As we have now settled on Qatar as our
target country, we will have to choose the most suitable operation mode. The
initial mode is our entry mode of operation, which can later be altered as
business develops and performance has been evaluated.
The most suitable entry mode for
Company X is what Hollensen (2004) calls a strategic alliance, i.e. a
non-equity joint venture. This would involve ‘downstream-based collaboration’
in our case. This means Company X cooperates with Partner Y. The parties
collaborate on marketing, distribution, sales and/or service. The joint venture
is managed through contracts; no separate Joint Venture Z is created (hence
non-equity).
Hollensen (2004) divides the joint
venture formation into seven major stages. These stages are:
1.
Joint venture objectives
2.
Cost/benefit analysis
3.
Selecting partner(s)
4.
Develop business plan
5.
Negotiation of joint venture agreement
6.
Contract writing
7.
Performance evaluation
Arguably selecting a partner is our
biggest challenge. The partner has to have access to the gatekeepers of our
potential market, e.g. architects, construction companies operating in Qatar,
and the Qatari government. The partner must also have the will to market our
products; to convince buyers to choose our litter bins over competitors.
In a past group meeting, we discussed
the possibility of a joint venture with, for example, a construction company
operating in Qatar. The motivation for this is a mutually beneficial outcome.
As Hollensen (2004) describes the choice of partner, “the goal is to develop
synergies between the contributions of the partners, resulting in a win-win
situation for both.” In our case, we would extend the construction company’s product
range with high quality litter bins. The construction company, on the other
hand, extends our network further (marketing, distribution).
This is in line with Prof. Mika
Gabrielsson’s guest lecture on Born Globals. He emphasized cooperation with MNCs
because it can compensate for the traditional weaknesses of Born Globals.
Company X, while perhaps not strictly a Born Global (no consensus on this yet),
has many of the weaknesses of a Born Global. Cooperation with a well-known MNC
would certainly be beneficial.
Obviously, firms rarely 'go by the
book'. For example, a recommendation from an acquaintance can be enough to
instantly determine the firm's direction. One bad experience in a country, with
one agent, can make management unwilling to go there again.
It seems you had already come up with the idea of cooperating with MNCs. Good :)
ReplyDeleteI was wondering would hiring a local marketing consultancy be considered as using a local agent?
If a construction company is chosen as a partner would they get a commission from every waste bin sold through them, or how would they benefit, as "extending the product range" is not necessarily in their interests?
Noora, thanks for the post!
DeleteYou mentioned really interesting thing here when saying that extending construction company's product range is not necessarily in their interests. This has to be investigated more deeply by the project group.
Hey Noora, thanks for all the comments!
ReplyDeleteI just wanted to add, that hiring a local marketing consultancy might not be as beneficial as it seems, since the company is operating B2B and our primary customer would be construction companies and architects. Moreover, it is important to realize that major construction companies operating in Qatar are actually international companies, originating from other countries than Qatar. Therefore, hiring a local marketing agency will not be of much benefit, since our marketing campaign must be global ( or at least focused on international companies that also do business in Qatar).