International Market Entry Strategies of Breezy Auto Parts

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School of Business, Algonquin College of Applied Arts & Technology
International Market Entry Strategies – MGT1103 300
Case Study Module #2
Submitted to: Professor Norman Hotchkiss
November 25, 2021

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Table of Contents
Executive Summary.....................................................................................................3
Situational Analysis......................................................................................................3
Assumptions.................................................................................................................6
Core Problem...............................................................................................................7
Evaluative Criteria........................................................................................................7
Alternatives and Analysis of Alternatives......................................................................9
Decision and Justification...........................................................................................11
Implementation...........................................................................................................13
References................................................................................................................ 16
Annexes..................................................................................................................... 19
Questions answered for Case study #2, Breezy.........................................................19

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Executive Summary
This case study analysis showcases how Breezy, a manufacturer of Auto Parts can
redefine its market strategy and business plan. Until a few years ago, Breezy was a leading
industry supplier of carburetors, fuel injectors and air filters in North America. In the last few
years, the company has struggled with steady business decline due to pressure from external
factors such as rising gas prices; car manufacturers redesigning their vehicles for fuel efficiency
and installing different sources to power their cars such as hybrid and electric motors, leading to
anemic sales and declining profit margins.
In light of these facts, the company's CEO announced a visioning workshop for senior
managers to investigate this matter to avoid further financial losses. The key aim for this
workshop was to redesign the company's strategy in order to recapture its lost domestic market
share and to bring its products to international markets. A SWOT and PESTE analysis were
carried out so as to determine the present situation and the possibilities to expand
internationally.
We present this case study based on market information to define the best action plan
for the expansion of the Breezy company to international markets, taking into account the
company's current financial and capacity restrictions.
Undergoing the following analysis and research, it was concluded that it would be most
suitable for Breezy to look forward to expand in South American market by forming a Strategic
Alliance with a well-established Automobile manufacturer as a primary step. Breezy can provide
auto parts as raw material required by the alliance and the assembling of the same can be done
in the target market. Benefits, advantages and shortcomings of this international market entry
strategy is elaborated in the following report including the associated alternatives, evaluation
and timeline so as to make it an achievable business idea.
Situational Analysis
In the face of automotive industry issues, Breezy Auto Parts has struggled to overcome
them in its domestic market, North America, and so reverse its commercial slide. The
organization then chose to do a deeper scenario analysis in order to gain a better knowledge of
the issues that are affecting it. The analysis will enable Breezy to identify its strengths and
weaknesses as they relate to external threats and opportunities. It is thus a way of helping
management to select a position in that environment based on known facts.

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The PESTE analysis stands for political, economic, social and technological influences
on a business. SWOT is a situational analysis tool for company leaders that involves assessing
strengths, weaknesses, opportunities and threats. The PESTE analysis has correlated strongly
with the threats analyzed out of SWOT, but also has relevance to the opportunities assessed
under the same (Kokemuller, 2019).
SWOT Analysis:
Strengths - Breezy Auto Parts, based in North America, is an experienced company in
the domestic market for more than half a century. The company is considered a significant
player in the automobile parts industry, recognized as North America's leading supplier of fuel
injectors and air filters, which means a decisive competitive advantage.
The partnerships are an important part of its businesses, Breeze is a supplier of the Big
Three domestic manufacturers and also developed strategic partnership with foreign car
manufactures, redesigning some of its products to fit the foreign models.
Besides, another company's competitive advantage is the integration established with its
customers by using industry best practices, through its just-in-time manufacturing and just-in-
time inventory models with electronic data interchange (EDI), which allows Breezy to have low
storage costs, more cost-efficient production, improve cash flow and waste elimination.
Weaknesses - The profits are getting razor-thin. Breezy can no longer count on
respectable profit margins due to its anemic sales and the company's fixed costs, tied to its
manufacturing plant.
The company has little influence over broad trends such as gas prices or the pace at
which car manufacturers decide to redesign their vehicles for fuel-efficiency or install different
sources to power their cars. Moving into new products and redesign would require more R&D,
retooling and which may take years. It demands more careful coordination and efforts to follow
what the industry is working on. Although, it must follow the just-in-time delivery model, as the
company's pattern.
Opportunities - Due to the previous success and the overwhelming size of that market,
Breezy had focused exclusively on the North American market. However, there are other
automotive markets to be considered, especially in developing countries, as India, Mexico and
Brazil. In addition, India's Tata Company had announced its intention to develop a popular car
for the Indian market.

