ANALYTICAL APPLICATION 1

DFI Strategy

ABC Co. has recognized numerous opportunities to expand in foreign countries and has assessed many foreign markets, including Brazil, Greece, Mexico, Portugal, Singapore, and Thailand. Ithas opened new stores in Europe, Asia, and Latin America. In each case, the firm was aware that it did not have sufficient understanding of the culture of each country that it had targeted. Consequently, it engaged injoint ventures with local partners who knew the preference of the local customers.

a. What comparative advantage does ABC have when establishing a store in a foreign country, relative to an independent variety store?

b. Why might the overall risk of ABC decrease or increase as a result of its recent global expansion?

C .ABC has been more cautious about entering China. Explain the potential obstacles associated with entering China.