Direct and Indirect Export
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Mode of Export |
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Indirect Export and Direct Export |
The choice of both direct as well as indirect exporting is of great significance in particular of similar markets and for similar customer base (Wall et al., 2013). |
The manufacturers exporting the goods are able to access to direct information on the basis of the demand and the requirement of importer. On the contrary, in indirect exportation, the manufacturer is unable to access the detailed information. A direct authoritative power can be implemented in direct exporting process over factors like packaging, pricing, brand promotion, post sale services (Crozet, Lalanne & Poncet, 2013). However, in the case of indirect marketing, the producer does not direct access or control over these key elements of marketing. There is a high-level risk in the former mode of export whereby the exporter has to make assumptions the aspects of production and marketing (Wall et al., 2013). On the contrary, the level of risk and danger is relatively less in indirect exportation as the producers are taken into account only for manufacturing hazards. |
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Contractual Mode |
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Licensing and Franchising |
Licensing is regarded as an arrangement whereby the licensor trades the right to utilize its intellectual asset for a negotiated amount of fee that is royalty (Chen & Sternquist, 2013). The concept of Franchising is regarded as an agreement whereby the franchisor authorize the franchisee to employ the business framework, brand identity or to conduct the business as an autonomous entity of the parent firm. |
There is no requirement of registration in licensing whereas, a strict regulation of registration in franchising. The licensor has immense control on the utilization of intellectual possessions exercised by the business procedures of the licensee (Twarowska & K?kol, 2013). In case of franchising, the franchisor is able to exercise considerable authority over the business process of the franchisee. In licensing the transfer of assets or rights can occur only for once, whereas in the process of franchising an a constant as well as ongoing support is exerted from the franchiser (Chen & Sternquist, 2013). |
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Investment Modes |
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Joint Venture Subsidiary and Wholly Owned Subsidiary |
The only area of similarity between a joint venture and a wholly possessed subsidiary lies on control and authoritative power exercised by other business ventures (Twarowska & K?kol, 2013). |
The joint venture ancillary is established, owned and controlled by two or more organizations. On the contrary, an individual or a single firm owns the wholly owned ancillary. The beneficial rate tends to be higher in the wholly owned subsidiary as there is no distribution of profits and revenues in this investment mode where as in case of joint venture ancillaries the scenario is the opposite (Verbeke, 2013). The potential level of risk is distributed amongst more than a single company (Chang, Chung & Moon, 2013). On the contrary, in wholly owned ancillaries, the parent organization takes into account all the loss and risks by itself, hence increasing the level of risk. |
Foreign Direct investment is considered as the investments exercised by a company in other nations. However, this type of investment can be regarded in the form of establishing subsidiaries or ancillaries in the foreign county along with the execution of production activities within the ancillaries (Brown, 2016). The concept of FDI has been acknowledged by the foreign nations because of accumulating more investments that would further pave ways for employment opportunities and further generate income and revenues (Vahlne & Johanson, 2017). However, SIS has decided to employ a direct foreign investment mode of entry might experience few risks and issues such as rate of exchange risk and country risk and problem.
- Exchange rate or foreign exchange risk- As a fashion design organization, SIS has been producing investments in foreign nations, thus dealing with foreign currency. In such a scenario, the organization has to work on converting their currency to the foreign currency by utilizing the exchange rate (Hayakawa, Kimura & Lee, 2013). The rate of exchange continues to fluctuate and thus there is a level of risk that has been undertaken by this company.
- Political Stability-The Foreign Direct Investment comprises an element of certain risk and problem. Nations comprising an unhesitant and uncertain political state of affairs will be vulnerable to major form of hindrance and disincentive (Holmes et al., 2017). Factors related to financial crisis can further depress the forms of investment.
- Country risk- The nations where SIS has been planning to make investments will be associated with certain level of risks with it. This issue can be related to the financial condition as well as the political state of Thailand, whereby it is planning to make the expansion (Vahlne & Johanson, 2017). However, it must be noted that the political circumstance of this fashion company is different in the domestic nation and in the foreign states namely Wellington as well as Christchurch.
Ways to avoid Exchange rate risk
Invest in hedged or circumvent Exchange-Traded Aid/Funds (ETFs)- This form of funds have its accessibility for a broad array of underlying possessions which has been traded in majority of the dominant markets.
Several ETF funders provide hedge as well as confronted version of their finances that can keep an account of popular aid and investment standards. However, it must be noted that circumvent funds and resources have the potentiality to have a considerable improved expense ratio in comparison to the correspondents because of the expense rate of hedging.
The factors of political risks and problems generally discourage the process of Foreign Direct Investment in the domains of both developed as well as developing economies. Certain established political and strategy circumstances can magnetize several investment situations by reducing the rate of political risk and challenges and further enhancing the stability as well as liberal policy regulations in order to concentrate on improved rate of foreign investment. However, it must be noted that these strategies can be regarded as enduring and time-consuming modifications.