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According to the International Organization of Motor Vehicle Manufacturers, the following
countries are the top automobile producers in the world based on 2020 statistics. Numbers
include total vehicles produced, both cars and commercial vehicles (OICA, 2021):
1. China (25.22 million)
2. United States (8.82 million)
3. Japan (8.06 million)
4. Germany (3.74 million)
5. South Korea (3.50 million)
6. India (3.39 million)
7. Mexico (3.17 million)
8. Spain (2.26 million)
9. Brazil (2.01 million)
Threats - Foreseeable future with the increase of crude oil cost, offset periodically by
drops in oil prices. This trend indicates that the cost of driving gas-run cars will increase.
Another important observation is that there is a popularity declining of gas-guzzling models in
the face of the market share increase of hybrids and electric vehicles driven by Tesla's entry
into this market.
The World Economic Forum (Richter, 2021) said, "Tesla's meteoric stock market rise in
2020 and several countries and car manufacturers announcing new electric vehicle targets,
electric cars have been in the spotlight for a while now". Besides, the report indicates that
China, Germany, and the United States were the largest market in plug-in electric passenger
car sales in 2020. Also, the China Association of Automobile Manufacturers (CAAM), sales of
battery electric vehicles (BEV) and plug-in hybrids (PHEV) amounted to 1.00 and 0.25 million in
2020, respectively. That puts China ahead of Germany (395,000), which overtook the United
States inV sales (Richter, 2021).
In addition, the North American market is saturated, and consequently, the scope for
expanding sales is limited there. Therefore, after the SWOT analysis, developing countries can
offer favourable market conditions that Breezy could explore more through PESTE analysis. It
will focus on the Latin American landscape, considering Brazil due to your strategic position in
the region.

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PESTE Analysis - Brazil:
Factor Opportunity Threat
Political
Democratic country.
There is increased
criticism from the
population, political
instability and corruption
with delay in major
economic reforms.
States are also
independent in many
aspects. It is common for
them to create state laws
that benefit the entry of
foreign companies through
tax incentives.
Polarization in Brazil
has been considered a
political risk regarding
the future of its
democracy (Pantano,
2021).
Economic
The country has been
experiencing instability in
its economy with growing
inflation and poverty.
The economy contracted
by 0.1% in the second
quarter of 2021, a
reversal from the previous
three quarters of growth.
The domestic market, the
6th in the world for
automotive, and Brazil'
strong export vocation are
two of the major assets
responsible for holding the
country as one of the top
ten automotive producers
in recent years (Apex-
Brasil, 2021).
Implementation of
Federal Law called Rota
2030. It benefits
automakers that build
full-electric vehicles
(Bland, 2018)
Socio-Cultural
In general, the country
has an optimistic
population, however
poverty remains a
significant issue.
The high cost of hybrids
and electric vehicles driven
does not allow most of
Brazilian can afford them.
There are movements
indicating that Brazilian
government wants
Tesla opens a
Gigafactory in the
country (Siqueira,
2020).
Technological
The Brazilian projects that
light electric vehicles in
Brazil will triple till 2050,
reaching 130M units, out
of which 11.9M being fully
electric vehicles (Apex-
Brasil, 2021).
Limited infrastructure for
the use of alternative
energy and its high cost.
There are increasing
incentives and initiatives
to develop electric
mobility in the country
and a great potential for
public and inter-city
transportation (Apex-
Brasil, 2021).
Environmental
Brazil is the 8th world
vehicle producer and has
the 6th largest market for
automotive industries
(Apex-Brasil, 2021).
Brazil is the 9th world oil
production and export
(World Population Review,
2021)
Oil is a nonrenewable
resource.

