Question

Assuming today was 1st January 2019. You are the chief financial officer of a US-based company which manufactures and distributes office supplies. As the competition in local market was getting stiffer despite the company’s strong customer base, the Board of Directors (the Board) is considering for the company to expand its international business by penetrating to either the Canadian market or Mexican market through exporting. The company anticipates strong demand for office supplies in these two markets.

a) What are factors to be considered in deciding which market is more feasible?

b) You are responsible for developing contingency plan as the selected market will impose trade barriers over time. The board is in favour of establishing a subsidiary in the country of concern under such conditions. Argue whether this plan is reasonable. Are there obvious reasons for the plan to fail?

Answer 1

A. To decide which market is more feasible, analyze the factors of profit potential and revenue, the market's culture, legal barriers, economic viability, market dynamics, market attractiveness, and the company's capability to adopt new trends and demands. If these factors are considered, and all of them are adaptable in the market, we can decide that the market is feasible for the company. The board favor of establishing a subsidiary in the country is a concern under such conditions. This plan is reasonable because it helps to access some markets for the company's products and services, more affordable for manufacturing companies, access the local knowledge, expands the brand recognition, knows customers requirement, select target audiences.

B. The subsidiary plan may fail because of the high cost and time requirement, variation in currency, lack of focused business may lead to a subsidiary plan's failure, and conflict interest between the subsidiary and parent companies. By the Government regulations like stringent immigration policies, the current immigration status of employees