As an Italian manufacturer of high quality gravel bicycles, you successfully sell your bikes through your own shop in your factory and a few selected retailers. The selling prices for your bike range between €5000 and €7000. You now plan to sell your bikes into the German market (you may alternatively choose your home country as the market the Italian manufacturer could want to sell in – indicate the country then). Discuss how you would approach this project.

There are a variety of ways in which a company can enter a foreign market, and all of them might be effective or ineffective depending on the circumstances. Most of these strategies are discussed below and then interpreted in application to the bicycle company from the case study. The most evident and structurally simple way of foreign market penetration would be direct exploring.

Direct exporting, as stated in the title, is selling directly into the market you have chosen, fully relying on the financial and production-oriented resources a firm already possesses. It is the most popular approach, with multiple firms choosing to engage in it once they are confident in their local sales and sources of income. To establish and facilitate the process, the firm works with distributors and agents to avoid legal complications and unnecessary costs. These agents and distribution staff members become the face of the company overseas and should be chosen with the utmost care and attention to detail.

Another way of entering a foreign market is licensing, a relatively sophisticated agreement where a company transfers the rights to the production of its products to another company. Said strategy is most often used when the buyer firm has an established and large share of the market. This approach would work since Germany already possesses several well-known bicycle brands. It would help the incoming firm to avoid the difficulties of the competition against the well-established companies but is also associated with sharing the profits.

Franchising is another potential option for the case study firm, as it is one of the most effective strategies for a rapid market extension. It works the best for companies that have a repeatable business model that can be easily replicated and doesn’t require highly specific supplies. The main barrier to entry is that for the franchising model to be effective, an initial firm should be somewhat recognizable or able to quickly occupy its intended niche abroad. I find the franchising model to be questionable for the firm since the bicycle production with product prices between 5000 and 7000 is not very suitable for it.

Partnering is arguably the most flexible of the foreign market entry strategies and is often unavoidable in one way or another. Depending on the details of the agreement, it can take a variety of forms ranging from a simple co-marketing agreement to a strategic manufacturing-oriented co-production of product parts. With the case study company wanting to enter a German market well-known for its technological and mechanistic innovations, partnering might be the way to go, considering it involves expertise and tool exchange. Additionally, the case study firm would gain access to local expertise in matters of business, law, and general customs.
To minimize financial and logistic risks, a case study company might opt for partnering with another non-German or local firm and forming a joint venture.

Joint ventures are a form of partnership that consists of the establishment of a third, independently managed business organization. Within this framework, two companies agree to work together in a particular market and establish a third firm for this purpose, sharing risks and profits alike. The downside to this arrangement could lie in the conflict of interests that is difficult to avoid when the companies in question have already competed in the past. The joint venture model, however, might work for the case study firm if it partners with a business that wants to enter the bicycle production industry.

Last but not least, out of the available options would be buying a local bike company in Germany and then influencing its marketing and production strategies. Since the Italian manufacturer in question is a successful establishment selling high-quality bikes to a luxury market segment, their budget is on the higher side of the scale. The manufacturer could purchase a local German firm that, perhaps, produces low- or mid-ranged bicycles and penetrate the market through them. This option creates logistical complications, however, since for the company to preserve its existing clientele, it would not be reasonable to significantly change the price range of products. However, buying another luxury bike firm can be a complicated task due to it being likely to be highly-priced and, therefore, less affordable.

Answer by Academic.tip's expert
An answer to this question is provided by one of our experts who specializes in marketing. Let us know how much you liked it and give it a rating.

Cite this page

Select a citation style:

References

Academic.Tips. (2022) 'As an Italian manufacturer of high quality gravel bicycles, you successfully sell your bikes through your own shop in your factory and a few selected retailers. The selling prices for your bike range between €5000 and €7000. You now plan to sell your bikes into the German market (you may alternatively choose your home country as the market the Italian manufacturer could want to sell in – indicate the country then). Discuss how you would approach this project'. 7 October.

Reference

Academic.Tips. (2022, October 7). As an Italian manufacturer of high quality gravel bicycles, you successfully sell your bikes through your own shop in your factory and a few selected retailers. The selling prices for your bike range between €5000 and €7000. You now plan to sell your bikes into the German market (you may alternatively choose your home country as the market the Italian manufacturer could want to sell in – indicate the country then). Discuss how you would approach this project. https://academic.tips/question/as-an-italian-manufacturer-of-high-quality-gravel-bicycles-you-successfully-sell-your-bikes-through-your-own-shop-in-your-factory-and-a-few-selected-retailers-the-selling-prices-for-your-bike-range/

References

Academic.Tips. 2022. "As an Italian manufacturer of high quality gravel bicycles, you successfully sell your bikes through your own shop in your factory and a few selected retailers. The selling prices for your bike range between €5000 and €7000. You now plan to sell your bikes into the German market (you may alternatively choose your home country as the market the Italian manufacturer could want to sell in – indicate the country then). Discuss how you would approach this project." October 7, 2022. https://academic.tips/question/as-an-italian-manufacturer-of-high-quality-gravel-bicycles-you-successfully-sell-your-bikes-through-your-own-shop-in-your-factory-and-a-few-selected-retailers-the-selling-prices-for-your-bike-range/.

1. Academic.Tips. "As an Italian manufacturer of high quality gravel bicycles, you successfully sell your bikes through your own shop in your factory and a few selected retailers. The selling prices for your bike range between €5000 and €7000. You now plan to sell your bikes into the German market (you may alternatively choose your home country as the market the Italian manufacturer could want to sell in – indicate the country then). Discuss how you would approach this project." October 7, 2022. https://academic.tips/question/as-an-italian-manufacturer-of-high-quality-gravel-bicycles-you-successfully-sell-your-bikes-through-your-own-shop-in-your-factory-and-a-few-selected-retailers-the-selling-prices-for-your-bike-range/.


Bibliography


Academic.Tips. "As an Italian manufacturer of high quality gravel bicycles, you successfully sell your bikes through your own shop in your factory and a few selected retailers. The selling prices for your bike range between €5000 and €7000. You now plan to sell your bikes into the German market (you may alternatively choose your home country as the market the Italian manufacturer could want to sell in – indicate the country then). Discuss how you would approach this project." October 7, 2022. https://academic.tips/question/as-an-italian-manufacturer-of-high-quality-gravel-bicycles-you-successfully-sell-your-bikes-through-your-own-shop-in-your-factory-and-a-few-selected-retailers-the-selling-prices-for-your-bike-range/.

Work Cited

"As an Italian manufacturer of high quality gravel bicycles, you successfully sell your bikes through your own shop in your factory and a few selected retailers. The selling prices for your bike range between €5000 and €7000. You now plan to sell your bikes into the German market (you may alternatively choose your home country as the market the Italian manufacturer could want to sell in – indicate the country then). Discuss how you would approach this project." Academic.Tips, 7 Oct. 2022, academic.tips/question/as-an-italian-manufacturer-of-high-quality-gravel-bicycles-you-successfully-sell-your-bikes-through-your-own-shop-in-your-factory-and-a-few-selected-retailers-the-selling-prices-for-your-bike-range/.

Copy