GG Farm Machinery Company is a French manufacturer of a specialized piece of machinery. Marcel Ger, the managing director of GG, was convinced there was a market in Australia for his machine and he wanted to explore in more depth how his company might do business there. Since GG was a relatively small company with less than 50 employees and an annual turnover in 2010 of approximately e45 million, the company did not have people available to make an appraisal. In addition, Marcel himself had little spare time for such an endeavor.

An international marketing consultant firm, Bonjoir Consulting Company, was hired to make an assessment of the Australian market for GG’s machinery. Market entry mode was also to be examined and Bonjoir was to recommend whether an export or a licensing strategy would be the best approach to use in developing the market.

As part of the research effort, the project director assigned by Bonjoir to the GG project traveled to Australia where a number of potential distributors, licensees, and end users were visited. While in Australia, the project director discussed the issue of tariff and nontariff barriers with Australian Customs officials.

The findings reported to Mr Ger by the consultant are summarized in Table 9.4.

Based on these findings, a decision was made by Mr Ger to enter into a licensing agreement with an Australian manufacturer.

Questions

1. Do you agree with the decision made by Marcel Ger? Explain your answer.

2. What other modes of market entry into the Australian market might GG have considered? Why are these viable alternatives?

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Table 9.4 Consultant's report to GG Farm Machinery Factor Product's Australian market potential Service requirements Transportation costs Strength of French franc Import duties Patent protection Capabilities and interests of potential representatives Price competitiveness Finding Excellent Minimal High and difficult to reduce Moderately strong Exist for some products Exporter holds strong French and Australian patents Best candidate wanted to become a licensee, not a distributor Price was sensitive issue: any duties would seriously damage export efforts Licensing Yes Yes If duties are significant Yes Yes Yes Strategy favored Either Export Yes In short run, no duties favor export