Assignment on:

Exporting as an Entry Mode of International Business: with specific reference to Nassa Group.

Course Title: International Business

Course Code: EM 516

Submitted to:

Mehnaj Afrin
Asst. Professor
Department of Management
Faculty of Business Studies
University of Dhaka

Submitted By:

Hossain Al Fuad
ID: 3 17 36 073
Department of Management,
University of Dhaka
About the Entry Mode:
Definition:
A structural agreement that allows a firm its product market strategy in a host country either by carrying
out only the marketing operations, or both production and marketing operations there by itself or in
partnership with others

Once a firm decides to enter a foreign market, the question arises as to the best mode of entry. Firms
can use six different modes to enter foreign markets:

Exporting
Turnkey projects
Licensing
Franchising
Joint ventures
Wholly owned subsidiary

Each entry mode has advantages and disadvantages. Managers need to consider these carefully when
deciding which to use. Since in this assignment I am considering Exporting as the entry mode to enter
the international market with specific reference to the company NASSA Group, I must need to have clear
view of the entry mode as well as its advantages and disadvantages.

Exporting:
Exporting is the marketing and direct sale of domestically produced goods in another country. Exporting
is a traditional and well-established method of reaching foreign markets. Since it does not require that
the goods be produced in the target country, no investment in foreign production facilities is required.
Most of the costs associated with exporting take the form of marketing expenses.

Many manufacturing firms begin their global expansion as exporters and only later switch to another
mode for serving a foreign market.

Advantages of Exporting:
Exporting avoids the often substantial costs of establishing manufacturing operations in the host
country.
It may help a firm achieve experience curve and location economies. By manufacturing the
product in a centralized location and exporting it to other national markets, the firm may realize
substantial scale economies from its global sales volume.

Disadvantages of Exporting:
Firstly exporting from the firm's home base may not be appropriate if lower-cost locations for
manufacturing the product can be found abroad. Thus, particularly for firms pursuing global or
transnational strategies, it may be preferable to manufacture where the mix of factor conditions
is most favorable from a value creation perspective and to export to the rest of the world from
that location.
 A second drawback to exporting is that high transport costs can make exporting uneconomical,
particularly for bulk products. One way of getting around this is to manufacture bulk products
regionally. This strategy enables the firm to realize some economies from large-scale production
and at the same time to limit its transport costs.
Another drawback is that tariff barriers can make exporting uneconomical. Similarly, the threat
of tariff barriers by the host-country government can make it very risky.
A fourth drawback to exporting arises when a firm delegates its marketing, sales, and service in
each country where it does business to another company.

Factors to be considered before adopting Exporting entry mode:

External Factors:
Market Size: Market size of the market is one of the key factors an international marketer has to keep in
mind when selecting an entry mode. Countries with a large market size justify the modes of entry with
long-term commitment requiring higher level of investment, such as wholly owned subsidiaries or equity
participation.

Market Growth: Most of the large, established markets, such as the US, Europe, and Japan, has more or
less reached a point of saturation for consumer goods such as automobiles, consumer electronics.
Therefore, the growth of markets in these countries is showing a declining trend. Therefore, from the
perspective of long-term growth, firms invest more resources in markets with high growth potential.

Government Regulations: The selection of a market entry mode is to a great extent affected by the
legislative framework of the overseas market.

Level of Competition: Presence of competitors and their level of involvement in an overseas market is
another crucial factor in deciding on an entry mode so as to effectively respond to competitive market
forces.

Physical Infrastructure: The level of development of physical infrastructure such as roads, railways,
telecommunications, financial institutions, and marketing channels is a pre-condition for a company to
commit more resources to an overseas market.

Level of Risk: From the point of view of entry mode selection, a firm should evaluate Political Risk,
Economic Risk and Operational Risk.

Production and Shipping Costs: Markets with substantial cost of shipping as in the case of low-value
high-volume goods may increase the logistics cost.

Internal Factors:

Company Objectives: Companies operating in domestic markets with limited aspirations generally enter
foreign markets as a result of a reactive approach to international marketing opportunities. In such
cases, companies receive unsolicited orders from acquaintances, firms, and relatives based abroad, and
they attempt to fulfill these export orders.
Availability of Company Resources: Entering into international markets needs substantial commitment
of financial and human resources and therefore choice of an entry mode depends upon the financial
strength of a firm.

