THE QUESTION IS

Describe 3 reasons international business is more difficult and often more risky then running a purely domestic business.

HERE IS CLASS NOTES:

ST - CHAPTER 8: STRATEGY IN THE GLOBAL ENVIRONMENT

OUTLINE - CHAPTER 3: THE GLOBAL ENVIRONMENT

External environment

Competition

Economic environment

Demographics

Cultural risks of globalization

Political / legal environmental

Technological environment

Trade

Determining market potential

Choice of entry mode

Appendix suggestions for adapting globally

Cases

Videos

LESSON

EXTERNAL ENVIRONMENT

Competition

Direct

The most obvious form of competition is direct competition (also called category competition or brand competition), in which products that perform the same function compete against one another.

See example of competitive environment in Cola Wars movie. Competing for same customers with similar product just differing messages (religious vs economic).

Indirect

Indirect competition occurs when products provide alternative solutions to the same market. i.e. Museums vs. Netflix.

Economic environment

Must examine such economic factors as GDP, money supply (M1), inflation, debt, reserves (foreign currency reserves or savings), current account, wealth creating power (productivity), income distribution.

See xls file titled International macro exercise-w hw for practice and (in what this shows section) additional clarification on global economics.xlsx main thing to understand is: growth in money supply (M1) relative to growth in GDP. If money supply growth too fast relative to GDP, inflation will result (rise in prices) but no increase in personal wealth so prices become out of reach, currency devalues, financial crisis can result as presented in Weight Watchers Mexico case. See in xls file International macro exercise-w hw.xls What this shows section and How to analyze section (specifically rows 63-65 for analysis).

See also OPTIONAL doc file titled International macro terms w practice Q&A.

Demographics

Age, gender, education, ethnicity. Some countries younger population, some older. Niger youngest at 15.4, Japan oldest at 47.3. Second oldest is Germany at 47.1. 19 out of 20 youngest are African. What are marketing inferences? Product type must target just age. Other things to consider are economic factors, productivity, etc.

Cultural risks of globalization

Show India, Zambia, Japan videos.

Types of cultures (from book, When Cultures Collide by Lewis posted mydrive (optional)) multi active (Latin, Middle East), reactive (East Asian), linear active (Anglo-Saxon). See chapter 3 on categorizing cultures.

Political / legal environment

Some governments hostile to foreigners. Many countries employ rules governing foreign ownership.

Technological environment

Internet, mobile telephony (advertising), computing, etc.

Blockchain (general)

Internet of things see videos below.

Mobile advertising

TRADE

Regional trade zones ACP (African, Caribbean, pacific island), ASEAN (in Asia) reduces or eliminates tariffs, facilitates trade.

See China trade video

World trade organization (WTO)

GATT was established in 1994, was designed to promote world trade by reducing tariffs and other international trade barriers. Now called WTO.

See Jamaica bananas

Role of IMF see IMF video

Determining market potential

See table 19.1 below for indicators of market protentional/risk factors in global marketing

Choice of entry mode

• Licensing
• Joint venture (JV)
• Foreign direct investment (FDI)

APPENDIX SUGGESTIONS FOR ADAPTING GLOBALLY

3 themes:

1. Dont Assume anything
2. Recognize that you have prejudices or preconceived ideas
3. Learn different cultures, laws, competitors (styles), economic conditions, distribution, different medium, different advertising rules, varying attitudes toward corruption.

Dont assume anything regarding language

Jumper = sweater

Torch = flashlight

Cooker = pot

To let = to rent

Flannel = pajamas

Translations

It takes a tough man to make a tender chicken It takes a virile man to make a chicken affectionate

Nova car no go

Esso gasoline in Japanese stalled car

Cake mix is as easy as making rice insult in Japan

Symbols

Owl bad luck in India

Stork delivers a baby peach floating on the river

The product perspective

Corn flakes fairly neutral product:

In Japan well accepted as snack, but not as breakfast food (much bigger category)

Corn flakes that taste like seaweed, carrots and zucchini

Sell tea cups package of four bad luck in China and Japan

Standardize Practices across businesses (for example UPS delivery company)

US Success very standardized approach. Drivers are trained, manual, dress the same

Communication strategy around brown identity clothes, trucks

France no wine at lunch

England no dogs in the truck

Spain brown trucks look like hearses

Germany brown shirts not since Hitler

Sales Force

USA: Paid on commission motivate individual performance

Sweden: Law of Jante - Dislike of tall poppies better to have team incentives

Work attitudes

In much of Europe people choose to work 8 or 9 hours family and balanced life is important

Many places large numbers of people belong to a union and union and management come to reasonable agreements!!

Competition is not always viewed as positive longer term relationships, trust