PART 3 Flashcards
ASSESSING GLOBAL BUSINESS RISKS (3)
Economic Risks
Cultural and Social Risks
Technological Risks
Economic fluctuations, currency exchange rates, and inflation can pose risks to global businesses.
Conducting thorough economic analyses helps in risk mitigation
Economic Risks
Differences in cultures and societal norms can affect market acceptance.
Adapting products and marketing strategies to local cultures minimizes these risks.
Cultural and Social Risks
Rapid technological changes can impact industries.
Businesses must stay updated
Invest in technology to remain competitive
Mitigate obsolescence risks .
Technological Risks
IMPORTANCE OF GLOBAL BUSINESS ANALYSIS (4)
Strategic Decision-Making
Risk Mitigation
Competitiveness
Regulatory Compliance
provides insights for making informed strategic decisions
helps businesses identify opportunities and threats in various markets
Strategic Decision-Making
allows businesses to identify and assess risks
proactive ______ strategies can be developed
minimize potential negative impacts
Risk Mitigation
enables businesses to stay competitive
changing market conditions
customer preferences
technological advancements
Competitiveness
need to comply with diverse regulations
avoid legal issues
maintain a positive corporate image
Regulatory Compliance
MARKET ENTRY STRATEGIES
Exporting
Licensing
Franchising
Joint Ventures and Strategic Alliances
Foreign Direct Investment (FDI)
Market Entry Strategies
methods and channels that a company uses to enter a new market
the most appropriate method of entering a market depends on the company’s:
Resources
Objectives
Market
goal of market entry strategies
enter a new market successfully and achieve sustainable growth
expand within its home country
Goal: grow the company’s local market share
Domestic Market Strategy
expand outside home country
International Market Strategy
Capacity of a market to generate demand for a particular product or service
Market Potential
An estimate of the maximum sales opportunity that a product or service may have in a target market
Market Potential
an evaluation of the expected sales, given the customer base’s size and the product or service’s demand in the market
Market Potential
Marketing and direct sale of domestically produced goods in another country
EXPORTING
traditional and well-established method
EXPORTING
no investment in foreign production
EXPORTING
Most cost: marketing expenses
EXPORTING
the easiest way to enter an international market
EXPORTING
the sale of products and services in foreign countries that are sourced from the home country
EXPORTING
A company that wants to get into an international market quickly while taking only limited financial and legal risks
LICENSING
Allows a foreign company (the ____) to sell the products of a producer (the _____) or to use its ______ (such as patents, trademarks, copyrights, technology) in exchange for ____
licensee, licensor, intellectual property, royalty fees
Essentially permits a company in the target country to use the property of the licensor. Such property is usually _____, such as ____,____, _____. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance as well.
intangible
rademarks, patents, and production techniques
Commonly used in industries like fast food, hospitality, and retail
FRANCHISING
is a natural form of global expansion for companies that operate domestically according to a franchise model, including restaurant chains, such as McDonald’s and Kentucky Fried Chicken, and hotel chains, such as Holiday Inn and Best Western.
FRANCHISING
Under an international franchise agreement, a company (the _____) grants a foreign company (the ______) the right to use its brand name and to sell its products or services.
franchiser, franchisee
The ______ is responsible for all operations but agrees to operate according to a ______ established by the ______.
franchisee
business model
franchiser
The ______usually provides advertising, training, and new-product assistance.
franchiser
form of international business entry where a company from one country makes a substantial investment in another country, acquiring a significant degree of control or ownership in a business entity located in the foreign market
FOREIGN DIRECT INVESTMENT
signifies a long-term interest and commitment by the investing company in the economic activities of the host country
FOREIGN DIRECT INVESTMENT
involves the establishment of a physical presence in the foreign market
FOREIGN DIRECT INVESTMENT
involves the establishment of a physical presence in the foreign market (3 factors)
acquiring or establishing subsidiaries
joint ventures
wholly-owned enterprises
IMPORTANT FACTORS TO CONSIDER IN MARKET ENTRY (4)
Cultural and linguistic differences
Quality and training of local contacts and/or employees
Political and economic issues
Experience of the partner company
These affect all relationships and interactions inside the company, with customers, and with the government. Understanding the local business culture is critical to success.
Cultural and linguistic differences
Evaluating skill sets and then determining if the local staff is qualified is a key factor for success.
Quality and training of local contacts and/or employees
Policy can change frequently, and companies need to determine what level of investment they’re willing to make, what’s required to make this investment, and how much of their earnings they can repatriate.
Political and economic issues
Assessing the experience of the partner company in the market—with the product and in dealing with foreign companies—is essential in selecting the right local partner
Experience of the partner company
