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Summary International Business Awareness IBO Y3

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Heel boek samengevat? Nee
Wat is er van het boek samengevat? Ch13, ch12, ch14, ch15 , ch11, ch20
Geupload op 28 september 2021
Aantal pagina's 25
Geschreven in 2020/2021
Type Samenvatting

international law
ibo
international business awareness
iba

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International Business Awareness
Week 1
CH13: Evaluation of countries for operations

Location is the most import factor in international business. Because all companies have limited
resources, they must be careful in making the following decisions:
1. The location of sales, production and administrative/auxiliary services
2. The sequence for entering different countries
3. The portion of resources and efforts to allocate to each country where they operate

Companies need to:
 Determine the order of country entry
 Set the rates of resource allocation among countries

Main reasons to go abroad are to spread risk (1) to reduce costs (2) to gain sales (3)

Step 1: Scanning - the process by which managers examine many countries broadly and the narrow
them down to the most promising ones (cheap)
Step 2: Detailed analysis - compare feasibility and desirability of countries (resource intensive)

Escalation of commitment – the more time and money companies invest in examining the alternative,
the more likely they are to accept it, regardless of its merits.

Opportunities: Sales Expansion Opportunities: Resource Acquisition
- GDP and population Cost considerations:
- Economic and demographic variables: - Labour
 Leapfrogging of products - Infrastructure
 Prices - Ease of transport and communications
 Income elasticity - Government incentives and disincentives
 Substitution
 Income inequality
 Cultural factors and taste
 Existence of trading blocs

Risks:
1. Companies and managers have differences in their perceptions of risk.
2. One company’s risk is another’s opportunity.
3. Reducing risk other than avoiding location.
4. There are always trade-offs.

Risk aspects:
1. Competitive risk.
- Making operations comparable.
- Geographic diversification.
- Following competitors or customers.
2. Monetary risk.
- Exchange rate stability.
- Inflation rates.
- Liquidity preference.
- Capita; controls.
- Government spending
3. Political risk.
- Changes in government policy.
- Operational issues.
- Nationalization.
4. Natural disasters.

,!!! Location decisions affecting international operations: tools: SWOT / PESTLE/STEEPLE

S – Social: cultural and demographic change can directly affect the activities of a business. E.g.
increase in the number of working mothers, rise of disposable fashion, animal right movement.
T – Technological: the fast-changing technological environment presents constant threats and
opportunities for a business. Technology affects all aspects of business functions.
E – Economic: these are factors such as interest rates, economic growth, employment, international
trade and state of infrastructure.
E – Ethics: the moral principle that are, or should be, considered in business decision-making.
L – Legal: governments will impose laws and regulations to limit the adverse effects of business
activity on the general public. Legislation will can also be passed to protect businesses.
P – Political: political stability of a country and government policies will provide opportunities and
threats for a business.
E – Environmental: individuals, organizations and governments are increasingly concerned about the
impact of business activity on the environment.

Country selection tool: The Grid

, Example Booking.com The Opportunity-risk Matrix:

Indices:
- MPI index
- Economic freedom index
- Corruption perception index

Assessing market potential: {PGM x LP – (BC + Av + U + BD +
Aff)} x PD x US x PL
- PGM = people in geographic market.
- LP = logical potentials
- BC = benefit comprehension
- Av = availability
- U = usability
- BD = benefit deficiency
- Aff. = affordability
- PD = penetration
- US = usage rate
- PL = price level

Potential market size = number of consumers in geographic market x % of logical potentials
you can lose potential because: they don’t understand / they can't get it / they can’t use it / they're not
convinced of the benefits / they can’t pay the price (or are not willing to).

Country evaluation
Quantitative Risk issues Qualitative
- Market size and - Political risk - Competition
development - Competitive risk - Distribution
- Sales potential - Monetary risk - Suppliers
- Cost and resource - Natural disaster - Trends
availability - Consumer behavior

Data Sources (for the grid)
 Market research / consultants
 Government agencies
 International organizations
 Trade associations

Data Quality Issues
 Accuracy – governmental resources may limit accurate data collection
 Corruption – governments may purposely publish misleading information
 Response bias – respondents may give false information to data collectors
 Black market activity – official data may include only legal and reported market activities
 Methodological issues – poor methodology may be used

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