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Assumptions
Considering the scenario presented in the SWOT, it would be interesting for this product
as an entry point in the South America market. Due to the lower cost, it is common for popular
cars in developing countries to be gasoline powered. Brazil, for example, has an important role
being one of the largest oil and car production. Also, it would be a strategic partner in the South
America region, which demands less financial investment and efforts if we compare with India
market, where the geographic distance contributes to the increase of financial and other
resources. On the other hand, keeping the focus on North America could be a possibility given
the fact that Breezy is consolidated there and has a good relationship with the important car
producers there, despite the long process for the products development.
Core Problem
As comprehended from the given scenario, the core problem is Breezy's dilemma to
decide which way to expand its business and tackle the present financial crisis simultaneously.
Scrutinizing the possible options, Breezy can focus on the current North American market and
work with its existing partners to develop new products to cope with modern electric
automobiles or create a new customer base and search for new markets to expand outside of
North America, preferably in South American or Asian countries.
Evaluative Criteria
Expanding into a foreign market could open up so many new opportunities, but it could
also become a nightmare. For the case of Breezy, their situations are different from other large
businesses looking to expand abroad. If investing wrongly in a foreign market, they could be
throwing money down the drain and the business will go downhill from now on. This is largely
because they do not have the extra profits to test multiple waters. However, in today’s world, it
has become crucial for most medium to large companies to market their products outside their
domestic markets, and Breezy already counts as one of the dominant players in the automobile
industry. For the brand that has already established its name in a giant market such as North
America, there is no doubt they should also enter a foreign market. “To succeed in international
trade, organizations must carefully plan the where, when and how of entering new markets”
(FITT, 2017, pg.13). According to the textbook, there are wide ranges of criteria to consider
before a market entry (FITT, 2017, pg.15), and below are the most important criteria for Breezy
to consider. Therefore, it is necessary for Breezy to evaluate the following criteria. A primary
objective of these criteria is to help guide Breezy into which road best suited for their future,
whether to stay only in North America, or to expand.

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The criteria will be grouped into four most important sections: opportunity and market
attractiveness, connection, finance, and macro-environment factors.
Opportunity and Market Attractiveness
The thing that Breezy is most scared of is the redesign process, mainly because its
original products have decisive competitive advantages over others. It was stated multiple times
in the Case Study that transitioning, redesigning, and retooling would take years and a lot of
money with its existing manufacturers. So, choosing a country that still use gas and oil, the
traditional gas-running cars, would be the best option for Breezy. Not all countries will be
attractive for all companies. Breezy needs to find markets that can afford electric vehicles easily
and refrain from entering those markets. Any country that, for some reason, does not want to or
could not transition into hybrid and electric vehicles is the best country. In addition, for Breezy to
expand and offer standard auto parts, the market needs to be unsaturated. By answering this
criterion, Breezy will solve the “where” of entering new markets.
Connections
Will the chosen path bring in better connections and better cost of manufacturing new
products that Breezy wants? It was stated in the Case Study that it is expensive and time-
consuming with the existing partners to develop fuel-efficient cars. If staying in North America,
Breezy either needs to look for new partners or think of new products, which probably should be
the last thing Breezy wants to do.
Finance
With Breezy’s tight financial situation, the chosen path must bring in more income than
Breezy is already making.
The country should have investment incentives and stand out from other countries. This
either comes in the form of Free Trade Agreements or investment opportunities created by the
government. The attitude of the country towards foreign companies and foreign investments
must be considered as well. In addition, their citizens are using products similar to Breezy’s. All
this information is readily available on Government of Canada’s websites.
There are a lot of institutions that could aid Breezy in going abroad. If Breezy needs
more information, it should contact Canada Trade Commissioner Service in both Canada and
the considered countries. Trade commissioners provide expert advice for companies to take
advantage of preferential access to foreign markets (Government of Canada, 2021). If Breezy
needs help with the financial aspect, it could seek out EDC. EDC provides lending, credit

