Podcast
Questions and Answers
What can be a benefit of managing a business globally?
What can be a benefit of managing a business globally?
Which factor contributes most directly to the speed of globalization?
Which factor contributes most directly to the speed of globalization?
What aspect does political economy NOT evaluate?
What aspect does political economy NOT evaluate?
Which strategy is best when customer preferences vary significantly across countries?
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?
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?
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?
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?
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?
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?
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?
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?
What factor does NOT influence preferred entry strategies for businesses?
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What does the 'Do It Yourself' entry strategy typically involve?
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?
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?
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.
