7. In this module, we have outlined the five most common modes of international

Question

7. In this module, we have outlined the five most common modes of international market entry: exporting, licensing and franchising, acquisition, partnering (or strategic alliance) and establishing a new subsidiary. Each entry mode has advantages and disadvantages, and by understanding these, organizations can avoid the high costs of establishing operations in a new international market. For this discussion activity, respond to the following prompts:

Research one organization that has expanded into an international market (crosses national borders) and outline how this organization entered this new market. Identify the specific mode of entry that the organization used.

What were the organizational advantages or disadvantages of using this mode?

Has this organization been successful?

Explanation / Answer

I am taking an example of Xiaomi. This is a Chinese mobile manufacturing company which was founded on 6th April 2010 and within few years of operation it has become world’s third largest mobile manufacturing company. The company has achieved this on a great strategy execution that I am going to talk about.

Earlier the company was selling its product in China only but soon it decided to go global hence it first went its neighbor country India and India is big economy for mobiles. The company needed huge amount to open stores in India men power to sell, other expanses to sustain in competitive market, But Company has decided to sell their product through ecommerce site. The flash sale was started at 2PM and early comers were getting phones and later comers were not. This strategy saved company from investing huge amount of money in the country and hence this reduced the cost of the products resulting the cost was cheaper and selling price was cheaper and company was offering great phone under very low price and company had sold million of pcs in second. The product was 30-40 % cheaper than the competitors. The company was producing millions of phone due to hype in the market hence due to economy of scale the product cost became cheaper. The product was exported to India to a vendor and it was sold online without any middlemen.

I have stated the advantages of this method now here were some disadvantages of the strategy.

Being a developing country there were some areas where internet connection was not fast as the metro cities so maximum phones were sold in metro cities.

There were some remote areas where company was unable to deliver the phone

Nearly 60-70% population of India was untouched with this strategy and if they use brick and mortar model then there will be selling price difference between these two methods hence company was obliged to sell phone through flash sale only.

Overall the company strategy was successful and soon it became the 3rd largest mobile selling company after Samsung and Apple.

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