what would you do???? You are the Chief Financial Officer of a large publically
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what would you do????
You are the Chief Financial Officer of a large publically traded U.S. based manufacturing corporation with annual sales revenues of over $2 billion. You hold a dominant market share position in your industry and the vast majority of your sales take place in your home country, the United States. Your firm's strengths are its technical manufacturing expertise and a very efficient supply chain management system. All of your manufacturing locations in various parts of the country are non-union. Over the last decade, the market for your firm's products has exhibited slow growth and the majority of your revenue increases have come from taking market share away from your competitors. While this has been a successful strategy, it has been a high cost-low margin proposition. This strategy combined with the a recent economic recession has left the company in a weaker than normal financial situation. Cash reserves are low and both short and long term debt is higher than what the firm would usually consider acceptable but current low rates that have been locked in have kept interest expense manageable. Projections are for both long term and short term interest rates to rise. The firm's debt rating was downgraded last year by the ratings agencies and is now at the bottom of investment grade. The stock price of the firm has recovered from its low during the recessiorn but has not increased at the same pace as the general stock market over the past two years. Shareholders are unhappy with the lack of movement in the stock price and are demanding management take action. The company pays a small dividend which it can cover with existing earnings. The CEO of your firm has decided that it is time for the firm to explore entering new markets and/or look at acquisitions to get the company back on the growth track. He has tasked the eaders of your organization to bring forward ideas and options which have been narrowed down to two. He is looking for a recommendation from you as CFO on one of the following two options.Explanation / Answer
In this specific situation joint venturing and franchising would be the most appropriate for the company to invest into the international market this type of approach would help the organisation to maintain profits and to reduce the overall cost involved in Operation as company's shares are not at a good state.
Franchising and joint venturing with different companies which are already operating inside Brazil tech market would be the best option for apple to enter Brazilian market. High taxes on import as well as provision of different services is also a bit tough in Brazilian market as its growing market and does not have an special or stable opportunity. Mind power of the people is also not that much as compared to United States of America hands entering a specific market requires extensive research and development for the same criteria.
Some basic Strategies for entering International markets are as follows
Direct exporting
By directly exporting into the international market a company can enter into a foreign market very easily. The only drawback of this type of the market that the company is not directly responsible to the customers but to the service provided he is relying on to the other country.
Direct exporting can be very beneficial for an organisation as it is totally based on exporting the manufacturing goods as well as raw materials from the factory itself which reduces the overall cost over different mediums. This specific type of international business entrance provides a very rigid support as it doesn't need any kind of profound the structure inside the target country.
Direct export also has a limitation of being less effective in the market as there is no direct marketing involvement is done. While exporting the goods from a country to a different country, overall cost of the export could be very effective for an organisation which could directly into loss.
Franchising
Why opening franchisees in different countries for your brands or service you can easily extend your business to different countries and enter the new market. But you have to be a well established brand in your own country for expanding franchisees into different countries as it requires a global identity. Without a broker Global identity one cannot do business in foreign countries.
Opening a franchise in 2 different country could be very beneficial for a company to establish its chain inside other country. While entering the international market franchise is one of the most popular ways of creating our business in different countries. This specific type of entrance is strategy has benefit of creating a brand identity using the company's Global brand image.
Franchising also creates problems towards a specific society by having toughness to maintain their structure. This specific deafness directly decreases the overall efficiency of the franchise system and reduce the overall effect of the supply chain in terms of the international markets.
Joint ventures
Joint ventures are the safest way to invest your money in different countries as well as International businesses. With the help of joint ventures one can easily invest their money with the purely experience company and can gain profit.
Joint ventures can provide use profit if they are done correctly. That can be very beneficial in terms of Huge investment as the risk is lower because an experienced company in the same country is already working with you.
Joint ventures can also be very dangerous for an organisation as they can expose the company to a bigger loss.
According to me franchising is one of the best ways to enter an international market for this company. By maintaining a company's Global brand image inside a specific country, organisation can gain benefit from it free exist society. This specific type of entrance strategy ensure that the company brand image reflects the positive way of the product or service into the society which directly leads the company to increase sales. Success rate of the franchise is also higher in entering the international market as most of the international firms who Enter the New Market provides a basic survey as well as research on the specific country.
Franchising would also provide financial support to the company as company does not has to invest extreme amount in creating infrastructure which is essential for other entry modes in different countries.
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