INSTRUCTIONS: Please RESPOND to this answer from the Point of view as a student. Use credible sources and respond as if you are a manager of a marketing agency. Tell this student what your marketing agency would think of each of these answers from a Management perspective in about 4-5 paragraphs:
Choosing one’s entry vehicles into international markets first requires firms to determine if they will risk capital. Then, firms must choose the form of the vehicle of choice, as each option offers different lefevle of ownership control, local presence, and risk (Carpenter & Sanders, 2008).
The types of vehicles are discussed below:
Exporting is the practice of selling products, production, or services in a foreign country. As exporting allows the firms to use an intermediary to perform the functions of the market, it is much more risk-free than many other vehicles, and is therefore popular with small firms.
However, it is not without costs. Costs associated with this vehicle include transportation, appealing to a target country, and meeting the packaging and ingredient requirements for that particular market. For this reason, it is common to export to countries or markets close, in terms of the CAGE framework, to one’s domestic market (Carpenter & Sanders, 2008).
Exporting practices include licensing and franchising, turnkey projects, R&D contracts and comarketing. These allow firms to transfer the risk of implementation to other firms (Carpenter & Sanders, 2008). McDonald’s is notorious for its successful franchising of its product and brand internationally. The famous fast food retailer describes itself, “McDonald’s has always been a franchising company and has relied on its Owner/Operators to play a major role in the System’s success. McDonald’s remains committed to franchising as a predominant way of doing business” (McDonalds, “Why McDonalds?” para. 2). The other varieties of exporting include turnkey projects, R&D contracts, and comarketing, which are specialized contracts allowing a foreign firm to enter the market (Carpenter & Sanders, 2008).
Alliances with local firms can allow companies to enter a market, especially those in which government regulation can pose a challenge. The example provided is China in the past, which required Chinese businesses to be involved in any new firm projects. Alliances are also particularly helpful when firms are unfamiliar with the local culture or industries or operational complexity encourages them to outsource (Carpenter and Sanders, 2008).
Foreign Direct Investment (FDI)
FDI is the most risky vehicle for entering foreign markets. It describes when firms make a financial investment in a foreign market to facilitate a new venture and enter that market, and therefore, requires a great deal of time and money. Types of FDI include acquisitions, equity alliances, and greenfield investments. The first two are popular, and provide a quick-moving way to begin ventures. In this entry mode, firms purchase successfully operating and staffed companies and businesses, minimizing the ground work needed. Greenfield investments are the most costly and less popular. In these investments, firms start a new venture from the ground up (Carpenter & Sanders, 2008).
At first, I struggled to apply these types of vehicles into global markets to the hospitality industry. We don’t have products or technology that are particularly rare or not present in global markets. However, as I considered this further, I understood how these concepts do apply. My umbrella firm, Two Roads Hospitality, is a management company, which owns/manages or just manages hotels worldwide. In this way, the management of other hotels allows entry into global markets with less risk and financial resources. As the company expands globally, owning more hotels outside of the US’s borders will become more sustainable with greater economies of scale, and even, knowledge. This process allows Two Roads the ability to learn, move strategically, and instill infrastructure to own and operate more hotels worldwide.
Carpenter, M. and Sanders, W. (2008) Strategic Management: A Dynamic Perspective. Upper Saddle River, NJ: Prentice Hall.
McDonalds (2016). Why McDonald’s? Retrieved on November 11, 2016 from