Big Drive Auto Scenario
Big Drive Auto Scenario
It is the dream of every organization to enter a new market and in the process realize its dreams. However, this dream becomes very difficult to achieve due to a number of factors among them entry barriers put in place by those companies that are already operating in those countries. According to Arthur, S. & Sheffrin, M. , (2003), some common non-pricing barriers likely to affect a firm wishing to enter a new market are high advertising costs, government policies, customer loyalty, and cost advantage independent of scale and distributor agreements.
It would therefore be recommendable for such a firm to enter into negotiations with the government of the country where it wants to venture and the other firms that are operating in the country. This way, the new company will be able to cut on the cost of production. The reason is that in the negotiations, the companies will be able to discuss and have a common pricing index that should apply to the new company.
Even though the other old company will not pay any new prices, the new company will have its prices reduced substantially. This helps the new company to reduce on the cost of production thereby having more disposable income. It can use this disposable income to invest on new technology or to maximize on its production. (Arthur, S. & Sheffrin, M. , 2003) Another recommendation would be for the new company to first form a joint venture with the other operating company in the new company.
This way, the new company will be able to escape or rather to get over all the other non-pricing barriers such high advertising costs, customer loyalty and distribution agreement. Under the umbrella of the already operating company, the new company now in the joint venture will be able to penetrate the market and only after it has succeeded in establishing the market should it break and be on its own.
Due to these barriers, we can present sales at the new company in the tables below taking a span of ten years. From the tables, it is clear that the business is moving all right up to the year 2002 when it suddenly goes down. This defines the time when the new company decides to break-off from the joint venture and be on its own. The business goes down as they are now running independently but it slowly regains momentum because they are familiar with the market. (Arthur, S. & Sheffrin, M. , 2003)