1. Discuss in brief the different modes of entering the global market.

Changes within the internal and external business environment have meant that
increasingly firms are growing their operations over national borders. External factors
such as the removal of trade boundaries, free exchange agreements between nations,
and a rising center lesson have made the thought of going worldwide more alluring to
organizations over the world. Internal components such as: expanding benefits,
expanding market share, and getting to be a worldwide brand are more drivers for
organizations to globalize. While there is a part of drivers of internationalization, and
subsequently potential preferences to internationalize.

Types of Global Market Entry Modes

An organization includes a number of diverse passage modes to select from when it
internationalizes its operations. All organizations will have distinctive reasons for
going worldwide, which can have an influence on which section mode is best suited
to them. An organization will have to decide their craved level of commitment,
adaptability, control, nearness, and chance when going worldwide, in arrange to select
the passage mode which best suits their circumstance. A number of foreign market
passage modes exist, counting: exporting, licensing, franchising, joint venture, and
wholly-owned subsidiary. The following section will analyze these foreign market
entry modes in more noteworthy detail.

1. Exporting
Export mode is the most common procedure to utilize when entering
international markets. Exporting is the shipment of items, made within the
domestic market or a third nation, over national borders to fulfill outside
orders. Shipments may go straightforwardly to the end-user, to a merchant, or
to a distributor. Exporting is basically utilized in the introductory section and
continuously advances towards foreign-based operations. Export passage
modes are diverse from contractual entry modes and investment entry modes
in a way that they are specifically related to manufacturing. Export can be
partitioned into direct and indirect export depending on the number and sort of
mediators.
a. Direct Exporting
Direct exporting implies that the firm has its own department of trade
which offers the items by means of a middle person within the foreign
economy namely direct agent and direct distributor. This way of
exporting gives more control over international operations than indirect
exporting. Subsequently, this alternative frequently increases the deal's
potential additional benefit. There's as well the next hazard included
and more monetary and human speculations are required.

Advantages of Direct Export:

● Access to the local market experience and contacts to potential

customers.
● Shorter distribution chain (compared to indirect exporting).
● More control over the marketing mix (especially with agents).
● Local selling support and services available.
 Disadvantages of Direct Export:

● Little control over market price because of tariffs and lack of

distribution control (especially with distributors).
● Some investment in sales organization required (contact from
home base with distributor or agents).
● Cultural difference, providing communications problems and
information filtering (transaction cost occur).
● Possible trade restrictions.

b. Indirect Exporting
Indirect exporting is when the exporting makes are utilizing
independent associations that are found within the foreign nation. The
deal in indirect exporting is like a residential sale, and the company
isn't truly included within the worldwide marketing since the outside
company itself takes the items overseas.
An indirect export is frequently the quickest way for a company to
induce its products into a foreign market since customer relationships
and marketing frameworks are already built up. Through indirect
export, it is the third party who will handle the full exchanges. This
approach for exporting is valuable for companies with limited
international development goals and in case the deals are essentially
seen as a way of arranging the remaining generation, or as minimal.

Advantages of Indirect Export:

● Limited resources and investment are required.

● A high degree of market diversification is possible as the
company utilizes the internationalization of an experienced
exporter.
● Minimal risk (market and political).
● NO export experience is required.

Disadvantages of Indirect Export:

● No control over marketing mix elements other than the product.
● An additional domestic member in the distribution chain may
add costs, leaving a smaller profit to producers.
● Lack of contact with the market (no market knowledge
acquired).
● Limited product experience (based on commercial selling).

2. Licensing & Franchising

Licensing is when a firm, called the licensor, leases the right to use its intellectual property—
technology, work methods, patents, copyrights, brand names, or trademarks—to another firm,
called the licensee, in return for a fee. The property licensed may include: Patents
Trademarks Copyrights Technology Technical know-how Specific business skills.
Licensing concerns product rights or the strategy of generation promoting the product rights.
These rights are more often than not secured by an obvious or a few other intellectual rights.
Licensing is when the exporter, the licensor, offers the right to make or offer its products or
services, on a certain market zone, to the foreign party (the licensee). Based on the
agreement, the exporter gets a one-time fee, royalty, or both. In other words in a licensing
agreement, the licensor offers respectability resources to the licensee. The latter is within the
foreign market and should pay royalty expenses or made a lump sum payment to the licensor
for resources like e.g. trademark, technology, licenses, and know-how. Licensing agreement’s
substance is ordinarily very complex, wide, and periodic.