SIS can execute certain recommendations, in order to gather an enhanced rate of foreign investment. The improved lucrative and commercial approach to magnetize the base of foreign investment and capital is by forming as well as strengthening the policies of governance institutions within the nation. However, it must be taken into consideration that the inflow of foreign trade investments is not entirely resolute by elements extracted externally such as manufacturing supply goods.
Comprehending and bringing transformations in the financial and political scenario of the particular nation plays a vital role for establishment of productive trade associations with the trading associations. The company SIS can focus on the country risk line evaluation report, which is a copied analysis that consists of risk measurement that is based on several factors based on economic, civil as well as commercial circumstances. This type of assessment report updated every month will facilitate in the evaluation of the business conditions of the target nation. For this case, the trade scenario of Thailand can be taken in account.
Licensing and Franchising
The process of Greenfield Investment is considered when a parent organization decides to initiate its trade operations in a foreign nation through establishments the creation of upcoming production competences from the scratch that involves several necessary organizations (Basile, Benfratello & Castellani, 2013). However, SIS might experience certain level of problems and challenges while expanding its business in Thailand.
Limitations in share- This type of problem can be considered as one of the major issues during the expansion of the business of SIS, as a foreigner can possess an increased rate of almost 50% in a Thai organization (Jude & Levieuge, 2015). Thus, there lies an emphasis in the significance of a reputed lawyer as well as renowned business associate as the company will be belonging to the minority section in that nation.
Language Obstruction- The aspect of Thai language can be termed as another vital factor while expanding the business of the fashion company (Liu et al., 2013). The officials of SIS must employ native staffs or employees who will be fluent in speaking English as well as Thai language.
Political and Financial Disorder- Although the Asia Economic Crash that took place in 1997, it created a grave scenario for the Thai financial organizations in order to make improvements and further the amount of liability which is still very dominant. It is immensely influenced by the Thai rule and regulations (Gitman et al., 2013). However, the country offers a plethora of effective and promising aspects, at the same time there lays a vast range of uncertainty along with the trading domain of Thailand. The company can access a renowned website called www.thaienglish.com that will facilitate its employees in document interpretation, investing the Thai fashion industry and maintain a strong association with the Thai people.
Ways to curb the share limit in Thai market
The concept of preference shares in Thailand is generally regarded as the increased ranking shares regarding certain matters of the organization. The framework of preference contributes contradictory ordinary shares and contributions in any Thai firms that is typically utilized to exercise the control to foreign investors above the group of stakeholders comprising the Thai company. The preference stakeholders can the accessibility to receive an equivalent share of the revenues regardless their shares are paid or due. SIS must take into consideration that preference stakeholders have the authority of voting at the stakeholder meeting. However, the voting procedure is immensely dependable on the content of the documents provided by the company. The fashion company must consider that this voting power exercised by the preference shareholders is equivalent to a single vote for one share or there is a possibility of improving the voting authority by increasing the number of votes from one vote to ten votes for a single share unit.
Joint Venture and Wholly Owned Subsidiary
Methods SIS can implement to curb Linguistic Barriers
SIS must keep in consideration that several trade and business application forms must be completed in Thai language. Thus, the company has to recruit people who will have excellent fluency in Thai language and would easily comprehend Thai script that comprises 44 consonants and 28 vowels along with over two-tone diacritics. The fashion organization must take into account the difficulties of Thai language to comprehend them particularly to the western companies.
The officials of “SIS” (saw in style) being a Greenfield investment company must work on go through a detailed assessment of the financial organizations of Thailand in order to enhance the amount of debts existing in the financial industries. The company can access a renowned website called www.thaienglish.com that will facilitate its employees in document interpretation, investing the Thai fashion industry and maintain a strong association with the Thai people.
