Entry Mode to Foreign Markets (Research Paper Sample)

mDR LIMITED ENTRY TO AUSTRALIA
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mDR Limited Entry to Australia
Introduction
Companies face tough decision in choosing the best entry mode, when they are interested in servicing foreign market. There are various entrymodes, which include exporting, joint venture, sole venture and licensing. The entry mode is determined by ownership advantage of the firm, location of the market, and advantages of international transactions. These factors play a crucial role in determining the firm’s entry mode. Entry mode plays a crucial role in determining the amount of investment, and the expected returns. In determining the entry mode of mDR Limited to Australia, a definite research is mandatory. This research will review the firm’s main services, and the firm’s ownership advantage. It will help in gatheringand assessing Austrian market, to determine market potential, internalization advantage and prevailing investment risks. Managerial perception about Austrian market is important, especially in determining financial and market capacity. In making the decision, mDR Limited is expected to make a decision on the best entry mode. This entry mode should offer the highest risk adjusted return on investment. The entry mode should also rank mDR Limited in terms of market control, thus improving firm’s competitive position.
Sole Venture Entry Mode
mDR Limited is a well established company in Singapore, and it is listed on Singapore Exchange. This company offers various services in the market, especially in the field of telecommunication. Its market field places it at a perfect position in extending to foreign market. Sole venture entry mode is the best for mDR Limited. Sole venture mode has a high investment, resulting to high risk and returns. This mode will also give mDR Limited a chance to have control of the market and its transactions CITATION Blo06 \l 1033 (Blomstermo, Sharma, & Sallis, 2006).
Company Analysis
mDR Limited deals with various services in the technology field. It operates the largest telecommunication network, by distributing and retailing telecommunication devices. It also operates retail stores, and provides M1 and SingTel broadband for wireless, fixed and mobile. Under their shop branded as Hand-phone shop, mDR Limited distributes mobile devices as well as accessories for giant brands like LG, Sony, Nokia and Samsung. mDR Limited provides after market services, especially for mobile devices and electronic products CITATION Bro03 \l 1033 (Brown, Dev, & Zhou, 2003).
mDR Limited service of distribution and retail of mobile phone brands, through their outlet shops and franchised stores is more applicable in foreign market. They have over 70 outlets in Singapore. This service fits well when sole venture entry mode is utilized. Since mDR Limited distribute phones from reputable firms, they have less investment in terms of production and manufacturing. This gives them a competitive advantage in terms of production resources. mDR Limited has been able to dominate Singapore market, especially in distributing and retailing telecommunication accessories. This success in Singapore will easily be applied in new market environment. The management professionalism applied by the company in offering comprehensive customer relationship, and offering after sale services on behalf of the main companies will set mDR Limited on a strong foundation. Meaning acceptance and marketing strategy in a new environment is possible. As a sole venture, mDR Limited will be able to control its brand, and its management strategies CITATION Bro03 \l 1033 (Brown, Dev, & Zhou, 2003).
mDR Limited has a market capitalization of SGD114.72 million as at the end of fiscal year 2012. It has a profit margin of 1.34 percent, and operating margin of 1.68 percent. The company has been doing well, as its return on equity stands at 10.25 percent CITATION Bro03 \l 1033 (Brown, Dev, & Zhou, 2003). This means mDR Limited has a strong foundation to enter Austrian market, and be able to comfortably compete with other brands CITATION Blo06 \l 1033 (Blomstermo, Sharma, & Sallis, 2006). With sole venture entry mode, mDR Limited will have ownership advantage, therefore possessing superior assets and skills which will enable them to survive the new environment. This is supported by the company’s size and multinational experience.
As a sole venture in Australia, mDR Limited will be able to enjoy its management secrets. This reduces the risk of loss of long term revenues. For instance, if the company uses joint venture mode, it might run into the risk of the partner firm learning and acquiring management strategies and decide to operate a separate entity. This would lead to unexpected competition. Hence, with sole venture entry mode mDR Limited management skills will be intact CITATION Bro03 \l 1033 (Brown, Dev, & Zhou, 2003).