Under franchising, an independent organization called the franchisee operates the business
under the name of another company called the franchisor. In such an arrangement the
franchisee pays a fee to the franchisor. Franchising is a form of licensing, which is most
frequently utilized as a market entry mode for services such as fast foods, trade-to-consumer
services, and business-to-business services. Franchising is to some degree like licensing
where the franchiser gives the franchisee right to utilize trademarks, know-how, and trade
title for royalty. Franchising does not as it were cover products (like licensing) but it usually
contains the whole business operation including products, suppliers, technological know-
how, and indeed the look of the business.

Advantages of Licensing and Franchising

● Low cost of entry into an international market
● Licensing or Franchising partner has knowledge about the local market
● Offers a passive source of income
● Reduces political risk as in most cases, the licensing or franchising partner is a local
business entity
● Allows expansion in multiple regions with minimal investment

Disadvantages of Licensing and Franchising

● In some cases, one might not be able to exercise complete control on its licensing and
franchising partners in the overseas market
● Licensees and franchisees can leverage the acquired knowledge and pose as future
competition for the business
● Business risks tarnishing its brand image and reputation in overseas and other markets
due to the incompetence of their licensing and franchising partners

3. Joint Ventures
A joint venture may be a legally binding course of action whereby a separate entity is made
to carry on exchange or business on its own, separate from the core business of the members.
A joint venture happens when modern organizations are made, together possessed by both
partners. At slightest one of these partners must be from another nation than the rest and the
area of the company must be outside of at least one party’s domestic nation.

Typically, a company forming a joint venture will often partner with one of its customers,
vendors, distributors, or even one of its competitors. These businesses agree to exchange
resources, share risks, and divide rewards from a joint enterprise, which is usually physically
located in one of the partners’ jurisdictions. The contributions of joint venture partners often
differ. The local joint venture partner will frequently supply physical space, channels of
distribution, sources of supply, and on-the-ground knowledge and information. The other
partner usually provides cash, key marketing personnel, certain operating personnel, and
intellectual property rights.

Advantages of Joint Venture

● Both partners can leverage their respective expertise to grow and expand within a
chosen market
● The political risks involved in joint-venture is lower due to the presence of the local
partner, having knowledge of the local market and its business environment
● Enables transfer of technology, intellectual properties, and assets, knowledge of the
overseas market, etc. between the partnering firms

Disadvantages of Joint Venture

● Joint ventures can face the possibility of cultural clashes within the organization due
to the difference in organization culture in both partnering firms
● In the event of a dispute, the dissolution of a joint venture is subject to a lengthy and
complicated legal process.

4. Strategic Acquisitions
Strategic acquisition implies that a company acquires a controlling interest in an existing
company in the overseas market. This acquired company can be directly or indirectly
involved in offering similar products or services in the overseas market. One can retain the
existing management of the newly acquired company to benefit from their expertise,
knowledge, and experience while having their own team members positioned on the board of
the company as well.

Advantages of Strategic Acquisitions

● Business does not need to start from scratch as can use the existing infrastructure,
manufacturing facilities, distribution channels, and an existing market share, and a
consumer base
● Businesses can benefit from the expertise, knowledge, and experience of the existing
management and key personnel by retaining them
● It is one of the fastest modes of entry into an international business on a large scale

Disadvantages of Strategic Acquisitions

● Just like Joint Ventures, in Acquisitions as well, there is a possibility of cultural
clashes within the organization due to the difference in organizational culture
● Apart from that there mostly are problems with seamless integration of systems and
processes. Technological process differences are one of the most common issues in
strategic acquisitions.
5. Foreign Direct Investment
Foreign Direct Investment involves a company entering an overseas market by making a
substantial investment in the country. Some of the modes of entry into international business
using the foreign direct investment strategy include mergers and acquisitions, joint ventures,
and greenfield investments. This strategy is viable when the demand or the size of the market,
or the growth potential of the market is substantially large to justify the investment.

