International Market Entry Strategy: ABC Company's American Expansion

This report examines the international market entry strategy of ABC Company Pvt. Ltd., a Malaysian biotechnology company seeking to expand into the American market with a new medical product. The report analyzes three potential entry modes: manufacturing in Malaysia with American sales agents, establishing a US subsidiary, and a joint venture with a Mexican firm. The core of the report critiques the decision to manufacture in Malaysia and hire American sales agents, citing advantages such as addressing cultural differences, maintaining product quality, reducing management concerns, gaining market insights from local staff, cost-effectiveness, and production flexibility. The report concludes that this approach is the most suitable for ABC Company, considering both internal and external environmental factors. The analysis draws on theoretical and empirical arguments, providing a comprehensive understanding of the chosen entry mode and its benefits.

INTERNATIONAL BUSINESS ENVIRONMENT –
727703

Table of Contents
Introduction.......................................................................................................................3
Company background..................................................................................................................3
Choosing the right option.............................................................................................................3
Critique – Reason for choosing the first option...................................................................3
Conclusion.........................................................................................................................5
Bibliography.......................................................................................................................6

Introduction
Company background
ABC Company Pvt. Ltd. is a Malaysian based company that operates in the bio-technology
sector and produces medical products. Recently, the company has developed a new medical
product which is a lot of value to the entire world. The company is planning to expand its
operations in the American market and sell its new product to the American customers. The
cost of manufacturing the new product will not be an issue for the company but there are a
number of operational models that the company needs to choose from. To achieve its
objective, the management is planning to keep the manufacturing operations limited to its
home country while it plans to hire sales agents who would handle the American market to
boost up the sale of its product.
Choosing the right option
The company can enter the American market using three different entry modes, which are:
- Manufacture the products at its home facilities and hand over the marketing
operations to American sales agents
- Manufacture the new product in Malaysia itself and open up a new subsidiary in the
American market to handle all the marketing operations
- Enter into an alliance with a famous Mexican firm in a 50/50 joint venture where the
products would be manufactured in Mexico and experienced American sales
executives would take up the marketing operations.
This report is aimed at gaining a deeper insight into the entry modes that a firm can use to
enter into a foreign market. Therefore, a thorough analysis of one of the best options is
carried out in this report using theoretical and empirical arguments.
Critique – Reason for choosing the first option
The present day business world is tough and highly competitive where entering a foreign
market can be highly beneficial for a company but at the same time, the overall process can
be a huge challenge to the management of a business organisation. Selecting the right entry
mode to enter a foreign market depends on a number of internal and external environment
factors and can have a great impact on the overall success of a foreign venture.

For ABC Company, restricting the entire manufacturing process to the home country and
hiring foreign sales experts to look after the marketing operations in the American market is
the best entry mode because:
First of all, entering into a foreign market can be difficult if there are cultural differences
between the two markets. In all probability, the Malaysian company is not well acquainted
with the American culture and the preferences of the American customers (Stelladoradus,
2012). In such a case, it is always better to recruit employees from the host country itself as
they are aware about the cultural preferences of the people of their country and can carry out
the marketing operations in a better way. Thus, in house production and hiring American
employees for marketing will enable the company to deal with cultural gaps that exist
between the two countries.
Secondly, being in such a sensitive field (medication and medical products), it is very
important for the company to maintain quality of its products and ensure that the dosage of
each component is in the right ratio. Further, loss of quality or presence of harmful
components can invite legal troubles for a company in the medical industry (Borren, 2014).
In such a situation, by restricting the manufacturing process to the home country, it would
become easier for the company to keep a check on the quality of its products and to avoid
legal troubles. Manufacturing the products in the home country itself will also help the
company in reducing its management considerations as expanding the manufacturing process
to the American market can increase administration concerns (Brandongaille, 2015).
Thirdly, recruiting experienced marketing staff from America itself would allow the company
to gain a lot of information about the American market and its customers from their personal
experience. The marketing operations will also become more efficient as the American staff
would know how to approach the American customers, what exactly to offer to them and how
to convince them to make a buying decision.
Fourthly, restricting the manufacturing process to the home country and hiring host country
employees for the marketing operations is going to be a cost effective option for the
company. Opening up new manufacturing units in the host country can involve a lot of
investment and without having sufficient knowledge about the response that the product

receives, it becomes highly risky to invest so much in a foreign market. Therefore, cost
effectiveness can also be a great advantage if the company sticks to the first option.
Fifthly, a lot of careful researches and studies have concluded that expanding the
manufacturing process to America can increase the overall production cost because of a
whole new setup and expensive labour wages (CGS, 2016). Restricting the manufacturing
process in the home country itself can decrease the cost per product because of a reduction in
the labour cost associated with production.
Lastly, in house manufacturing can make the entire production process more flexible.
Restricting the production in the home country can allow the company to make quick
improvements to the product, which cannot be possible in case the company decides to shift
its manufacturing process to host country (America). In the other scenarios, manufacturing
the medical product in America would take a lot of time if the management decides to
introduce some changes to it or improve it in a certain way as it would require a lot of
communication between the headquarters and the host country.
Conclusion
Selection of an entry mode for entering into a foreign market can vary from one business
organisation to another but in the case of ABC Company Pvt. Ltd. it would be best suitable
for the company to keep all the manufacturing process in house while it can hire experienced
American employees to handle its marketing operations in the United States.

Bibliography
Borren, T. (2014, February 15). 5 Smart Reasons to Outsource Manufacturing Overseas .
Retrieved May 3, 2018, from yfsmagazine.com:
http://yfsmagazine.com/2014/02/15/5-smart-reasons-to-outsource-manufacturing-
overseas/
Brandongaille. (2015, September 15). 8 Pros and Cons of Inhouse Manufacturing . Retrieved
May 3, 2018, from brandongaille.com: https://brandongaille.com/8-pros-and-cons-of-
inhouse-manufacturing/
CGS. (2016, July 6). Manufacturing in America: The Real Benefits and the Drawbacks of
Reshoring. Retrieved May 3, 2018, from www.cgsinc.com:
https://www.cgsinc.com/blog/manufacturing-america-benefits-and-drawbacks-
reshoring
Stelladoradus. (2012, November 26). The Advantages of Manufacturing your Products In-
House . Retrieved May 3, 2018, from www.stelladoradus.com:
https://www.stelladoradus.com/advantages-manufacturing-products-in-house/