MarsQuest's Global Strategy: Entering German Market for Expansion

This report examines MarsQuest's global strategy to enter the German market to reduce labor costs. The company, a sunglass manufacturer, analyzes the political, economic, social, technological, legal, and environmental factors of Germany. It explores market entry modes such as franchising and mergers and acquisitions. The report highlights the advantages of entering Germany, including lower wage rates and business freedom. It also discusses the need for adjustments in management, operations, and employee training to align with the German business environment and competitive market. The conclusion emphasizes the importance of analyzing the host country's environment and choosing appropriate entry modes to achieve the company's objectives.

Running head: GLOBAL STRATEGY
Global Strategy
Name of the Student
Name of the University
Author note

1
GLOBAL STRATEGY
Executive summary
The aim of the paper is to analyze the strategy of the sunglass company to enter a low wage rate
country in order to reduce their labor cost. The company chose Germany to enter the new market
because the wage rate of Germany is lower than Canada where the company operates. However,
the environment condition of Germany will initiate the company to make various changes in the
operations, management and the labor. The company chooses to enter the new market using
franchisee and merger and acquisition as the entry mode.

2
GLOBAL STRATEGY
Table of Contents
Introduction......................................................................................................................................2
External environmental Analysis.....................................................................................................2
Market Entry Modes........................................................................................................................5
Reason for entering Germany for Business expansion....................................................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................8

3
GLOBAL STRATEGY
Introduction
The sunglass company named MarsQuest is one of the well known sunglass
manufacturing company in Canada. The company has been facing issues in its cost of
manufacturing as the wage rate and cost of manufacturing was increasing. Thus the company is
planning to enter a new country that has low wage rate. This will help the company to employee
labor at low wage and reduce labor cost and cost of production. Thus the chosen country for
entering with the business is Germany. This is because the wage rate per hour is comparatively
low in Germany about $10.87 compared to $14 wage rate per hour of Canada
(Tradingeconomics, 2018). Thus, it will be beneficial for the company to enter Canada and take
advantage of their low wage rate. The paper discusses the environmental analysis and market
entry mode that the company will choose in order to decide to enter Germany.
External environmental Analysis
Political-
Germany is a democratic country and known for its politically stable nature. There were
certain tensions in Berlin; however, the market players are relaxed after the situation got solved.
Moreover, it is said the euro does not get much affected by the political changes of Germany
(Amadeo, 2017). This makes the companies feel relaxed about the wage rate.
Year Political stability
2012 0.77
2013 0.93
2014 0.92

4
GLOBAL STRATEGY
2015 0.72
Political stability of Germany
Source:
2012 2013 2014 2015
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Political stability
Political stability
Political stability of Germany
Source: (Ivanovitch, 2017)
Economic
Germany is economically well stable country and ranks in the sixth position among all
the largest country of the world. The growth rate of Germany is 1.9 percent in 2016 which has
increased considerably compared to 1.5 percent from the past year (German Economy, 2018).
This poses an advantage over the company that operates in Germany as the purchasing power of
the consumers is also high.
Social and cultural

5
GLOBAL STRATEGY
The society of Germany is advanced and mainly focuses in own happiness. This is
because the country scores high in power distance which shows that small family exists and no
such traditional joint family. Moreover, the society is governed by highly competitive
environment as it is a highly masculine society (Germany - Geert Hofstede, 2018). People focus
on performance in a great way.
Technology
Germany has always played a great role in contributing to technology innovation like all
other developed countries (Digital Single Market, 2018). It has been indulged in various
innovations from production to all types of business operations.
Legal
The country stands strong in case of business freedom and investment. This makes it easy
for any new company to enter Germany with its business idea. Moreover, the corporate tax in
Germany is 15 percent which the business needs to provide to the government while operating in
the country (FocusEconomics, 2017).
Environmental
Germany has huge environmental problem due to increased air pollution. This is due to
increasing industrialization in Germany. This puts huge pressure on the new companies that enter
the country to follow strict environmental laws in its manufacturing units.

