Jabwood al Affiliation) Jabwood Introduction Considering the economic crises that Jabwood is facing, there is a need to choose the best out of all possible modes of entry into a foreign market. A mode of entry into an international market is the channel that an organization employs to get entry into a fresh oversees market. Some of possible means of entry that Jabwood can employ include export, licensing, joint venture, and foreign direct investment. After deciding on which nation to focus, Fayez together with other family members had an obligation to select the best mode of entry in order to ensure that the wood company regains the percentage of total sales that had dropped by 20%.
There was a need to consider situations in various countries where Jabwood had established their markets. This was necessary because a mode of entry to a foreign market should match the political, economic, as well as current state of infrastructure in the country of interest (Jabado, Obeid & Danhash, 2012). Modes of entry for Jabwood One of the possible modes of entry that Jabwood can employ is licensing.
This is an overseas form of operating in which a firm in a particular country agrees to allow a firm from another country to use its skills for example manufacturing, processing, a similar trade mark, knowledge in addition to other skills provided by the licensor. This mode of entry has less involvement and minimal expenses. The only expense that Jabwood can undergo to adopt this mode is signing the agreement and monitoring how it is implemented. Some advantages that this mode has include; it is a good way to embark on operations in another country and open chances to relationships of low risk manufacturing.
Licensing can help the company to gain more knowledge about a foreign market. Linkage of parent and a receiving partner interests implies that both will earn most through their marketing efforts. This mode has a minimal political risk because the license is fully owned locally. However, before selecting this mode, its shortcomings should as well be well thought-out. Possible profits from marketing plus manufacturing can be lost. This mode has a limited form of operations, which depends on the initial agreement, the product that the company deals with, process, and the trademark.
Licensees can become competitors for the market of similar products that the main company deals with (Jabado, Obeid & Danhash, 2012). The second mode of entry that Jabwood should opt for is exporting. This is the most traditional and commonly used mode of operation in foreign markets. This method involves marketing of good that have been produced in one country to another country.
Markets for that good can be in more than one country. Exporting has two approaches of selling goods to overseas markets, which include direct and indirect approaches. Direct exporting is where an organization commits itself to market in foreign markets on its own behalf. Indirect marketing involves making use of an agency in a particular country to market the company’s goods on its behalf. In this mode, the process of manufacturing is home based hence it less risky as compared to foreign based. Exporting gives an opportunity to take a study about the foreign market before implementing full investment.
Another advantage of exporting is that it reduces potential risks of operating on overseas markets (Jabado, Obeid & Danhash, 2012). Exporting is easy to establish in an overseas market. Some of its shortcomings consist of; the abroad agents can dictate what producers of the product should do. This denies product producers authority to decide on a number of issues that affect the market. Sometimes it is difficult to understand market needs of foreign customers because the manufacturer is not in direct contact with potential customers.
Jabwood can also employ joint ventures, which is an enterprise that two or more partners share ownership and rights of that company. There is joint strength of finance and the partners can share risks involved in the business equally. The partners lack full control of the business and they might have varied views about expected benefits from the business. Foreign direct investment involves acquisition of overseas assets for controlling its operations and benefits. This mode offers more control for foreign assets and ease of responding to issues like changes in the market.
There is a good understanding of the host market, which makes it possible for customers to get used to the goods. On the other hand, it is expensive in terms of money and involvement (Jabado, Obeid & Danhash, 2012). Sequence of expansion and resource allocation The best entry mode that Jabwood should adopt is licensing. Because of unrests in some of its potential markets in the world, this is the best mode because it can permit a certain firm that has already adapted to the market environment to carry out its activities.
This approach is also less expensive in terms of finance and involvement. Fayez should consider several steps in order to restore the business. He should ensure total control of financial flow because this is what was done to get the business to its earlier period success. It also assists the corporation to uphold a good financial position. They should ensure that their products are sold in large quantities to maximize profits.
References Jabado, R., Obeid, H., & Danhash, B. (2012). JABWOOD INTERNATIONAL: THE RISKY BUSINESS OF EXPANDING EAST. Richard Ivey School of Business, (2012-11-09), 1-11.