Entry to a new market Research Paper Example | Topics and Well Written Essays - 2000 words

Entry to a new market - Research Paper Example Making an entry into the existing automobile Indian market should be carefully approached. For example, a company should consider whether to enter into the market through a joint venture, or opening up a subsidiary of the organization as part of the mother branch. The company should be aware of the pros and cons of all the available options and how much they would cost. Entry Modes into the market Foreign direct Investment One of the advantages of a foreign direct investment mode of operation is that the organization would have a large proportion of direct control of the firm that it sets up in India. A foreign direct investment would allow the American company to gain a high tax exemption. The Government of India is bound to view the foreign direct investment as an opportunity that will increase the country’s income through labor provision to its nationals.. A foreign direct investment often includes transferring labor, funds and new technology to the target market (Iyer 272) . A foreign direct investment might involve purchasing of an already existing organization or starting up of a new one. A foreign direct investment into India will require an input of large resources by the automobile company. The resources will go into putting up the organization and marketing services. However, the organization would gain a better understanding of the customer needs and how to reach their target market audience. Joint Venture The organization might also consider a joint venture entry into the Indian market. A joint venture with an automobile company would be strategic if the CEO decides to invest a minimal amount of money into the venture in India. The American automobile company would ideally invest half the money while the India co-venture investor would invest the other half. Both investors would learn from each other for the good of the organization. The Indian investor would guide the American automobile investor on issues such as Indian tax system, best labo r sources, best location, cultural awareness and distribution lines. A joint venture would be highly recommended when the two merging companies have the same kinds of business strategies that they would want to achieve. In order for the joint venture to succeed, both the organizations should be clear on their strategic goals and objectives, and the timelines within which they hope to achieve them. The joint venture organizations should also clarify on the duties and responsibilities of the different personnel that they both bring in to the organization. There are critical issues that might arise in the running of joint ventures (Tsang 218). The companies might have proprietary information that they might be afraid of sharing. Secret business ideas take a lot of resources to develop. Therefore, none of the organizations would take the resources invested lightly. One or both of the organizations’ employees might also develop apathy at the expense of the other joint venture part ner’s employees. If the duration of the organization was unclear, disputes might arise on how and when the company should be closed down. There might also be cultural disputes between the two companies in the joint venture. Each of the companies in the automobile joint venture might want to get the best of the partnership while what they put in is not equal to what they want to gain. Licensing Licensing for the automobile organization would require the organization to license an organization