The 10-year entry plan has been modified from this -
First year. Mexico
Third year Venezuela
Fifth year Peru and Brazil
Sixth year Chile and Argentina
To this –
First year – Chile
Third year – Argentina
Fifth year – Mexico and Brazil
Sixth year – Peru and Venezuela
The main reasons have been discussed in a previous report but to put it succinctly here, it would be prudent for the company to start with Latin American countries that are more politically and economically stable and with less geographical area to cover logistically.
Exporting would be the best method of entry into Chile and Argentina since both are relatively stable countries economically and politically. Their currencies are also stable, and demographically, they are the countries in Latin America with the most number of middle class people, most likely to use the products of AllStars. At this point, all the manufacturing is still done in the US, and the products are just exported to Chile first in the first year, and as the brand is established there, to use it as a template once the company moves to expand in Argentina by the third year.
At this point, exporting would be advantageous to Allstar since manufacturing is home based making it less risky than overseas based. It also gives an opportunity to "learn" overseas markets before investing in bricks and mortar and it reduces the potential risks of operating overseas (Piercy, N., 1982). One disadvantage of exporting is that the company can be at the mercy of unscrupulous overseas agents and may lack the control (Jaffee, S., 1993).
However, as the company reaches the bigger Latin American countries like Mexico and Brazil, it would be more prudent to establish a manufacturing arm there since the populations of these two countries are way over 100 million and I think it would be worth investing there since the products of AllStar are not necessarily just for the middle class, but something that even the lower social classes have to use on a daily basis. The important thing now is to make sure the products are sold at an affordable price, and this can mean, resizing the products according to the prices the market can easily afford.
The entry methods for Brazil and Mexico can either be contract manufacture or
participation in export processing zones or free trade zones. In contract manufacture, the company contracts companies to do the production through them. This can be advantageous to the host countries, in this case, Mexico and Brazil since that how they can obtain knowhow, gain capital, learn new technologies, allow employment opportunities in the respective countries; foster foreign exchange earnings and gain reputations for the local companies as being world-class (Cunningham, M.T., 29186).
Finally, since the political and economic situations in Peru and Venezuela are particularly unstable, the entry method for them can be through licensing where a company in those countries can get a license to produce the products of Allstars in that country. It’s a good way to start foreign operations there as it opens the door to low risk manufacturing relationships. The advantages include the particular linkage of parent and receiving partner interests means both get most out of marketing effort and the company’s capital is not tied up in foreign operations. However, one major disadvantage is the limited form of participation and that licensees can become eventual competitors as they overcome cross technology transfer deals (Anderson, E. & Coughlan, A.T., 1987).
Anderson, E. and Coughlan, A.T. (1987). International Market Entry and Expansion via Independent or Integrated Channels of Distribution". Journal of Marketing, Vol. 51. January 1987, pp 71-82.
Cunningham, M.T. (1986). Strategies for International Industrial Marketing. In D.W. Turnbull and J.P. Valla (eds.) Croom Helm 1986, p 9.
Jaffee S. (1993). Exporting High Value Food Commodities. World Bank Discussion Paper" pp 198, 1993.
Piercy, N. (1982). Company Internationalisation: Active and Reactive Exporting. European Journal of Marketing, Vol. 15, No. 3, 1982, pp 26-40.