Question

Devonaile Inc. is a small-scale apparel manufacturer in Florida. Devonaile and other similar firms from Florida collaborate and form a separate company in India as none of the participants in this collaboration have active operations in the Indian market. The newly created firm primarily manufactures apparel suited to the tastes and preferences of the Indian customers. Identify the type of foreign market-entry approach depicted in this scenario.

1) A franchising agreement
2) A consortium
3) A licensing agreement
4) Direct exporting
5) Indirect exporting

Answer 1

The scenario illustrates a consortium, where Devonaile Inc. and other apparel manufacturers collaborate to form a new company in India to manufacture apparel for the local market.The right answer is option 2)

Step-by-step explanation:

The foreign market-entry approach depicted in this scenario is a consortium. A consortium is formed when multiple firms from a similar sector or industry collaborate to create a new entity. This joint venture is usually geared towards accomplishing a particularly complex project or entering into a market which may be challenging or risky for a single firm to tackle on its own. In the case of Devonaile Inc., the company along with other apparel manufacturers in Florida, came together to form a separate company in India because they lacked individual operations in the Indian market. This alliance allows them to pool resources, expertise, and risks while focusing on producing apparel that caters to the preferences of Indian customers. Unlike franchising or licensing agreements, where a single firm offers the right to use its business model or intellectual property, a consortium involves shared ownership and joint decision-making.