Case Study

SUD MARINE COMPANY

Sud Marine is a French company with a large object of activity, dedicated to high technology
products. The company counts with a turnover rate of 64 million euros 53 million coming from
exports, 700 employees and a unique parking place.
In order to internationalize, the company decided to penetrate the American market with its main
product, SICOMOD a simulator for Diesel engines, that appeared as a result of more than 5 years of
research. Sicomod is an electronic tool that helps the trainer and the trainees to simulate different types
of errors of industrial Diesel engines. This product has two main advantages: firstly, it replaces the work
with a real engine (which is much more expensive), and secondly, its modularity (one can integrate any
innovation or modification of the parameters in order to simulate any type of error of Diesel engines).
Sud Marine determined US as being the key market of internationalization of the product.
Basically, there are 4 ways of implementing on the USA market:
Opening a representative (local) office and recruiting a commercial agent. The post-sale
service will be provided by a service society / company.
Opening a representative (local) office, recruiting commercial personnel and creating an
assembling unit for assembling the final product, but also for commercializing and
maintaining it.
Recruiting a commissioner that will provide also the post-selling service.
Signing an exclusivity contract with an importer. The importer will buy the product, resale
it in his own name and provide also the post-selling service.
1.

2.

Considering only the corresponding financial information for a period of 4 years, what
internationalization solution do you find most appropriate for Sud Marine in order to
penetrate the American market?
What about from a commercial point of view? Is the above chosen solution also the best one?
Explain your point of view.

Annex 1
Segmentation of the USA market for Sicomod
Education
.............................................................................................. 25 locations
Transportation ............................................................................................. 75 locations
Public Services ............................................................................................. 50 locations
Producers of Diesel engines
..................................................................... 65 locations
National Defence
................................................................................. 35 locations
TOTAL ......................................................................................................... 250 locations
To the 250 locations, SME considers that it could sell 50 Sicomod Simulators in 4 years.
(Previsions over a period of 4 years; we do not take into account the inflation rate when calculating the
costs implied by each method).
Annex 2
Sales objectives (in no. of products sold)
First year:
............................................................................................... 3 products
Second year:
............................................................................................... 7 products
Third year:
............................................................................................... 15 products
Fourth year:
............................................................................................... 25 products.
TOTAL .......................................................................................................... 50 products

The DDP price for one Sicomod sold in US is 137,000 euros. The price could be also influenced by
logistics. The warranty for one Sicomod is 6 months (it is included in the selling price).
After the warranty period ends, any buyer signs an annual maintenance contract provided by Sud
Marine (for solution 2) or by another company / entity (for solutions 1, 3 or 4). The price for the
maintenance contract is 4,878 euros / Sicomod / year, no matter the implementation method.
Annex 3
The costs implied by the different ways of penetrating the US market
Cost with renting an office
Renting the office: ...........................................................................
Secretary:
...........................................................................
Cost with an American commercial agent
Fixed wage / salary: ...........................................................................
Sales commissions:
.....................................................................
Cost with a local assembling unit
Local shop:
.............................................................................
Assembling material (redeemable / depreciable in 4 years): ...............
Wage of the technician: ......................................................................
(a technician can assembly only 10 Sicomod / year)
Maintenance cost: .............................................................................
Cost with a commissioner:

.....................................................

Cost with an exclusive importer:

.............................................

1,219.5 euros / month

813 euros / month
2,032.5 euros / month
3% of the turnover rate
(DDP price)
1,219.5 euros / month
6,096 euros
1,707.31 euros / month
1.25% of the turnover rate
(DDP price)
15% of the turnover rate
(DDP price)
30% of the turnover rate
(DDP price)

We consider that all the simulators from one year will be sold at the beginning of that year.