Task 4
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GOALS TO BE ACCOMPLISHED |
CONTRIBUTIONS OF EACH GOAL |
TASKS TO ACHIEVE THE AIMS |
RESOURCES TO OVERCOME |
TIMELINE |
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Time zone difference |
Effective time zone based workforce further regarded as geographically dispersed employees offer the most efficient and functional skill from across the world. If SIS with a successful time zone framework and maintain a steady communication procedure with its foreign employees and clients, the firm would be able to compete in the present trade environment. |
Establishment of Time Zone Rules and maintain constant process of communication The fashion-designing firm must recruit employees and further organize the structure in order to have detailed knowledge and information about the zones they are dealing with. SIS executives must keep in account their varied time zone framework As a result, there must be a detailed and transparent communication process by sharing accessibility, availability, operations through chosen communication tools. Operating in the fashion industry, SIS might get urgent assignments, thus the communication team must be well acquainted in dealing such situations. |
SIS can utilize Google calendar in order to manage the calendar so that it can show the time of the day as well as the corresponding timings of the second time zone. Boomerang is another popular time zone tool that facilitates the SIS executives schedule their emails in order to send them afterward. This tool is considered handy particularly for team members who will be in Thailand during emergency fashion events or orders. |
This goal of effective timeline framework must be implemented a month prior to the complete expansion of the business in order to negate any miscommunication among the executives. |
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Corporate Compliance |
SIS deals with several global fashion brands and labels, the company might experience criminal charges for avoiding legal regulations. Thus, the company must adhere to varied legal procedures and regulations in regards to the ways their business should be operated. SIS must also follow rules of involvement while import and export procedures, negotiating will customers and following employee remuneration for both national and employees working in Thailand. |
Have detailed assessment of the rules and regulation of the potential country where it is planning to make its expansion. |
The Thailand authority implements registration, Certification along with licensing demands and requirements. SIS must assess the regulations along with the State Administration of Quality administration, as well as relevant authority to manufacture the fashion products. The company must collaborate with the team of experts who have prior experience within the particular country (Thailand) in order to comprehend the business perspective the country. Establish procedures to achieve the goals within the given deadline. Thoroughly comprehend and adapt to the alterations in the rules and compliances and understand what is new and effective to SIS. |
3-6 months required to complete the necessary compliance regulations of the specific country. |
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Language Barriers |
Effective communication is considered as an effective tool to achieve success for SIS. As the company will be dealing with several Thai people proficiency and fluency in English is the de facto linguistic along with immense proficiency in the Thai language in their business. The company headquartered in Auckland primarily communicates in English, but for its Thai expansion, SIS would require to employ local Thai people and the ones proficient in communicating with them. |
SIS must employ recruits who require certain level of patience and comprehension towards the Thai culture. |
Rely on reliable translate tools and documents. Employing effective interpreter will also facilitate in overcoming the issues related to language obstruction. SIS must acknowledge positive brand and awareness and perception to attract global fashion brands to establish effective connections and networks with the local Thai markets. SIS must further utilize tools and web services to overcome the language barriers for the executives who will be travelling to Thailand for the proposed expansion. Tools such as Memrise, Babbel, iTranslate can be implemented by the SIS business executives during their visit to Thailand for the business expansion discussions, negotiations and other necessary legal procedures. |
Within 1-2 months SIS of the business expansion |
References
Basile, R., Benfratello, L., & Castellani, D. (2013). Geoadditive models for regional count data: an application to industrial location. Geographical Analysis, 45(1), 28-48.
Brown, A. (2016). Political regimes and employment relations in Thailand. Journal of Industrial Relations, 58(2), 199-214.
Chang, S. J., Chung, J., & Moon, J. J. (2013). When do wholly owned subsidiaries perform better than joint ventures?. Strategic Management Journal, 34(3), 317-337.
Chen, Y. F., & Sternquist, B. (2013). Differences between international and domestic Japanese retailers. In The Internationalisation of Retailing (pp. 124-139). Routledge.
Crozet, M., Lalanne, G., & Poncet, S. (2013). Wholesalers in international trade. European Economic Review, 58, 1-17.
Gitman, L. J., Joehnk, M. D., Smart, S., & Juchau, R. H. (2015). Fundamentals of investing. Pearson Higher Education AU.
Hayakawa, K., Kimura, F., & Lee, H. H. (2013). How does country risk matter for foreign direct investment?. The Developing Economies, 51(1), 60-78.
Holmes Jr, R. M., Miller, T., Hitt, M. A., & Salmador, M. P. (2013). The interrelationships among informal institutions, formal institutions, and inward foreign direct investment. Journal of Management, 39(2), 531-566.
Jude, C., & Levieuge, G. (2015). Growth effect of FDI in developing economies: the role of institutional quality.
Liu, P., Koroma, S., Arias, P., & Hallam, D. (2013). Trends and impacts of foreign investment in developing country agriculture: evidence from case studies. Food and Agriculture Organization of the United Nations (FAO).
Twarowska, K., & K?kol, M. (2013). International Business Strategy-reasons and forms of expansion into foreign markets. In Management, knowledge and learning International conference (pp. p1005-1011).
Vahlne, J. E., & Johanson, J. (2017). The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments. In International Business (pp. 145-154). Routledge.
Vahlne, J. E., & Johanson, J. (2017). The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments. In International Business (pp. 145-154). Routledge.
Verbeke, A. (2013). International business strategy. Cambridge University Press.
Wall, N. R., De La Parra, M., Callaway, E. M., & Kreitzer, A. C. (2013). Differential innervation of direct-and indirect-pathway striatal projection neurons. Neuron, 79(2), 347-360.
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