ill include an audit of two of the three countries, a recommendation of the one country that seems most suitable, and a strategy for entering that country. Without questioning some internal assumptions that Bob has made concerning his production power, we shall accept (blindly) his belief that he can boost production to 2,000 figurines per day. The one business fact that we cannot ignore, however, is the very slim margins with which he is operating, specifically, a retail price of $30 for an item that costs him $20.
Generally, the novelties and house ware segments that he would be selling in usually operate on markups of 60 to 80 percent, with an item that costs $1 selling at retail for $5. These markups are necessary because of the typical channels that the figurines are sold in. However, we shall accept the assumption that, should HSR grow, and his volume increase, the costs would be reduced.
When considering international marketing, HSR must establish minimum parameters that the company will accept before attempting to export the replicas. This means that HSR must have flexibility concerning its own internal structure. This flexibility is necessary because HSR will be called upon, most likely, to revise certain of his operations and strategies based on the role of the governments of the countries considered, and the way in which the company would operate in the foreign nation (whether directly, as part of a joint venture, or through some licensing effort) (Dunning, 1995).
The country audit should also consider the political situation in the target country, as well as the labor situation (both at home and abroad), differences in the currencies between the various countries, and barriers to trade (both tariff and nontariff) that need to be evaluated. The considerations of the barriers which a company needs to overcome usually give a good indication of whether a particular venture will be profitable or unprofitable (...