MGMT101: Foreign Market Entry Strategy and Alliances Report

This report delves into the critical decisions firms face when expanding globally, focusing on the 'which, when, and how' of foreign market entry. It examines the three fundamental decisions: which market to enter, considering factors like political stability and economic growth; when to enter, weighin...Read More

Running Head: MANAGEMENT 0
Global Business

MANAGEMENT 1
Question 1
Solution 1) The three basic decisions are taken out by the firm while deciding on foreign
expansion includes –
 Which market to enter – It is related to the choice of foreign market. There are more
than 200 countries in the world and any organisation desires to expand on
international platform first need to evaluate country attractiveness. Generally, a
country having stable political environment with a larger and emerging economy is
more favourable for the company (Zeschky, Widenmayer & Gassmann, 2011). In
addition, a firm perceived value in a specific international country market has an input
on the choice as well. Lastly, a firm also needs to evaluate market entry source with
balancing benefits, costs and risks. For example, Aalst Chocolate, Singapore
Company can plan to expand their operations in India due their business friendly
laws, abundance of resources and labout-intensive sectors.
 When to enter those markets - It is related with the timing of entry as an
organisation can attain first mover advantage while gaining cost advantage. In
addition, entering proactively in the market will also help the brand to build a long
term and sustainable competitive advantage. However, on the other hand, they may be
some drawbacks too like training cost due to differences in culture, necessary
education and customization (Zott & Amit, 2008). In addition, entering into a market
at a later stage can bring out various other advantages such as learning from earlier
firm mistake, analyse competitor strategy and so on. For example, recently Ola has
moved to Australian market with price-focused incentive and registered 30k driver
partners within three months whereas, on the other hand, Uber has 82K drivers across
Australia in five years (Khatri, 2018). The company choose the right time to enter into
Australian markets and thus glow their wings.
 On what scale – If a firm enter on a large scale, it allows the company to gain first
mover advantage and help the firm to strategize in the longer run. In addition, it also
requires higher economic and strategic commitment, which is difficult to reverse if
something goes mistaken. Considering the same example of Ola, the company have
invested $1 billion in Australia as fresh funding considering long-term perspective.
Hence, investing such big amount requires longer strategic commitment from Ola in
the Australian economy.

MANAGEMENT 2
On the other hand, if the firm decides to enter on a smaller scale, it helps their
business to become acquainted with the foreign nation before committing strategically
and investing higher capital.
Question 2
Solution 2) The different modes firms use to enter foreign markets are –
 Exporting – It is one of the common forms to expand the business in international
countries and it helps the firm to attain economy of scale while avoiding substantial
costs of setting up new facilities. However, some organisation found it costlier due to
transportation and trade barriers. For example, BMW largest plant is in South
Carolina where it develops its X series SUVs and exported nearly three-quarters of
the 371,000 cars it manufacturer there and thus makes them the biggest car exporter in
the US (Isidore, 2018).
 Turnkey projects – This mode of entering allows organizations to overcome local
restrictions against FDI and foreign organizations and there are also fewer risks than
FDI. These projects also indicate short-term interest in the nation. For example, Fluor
and Bechtel have built many foreign plants and projects.
 Licensing – Here one company, the licensor, enables another firm in an international
country the rights to intangible property such as copyrights and patents. This is for a
limited period of time and mainly in exchange for a payment. However, the biggest
drawback in this mode is the high risk of losing technological expertise. For example,
Salvatore sells a license to make the t-shirts to Carol, who pays him royalties and
based on how many t-shirts she sells.
 Franchising – It has similar to licensing, however, it involves branding and emphasis
on organisation that sells service. It helps the firm to get relieved from various costs,
as they do not need to set up their own facilities. Here, the main issue any
organisation may face can be related to quality control. For example, Dominos adopt
franchise to enter into foreign markets.
 Joint ventures – When an enterprise is established with two or more independent
firms. It is considered as a good way overcoming larger country differences (Meyer,
Wright & Pruthi, 2009). For example, BMW and Toyota both do joint venture with a
research into vehicle electrification, hydrogen fuel cells and ultra- lightweight
materials.

MANAGEMENT 3
 Acquisitions - A firm can set up its presence in the foreign country effectively by
acquiring another firm, however, they may be problem due to the merger of the
different cultures of the firm. For example, Walmart’s acquisition of Flipkart is the
biggest ever in India, with the US-based retail giant spending $16 billion.
 Greenfield ventures – This mode makes it easier for an organisation to install the
type of culture and subsidiary it wants. This mode of internalization helps the firm to
facilitate greater control on all aspects of the enterprise including employees and
brand recognition. Starbucks and Coca – Cola are examples of multinational
organizations that have undertaken many Greenfield investments globally.

MANAGEMENT 4
References
Isidore, C. (2018). These are the top US exports. Retrieved from
https://money.cnn.com/2018/03/07/news/economy/top-us-exports/index.html
Khatri, B. (2018). Ola Doesn’t Need A Marketing Strategy In Australia, It Has Uber Drivers
On Its Side. Retrieved from https://inc42.com/buzz/uber-drivers-are-olas-new-
marketing-strategy-in-australia/
Meyer, K. E., Wright, M., & Pruthi, S. (2009). Managing knowledge in foreign entry
strategies: a resource‐based analysis. Strategic management journal, 30(5), 557-574.
Zeschky, M., Widenmayer, B., & Gassmann, O. (2011). Frugal innovation in emerging
markets. Research-Technology Management, 54(4), 38-45.
Zott, C., & Amit, R. (2008). The fit between product market strategy and business model:
implications for firm performance. Strategic management journal, 29(1), 1-26.