Recommend which method of market entry QH should use to start selling houses in the European market.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2019). The mark or mark type is shown in brackets.

1. [0] Examiners note: This is about method of entry into Europe NOT whether QH should enter the market. In the case of franchising, QH would be the franchisor. Do not reward references to QH as a franchisee of a European company
2. [1] Knowledge: Entry methods explained
3. [1] Knowledge: Franchise - license to sell franchisor's product/service
4. [1] Knowledge: Direct investment – setting up own manufacturing plant in new market
5. [1] Knowledge: Joint venture – selling product/service in agreement with another business, usually local to market
6. [1] Knowledge: Agent - selling through independent representative in new market
7. [1] Knowledge: Direct exporting – selling to individual customers in new market
8. [1] Application: Wooden house kits
9. [1] Application: Requirements of European market (meeting building regulations)
10. [1] Application: Exchange rate depreciation will impact costs depending on method of entry, e.g. direct exporting vs. direct investment
11. [1] Application: QH no links with European developers, builders or governments
12. [1] Application: High cost rules out direct exporting
13. [1] Application: Possible export subsidies
14. [1] Application: Shipping costs
15. [1] Analysis: Advantages and disadvantages of the proposed methods:
16. [1] Analysis: Franchise or licensing: Lower set up cost, Trade barriers may be reduced, Franchisee will pay upfront for operating the franchise and royalties, Local expertise. Disadvantages: Risk to QH reputation if franchisee does not maintain standards, Sharing profits.
17. [1] Analysis: Direct Investment: Higher profit margins, Full control of marketing and operations, Avoids trade barriers. Disadvantages: High set-up costs, More market research than franchising or joint venture as new to the market.
18. [1] Analysis: Joint Venture: Risks shared, Local expertise available. Disadvantages: Not full control, Possible disagreements, Possible loss of industrial secrets.
19. [1] Evaluation: Recommendation on method with justification
20. [1] Evaluation: Ranking of methods
21. [1] Evaluation: Conditional recommendation
22. [1] Evaluation: Depends on availability of finance (for direct investment)
23. [1] Evaluation: Suitable joint venture companies (with experience of kit houses)
24. [1] Evaluation: Depends on exchange rate movements, e.g. direct investment
25. [1] Evaluation: Depends on existence and nature of any trade barriers in Europe
26. [1] Evaluation: Begin sounding out possible partners for each method and/or contact European government agencies without committing large resources
27. [1] Evaluation: Contact government in Z for possible help/assistance (possible export subsidies)