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insurance, and export programs for companies to be more confident in their export choices
(EDC, n.d.).
On the other hand, Breezy must also determine the best mode of entry to the country.
According to the textbook, to choose the best mode of entry, the method must align with the
company’s strategic objectives, capable of overcoming barriers to entry, and suitable to achieve
objectives in the market (FITT, 2017, pg.13). By answering this criterion, Breezy will solve the
“how” of entering new markets.
Macro-environment factors
Any degree of obstacles the company must face, industry structure, trade barriers,
innovation of technology, and many more other factors must all be considered carefully. These
factors can affect the initial investment required and the later profits of the company. This will
help Breezy solve the “when” of entering new markets.
Alternatives and Analysis of Alternatives
Critical questions, such as the current situation of Breezy concerning its options, should
be answered while considering alternatives.
The alternatives are:
Alternative One: Breezy could stay focused on the North American market, collaborating
with current partners to create solutions for future fuel-efficient vehicles. It might also strive to
diversify its product line beyond fuel injectors and air filters to include additional vehicle parts.
Alternative Two: Outside of North America, Breezy might try to establish new clients and
markets. During the PESTE investigation, it was noted that vehicle production was expanding in
nations such as Brazil and India. (FITT, n.d.)
It must question:
 If it has the capabilities to operate?
 This includes evaluating the organization's strategic objectives and mission,
commitment to change, product/service offerings, human resources, financial
resources, production resources/capacity, logistics resources and cultural
competency.
 The risk and cost of choosing any of the options?
 The risk includes economic and commercial risks of staying in North America or
expanding to a new market. Further risk has personnel, social, and intellectual
property risks if it expands to a new market.

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 How to mitigate these risks? The Strategic Plan and implementation.
Alternative One
In its North American business, Breezy has formed ties with international vehicle
manufacturers. As the price of gasoline rises, the number of individuals who drive gasoline-
powered vehicles has decreased. It's time for breezy to establish itself as a significant player in
the global automotive industry and expand beyond North America.
Another issue is pollution and ozone depletion in major cities. The issue concerns
carbon and greenhouse gases. Carbon monoxide, smog-causing volatile organic compounds
and nitrogen oxides, sulphur dioxides, formaldehyde, and benzene are among the harmful
pollutants released by vehicles burning gasoline and diesel fuels. According to the report,
Breezy's revenue is decreasing, which means the organization is not financially confident to
operate or risk investment in the research and development of a new product. (Coltura, n.d.)
Risk and cost include but are not limited to intensive strategic planning, commercial feasibility,
consumer acceptance, competitors, and the product introduction timing. As an organization
going through a revenue crisis, it is advisable to avoid developing/investing in a new product or
service due to all the factors listed above.
Alternative Two
Breezy as a large corporation requires a competitive advantage. Breezy should be in the
business of selling quality carburetors and filtration equipment where it has a niche and
competitive advantage to the global market. Establishing a market in Asia or South America is
more profitable and not as limited in North America.
Conducting research and developing a new product would be more expensive and
riskier than expanding outside its horizon (North America). According to the case study, a
PESTE analysis was carried out, and it was noted that vehicle production was expanding in
nations such as Brazil and India. In India, an automobile manufacturer company, Tata Motors,
introduced its plan to produce a popular automobile for the Indian market. It was proposed that
Breezy begin cultivating the same intimate connections with foreign vehicle manufacturers as its
North American rivals. (FITT, n.d.)
Furthermore, Brazil has a strong export vocation. Its local market, which ranks sixth in
the world for automotive, is two of the primary advantages that have helped the nation maintain
its position as one of the top ten automotive makers in recent years. In Brazil, alternative energy
has limited infrastructure and is expensive. The high expense of hybrid and electric vehicles
does deter people from driving them. (ApexBrasil, n.d.)

