Background

You have just begun a new job as President of Unlimited Combines(UC), a Canadian farm

equipment manufacturer whose flagship product utilizes newtechnology to increase the

productivity of grain harvesting. UC’s equipment allows farmersand commercial grain-growing

operations to harvest wheat, barley and similar cereal cropsfaster and with less waste than any

other equipment manufacturer.

You are surprised to find that while UC’s products sell verywell in the domestic market, they

appear to be a well-kept secret around the world. Recognizingthat the world market offers an

excellent growth opportunity, you hire Patricia Paget, a newbusiness school graduate, as your

export manager, and assign her the responsibility to create andimplement an international

business plan and begin developing new global businessopportunities for Unlimited Combines.

The International Business Plan

Patricia’s first task is to generate an international businessplan. She develops a table of contents

making sure to mention issues of the new era in global business,the global supply chain,

technology, culture and ethics. Also addressed are internationalmarket research, entry and

maintenance, trade finance, global logistics and distribution,and legal issues and compliance.

When her plan is complete, Patricia emails a form letter to morethan 130 Canadian trade offices

around the world in order to confirm which markets are the mostsuitable. Within two weeks, she

receives responses from more than sixty of the offices, withcontact information for a total of more

than four hundred potential business partners. However, she ispuzzled as to why some of the

companies appear to have no relationship with farm equipment.She receives no reply from the

other seventy or so offices.

In order to qualify the potential distribution channels, shesends an English form letter out to the

four hundred potential business partners, with a questionnairefor them to fill out. After three

weeks, she had received replies from only 12 of them. Patriciais becoming frustrated that she

has now spent over a month on trying to find potentialdistributors for the products, with few

results.

International Market Entry Strategies Module — Planning forInternational Market Entry

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One of the positive results Patricia has received is from aJapanese manufacturer of farm

equipment. She arranges for a business trip to Japan to meetwith them. Upon arrival, she

encounters several problems. The company is located severalhundred kilometers from the

nearest large city, and by sheer luck she finds anEnglish-speaking person to help her with a train

connection. When she arrives, she is given several attractivegifts, but has brought none with

her—just brochures. She quickly finds that nobody at the companyspeaks English, although the

written communications had been in English, and she only broughtEnglish language brochures.

The company eventually brings someone in to help withtranslations. However, this only highlights

a major problem: the company thought the UC combine would workon rice, which was incorrect.

Rice turns out to be the main crop grown in Japan, but fewcereal crops are grown because they

are easily imported at low cost. Only a small percentage ofJapan’s land is suitable for farming,

so farmers focus on higher-value produce.

Because Patricia has arranged for no other meetings during hertrip to Japan, she is determined

to make this one a success. They discuss many topics as shetries to forge a relationship with the

company, and it turns out that the Japanese company exports itsequipment around the world

and might consider a strategic alliance with UC, whereby itwould leverage its distribution network

to sell UC’s products.

One troublesome issue is financing. She is surprised to find theJapanese company prefers to

arrange for long-term payment terms through trade financing, butshe insists that they work on a

cash in advance basis. She knows from what she has heard thatinternational trade is risky, and

that payment in advance would eliminate the risk ofnon-payment.

Another issue is technical support. The Japanese suggest thatthey would like to have technical

training as part of a legal contract they would sign, if theydecide to work together. Patricia knows

that they might reverse engineer UC’s product, and does not wantto be constrained by a

contractual or legal obligation, so is not enthusiastic aboutthis.

Marketing support also presents a problem. The Japanese want totranslate her brochure into

other languages at their own expense, and ask if she would emailthe document to them so they

could do the translation. However, she says she cannot, forcopyright reasons, but that they can

use the brochure she is going to leave them if they don’t tellanyone.

Another feature of “marketing support”, it turns out, is that itis occasionally necessary for them to

pay bribes to government officials in some of their non-Japanesemarkets. They matter-of-factly

say this is just a cost of doing business in some countries, andask if UC will be able to contribute

to paying these “commissions”.

Finally, the Japanese want Cost, Insurance and Freight (CIF)pricing, but Patricia insists on Ex

Works (EXW) terms. This will also help her to minimize risk andkeep costs down, and let the

Japanese pay the cost of freight. She has enough to do, afterall, and does not want to get involved

with the complexities of global logistics.

As Patricia leaves the meeting, pleasantries are exchanged. Whenshe asks if they think there is

a chance to do business together, she receives a smile from thegeneral manager, who says, “We

will try.”

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When Patricia returns, you ask her how the trip went. Sheprovides the details outlined above,

and replies that although it went reasonably well, the Japanesewere fairly demanding and difficult

to do business with. During the next month, after repeated andincreasingly demanding attempts

to extract an agreement to purchase from the Japanese company,she finally receives a simple

reply saying, “We are sorry, but we prefer to do business withUnlimited Combines at some time

in the future.”

Learning Outcomes

This case study relates to the following learning outcomes fromthe module Planning for

International Market Entry in the course International MarketEntry Strategies:

• Explain the types of market entry strategies andconsiderations for both products and

services in terms of their application, advantages anddisadvantages.

• Select the most advantageous market entry strategy for aninternational venture based on

the results of feasibility research, risk analysis, andcompetitive analysis.

• Identify, research and analyze potential business partners todetermine compatibility for

an international venture.

• Develop a strong international business plan including keybusiness strategies with

identified metrics upon which the organization can monitorprogress, success and

weaknesses.

• Develop a strategic plan for market entry, based on theinternational business plan.

International Market Entry Strategies Module — Planning forInternational