6
GLOBAL STRATEGY
Market Entry Modes
To enter into a new market in is necessary that the company choose desirable entry mode
to enter the new market successfully and capture adequate market share. Some of the common
entry mode that the business uses to enter a new market is exporting, licensing, franchising, joint
venture, strategic alliance and merger and acquisition. Some of the modes help the company to
know the new market the customers easily (Gubik & Karajz, 2014). Each of them has their own
advantages and disadvantages.
Exporting- it is the by which the company capture consumers of other countries without entering
the country physically. It is a process of just selling the goods to other country.
Licensing- it helps the foreign company to take up proprietorship in the new country and start
manufacturing business. However, the company offers only certain resource for license in the
host country. This entry mode needs extensive market research (Collett, 2015).
Franchising- it is a process in which semi-company owners pay fees and royalties to the parent
company to sell their product with the trademark of the parent company (Gubik & Karajz, 2014).
Joint ventures- it is the best method to share risk, technology and cost to run the business
successfully (Collett, 2015).
Strategic alliance- it is a type of cooperative agreement that takes place between two firms. One
firm can be from the home country and the other from the host country (Gubik & Karajz, 2014).
Merger and acquisition- merger and acquisition is done by joining hands or taking up one firm
of the host country to use their knowledge and ideas about the host country market.

7
GLOBAL STRATEGY
From all the entry modes the most appropriate entry mode for the sunglass company to
enter German market is to use franchisee and merger and acquisition. This is because it will help
the company to reduce investment cost in the new country and use the idea about the consumer
and demand trend of the market that the existing company of Germany holds.
Reason for entering Germany for Business expansion
From the above analysis it is seen that entering the German market is beneficial for the
company because of various reasons. The first reason is low wage rate for which the company is
actually planning to enter a new low wage rate economy. Moreover, the business freedom that
the country offers to foreign companies is the additional reasons to enter German. Moreover, the
company will also save cost by adopting merger and acquisition and franchisee to enter the
country. However, the company needs to make certain changes in its management system and
employees to cope up with the new business structure (Digital Single Market, 2018). German
being technologically advanced country adopts various advanced manufacturing techniques.
Thus, the business needs to carry out training programs to make help the staffs learn about the
new techniques (FocusEconomics, 2017). It is also necessary that the operation structure is such
that does not emit much pollution in the environment as Germany already face air pollution
problem. Workers also need to be trained about methods so that they achieve good production as
people of Germany are highly competitive. They have to be above others in order to survive in
such market environment. Thus, environmental analysis of Germany is important for the
company

8
GLOBAL STRATEGY
Conclusion
From the above analysis it can be traced that the company has to analyze the market
environment and economical environment of the host country in order to start their business in
the new country. As the company wants to reduce the labor cost by entering a country with low
wage rate, thus Germany has been chosen as the new host country. This is because the wage rate
per hour of Germany is less than that of Canada. Moreover, from the environment analysis it can
be deduced that the company needs to make various changes in the management, operations and
training employees to adopt the new scenario. Moreover, the company was able to know the
competitive environment Germany imposes and the changes they need to make accordingly.
However, the company will choose to enter the new mrket using two modes of entry such as
franchisee system and merger and acquisition. This will help them to reduce cost further and
fulfill their actual objectives. Moreover, mergers and acquisition will help the company to use
the expertise of the firm already existing in that market.

9
GLOBAL STRATEGY
References
Amadeo, k. (2017). Germany's Economy: Successes and Challenges The Balance. Retrieved 24
January 2018, from https://www.thebalance.com/germany-s-economy-3306346
Collett, N. (2015). Mergers and acquisitions. John Wiley & Sons, Ltd.
Digital Single Market (2018). Germany, a world leader in technology, engineering and
innovation Digital Single Market. Retrieved 24 January 2018, from
https://ec.europa.eu/digital-single-market/en/news/germany-world-leader-technology-
engineering-and-innovation
FocusEconomics (2017). Germany Economic Outlook. FocusEconomics | Economic Forecasts
from the World's Leading Economists. Retrieved 24 January 2018, from
https://www.focus-economics.com/countries/germany
German Economy (2018). German Economy: Facts, Population, GDP, Inflation, Unemployment,
Business. Heritage.org. Retrieved 24 January 2018, from
https://www.heritage.org/index/country/germany
Germany - Geert Hofstede. (2018). Geert-hofstede.com. Retrieved 24 January 2018, from
https://geert-hofstede.com/germany/about/culture.html
Gubik, A. S., & Karajz, S. (2014). The Choice of Foreign Market Entry Modes: The Role of
Resources and Industrial Driving Forces. Entrepreneurial Business and Economics
Review, 2(1), 49-63.

10
GLOBAL STRATEGY
Ivanovitch, D. (2017). Germany's withering stability is just a local issue. CNBC. Retrieved 24
January 2018, from https://www.cnbc.com/2017/11/19/germanys-withering-stability-is-a-
local-issue-commentary.html
Tradingeconomics. (2018). Germany Gross Minimum Wages | 2015-2018 | Data | Chart |
Calendar. Tradingeconomics.com. Retrieved 24 January 2018, from
https://tradingeconomics.com/germany/minimum-wages