1) a.Choose a market entry mode and explain the factors
would influence your entry mode selection.
Globalization means service firms have great opportunities to
conduct their business in foreign markets. Therefore, the
primary consideration and the most critical issue in an
international market entry strategy is the selection of an
appropriate entry mode. Entry mode selection is interpreted to
mean a suitable way for enterprises to enter foreign markets so
as to operate their international businesses by exploiting their
Therefore, I choose exporting as a market entry mode.
Direct Exporting strategies:
A direct strategy is when products are sold directly to buyers in
target markets either through local sales representatives or
local sales representatives promote their company's products and
do not take title to the merchandise.
distributors take ownership of the goods (and the accompanying
risk) and usually on-sell through wholesalers and retailers
The modern form of exporting is popular and has
the distinguishing characteristics:
Low initial investment
Reach customers quickly
Complete control over production
Benefit of learning for future expansion
It offers low financial risk
local operating knowledge is enough to run the
Costing, timing, customs clearance can be done by
Transportation arrangements can be done by
There are four potential benefits that our international
business may realize from strategic alliances:
Easy of market entry: Advances in telecommunications,
computer technology and transportation have made entry
into foreign markets by international firms easier. Entering
foreign markets further confers benefits such as economies
of scale and scope in marketing and distribution.
Shared risks: Risk sharing is another common rationale
for undertaking a cooperative arrangement when a market
has just opened up, or when there is much uncertainty and
instability in a particular market, sharing risks becomes
Shared knowledge and expertise: Most firms are
competent in some areas and lack expertise in other areas;
as such, forming a exporting strategic alliance can allow
ready access to knowledge and expertise in an area that a
company lacks. The information, knowledge and expertise
that a firm gains can be used, not just in the joint venture
project, but for other projects and purposes.
Synergy and competitive advantage: Achieving synergy
and a competitive advantage may be another reason why
firms enter into exporting. Exporting has becomes a way
to decrease the risk of market entry, international
expansion, research and development etc.
.In retail, entering a new market is an expensive and time
consuming process. Forming exporting strategic alliances with
an established company with a good reputation can help create
favourable brand image and efficient distribution networks.
Even established reputable companies need to introduce new
brands to market.
The factors that influence the selection mode are as follows:
Exporting is treated as the most traditional form of
All related costs to exporting have to do mainly with
marketing, so it is not only the oldest but also the safest
way to reach a foreign market.
it does not require your company to move its premises and
everything can be done directly in the country of origin.
there are a number of associated risks and costs, mainly to
do with transport with the most important factor being,
inability to be close to the foreign market (indirect access
to market data etc.
Exporting are increasingly becoming an important part of
overall market entry strategy, as a way to grow product
and service offerings, develop new markets and leverage
technology and R&D.
Risk management is a company wide concern and
exporting strategic alliances have their share of risks.
The Joint venture strategic alliance I suggest. The joint
venture mode involves relatively lower investment and
hence provides risk, return, and control commensurate to
the extent of equity participation of the investing firm
Below are the key benefits of forming a joint venture:
Sharing Assets. Creating a joint venture allows the
participants to share their collective tangible and intangible
assets in pursuit of a common goal. For example, two or
more parties may collectively own the intellectual property
required to develop a new product or technology, but none
of the parties individually has all of the necessary IP rights
to pursue the project.
3) b. Assume the apparel company has decided to enlist a
foreign partner in a strategic alliance. Which form of
strategic alliance do you suggest? Why?
Sharing Critical Expertise and Experience. By forming
a joint venture, the parties can share management
experience and expertise, industry knowledge,
technological capabilities and any other expertise or
experience necessary to the business.
Sharing Costs. Another key benefit of entering into a joint
venture is sharing costs. Joint ventures often allow their
participants to undertake a venture that neither could
afford independently. Research and development, labour
and management, distribution, supply and administrative
costs as a percentage of revenues may be significantly
reduced for each party
Sharing Business Risk. A joint venture enables the
participants to share the business risk of creating a new
product or service or entering into or expanding a
business.. Sharing resources and costs can help ease the
burden of the risk.
Access to New Markets. Forming a joint venture can
enable the participants to access geographic or high-
growth markets that they would not otherwise have access
to individually. The parties may also pool their access to
suppliers or customers. For example, one joint venture
member may have the required intellectual property for a
venture while the other has the infrastructure or
distribution networks to access markets and customers.
Diversification. Another key reason that parties enter into
joint ventures is to diversify their own businesses. As
mentioned above, a joint venture may help participants
gain access to markets or businesses that they could not
enter individually. Diversification helps reduce a
participant's business risk across its product or service
lines, and may also increase the participant's access to
resources (such as superior talent) and more capital if the
profits and/or assets of the joint venture grow significantly.
Flexibility. There are many ways to structure a joint venture, which
offers co-ventures maximum flexibility in creating the entity and
establishing a relationship that works for them. For example, if
multiple parties are involved, an M&A transaction could prove costly
and difficult to manage and would usually require one or more of the
parties to cease to exist and/or cede control of their businesses. In
contrast, a joint venture structure allows each party involved to
undertake a new business opportunity while maintaining their
respective identities and existing business operations.
Favorable Tax Treatment. Unincorporated joint ventures, such as
general partnerships, can provide favourable tax treatment for their
parties. They allow profits to flow through to coventurers' financial
statements without the double taxation that would occur, first, on a
corporation's profits and, then, on the dividends paid to its
shareholders. They also allow losses to flow through to co-venturers
that can be used to offset income from the co-venturer's other