Sterling Marking Products Case Study

I recommend that Sterling should consider a fully owned subsidiary as an entry mode into the U. K. market. However, we need to ensure U. K. laws permits 100 percent ownership and understand tax incentives applicability. In addition, as an organization we would need to internally develop a strategic road map in terms of our approach to international markets. The objective of the roadmap is to provide Sterling with some guidance and a broad approach to how we conduct business on a global scale, considering recent interest in our product from firms in other countries and possibility of pursuing those opportunities.

As an organization, this is much needed to prevent some of the issues we experienced domestically while establishing our branches in Toronto and Windsor, as well as our recent challenges in the U. S. market with Julius Blumberg Inc.

My recommendation for a fully owned subsidiary in the U. K. is based on the following: In Europe, U. K. is the only European country where seals are legally required for corporations, and the most populous country in that region (exhibit 1), this continues to make U. K. the most attractive market in Europe for sales, regardless of whether seals might no longer be required in the future. Also, establishing a presence in the U. K. will place Sterling in a position to easily penetrate other European market for future expansion. Based on a qualitative cost & benefit analysis (exhibit 2), a wholly owned subsidiary provides the most advantage to Sterling. Although this requires the most capital and management commitment, the benefits it offers offsets such costs including full profitability as opposed to a shared profit in case of a joint venture (exhibit 3).

Also, in terms of the goals, strategy, resources and organizational structure of Sterling, a subsidiary best enables the firm to reach its objectives (exhibit 4). Options open to Sterling with a subsidiary is either to purchase a U. K. seal producer (Jordan) or build a branch as a Greenfield project. Buying out a local producer will allow a speedy market entry and access to local workers. This will also give Sterling access to current customers of the local seal producer. For this reasons, a “buy-out’’ subsidiary will be preferred over building a new branch.

The U.S. market is also one that is in need of a ‘turn around’ in terms of sales and profitability. Once our seven-month contract with Julius Blumberg Inc. is completed, I will suggest we change our method of entry into the U. S. Market. Our trial with Bloomberg sales force shows that a direct sales approach dramatically increases sales in this market, therefore we should continue to export and invest in a sales and distribution team locally in the U. S. to drive sales. This will also allow us to penetrate the market faster and minimize any additional capital cost.

In terms of interest shown in our product by other countries, I will suggest we research into sales opportunities in Japan for the reasons that Japan has a high population and number of lawyers compared to most of the other countries, geographically Japan also allows us to establish a hub in Asia so that we can establish a footprint in this region. However, deciding on a method of entry into this market will require gathering special information and understanding the Japan market. This research will need to be done prior to deciding a similar method of entry as was suggested for the U. K. market.