Essay on Giordano Entered a Contract Joint Venture with Real in Germany, Why This Form Was Chosen Than Other Forms of International Market Entry Method?
Threats & Opportunities
During 2000 & 2001, Giordano had been facing a serious of challenges, like intensifying competition, rising unemployment rate, which had increased to 4.5% in March 2001. Moreover, economic growth in Asian countries was predicted to drop during that period of time. The management believed that the Group profit was at risk if the growth of its two major markets, Hong Kong & Taiwan, slowed down in consequence.
Giordano management decided to continue its multi-region development strategy and, as a result, the Group made its debut in Germany through a joint venture in March 2001. Germany is an important gateway for the Group to enter into the European Union (EU) consumer market. Through this venture, the Group also…show more content… It involves the transfer of resources including capital, technology and personnel.
Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment. However, it requires a high level of resources and a high degree of commitment. Except previous trial/small scale expansion had been done to test the feedback in Germany, otherwise, this case is comparatively too risky for Giordano’s first entry to European counties.
4) Joint Venture To share the risk of market entry into a foreign market, two organizations may come together to form a company to operate in the host country.
Giordano is therefore bounded to 'match up' with an appropriate local partner (REAL) in order to smooth entry into that business environment. Shop-in-shop systems are becoming increasingly powerful. From a study (Ref.no.5), every fourth Euro spent on textiles in Germany goes to four leading companies - KarstadtQuelle, Otto, C&A and Metro. Apparently, Giordano selected a good business model and a potential partner for entering the Europe.
There are 5 common objectives in a joint venture:
market entry
risk/return sharing,
technology/resources sharing
joint product development
conforming to government regulations.
Most likely, the above objectives met with that of Giordano quite well. At that moment, what Giordano looked for was an economic (cost control) and efficient (speed) way to expand into the
