Orders from across the border: Lena's Bakery Ltd already sends 200 sourdough loaves a week to a café in Seren, in Marovia, across the border (1.6.1). Now a food wholesaler in Seren, which supplies cafés across the city, wants Lena's crackers: 1,000 packets a week.
At home, cracker sales have stopped growing. The cafés Lena's supplies bought 18,000 packets in 2025, about 350 a week, and Marco forecasts 17,500 for 2026 (4.5.1).
Selling to customers in another country is entering an international market. Look back at 1.6.1: a business goes abroad for new customers, lower costs, a way past trade barriers and a spread of risk. The same reasons hold for any business that sells abroad, however it does it. Seen from the business, they are its opportunities.
What Seren offers Lena's
More customers
At home the town has Lena's shops, a Goldcrust and a Crumbline. Seren is a whole city of customers who have never tried a Lena's cracker. The sales are new ones, not taken from a rival at home (a larger market).
A lower cost per packet
Baking 1,350 packets a week instead of 350 spreads the oven time, the cutting machine and the flour order over more packets, so each one costs $0.85 to make instead of $1.00: the economies of scale from 1.5.3.
Less risk from one town
The town's biggest employer, a packaging factory, plans to cut 300 jobs in 2026. If people at home cut back, the cafés in Seren keep ordering. Two markets are safer than one (spreading risk).
A longer life for the crackers
At home the crackers are in maturity: 18,000 packets in 2025, 17,500 forecast for 2026. A new country gives a product that has stopped growing a new set of first-time buyers, one way to extend its life (4.5.1).
A name known in two countries
Every packet on a Seren café table carries the green wheat ear. If Lena's ever opens a shop there, its first customers will already know the name.
Not all of it is gain. The wholesaler pays $2.00 a packet, less than the $2.50 cafés pay at home, because it has to sell them on. Marovia charges a 20% tax on baked goods brought in from abroad (a tariff, 1.6.1), so each $2.00 packet pays $0.40 at the border, plus $0.10 to transport it. Here is one week of crackers, with and without Seren.
| Crackers, one week | Home only | Home and Seren |
|---|---|---|
| Packets baked | 350 | 350 + 1,000 = 1,350 |
| Cost to bake each packet | $1.00 | $0.85 |
| Left from the 350 home packets at $2.50 | 350 × $1.50 = $525 | 350 × $1.65 = $577.50 |
| Left from the 1,000 Seren packets at $2.00, after tariff and transport | None | 1,000 × ($2.00 − $0.85 − $0.40 − $0.10) = $650 |
| Total left each week | $525 | $1,227.50 |
The gain is bigger than the new orders: The 1,000 packets for Seren leave $650 a week, even after the tariff takes a fifth of their price. They also make every packet cheaper to bake, so the 350 sold at home leave $52.50 a week more: about $2,700 a year for doing nothing different at home.
In all, Lena's has $702.50 a week more than before. Selling abroad can pay even with a tariff, because the extra volume lowers costs at home too.
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The cheapest way into Seren keeps everything at home. Lena's bakes in its own ovens, with its own staff, as it does now. Only the selling crosses the border. There are two ways to do that.
Exporting: Making a product at home and selling it to customers in another country is exporting. The 200 loaves a week for the Seren café are exports already.
For the crackers, Lena's sells to the Seren food wholesaler (a distributor), who buys in bulk and sells on to cafés across the city. It could instead sell to each café itself.
What exporting gives
- The same ovens and staff: no shop or factory abroad
- A cheap way to test whether Marovians buy, before spending more
- More packets from the same ovens, so a lower cost per packet
What exporting costs
- The 20% tariff on every packet that crosses the border
- Transport and time: fresh bread is stale by the next morning
- Little contact with customers; a distributor sets the shelf and takes a cut
- Paid in Marovia's money, so the exchange rate moves each order's value (1.6.1)
The second way skips the café. Lena's already takes orders for breakfast boxes on its website (2.1.7). Add a page for Marovia, and a shopper in Seren can order crackers on a phone and have them posted from Lena's in three days.
Buying and selling over the internet is e-commerce. Used to reach buyers in another country, it is a way into that market with no shop and no partner there at all.
What it gives Lena's
- Customers anywhere in Marovia, not only the cafés in Seren
- Almost no set-up cost: the website already exists
- Lena's sells straight to the shopper and keeps the distributor's cut
- Every order shows who buys, where and how often
What it costs
- Postage on every small parcel, and the tariff still applies at the border
- Only for products that travel: crackers yes, a fresh loaf no
- Shoppers cannot taste before they buy, and rival sellers are one click away
Selling there is not operating there: Through the café, a distributor or the website, every packet is still baked at home. Lena's sells in two countries but operates in one, so it is not a multinational company (1.6.1).
That is the strength of both methods: very little money at risk. It is also their limit. Lena's has nobody in Marovia, so it learns about its customers second-hand.
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Two offers from Seren: Ana Petrak runs two coffee shops in Seren's old town. She wants to open a Lena's Bakery there as a franchise, on the deal Sofia signed in Riverton (1.5.4).
Mira Horvat, whose three-shop bakery in Seren lost a fifth of its sales when Goldcrust arrived (1.6.2), has a different idea: a new company, owned half each, to run bakery-cafés in Seren.
Both offers put a Marovian partner between Lena's and the customer. The partner knows Seren's streets, suppliers, rules and workers; Lena's brings the name and the recipes. What differs is who owns the shop, who pays for it and who takes the profit.
