Reference no: EM133556101

Strands of Profits Based in British Columbia, Canada, SeeU Copper Industries was a relatively small producer of copper wiring. The prices for copper supplies had risen dramatically in recent years, but wise management of company operations and several large deals had resulted in SeeU becoming very profitable. However, competition in the Canadian market was fierce, and the closest market, the U.S., was even worse. SeeU wanted to become a larger company-one that was a leading provider of copper wire. This would mean expanding overseas. SeeU needed to find a market that was not already saturated, that offered potential for growth, and where it could become a dominant player. Making All the Right Moves SeeU was in a healthy financial position and planned its international expansion carefully. It analyzed its internal resources, strengths and weaknesses against its strategic objectives and determined that it needed help to find a market to enter. It would also need help with international sales, but could cope with the manufacturing and financial demands of an export operation. SeeU commissioned a market research company to investigate the best markets for it to enter. After careful consideration of the options presented, SeeU settled on Indonesia. There were many reasons for this selection. Indonesia was in a period of rapid industrialization and modernization; it needed vast amounts of copper wiring. Imports of copper had already risen 195 percent between 2016 and 2019. There were no restrictions on copper wire imports and foreign investment in the country was being actively welcomed by the Indonesian government. Economic growth was rapid and healthy. Facilities and employees were inexpensive. SeeU sent representatives to Indonesia on a trade visit. They were welcomed by construction companies and by government procurement departments responsible for many major construction and infrastructure expansion projects. SeeU's management was excited at the possibility of obtaining government contracts. However, to do business in Indonesia, SeeU knew that it needed help with translation and advice about the culture, customs and ways of doing business in Indonesia. The decision was made to find an Indonesian agent to represent the company and to invest in a production site in Jakarta, the capital. A Dangerous Offer At first, all went well. Construction of the wire manufacturing plant proceeded smoothly, and it was soon ready for operations. Employees were trained and hired. SeeU was willing to take a small loss before production started in order to gain a large market share. SeeU also appointed an agent who seemed delighted to be representing the company and who had numerous contacts within government procurement departments. The agent soon announced that he had negotiated a major deal with a provincial government department-providing copper wire for a telecommunications infrastructure upgrade across a province. The contract was worth about CAD 200,000. There was only one obstacle: the government representative with whom the agent had negotiated was seeking reelection. If he was not reelected, the deal might fall through. The agent therefore recommended that SeeU forward some funds to the representative's bank account to help him become reelected. SeeU's management refused to make the payment, which they saw as a bribe. The agent became furious and told them this was how business was done in Indonesia. Without facilitating payments, they would be unlikely to make deals. He announced he would not work for the company any longer.

Learning Outcomes This case study relates to the following learning outcomes from the modules Planning for International Market Entry and Intercultural Competence in the course International Market Entry Strategies:

- Select the most advantageous market entry strategy for an international venture based on the results of feasibility research, risk analysis, and competitive analysis.

- Identify, research and analyze potential business partners to determine compatibility for an international venture.

- Explain how intercultural competence can benefit international trade initiatives.

1. SeeU planned its market entry carefully. What might it have done differently to avoid this situation?

2. Was the facilitating payment requested by the agent really a bribe?

3. If bribery is a common and accepted way of doing business in a market, should companies go along with it in order to compete with domestic companies? Explain your reasoning.