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Brazil ranks ninth in the world in terms of oil output, and its exports allow many
Brazilians to afford them, which means there are lots of opportunities for Breezy to operate in
this market. (ApexBrasil, n.d.)
Decision and Justification
Investment in Brazil:
Brazil offers various investment prospects for multinational corporations in multiple
industries (Reuters, 2016). The automotive manufacturing, renewable energy, health sciences,
oil and gas, and infrastructure industries are prioritized in Brazil's national investment promotion
policy. Brazil's export portfolio is diverse and spans vital economic sectors, putting the country
as Latin America's second-largest exporter (Reuters, 2016). In most economic areas, foreign
investors in Brazil are treated legally the same as domestic investors. The country is one of the
world's top FDI recipients. Brazil is an attractive market for international investors for several
reasons, including its domestic market of nearly 210 million people (Santander, 2021).
EDC identifies the Brazillian market as a resourceful region to expand the business. It
has a diverse economic system and export base, which provides various opportunities for
Canadian manufacturers and venture capitalists, such as increasing infrastructure development
in a few key areas. There is a vast demographic, a significant customer base, a strictly
controlled banking mechanism, and oil, minerals, and agro-based wealth (EDC, Evaluating the
market in Brazil, 2021). The Brazillian market is open to EDC solutions for investors, exporters
or venture capitalists seeking advice on exploring possibilities in Brazil.
According to a report published by the trade commissioner service, if opening a physical
presence in Brazil is not an option, identifying the appropriate domestic collaborator or agent
could be a possible way to access the Brazilian market ( Trade Commissioner Service, 2021).
The network of trade commissioners in Brazil, which includes six branches, can assist
businesses like Breezy in obtaining on-the-ground domain expertise and connecting with the
relevant industry connections ( Trade Commissioner Service, 2021).
Establishing strategic alliances with local engineering and infrastructure enterprises is
how Canadian SMEs might acquire a competitive advantage. Such alliances can assist Breezy
in incorporating your strategies into PPP1 ventures and supply networks ( Trade Commissioner
Service, 2021).
Brazil has subsequently adopted initiatives to boost economic development, the
consequences of which should materialize in 2017/18. The Export National Plan (Plano
Nacional de Exportaçes – PNE) was created in 2015 to close the gap between Brazil's
1 PPP: Public private partnerships

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economic size and its export volume—in other words, boosting the export culture of Brazil—is
one measure that stands out. (Reuters, 2016)
The PNE is built on the following five pillars: (Reuters, 2016)
Market Access: Through bilateral, regional, and international measures on tariff and non-tariff
issues, trade barriers are removed, and greater integration into the network of trade agreements
is achieved.
Trade Promotion: Identification of 32 key markets for Brazilian exports is referred to as trade
promotion.
Trade Facilitation: Encourages the elimination of red tape and the standardization of
bureaucratic and customs regulations.
Export Finance: Improves mechanisms for funding existing foreign trade and assists
businesses who require export financing.
Export Tax Regimes: Advocates the simplicity of exporter-friendly schemes like duty drawback
and re-export initiatives.
The plan's most notable features are aspirations to further use Brazil's position as a
gateway to Latin America through inter-regional and intra-regional free trade agreements, as
well as a slew of new export promotion initiatives. (Reuters, 2016)
Furthermore, the nation offered various infrastructural concessions, which aided
investment. The current president intends to significantly improve the country's economic
environment by enacting measures such as reducing the number of days needed to establish a
corporation in Brazil from 79.5 days to the regional average of 30 days. Relaxation of regulation
in some industries and anticipated changes to the tax structure encourage foreign investment
(Santander, 2021).
Brazil and Canada – Trade Balance
As previously stated, trade between Brazil and Canada has grown dramatically in recent
years. Brazil is not only essential for international business in South America, but it is also one
of the world's most influential players. Due to Brazil's strategic location in South America, the
Canadian government designated Brazil as a target for development and incentive activities
(Reuters, 2016).
Considering the above-mentioned characteristics and potential of Brazilian market and
the demographics of trade relations between the two nations, it is strongly suggested that
Breezy should consider expanding in the Latin American market with a cooperative market entry
strategy by seeking strategic alliances with well-established companies that use carburetors,

