Entry Modes Proposal for Majic Juice

Group: 27
 Background & Proposal

The Problem: Magic Juice was planning to enter international markets by launching new stores. The main problem here is what entry mode (s) they should choose considering all the
unfavorable situations in abroad.

The Solution: “Magic Juice” can follow the given modes to expand its business in foreign market;

Non-Equity Mode Equity Mode

Franchising Joint Venture
 Characteristics, Pros & Cons

Franchising
Characteristics Pros Cons
1. Main characters are franchisor 1. Franchising will be risk- 1. It will be difficult for MJ to
and franchisee. reducing and economical way find out right franchisee and
2. Market-oriented method where for MJ to enter into 3-5 top maintain a cooperation.
franchisor grants franchisee to attractive foreign markets 2. Due to lack of communication
use product and name in return instead of establishing new and cultural differences it will
of financial compensation. stores from the root. be hard for MJ to deliver
3. Two types of franchising such 2. MJ will be able to achieve instructions, business process,
as (a) product and trade name scale of economies in a new employee training, advertising
franchising, (b) business market without direct and so forth.
package franchising. investment.
 Characteristics, Pros & Cons
Characteristics
1. Partnership among minimum two
parties (individual or company) to
create a new business unit or
control the old one.
2. Control depends on the
percentage of ownership or the
number of shares the parties hold.
Joint Venture
Pros
1. It will speed up the foreign market
entry for Magic Juice (MJ) without a
large investment in a foreign market
like wholly owned.
2. Joint Venture will help MJ to
negotiate with host country
authorities.
3. MJ will have depth knowledge of
local distribution, marketing and
culture.
4. JV will minimize the risk of
international expansion of MJ by
distributing cost & investment among
partners.
5. Good option for MJ if it wants a
quick expansion with sustainable
control and better public image in a
new market.
Cons
1. It will be difficult for MJ to find
out right partner where a successful
joint venture will take place.
2 Lack of trust and reciprocity where
host-country partner can hide
important information which are
necessary to understand the new
market.
3. Risk of conflict, lack of control
over management and operation.
4. MJ can face with large loss
because of host partner or business
may fail if host partner doesn’t
complement properly
 Managerial Challenges & To-dos
Entry Mode Managerial Challenges
Franchising Franchising involves conflict which may
break the relationship among the
franchisor and franchisee in future. It is
also difficult for franchisor to maintain the
quality of product or service instead of
giving instructions, business model and
training to employees. All these barriers
finally terminate the contract.
To-dos
Majic Juice must find the right franchisee
to promote and introduce its product or
service in a new market. In addition,
strong communication, day-to-day
observation and good understandings are
very important from the beginning of the
contract between two parties.
 Managerial Challenges & To-dos
Entry Mode Managerial Challenges
Joint Venture Finding the right partner who will
complement in a new country or a new
market is really difficult. On the other
hand, different goals and
organizational culture, lack of trust and
commitment, high risk of debt of one
partner are the main barriers of joint
venture.
To-dos
MJ must pursue a strong analysis on the
host country’s company before going into
joint venture. Nothing is valuable than
information like the image of the host
company, annual profit and debt, cash
flow, main product or service line of the
host company, the previous joint venture
history, the capacity of the company (like
internal and external resources).
The best mode for the Magic Juice considering the situation of MJ and
the contextual factors in the markets to enter

(a) Internal Firm Factors:

Factors Franchising Joint Venture Best Mode for MJ

Considering the factor
1. Resource Capabilities Limited Unlimited Franchising

2. Transaction Cost Low. High Franchising

3. Willingness for Low High Franchising

Commitment

4. Desired level of Control Low High Joint Venture

(b) Host Country Factors
Factors Franchising Joint Venture Best Mode for MJ
Considering the
factor
1. Economic Risk Low economic risk High economic risk Franchising
compared to JV. compared to
Franchising.
2. Political/Regulatory Risk Low impact on franchising High and direct Franchising
business. impact on JV.
3. Trade Barriers Depends on country but High compared to Franchising.
generally low in case of franchising.
franchising.
4. Cultural Distance Low impact on franchising High impact on JV’s Franchising
operation. partnership.
(c) Home Country Factors

Factors Franchising Joint Venture Best Mode for MJ

Considering the factor
Home Country Policies Simple for franchising Complex because of direct Franchising.
business because of not investment from home
direct investment. country’s investors.
 Recommendation

** If Magic Juice wants to go for non-equity mode then franchising is the best option to consider than
other non-equity modes.

** On the other hand, if Magic Juice wants to go for equity mode then Joint-Venture is the best mode
compared the Wholly-Owned.

**Again, if we consider between the Franchising and Joint Venture, then Franchising is the best mode
for Magic Juice considering the overall factors.
Thank You