Practice 18/ 19

Question 1

The risk of staying purely domestic

Answer 1

• Lower sales
• Lower fixed cost dilution
• Lower profitability
• Higher exposure to domestic economic cycles
• Higher cost of resource acquisition

Question 2

Choosing location for

Answer 2

• Where to Sell
• Where to Produce
• Where to have R&D
• Where to have Call Centre
• Where to place the HQ

Question 3

Importance of location

Answer 3

• Limited Resources
• Distinct Risks & Opportunities
• Higher/Lower Strategic Fit
• Sustain/Improve/Extend competences

Question 4

Alternative gradual commitments

Answer 4

• Intermediates before moving on to M&A
• Export before moving on to local production (FDI)
• One country before expanding in the region (ex: Poland vs Eastern Europe)

Question 5

Geographic Diversification

Answer 5

Rapid movement to many countries and gradual commitment in each one Ex: Industries with high obsolescence risk

Question 6

Reinvestment

Answer 6

A company may have to make additional commitments in a new location. Ex: IKEA Indian Rugs and Child Labour, invest in IKEA Foundation
Ex: Sumol+Compal Moz, invest in turnaround

Question 7

Geographic Concentration

Answer 7

Become among Top 3 before moving on to another region
Ex: Industries with high entry cost such as Retail and/or Local Production

Question 8

Harvesting

Answer 8

Divesting underperforming operations usually take too long with fear of management consequences and bad publicity

Question 9

Detailed country analysis

Answer 9

• market dimension and sales growth potential
• cost of resource acquisition
• Political and legal
• financial
• natural disasters
• competitive landscape

Question 10

Harvesting example

Answer 10

Burger King, Tesco

Question 11

Reinvesting example

Answer 11

Ikea, sumol+compal

Question 12

Geo Diversification example

Answer 12

Uber, Revolut

Question 13

Geo Concentration example

Answer 13

JM, sumol+compal