Imagine that you and your fellow MBA students in this class are a team of consul
ID: 344653 • Letter: I
Question
Imagine that you and your fellow MBA students in this class are a team of consultants hired by a company for the purposes of recommending a potential international strategy for a U.S. company. In the discussion forum, you will be discussing options for the client, "ABC Cabinet Company."
ABC Cabinet Company is a kitchen cabinet maker. The company makes semi-custom cabinets in their current factory in the U.S., then ships the cabinets directly to their customers' homes. The customers then install the cabinets themselves or hire a contractor for the installation. Most of their customers have been in the U.S., but the company has shipped cabinets to countries outside of the U.S. Demand in the new home sales market for your client's quality-made cabinets has been increasing, both in the U.S. and in other countries, particularly in parts of Central and South America, for example in Costa Rica and Colombia. The cabinet making process is labor-intensive and demand is quickly outpacing supply from their U.S.-based factory. The CEO is considering opening a new factory in a Central or South American country rather than expanding domestically.
Use the following questions to guide your discussion:
1. What is the main reason the company should decide to expand outside its domestic market?
2. Which option(s) should the company choose for entering into the international market? Why?
3. Should the company use a multidomestic, global, or transnational approach? Why?
Explanation / Answer
2. There are many options for companies to enter international market. They are
Among these best option for company is to establish subsidiary. By establishing subsidiary company can completely reap benefit of international market. Entire company can be built on companies ideology without interference from outside force. Company can establish its own manufacturing and marketing unit.
The main drawback of establishing subsidiary is countries trade & cultural barriers. Many of the countries do not allow foreign companies to establish 100% subsidiary. In this scenario company can opt for joint venture with local partner.
In joint venture, company should select partner who fits its ideology. Here manufacturing and marketing activities are shared by both partners.
3. Before discussing whether company should use Multinational, Global and Transnational strategy. We should understand what is the definition of these terms
The best strategy for company is to establish transnational company. This is because company should adopt local market for sustaining and innovating. The main difference between multinational and transnational is leadership. Multinational companies have central leadership but transnational have local leadership. It is always better to have local leadership to adopt to local market.