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gas injectors and air filters for the automotive industry in Brazil. This will allow the company to
enter swiftly into the market, low/medium financial risk and medium proximity to the market.
By developing a strategic alliance with a local establishment in the target market,
both parties agree to share their expertise, competence, and resources to operate a business.
In exchange, they decide to fragment the gains from the venture and accept accountability for
any losses (FITT, International Market Entry Strategies, 2017, p. 45).
Breezy can significantly benefit from the marketing expertise and operational skills
established by a local enterprise. Breezy can also offer their products at a lower cost by
partnering with a local company since they save the added costs of import duties on finished
products and international transportation. Other benefits of cooperative strategic alliance
encompass:
• Developing a local presence without having to invest in the market;
• A local partner can assist Breezy in avoiding problems that might otherwise arise due
to cultural and language differences; and
• The partner organization fulfills the criteria for local professional qualification to perform
business operations.
• It would be most suitable for Breezy to initiate this approach to operate with minimal
risks involved in terms of investing finances and maintaining a reputation in a brand-new
market.
According to David Verbiwski, a Canadian Trade commissioner in Sao Paulo, Brazilian
import taxes can be complex and quite hefty based on the goods. He further explains that the
importance of understanding how the import system operates is that you can gain accessibility
to half of Latin America's marketplace. Even though tariffs appear excessive, you are competing
on an equal footing with other worldwide players. The problem arises when you have a Brazilian
rival who does not have to pay some import taxes, you may be at a disadvantage (Verbiwski,
2018).
Mr. Verbiwski also advised that another alternative is to license your idea to a Brazilian
firm that makes similar components, which might then advertise and manufacture on your behalf
while paying royalties to Dimension Displays in Canada. Other corporations have gone down
this road not to save money on total production but import duties. It has a dual advantage
because Brazil enjoys favorable export duty rates to other Mercosur nations (Verbiwski, 2018).
Implementation
Since we are talking about mega industries such as automotive, first, Breezy needs to
define a work team fully dedicated to the expansion project that must contact an international

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trade agent through TCS. With this first contact, the team will refine the details of the company's
market entry plan and get advice on potential partners in Brazil. Also, it will be essential to reach
The Canadian Embassy in Brasília to learn more about current import policies, understand if
there are special regulations and economic incentives for cooperation in the industry.
With the advice of the trade agency and the Canadian embassy in Brazil completed,
Breezy's expansion team will contact the suggested companies, showing the commercial
proposal and highlighting the benefits for both parties. When the team receives the responses,
they will organize virtual meetings to explain in more detail the business plan and agree on the
common ground for both companies, detailing a mutually beneficial framework. Once the
potential business partners are defined, the team will organize face-to-face visits to solidify the
trust between the work teams and generate closer contact.
Next, Breezy's team will prepare an internal plan on how to enter the market to be
verified later by the business partner's work team, this review will aim to take advantage of the
business partner's knowledge of the local market and adjust the plan to Brazilian regulations,
both legal and import and customs issues and the translation of the packaging into Portuguese
in case local laws require it.
For implementing the agreed plan, the export of the first batch of products will be carried
out, which will serve to understand the export/import process to Brazil, identify problems in the
process, confirm the estimated deadlines, points that may generate delays, points that may
create cost overruns. All this is to refine the export/import processes in the future. Also, we will
monitor the movement of the products in the Brazilian market and the acceptance they are
achieving during the first months. Simultaneously, the team will intensify the marketing strategy
to publicize the product and its quality to gain access to other markets in the Southern Cone.
The team will set the entire implementation process in a Gantt Chart, and Breezy's
senior management must review and approve it before the start of implementation (see Figure 1
and Figure 2).

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Figure 1: Breezy's expansion process Timeline
Figure 2: Breezy's expansion process Gantt Chart

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Export Development Canada. (n.d.). Export Development Canada (EDC).
EDC. https://www.edc.ca/

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Annexes
Questions answered for Case study #2, Breezy
1. How should Breezy prepare for negotiating with offshore car manufacturers? Include
market entry and cultural factors.
 Define Research Objectives for Business Relationship: In order to analyze the
partnership with Standard Benchmark, Breezy must evaluate the Company's Objectives,
Goals, Mission - Vision - Values & Work Ethics and compare them with Breezy's. They
will determine whether we are able to work together in the future on common ground.
Among the benchmarks is the reputation of the manufacturer, the payment methods, the
nature of the contracts, etc. (FITT, International Market Entry Strategy 2017, P.171)
 Assemble a Negotiating Team: It is imperative that we research and develop a clear
picture of how these new partnerships will benefit the company before negotiating any
deal. It must be a win situation for the company. Initially, we are going to need a team for
factors such as - selecting a bargaining strategy and performing due diligence on the
parties involved, as well as learning the country's commercial and social norms. As a
team, all levels of management must contribute to this Negotiating. Top Level: Chief
Negotiator, Middle Level: Experienced Interpreter, and Lower Level: Personnel with
technical, operational, and legal knowledge. (FITT,Interntional Market Entry Strategy,
2017, P.172)
 Establish Trust: Networking & Business Relationships play a vital role in the expansion
of businesses. The establishment of trust between two parties is crucial for the
successful conduct of business. Trust cannot be established at the first meeting, so we
need to establish rapport with the manufacturer first. (FITT, Interntional Market Entry
Strategy 2017, P.174)
 Establish the Business Framework: Now comes the most critical part of building a
business framework. It is crucial to finalize an agreement in which both parties agree on
the general objectives, internal & external factors, and most importantly, respective
contributions to the deal. (FITT, Interntional Market Entry Strategy, 2017, P.175)
 Establish the Legal Framework: The legal framework is the language of the contract
that implements the general terms of the business framework. MOUs (Memorandums of
Understanding) and AOAs (Articles of Association) are important documents. Having
legal documents defining the scope of work, who is responsible for what, is extremely
important. This ensures smooth operations. Having a legal framework plays a major role

