ADVANDED BIOMEDICAL DEVICES: ASSESSING READINESS TO EXPORT

Do you believe ABD’S products are in a state of readiness to begin exporting to

Europe? Why or why not? Are the products ready for exporting to emerging markets
(e.g. China, Mexico, Russia)? Why or why not? What factors suggest Speedheal
products might enjoy demand in all types of foreign markets?

 Advanced Biomedical Devices able to begin exporting to Europe because

their products have performed well in the target markets which similar
market characteristics and requirements to its home market, the United
States.
 The products are also ready for exporting to emerging markets such as
China, Mexico, and Russia (Based on world Economic Outlook Databases,
International Monetary Fund at www.imf.org.) among others due to the
increase in living standards and a larger middle class, which will increase the
aggregate expenditure.
 Exporting Speedheal product will develop demand due to the product
already performing very well in the US market.
 The product is unique and focuses on healthcare which is a universal concern
for nations and it’s in their best interest to have the fastest recovery for
patients and since the product addresses universal health needs through the
promotion of healing and the reduction of postsurgical pain by keeping the
wound area from swelling which ultimately leads to less time in hospitals or
out of work.
 The Speedheal device is small in size, this means export costs for ABD aren’t
going to be high.
 Managers have taken steps in making sure that suitable storage will be
available internationally to keep the device in, as they are sensitive to
changes in temperature.
 ABD employs an experienced management team whose members have
worked extensively in the EU market, the Pacific Rim and Latin America. The
international orientation and diversity of the team as well as the US success
demonstrates that the company has the skills, knowledge and capabilities,
which will lead the company forward and successfully into
internationalisation.

Does management at ABD possess the appropriate knowledge, skills and

capabilities for internationalizing?

 ABD has a skilful management team whose members have worked

extensively in the European market, the Pacific RIM and Latin America. The
international orientation and diversity of the team and their apparent
success in the United States demonstrates robust knowledge, skills and
capabilities appropriate for internationalisation.
 The steps that managers should take to prepare the firm, managers and
employees to internationalize, involves six formal steps in the global market
 opportunity assessments:
 Analyze the organizational readiness to internationalize. 2. Assess the
suitability of the firm’s products and services for foreign markets. 3. Screen
countries to identify attractive target markets 4. Assess the industry market
potential, or the market demand for the products or services in selected
target markets 5. Choose qualified business partners, such as distributors or
suppliers. 6. Estimate company sales potential for each target market

How well did ABD complete the key tasks in global market opportunity
assessment?

In analysing ABD’s preparedness to engage in international business activity,

Dr. Bentley and his management team formulated pertinent questions to
clarify ABD’s international goals and outlined key elements of its strategic
direction in an effort to establish a comprehensive strategic plan that would
lay the foundation for international success.

 The high performance of the Speedheal products in the

multicultural market of the United States provided the
management with huge confidence that the products would do
well internationally. However, ABD’s management was not
complacent as they examined portability, cost and ease of
exporting the product and the possibility of after-sales service
when compared to other competitors’ offering. Pricing was
looked at through the visits to trade shows in Europe and it was
determined that the prices were not too high. However, more
research will be needed to structure their pricing approach
internationally. Further, in assessing the suitability of ABD’s
products for the foreign markets, the management team was
able to identify that extensive training of its sales representatives
would be needed to meet the requirements of channel
intermediaries such as nurses, doctors and other professionals
who are intimately involved in the decision making of purchasing
hospital supplies in foreign markets. They also looked at logistics,
storage, packaging, movement of inventory internationally and
the flexibility and adaptability to meet worldwide standards such
as the CE mark and ISO standards.
 The team identified Australia, Canada, Western Europe and
Japan as attractive target markets because of their large
proportion of affluent consumers with the ability to pay for
sophisticated medical care. However, having gathered basic
information on the markets and competition in those countries
they needed to do much more research looking at other factors
such as market intensity, receptivity to imports, infrastructure
and country risks.
 The management team established in their strategic intent the
need to develop international marketing plans for each target
 market. They therefore recognized that extensive work and in-
depth analyses will be needed in order to achieve the objectives
of assessing the industry market potential and the market
demand for the products or services in selected target market.
ABD’s management team outlined the objective of building
distributor relationships in a number of countries. But, in
choosing qualified business partners, such as distributors or
suppliers, the criteria was not established to clarify and
determine the ideal partners to suit appropriate market entry
strategy.

What countries would you recommend targeting first for ABD?

