Lebanese Apples Inc. New Market Entry Paper Example

Brief Synopsis of the Issue

This report provides an analysis of proposed Lebanon enjoys a good climate for Agriculture. The country is one of the major producers of vegetable and fruits. Lebanese Apples Dethroned is one of the major farms produces in Lebanon. Our company, Lebanese Apples Inc. has several untapped markets across the world, and this export strategy aims at identifying and analyzing the available opportunities created by the engagement in international trade activities. The history of apple fruits can be traced in a long way since the product was recognized as the "king of the fruits." The origin of this product was primarily from the Romans who helped significantly in the distribution of the apple trees across the country. The ecosystem in Lebanon favors fruits production with a high cooperative advantage concerning other countries. The state grows different varieties of apple fruits which are then exported to other countries and other sold locally.

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America is one of the best countries with a good opportunity for the fruits and vegetable exporting firms. The market research conducted revealed that Central America is an excellent opportunity which has been under-utilized. As developing countries, demand for this particular product in the region is also increasing and the current supply of apple fruits. The export strategy explores how Lebanese Apples Inc. in Lebanon can venture into this new market in the international context. The paper will also provide the recommendations for the entry strategies. As well as assessment of the potential risk.

Recommendation(s)

There are different strategies that the company can utilize to enter the identified new market in Central America. They include:

Direct Exporting

This is the process that will enable Lebanese Apples Inc. to make use of international trade opportunities to directly export Lebanese Apples to Central America. This can be done through a foreign-owned distributing network such as Foreign Direct Investment (FDI) in the U.S. The method will help in winning customer loyalty more quickly due to physical presence in the international market which facilitates direct contact with the customer. Another benefit of this mode of entry is that it will enable Lebanese Apples Inc. to study the foreign market more easily and respond to the identified signals on time. The company will enjoy full control of the sales process and ensure relatively high performance. On the other hand, direct exporting is associated with high costs right from start-up to operational costs. The other risk would be on the availability of potential trade barriers that may hinder businesses between Lebanon and Central America. It might also be time-consuming (Daszkiewicz & Wach, 2014).

Indirect exporting

It is the process where Lebanese Apples Inc. consider selling fruits to Central America through a domestic intermediary. Some of the advantages of this method include; low entry and operational costs, low staffing is required, low financial risk, the internationalization mode is also less complicated compared to the direct exporting method (Daszkiewicz & Wach, 2014). On the other hand, the disadvantages associated with the technique include; less control of the sales process, low profitability, lack of direct contact with the customers, the intermediary might find a better supplier at better terms, there is high transportation cost as the company will be required to transport apples when fully packed which will need more space.

Cooperative Export

This is associated with export grouping and piggybacking. It will allow Lebanese Apples Inc. to collaborate with other exporting companies to reach the target market. Some of the advantages related to the method include shared costs, shared risks, and synergy effect. The drawbacks include; over dependency on other exporting partners, the company might fail in the foreign market in the other partners withdraw.

Licensing and Franchising

Lebanese Apples Inc. is a well-known company dealing with the sale of apple fruits. Our brand name is recognized internationally which act as one of the company's strength. Licencing/franchising will involve sales of the rights to the foreign company to operate as Lebanese Apples Inc. only for exportation of apple fruits to Central America. The advantages include; low entry cost, high chance for rapid expansion, low financial risk, less commitment of the staff. On the other hand, the disadvantages include, lack of control over the sales process, lack of control of the quality of products, low profitability, relatively low customer loyalty, and also, the licensee/franchisee require specific qualifications which are not readily available (Daszkiewicz & Wach, 2014).

Assembling Operation

This entry method is more applicable with the manufacturing firms, Lebanese Apples Inc. deals with the sale of an agricultural product which requires no processing. However, the fruits are packaged to make them more appealing to the consumers and also facilitate the pricing process. The company targets the customers in all social classes and hence there is various packaging method to support different pricing for each market. The proposed entry methods are as summarized in the figure below:

Background

Globalization offers an excellent opportunity to the business is expanding its operations in the foreign market. International trade is a critical component of globalization. It facilitates the exchange of goods and services between two or more countries through a concept known as exporting and importing. It has got a critical role when it comes to economic development as it encourages output maximization. The country is capable of utilizing its factors of production to produce commodities that it has a comparative advantage on and eventually exchange with another for other products. For instance, Lebanon is good in agricultural activities when growing fruits and vegetable while China is good at growing rice (Ganry, 2011). It will be much economic if each country produces what they are good at and exchange with one another through free trade processes. The strategy will also help in attaining high productivity for improved efficiency.