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during disputes & voluntary closure of businesses (FITT, Interntional Market Entry
Strategy, 2017, P.178)
2. What type of offshore organization do you recommend for Breezy? Include a full
discussion of advantages, disadvantages, and conditions for the option you've chosen.
Negotiating Strategic Alliances with automotive related companies:
Breezy should look forward to form a Strategic Alliance with a well-established
automobile manufacturer in Brazil, who are looking to outsource their parts. Forming a
partnership, formerly known as a strategic alliance with a local establishment in the desired
territory could be a preferred technique for entering markets. To conduct trade in the
desired market, both parties collaborate to share their resources, expertise and strengths. In
exchange, they agree to split the gains from the venture and accept the accountability for any
losses (FITT, International Market Entry Strategies, 2017, p. 45).
A moderately coupled Strategic Alliance at this stage could prove very beneficial for
Breezy. Subcontracting is a suggested market entry strategy for Breezy and has the following
Pros and Cons (FITT, International Market Entry Strategies, 2017, p. 42):
 The strategic goal of Breezy is to save expenses or, in the worst-case scenario, get
access to more resources.
 There is no requirement for Breezy to seek a business license in order to operate with
the partner alliance.
 This will allow Breezy to concentrate on other crucial possibilities to expand and prosper
their business.
 The cost of establishing the production unit in the desired region is zero.
 Abandoning the partnership with the intended establishment is quite simple.
 Finding qualified subcontractors may be a challenging and time-consuming task for
Breezy.
 Once an alliance is finalized, Breezy needs to make sure that it be well examined and
constantly supervised.
 If the partner alliance is proven to be working unethically, Breezy's reputation might
suffer (but that can be a calculative risk as it's just the first step towards expansion,
Breezy can abandon the partnership if it suffers anything of that concern).
Delivering raw materials, semi-finished parts, a design, or the technique to make items
for a foreign company, or just contracting with an overseas automaker to produce

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parts independently. In either case, Breezy's parts are purchased by the subcontracting
company, which helps them generate revenue overseas with minimal risk involved (FITT,
International Market Entry Strategies, 2017, p. 41).
 Doing Indirect Exporting by Confirming Houses: the advantages include avoiding
trading complications, conditions legal property, sale fix number of parts per month.
Some disadvantages include the possibility of lost to stablish direct relationships with
clients, to generate a dependency on the partner, probably will have to pay some
commission fees and divide loyalties and lastly, the company will be exposed to
transportation risks (FITT, International Market Entry Strategies, 2017, p. 26).
3. What costs (Cost categories not actual figures) are likely to be incurred?
 Strategic Cost (FIIT, Feasibility of international trade, p.186 & p.182)
Offshoring Cost: You will have to find a reliable supplier and manufacturer, build a
good team, and have quality products shipped to the country. While offshoring sounds
easy, it comes with a lot of risks.
Legal Fees: It is important to note that legal fees play an important role in cost benefits
since they include the cost of performing all legal work in an international country.
Advantages: Cheaper labor, skilled labor, faster turnaround time.
Disadvantages: Geographical risk, cultural differences, communication problems.
Freight, Brokerage & Tariffs Costs: We must pay inward and outward freight
charges when offshoring, as well as brokerage charges, which raises products' prices. It
is difficult to survive without tariffs as there is a high probability of dumping or anti-
dumping.
Research & Development Costs: Breezy intends to grow & plan. Most capital
expenditures are spent on research related to product development, market research,
human psychology, etc.
 Potential risk-related cost

