SUBJECT: Analysis of the best mode to entry UK market

After doing an exhaustive market analysis I have concluded that the best option for our company will be entering the UK market through a wholly owned subsidiary, because it will reduce the risk of losing control in our technological competitive advantage.

In the previous months we have been working on the expansion of our product and the possibility of entering the U.K market. Now, once we have decided which market are we entering, when are we doing so and on what scale, we should focus in how are we doing the entry. In order to take the best alternative possible we analyzed the various modes for entering foreign markets, assessing both the advantages and disadvantages.

If we decide to export we wont need to invest in establishing manufacturing operations in the host country and we could benefit from the learning curve. Drawbacks to this are that the transport cost could be higher than the benefit that we will obtain; the trade barriers (customs tariffs or quotas) that the UK may have can slowdown the trade to the point of being unprofitable.
In the other hand, expanding through a turnkey project will be a good choice if we are entering a country where FDI is complicated. However this method is risky because it could create strong competitors and it won't have sense if the company is planning a long-term presence in the market.
Other way to entry is using licensing, as licensor is a good option because it implies a low development cost and risk, contrasting with the lack of control over technology this could have and the inability to engage in global strategic coordination.
Similar advantages will have a franchisee, but with a longer-term view and not only granting intangible property but also the ''know-how'' for doing business, nevertheless could implies a lack of control over quality.
Joint ventures entry will benefit us because we can access to local knowledge, we can share cost and risk and it is normally politically acceptable. However, we can lack control over technology or be unable to engage in global strategic coordination.
The last alternative could be to enter with wholly owned subsidiary, with a main drawback: high cost and risk, however the more likely for our situation.

An option could be to import the inputs or outsource the manufacturing process to countries with lower productions cost or beneficial tax policy. But in reference to the UK market penetration, studied and assessed the options, and after analyzing other sources as Forbes Tax Misery Index or the OCDE, I consider that the best alternative is to engage in FDI through acquiring an established firm in the UK. Because we are unwilling to transfer our know-how and it is difficult to protect by a license, this alternative is the most suitable. This way of entry will give us strong control in the operations in the UK in order to possess the 100 per cent of the profits that the foreign market will generate. In addition, we will take advantage of the global strategic coordination and the learning curve achieved in other countries with the rest of the subsidiaries along time.
To summarize I consider that engaging in FDI is the best option.

REFERENCES
Hill, Charles W. L & Wickramasekera, Rumintha & Cronk, Thomas 2011, Global business today : Asia Pacific edition, 2nd ed, McGraw-Hill, North Ryde, N.S.W