International Entry Mode Strategy - Assignment
Added on 2020-03-01
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International Entry Mode Strategy
IntroductionThe international business environment is highly competitive. Any organization seeking entry into the new markets needs a strategy on how to, establish, manage, export or import products and services[ CITATION Jon11 \l 1033 ]. The analysis of the new business environment calls for a comprehensive plan that highlights the strengthsand weaknesses of the business as well as the host country’s advantages. There are a number of factors influencing the external and internal environment. This analysis is afocus on Rubric Water’s plan to invest in the Western Cape part of South Africa. It studies the strengths and weaknesses of entry mode approaches and Rubicon’s internal capabilities. A closer look at the geographical region brings out Western Cape’s competitive advantage. A study of the external environment shows its potential. In order to understand the best entry mode the analysis weighs the FDI mode such as management contract, joint ventures, franchising, M & A for the best approach[ CITATION Gru12 \l 1033 ].Company BackgroundRubicon Water is an Australian company from Victoria. This is a global venture seeking to open a branch in South Africa. Recently it signed a contract to venture into China; the company provides advanced technology using innovative software. It facilitates for irrigation through improved water management and channel distributionservices. This enhances water equity and high performance irrigation agricultural investments that require less labour, energy and labour. It improves productivity through its technology hence it is reliable for district water supplies[ CITATION Pet13 \l 1033 ].Analysis of the New MarketWestern Cape South Africa as a new market is a dry region with water deficit. Statistics from the province reveals water deficit within useable dam capacity of less than 10%[CITATION Gov17 \l 1033 ]. However, the report points that the Western Cape Water Supply System has an untapped capacity. Advanced technology is a viable solution for this region’s agricultural water use[ CITATION Sum11 \l 1033 ]. This is because of the climatic disadvantages in the province. Rubicon provides a sustainable
solution for public sectors such as agricultural development. Cape Town is home to the Philippi Horticultural Area of Cape Town that has 3074ha of arable land. The province is also at the frontline in energy efficient projects[ CITATION Har17 \l 1033 ].Analysis of Foreign Direct Investment Entry ModeCurrently Rubicon has signed a joint venture with Beijing’s Green Valley[ CITATION Rub171 \l 1033 ]. Its plan in China uses the internet water strategy in partnership with the government for regional irrigation. This is ideal for China because the region is developed. On the other hand, a joint venture involves more parties in this case it accommodate the private owned Rubicon and the government of SA as well as local partnership. Shared ownership of this public service reduces on risks and improves the returns. Challenges with the Greenfield approach hinders its viability because low-income regions have low global liquidity. South Africa is not entirely a low-income region but its average economy is prone to economic hurdles. The Country does not feature among resource rich nations therefore a Merger and Acquisition is not viable. This decision is dependent on the economic and financial viability of SA and more so Western Cape region. The Western Cape is the heart of South Africa’s Agricultural sector and it stands out as a low employment region [ CITATION Har17 \l 1033 ]. This gives management an edge because it provides an opportunity for employment. A Wholly Owned Subsidiary (WOS) represents a company, which claims 100% ownership. This would not be a good idea because the South African and Local governments own shares in development projects. However, based on the challenges in South Africa, management contract is the best approach because it allows Rubicon to supply the pump to utility services in SA. This is perfect for developing countries, which need development and infrastructural support. SA has the expertise for managing the innovation and this is a low risk approach. It would provide employment for Western Cape. Effective FDI is also affordable and has direct benefits.
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