Some of the reasons because of which companies opt for foreign direct investment strategy as
the mode of entry into international business can include:

● Restriction or import limits on certain goods and products.

● Manufacturing locally can avoid import duties.
● Companies can take advantage of low-cost labor, cheaper material.

Advantages of Foreign Direct Investment

● You can retain your control over the operations and other aspects of your business
● Leverage low-cost labor, cheaper material, etc. to reduce manufacturing costs towards
obtaining a competitive advantage over competitors
● Many foreign companies can avail of subsidies, tax breaks, and other concessions
from the local governments for making an investment in their country

Disadvantages of Foreign Direct Investment

● The business is exposed to high levels of political risk, especially in case the
government decides to adopt protectionist policies to protect and support local
business against foreign companies
● This strategy involves substantial investment to be made for entering an international
market

2. Why have Starbucks failed in Australia but succeeded in China? Critically analyze.

Failure in Australia
After the fruitful extension in China, Starbucks begin with stores in Australia in July of 2000.
With certainty in their choice to grow to assist, which decreased in 2008 with the closure of
the larger part of their stores. Starbucks’s development into Australia clearly did not succeed
like their other developments to other created nations had. This could be explained due to
three reasons: advanced local coffee culture, the pace of expansion, and lack of effort to adapt
(like they did in China).

a. Advanced Local Coffee Culture

The lack of awareness about the challenges brought a strong and large coffee drinking
culture in Australians was one of the reasons for failure. Before Starbucks was even
introduced into the United States, Australians were already “enjoying espresso lattes
in coffee shops set up by Greeks and Italian immigrants”. Consumers with a pre-
existing market such as this one need to become acclimated to a new company. The
charm of the local coffee shops was one aspect that Starbucks did not contain and
needed time to develop. Therefore, when Starbucks came in with their American style
coffee culture, where coffee is essentially a product or a commodity. Starbucks had a
basic menu and offered more sugary drinks which most Australians didn't like. Plus,
Starbucks charged more than the local cafes. So, Australians instead opted to pay less
for coffee they liked from a local barista they trusted.
 b. Pace of Expansion
When Starbucks entered Australia, it expanded at an extremely fast pace and by 2008
it had opened 90 stores. However, such speed “grew faster than its popularity” as it
ultimately resulted in a loss in the first seven years.

They tried to grow the empire too fast by rapidly opening up multiple locations
instead of slowly integrating them into the Australian market. This didn't give the
Australian consumer an opportunity to really develop an appetite for the Starbucks
brand. So for the Australian consumer, Starbucks became something that is too easily
available for them and thus there wasn't this point of difference or a feeling of want.

c. Lack of effort to Adapt

One of the problems with Starbucks is that they thought that their business model
could just roll out to a different environment and that there was no need for them to
adjust. In contrast, McDonald's entered India with a menu tailored to Indian
consumers.
Australian population preferred having other certain types of food within such coffee
shops such as sandwiches and other small bites. While Starbucks resisted the idea of
serving hot food from day one, rather encouraged innovation, it never envisioned
people coming into Starbucks for a sandwich. The lack of attention and willingness to
explore the established coffee culture in Australia resulted in the poor performance,
and eventual closure of the majority of their locations.