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Rework: If there is some default or faults in the product then we must send it back
offshore which is very expensive
Quality: To ensure that the manufacturer's products are special and standardized, we
will need to hire or maintain a quality assurance agency, to provide us with excellent
quality, material used &, etc.
Product Liability: Who is responsible for the scrap? Is someone liable to be held
accountable for the product in case of delays, accidents, scrap, etc.?
Opportunity Cost: In the event of lost orders, customers, etc., who will be responsible?
If suppliers are unable to meet the demand or respond quickly enough?
Brand Image: we should focus on customer loyalty and customer satisfaction during
cost analysis. The process of acquiring customers and retaining them is quite difficult.
Risk of Intellectual Property: IP is incredibly significant since many innovations are
copied and sold at an affordable price after a few weeks.
4. How could this initiative be financed?
 According to FITT, some of the best ways to get project financing would be through
EDC, BDC, banks loans, surety bonds. Some of this will be explained in detail below.
A business can also be funded in several ways, such as through fundraising, venture
capitalists, debt and equity, Kickstarter, and private equity.
Major Financing (Export Development Canada, n.d.)
Loans/ Debt from Local or International Banks: To grow or expand, Breezy will need
funds to execute its plans. Borrowing money from the bank acts as a debt that must be
repaid-with interest as an additional cost. In each country, each bank has its own loan
strategy, interest rate, and payment feasibility.
Financial Aid from Government Agencies: Local businesses are supported by the
North American market. International trade is facilitated by NAFTA. Financial aid allows
companies to expand and capture the market. To qualify for financial aid, you must meet
certain criteria. Ideas for start-ups, innovation, and change, electric cars, etc.

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Listing of a company IPO, Raise & Debt: Stock exchanges are used to raise funds for
companies. IPOs have become an important way of raising money for companies, but
they have resulted in a reduction of shareholders' equity stakes.
SEZs (Special Economic Zones): Investors are attracted to the company because it is
in a country with administrative authority in a third country. The company engages in
both domestic and international trade. A special arrangement, tax concessions, or
benefits are granted to a company due to its contribution to national income,
employment creation, and economic development.
Among the examples are Export Development Canada, RIBC, or CBC Banks, or listing
of companies like Tesla and others for capital, SEZs in INDIA, such as Amazon in
Hyderabad, and Noida, the largest SEZ in Asia. (Export Development Canada, n.d.)
(FITT, Interntional Market Entry Strategy, 2017, P15)
5. What risks does the offshore venture face and what risk management strategies would
you use?
Despite the appeal of offshore ventures, there are numerous risks associated with them.
The major risks are: (FITT, Feasibility of International Trade 2017, P9)
 Delays & High Risk on Containers – Offshoring can result in delays, sinking risks,
pirate risks, etc.
 In transit theft or damage to shipping containers. (Recent Suez Canal Accident)
 Clearance & Customs Policies can pose a significant risk for the company due to
laws, tariffs, and other factors in play.
 Dumping & Anti-Dumping (FITT, International Economics and Global Issues, Module 4
& 5)
 Market fluctuation is caused by currency fluctuations (Forex), political tensions
between countries & cultural differences.
 Risk Management Strategies
Cultural Difference: In order to survive on the market, Breezy must adapt to all cultural
differences. The language, demographics, beliefs, traditions, values, and customs. The
brand will suffer if cultural knowledge is not adequate.
Quantitative & Qualitative Factors: A brand must look at two major things if it hopes to
survive, such as revenue, net profit, sales, and other major indicators (Quantitative

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Factors). Meanwhile, Qualitative Factors include brand reputation, customer loyalty, and
customer satisfaction. (FITT, Feasibility of International Trade 2017, P.111)
Measurement Criteria: There needs to be a parameter that determines whether the
company is profitable or successful. Our goal is to monitor and measure the company's
revenue and expenses.
Monitoring Performance: Establish quarterly goals and monitor your progress towards
them. We will build more if we reach our goals, and if not, we will find a solution to the
problem. Potentials Advantage allows us to keep track of achievements.