Assume that you want to expand your English teaching business to other non-U.S.

countries where some individuals may want to learn to speak English.

a. Explain why you might be able to stabilize the profits of your total business in this manner. Review the motives for direct foreign investment that are identified in this chapter. Which of these motives are most important?

b. Why would a city such as Montreal be a less desirable site for your business than a city such as Mexico City?

c. Describe the conditions in which your total business would experience weak effects even if the business was spread across three or four countries.

d. What factors affect the probability that the conditions you identified in part

(c) might occur? (In other words, explain why the conditions could occur in one set of countries but not another set of countries.)

e. What data would you review to assess the probability that these conditions will occur?

f. Assume that your business has already created some pamphlets and CDs that translate common Spanish terms into English to supplement your primary service of teaching individuals in Mexico to speak English. How could you expand your business in a manner that might allow you to benefit from economies of scale (and perhaps even benefit from your existing business reputation)? When you attempt to benefit from economies of scale, do you forgo diversification benefits? Explain.

g. How would you come to a decision on whether to pursue business expansion that capitalizes on economies of scale even though it would mean forgoing diversification benefits? Do you think economies of scale would be more or less important than diversification for your business?

h. Is there any way to achieve both economies of scale and diversification benefits?