Reference no: EM133338535

Assignment:

Case study: PLANNING FOR INTERNATIONAL MARKET ENTRY

Background

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 human resources, trade finance, global logistics and distribution, and legal issues and compliance. Having looked at the company's internal readiness, she feels the plan is now complete and Patricia sets her sights on finding new customers.

UC is well positioned in the domestic market and has a vision for growth. The company hardly does business internationally, and the management team is set on unlocking company potential in global markets. With no international trade partners, Patricia takes on the ambitious task to establish some connections. She is feeling confident. With the machinery selling so well domestically, surely the success of the product can be replicated elsewhere.

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. However, she soon receives a call from the local Global Affairs Canada office and they ask her why she is contacting so many trade offices at once. She is invited to come in to meet with the local staff to discuss the company's plans and she is told that a more focused approach is needed. Patricia is not really interested in going to a meeting locally but none of the 130 trade offices she emailed responded to her.

Working on her own, mainly using Google searches, she manages to develop a list of 200 companies in more than 30 countries that she thinks might be interested in their equipment. In order to qualify these companies as potential distributors, she sends a standard English form letter out to all of them, along 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.

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 luckily 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. The Japanese manufacturer suggests that if they were to support UC in Japanese sales, ensuring compatibility with rice would likely be a key determinant for success.

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. Patricia has learned that Canada and Japan are partners in the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), and she concurs that the conditions for trade and political commitment are in her favour.

However, as negotiations continue, Patricia finds out about Japan's unique standards and testing protocols within the Japanese automotive and industrial machinery markets. The Japanese counterpart mentions that while tariffs have been lowered, in practice the Japanese market remains quite protected due to government's stringent policies and practices, and that due to a long history of protecting domestic industry, the Japanese farmers remain quite loyal to local equipment manufacturers, like Kubota and Mitsubishi. However, the Japanese manufacturer would do their best to help UC navigate the hindrances. He mentions that they know the right people, and through offering facilitating payments some of these problems will disappear. He matter-of-factly says that this is just a cost of doing business, and asks if UC would be able to contribute to paying these "commissions" as part of marketing support.

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."

When Patricia returns, you ask her how the trip went. She provides the details outlined above, and replies that although it went reasonably well, the Japanese were fairly demanding and difficult to do business with. During the next month, after repeated and increasingly demanding attempts to extract an agreement with the Japanese company, she finally receives a simple reply saying, "We are sorry, but we prefer to do business with Unlimited Combines at some time in the future."

Going back to the drawing board, Patricia is left to reflect on the lessons learned from the experience. She is wondering whether pushing for Japan as an expansion opportunity was a mistake after all. There are a few other organizations in other regions that responded to her inquiry but after such a failed attempt, which one should she pursue? She is determined to make the next talks more profitable and successful.

QUESTIONS:

1) You have been asked by the Board of Directors to comment on the best entry mode for UC.

a) Knowing what you know about UC's business and international experience, do you think that UC is ready for international expansion?

b) What would you recommend as a best entry method for UC and why?

c) Provide a detailed description of your chosen market entry method?