Imagine that you are the inventor of unique, robotic dolls that have been very successful and popular in your home country. You see a great opportunity in bringing this product to Germany. Conduct a basic analysis of the German market and suggest the best entry mode (exporting, nonequity, or direct foreign investment) for your product.

Question

What will be an ideal response?

Answer 1

The student’s analysis and recommendation could look as follows:
External Environment Analysis:
? Markets for the products/services: According to a 2006 Euromonitor International Report, the number of children in Germany is declining as a percentage of the population and there is a trend toward smaller families and less spending. Toy giants Playmobil and Lego are both struggling, especially since German consumers are very price conscious.
? Per capita income of the population: Approximately US$34,200 in 2007
? Labor and raw material availability: All of the resources needed to manufacture the dolls should be easily available since Germany is part of the EU and has numerous trade pacts with countries outside of Europe that supply raw materials.
? Exchange rates, exchange controls, and tariffs: .73€ = US$1.00 in 2007
? Inflation rate: 2.1% in 2007
? Competitive products/services available: There are numerous doll manufacturers in Germany including well known brands like Engel-Puppen Gmbh and Steffi Love as well as major international brands like Mattel.
? Positioning and political risk: Little or no political risk.
Data from: Consumer Lifestyles – Germany (2006 report by Euromonitor International); CIA World Factbook – Germany
Entry Modes:
? Exporting: Best option if the inventor has a relatively well-established manufacturing base set up already; Internet sales could be advantageous since German shoppers are looking for bargains online.
? Non-Equity: Since German toys are known for their high quality, a licensing agreement could be a great option for the inventor. It also reduces the risk of entering the market, especially when toy sales are on the decline.
? Direct Investment: A joint venture could be the best route for the inventor, if he can convince one of the well-established doll makers to help him launch his robotic doll. The robotic doll strays from the traditional wood and porcelain dolls in Germany and has good potential of attracting new buyers to the doll market.