Int Market entry
You have just begun a new job as President of Unlimited Combines (UC), a Canadian farm equipment manufacturer whose flagship product utilizes new technology to increase the productivity of grain harvesting. UC’s equipment allows farmers and commercial grain-growing operations to harvest wheat, barley and similar cereal crops faster and with less waste than any other equipment manufacturer. You are surprised to find that while UC’s products sell very well in the domestic market, they appear to be a well-kept secret around the world. Recognizing that the world market offers an excellent growth opportunity, you hire Patricia Paget, a new business school graduate, as your export manager, and assign her the responsibility to create and implement an international business plan and begin developing new global business opportunities for Unlimited Combines.
The International Business Plan
Patricia’s first task is to generate an international business plan. She develops a table of contents making sure to mention issues of the new era in global business, the global supply chain, technology, culture and ethics. Also addressed are international market research, entry and maintenance, trade finance, global logistics and distribution, and legal issues and compliance. When her plan is complete, Patricia emails a form letter to more than 130 Canadian trade offices around the world in order to confirm which markets are the most suitable. Within two weeks, she receives responses from more than sixty of the offices, with contact information for a total of more than four hundred potential business partners. However, she is puzzled as to why some of the companies appear to have no relationship with farm equipment. She receives no reply from the other seventy or so offices. In order to qualify the potential distribution channels, she sends an English form letter out to the four hundred potential business partners, with a questionnaire for them to fill out. After three weeks, she had received replies from only 12 of them. Patricia is becoming frustrated that she has now spent over a month on trying to find potential distributors for the products, with few results. International Market Entry Strategies Module — Planning for International Market Entry © FITT 2 One of the positive results Patricia has received is from a Japanese manufacturer of farm equipment. She arranges for a business trip to Japan to meet with them. Upon arrival, she encounters several problems. The company is located several hundred kilometers from the nearest large city, and by sheer luck she finds an English-speaking person to help her with a train connection. When she arrives, she is given several attractive gifts, but has brought none with her—just brochures. She quickly finds that nobody at the company speaks English, although the written communications had been in English, and she only brought English language brochures. The company eventually brings someone in to help with translations. However, this only highlights a major problem: the company thought the UC combine would work on rice, which was incorrect. Rice turns out to be the main crop grown in Japan, but few cereal crops are grown because they are easily imported at low cost. Only a small percentage of Japan’s land is suitable for farming, so farmers focus on higher-value produce. Because Patricia has arranged for no other meetings during her trip to Japan, she is determined to make this one a success. They discuss many topics as she tries to forge a relationship with the company, and it turns out that the Japanese company exports its equipment around the world and might consider a strategic alliance with UC, whereby it would leverage its distribution network to sell UC’s products. One troublesome issue is financing. She is surprised to find the Japanese company prefers to arrange for long-term payment terms through trade financing, but she insists that they work on a cash in advance basis. She knows from what she has heard that international trade is risky, and that payment in advance would eliminate the risk of non-payment. Another issue is technical support. The Japanese suggest that they would like to have technical training as part of a legal contract they would sign, if they decide to work together. Patricia knows that they might reverse engineer UC’s product, and does not want to be constrained by a contractual or legal obligation, so is not enthusiastic about this. Marketing support also presents a problem. The Japanese want to translate her brochure into other languages at their own expense, and ask if she would email the document to them so they could do the translation. However, she says she cannot, for copyright reasons, but that they can use the brochure she is going to leave them if they don’t tell anyone. Another feature of “marketing support”, it turns out, is that it is occasionally necessary for them to pay bribes to government officials in some of their non-Japanese markets. They matter-of-factly say this is just a cost of doing business in some countries, and ask if UC will be able to contribute to paying these “commissions”. Finally, the Japanese want Cost, Insurance and Freight (CIF) pricing, but Patricia insists on Ex Works (EXW) Incoterms® 2020. This will also help her to minimize risk and keep costs down, and let the Japanese pay the cost of freight. She has enough to do, after all, and does not want to get involved with the complexities of global logistics. As Patricia leaves the meeting, pleasantries are exchanged. When she asks if they think there is a chance to do business together, she receives a smile from the general manager, who says, “We will try
Case Study Questions
1. What could Patricia have done differently in her overall approach to developing international sales for Unlimited Combines?
2. What could Patricia have done differently when planning her business trip to Japan—and, had she still decided to go, how could she have made it more successful?
Case study should be completed with the following elements included (refer to case study methodology for more details):
Details of the Case Format
1. Executive Summary
The executive summary should provide an overview of the key facts of the entire report. Often, the summary may be the only part of the written report read by a senior executive and therefore, should include adequate detail to allow the executive to make a go/no go decision.
It should include, at a minimum:
a. Key factors from the situation analysis
b. The core problem or issue
c. Explain the alternatives evaluated and what criteria were used
d. The chosen alternative and its reasons for selection
e. Any significant issues which may arise from the chosen alternative and recommendations to deal with these issues
f. Benefits to the organization resulting from the decision
g. Description of the implementation
Although the executive summary appears first in your report, it should be the last section of the report that is written and can only be prepared once you have completed the case.
2. Situation Analysis
This is an evaluation of an organization’s current situation with the goal of providing a basis on which to make your assessment of the case. The situation analysis is an objective evaluation of an organization’s internal and external environments.
In the format of a SWOT, your entries should be limited to those that are factual, relevant to the case and should be quantified. Be sure to quote sources:
• The organization’s strengths and weaknesses (at a micro level, from within the organization)
– Consider the company’s market position, market share, financial situation (sales, net income, etc.), operations, management, use of technology, etc.
• The organization’s opportunities and threats (at a macro level, the external environment over which the organization has very limited or no control)
– Consider legal, political, demographic, technological, competitive, etc.
This section of the paper should be used throughout the remainder of your case study to provide support for and direct your assessment of the core problem, alternatives and recommendations.