Mega Bikes Case Study: Entry to European Market Expansion Strategies

The case study analyzes Mega Bikes, a Canadian mountain bike manufacturer, aiming to expand into the European market. With a successful domestic presence and a new production unit, Mega Bikes explores various market expansion strategies. The report evaluates options such as exporting (direct and indirect), joint ventures, and licensing, considering their respective benefits and risks. The analysis concludes that direct exporting is the most suitable option for Mega Bikes, given its limited financial resources and desire for control over product quality and customer satisfaction. The study highlights the advantages of direct exporting, including control over product quality and the ability to withdraw from the market if needed. Risks such as identifying a suitable distributor and increased product costs are also discussed. The case study provides a comprehensive overview of the strategic decision-making process for international market entry, offering valuable insights into the challenges and opportunities faced by businesses seeking global expansion.

ENTRY TO FOREIGN
MARKET
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2019
Case study of mega bikes
STUDENT DETAILS
[Company name] | [Company address]

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Contents
Introduction................................................................................................................................2
Market expansion strategies available for Mega Bikes..............................................................2
Exporting................................................................................................................................2
Joint Venture..........................................................................................................................3
Licensing................................................................................................................................3
Option Suitable for Mega Bikes.................................................................................................4
Direct Exporting.....................................................................................................................4
Potential benefits and risk for Mega Bikes in Direct Exporting............................................5
Conclusion..................................................................................................................................6
Bibliography...............................................................................................................................7

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Introduction
The case discusses Mega Bikes, dealing in manufacturing and sale of mountain bikes
in Canada. The organisation has achieved success within the nation and has set a production
unit for manufacturing of bikes. The company is looking for expanding its business
operations in the European market, as the company’s website has reported visitors from
foreign nations. To expand its business globally, Mega bikes have multiple options and
among those options, it can focus on a single option among those for its foreign expansion.
Such options are discussed in the report and the best suitable option for Mega Bikes has been
identified.
Market expansion strategies available for Mega Bikes
As defined in the case Mega Bikes has invested in a Factory in Vancouver, due to
which it as limited financial capability to establish a manufacturing unit in Europe. So rather
than establishing a manufacturing unit, Mega Bikes can adopt other ways for expansion of its
business activities. The strategic options available for Mega bikes are:
Exporting
Mega bikes can involve in exporting activities in an indirect manner or through direct
manner. In indirect exporting the company is not required to explore or understand the
foreign market directly. It can sell its products through an intermediary located in the nation
knowing the market. These intermediaries are termed as foreign buying agents, export trading
companies, brokers or foreign trading companies. Such companies purchase products from
the manufacturers based on market demand and take care of the entire territory without
having any direct involvement of the manufacturing organisation (Manzella, 1999).

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Direct exporting requires the major involvement of the manufacturing organisation
within the foreign market. It is a better option than indirect exporting because it contributes to
higher profits and company can contribute more in promotion as well as customer satisfaction
services, but it also involves more risk as compared to indirect exporting. In such export
models, the company remains in direct contact with the distributors and sellers and are
effectively able to handle the activities within the territory (Yaşar, 2013).
Joint Venture
Other than exporting, Mega Bikes also have an option to establish a joint venture with
a firm either conducting its business in the target market or maybe in some other nation and
looking to enter the target market. A joint venture is a form of partnership, in which two or
more companies sign a contract to work together rather than two individuals. Mega Bikes has
limited resources to establish a manufacturing unit in the target market. Therefore, it can
search for a company who is willing to invest in such business and at the target location,
along with that company, Mega Bikes can form a joint venture and can enter the target
market. Being in a joint venture requires limited capital and knowledge while entering the
market and after then the investment can be made as per the demand in the respective market.
But being in joint venture also have certain limitations, as along with shared capital and
assets, the joint venture also involves sharing of brand image, profitability and the benefits of
the organisation, also being in joint venture will result in involving of the partner company in
managerial decisions and activities which sometimes becomes a point for disagreement and a
negative impact for the business establishment (Killing, 2013).
Licensing
Licensing is also an option to expand business operations in foreign markets. Through
licensing, the manufacturing company can license its technology and production process to a