 We recommend that ABD’s management team targets the countries that

provide similar market characteristics and requirements to that of the United
States as their first priorities in identifying foreign markets with attractive
investment potential. Of particular focus are the commonality of language to
facilitate ease of communication and reduction in cultural risks. Further, all
these countries enjoy business climates which are rated A1 in respect of
availability of corporate financial information, efficient debt collection,
intercompany transaction and institutional quality. Consequently, we concur
that countries namely Australia, Canada and England should be the initial
markets for export. These countries provide attractive markets for ABD’s
products for a number of reasons; chief among which is their high per capita
income.
 Australia provides a very good political and economic environment which
accounts for a solid banking system and a moderate national debt. The per
capita income is $38,159.60, unemployment rate sits at 5% and a remarkably
low inflation rate of 3.4%. The mineral resources and large-scale investment
plans are strong features of Australia growth potential. Entry in to this
market would be fuelled by its dynamic demography and proximity to Asia.
This augurs well with ABD’s strategic intent to facilitate further expansion
globally within the next five years.
 Canada will be among the initial target markets mainly because of their
abundant and diversified energy resources. They also enjoy stable economic
governance primarily through their stringent public financial management
and evident in their low corruption perception index of 10/183. The
investment environment is superb on the basis of its 13/183 Ease-of-Doing-
Business Ranking; and is moreover sustainable due to the country’s strict
oversight. The apparent weakness of strong dependence on the United
States, is a plus for ABD, as there lies the dominant home market.
 England’s attractiveness is based on its flexible monetary policies and
economic models in favour of industry and commerce. They have a 7/183
Ease-of-doing-Business ranking and boost a $654 billion import industry.
Having GDP per capita of $35,686.2, the inflation rate stands at a modest
4.5%
What approaches could ABD employ to estimate the firms sales potential for
markets in Europe and other affluent economies?

 The company’s sales potential is the share of the annual industry sales the
firm can realistically garner in the targeted countries (Cavusgil, Knight and
Riesenberger, 2012). In assessing the company’s sales potential,
management will require highly refined and structured market information.
 The approaches ABD could employ in estimating its sales potential for
markets in Europe and other affluent countries by:
 Conducting detailed surveys of market to include doctors, nurses, health
practitioners, distributors, and sales representatives. This will be done in
order to ascertain the quantitative grasp of the product and the potential of
growth.
 Doing trade audits. These audits must be done in order to garner necessary
information regarding other modes of distribution to compliment what
exists.
 Gathering estimates from local partners. This gives a comfortable feel of
what the possible customer usage.
 Competitor intelligence gathering. This becomes necessary to generate
information on key competitors in the market and assess the level of sales
ABD can take away from them.
 Test Marketing. It is necessary to limit operating efforts in the foreign market
in order to ascertain long - term sales potential and other aspects of market
intelligence.

BARETT FARM FOODS: A SMALL FIRMS INTERNATIONAL LAUNCH

Do you see any problems with Philip Austin’s plan for European expansion? Do
you support his entrepreneurial approach to exporting? What should be the
features of a more systematic approach to exporting?

 Philip Austin could have two of the of the following issues in the EU
market:
 BFF had little experience in export
 BFF has to solve many export sector problems
 Europe also has many differences in tastes, regulations and market
structures.
 While Austrailians love vegemite (a brown, salty breakdast spread made
from yeast) the product has little popularity outside Australia

Why did Barrett choose exporting as its entry strategy for Europe, as opposed to
foreign direct investment or licensing? What advantages does exporting provide
to Barrett? What are the potential drawbacks of exporting for Barrett?

 Physical characteristics should be considered when developing an export-

 strategy.
 BFF sells nuts, cereal bars, garlic, ginger, dried fruits, and honey which
have a long lasting sell by date
 They don’t weigh a lot so transport costs will be low
 The export-strategy of BFF for entry into foreign markets may have
several problems:
 They have a poor opportunity for experiencing local markets
 An export strategy is sensitive on the such as tariffs or
exchange rates

What challenges can Barrett expect in its export drive? What types of new
capabilities does the firm need to acquire to manage its export transaction?

 BFF has to consider packing, insurance, tariffs, taxes, storage and decide
what profit margin they are looking for
 BFF needs to understand the foreign market
 Comprehensive market data and insightful market analysis can help BFF
make informed, intelligent decisions
 BFF may have to hire a market research firm or Austrade to analyse the
EU markets

How should Barrett choose between direct and indirect exporting? What are the
ideal characteristics of EU intermediaries for Barrett? Where can Barrett turn for
financing its export sales?

 Indirect exporting could be better

 BFF has little experience in exporting products
 They have to learn how to sell goods overseas successfully
 In the long run, BFF should show its exporting competence such as
exporting department

There are already numerous companies selling processed foods in Europe. What
can Barrett do to compete successfully against these firms?

 BFF should modify its own products to accommodate the EU markets

 BFF has focused on the Austrailian market meaning there is no guarantee
that they could be successful in the EU
 They have to plan new marketing strategies for the EU markets
 They should try build a long term relationship with the consumer

Why does Austrade want Australian firms to focus on exporting processed foods?
Why is exporting high-value added products good for Austrailia?

