International Business Management: Global Gear's Expansion Strategy

This assignment analyzes the international expansion strategy of Global Gear Ltd., a South Korean mattress retailer, focusing on its potential entry into Latveria. The paper explores various entry modes, including direct exporting, licensing, franchising, partnering, and joint ventures, recommending direct exporting as the most suitable option. It then examines the legal considerations, highlighting the differences between South Korea's civil law system and Latveria's mixed legal system, emphasizing the importance of understanding local laws and currency fluctuations. Finally, the assignment assesses the political risks Global Gear might encounter in Latveria, such as potential economic crises and political instability, and suggests strategies for mitigating these risks, including cultivating relationships with political parties. The analysis provides a comprehensive overview of the challenges and opportunities Global Gear faces in expanding its business internationally.

Online Exam - International
Business Management.

TABLE OF CONTENTS
QUESTION 1..................................................................................................................................3
Entry modes for Global Gear Ltd................................................................................................3
QUESTION 2..................................................................................................................................5
Considerations to be monitored by Global Gear related to legal systems...................................5
QUESTION 3..................................................................................................................................6
Political Risks to be monitored by Global Gear in Latveria........................................................6

QUESTION 1
Entry modes for Global Gear Ltd.
Every business needs to select a target market for providing goods and services but the
business does not limit itself to that target market only but strives hard to expand according to
the growth of the business. In order to expand the business for reaching the greater number of
customers in the global market, various businesses started entering the foreign market. There are
many different ways for entering the international market because no single strategy is able to fit
better because of the size and nature of business. There are various factors in which the selection
of the strategy depends upon such as adaptation cost, transportation cost, tariff rates etc. Global
Gear is a retailer company dealing in mattresses which is headquartered in South Korea. The
senior management of the company decided to expand itself in Latveria for increasing the
customer base and the profitability of the company. Following are the entry modes which can be
used by the company for expansion.
Direct exporting: In this mode of entry, the businessman deals in exporting the final goods to
the other country which is the host country by taking help of agents and distributors. These are
also considered as face of company in the foreign or international market. This is considered to
be the easiest method of expansion but the company needs to select the agents and distributors
very carefully as the profit and loss depends on them. Global Gear can use this method as its
reputation made in South Korea can help it in convincing the distributors and agents. This
company is the manufacturing company which is why it has many contacts with the people in
other countries like Latveria.
Licensing: In this mode of entry, the company needs to maintain contact with the businesses in
the host country for making them agree to sell the products of the business. The businesses like
Global Gear has earned greater revenues which is why, the company can easily convince the
foreign business to deal in their products as the country needs to ensure that the company did not
face the failure. This does not mean that the company sells the business to another country but
this means that the company gives some rights to the country for selling the products. The
company does not lose control in this case. Global Gear can use this mode of expansion for
expanding in Latveria as this becomes easy for the company to convince the country for selling
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its products and services of mattresses. The competition of mattress business was highly
competitive because of the three international companies and 12 national companies which is
why the country also analyse every aspect of the company before selling its products and
services. Also, the laws in Latveria are complex and different which is why it is must for the
country to ensure that the products and services of the company adhere to these laws. South
Korea has civil law system while Latveria has mixed legal system so the products must follow
the customary law system which is common for both the countries.
Franchising: This mode of expansion is the most rapid method of entry which is mostly used in
North America. This mode can also be implemented in other countries but this strategy mostly
work in the case of model of repeatable business such as food outlets. But there are two
conditions for making use of this entry mode. The two conditions include strong brand
recognition in the existing market and the need for thinking about the future competition in the
new market. In order to use this entry mode, the companies need to follow some steps which
include creating the own successful brand or business, allowing the other business owners for
letting them open branches of business which are referred as branches and then some amount
needs to be paid in sharing profit or commission. Global Gear can use this mode of expansion or
entry as it has its established brand which is successful by running 6 warehouses and also serving
more than 15 retail outlets across the cities of South Korea. Also, the company has a major
online presence which increases its value and brand. The company has also various franchises
and can pay some amount in sharing profit.
Partnering: There is no actual definition of this type of entry mode. The company can make use
of it by contracting with the foreign partner which can either help the business in marketing in
other country or can help in investing in the market. At the time of partnering, the company
needs to consider the potential of partner which can help in the growth of the business. Global
Gear can use this entry mode by doing partnership with the experiences partner which can help
in making grip over large market. This is more efficient when the culture and the business style
of both the countries are different. This is why, it can be used in case of Global gear because
there are various differences in South Koreas and Latveria including limited differences, political
