Flyboy, IncFlyboy, Inc which is successful manufacturer of aircraft’s wants to expand its market to Pamonia. (a small oil rich kingdom that was once an Italian colony). The government would be the principal purchaser, along with some royalty private families. It is not possible for Flyboy to enter the marker without a local representative.
Flyboy is aware that “grease payments” and lavish gifts to customer is Pamonia is customary. Before Flyboy can make any decisions in expanding to Pamonia, several aspects need to be carefully analyzed and planned out, to avoid future troubles and make a smooth transaction. Both the advantages and disadvantages of this transaction should be considered. Typically the advantages of effectively expanding abroad outweigh the disadvantages and therefore the advantages will only be boldly stated.
More time will be spent in analyzing in more detail the minuses of this transaction and showing how these disadvantages can be overcome by Flyboy. The two major advantages of Flyboy moving into Pamonia include: The opportunity for Flyboy to expand its geographic scope of its marketing. And the local presence permits Flyboy to maintain the aircraft’s sold abroad, which can lead to better customer service and translate in to customer loyalty and satisfaction. This by the same token crates an increase in revenue.
On the other side of the coin- the disadvantages or not so attractive side of the transaction are the following: By setting up and hiring agents (dependent or independent) the company has subject itself to local laws and regulations. There are many different international laws that help out a firm when entering a new foreign market, but there are just as many new host country regulations that Flyboy should consider before making any critical decisions. An example of one of the regulations that Flyboy should consider, especially if it will be in charge of marketing, is the regulations for advertising abroad. Adverting regulations are established so the host country can make sure that the new company complies with regulation such as publishing the truth in advertising, the language used in the ads, and so they can have some control over the specific content. Flyboy should have very well planned marketing strategies and local marketing considerations.
Since many of the advertising regulations abroad are not even a stated law, but rather an industry code observed by the local marketing organizations; the best thing any new foreign company should do is seek legal advice from local practitioners and fashion local advertising appropriately. Other regulations that Flyboy should take into consideration are the standards set forth by the Foreign Corrupt Practices Act (FCPA) which regulate the behavior of US companies abroad. The FCPA mainly prohibits the bribery of officials abroad and requires for US companies to keep accurate books, records, and accounts, which in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets. For US companies to effectively set up and expand abroad they need to consider all the different regulations set by the US and those set by the country they with to penetrate or expand to. Another step that Flyboy may take to avoid problems is to seek the Department of Justice Review Process in which before entering a transaction the DOJ analyzes the transaction and raises any possible FCPA issues. This gives Flyboy the opportunity to better evaluate the pros and cost of the transaction and become proactive rather than reactive to such issues.
This is a good manner in which Flyboy can address beforehand any issues that might complicate the transaction. Also the fly boy might wan to closely consider and implement prudent behavior in which: Directs payments to government officials other than those associated with the most ministerial tasks of clearing customs, should be avoided. Flyboy should carefully select the people or agencies it relates itself to and works with and even more carefully pay them. Premium transactions should be avoided in nations with suspect reputations. And appropriate inquiry should be made with respect to the government officials who discretion is involved in any given transaction. 2.
Flyboy should evaluate what kind of terms should be se up with its local agent. Which way should it go, should it opt for an independent agent in which he / she is not closely regulated and has more freedom to work as they please, with vague guidelines and are able to make decision son their own? Or should it set up or enter terms with a dependent agent? I believe that the best terms on which to enter with the Pamonian agent should be those of a dependent agent. Flyboy should have good control over what it is the agent is doing and how it is being done, what procedures are being used? Thought having a dependent agent brings on many responsibilities and liabilities, these might just be worth it, if you gain a better quality control system. By having a dependent agent, Flyboy can monitor the agent’s behavior by providing him with a specific, detailed schedule of what should be done at all times. This way Flyboy leaves an open door for any changes or improvements it might see fit. Having a dependent agent may also crate better customer service, because the agent can concentrate its time and efforts in attending all the needs of the particular client he / she is assigned to.
3. Perhaps Flyboy should also consider if using an Italian firm, as a distributor would be a good idea. Since no useful general principles apply to all countries, and most rules abroad are diverse and arbitrary as the local human culture, and as transitory as political opinions, perhaps using an Italian firm as the distributor would be a good idea. This would help Flyboy in following the norms of Pamonia concerning the different regulation s and codes of the area, since the Italian firm is already accustomed to them and knows more (is more familiar with) the local practices.
Flyboy should at all times be very involved in the transaction and overview any action taken in its behalf. Of course many of these complicated regulations can be avoided completely if Flyboy decides that it will merely deliver free on board (FOB) Pamonia. This way Flyboy would only be subject to US regulations, with which the firm is clearly familiar with and knows what to expect at all times. If Flyboy des not have any agents abroad, it cannot be subject to Pamonian regulations.
This may sound like a good idea or a more convenient option, but other aspects should also be considered. If the firm simply delivers the aircraft’s FOB, then Flyboy will not b able to easily and conveniently provide maintenance to its products, therefore having a lower customer satisfaction. Not only that, but this means that Flyboy has no control over the marketing of its product in Pamonian, or rather has no marketing abroad, period. This means that the only Pamonian customers it will gain are those that accidentally stumble upon its Internet website.
This means that there is no real opportunity or rather Flyboy has disregarded its opportunity to expand the geographic scope of its marketing. No one said expanding abroad was an easy tasks, it involves a great deal of analyzing and planning, but usually the benefits gained from such transaction are well worth it.