Frank Davis Comes Madagascar

2450 words 10 pages
General evaluations about the case

Frank Davis works for a U.S food processing company Summit Foods, and he visits Madagascar because the company is interested in the local spices market and wants to evaluate if there are good opportunities to enter this market. As we know the cost to enter a new market depends on the company marketing strength, on the ability to access to low cost product and effective production, the experience of the company, the effectiveness of the company infrastructure in terms of organization, technological efforts likely to be successful as measured by the strength of the development organization and the availability of adequate operating capital.
Once in Madagascar the issues with which he must deal are
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He must find agents and distributors, with prior experience in distributing products. Local agents have priority since they can easily communicate in Malagasy and French. He also must find the safer and cheaper way to enter the market. The products can enter Madagascar via air or sea. In the transportation he must also calculate the bad infrastructure. The advantages are that exporting minimizes risk and investment and the possibility to uses local facilities. The disadvantages are transport costs, trade barriers and tariffs add costs, and from the case we see that the data available are not updated so no security in what you are entering, and since in Madagascar the companies are a family affair the companies are viewed as strangers.
Another positive thing if the work would be made by local workers is the low labor cost and the ability of the Malagasy work force to master new skills quickly, but still Frank needs to make additional plant facilities

b) Licensing and Franchising

As we know a license agreement, grant to another firm the right to use any kind of expertise and trademark for one or more of the licensor's products. From licensing agreement Frank will obtain a sizable income, but still in a non stable economical country and with a lack of consistency in the Malagasy Commercial Code, this kind of contract must be negotiated carefully. Another risk here is that the licensee will become a future competitor, upon