The agency cost of Sports Exports Company is lower than most Multinational Corporation because the owner and the manager are the same. The owner does not have managers who are based in other countries. The company is run only by one person whom Mr. Jim Logan itself.
DOES SPORTS EXPORTS COMPANY HAVE ANY COMPARATIVE ADVANTAGE OVER POTENTIAL COMPETITORS IN FOREIGN COUNTRIES THAT COULD PRODUCE AND SELL BASKETBALLS THERE?
Answer: The Sports Exports Company has a comparative advantage by applying an idea that has been successful in the United Kingdom to other countries.
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If basketball becomes a popular idea in foreign countries, the Sports Exports Company will be the first firm to benefit from the popularity.
HOW WOULD JIM LOGAN DECIDE WHICH FOREIGN MARKETS HE WOULD ATTEMPT TO ENTER? SHOULD HE INITIALLY FOCUS ON ONE OR MANY FOREIGN MARKETS?
Answer: Mr. Jim Logan must need to make a decision before entering the foreign market by bearing in mind the various factors that may affect with the company, such as the potential demand for basketballs in each country and the possible level of competition.
Mr. Jim Logan should also consider the volatility and risk of the foreign currency in each country where Mr. Logan may attempt to enter in relation to the currency of UK. Mr. Logan want to extend his business internationally across different countries, he should first to focus on one specific country when establishing his international business and there is a potential that he can find other distributor of sporting goods that will sell the basketball to retail stores in various countries.
He must be stay and focus to provide the basketballs to the distributor and no need to travel in different countries
THE SPORTS EXPORTS COMPANY HAS NO IMMEDIATE PLANS TO CONDUCT DIRECT FOREIGN INVESTMENT. HOWEVER, IT MIGHT CONSIDER OTHER LESS COSTLY METHODS OF ESTABLISHING ITS BUSINESS IN FOREIGN MARKETS. WHAT METHODS MIGHT THE SPORTS EXPORTS COMPANY USE TO INCREASE ITS PRESENCE IN FOREIGN MARKETS BY WORKING WITH ONE OR MORE FOREIGN COMPANIES?
Answer: The Sports Exports Company may think about a licensing agreement where foreign firm produce basketballs and sell them that will avoid the cost of exporting but would be result in expenses charged by foreign company. The Sports Exports Company may use the method of joint venture which the company produces and exports the basketballs exclusively to a specific foreign firm that focuses on distributing sporting goods to a retail stores in various countries. The foreign company may charge a mark-up beyond the price of the basketball and charge when there is a purchase.
Read about difference between import substitution and export promotion
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