International Economics Question
Assignment Details
Once a company has decided to move into a new foreign market, they must first weigh up the potential benefits and costs. If foreign market entry is being considered, the organization’s strategic mission, vision, and values, will drive the choice of market entry mode. In this assignment, you will have the opportunity to apply research to recommend a course of action for a given business scenario regarding foreign market entry considerations.
Scenario: You are the owner of a small U.S. based coffee distributor. You sell not only coffee but also related products such as branded mugs. For the past 3 years, your company’s branded coffee mugs have been produced and sold in Norway through a licensing agreement with Norwegian firm Drikke AS through its “Kaffekopp” subsidiary. The Drikke AS CEO, Espen Foldnes, recently visited you and revealed that his firm was about to acquire its leading rival in the Norwegian market, and, as a result, wants to sell its Kaffekopp unit. CEO Foldnes has approached your firm with two proposals.
First, Drikke AS is willing to sell you its Kaffekopp subsidiary outright. This would represent an acquisition for you in the Norwegian market.
Second, suppose the two firms cannot agree on terms for a purchase of Kaffekopp. In that case, Drikke AS is willing to sell its licensing agreement back to you, which will effectively allow you to formulate a new strategy for your company in Norway.
For this assignment, use your research from your Unit 7 Journal to develop an informative essay addressing the checklist items below.
Assignment Checklist:
Identify one advantage of acquiring the existing subsidiary and maintaining production in Norway.
Identify one disadvantage of acquiring the existing subsidiary and maintaining production in Norway.
Explain one advantage of repurchasing your licensing rights in Norway.
Explain one disadvantage of repurchasing your licensing rights in Norway.
Describe the most advantageous method for establishment of a new production subsidiary in Norway through ONE of the following entry modes:
establishing a Greenfield venture
exporting your American-produced mugs to Norway
franchising to another firm
re-licensing to another firm in Norway
Summarize your final decision based on the available options. Be sure to provide support for your choice.