Level of Commitment: In view of the market potential, the willingness of the company to commit
resources in a particular market also determines the entry mode choice. Companies need to evaluate
various investment alternatives for allocating scarce resources. However, the commitment of resources
in a particular market also depends upon the way the company is willing to perceive and respond to
competitive forces.

International Experience: A company well exposed to the dynamics of the international marketing
environment would be at ease when making a decision regarding entering into international markets.

Flexibility: Companies should also keep in mind exit barriers when entering international markets. A
market which presently appears attractive may not necessarily continue to be so, say over the next 10
years. It could be due to changes in the political and legal structure, changes in the customer
preferences, emergence of new market segments, or changes in the competitive intensity of the market.

About the Company:

Introduction:

NASSA Group is a market leader in garment and textile manufacturing and exporting services for global
clients, supplied from the heart of Bangladesh.

Established in 1990 by Mr. Nazrul Islam Mazumder, Nassa Group has grown rapidly and evolved into an
international conglomerate serving multiple fashionables and commercial markets with ready-made
garments. Nassa Group globally has 3 0,500 Employees with 34 factories and 195 production lines, and
recorded over USD 412 million sales in 2013.

A leading own equipment manufacturer headquartered in Bangladesh, NASSA Group is renowned

amongst clients across the world for our state of the art equipment, optimally efficient supply chains,
100% ethical trading policies, environmental compliance and strong commitment to sustainability.

Nassa Group consist of 5 manufacturing zones with 34 factories and has the capacity of 4.2 million units
to produce per month. Their clients enjoy NASSA Group’s end-to-end manufacturing services that cover
every aspect of garment production from textile production to manufacture, washing, finishing, quality
control, clearance and shipping. This wholly owned infrastructure equips us to deliver new products to
market via a fast, competitive and seamless supply chain that others who outsource cannot offer.
Operations Worldwide:
Main customers of Nassa Group are based in USA. Europe is also grooming day by day. Below is the
present customer list and business volume with them.
USA major buyers:

KMART: Main items are men’s, ladies, children’s shirt, blouses, shorts, pants, jackets, jumper,
romper, overall, short all, snow items etc.
WALMART: Main items are men’s, ladies, children’s shirt, blouses, shorts, pants, jackets, jumper,
romper, overall, short all, snow items etc.
SEARS: Main items are men’s and ladies, trousers, swim shorts, shirts, pajama sets etc.
JCPENNEY: Main items are board shorts, shirts and trousers

EUROPE major buyers:

Main customers here are SPRINGFIELD, CARREFOUR, TESCO, H&M, ZARA, BERSHKA, OXYLANE,
ORSAY, PROMODGEMO, PIMKE etc. Main items they do are ladies casual wears specially jeans and
trousers, fleece items like jackets and outerwear, pajama sets, snow items etc.

Access to other Entry Mode:

Nassa Group also own retail fashion brand level called WAVEN which is established in Lodon and it is a
wholly owned subsidiaries business. Other than that they also own a Hong Kong based fashion brand
called China Supreme Limited which is formed by a joint venture with Taipei industries Ltd.

Core Competencies:
Firms often expand internationally to earn greater returns from their core competencies, transferring
the skills and products derived from their core competencies to foreign markets where indigenous
competitors lack those skills. The optimal entry mode for these firms depends to some degree on the
nature of their core competencies. A distinction can be drawn between firms whose core competency is
in technological know-how and those whose core competency is in management know-how.

Technological know-how: Technological competencies comprise a portfolio of abilities that enable an

exporter to collect, analyze and interpret significant market information. Market knowledge, whether
objective (acquired through formal market research) or experiential (because of foreign market
operations) is closely associated with export performance. Thus, firms with enhanced knowledge on
customers, competitors, marketing practices and the general environment tend to develop a positive
perception of export opportunities. Conversely, inexperienced exporters often perceive considerable
uncertainty, which in turn adversely affects their perceptions of potential risks and returns about
overseas markets and operations. As a garments exporter Nass Group keep themselves well informed
about the international market and trends to keep up with the frequently changing demand through the
use of information and technology. Also Bangladesh Ministry of Commerce & Trade provide the
potential exporter with a "best prospects" list, which gives the names and addresses of potential
distributors in foreign markets along with businesses they are in, the products they handle, and their
contact person which is also important to expand exporting. In addition Bangladesh Garment
Manufacturers and Exporters Association (BGMEA) organizes different exhibition which helps to
exchange new technologies and give a clear view to international market.

