Entry modes: The Akij Food and Beverage Limited (AFBL) Company is one of the largest
manufacturers, distributors and marketers of nonalcoholic beverage concentrates and syrups
in the Bangladesh. It is best known for its flagship product, Mojo, and is one of the largest
corporations in the Bangladesh. Today, AFBL is a domestically recognized soft drinks
company with ambitious plans to further grow the brand. The company owns the majority of
the soft drinks available. Some of these brands include, Mojo, Speed, Clemon and Frutika.
When an organization has made a decision to enter a foreign market, there are a variety of
options open to it.
An organization wishing to “go international” faces three major issues:
i) Marketing – which countries, which segments, how to manage and implement marketing
effort, how to enter?
ii) Sourcing – whether to obtain products, make or buy?
iii) Investment and control – exporting, joint venture, global partner, acquisition, green field
investment, franchising.
AFBL Company has decided to launch their flagship product, Mojo in EGYPT through
exporting entry mode system. By this system there have some advantage and challenges as
well as some tariffs and regulation cost occur.
Advantages:
1. Avoid property, plant and equipment cost: Through exporting system, AFBL
Company need not to establish factory production system. By exporting through
shipment or cargo service, the AFBL Company can easily deliver their product in the
target market (EGYPT). So the company can save their long term investment by
exporting.
2. Increased Sales and Profits: Selling goods and services to a market the company
never had before boost sales and increases revenues. Additional foreign sales in
EGYPT over the long term, once export development costs have been covered,
increase overall profitability.
3. Gain Global Market Shares: By going international, AFBL Company will
participate in the global market and gain a piece of their share from the huge
international marketplace.
4. Diversification: Selling to multiple markets allows companies to diversify their
business and spread their risk.
5. Lower per Unit Costs: Capturing an additional foreign market will usually expand
production to meet foreign demand. Increased production can often lower per unit
costs and lead to greater use of existing capacities.
6. Gain New Knowledge and Experience: Going international can yield valuable ideas
and information about new technologies, new marketing techniques and foreign
competitors. The gains can help domestic as well as foreign businesses.
Exporting Challenges:
1. Product Modification: When exporting, AFBL companies may need to modify their
products to meet foreign country safety and security codes, and other import
restrictions.
2. Financial Risk: Collections of payments using the methods that are available (open-
account, prepayment, consignment, documentary collection and letter of credit) are
not only more time-consuming than for domestic sales, but also more complicated.
Thus, companies must carefully weigh the financial risk involved in doing
international transactions.
3. Export Licenses and Documentation: Though the trend is toward less export
licensing requirements, the fact that some companies have to obtain an export license
to export their goods makes them less competitive. In many instances, the
documentation required to export is more involved than for domestic sales.
Tariffs and non-tariff barriers:
Tariffs:
Tariff rates in Egypt have been reduced to a maximum of 40 per cent - except cars, alcoholic
beverages and certain luxury items. Tariffs on many items are lower, with the average rate
still in excess of 25 per cent.
In addition to the government levies a service fee on the value of imported shipments is
charged at two per cent or four per cent depending on the customs duty of the imported item:
2% for commodities subject to customs duties between5% to 30%.
4% for those subject to custom duties over 30 %.
Alcoholic beverages, larger cars, tobacco and tobacco products are subject to duties up to
3000 %.
Non-tariff barriers:
The General Authority for Exports keeps a registry of all importers who issue an
import card to registered importers. The import card must be presented when an
import transaction is undertaken. All import transactions require a letter of credit to be
issued from an officially registered bank.
To Order bills are acceptable provided that the name of the bank which opened the
letter of credit is indicated, as well as the name of the importer of the goods.
Certificate of origin must be issued and attested by an approved authority.
