Blaze Pizza has recognized numerous opportunities to expand in foreign countries

Question

Blaze Pizza has recognized numerous opportunities to expand in foreign countries and has assessed many foreign markets, including Brazil, Greece, Mexico, Portugal, Singapore, and Thailand. It has opened new stores in Europe, Asia, and Latin America. In each case, the firm was aware that it did not have sufficient understanding of the culture of each country that it had targeted. Consequently, it engaged in joint ventures with local partners who knew the preference of the local customers.

      a.   With Blaze Pizza being a fairly new Company, is there an advantage/disadvantage for a company of its size operating as a Joint Venture in Brazil?

      b.   Why might the overall risk of Blaze Pizza decrease or increase as a result of its recent global expansion?

      c.   Blaze Pizza has been more cautious about entering China. Explain the potential obstacles associated with entering China?

Blaze Pizza Background: A Chipotle style Pizza franchise started in California. The company has grown exponentially, and has signed Lebron James to become the company’s spokesman. With Lebron James leading the charge, the company is poised for additional growth and global domination

Explanation / Answer

a. There are several advantages for a company of the size of Blaze Pizza operating as a Joint Venture in Brazil, such as:

b. The overall risk of Blaze Pizza might increase as a result of its recent global expansion which is explained below:

1. Consumer need. The first and most important question Blaze Pizza must answer is whether local consumers in the target market can afford to buy our products or services and if Blaze Pizza can sell them at a competitive price. It's irrelevant that Blaze Pizza sell the highest quality products or services if target consumers simply don't have sufficient purchasing power to buy them. Analyze a market's consumers, demographics, and competitive landscape. Understand our own cost structures in the foreign markets.

2. Customization and localization. Consider tailoring our product to local demands or tastes. Blaze Pizza will need to be flexible and adaptable to seize the target market's business opportunities.

3. Mode of entry. Consider whether to enter the new market with a partner or not. Going it alone brings additional risks for the middle market company. Initiating a joint venture with a local partner who is deeply familiar with the target market is often the best alternative. Selecting the right partner is crucial, however, so take our time and think carefully before committing to any relationship. Since middle market companies tend to have less bargaining power compared to large enterprises, they may find themselves particularly at risk in dealing with unethical partners or intractable government agencies.

4. Barriers to entry: Research potential barriers to entry in the target market, including "soft barriers" such as language and culture, and more business-centric ones such as inadequate infrastructure (roads, ports, etc.) and expensive transport and logistics costs. In recently booming Brazil, infrastructure is sub-par and transport costs are very high, especially in the north. In this case, our company would be wise to research the possibility of partnering with knowledgeable local partners and suppliers who better understand how to overcome this challenge while maximizing business opportunities.

5. Legal/regulatory structures. Gain a granular understanding of the target market's legal and regulatory structure, especially as it relates to our middle market company's products or services. Leverage our research to plan ahead of time for additional costs.

6. Exchange rate and country risk. An additional layer of complexity presents itself in the form of exchange rate fluctuations with the local currency and monetary restrictions imposed by foreign governments. An additional concern is the protection of intellectual property in the target market and enforcement of contracts, which can be challenging in several developing markets. Finally, there may be risks related to political corruption and personal security, especially when doing business in unstable regions like the Middle East. Consider all of these factors before committing resources to a new market.

c. The potential obstacles associated with entering China are as below:

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