International trade is much vital tool that allows the countries to be economically linked. Lebanon has built a competitive advantage with several niche products (Leeters, 2016). The company emphasize more on value addition to the fruits and vegetables for profit maximization and meeting the customers' needs. The approach is also critical in facilitating product differentiation. Apple fruits exporting firms are continually increasing and hence creating intense competition in the industry. Firms in these sectors are competing in terms of quality and price. Lebanese Apples Inc. has got a competitive advantage in both of this area and hence, the chances of succeeding in the Central American Market are high.

International Trade Theory

Comparative Advantage Theory and Absolute Advantage of Lebanon

The comparative advantage theory provides that with free trade economy, the agents will produce more on the goods and services which they have a maximizing capacity. It is an economic reality that describes the gain arising from the trade between two parties. Comparative advantage helps the traders to maximize productivity while minimizing the opportunity cost. The producers do not compare the production cost but instead compares the opportunity cost of producing one product over the other. David Ricardo coined the theory of comparative advantage in 1817 where he tried to explain the concept of international trade (Elliott, 2010). His major argument was that if two countries under free trade were to produce two commodities, each would increase productivity and export the good/service that it has a comparative advantage and import the other. Under this situation, the two countries will be at equilibrium when the import balances with the exports.

Natural Advantage

A natural advantage exists where one country is capable of producing more of the commodity due to the availability of natural resources, climatic conditions, and access to required human capital among others. Lebanon is known for a favorable climatic condition that supports high productivity of fruits and vegetables. The annual imports of these commodities amount to EUR 185 million while the exports were about EUR 225 million. It signifies that the country exports more than 500,000 tonnes (Ganry, 2011). Most of the fruits and vegetables produced in Lebanon are consumed in the Middle East. The state also exports substantial quantities to the Gulf States. The differences in the natural advantages in different countries help in promoting international trade.

The host country

Central America experiences a steadily growing economy. The GDP per capita is also higher compared to other nations and hence providing the consumers with a greater purchasing power (Leeters, 2016). Market research shows that there is a golden opportunity in this market since there is no other firm exporting apple fruits to the region. The existence of the free trade option between Lebanon and Central America is another strength that Lebanese Apples Inc. should utilize. The entry into this new market will help our company in growing its market share and boosting sales for higher profitability. The trend in GDP growth in Latin America & Caribbean is represented in the graphs below:

Research on the Assessment Topic

Latin America provides an excellent opportunity for fresh farm produce, and many countries are entering into this market through international trade and global integration. However, for any company to take advantage of these opportunities, they ought to have a better understanding of the foreign market. Exporting companies must appreciate the diversities in customer's preferences and tastes to ensure ranging from one country to another. Research conducted by Alvarado & Mildred (2013) revealed that customer's needs are localized. It is also vital to analyze the international business environment before venturing into this new market. The management should first address critical questions concerning their operations in the foreign market. The legal environment in Central America favors foreign companies and hence making the market appropriate for exportation of apple fruits.

The states in Central America and more particularly El Salvador, Guatemala and Honduras have several barriers such as language, cultural, technology, and poverty that may hinder the development of international trade in these market. Lebanese Apples Inc. should aim at addressing some of these barriers through the implementation process to ensure prosperity in the markets. The market requirement should also be assessed on the growing, harvesting, packaging storage and transportation of the fruits.

The trend of disposable income in the target market

The target market has a steady growth in disposable income. According to the recent statistics by the World Bank, the estimated growth of 0.9% was noted with Latin America and the Caribbean in the year 2017. This was following a significant contraction that was experienced in the previous two years (World Bank, 2018). Private consumption has been high since the year 2017, and it is expected to continue increasing even in the following years. Thus the various countries prov...