Question

What would you suggest the best entry mode would be for your company? (Assume they are currently not in country x at all but want to enter the country in the market described above). Please briefly describe.

What would you suggest the best international strategy be for your company? Please describe.

Answer 1

A joint venture is one of the most popular methods among business organizations when they seek to expand their business in other countries. These can be treated as a formal partnership between the different incorporated members such as business organizations, MNCs and so on. Joint Ventures are not formed between the individuals. The Equity positions will be enjoyed by thee each member of the joint venture.

The main advantages of a joint venture are illustrated as below:-

• Limited investment by the organizations
• Local marketing and production, procurement can be availed from the local partner.
• It is the best method to have a better understanding of the local / host market.
• It can be used to share the expenses and risks associated with market development in the host market.
• The knowledge of the local partner can be useful in making strategies.

The above-stated reasons elaborate on why US companies expanding the overseas operations favor Joint Ventures. In comparison to joint ventures, wholly-owned subsidiaries are not a good option due to the following limitation:-

The firm has to bear all the expenses for establishing the units

There is a risk of greater losses in case of failure

The companies may not have enough knowledge about the local market

The resources can be over-utilized and thus the future expansion could be difficult