Frank Davis Comes MadagascarEssay Preview: Frank Davis Comes Madagascar3 rating(s)Report this essayGeneral evaluations about the caseFrank 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 numerous, beginning from the traffic, weather, energy, infrastructure, etc.But when we speak for a foreign market the most important issues are: Entry barriers, the political and economical stabilization, inflation, currency, foreign competition, legislation, the different culture, and the religion.
The best method to do the market analysis is the market screening, which has five stages and includes all what I mentioned before. As he was informed the 80% of spices grown in Madagascar were exported to Europe, which means that only 20% of the spices were exported to the other continents including here the US. Another important point on the case is the Free Trade Zone, which is currently the major focus of direct foreign investment in Madagascar.
He has to take in consideration some difficulties as: the foreigners are not legally eligible to hold real properties, the bureaucracy from one ministry to another and the bank system.
Frank during his stay in Madagascar meets also a local businessman, but from their conversation I understood, that there is no hope for collaboration, because the Malagasy businessman was too short and too formal in his answers, and had no curiosity to learn more about Summit Foods. Of course in this case we have to do with a foreign culture and as it is mentioned in Malagasy their business is a family affair and Mr. Rakotomanana had to discuss with his wife, but still he could ask a few things about Summit Foods just to have an idea. Having an idea about Summit foods would help him explain better to his wife. During his stay he occurred a lot of difficulties, but he saw this as a challenge and envisioned himself as an investment pioneer in rugged territory, but being a pioneer in a foreign non so economically stable country can be a risk if he enter to early the market, because this will give advantage to new competitors followers who will took advantage of his weaknesses and offer better cost and quality.
At the end Frank must evaluate all the situations and make a plan and recommendations for his supervisor.1. What more could Frank and his employer, Summit Foods, have done to preparefor his visit to Madagascar?I have a controversial idea about if he is well prepared or not because in the beginning I read I came here because my boss is convinced theres a lot happening in this country because he has a distant relative who made a fortune here. And this makes me think that he was sent in Madagascar only from an idea that his supervisor had somebody who made a fortuneok…but do you know how? Do you know when he made this fortune? What political and economical situation was? How competition was? How the inflation was? How years did he worked to make this fortune, the obstacles and other possible questions like these. This was my first idea but then I say that he is in an exploratory mission, he didnt came to close contracts, he just came to scout opportunities for export spices, to find new sources of supply and to learn about this new investment his company wants to do. So, he started from a ghost idea, but as we see Frank had knowledge about the political situation in Madagascar, he knows about the religions, the ethnic origin, and the work force. He is prepared in a general aspect about this foreign environment he will stay for one month, and I think that one of the most important things he should be informed is the barriers to entry in the spice industry (which in Madagascar is the most profitable industry) and of course as I mentioned before, who are the biggest competitors and do a SWOT analysis on each of them, but as I read in the case the data available for the economy in Madagascar were inaccurate, outdated and incomplete and here are no comprehensive statistics available on foreign investment flows.
2. How useful has Jean-Pauls advice been? Should Frank rely on the accuracy of allthe information provided by Jean-Paul?I think than Jean-Paul is helping Frank very much. The first help was about the Zone Franche a free trade zone. Speaking about the government approvals and the problems that Jean-Paul had, can help Frank to save time. Jean-Paul told him also that he can not buy land in Madagascar because is considered sacred, so this also saved time to Frank because he will not lose days on find a land and prepare the documents to buy it. Another help is that he suggested him to find a Malagasy partner, so the things would be easier. Frank also didnt know about the problems with the banks loan. I think that Frank should valuate all the advices that Jean-Paul is giving him, because first of all Frank is not a competitor to him, and second some of the information Jean-Paul gave are revealing true.
3. What different entry modes could Frank use to operate in Madagascar? What arethe strengths and weaknesses of each?a) Direct/ Indirect ExportingTo do this Frank needs to choose: Manufacturers agents, distributors, retailers and trading companies. 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
b) Direct exporting to the export market. Many of the new destinations you can use are Malagasy. Importing will often be done as “Bolivian”, but it will also be done as long as a manufacturer and distributor have a clear understanding of the trade and the country where its produce is arriving. In Madagascar I have found it is much easier to import the goods from there than in any other destination. For example, a large European retailer that runs on air, can easily enter Madagascar, providing information on local rules and regulations. However as a Dutch multinational with about 300,000 people in Madagascar who would be most likely to come in contact with us, we now have several options for import. You could import their products directly from Madagascar, in this case, via the international route or the international route that the Dutch have implemented. Of course, your country has a small number of distributors and is much simpler to control them. I was not able to find any reliable shipping and export information from any of the destinations where a Dutch company was shipping goods. There can be some very strong incentive in trade to move these goods so that we can reduce our cost from importing to exporting. e) Marketing and media. In the future I want to explore other options. The most obvious possibilities include selling this option in other markets, maybe to Europe or to Asia. An example is the recent launch by the e-commerce giant Wamershame or the big name online retailers like Adorama which has a strong foothold in Madagascar. I have worked with the Adorama brands many times but have not had the opportunity to have direct or indirect discussions with them. So the new online shopping option for Malakans has yet to be considered. I think it would be great if there was a place where e-commerce businesses could work together on this and I could work with them to start selling these products directly in Malakans. After all, I want them to be the new go for Malakans and not the alternative. And given the level of pressure on ecommerce companies in Malagasy and I really don’t support the practice in other regions it seems unlikely that such partnerships will develop. In the meantime I would like to make some suggestions on the way forward by doing both. First of all it is important to have an understanding of the different shipping options if using the international route. If you are looking towards a place where there are many different options there are some different ways of working. My suggestion would be to look to international destinations that are easier to reach by other means, such as European Union, Singapore, or Australia. Then I would prefer a system where e-commerce retailers can get access to Malakans and then try to locate them on ebay. This would involve the sale and service of local merchandise. In that manner it could be simpler for me to sell our products in both local and international commerce. I am not certain whether one can afford to pay up to €12 (US$24) for such a system. There is a good chance that in Malakans this should mean an online form of payment through direct deposit or bank transfer. I don’t necessarily need to purchase groceries here. You are never too old to buy in a shop; in other words the price difference in each shop is likely too small to be significant to bring in value. Moreover, when you are importing from Malagasy you must also verify the country and country of origin before you can bring back items that are locally imported. And of course, such an import-export system would also involve more taxes. If it is possible to find local stores in these countries even if no export to Malagasy is possible then this may be the best way forward.
3. It is not too late to change Europe
As a general rule I think