Success In China
Starbucks had meticulously organized its efforts in China around three key pillars of Chinese
society: family, community, and status. Unlike in Australia, Starbucks understood Chinese
culture and adjusted its strategy right away.
a. Family
Starbucks fully understood family is the key source of security, education, and spirit
for the Chinese people and made engaging parents a cornerstone of its people
operations. Starbucks hosted an annual “Partner Family Forum,” where its employees
(whom the company calls “partners”) and their parents can learn together about the
company and its future in China. “Partners” talk about their professional experiences
in the company and Starbucks leadership. In most cases, there were whole families.
There were parents, grandparents, aunts, and uncles. Much more importantly, it says
to Chinese “partners” that it respects their parents in a way that truly touches the
Chinese heart.

b. Community
Chinese highly value their community, traditionally labeled as their “inside circles.”
Be it their homes, schools, or companies, they turn to these circles for loyalty,
information, and approval of their choices.
With this in mind, Starbucks designed its retail spaces to facilitate these “circles”
coming together. Unlike in the United States, where Starbucks chairs are often the
quiet haunts of solitary laptop users, China’s Starbucks is laid out to welcome crowds,
noise, and lounging.
Consequently, Starbucks customers not only enjoy the coffee (in all its Chinese
variations), they feel fulfilled going to a Starbucks with their friends or families.
 c. Status
The Chinese place a premium on gaining and upholding reputation and status,
especially for their family and community. Consequently, they want to be associated
with brands and products that portray prosperity, success, and upward mobility.

Starbucks has positioned itself as the premium coffee brand in China. It charges 20%
higher prices in China compared to other parts of the world. It chooses very high-end
locations for its outlets including luxury malls and iconic office towers. And since
foreign brands, particularly in food and beverage, are viewed as premium, Starbucks
often labels its products with the country from which its products are imported.

3. Does culture influence international marketing communication? Explain with some

case study examples.
Culture refers to the influence of religious, family, educational, and social systems on people,
how they live their lives, and the choices they make. Marketing always exists in an
environment shaped by culture. Organizations that intend to market products in different
countries must be sensitive to the cultural factors at work in their target markets. Even
cultural differences between different countries or between different regions in the same
country–seem small, marketers who ignore them risk failure in implementing their programs.

In a business context, culture relates to what behavior is common and accepted professionally
in one location, compared to another. What may be acceptable business practices in one
country, may be very different from the approach that is used by businesses overseas.
Therefore, recognizing how culture can affect international business is something that should
be understood in order to avoid misunderstandings between colleagues and clients, and also
to make sure that businesses are presenting themselves to their new market in the best way
they can.

Communication plays an important role in international business, and sometimes effective

communication can be the difference between succeeding or failing in a new market.
Effective communication is particularly important for international businesses as there is a
risk of your messages getting ‘lost in translation’. There are several things that need to be
considered when looking at how effective your business’ communication is at an
international level.

The first thing that should be considered when looking into communication is any language
barriers that may hinder the communication between you and your new market. However,
this goes deeper than just the language that is used to communicate, it’s how the messages are
conveyed that’s important. Language barriers not only relate to people speaking different
languages, but also to the tone used in those languages. For example, in countries like the US
or Germany, it is common for people to speak loudly and be more assertive when sharing
ideas amongst colleagues. However, in countries like Japan people typically speak more
softly and have a more passive tone when making suggestions to colleagues.

Another thing to consider is the basic customs, mannerisms, and gestures that are commonly
accepted in that culture. Behavior that might be commonplace in one culture could be
unusual or potentially offensive to a client or colleague overseas. Professor Jean
Vanhoegaerden gives the example of a business handshake being the norm in European and
US cultures, but in some Middle Eastern cultures, handshakes are seen differently. For
example in some cultures, handshakes must involve the right hand only as the left hand is
seen to be less hygienic.

Businesses that are looking to operate internationally need to be aware of language barriers,
tone, and body language. Cross-cultural communication can be a challenge, but approaching
cultural differences with sensitivity, openness, and curiosity can help businesses succeed
internationally.

In line with the above case, Starbuck’s coffee culture was unable to impress Australians.
Despite being a global success, people refused to buy coffee from Starbucks, and those who
tried Starbucks were not impressed. Consumers felt it didn't measure up to the several local
products that were mostly superior. Lack of Starbucks awareness for researching passionate
coffee preferences and culture of Australians can blame for such consequences.

