Philip Austin: From Trade Fair to Exporting Success Paper Example

Introduction

Philip Austin is the general manager of Barrett Farm Foods. He was determined to expand the export business after coming from an industry trade fair held in Cologne, Germany. He found that many Australian firms are already doing business in Europe. Many success stories were pointed out, such as Burn Philip and Elders-IXL. The problem comes in because Austin recognized an opportunity, but he had little knowledge about the export market. Upon returning from the trade fair, Philip Austin formed a task force that was supposed to implement the export drive. The three managers noted some challenges with the export business. Despite there been some prospective customers, going global required the company to weigh the options since it involved a lot.

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The Multiple Causes of the Problem

One reason why there is a challenge in expanding the export business for Barrett foods is because it deals with perishable goods. Special equipment are required for handling foods. It is a process that needs the utmost care to prevent losses. Due to the difference in taste between Europe and Australia, many studies are required to ensure that the products exported match the needs of customers. Since Barrett is yet to be recognized in Europe, it may spend a lot on brand marketing. Increasing marketing in foreign countries will leave small profit margins.

Since Barrett has little knowledge about the export market, it has to rely on foreign intermediaries. Austin met Peter Telford, who was willing to represent Barrett in the European Union. Although the agent emphasized his knowledge about the market, he may not be the right choice for Barrett due to some reasons. First, he does not know about the company's product since he just met the manager in the trade fair. The second reason is the company had not researched about him. He may not be having a good record in that kind of business, and therefore, there is a need to do due diligence. The third reason is that the company does not know about his charges. The cost of doing business with the intermediary might be high, leaving small profit margins.

The pricing strategy is also likely to be a challenge. The products have to be sold at a price which covers all the cost of exportation. Various intermediaries are involved from shipping to the selling agents. All that cost added to the initial expense at the country of origin will make the product have a high selling price. Barrett needs to cover some of the expenses like selling in the European countries to eliminate some costs. Tariffs and fees of marketing are additional expenses.

The strategy that Mr. Austin was suggesting is direct exporting. Many challenges come with this kind of exporting, mostly because of uncertainties. One does not understand the foreign market and relies upon the analysis of the intermediary. As the task force found, there is a lot of costs that are involved. If the company is established with a reputable brand, it would be easier to sell in the European countries. The company needs to look for alternatives to direct exporting or use other strategies to do international business.

Alternatives Ways of Solving the Problem

Online Selling

Many businesses are minimizing their cost of operation through online selling. It is possible to have customers, even in foreign countries. Barrett can do direct exporting, but the mode of selling should be online. The customer can pay for the goods, including the cost of shipping (Peleckis, 2016). By using this strategy, some fees such as the agent commission, are eliminated. All the documents which are required are uploaded online.

Licensing

Licensing is one method that Barrett can use to enter the international market. The plan has a relatively low risk. It also involves a lower cost. Barrett will be the licensor since it is the one that has the brand. The licensee is the buyer of the products, which happens after a licensing agreement. If Barrett Farm Foods gets in such agreement, the farm products will be sold by another company in the European Union under their brand. Barrett will receive a percentage of the revenue, which was in agreement. The company will have saved the time and resources needed to do market research in a new country.

Franchising

Franchising is like the opposite of licensing. In this case, Barrett is the one which will sell their products but under an established brand name. The main advantage is using the brand, which is already known, and then there will be no need to market the product (Le Nguyen et al., 2016). The franchisee pays a certain percentage of the profit to the franchiser. In this case, Barrett will not incur the advertising cost since it is catered by the franchiser. The company will also enjoy free training and advice on how the products are supposed to be.

Joint Venture

In a joint venture, two or more parties agree to invest under an agreement to carry out the business together. The project is shared amongst the parties, and therefore profits and loss are supposed to be shared equally (Peleckis, 2016). Under this form of business, Barrett will have to search for another company in the European countries so that they can invest together. There is a high likelihood of getting a partner because as shown in the case, there is a high demand for European products in the European supermarkets. The arrangement should be such that the foreign company sells the product while Barrett does the manufacturing part. The profits should then be shared according to the agreement.

