permit your manufacturing. There will be various factors that will impact your decision of strategy, including, yet not restricted to, tariff rates, the level of adaptation of your item required, marketing, and transportation costs. While these factors may well increase your costs, normally, the increase in sales will counterbalance these expenses.

• Direct Exporting: Many companies, when they have established a sales program go to agents and/or wholesalers to speak to them further in that market. Agents and wholesalers work intimately with you in speaking to your inclinations. They become the face of your company and in this way, your selection of agents and merchants must be handled similarly you would employ a key staff individually.
• Licensing: Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the utilization of an item or administration to another firm. Licenses can be for marketing or creation. permitting).
• Franchising: Franchising is a typical North American procedure for rapid market expansion yet it is gaining traction in different parts of the world. Franchising functions admirably for firms that have a repeatable plan of action (eg. food outlets) that can be easily transferred into different markets. Two caveats are required when considering utilizing the franchise model. The first is that your plan of action ought to either be exceptionally one of a kind or have a solid brand acknowledgment that can be used internationally and also you may be creating your future rivalry in your franchisee.
• Partnering: Partnering is almost a need when entering outside markets and in certain parts of the world (for example Asia) it may be required. Partnering can take a variety of structures from a straightforward co-marketing arrangement to a sophisticated strategic alliance for manufacturing. Partnering is a particularly valuable strategy in those markets where the way of life, both business and social, is substantively not quite the same as your own as local partners bring local market information, contacts, and whenever picked carefully clients.
• Joint Ventures: Joint endeavors are a particular type of partnership that includes the creation of a third freely managed company. It is the 1+1=3 procedure. Two companies agree to cooperate in a particular market, either geographic or item and create a third company to undertake this. Dangers and benefits are normally shared equally. The best example of a joint endeavor is Sony/Ericsson Cell Phone.
• Buying a Company: In certain markets buying a current local company may be the most appropriate entry strategy. This may be because the company has substantial market share, are a direct contender to you, or because of government regulations, this is the main alternative for your firm to enter the market. It is certainly the most expensive and deciding the genuine value of a firm in an outside market will require substantial due industriousness. In addition to side, this entry strategy will immediately give you the status of being a local company and you will get the advantages of local market information, an established client base, and be treated by the local government as a local firm.
• Piggybacking: Piggybacking is a particularly novel way of entering the international arena. On the off chance that you have a particularly fascinating and exceptional item or administration that you offer to large residential firms that are at present engaged with outside markets, you may want to approach them to check whether your item or administration can be remembered for their stock for international markets. This diminishes your hazard and expenses because you are essentially selling domestically and the larger firm is marketing your item or administration for you internationally.
• Turnkey Projects: Turnkey ventures are particular to companies that offer types of assistance, for example, environmental counseling, architecture, development, and designing. A turnkey venture is the place the facility is developed from the beginning went over to the customer ready to go – turn the key and the plant is operational. This is an excellent way to enter remote markets as the customer is normally a legislature and frequently the venture is being financed by an international financial agency, for example, the World Bank so the danger of not being paid is eliminated.
• Greenfield Investments: Greenfield ventures require the greatest inclusion in international business. Greenfield speculation is the place you purchase the land, assemble the facility, and operate the business continuously in an outside market. It is certainly the most expensive and holds the most elevated hazard yet a few markets may expect you to undertake the expense and hazard because of government regulations, transportation costs, and the ability to access innovation or gifted labor.

Market entry strategies considerations for both products and services as far as their application

• In marketing items from less created nations to created nations point presents major issues. Purchasers in the intrigued outside nation are usually careful as they see transport, cash, quality, and quantity issues. This is valid, say, in the fare of cotton and different wares.
• In some cases, this is way past the extent of private organizations, so the Government may get included. It may get included to help a particular ware, yet additionally to help the "open great". While the structure of another road may assist the quick and speedy transport of vegetables, for example, and along with these lines aid in their marketing, the road can be put to different utilizations, in the drive for open great utilities.
• Also, entry strategies are frequently marked by "uneven speculations". Immense speculations may have to be undertaken, with the financial specialist paying a high hazard cost, well before the full utilization of the venture comes. Genuine examples of this incorporate the structure of port facilities or food-handling or freezing facilities.
• Also, the gear may not have the option to be utilized for different procedures, so the asset explicit hardware, secured in particular use, may make the proprietor entirely vulnerable to the bargaining intensity of raw material providers and item purchasers who process alternative creation or trading choices.
• Zimbabwe is encountering such issues. It manufactured a large freezing plant for vegetables however ended up without a contract. It has been constrained, right now, to accept sub optional volume item materials just to keep the plant ticking over.
• The structure of an insight framework and creating an image through advancement takes time, exertion, and cash. Brand names don't appear for the time being. Large interests in advancement campaigns are required. Transaction costs also are a critical factor in working up a market entry strategy and can turn into a high barrier to international trade. Expenses incorporate search and bargaining costs.
• Physical distance, language barriers, coordination expenses, and hazard limit the direct observation of trade partners. The requirement of contracts may be expensive and weak legal integration between nations makes things troublesome. Also, these factors are important while considering a market entry strategy. These factors may be so expensive and hazardous that Governments, rather than private individuals, frequently engage in product frameworks.
• This can be found on account of the Citrus Marketing Board of Israel. With an imposing business model fare marketing board, the whole framework can behave like a solitary firm, regulating the blend and quality of items going to various markets and negotiating with transporters and purchasers. While these Boards can encounter economies of scale and absorb many of the dangers recorded above, they can shield makers from information about, and from. purchasers. They can also turn into the "fiefdoms" of personal stakes and become political. They at that point bring about giving decreased creation motivators and cease to be demand or market-orientated, which is detrimental to makers.
• Normal ways of expanding the markets are by the expansion of product offerings, geographical turn of events, or both. Note that the more the product offering and/or the geographic area is expanded the greater will be the managerial multifaceted nature. Newmarket open doors may be made available by expansion yet the dangers may exceed the advantages it may be smarter to concentrate on a couple of geographic areas and do things well.