Franchising into Seren
The deal
Ana pays Lena's what Sofia pays: $20,000 to join and 6% of every month's sales (the royalty). She finds the shop, pays about $120,000 for the ovens and fit-out, and hires her own bakers.
What Lena's gains
A shop in another country for none of its own money. Ana's savings are at stake, so she works hard, and she already knows what Seren's customers want.
What Lena's gives up
Control. Riverton is only sixty kilometres away, and the Hillcrest franchisee still cut corners (1.5.4). Seren is across a border, so a problem there is found out even later.
What else it costs
Lena's takes a slice of Ana's sales, not the shop's profit. And Marovia's law on franchise agreements is not the same as the law at home, so the contract needs a Marovian lawyer.
Mira's idea is a joint venture (1.5.2): two businesses create, own and run a third business together, sharing its costs, profits and risks. Seren Hearth Ltd would open two bakery-cafés in Seren, selling Lena's sourdough beside Mira's rye bread. Neither bakery is bought; each carries on as before.
| Seren Hearth Ltd | Lena's Bakery Ltd | Mira Horvat's bakery |
|---|---|---|
| Puts in | $80,000, the recipes and the name | $80,000, and her knowledge of Seren's customers, suppliers and rules |
| Owns | Half | Half |
| Takes of the profit | Half | Half |
| Big decisions | Only with Mira's agreement | Only with Lena's agreement |
| If it fails | Loses up to its $80,000 | Loses up to her $80,000 |
Half the risk, half the say: Lena's risks $80,000 instead of the whole $160,000, and gains a partner who already knows how Seren works.
The price is half the profit and half of every decision. If Mira wants to cut prices to fight Goldcrust's $1.00 loaf and Lena wants to hold hers, they must agree. And if the partnership ends, Mira keeps what she learned of Lena's recipes.
Goldcrust's way: When Goldcrust went to Marovia, it built its own factory in Seren and opened 30 bakeries that it owns and runs (1.6.2). Nobody shared the cost, and nobody shared the profit.
Lena's could do the same on a small scale: its own bakery-café on a Seren high street, for about $150,000.
Setting up or buying operations that a business owns and runs in another country is direct investment (foreign direct investment). With its own shop in Seren, Lena's would operate in two countries, not just sell in them: a multinational company (1.6.1).
What its own shop gives
- Full control: Lena's recipes, Lena's training, Lena's price
- All of the profit, not a royalty or a half share
- Bread baked in Seren pays no tariff and is fresh every morning
What its own shop costs
- The most money: about $150,000, on top of the $120,000 borrowed for Station Road
- The most risk: if the shop fails, the whole loss is Lena's
- The slowest start: Marovia's laws, staff and suppliers learned from scratch
Line the five methods up and a pattern appears. Each step puts more of the business's own money and people into the other country. In return it gets more control, and a bigger share of what the customers there pay.
| Way into Seren | Lena's money put in | Control | Risk | What Lena's receives |
|---|---|---|---|---|
| Exporting | Transport only | Low: the café or distributor sells | Low | The packet price, less tariff and transport |
| E-commerce | Almost none: the website exists | Medium: sells to the shopper | Low | The full price, less postage and tariff |
| Franchising | None: Ana pays for the shop | Low: only through the agreement | Low | $20,000, then 6% of sales |
| Joint venture | $80,000 | Shared with Mira | Medium: half of any loss | Half the profit |
| Direct investment | About $150,000 | Full | High: all of any loss | All the profit |
What decides the way in
- Money. How much the business can put in or borrow. Lena's has just borrowed $120,000 for Station Road.
- Knowledge of the market. A business that knows little about the country gains most from a partner who knows a lot.
- The product. Goods that keep, like crackers, can be exported or sold online. Fresh bread has to be baked where it is eaten (1.6.1).
- Control. A packet survives a distributor. A café's bread and service need someone Lena's trusts at the oven.
- Attitude to risk. Lena wants to grow; Marco would rather not borrow again. The owners' appetite for risk decides how far up the ladder they climb.
Start low, climb later: Many businesses climb the ladder a step at a time: export first to test the market, then a partner, then their own shop once the sales are proven.
Lena's 200 loaves a week are the first step. The café's orders are the evidence for the next one.
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How this comes up: Going abroad comes with a case. The long question gives figures for two ways into a country, or for two countries, and asks you to recommend one; or it asks you to discuss the advantages and disadvantages of selling there. Both are ten marks.
Shorter questions ask you to state two methods of entering an international market, describe one, or explain one advantage and one disadvantage of a method for the business in the case.
The ten-mark pattern
- Why go at all, from the case. New customers, a lower cost per unit, less risk from one market: one number each, and keep it short.
- Option one, both sides. What the first method gives the business and what it costs, with the case's figures.
- Option two, both sides. The same for the second method. Compare them on money, control, risk and share of the profit.
- A recommendation with a condition. Which one, why, and what would change your mind.
- What the case does not tell you. One or two facts you would need to be sure.
Two traps: Whether instead of how. A question on the way in is not asking whether to go abroad at all. Give the opportunity a sentence or two and spend the answer on the methods.
One option only. Arguing for your choice without weighing the other stays in the middle marks, however good the argument.
Recommend whether Lena's Bakery Ltd should enter the Marovian market through a joint venture with Mira Horvat's bakery or by opening its own bakery-café in Seren.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.