Before Starbucks was even introduced into the United States, Australians were already
“enjoying espresso lattes in coffee shops set up by Greeks and Italian immigrants”.
Consumers with a pre-existing market such as this one need to become acclimated to a new
company. When Starbucks came in with their American-style coffee culture, where coffee is
essentially a product or a commodity. Starbucks had a basic menu and offered more sugary
drinks which most Australians didn't like. Plus, Starbucks charged more than the local cafes.
So, Australians instead opted to pay less for coffee they liked from a local barista they
trusted.

Not all of the obstacles faced by businesses looking to grow overseas areas are visible.
Cultural issues are all too frequently overlooked or brushed aside as an afterthought while
negotiating a way through new and unfamiliar marketplaces. Managing the cultural
consequences of foreign growth is, in fact, a non-negotiable component of its success.
Companies that master cross-cultural communication are in the best position to leverage
shared knowledge and experience to improve their competitiveness at home and abroad.
Starbucks' entrance into Australia demonstrates an even worse lack of knowledge of local
culture. Starbucks attacked the Australian coffee industry with enormous ambition when it
first entered the market in 2000. They opened stores not just in big cities like Sydney and
Melbourne, but also in less populated villages along Australia's coast. By 2008, they have
opened 90 locations. Internally, all of the stores were structured and managed similarly to
those in the United States and they didn’t adopt the Australian culture.
Hence, the coffee culture did not suit the Australians. Though Starbucks was a global
success, people refused to buy coffee from multinational corporations. So, if Starbucks
should have adopted the following cultural measures, they would likely gain success in
Australia.
• Australian Coffee culture
• Taste and Preference
• Outlet designs and structure suiting Australian Culture
• Values and Ethics
• Price
• Advertisement tools
4. What are the challenges and opportunities to be considered when planning an
international business venture? Explain

CHALLENGES
Businesses typically produce goods overseas due to lower labor costs or taxes, and they sell
products and services in the global market because of the high potential for gaining a larger
audience, new customers, and increased revenue. Although international business is
extremely exciting, it can also be risky. Entering the new market presents many challenges to
be taken into consideration. Because every country has its own government, policies, laws,
cultures, languages, currency, time zones, and inflation rate, navigating the global business
landscape can be difficult. Here are five challenges to consider.

a. Language Barriers
When engaging in international business, it’s important to consider the languages
spoken in the countries to which one is looking to expand.
Does the product messaging translate well into another language? One example of a
product “lost in translation” comes from the luxury car brand Mercedes-Benz. When
entering the Chinese market, the company chose a Mandarin Chinese name that
sounded similar to “Benz”: Bēnsǐ. The name translates to “rush to death” in Mandarin
Chinese, which wasn’t the impression Mercedes-Benz wanted to make with its new
audience. The company quickly adapted, changing its Chinese name to Bēnchí, which
translates to “run quickly, speed, or gallop.”
It’s also critical to consider the languages spoken by your company’s team members
based in international offices. Once again, investing in interpreters can help ensure
your business continues to operate smoothly.

b. Cultural Differences
Just as each country has its own makeup of languages, each also has its own specific
culture or blend of cultures. Culture consists of the holidays, arts, traditions, foods,
and social norms followed by a specific group of people. It’s important and enriching
to learn about the cultures of countries where one will be doing business.
When managing teams in offices abroad, selling products to an international retailer
or potential client, or running an overseas production facility, demonstrating that
you’ve taken the time to understand their cultures can project the respect and
emotional intelligence necessary to conduct business successfully.

One example of a cultural difference between the United States and Spain is the hours
of a typical workday. In the United States, working hours are 9 a.m. to 5 p.m., often
extending earlier or later. In Spain, however, working hours are typically 9 a.m. to
1:30 p.m. and 4:30 to 8 p.m. The break in the middle of the workday allows for a
siesta, which is a rest taken after lunch in many Mediterranean and European
countries.
c. Managing Global Teams
Another challenge of international business is managing employees who live all over
the world. When trying to function as a team, it can be difficult to account for
language barriers, cultural differences, time zones, and varying levels of technology
access and reliance.

