PTXM Company International Trade and International Investment Strategies
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Introduction
PTXM adopted a proactive approach in domestic growth, in United States, rather than the reactive approaches. The proactive approach to domestic expansion has largely contributed to the company’s increase in earnings, reliability, efficiency and effective to customer satisfaction. Expanding PTXM company to international trade and investment need a proactive approach and provide for the global environment dynamics (Panhans & Kaufmann, nd). In this regard, key international and domestic risks and uncertainties are taken into consideration while developing and implementing international trade and investment strategies (Panhans & Kaufmann, nd). Proactive measures will prevent and minimize the incident of unanticipated problems and issues in the selected three markets segments. PTXM international trade and investment strategies will facilitate the achievement of overall business vision and goals. As indicated by the earlier research, the company accrues some benefits from the three segments. Australia has an overall least risk, Brazil has low production costs advantage, and Canada has low transportation costs. In addition, all market segments have friendly trade agreements and stable economy advantages. The company’s international trade and investments strategies are to be developed based on the anticipated market benefits.
PTXM International Trade and Investment Strategies
In reference to noted advantages, the company’s trade strategy will be indirect sales strategy for Canada while Australia will apply both indirect and direct sales strategies. Direct sales strategy deems fit for Brazil. Given that Brazil has a low production cost anticipation, investment strategy will be wholly owned strategy. Since Canada provide advantage in transportation cost, strategic alliance via franchising is deemed suitable. Overall least risk advantage in Australia calls for joint venture. The aims of the investment and trade strategies outlined, focuses in capturing PTXM opportunities within the selected market segments and reduce threats. The company’s international expansion strategy is determined by the Dunning electric theory of location advantages, international advantages, and the ownership advantages (Miozzo & Walsh, 2006). PTXM utilizes the eclectic theory model to develop international trade and investment strategies. According to the theory, PTXM will engage into international value adding operations that will increase competitive advantage in the global market environment (Miozzo & Walsh, 2006).
Advantages and disadvantages of the chosen strategies
Trade strategies
Indirect sales and direct sales strategies
Indirect sales strategy is employed by a company when production is in another country for example selling in Canada by use of intermediary while production facility is based in the United States. In this strategy, the company will not incur starts up cost for the channel. In addition, the company will not be responsible in physical transportation of goods and services to the oversea Canada market segment. The intermediaries are the strategic alliance such as franchising investments. Low transportation cost in Canada boost the relationship of franchisee and the customers since the prices are subsequently reduced. Indirect selling strategies pose some disadvantages, which might turn to be expensive to a company (Bradley, 2005). PTXM control over its product is curtailed by the indirect strategy. Similarly, the company poses at a risk of losing intermediary once the products’ profits are low or trading at a loss.
Direct selling imply situation where the company export and imports its products direct to the consumers (Bradley, 2005). Unlike indirect marketing, the company will directly deal with the market without using a franchisee or an intermediary. In this case, PTXM will continue possessing control of its products. The strategy further enhances and facilitates exploitation of the segment market. Monitoring customers’ progress in purchasing and level of satisfaction is vital for growth and especially in overseas markets (Bradley, 2005). Direct marketing in addition will promote communication and consistency in monitoring customers change in needs and satisfaction. However, direct marketing is expensive and utilizes many of company’s resources including time. Moreover, PTXM is not familiar with the markets dynamics in Canada, Australia and Brazil, this pose a disadvantage to the company since competition and the level of substitute’s products may cause change in taste and preferences. Another disadvantage when employing direct sales strategy in PTXM Company is that, the company needs to generate its demand for the product. Initial market entry is proved expensive and the company may end up making losses
Investment Strategies
Strategic alliance via franchising, joint venture, and Wholly owned strategy
Wholly owned subsidiary implies PTXM Company will have a foreign direct investment strategy in country having low cost of production advantage. Similarly, joint ventures and strategic alliances also include foreign direct investment. In wholly owned subsidiary, the company can set up a production facility in Brazil that has a production cost advantage. In addition, the company can engage into a joint venture with Canadians sales agents and enter the market segment. Strategic alliances are arrangements between one or more businesses with common objective and strive to achieve business goals (Hitt et al 2000). In this case, both parties must be willing to cooperate and willing to form one business. PTXM Company can franchise its operations in Australia that has an overall least risk in operations. Wholly owned strategy will provide PTXM Company with ownership specific advantages (Hitt et al 2000). These advantages include property rights, brand loyalties, and common governance. Wholly owned strategy provides no risk of losing technological and industrial professionalism to other foreign competitors. In addition, the company is in a position to control effectively and efficiently manufacturing operations and consequently realizing the learning curve advantages and the economies of scale. The only underlying disadvantage with wholly owned strategy is the responsibility of PTXM to bears all the costs and risks.
PTXM Company will enjoy knowledge diversity if it engages into joint venture. The joint venture process in international markets acts as strategy to share costs and risks between partners and reduce risks related to political influences (Hitt et al 2000). Joint venture conversely presents some disadvantages, which include risk of losing control and knowledge to partners who may otherwise opt to act as competitors. Through joint ventures, the company may loss its economies thus not realizing the experienced curve advantages. Similarly, strategic alliances may be beneficial reducing costs and risks, but the company loses quality control and profits.
Conclusion and Recommendations
PTXM Company strives to expand global markets by maintaining the current motivation to innovation and customer satisfaction. The ideal strategy for the company is to optimize production scale, reduce costs of production and achieve higher market shares in the global market. For this purpose, the company’s strategy should incorporate selling the same product in the international market, realizing cost saving measures from the increased economies of scale. Ideally PTXM Company should adopt international trade and investment as follows:
Canada
PTXM Company should adopt indirect sales trade strategy and Strategic alliance. This is because;
Canada provide advantage in transportation cost
The Company will not incur starts up cost
The Company will not be responsible in physical transportation of goods and
Acts as an incentive to franchisee to work with PTXM products
Brazil
Unlike in Canada, the company trade strategy recommended is direct sales strategy while investment strategy is wholly owned subsidiary strategy since;
Brazil has low production cost
Investment strategy preserves property rights, brand loyalties, and common governance and
No risk of losing company’s technological and industrial knowhow to competitors
Australia
Joint venture investment strategy incorporating both direct and indirect sales trade strategy are appropriate in Australian segment given that;
These strategies acts as costs and risks sharing measures
The strategy will reduce risks related to political influences
Indirect and direct sales strategies act as a diversification measures to balance both advantages and disadvantages.
PTXM Company should not engage into Turnkey Projects as an International market expansion strategy. Turnkey Projects are special method of carrying out international business trade and investments. The strategy present many disadvantage to the multinational company like PTXM Company. This strategy tends to benefit much customer and the developer. The strategy is short termed and it is executed for a short duration of time. For PTXM Company to benefit from this strategy, it must be capable of providing strict and clear performance requirements and standards to developer/ contractor. Otherwise, it will risk erosion of ideas, methods, products brands and loyalties and finally exit international market.
References
Bradley, F. (2005). International marketing strategy. New Jersey: Financial Times/Prentice Hall.
Hitt, A. M., Ireland, R. D. & Hoskisson, R. E. (2000). International strategy. Boston, Massachusetts: Southwestern college publishing.
Marcela Miozzo, Vivien Walsh (2006). International competitiveness and technological change. London: Oxford University Press,
Panhans, D. & Kaufmann, L. (nd). International expansion strategies: A research efficient framework and its application to the 10 EU accession countries. Retrieved from http://www.whu.edu/cms/fileadmin/redaktion/LS-IntMan/Publikationen_LK_4/25_LK_DP_IES_EIBA.pdf
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