Evaluate which method CP should use to enter the market in country D.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2023). The mark or mark type is shown in brackets.

1. [1] Understanding of methods of entry.
2. [1] Exporting directly to retailers – promoting and distributing products to retailers who take responsibility for the marketing.
3. [1] Joint venture – alliance with another business, two companies agree to act as one for a particular project.
4. [1] Direct exporting advantages: Quick to set up and discontinue.
5. [1] Direct exporting advantages: Little investment needed.
6. [1] Direct exporting advantages: Low initial cost, retailer bears risk.
7. [1] Direct exporting advantages: Retailer uses local knowledge of markets and promotion methods.
8. [1] Direct exporting advantages: CP retains control over marketing.
9. [1] Direct exporting disadvantages: May face trade barriers.
10. [1] Direct exporting disadvantages: Transport costs.
11. [1] Direct exporting disadvantages: CP relies on retailer to implement desired marketing strategy.
12. [1] Direct exporting disadvantages: Retailers may prioritise sale of other companies' products.
13. [1] Direct exporting disadvantages: CP may have cash flow and credit risks.
14. [1] Direct exporting disadvantages: CP unlikely to gain market information.
15. [1] Joint venture advantages: Shared risk.
16. [1] Joint venture advantages: Shared cost of investment.
17. [1] Joint venture advantages: Access to local market knowledge, distribution arrangements.
18. [1] Joint venture advantages: More control over marketing.
19. [1] Joint venture disadvantages: Higher costs, especially management and communication, and slower, more expensive to set up.
20. [1] Joint venture disadvantages: Possible conflicts over contractual arrangements and possibility that partner may become a competitor.
21. [1] Joint venture disadvantages: Loss of control as shared venture.
22. [1] Joint venture disadvantages: Reliance on another business.
23. [1] Nature of CP's paint products – good quality, value for money, strong brand name, priced above similar brands.
24. [1] Not supplied for own brand products.
25. [1] Identified market gap is for CP's existing products.
26. [1] Joint venture with wholesaler versus direct exporting to retailers.
27. [1] Different countries may have different cultures in terms of domestic use of paints inside and outside of homes, maybe due to style of houses or weather.
28. [1] Direct exporting may be less costly and more flexible as it can be set up quickly and the retailer takes the risk. However, there is no guarantee that retailers will give CP paints a high profile, so sales may not increase very fast.
29. [1] A joint venture allows CP to share the risk and gain expertise of a local company, this could increase sales. However, there may be some loss of control to the joint venture partner and if the company is a competitor, sales may not increase as fast as expected.
30. [1] Other options exist and could be researched: use of an agent, direct investment in a paints factory, etc. Is CP sure that the two put forward are the only realistic options?
31. [1] These options rely on accurate and reliable choice of paint retailer or wholesaler.
32. [1] Direct exporting may be suitable for CP as there are cost advantages for home paint production, assuming low trade barriers.
33. [1] Joint ventures may be suitable if the partner has good local knowledge and contacts. In the case of CP this may be very important in the specialist paints for the aircraft industry.
34. [1] Difficult to decide on these factors alone.
35. [1] Time scale and finance are important factors. Direct exporting is much quicker and cheaper to set up than a joint venture. CP have limited finance, so direct exporting may be the only possible option.
36. [1] Important to clarify objectives before deciding.
37. [1] More information needed regarding market in country D – e.g. the market research carried out, quantitative data on forecast costs of the options, revenues and finding suitable partners.
38. [1] Need to know the policy of the government in country D on foreign firms and any relevant laws or regulations covering trade, international marketing or paint products.
39. [1] A justified conclusion and/or recommendation e.g. recommendation of one option, or that both options are suitable, final choice depends on other factors above.