Management know-how: First-time exporters need to identify the opportunities associated with exporting
and to avoid many of the associated pitfalls. While competencies have no unified conceptual framework,
several studies have linked export performance to firm competencies. Management competencies
facilitate the transformation of organizational resources into value offerings for the export market. Nass
Group has a very experienced management team whom are experienced in working with several
exporting garments industry and they are well known of the way of channelize their product to
international market and generate higher value out of it.

SWOT Analysis:

Strengths: Weaknesses:
Less labor cost. Longer lead time.
Energy at relatively lesser price Lack of marketing tactics
Freely accessible infrastructure like railway, sea, Weak infrastructure
river and air route. Lack of sea port capacity
Has a great number of pre-export financing Political instability
organizations for guidance. Small number of manufacturing methods
Reasonably open economy, particularly in the Petty number of product variety
Export Lack of training organizations for industrial
Processing Zone. workers,
Several associations like BGMEA, BKMEA, and Autocratic approach of nearly all the investors
BEPZA etc. to build the tight collaboration with Absence of easily on-hand middle management
various connected organizations. Speed money culture
Duty free access to some of the largest market Time consuming custom clearance.
of the world like EU, USA. Subject to natural climate.
Thinness of currency opposed to dollar/euro, Incomplete port, entry / exit complicated and
helping exporters to earn subtle profit. loading / unloading takes much time
Convince of duty free custom bonded Communication gap created by the lack of
warehouses. English knowledge
Opportunities: Threats:
The EU is willing to establish industries in a big Political unrest situation of the country.
way as an option for China particularly for knits, Rise of price of raw materials.
including sweaters. Environmental pollution is a threat for survival.
Bangladesh is included in the least developed Labor unrest in RMG factories.
countries with which the US is committed to Capability to hold the market for the long term
enhance export trade. future.
If a skilled technician is available to instruct, Financial supports.
prearrange garments is an option because labor Complicated documentation process.
and energy cost is inexpensive.
Chittagong port is going to be handed over
foreign operators, which will make the port
service faster.
Bangladesh is gaining its political stability.
Problem faced by the Organization for choosing Exporting as an entry mode:
There is no alternative of ample supply of raw materials in order to become self sufficient in
garments industry.
Fail to deliver the product on the date.
Restriction of tariff and cotta system.
Increase the price of raw material.
Security of foreign buyer. If they feel unsecured to come in this country we can’t sell our product in
abroad and if fail to sell them we cannot survive the market.
Lack of training programs.
Lack of creativity.
Pressure of maintain the quality of product.
Bangladesh is not a stable country politically. Political instability is a great threat for this industry of
our country.
Middle man affect.
Sluggish Export linkage.
Time consuming custom clearance.
Time consuming schedule.
Communication gap.
Dependency on foreign market.
Trade block.
Credit problem.

Recommendation:
After studying Exporting as an entry mode of Nassa Group it is clear to me that they have selected the
right route to enter the international market. No other entry mode would have been this effective and
efficient that it is for exporting in garments industry.

Conclusion:
Nassa Group, as a giant company in garments sector, doing their business successfully for a long
time. As textile sector causes tremendous amount of pollution, the developed countries do not
allow them to be in their countries. In result of that it is not easy or I would say nearly
impossible to establish a textile plant in developing countries. More over labor cost in countries
of Europe and America is too high to obtain marginal value out of this business. Exporting allow
this company to utilize the cheap labor of Bangladesh and enjoy higher sales of their products
in international market and thus generate greater revenue out of this business. Other than that
the opportunity to export garments products with less tariff and tax as well as the advantage of
quota makes it obvious to choose exporting as entry mode for this industry.
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