With asset base of SGD63, 000 as of 2012, mDR Limited has a strong asset power to engage in international expansion. They will also be in a position to enforce patents and contracts in the aim of achieving economies of scale. More so, the company stands on giants shoulders. This means it will spend less on marketing, if it offers distribution and retail services of mobile phones. The products it is dealing with, from global brands such as Nokia, Samsung, Sony Ericsson, LG, Philips and Panasonic are known products in Australia, meaning less marketing. The only marketing mDR Limited will face is advocating their Hand-phone shop, 3Mobile and Mobile phone Megastore. This will not be a big handle considering their successful management strategy and customer relation CITATION Mil95 \l 1033 (Millmow, 1995).
Context Analysis
Australia Market
Australia has a capitalist economy, where demand is controlled by supply. As the rest of the world, Australia is highly growing in the usage and acceptance of technology. There has been a great shift from the use of fixed to mobile form of communication. This has led to decline of fixed communication revenue by 41 percent of the last decade. The mobile telecommunication industry has taken over, and it is controlling the total industry revenue. It has increase to 50 percent by 2012 CITATION Bro03 \l 1033 (Brown, Dev, & Zhou, 2003). This is a big growth, from a single industry. As a matter of fact, Australia is second to Singapore in the usage of Smartphone CITATION Son97 \l 1033 (Song, 1997). 68 percent of Austrian population between the age of 15 and 65 has Smartphone. The penetration of Smartphone is at 41 percent. This is expected to increase by 2017 CITATION Bro03 \l 1033 (Brown, Dev, & Zhou, 2003). The Smartphone industry is generating $15 billion in revenue, while the accessory and application are generating $ 15 revenue CITATION Blo06 \l 1033 (Blomstermo, Sharma, & Sallis, 2006).
This economic trend is due to the changing communication means, technological growth, and changing economic status. As of 2011 data, there were 29.28 million mobile voice and data services. This was an increase of 13 percent compared with 2010 statistics. This is highly attributed to the entry of Smartphone, and provision of internet through mobile cable CITATION Mil95 \l 1033 (Millmow, 1995). Emergence of Smartphone with the ability of touch screen has improved user friendly interface. This has helped user to integrate their phones with more activities CITATION Söl07 \l 1033 (Söllner, 2007).
With this mobile phone trend in Australia, the market is ripe for the entry of mDR Limited. Its entry with service of distributing and retail of mobile phones through their outlet will be boosted by the prevailing market trends. The demand is high to fit and accommodate supply. The competition is limited to the demand, which is yet to attain saturation. Sole venture entry mode will favor mDR Limited considering market demand, population growth, and market competition CITATION Bro03 \l 1033 (Brown, Dev, & Zhou, 2003).
Australian phone market is more attractive, making chances of attaining higher returns high. Market potential is high than investment risk, giving mDR limited a competitive edge to enter the market as a sole venture. With the increasing demand of phones, and the growth of technology every second, Australia has a potential market. Market potential is a key ingredient in determining overseas investment. The market also provides a long term market presence, giving the firm a chance to achieve economies of scale CITATION Mil95 \l 1033 (Millmow, 1995).
In political and social platform, Australia has a stable political history and a strong cultural background. Political and cultural uncertainties negatively affect the economic potential of a state. If the government is highly restrictive, in terms of policies, this will impede foreign investment. But this is not the case in Austria, meaning policies are favorable for foreign firms to enter the market even as a sole venture. Sole venture entry mode in Austria will lead to low control modes. Low control modes are seen to be more superior for many transactions. They allow the firm to gain from the economies of the marketplaces CITATION Roo94 \l 1033 (Root, 1994).
As a capitalist economy, Australia allows a free market. Meaning demand will be controlled by supply. Legal and economic policies are favorable to foreign firms, through favorable tax programs and smooth entry policies CITATION Blo06 \l 1033 (Blomstermo, Sharma, & Sallis, 2006). This is common in stable economies, with stable governments. Since mDR Limited will be introducing common products from giant industries, it will be easy gettingpatents and contracts. Global companies in most cases have worldwide patent. This leaves mDR Limited with th...