Analyse two factors influencing HCC's method of entry into international markets.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2024). The mark or mark type is shown in brackets.

1. [K] Methods of entry include direct export, use of agents, franchising and joint ventures.
2. [K] Factors influencing decision: Cultural differences between country K and E.
3. [K] Cost of alternative methods.
4. [K] Availability of finance.
5. [K] Desire to maintain control over marketing.
6. [K] Knowledge of the market.
7. [K] Market size.
8. [K] Competition in the market.
9. [K] Infrastructure available.
10. [APP] Current marketing depends on demonstrations of products to potential customers using regional sales agents. (using agents with knowledge of the local market might be appropriate)
11. [APP] Objective is to enter the market ahead of competition in January 2025. (direct export might be quickest way of entering the market)
12. [APP] Social mission of HCC. (direct investment as jobs will be created)
13. [APP] High gearing ratio. Has increased from 60% to 70%. (lower cost option of entry such as franchising or joint venture)
14. [APP] Low profit margin. (lower cost option favoured rather than direct investment)
15. [APP] Declining liquidity. (might suggest joint venture would be appropriate)
16. [AN] High gearing ratio and low profitability may mean that HCC needs to consider cost of method of entering the market due to lack of finance. This may favour a joint venture to share costs.
17. [AN] Country K may be culturally different to country E, making it more difficult for HCC to replicate its marketing mix. It may be beneficial to use an agent with greater knowledge of the market to gain entry.
18. [AN] Licensing production could reduce costs of selling products making them more competitive. However, this could result in a loss of control over quality and brand image of HCC.
19. [AN] Producing in country K could avoid economic barriers to trade therefore increasing the probability of success.