ACCA Strategic Professional · Strategic Business Leader · Strategic choices
Brenmark, a clothing retailer, wants to enter a distant country whose legal system is unfamiliar, whose market is uncertain, and where it wants to commit little capital and limit political risk. It still wants some control over operations and local knowledge. Which entry mode best fits?
Franchising fits best. The local franchisee provides capital and market knowledge, so Brenmark's investment and political risk stay low, while the franchise agreement lets it control brand standards. Greenfield and acquisition require heavy commitment, and exporting does not suit a store-based retailer.
- AWholly owned greenfield subsidiary
- BAcquisition of a local retailer
- CFranchising to local operatorsCorrect
- DDirect exporting through its own sales staff
Explanation
Franchising uses the franchisee's capital and local knowledge, keeps exposure low and retains control of brand and format through the contract. Greenfield and acquisition both need heavy investment and carry high political risk. Direct exporting suits products, not a store-based retail format, and gives no local presence.
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