Market Entry Mode

Topics: Economics, Investment, Foreign direct investment Pages: 9 (2511 words) Published: December 7, 2010
▪ Introduction
▪ Swot analysis
▪ What are the factors that Catexhaust should consider in opening a plant in Thailand? ▪ What are the reasons for FDI market entry mode?
▪ Should Catexhaust Company establish a plant in Indonesia? ▪ What are the cultural differences to put into consideration when investing outside Europe? ▪ Conclusion
▪ References




“The classical economic theory states that globalization relies on competition to drive down prices and increase product and service quality” (Lamb, Hair & McDaniel 2008). The country that operates more efficiently and has the technology to produce what is needed is likely to attract more investment than a country that does not (Lamb, Hair & McDaniel 2008). Most firms prefer to invest in countries where they can access cheap labor, advanced technology, stable economic climate, and good infrastructure among other factors facilitating effective performance of a business (Lamb, Hair & McDaniel 2008). Globalization consequently expands economic freedom, spurs competition and raises competition for international companies and offers access to foreign capital, global export markets and advanced technology while breaking the monopoly of often inefficient and protected domestic producers (Lamb, Hair & McDaniel 2009). A Consequent move by Catexhaust to establish a new plant in the Asian region requires the firm to evaluate the effectiveness with reference to its resources as well as the advantages and costs that it would incur on undertaking to open a plant in this region. ____________________________________________________________


Catexhaust Company benefits from Germany’s impressive economic performance evident from its total GDP in 2008 of $ 3649 billion making it the fourth highest country in the world (The Economist 2010). The company stands to gain access to a larger market base resulting from its investment in foreign regions (Standard Bank n d). However, the company is likely to face the challenges prevalent in the automotive industry such as the industry’s expensive fixed costs as well as huge volumes of investment and the high cost required to train and retain skilled labor in the company. In addition, the company faces threat of competition from other more efficient companies as well as the fluctuating prices of raw materials. ____________________________________________________________


Geographically, Thailand is well endowed with natural beauty, favorable tropical climate and consists of a friendly and hospitable population which makes the region generally accommodative and favorable for doing business (Communicaid 2009). The country holds a population over sixty million people has its capital city at Bangkok which is the key economic and political city (Communicaid 2009). In terms of economic compatibility, Thailand’s economy is in the process of growth and heavily relies on exports trade with the major markets situated in the North America Japan and Europe (Communicaid 2009). Thailand enjoyed economic boom in late 80s and early 90s but in 1997, the country was highly influenced by economic crisis that hit various countries of Southern Asia nation substantially discouraging FDI in the country (Communicaid 2009). However, the current Thailand market is vibrant with economic activities of both large and small nature which has played a major role in ensuring that the economy is dominated by increased competition which prompts international and local corporations to exploit the benefits provided by the market (Standard Bank n d). Catexhaust...
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