 Exporting processed foods can create jobs due to higher sales in Austrailia
 Much of the current exports are raw foods and not processed
 Austrade believe meat, cereal, sugar, dairy commodities, and marine
 products have most potential for food processing.

SUBWAY AND THE CHALLENGES OF FRANCHISING IN CHINA

Subway brings to china various intellectual property in the form of trademark

patents and an entire business system. What are the threats to subway intellectual
property in china? What can they do to protect their IP’s?

 Subway brings to China various intellectual property in the form of

trademarks, patents and entire business system. Specific threats to Subway’s
intellectual property in China?

 Trade mark being copied. That is its logo.

 The ambiguous legal environment in China concerning contracts
 and intellectual property rights.
 The lack of enforcement of IPR laws, which is uneven and
 sometimes obstruct by local interest.
 Lack of training and know how in courts regarding contract laws IPR laws.
 This can also extend to its menu and specific ingredients used which is
custom specific to Subway's
 What is Intellectual Property Right?
 Intellectual property rights refers to products of the mind, ideas (e.g. books,
software designs). Through the adaptation of Patents, Copyrights, Trade
Marks, intellectual copy rights can be protected.
 The case in China
 Intellectual property right is of great concern for much business venturing in
China. Many legal battles has arise between International companies and the
local Chinese companies.
Measures Subway can take to protect its
 IPR in China
 Acquire patent rights in China for their logo’s/TradeMark,
 Menu/recipes and technological know-how.
 Subway must have its legal officers well versed in the terms of
 Reciprocity of International treaties.
 There is hope for the upgrading of the IPR legal framework as in 2001 when
China joined the WTO.
 To date: there are special IPR courts in most provinces and major cities.

What do you think about Subway's method and level of compensating its master
franchisee and regular franchisees in China? Is the method satisfactory? Is there
room for improvement?

 Franchise fee is equivalent to 2 years salary for average Chinese.

 No formal banking system: loans for entrepreneurs were not readily available
hence the risk to start up franchise was bare holistically by the franchisee.
 Recommendations
 Method and level of compensating its master franchisee and regular
franchisees in China?
 Subway uses a master franchiser in Beijing called Jim Bryant. He recruits
highly committed franchisees and closely monitors them to maintain quality.
 He is allowed to recruit local entrepreneurs, train them to make them
franchisees.
 Bryant also acts as a liaison between local entrepreneurs and subway
headquarters.
 Current Franchising Climate in China
 As the world’s largest country and fastest growing economy China provides
an enormous opportunity for foreign franchisors. The key factor is to be
prepared and have the resources to survive in this rapidly growing and highly
competitive market.
 The concepts and products with the most interest in China include
 fast food and restaurants,
 auto-after market
 fashion and clothing
 children’s products and services.
 American brands in particular are very popular.
 The China strategy, which KFC, McDonalds and other franchisors employed,
was to open and operate corporate locations before franchising.
 A foreign franchisor must have operated two pilot locations for a minimum of
one year before offering franchises in China.
 The foreign franchisor must be registered with the Chinese government.
 Is the method satisfactory? Is there room for improvement?
 Its master franchisor “Bryant” gets half of subways initial franchise fee of US
$ 10 000.
 Regular franchisees in china receive 8% royalty fees. The master franchisor
receives 1/3 of these royalty fees.
 Close monitoring and training local entrepreneurs improves the chances of
subway to maintain its existing stores and increase its market share in china.

Current case
Recommendations

 Example
 Bryant had to print signs to explain to Chinese consumers how to order a
sandwich.
 Subways method and level of compensation seems appropriate especially in
a country like China where there are major cultural problems.
 Instead of teaching Chinese it could adapt its product to suit the taste and
preferences of Chinese customers (Special ingredients).
What are the advantages and disadvantages of franchising in China from Jim Bryant's
perspective? What can Bryant do to overcome the disadvantages? From Subway's
perspective, is franchising the best entry strategy for China?

Advantage
 Win-Win Proposition
 Combined know-how of franchisors with knowledge of franchisees in China.
Chinese entrepreneurs are eager to launch their own business.
 Minimal entry cost
 Local entrepreneurs bear the cost of launching the restaurant, hence
minimising cost to franchisors entering the market.
 Rapid expansion
 Franchisors can rapidly establish many outlets throughout any new market by
leveraging resources of local entrepreneurs.
 Brand consistency
 Brand consistency is easier to maintain if the franchisor sets strict
regulations, procedures and policies.
 Circumvention of legal constraints
 Franchising allows focal firms to avoid trade barriers associated with
exporting and FDI

Disadvantages of franchising in China

 Knowledge gap
 Few Chinese have proper knowledge about how to start and operate a
business. Filling the gap is a process that consumes energy, time and money.
 Ambiguous legal environment
 Issues such as local imitators can quickly damage the trademark of the focal
firm, making customers confused if several similar brands are present.
 Escalating start-up costs
 Delayed profitability from costs to overcome challenges such as lingual and
cultural barriers
 Shortage of restaurant equipment in China forces franchisors to lease
equipment to franchisees until it becomes available or until they are able to
afford it.

