Openning Trader Joe's in Canada - Assignment Example

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As companies begin to grow within its domestic marketplace they reach a point in their business lifecycle in which further growth becomes difficult to achieve domestically. At that point in time the alternative solution is to expand into the international marketplace. A company…
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As companies begin to grow within its domestic marketplace they reach a point in their business lifecycle in which further growth becomes difficult to achieve domestically. At that point in time the alternative solution is to expand into the international marketplace. A company in the retail food business that has had great success in the United States is Joe’s Trader. The company currently has stores in 33 locations across the United States (Traderjoes). The company is still in the planning phase of its international expansion. The target location for foreign expansion is Canada. The mode of entry the company is focusing on is acquisition. This report discusses the viability of an international expansion into Canada utilizing the acquisition entry strategy.
In order to penetrate a foreign market the managerial staff of a company must perform environmental scanning of the marketplace. Canada is the biggest market that is closest to the United States. The population of Canada is 32.32 million people whose gross domestic product per capita in 2005 was $32,645 (Studentsoftheworld). Canada is part of special trade treaty between the United States, Canada, and Mexico. This trade treaty is called the North American Free Trade Agreement (NAFTA). NAFTA is a trade agreement that began on January 1, 1994 which removes most barriers to trade and investment among the three countries (Usda). The existence of this trade agreement means that Joe’s Trader would not have any problems gaining market entry through the acquisition mechanism.
The people of Canada enjoy eating seafood and dairy products. Due to the French influence in its culture cuisine food items such as pea soup, French pastries, breads, crepes, special cheeses, lamb and veal are some of the food items Canadian citizens utilize in their homes on a daily basis (CultureGrams). The eating habits and preference for gourmet items is aligned well with the product offering of Trader Joe’s. The food market in Canada just as in other parts of the world is very competitive and profit margins are very low. Joe Trader has a product selection of upscale organic products, fresh vegetables and dairies, and many other cuisine food items that gives this firm a product differentiation which will enable to attract customer in market saturated with traditional supermarket stores.
The chosen strategy for entry into the Canadian marketplace is acquisition. An acquisition is good strategy for Joe Trader because it would enable fast access for the company into Canada. An acquisition strategy gives the firm full control over its foreign operation. One of the downsides of the acquisition strategy is that it requires a high capital commitment and the overall business are higher than in other entry modes such as licensing and joint ventures. The company could take advantage of its Washington location for logistical purposes to serve as a distribution center for its Canadian stores.
In the fast changing business environment of the 21st century companies can not depend solely on its domestic marketplace. Global expansion is necessary to diversity the business risks and to achieve greater levels of growth. Joe’s Trader is company food retail business that is seeking to become a multinational firm. They have chosen Canada as its target market and acquisition as the mode of entry. The proximity, cultural characteristics, income levels and size of the population are some of the reasons Canada is good location for the company to target. Acquisition is the alternative that will allow the company to penetrate the Canadian market, while keeping full control of supply chain and operation decisions.
Works Cited Page
CultureGrams. 2009. “Country Profile: Canada.”17 February 2009. 10 October 2006. “Canada.” 17 February 2009. 2009. “Trader Joe’s: Your Neighborhood Grocery Store.”17 February 2009. <> 2009. “North American Free Trade Agreement.”17 February 2009. Read More
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