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Questions and Answers
What can be a benefit of managing a business globally?
Which factor contributes most directly to the speed of globalization?
What aspect does political economy NOT evaluate?
Which strategy is best when customer preferences vary significantly across countries?
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What does the term 'culture' encompass in the context of international business?
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What is a challenge companies face when evaluating a foreign legal system?
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Which entry strategy involves partnering with a local firm to share resources and knowledge?
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What is one of the key reasons businesses might choose to standardize products globally?
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Which entry strategy involves selling rights to a third party for making or selling products?
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What is a potential disadvantage of increasing production costs in entry strategies?
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Which of the following is less formal than a joint venture but still allows for cooperation between businesses?
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What factor does NOT influence preferred entry strategies for businesses?
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What does the 'Do It Yourself' entry strategy typically involve?
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Which entry strategy requires authorization to use trademarks and conduct business abroad?
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Which of the following options is likely to provide the least control over business activities?
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Study Notes
Managing a Global Business Overview
- Operating a business internationally differs from a domestic one.
- Competition arises from both domestic and international companies.
- Sourcing resources, like labor or materials, can be obtained from outside the home country.
- Thorough analysis of foreign business partners involving political policies, economic standings, stability, and legal landscape is crucial.
- International businesses must decide between standardizing their products or adapting them to local preferences.
- Entry strategies like exporting, joint ventures, or franchising should be carefully considered.
- Global business expansion offers significant growth opportunities.
Globalization Markets
- Globalization signifies an increasingly interconnected and interdependent global economy.
- Four key factors accelerate globalization:
- Reduced trade barriers: Lower tariffs encourage global trade despite potential domestic industry impacts.
- Technological advancements: Air travel, communication technologies, and internet accessibility enable international business.
- Rise of multinational enterprises (MNEs): Increasing global business operations by companies.
- Formation of global institutions: Organizations like the World Trade Organization (WTO) and the World Bank provide governing mechanisms.
Political Economy
- Political economy encompasses a country's political climate, economic conditions, and legal structures.
- Political economy evaluation:
- Government's role in free trade, including state-owned or subsidized companies, and high tariffs discouraging foreign trade.
- Levels of civil unrest and potential instability.
- Ownership regulations requiring foreign companies to share ownership with local citizens.
- Economic conditions:
- A sound and stable economy with sufficient wealth for profitable business operations.
- Countries with high levels of poverty can pose challenges for achieving a successful business presence.
- Currency conversion rates and associated taxes.
- Legal system evaluation:
- Laws affecting foreign entities' business operations, potentially favoring citizens' rights over foreign companies.
- Limited law enforcement support in case of crimes against businesses.
- Ineffective law enforcement leading to limited crime prevention and law enforcement.
- Culture:
- The shared norms, beliefs, attitudes, customs, and values of a country's residents.
- Multiple cultures can coexist within a country.
- Some cultures might not welcome foreign cultures or companies.
- Language differences pose challenges.
- Failing to understand local culture can lead to significant business losses.
Key Strategies For Conducting Business in International Markets
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Product and Service Modification: Adapting products or services to local preferences is vital.
- Businesses should determine whether to adhere to local preferences or maintain global standards.
- Consider legal requirements in specific markets.
- Three product modification options:
- Global Standard: Utilizing the same product across all markets, like Coca-Cola's consistent formula for their drinks.
- Local Customization: Modifying products to meet the preferences of the local population.
- Combination Strategy: Customizing products for significantly different markets with large demand, while standardizing for other markets.
- Reasons for choosing specific modification strategies:
- Global Standard: Optimizing production costs by avoiding multiple product variations.
- Local: Adjusting to diverse customer preferences and high demand, although it increases production costs.
- Combination: Balancing cost-effectiveness with meeting local preferences in large markets while standardizing in smaller, less diverse markets, potentially resulting in increased sales.
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Entry Strategy: Choosing the most suitable method to enter a new market.
- Exporting: Shipping products from one country to another, or utilizing a distributor.
- Licensing: Granting a third party the rights to manufacture and/or sell the company's products and services.
- Franchising: Authorizing a business partner to operate under the company's trademarks and brands in a foreign country.
- Joint Venture: Forming a formal partnership with a business partner to operate in a specific country.
- Strategic Alliance: Establishing less formal collaboration with partners for business operations.
- Do It Yourself: Setting up a new business directly in the target country, or acquiring a majority stake in an existing company.
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Factors Influencing Entry Strategy Choice:
- Management's preference for control over business operations.
- Availability of suitable partners for licensing, franchising, joint ventures, or strategic alliances.
- Legal requirements, restrictions, and protections related to chosen entry strategy.
- Product suitability and adaptability for chosen entry strategy.
- Availability and attractiveness of acquisition targets and legal constraints.
- Time and challenges involved in establishing a new business in the foreign country.
- Production and Manufacturing Abroad: Beyond product sales, some businesses establish production facilities in foreign locations.
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Description
This quiz explores the nuances of managing a business on a global scale compared to domestic operations. Key themes include competition, sourcing resources, and analyzing foreign markets. Additionally, it examines globalization factors and strategies for international market entry.