To build and maintain a strong working relationship with a global team, facilitate
regular check-ins, preferably using a video conferencing platform so one can interact
 in real-time. When distance divides teams, as it has for many during the coronavirus
(COVID-19) pandemic, communication is key to ensuring everyone feels valued and
engaged.

d. Currency Exchange and Inflation Rates

The value of a dollar in one country won’t always equal the same amount in other
countries’ currency, nor will the value of currency consistently be worth the same
amount of goods and services.

Familiarize with currency exchange rates between one country and those where plan
to do business. The exchange rate is the relative value between two nation’s
currencies. For instance, the current exchange rate from the Canadian dollar to the US
dollar is 0.77, meaning one Canadian dollar is equal to 77 cents in US currency. Make
it a point to watch exchange rates closely, as they can fluctuate.

It’s also important to monitor inflation rates, which are the rates that general price
levels in an economy increase year over year, expressed as a percentage. Inflation
rates vary across countries and can impact materials and labor costs, as well as
product pricing.

e. Nuances of Foreign Politics, Policy, and Relations

Business doesn’t exist in a vacuum it’s influenced by politics, policies, laws, and
relationships between countries. Because those relationships can be extremely
nuanced, it’s important that one closely follow news related to countries where one
does business. The decisions made by political leaders can impact taxes, labor laws,
raw material costs, transportation infrastructure, educational systems, and more.

One example in Global Business is that if the Chinese government decided to

subsidize Chinese dairy farms, it would impact dairy farmers in all surrounding
countries. This is because, with extra funding, Chinese dairy farms may produce a
surplus of dairy products, causing them to expand their markets to neighboring
countries.
It’s both exciting and intimidating that the nuances of international politics, policies,
and relations can impact your business. Stay informed and make strategic decisions as
new information arises.

OPPORTUNITY
Any strategic decision must be taken based on a long process of information analysis for its
strategic management. Business Environment is made by different components in interaction
such as customers, supply and demand, management, clients, suppliers, owners,
government, technology, social trends, market trends, economic changes, etc. As a business
international venture engages the company in long term, many aspects must be taken into
consideration before engaging in such a process. Thus, a company must make a serious
analysis regarding its strengths, weaknesses, opportunities, and treats. The two first analyses
(strengths, weaknesses) are constituted by the company internal environment, while the two
second other elements (opportunities and threats) are constituted by the company external
environment

A strategy that acts as the basis for firms to sell their products and services beyond the
domestic market is called an international strategy. The organizations try to follow this
international strategy because they can acquire potential market opportunities. Operating
business in both domestic and international markets maximizes revenues and it provides a
scope for international diversification to extend the product life cycle. The industries such as
clothing, electronics, watchmaking, minerals, and energy have extended their operations to
foreign countries with the intention of reducing costs. In the case of few industries, huge
investment is required to minimize the cost when compared to fulfilling the demand for the
domestic market.

a. Increased market size

The size of an international market has a significant influence on firms as they can
invest in research and development to gain a competitive advantage. Organizations
usually prefer to invest in those countries which have scientific knowledge so that the
firms can make optimum utilization of research and development activities to gain a
competitive advantage. Firms belonging to domestic markets having low growth
opportunities always prefer international strategy to expand their operations and to
earn profits across the world.

b. Economies of scale
Expanding a firm’s operations reduces the total cost of the product and integration of
critical resource functions results in optimal economies of scale. Organizations can
gain core competencies with the help of resources and knowledge sharing with other
countries through international markets. Knowledge sharing helps in expand its
operations and to produce efficient products and services at cost-effectiveness.

c. Return on investment
Huge markets are crucial in acquiring returns especially for capital-intensive
investments like plant and capital equipment or research and development. The new
technological changes and new products sometimes cannot fulfill the customer’s need
so the firm’s role is to maintain investments in such a way to attract prospective
customers. Organizations always strive to develop new technology and products but
at the same time, they should adopt strategies to protect their intellectual property
rights from their competitors. The international expansion provides the scope for
larger markets and enables the firms to enhance their operations efficiently in terms of
capital investments and large-scale research and development expenditures.