What can Bryant do to overcome the disadvantages?

 Creating and enforcing a strong internal code and lobby to government to
ensure that proper counter measures are in place to address loopholes and
ambiguity in legal system.
 Develop measures to bridge lingual and cultural barriers/gaps
 Leasing inaccessible equipment to franchisees to make start-up cost more
manageable

Is franchising the best entry strategy for china

 Appropriate contract terms and ethical employees
 Fast food Franchising Climate in China
  The market for fast food is estimated at $15 billion per year.
 The target market for casual dining, China’s urban population, has expanded
at a 5% average annual growth rate over the past several years.
 Changing lifestyles have led to an increase in meals the Chinese eat outside
the home.
 Surveys reveal that Chinese consumers are interested in sampling non-
Chinese food.

Subway faces various cultural challenges in China. What are these challenges? What
can Subway and its master franchisee do to overcome them?

Challenges

 Customers stood outside and watched for a few days

 Signs were done to show customers how to order
 Some didn’t like the concept of touching their food, so they would gradually
peel off the paper wrapping and eat it like a banana.

What can Subway and its master franchisee do to overcome them?

 Study and adopt to the Chinese culture

 Careful selection of products to develop and sell
 Careful partner selection with reputable and ethical candidates
 Tailoring products to embrace customers’ cultural norms
 Establish a presence in highly commercialised areas to gain quick traction in
the market place

JAGUAR LAND ROVER

Describe how Jaguar Land Rover leverages the advantages of its parent company in
seeking new markets. Can this be a source of disadvantages as well?

 Advantages – greater potential within the market, giving JLR a competitive

advantage. TATA ALREADY HAS MOTOR COMPANIES IN OPERATION THI
SMAY ALLOW TWO DIFERENT COMPANIES.
 24% of predominant sales come from china
 Disadvantages- TATA is known for manufacturing cheap, affordable products.
JLR is known for being a luxury brand.
 JLR’s cheapest car starts from 320,000. Asia markets average income for a
family is roughly £5358.

How do you think shift of economic activity to emerging regions affects growth in
advanced economies?
  It will affect the employment rate of advanced economy.
 For e.g. if JLR’s manufacturing plant, assembly line, production units that are
currently in UK creating 1000’s of job locally was to be shifted in a new
market (India, China) could potentially be creating big employment rate in UK
 Affects the core value of brand
 Whereas it could mean growth in profit margin for a company where
emerging market possess reserves of raw materials low wage and high cost
labor, growing economy.

What is the role of government business linkage in creating emerging market

challenges?

 In many emerging markets, government plays a vital role in purchasing

products, services and right package in areas like railways, banking oils,
chemicals, steels etc.
 Emerging market government often announce TENDERS, where government
agencies seek bids from suppliers to procure bulk commodities products and
other services. Governments prefer dealing with vendors that offer the
complete sales and service packages.
 E.g. some of the largest construction projects as Panama Canal expansion,
three Gorges Dam in china which is expected to cost about $25 billion.
 Investment of $250 billion throughout 2020 to lay 75000 miles of new railway
track in China, are attracting interest from MNE’s around the world.

Could jaguar be spun back into a independent brand once again. Limitations of such
move.

 Yes it can do well as an independent brand, with sales and growth rate of JLR
rising higher every year it could represent itself better on its own.
 Company has successfully year of continued growth in all markets with
overall volumes up 16% reflecting continued product success including the
lunch of the range rover sport and jaguar f type and a full year sales of range
rover.

Limitations

 The contract with the parent company TATA motors

 The unstable EU economic market (currency, sales, politics, legislation)
 The downfall in the past years where TATA company saddled £3 million debt
suffering a loss of 100 million in 2009 alone by JLR

Discuss JLR’s shift into developing region like Africa? What will be the implications of
these on its sourcing and supply chain economics?

 Improving conditions in Africa where African governments are doing a better

job of managing their national economies. Policies reforms in countries like
 Botswana, Ghana, Kenya, Nigeria etc emphasize economic and political
freedom where better governance is helping drive economic success.
 A lot of developed and developing countries has begun a steady inflow of
direct investment in Africa with annual flows of FDI and loans exceeding 60
billion per year
 Emerging market such as Africa serves as excellent platform for sourcing. The
low cost for man skills, labor, manufacture of plants and subsidiaries, raw
materials helps forms to concentrate on their core competencies also
creating jobs for Africans.