Foreign Direct Investment

Foreign Direct Investment happens when a company engages in production in a foreign country. Barrett can only participate in such an arrangement after verifying that the cost of production in the European countries is lower may be due to some reasons like lower wages (Rosado-Serrano et al., 2018). Another reason can be to get tax incentives. The company can decide to be exporting agricultural raw materials. They are processed in foreign countries. Processing in the countries where it is intended to be sold has some advantages. For example, the final products will be packed according to the consumers' specifications.

Evaluating the Proposed Alternatives in terms of Pros and Cons

Online Selling

Online marketing will save time for Barrett Fast Foods. The time spent in the European countries trying to meet a lot of regulations will be eliminated with online selling. With just a few clicks of the button, one is ready to start selling. Some ecommerce platforms have existing templates where one can create their stores. There are many options for selling online, which include directing clients to the main website of the company. It is not only time as a resource that is saved, but the cost is also low. The cost of selling online cannot be compared with using intermediaries who can charge high. The information required can also be obtained over the Internet, and hence there is low research cost. The company will be able to get first-hand customer response. When dealing with intermediaries, they may distort the feedback and therefore fail to improve products to customers’ expectations. It is possible to reach more customers with online marketing without incurring costs. It is also easier to provide more information to the customer through content marketing. The company is able to analyze the niche market and serve them better.

There are some disadvantages of online selling, some of which are mostly due to the weaknesses of the Internet as a whole. The first one is confidentiality. Many transactions that are conducted online are prone to security threats such as hacking. Valuable customers’ information might reach third parties. Another disadvantage is that it is not possible to create a personal relationship with the customer. The consumers may fail to give all the feedback online.

Licensing

Licensing allows one to get almost instant access to the international market as long as the right partners are found (Rosado-Serrano et al., 2018). It is one way that Barrett Fast Food can enter into the European Union Market without taking a lot of time to understand the market. Again it is a low-risk strategy. Since Barrett has less knowledge of the European Union market, it must work with a company that understands the market better. There might be many barriers which Barrett has to deal with before entering the international market. Licensing will remove all the legal barriers to entry. There is also the likelihood of cultural obstacles. Since the company is dealing with food products, it is essential to have the right information about the type of food that is accepted by many communities in Europe.

When it comes to disadvantages, the main one is the loss of control. Barrett will not be the one that sell the product to the final consumer. Therefore, it is likely that there may be some form of violation of quality. It would be easier to maintain quality if the company was responsible for all the steps from processing to selling to the final customer in the international market. Barrett also has to do enough due diligence about the company in which they are investing. The success level and the profit that Barrett gets will be highly determined by the firm's current standing in the European Union. There may also be low revenues due to relying on an external party. It would be better if Barrett were involved in the marketing efforts since they can measure the success periodically.

Franchising

Most of the advantages of licensing also apply to franchises. The first pro is that when Barrett decides to use franchising, the entry barriers will be eliminated. Most of the legal requirements will be taken care of by the franchiser (Le Nguyen et al., 2016). The cost will also be reduced. Doing business in the international arena can be involving especially when one has to look for places to set the company and do all the marketing. It is easier for consumers to buy a brand that they are used to than when a new one from a foreign country is introduced.

When it comes to disadvantages, the main one is that Barrett will lose control of the operations of the business (Le Nguyen et al., 2016). It is not the same as when they are the ones managing from processing, marketing, and sales. The management will not be in a position to make strategic decisions that they find suitable for the company. Another con is that the revenue will also be reduced since there is some franchising fee that has to be paid.

Joint Venture

The advantages of a joint venture include raising the capital together, doing market research together, and the foreign company can give more ideas about the international market (Peleckis, 2016). The liability is on both parties, and therefore in case of a loss, it is shared equally. It is possible to get more expertise in leadership as a result of forming a partnership. The main disadvantage of a joint venture is the sharing of profit. The company also may partner with another firm that is not in an excellent financial position and end up making losses.

Foreign Direct Investment

If proper research is done in the European countries and Barrett decides to invest in the country, there are some advantages which the company can accrue, such as cheap labor and tax exemptions. The disadvantage is that it may be challenging to understand which country is suitable to invest in due to changes in economic conditions.

The Alternative Chosen

After evaluating the possible alternatives, and analyzing the pros and cons, the best strategy that Barrett can use is franchising. Since the company has less knowledge about the foreign market, it needs to work with a company that is well established.