cultural differences, as the Latveria has individual oriented culture while South Korea has
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community oriented culture. This can be analysed through Hofstede’s Cultural Dimensions
model. This can help the company in adjusting according to the new environment easily.
Joint Venture: This is a special type of partnership in which there is a formation of third and
independent party. Under this type of entry mode, both the companies who are ready for
partnership must agree to share the risks as well as profits in exact equal ratio and also doing the
business in particular market. There is mostly an equal share of 50-50% of the partners in the
new businesses keeping their companies separate. This entry mode can also be used in the case
of Global Gear as two businesses can partner with each other but there is also risks in case if the
other company needs to face loss due to the one company.
After analysing all the entry modes, this can be recommended that Global Gear must make use of
direct exporting because there is no need for extra investment in the new business and also they
can directly sell their own manufactured products in the new country. The company also gains
various opportunities for distributing and selling the products in other countries by taking
agreements of other firms in the other country like Latveria. Global Gear can also share the cost
of development with the host company and also the firm can have the ability for involving with
the global strategic coordination.
QUESTION 2
Considerations to be monitored by Global Gear related to legal systems
At the time of expanding the operations and products of a company in other country, the
company needs to monitor various different considerations which can help in analysing the legal
systems of both the countries and can help in filling the gaps between these two. Rule of law
must be considered which deals in the process, practice, constitution, norms, mechanism etc.
which helps in supporting the equality of all the citizens before the law. This helps in securing
the non-arbitrary form of government and many others which prevents the power’s arbitrary use.
The company Global Gear must consider the changes in the national currencies of both the
countries as the currency used in Latveria is Dinars and the currency used in the South Korea is
Won. This can be also observed from the currencies of both the countries that there are sharp and
large fluctuations between Won and Dinar. The company needs to address these fluctuations and
consider them in all the cases of supply and demand and performing all the operations. The
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currency also comes under legal systems as this can lead to many legal cases in the country and
there also comes need to involve the government in the same. Furthermore, this can also be
evaluated that the law system in South Korea has Civil Law system which has high degree of
predictability while the country Latveria has mixed legal system where two lay systems are
adopted including the Customary Law system and Common Law system. This is observed that
the customary law system is based on the specific local customs and also the practices which are
specific according to the specific customs. This law and its practices have relevance to the
personal and family law along with offering relevance to zoning, operation matters and business
hours. The laws adapted in Latveria are also very complex and difficult to understand which
means the company will need the services of the expensive lawyers for navigating and altering
the significant degree of corruption which can help in altering the judgements of the court. The
laws in South Korea are comparatively easier to follow and adhere to so the company Global
Gear needs to address to the complexity of the legal system in Latveria and must develop
strategies according to the same. This can be evidenced from the example that if the company
performs operations in South Korea which are legally correct in the eyes of legal system of South
Korea but not from the eyes of Latveria then the company cannot perform the operation in the
country Latveria. The business law can helps in various processes like maintaining order,
protecting the liberties and rights, resolving disputes, establishing standards along with at the
times of interaction with government agencies, individuals and other businesses. This is why,
rule of law can be used as it provides the company and its employees prosperity and peace while
the rule of man becomes tempting. The rule of law is the most important factor in the quality
governance when it links with the companion and the property rights. This is why, it is
considered as the central system to prosperity. This law gives freedom to the company so the
company Global leader must address the changes in the laws of the country Latveria.
QUESTION 3
Political Risks to be monitored by Global Gear in Latveria
The company at the time of expanding itself in other country needs to address the political
factors and the risks which can decide the success and failure of expansion. This can be observed
that Latveria has stable political system as compared to South Korea but it lefts with a leaning
government. This is mandatory that the average income and the living standards must be high
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and keep rising. This is not in case of South Korea. So there are political risks that if the
company does not keep the average income rising along with the increased living standards, then
the company can face a major loss. These are decided by the taxation and the regulatory policies
which has the goals of redistributing wealth from the traditional elutes members to the countries
which expands the middle class. In Latveria, this can be evaluated that there have been many
times of economic crisis due to the political upheaval in past and also the Army of the country is
always opposite to the existing government. This is why, the Global gear must consider these
risks and must be prepared in prior to that of its existing preparations. The business can also try
to cultivate personal ties with the various political parties in action so that the legal cases can
change the direction if the political party changes in the government. The company must have
established stronger relations with the political party which is currently in action so that many of
the losses can be hidden and the company does not need to face the greater or major loss. This is
why, it is must for the Global Gear Company dealing in mattresses to monitor the major risks
which can decrease the profitability or ruin the business. Addressing the political risks can help
the company in achieving the expansion goals.
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