To achieve Sterling’s objective of increasing revenue and to capitalize on opportunities in foreign markets, particularly the UK, it is critical to develop a strategy on foreign market entry. While I understand management’s concerns regarding focusing on new product innovation and managing a foreign branch, I am confident that these can be addressed and that revenues can increase.
After analyzing various costs, benefits, and firm factors, I recommend that we proceed with a wholly owned subsidiary in the UK, while continuing to research opportunities in other markets (Exhibit 1). A subsidiary would contribute additional profits of over $1.4 million in the first year, while allowing us to maintain our focus on a quality product, customer service and employee satisfaction (Exhibit 2). Additionally, our experience in the US taught us that a lack of involvement in marketing and selling activities could result in lower sales, despite strong market potential. We need to maintain control over techniques used in selling our product to achieve optimal sales results as well as to enforce our strict product specifications. It is also important that we act in a timely fashion, as while the UK is currently the only EEC country where seals are a legal requirement for corporations, it might not be a legal requirement in future. Its currency is also strong at the moment, with £1 = CAN $2.10, an indicator of economic stability and potential growth.
While licensing was also considered an option, there is a legitimate concern based on past behavior that the primary contender, MBF McFarlane, would copy Sterling’s strategies and product. Upon termination of the licensing agreement, they (or another licensee) could become a competitor, as the EEC lacks legal protection against duplicating a product, so long as there are minor alterations to the design. While this may