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foreign company to use the technology to manufacture and sell in the foreign market. Under
licensing the organisation can have control over the licensee by timely controlling the
manufacturing activities and instruct him to ensure production activities as per the company
requirements (Sherman, 2011).
Option Suitable for Mega Bikes
Direct Exporting
To expand its business in European regions with limited financial capabilities, Mega
bikes can opt for Direct Exporting. As within direct exporting option, the manufacturer does
not require to set up a manufacturing entity within the foreign nation, instead, it can export its
manufactured product within the market and can sell directly through a distributor or a seller.
In Direct exporting, the manufacturer does not require to invest a substantial amount
in setting up a manufacturing unit, also the manufacturer can depend upon the distributor in
conducting the market research activities. As the distributor is of the local region and
understands the market better than the manufacturer, so he will be able to provide a better
insight into the market conditions and requirements. It is a better option as compared to
indirect exporting and licensing because within indirect exporting, the Mega Bikes will not
have any direct control over the activities within the foreign market, due to which the
company will not be able to identify the areas which require the company’s attention to
expand business, and will not be able to perform well. In the licensing option, the company
have control over the licensee but still, the company is not able to control all the activities
performed by the licensee while production and distribution of products. such activities may
create a negative image for the brand (Export.Gov, 2016).

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Potential benefits and risk for Mega Bikes in Direct Exporting
Benefits:
 In Direct exporting the organisation will have proper control over the product quality,
as the product is being manufactured in its established manufacturing facility.
 The parent organisation can easily identify the market requirements and can
implement changes within the production process accordingly (Jones, Chandler,
Németh, Szarucki, & Kubica, 2018).
 Mega Bikes will have the option to easily withdraw from the market in the case, in
which the sale does not meet the expected level.
 Through Direct Exporting model, the organisation will be able to provide its
customers with effective after-sale services thus ensuring customer satisfaction, that
will contribute towards building a positive brand image (Hahn, 2004).
Risks:
 Identifying a distributor that will be able to effectively deal within the market is a risk
for the organisation. As the distributor will be responsible for dealing with customers
within the industry and to contribute towards firm growth.
 Dealing in foreign markets through direct exporting option will result in increased
cost of the product for the customers. As it will involve the distribution charges, the
distributor’s commission and other charges that may involve while transferring of
finished product from one nation to another.
 It requires maintenance of inventory within the foreign market so that the customer’s
demand can be met within a specific period without any delay, such maintenance of
inventory is an expensive operation for the organisation (New Zealand Trade and
Enterprise, 2019).

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Conclusion
As from the case study, Mega Bikes is performing well in Canada and has recently set
up a production unit in Vancouver, and keeping in mind the overseas views on its website,
the organisation is planning to expand its operations overseas, but the organisation does not
have enough capital to invest in manufacturing operation overseas. To expand its business in
the foreign market, from the multiple options available, Mega Bikes can opt for direct
exporting, through which it will not require to set up a manufacturing unit and will be
effectively expanding its operations within the foreign market.

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Bibliography
Export.Gov. (2016, October 20). Direct Exporting. Retrieved from Export.Gov:
https://www.export.gov/article?id=Direct-Exporting
Hahn, C. H. (2004, January). Exporting and Performance of Plants: Evidence from Korean
Manufacturing. Retrieved from The National Bureau of Economic Research:
https://www.nber.org/papers/w10208
Jones, B., Chandler, N., Németh, J., Szarucki, M., & Kubica, I. (2018). Fundamentals of
SME Management. Family Business Sustainability and Growth.
Killing, J. P. (2013). Strategies for Joint Venture Success. USA: Routledge.
Manzella, J. (1999). Strategic Options for Global Expansion. Retrieved December 2019,
from http://manzellareport.com/index.php/trade-finance/403-strategic-options-for-
global-expansion
New Zealand Trade and Enterprise. (2019). Direct and indirect exporting. Retrieved from
New Zealand Trade and Enterprise: https://www.nzte.govt.nz/common/direct-and-
indirect-exporting
Sherman, A. (2011). Franchising and Licensing: Two Powerful Ways to Grow Your Business
in Any Economy. USA: AMACOM.
Yaşar, M. (2013). Direct and Indirect Exporting and Productivity: Evidence from Firm‐Level
Data. Managerial and Decision Economics, 36(2), 109-120.